Vital Energy (VTLE) Valuation Update - May 9

[dan_s]

At the time of this post VTLE was trading at $51.47. < Below book value and less than 2X 2024 operating cash flow per share.

I have updated my forecast/valuation model for Vital Energy for their Q1 results and updated guidance, which looks too conservative to me since they beat their Q1 production guidance by a wide margin and they are completing more wells in Q2. 2024 well results are beating expectations. Horseshoe wells could significantly improve well level economics in several areas.

My 2024 forecast model is based on full-year production of 121,000 Boepd, which compares to Q1 production of 124,719 Boepd. My 2025 forecast is based on production of 122,000 Boepd.

Vital has a high percentage of their crude oil production in 2024 hedges: over 100% in Q3 2024, which significantly reduces commodity price risk. They have free cash flow locked in for 2024.

The only negative that I see, is that the balance sheet is a bit over-leveraged, but not by much and they have no near-term debt problems. Operating cash flow should be over $1 billion, more than enough to cover this year's capex budget of ~$800 million.

My valuation increases by $3 to $105/share, using an operating CFPS multiple of just 3.25X. < My 2024 CFPS forecast of $27.28 compares to TipRanks CFPS forecast of $28.73. < Vital's Q1 Adjusted Operating CFPS was $7.12.