Energy Prospectus

Raises estimates for full-year 2023 oil and total production

Reduces expectations for 2023 capital investments

2024 outlook reflects ongoing oAperational synergies and capital-efficient development

TULSA, OK, Aug. 08, 2023 (GLOBE NEWSWIRE) -- Vital Energy, Inc. (NYSE: VTLE) ("Vital Energy" or the "Company") today reported its second-quarter 2023 financial and operating results. Supplemental slides have been posted to the Company's website and can be found at www.vitalenergy.com. A conference call and webcast to discuss the results is planned for 7:30 a.m. CT, Wednesday, August 9, 2023. Participation details can be found within this release.

Highlights

Reported 2Q-23 net income of $294.8 million, Adjusted Net Income of $78.6 million and cash flows from operating activities of $248.9 million < Adjusted Net Income beat my forecast of $67.3 million.

Generated 2Q-23 Consolidated EBITDAX of $239.5 million and Free Cash Flow of $60.7 million

Reported 2Q-23 oil and total production that exceeded the high-end of Company guidance, producing 44.4 thousand barrels of oil per day ("MBO/d"), a Company record, and 90.0 thousand barrels of oil equivalent per day ("MBOE/d") < Higher than my forecast.

Reported 2Q-23 incurred capital expenditures below the low-end of guidance, investing $149 million, excluding non-budgeted acquisitions and leasehold expenditures

Closed previously announced accretive Midland and Delaware basin acquisitions, adding approximately 35,000 net acres and 130 gross high-value, oil-weighted locations < More high-quality "running room" is key to my valuation.

"Vital Energy continued to deliver exceptional results in the second quarter, exceeding production expectations while controlling capital investments and operational expenses and delivering more than $60 million of Free Cash Flow," stated Jason Pigott, President and Chief Executive Officer. "We are highly confident in our ability to execute on our 2023 plan as we further drive down costs, enhance base production and efficiently develop our high-margin inventory to maximize Free Cash Flow generation and reduce debt."

"In the second quarter, we closed two accretive, high-value oil acquisitions, further growing our inventory of capital efficient, oil-weighted development opportunities," continued Mr. Pigott. "These transactions enhance our operational scale and create sustainable synergies that enhance our Free Cash Flow outlook in 2023 and 2024."

2023 Outlook

Production. The Company recently increased expectations for full-year 2023 production to incorporate second-quarter 2023 outperformance and production associated with the Forge acquisition. Higher than expected volumes year-to-date were primarily related to stronger base production, which exceeded expectations for both oil and total production by approximately 10%. As a result, full-year 2023 oil production guidance is further increased to 41.9 - 43.4 MBO/d (previously 40.0 - 43.0 MBO/d) and total production guidance to 87.0 - 89.0 MBOE/d (previously 82.0 - 86.0 MBOE/d).

Capital Investments. Vital Energy recently updated full-year 2023 capital investment guidance to incorporate activity associated with the Forge acquisition. To optimize completions activities across the Midland and Delaware basin programs, Vital Energy expects to utilize a second completions crew in the Midland Basin commencing in late November 2023, a month earlier than previously planned. The additional capital expenditures are expected to be offset by operational efficiencies and moderating inflation. Accordingly, full-year 2023 capital investment guidance is reduced to $665 - $695 million (previously $675 - $725 million).

Operating Expenses. Total LOE is expected to increase slightly in the second half of the year, with unit LOE varying with production volumes. Unit LOE in the second half of 2023 is estimated at $7.40 per BOE.

Free Cash Flow. Through the first half of 2023, Vital Energy generated $57 million of Free Cash Flow. Integration of the Forge acquisition enhances the outlook for Free Cash Flow, which is expected to be approximately $90 million in the second half of 2023, at $80 WTI. Full-year 2023 Free Cash Flow is estimated to be approximately $150 million.

My valuation of $122 is too low, which is less than 3X annualized operating cash flow per share.