Vitel Energy (VTLE) Valuation Update - Feb 22

[dan_s]

VTLE closed at $47.22 yesterday. I am increasing my valuation by $6 to $126/share.

Vitel Energy reported strong Q4 results and they provided updated guidance after the market closed yesterday.
> Q4 results adjusted to reflect the declining share count: $$121.3 million reported net income, $7.05/share.
> Full year 2022 results: $631.5 million net income, $37.67/share and $800.5 million adjusted operating cash flow, $47.75/share.
> "Adjusted Net Income" (without non-cash mark-to-market gain on hedges) was $444.1 million, $26.49/share.

My forecasts:
> 2023 Net Income of $355.6 million, $21.55/share and $744.7 million operating cash flow, $45.13/share.
> 2024 Net Income of $447.0 million, $27.42/share and $792.9 million operating cash flow, $48.64/share.

TipRanks: "In the last 3 months, 5 ranked analysts set 12-month price targets for VTLE. The average price target among the analysts is $75.00. Stifel Nicolaus analyst Derrick Whitfield maintained a Buy rating on Vital Energy yesterday and set a price target of $133.00."

My only concern is the quality of Vital's "running room" because their production guidance for 2023 (if accurate) is ~9% decline year-over-year. They do expect to close the "Driftwood Acquisition" in April, which should give them a production boost.

My updated valuation model will be posted to the EPG website late this morning.