Veren Inc. (VRN.TO) Update - April 26

[dan_s]

Veren will remain in the Sweet 16 until it merges into Whitecap Resources (WCP.TO), which is expected to close May 12.
VRN.TO closed at $8.49Cdn on April 25. WCP.TO closed at $8.19 on April 25. < WCP's annualized dividend yield is 8.9%

My updated current valuation for VRN is $12.00Cdn
Three highly respected analysts have recently submitted new price targets to TipRanks.
Here are their updated price targets for Veren as a standalone company:
> $10.00Cdn by Jefferies on 4/22/2025
> $9.75Cdn by RBC Capital on 4/14/2025
> $13.65Cdn by CIBI on 4/10/2025

As of today, I am likely to replace VRN with WCP in the Sweet 16, but I need to build a forecast/valuation model for it in May.

Update on the merger from Whitecap:
On March 10, 2025, Whitecap and Veren Inc. ("Veren") announced a strategic combination (the "Combination"), to create a leading light oil and condensate producer with concentrated assets in the Alberta Montney and Duvernay. The combined company will be the largest Alberta Montney and Duvernay landholder, a prominent light oil producer in Saskatchewan and will leverage the combined asset base and technical expertise to drive incremental improvements to profitability and superior returns to shareholders.

Under the terms of the business combination agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each Veren share held. Whitecap management will lead the combined company, and the Board of Directors will be comprised of seven current Whitecap directors and four current Veren directors, including Craig Bryksa, President and CEO of Veren.

The Combination has received approval from the Competition Bureau, in the form of a No Action Letter, and Whitecap and Veren filed a joint information circular with securities regulators on April 4, 2025. Shareholder votes for both companies will occur on May 6, 2025, and upon receipt of approval by the Court of King's Bench of Alberta of the Combination, as well as other customary closing conditions, the Combination is expected to close on or about May 12, 2025.

OUTLOOK

Upon closing of the Combination, or shortly thereafter, Whitecap will provide updated 2025 production and capital guidance. The pro forma entity will be well positioned to manage through the current market volatility with its balance sheet strength, vast portfolio of high return, quick capital payout drilling opportunities and a management team that has successfully navigated through previous commodity price cycles including the COVID-19 pandemic price environment.

Our strategic priorities are as follows:

Balance Sheet Strength. Pro forma net debt at the end of 2025 is anticipated to be approximately $3.5 billion which equates to a net debt to annualized funds flow ratio of 1.0 times and 1.4 times at US$50/bbl WTI and $2.00/GJ AECO. We are targeting unutilized debt capacity of approximately $1.6 billion in 2025. Our objective is to ensure that our capital expenditures and dividends paid to shareholders are fully covered by funds flow to maintain our balance sheet strength.

Capital Expenditures. Our long-term organic production growth target is 3% – 5% per share enhanced by share repurchases with the flexibility to adjust our production growth rate to prioritize free funds flow generation. We are actively optimizing our 2025 pro forma capital programs in both the unconventional and conventional assets in response to current lower crude oil prices as well as for the cost uncertainty due to tariffs and will provide updated guidance on closing of the Combination, or shortly thereafter.

Return of Capital. The annual base dividend of $0.73Cdn per share provides shareholders with a stable and reliable cash flow stream through commodity price cycles.

The combined company's high-quality portfolio of assets, track record of execution and realization of the identified synergies will provide for greater resiliency through commodity price cycles and increased profitability going forward.

[dan_s]

Whitecap might be a better fit for our High Yield Income Portfolio. I will decide late in May.