Earnings call transcript: Vitesse Energy Q4 2024 misses EPS, revenue forecasts

Vitesse Energy Inc. reported its fourth-quarter 2024 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -0.285, falling short of the expected 0.58, and reported revenue of $59.8 million against the forecasted $71.18 million. Despite these misses, the stock experienced a slight increase of 0.41% in the market, closing at $24.43. According to InvestingPro data, the company maintains a healthy 8.63% dividend yield and trades at an EV/EBITDA multiple of 4.84x, suggesting relatively attractive valuation metrics despite the earnings disappointment.

Key Takeaways

• Vitesse Energy’s EPS and revenue significantly missed expectations.
• Stock price rose slightly by 0.41% post-announcement.
• Increased dividend and strategic acquisition of Lucero Energy.
• 2025 production guidance shows a 35% increase from 2024.
• Insider ownership over 25% and strategic hedging of production.

Company Performance

Vitesse Energy’s performance in Q4 2024 was marked by a substantial deviation from financial expectations, with both EPS and revenue missing forecasts. However, the company’s strategic moves, such as the acquisition of Lucero Energy and increased dividend payouts, may have provided a buffer against negative market reactions. The company’s production guidance for 2025, indicating a significant increase, also suggests a positive outlook moving forward.

Financial Highlights

• Revenue: $59.8 million, below the forecast of $71.18 million.
• Earnings per share: -0.285, missing the forecast of 0.58.
• Full Year 2024 Adjusted EBITDA: $156.8 million.
• Total Debt at Year-End: $117 million.

Earnings vs. Forecast

Vitesse Energy reported an EPS of -0.285, significantly below the forecasted 0.58, resulting in a negative surprise of approximately 149.14%. Revenue also fell short, with an actual figure of $59.8 million against a forecast of $71.18 million. This marks a considerable deviation from anticipated performance and contrasts with any previous quarters where the company may have met or exceeded expectations.

Market Reaction

Despite the earnings miss, Vitesse Energy’s stock saw a minor increase of 0.41%, rising to $24.43. This movement, although modest, suggests that investors may be focusing on the company’s strategic initiatives and future production potential rather than the immediate financial shortfall. The stock remains within its 52-week range, indicating a stable position amidst the earnings report.

Outlook & Guidance

Looking ahead, Vitesse Energy has provided a positive production guidance for 2025, projecting a 35% increase from 2024. The company plans to maintain a cash CapEx of $130-$150 million, with $20 million allocated for potential acquisitions. Additionally, 53% of oil production is hedged at $71.16 per barrel, ensuring some stability against market volatility.

Executive Commentary

CEO Bob Garrity emphasized the company’s focus on supporting its dividend, stating, "Our product is our dividend and everything we do is focused on supporting that dividend." He also highlighted the strategic importance of oil prices, noting, "Oil in the 60s is a sweet spot for us."

Risks and Challenges

• Potential operational challenges due to gas processing capacity limitations.
• High debt levels could pose financial risks.
• Market volatility in oil and gas prices may impact profitability.
• The substantial earnings miss could affect investor confidence if not addressed.

Q&A

During the earnings call, analysts inquired about the company’s acquisition strategy beyond the Bakken region and the use of the Luminess data platform for deal analysis. The management reiterated its focus on high-return assets and methodical capital allocation.

Full transcript - Vitesse Energy Inc (VTS) Q4 2024:

Conference Operator: Greetings and welcome to Vitesse Energy’s Call to discuss the Fourth Quarter and Full Year twenty twenty four Earnings. At this time, all participants are in a listen only mode. A question and answer session will follow a formal presentation. Please note this conference is being recorded. I will now turn the conference over to the Director of Investor Relations and Business Development at Vitesse, Ben Messier.

Thank you. You may begin.

Ben Messier, Director of Investor Relations and Business Development, Vitesse Energy: Good morning and thank you for joining. Today, we will be discussing our 2024 results and the expectations for 2025, including the impact of the acquisition of Lucero Energy Corp, which closed last Friday. Our 10 K and earnings were released yesterday after market closed and an updated investor presentation can be found on the Vitess website. I’m joined here this morning by Bob Garrity, Vitess’ Chairman and CEO our President, Brian Cree 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 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 reconciliation of historical non GAAP financial measures to the most directly comparable GAAP measure, please reference our 10 K and earnings release.

Now, I’ll turn the call over to Vitessa’s Chairman and CEO, Bob Garrity.

Bob Garrity, Chairman and CEO, Vitesse Energy: Thanks, Ben. Good morning, everyone, and thank you for participating in today’s earnings call. In 2024, we continued to deliver on our mandate to return capital to shareholders. It was a good year. We increased our dividend in June and have now paid $4.07 of dividends per share since our spin off in January 2023, while converting our undeveloped asset base to producing wells and sourcing highly economic deals, at the same time maintaining a conservative balance sheet.

Last week, we closed the acquisition of Lucero Energy Corp. In a stock for stock transaction. We expect this transaction to be immediately accretive to key financial metrics, bolstering the dividend and further strengthening our balance sheet. With Lucero now closed, our Board declared a quarterly dividend of $0.5625 per common share to be paid on March 31. That’s $2.25 per share on an annualized basis.

This represents a 7% increase to the dividend sequentially. Our Board of Directors has increased to nine members with Gary Reeves and Bruce Chernoff joining the Vitesse Board from Lucero. Their deep knowledge and experience will complement our Board nicely. I want to thank all the team members who have worked so diligently on this transaction, both from Lucero and Vitesse. The hard work on both sides was key to its success.

For 2025, our strategy is consistent. We will continue to return capital to shareholders via the fixed dividend and allocate capital based on our returns based hierarchy. We are well positioned to pursue additional acquisitions. I will now hand the call over to our President, Brian Cree to discuss our operations.

Brian Cree, President, Vitesse Energy: Good morning, everyone, and thanks, Bob. Production for the year was just over 13,000 barrels of oil equivalent per day. We expect production for the first quarter to be between 29,000 barrels of oil equivalent per day with a significant increase in the second quarter as Lucero was closed in March. As of 12/31/2024, we had 17.7 net wells in our development pipeline, including 9.7 net wells that were either drilling or completing and another eight net locations that had been permitted for development. The Lucero assets include 1.9 net wells that are waiting on completion and another 5.3 net locations that have been permitted for development.

We currently plan to begin completion activities on the 1.9 net wells later this spring. At year end, prior to incorporating Lucero, total proved reserves for Vitesse were 40,300,000 barrels of oil equivalent. Proved developed reserves were 27,200,000 BOE, while proved undeveloped reserves increased 8% to 13,000,000 barrels of oil equivalent. Proved undeveloped reserves are limited to those locations that are reasonably certain to be developed over the next five years. However, we believe our acreage also includes extensive undeveloped drilling and completion locations not currently classified as proved.

Natestra’s total proved reserves at year end had a PV-ten value of $586,600,000 with 78% being proved developed. Year end 2024 reserves were impacted by the reduction in the net realized oil and natural gas prices used in accordance with SEC rules. Net realized prices decreased by $4.09 a barrel for oil and $0.51 per Mcf for natural gas between 2023 and 2024. Including our internal estimates of Lucero reserves using the same pricing, the pro form a PV10 value would have been just over $800,000,000 To mitigate the impact of these commodity price changes for 2025, we have approximately 53% of our oil production hedged at a weighted average price of $71.16 per barrel at the midpoint of our guidance. For the first time since going public, we added natural gas hedges to take advantage of the increase in natural gas prices and the call skew present in Henry Hub costless collars.

We have 15% of our natural gas production now hedged at a weighted average floor of $3.73 and a weighted average ceiling of $4.88 per MMBtu. Again based on the midpoint of our guidance. For the same volumes, we swapped the basis differential to increase the effectiveness of our natural gas hedge. In addition to these volumes, we have over 2,500 barrels per day and 8,000 millimeters

John White, Analyst, ROTH Capital Partners: millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters

Noel Parks, Analyst, Tuohy Brothers: millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters

Brian Cree, President, Vitesse Energy: millimeters Btu per day of our 2026 oil and natural gas production hedge at roughly $67 per barrel and through a costless collar of $3.71 by 4.47 per MMBtu. Thanks for your time. Now, I’ll turn the call over to our CFO, Jimmy Henderson.

Jimmy Henderson, CFO, Vitesse Energy: Good morning, everyone. Thanks, Brian. I will provide a quick review of our financial results for the fourth quarter and full year of 2024, as well as an update on our financial status. Please refer to our earnings release and 10 ks which we filed last night for any further details. Our production for the quarter was just under 13,000 BOE per day with the 68% oil cut.

This brought our total twenty twenty four production to 13,003 boe per day with the 69% oil cut. These amounts were just within guidance as some of our larger working interest wells were not brought online during the fourth quarter, but shifted into early twenty twenty five. For the year, adjusted EBITDA was $156,800,000 and adjusted net income was $35,700,000 GAAP net income was $21,100,000 and you can see the reconciliation of that in our press release that we filed last night. Cash CapEx and acquisition costs combined for the year were at the midpoint of our revised guidance of $115,200,000 These costs were funded within operating cash flows as well as draws on our credit facility. At the end of twenty twenty four, we had total debt of $117,000,000 with net debt to adjusted full year EBITDA of just 0.7 times.

In connection with the closing of Lucero, we increased our borrowing base to $315,000,000 with the aggregate elected commitments also increased to $250,000,000 Thanks as always to all the banks in our syndicate for their continued support. The Lucero closing further strengthened our balance sheet as they had no borrowings and held a net cash position of approximately $50,000,000 at the close. This transaction also had the benefits of increasing our public float while maintaining meaningful insider holdings. The test insiders now own more than 25% of the company. We are also providing guidance for 2025.

On a two stream basis, we anticipate production in the range of 17,000 to 18,000 BOE per day for the full year, an increase of approximately 35% at the midpoint versus 2024 levels. We anticipate an oil cut of 66% to 70%. With the Lucero transaction closed in March, production for the first quarter is expected range from 14,000 to 15,000 per day And cash CapEx for the year is anticipated at $130,000,000 to $150,000,000 weighted more towards the first half of the year as the larger working interest wells are brought online. This includes the completion of two drilled uncompleted wells that Brian mentioned earlier and approximately $20,000,000 of expected acquisitions during the year. Remember that production and CapEx can be lumpy during the year and they were not held to a fixed capital budget, but will always allocate capital to the highest rate of return projects.

We are very excited to have Lucero as part of the good test team. The effort put into the closing of the transaction was readily apparent and we look forward to seeing the value this hard work will produce as we move forward together. With that, let me turn the call over to the operator for Q and A.

Conference Operator: Thank you. And our first question comes from Jeff Grampp with Alliance Global Partners. Please state your question.

Jeff Grampp, Analyst, Alliance Global Partners: Good morning, guys. Hey, Jeff.

Bobby Brooks, Analyst, Northland Capital Markets: I

Jeff Grampp, Analyst, Alliance Global Partners: was curious, Bob, to get your perspective on the acquisition side of the world or ground game, obviously, you guys get a nice chunk of cash from Lucero and delever the balance sheet and free up some liquidity amidst some volatile oil markets that I imagine could be lucrative from an acquisition standpoint. So does this maybe lead you guys to perhaps be a bit more aggressive on the ground game or acquisition front given those dynamics? Or how might you think about that strategy in the context of kind of the improvements on the balance sheet side?

Bob Garrity, Chairman and CEO, Vitesse Energy: Yes. Hi, Jeff, and thanks for the question. When we look at the screen every day of the oil price, when we see it starting with a six, that is very advantageous for us in the acquisition front. Oil in the 60s allows our current asset to perform very well. And I will tell you, we have not seen this much deal flow in something that’s a little chunkier since we’ve been public.

So again, we’ll be very methodical. We waited a couple of years for Lucero, but I’m telling you that’s a great question. Oil in the 60s is a sweet spot for us, Jeff.

Jeff Grampp, Analyst, Alliance Global Partners: Great. I appreciate those details. And maybe switching from offense to defense, curious to get updated on kind of the dividend philosophy. Obviously, we have the increase with the transaction here and you guys have some nice hedges for the next couple of years. But to the extent you use your balance sheet to maintain that dividend, is that something you guys are comfortable with in kind of the near medium term provided leverage is still low or like what are the toggles or variables that you guys are kind of looking for that we should look for that might necessitate revisiting the dividend plan if at any point?

Thanks.

Bob Garrity, Chairman and CEO, Vitesse Energy: Yes. No, thanks, Jeff. Look, our product is our dividend and everything we do is focused on supporting that dividend and growing that dividend. So we are risk managers, we do have hedges, but the biggest risk management is how economically we spend our capital. So you need to remember, everyone needs to remember, when the price of oil goes down, our drilling and completion costs go down.

So it’s a dynamic process. It’s almost impossible to figure out what a breakeven is. So as the price of oil goes down, our CapEx will go down and that is beneficial to our coverage ratio. So in a band of $55 to $85 oil, our dividend is solid.

Jeff Grampp, Analyst, Alliance Global Partners: All right. That’s really helpful. Thanks for the time.

Noel Parks, Analyst, Tuohy Brothers: Thanks, Jeff.

Conference Operator: Your next question comes from Bobby Brooks with Northland Capital Markets. Please state your question.

Bobby Brooks, Analyst, Northland Capital Markets: Hey, good morning, guys. Thank you for taking my question. I’ll kind of piggyback on Jeff’s question Jeff’s point on the M and A outlook. But so you guys mentioned in the press release that you guys are positioned operationally and financially to pursue additional acquisitions. And then the CapEx guide bakes in twenty million dollars of incremental acquisitions.

So I was curious on one, what does that $20,000,000 consists of? And second, as you think about your acquisition strategy going forward, is it kind of broadening in terms of the size and maybe region of what you guys were looking at the past or since you’ve came public?

Bob Garrity, Chairman and CEO, Vitesse Energy: Yes. So the answer to that, the second question is absolutely. So the ability to operate, Jimmy, Brian and I were operators in the past. The ability to operate gives us acquisition power that we can look at our lens is broader. So we are looking for alpha where we can find it.

Look with the gas strip where it is today, we’re looking at gas assets where we hadn’t focused on that in the past. So we are looking we’ve always looked outside the basin. But obviously the Bakken is our first love and we still think there’s acquisition running room in the Bakken. Brian, you want

Bobby Brooks, Analyst, Northland Capital Markets: to comment more on that?

Brian Cree, President, Vitesse Energy: Yes. And I’ll just kind of touch on the fact that you guys have seen us do quite a few acquisitions over the past few years. We’re constantly looking at that ground game. We’re looking at opportunities. Bob talked about oil prices being in the 60s.

We’re seeing lots of deals. We’ll continue to evaluate all of these deals. For us, there was a question earlier about whether or not we’d be more aggressive with the cash on our balance sheet. I don’t think that we ever really get aggressive. We have a rate of return hierarchy that we talked about earlier.

We have a rate of return hierarchy that we talked about earlier. We’re going to stick with that. And as opportunities present themselves, we will definitely take advantage of those. But certainly as we think about our guidance and our budgets for the year, we do build in those acquisitions and they can take many different forms. I mean, we may find something that’s more of a PDP type acquisition.

We may find near term development. We’re looking at a variety of things right now, and we’re pretty highly confident that we’ll get some of those closed during the course of the year.

Bob Garrity, Chairman and CEO, Vitesse Energy: We do not have a CapEx budget. We guide simply because of what our expectations can be. But with our capital structure, we will seek highly economic things when we can find them. So, Jimmy, do you want to add anything?

Jimmy Henderson, CFO, Vitesse Energy: Okay. You guys covered it. Yes.

Bobby Brooks, Analyst, Northland Capital Markets: That was great color. I appreciate it. And just wanted to kind of circle back on the $20,000,000 of that. And I know you said you give the CapEx guide just for expectation purposes. But any color that you could give on like what the expectation is of that $20,000,000 Is that just more ground gain, smaller acquisition stuff?

Or is it something a bit more or is it something for maybe a bit more chunky like you mentioned?

Jimmy Henderson, CFO, Vitesse Energy: Yes, Bobby, I think that Brian covered it pretty well. That can take many different forms. Given where we are now that we want to put a number out there, what our expectations are, given line of sight to things that are available, but it can take the form of several different styles of acquisitions. But we look at everything from chunkier deals that could be the entire $20,000,000 to several smaller deals that total up to that. So I hate to put you off a little bit, but it’s just a placeholder for things that we think that we can pull down during the year.

Bobby Brooks, Analyst, Northland Capital Markets: No, fair enough. That makes sense. And then as you mentioned, you guys are looking at things outside the Bakken, right? And I wanted to kind of maybe tie it into like Luminea, I’m going to say this wrong, your system Lumineas and kind of how you can leverage because my understanding is that’s really kind of focused on well data within the Bakken or is it a bit more broad than that and kind of the advantages that you get using that for deals within the Bakken, is that something that you can leverage as you look outside of it?

Bob Garrity, Chairman and CEO, Vitesse Energy: Absolutely, Bobby. We have it’s Luminess and thanks for mentioning it. We take great pride in that and it expands every day. We scrape unbelievable amounts of data. So we’ve got data for the Haynesville, for the Mid Con, for the Permian, for certainly for the DJ and the Powder.

And it’s a very powerful engine. So we can analyze a deal that has thousands of wells literally within days. So we lean on Luminess a lot and it’s very critical that that becomes a more powerful tool in the future.

Bobby Brooks, Analyst, Northland Capital Markets: Fair enough. And then the last one for me is, you guys make it very clear that you’ll allocate capital to the highest return assets. So keeping that in mind, does the added Lucero operated acreage bump kind of bumped down some of the non op inventory? Just trying to get a sense of how the added Lucero acreage changes your perspective on how you want to work through your inventory over the next, call it, two, three years?

Bob Garrity, Chairman and CEO, Vitesse Energy: Brian?

Brian Cree, President, Vitesse Energy: Yes. I think that it just gives us the added flexibility, right? We have we now have an operated asset that competes against our non op. So we’ve said it many times, we don’t have a budget, we’ll continue to invest capital where we think it’s best rewarded. And but having that operated asset, they do have several very strong drilling locations that are now in our inventory that we can access.

For 2025, our intention at this point is only to complete the two drilled but unlocated the two drilled but uncompleted wells at this point. But we’re going to continue to evaluate those drilling opportunities. Right now, they’re on our they’re kind of on our budget for 2026, but we’ll continue to evaluate it as we get other non operated opportunities in the door.

Bobby Brooks, Analyst, Northland Capital Markets: Fair enough. Thanks. Thank you guys for taking the questions and congrats on the great year.

Bob Garrity, Chairman and CEO, Vitesse Energy: Thanks, Bobby.

Conference Operator: Your next question comes from John White with ROTH Capital Partners. Please state your question.

John White, Analyst, ROTH Capital Partners: Good morning and congratulations on closing the deal and your strong 2024 results.

Jimmy Henderson, CFO, Vitesse Energy: Thank you, John.

John White, Analyst, ROTH Capital Partners: Yes. Lucerno properties, what percentage are operated?

Brian Cree, President, Vitesse Energy: Basically, 100% of the assets. They do have some very, very minor non operated working interests, but the vast majority of their interests are all operated properties.

John White, Analyst, ROTH Capital Partners: Okay. And reading the operations update, it looks like the Lucerno working interest is much higher than legacy Vitesse acreage?

Brian Cree, President, Vitesse Energy: It is, John. Remember that our average working interest in our 7,000 properties is roughly 3%. But when you bring in the 60 to 65 producing wells that Lucero has an interest in, their average working interest is going to be closer to 75% to 80% in those properties.

John White, Analyst, ROTH Capital Partners: Okay. So I read that right?

Brian Cree, President, Vitesse Energy: You did.

John White, Analyst, ROTH Capital Partners: All right. Well, thanks for the answers and I’ll pass it back to the operator.

Bob Garrity, Chairman and CEO, Vitesse Energy: Thank you, John.

Conference Operator: Thank you. Our next question comes from Noel Parks with Tuohy Brothers. Please state your question.

Noel Parks, Analyst, Tuohy Brothers: Hi, good morning. I apologize if you already touched on this, but can you just sort of talk about the status of infrastructure in the basin, the utilization, thinking about gas and both gas and oil takeaway. And I guess I don’t think so much these days about footprint, but just about what’s aging out there and might be in need of attention?

Jimmy Henderson, CFO, Vitesse Energy: Hey, Noel. This is Jimmy. Thanks for the question. Yes, in general, I’d say the Bakken is in pretty good shape as more mature basin, if you will. I think from an oil takeaway situation, we’re in really good shape.

We are impacted from different markets or different sources of oil like coming down from Canada, but in general for takeaway, we don’t have issues moving out of the basin. On the gas side, we could always use more gas processing and particularly NGL takeaway capacity. And so it’s a bit of a balancing act right now to recover just enough ethane to fill up the gas pipes and get the NGLs moved on the NGL pipelines. So we could always use more on that side. But generally, I’d say we’re in pretty good shape for the current level of activity and the rig count in the basin.

Noel Parks, Analyst, Tuohy Brothers: Great, thanks. And this is just sort of a reality check question. As I was looking through the slides and I saw the pie chart that showed the range of operators, I actually was astonished that it still is not more concentrated as far as the operatorship than it is that there’s still as much fragmentation even the largest operators don’t seem to have really a dominant share. So I guess, is everyone I think about the private guys especially just so entrenched with getting the returns, running down their wells, etcetera, a little bit of drilling that things are just probably as consolidated as you think they’re going to get or are there maybe some of those long awaited exits on the horizon, would you say?

Brian Cree, President, Vitesse Energy: So I’ll take the first crack at that. This is Brian and let Bob or Jimmy jump in. But there’s been quite a bit of consolidation and we’ve seen originally our the number of operators that we had interest with were ranging up toward 40 and we’re down closer to 30 now. So that consolidation has happened and even from just the standpoint of I see the pie chart you’re looking at and that’s on an acreage basis. If you look at it from a production basis, we’ve got about five operators now that make up roughly 75% of our total production.

So the consolidation has occurred and it probably will continue to occur. I think there’s some other companies out there that over the next few years will likely they’ll find ways to consolidate. It’s a smart thing and a good way to do business.

Noel Parks, Analyst, Tuohy Brothers: Right. And Joe, somebody else going to add something?

Jimmy Henderson, CFO, Vitesse Energy: I think Brian covered it pretty well.

Noel Parks, Analyst, Tuohy Brothers: Okay, great. Thanks a lot.

Jimmy Henderson, CFO, Vitesse Energy: Thanks, Noel.

Conference Operator: Thank you. There are no further questions at this time. I’ll hand the floor back to Bob Garrity for closing remarks.

Bob Garrity, Chairman and CEO, Vitesse Energy: I want to thank everyone for taking their time today and we look forward to the next call that we have with you. In the interim, if you have any questions, please contact Ben directly. And thank you.

Conference Operator: Thank you. With that, we conclude today’s call. All parties may disconnect. Have a good day.

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