Vital Energy - outlook Q2 results

[Petroleum economist]

Around 24th July (TBA) Vital Energy will publicize its Q2 results.

Production
• Q1 production (124.7 K BoE/d) beat the outlook (117.5 -122.5 K BoE/d).
• The higher-than-expected Q1 production was due to the acceleration of a 20-well package in West Glasscock County.
• In Q1 Vital turned 21 wells In line. In Q2 24 wells will be turned in line
• Q1 was the sixth quarter in a row that Vital beat its outlook.
• Vital has indicated that 2024 production will peak in H1, with 60% of the TIL's planned in H1.
• Vital Q2 outlook is 122-126 K BoE/d.
• Based on above I expect a Q2 production of 124.5 K BoE/d, to fall back thereafter to 122 K BoE/d (Q3) and 120 K BoE/d (Q4).

Balance sheet
• The balance sheet in Q1 was in flux with the implementation of the $ 1.0 B refinancing package.
• The Q2 balance sheet should provide a clearer picture on the long-term debt situation.
• I expect a long-term debt of $ 1,560-1,580 M.

Profitability
• Gas prices have not recovered in Q2. Gas revenues thus should be minimal. 96% of the revenues should be liquid derived.
• Higher expenses from Q1 on chemicals and water disposal should continue.
• The new $ 1.0 B financing package should reduce the interest paid. I expect for Q2 interest payments of $ 45 M. This is excluding any special charges associated with finalization of the package.
• Hedging will lead to substantial losses. I expect realized hedging losses of $ 29-30 M.
• Q2 net profit should be $ 89 M (eps=$ 2.33). This is excluding non-cash hedging results and deferred tax (mostly to be offset against $ 1.6 B NOL’s.
• For 2024, on a similar basis, I expect a net profit of $ 399 M (eps=$ 10.63, PE=4.1).

Conclusion
VTLE should report good Q2 results, with production at the higher end of the guidance, a reducing long-term debt and profits setting Vital up for decent 2024 results.

[dan_s]

My valuation was $105. Likely to go higher with better than forecast Q2 results.