At this point I rate VRN a HOLD.
I will be replacing it in the Sweet 16 with WhiteCap or another upstream company that gets the majority of its revenues from natural gas and NGL sales.
I do think WhiteCap made a good acquisition for their shareholders. Size does matter in this business and when the FEAR of the tariff's fades, which it will eventually, WhiteCap should look very good.
Riley Exploration (REPX) deserves a promotion to the Sweet 16.
Veren Inc. (VRN) Update - Mar 11
Veren Inc. (VRN) Update - Mar 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
-
Petroleum economist
- Posts: 294
- Joined: Wed Aug 23, 2023 7:01 am
- Location: The Netherlands
Re: Veren Inc. (VRN) Update - Mar 11
Merger of Whitecap and Veren
Summary
I have completed a first pass evaluation of the announced merger of Whitecap and Veren. The overall result, based on the latest share prices, indicates that the merged company can be an attractive investment. Reserves are ample, production growing, the balance sheet is in a good shape, the profitability is good, the PE is low, and the returns are high.
The merged company ranks a high 10th (9th without import tariffs) in my 84 oil and gas companies ranking.
Reserves
• The combined 2024 proven reserves (1P) of Whitecap and Veren are 806+739 = 1,545 M BoE.
• The reserves are equivalent to a good 11.1 years of the combined 2025 production.
• Both Whitecap (1.23) and Veren (1.61) reported in 2024 good Reserves Replacement Ratios.
• Based on the reserves and RRR combined, the merged company has the capacity to grow production with 5% per year.
• The growth potential is confirmed by the probable reserves (2P) – Canadian companies publish these - of 1.233 +1,103 =2.336 M BoE.
• Liquids are 61-62% of the total and gas 38-39%.
Production
• The combined production in 2025 can be 370-380 K BoE/d. Note that the merger will be only be implemented in late May 2025 so this will not be a reported number.
• After 2025 production can grow with 5%/year to 445-450 K BoE/d in 2029.
Balance sheet
• Both Whitecap and Veren had a decent balance sheet.
• The combined balance sheet will have a good equity ratio (=equity/balance sheet total) of 57.6%
• The combined long-term debt will be C$ 2,963 M.
• The long-term debt leads to a good 2025 debt/EBITDA ratio of well < 1.0.
• The balance sheet allows shareholder returns.
Profitability
• With WTI at $ 70-75/bbl and with the effects import tariffs applied, I can see in 2025 an eps of C$ 1.27-1.49 (PE= 5.4-6.3). The eps can increase to C$ 1.60-1.92 (PE=4.2-5.0) in 2029.
• In my evaluation I have included C$ 40 M in operational synergies, although Whitecap is quoting higher numbers (C$ 75 M).
• Without the effects of the US import tariffs, the eps numbers can be C$ 0.30 higher than the numbers shown above.
Shareholder returns
• The annual 2025 dividend after the merger is set at C$ 0.73.
• The dividend is equivalent to a high return of 9%.
• After the 2025 the dividends can increase.
Conclusions
Based on the latest share prices, the merged company can be an attractive investment. Reserves are ample, production growing, the balance sheet is in a good shape, the profitability is good, the PE is low and can fall further and the returns are high.
The merged company ranks a high 10th (9th without import tariffs) in my 84 oil and gas companies ranking.
Whitecap shareholders may not be happy with the drop of share price yesterday but over time they should recover their losses. Veren shareholders are real winners.
Summary
I have completed a first pass evaluation of the announced merger of Whitecap and Veren. The overall result, based on the latest share prices, indicates that the merged company can be an attractive investment. Reserves are ample, production growing, the balance sheet is in a good shape, the profitability is good, the PE is low, and the returns are high.
The merged company ranks a high 10th (9th without import tariffs) in my 84 oil and gas companies ranking.
Reserves
• The combined 2024 proven reserves (1P) of Whitecap and Veren are 806+739 = 1,545 M BoE.
• The reserves are equivalent to a good 11.1 years of the combined 2025 production.
• Both Whitecap (1.23) and Veren (1.61) reported in 2024 good Reserves Replacement Ratios.
• Based on the reserves and RRR combined, the merged company has the capacity to grow production with 5% per year.
• The growth potential is confirmed by the probable reserves (2P) – Canadian companies publish these - of 1.233 +1,103 =2.336 M BoE.
• Liquids are 61-62% of the total and gas 38-39%.
Production
• The combined production in 2025 can be 370-380 K BoE/d. Note that the merger will be only be implemented in late May 2025 so this will not be a reported number.
• After 2025 production can grow with 5%/year to 445-450 K BoE/d in 2029.
Balance sheet
• Both Whitecap and Veren had a decent balance sheet.
• The combined balance sheet will have a good equity ratio (=equity/balance sheet total) of 57.6%
• The combined long-term debt will be C$ 2,963 M.
• The long-term debt leads to a good 2025 debt/EBITDA ratio of well < 1.0.
• The balance sheet allows shareholder returns.
Profitability
• With WTI at $ 70-75/bbl and with the effects import tariffs applied, I can see in 2025 an eps of C$ 1.27-1.49 (PE= 5.4-6.3). The eps can increase to C$ 1.60-1.92 (PE=4.2-5.0) in 2029.
• In my evaluation I have included C$ 40 M in operational synergies, although Whitecap is quoting higher numbers (C$ 75 M).
• Without the effects of the US import tariffs, the eps numbers can be C$ 0.30 higher than the numbers shown above.
Shareholder returns
• The annual 2025 dividend after the merger is set at C$ 0.73.
• The dividend is equivalent to a high return of 9%.
• After the 2025 the dividends can increase.
Conclusions
Based on the latest share prices, the merged company can be an attractive investment. Reserves are ample, production growing, the balance sheet is in a good shape, the profitability is good, the PE is low and can fall further and the returns are high.
The merged company ranks a high 10th (9th without import tariffs) in my 84 oil and gas companies ranking.
Whitecap shareholders may not be happy with the drop of share price yesterday but over time they should recover their losses. Veren shareholders are real winners.
Regards
Harry
Harry