Vital Energy (VTLE) Update - Feb 10

[dan_s]

Vital previously announced Q4 production of ~113,400 Boepd (52,800 BOPD), which exceeded my forecast by more than 8,000 Boepd. Their Q3 actual production was 101,746 Boepd (48,996 BOPD).
Based on my updated forecast model, Vital's full year results should be approximately Net Income of $21.14 per share, Operating CFPS of $37.78. Free cash flow for the year should be approximately $300 million, $12.62/share based on average common stock outstanding during 2023 of ~23.8 million share.
Recent acquisitions have been acquired for cash + common stock (following the ESTE strategy), so the fully diluted share count increase to approximately 36.9 million, which is still low for a company of this size.
My current valuation of VTLE remains $100/share.
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TULSA, OK, Feb. 05, 2024 (GLOBE NEWSWIRE) -- Vital Energy, Inc. (NYSE: VTLE) ("Vital Energy" or the "Company") today announced the second acquisition of additional working interests in producing assets associated with the recent asset acquisition from Henry Energy LP, Moriah Henry Partners LLC and Henry Resources LLC (collectively "Henry") for total consideration of approximately $78 million. < Seller was Granite Ridge Resources (GRNT), one of the companies in our Small-Cap Growth Portfolio.

The purchase increases Vital Energy’s working interest in 54 producing, low-decline wells by an average of 67%, increasing the Company’s estimated 2024 production by approximately 1,850 BOE/d (51% oil) and estimated 2024 Free Cash Flow2 by approximately $25 million3.

This is the second transaction associated with the exercise of tag-along rights by owners of certain assets in the Henry acquisition. Vital Energy purchased and financed the assets on the same terms as the Henry purchase and sale agreement, which valued the Company’s shares at $54.96. Vital Energy funded the transaction through the issuance of approximately 879,000 shares of its common stock and approximately 980,000 shares of its 2.0% cumulative mandatorily convertible preferred securities. The Company does not anticipate any additional transactions related to the exercise of tag-along rights.

"We are pleased to have closed our second transaction to increase our working interests in high-value properties associated with the Henry acquisition," stated Jason Pigott, President and Chief Executive Officer. "Both transactions were attractively priced, accretive to Free Cash Flow per share and highly supportive of our deleveraging goals."

1Assumes VTLE February 2, 2024 closing price; 2Non-GAAP financial measure; please see supplemental discussion of GAAP to non-GAAP financial measures at the end of this release; 3Assumes $72 WTI / $2.50 HH for FY-24

About Vital Energy

Vital Energy, Inc. is an independent energy company with headquarters in Tulsa, Oklahoma. Vital Energy's business strategy is focused on the acquisition, exploration and development of oil and natural gas properties in the Permian Basin of West Texas.

[dan_s]

On February 6, the day after the press release, Neal Dingmann at Truist Financial raised his price target for VTLE by $5 to $86. He rates the stock a BUY.

TipRanks: "In the last 3 months, 10 ranked analysts set 12-month price targets for VTLE. The average price target among the analysts is $56.27. The 10 price targets range from $46 to $86 (Truist Financial on 2/6.)

The only negative that I see for VTLE is that it does not pay a dividend. This actually makes it more of a takeover target.
Something to think about: Vital currently has more production than Earthstone did when it was acquired by Permian Resources (PR).