Energy Prospectus

Q4 production slightly lower than my forecast, but guidance below is good. I am expecting Q1 and Q2 2025 production to average 190,000 Boepd thanks to most well completions coming after Spring BreakUp that ends in May (happens each year in Western Canada), then ramp up to over 195,000 Boepd in Q4. My forecast model assumes 2026 production will be 200,000 Boepd, which I believe to be conservative. My updated forecast / valuation model for Veren will be posted to the EPG website later today. Important fact: ~48% of Veren's natural gas is sold in the U.S.
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From today's press release:

Veren exited 2024 with strong December production of 190,296 boe/d, and fourth quarter average production of 188,721 boe/d (up from 184,829 Boepd in Q3 2025). The Company's full year 2024 annual average production was 191,163 boe/d, which was in-line with its guidance of 191,000 boe/d.

Veren remains on track with its 2025 annual average production guidance of 188,000 to 196,000 boe/d (65% oil and liquids) based on development capital expenditures of $1.48 billion to $1.58 billion. The Company's capital program is weighted to the first half of the year, while its production is weighted to the second half based on the timing of its development program and planned facilities downtime in early 2025.

Veren expects to generate excess cash flow of $575 million to $775 million (US$70/bbl to US$75/bbl WTI and $2.00/Mcf AECO) in 2025. Due to the timing of its capital expenditures spending and production profile, a significant portion of the Company's excess cash flow in 2025 is expected to be realized in the second half of 2025.

My updated current valuation of VRN is $15.00Cdn / $10.50US per share. At the time of this post VRN was trading at $7.93Cdn per share.

Veren's dividends are $0.115Cdn/quarter. < Annualized yield of 5.8% base on the current share price.

My forecast for 2025 is very close to the TipRanks' consensus forecasts for net income per share and operating cash flow per share. Only 1 of 7 forecasts submitted to TipRanks has been recently updated. All of the older ones are based on much lower natural gas prices.

TipRanks: "In a report released yesterday, Michael Harvey from RBC Capital maintained a Buy rating on Veren, with a price target of C$10.00. The company’s shares closed last Friday at $5.45US."

I think there is a good chance that Veren exits 2025 with production over 200,000 Boepd, which will make my 2026 forecast too conservative.

The PV10 Net Asset Value based only on proved reserves (P1) per share as of December 31, 2024 should be over $9.25Cdn.

Bottomline: VRN is a cheap stock, pays a nice dividend and it has a lot of high-quality "Running Room".

I cannot see anything that justified VRN trading below book value.
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There is still a lot of FEAR of "Drill Baby Drill" and Trump Tariffs on Canada's exports of oil & gas to the U.S. In my opinion, those FEARs are unlikely to become reality. Trump wants Canada to stop illegals and drugs from coming across the northern border, which is not an unreasonable request. Plus, a tariff on Canadian oil would raise U.S. diesel prices by quite a bit.

Veren's Q3 2024 Operational Update included admission that the new completion method that they tried on several horizontal wells within their Montney acreage did not work. Those well results were much worse than previous well results in the same area. Today, Veren announced good Q4 operating results and an encouraging reserve report. Petroleum engineers like to try new things from time-to-time. Some things work and some things don't. "Stuff Happens" in the oilfield.

Note below from Jon Costello at HFI Research on 1-21-2025

Note: Dollar values are in Canadian dollars unless otherwise specified.

My investment thesis for Veren (VRN) boiled down to main two points:

1. The company’s geology is very good despite its recent terrible well results.
2. There are no more shoes to drop for shareholders.

Both points were validated this morning when Veren reported the results of its 2024 reserve report.

The VRN bear thesis held that the company’s bad well results reported on October 31, 2024, reflected problems with its geology. If that were the case, VRN would have reported significant reserve impairments in its 2024 reserve report.

With the reserve report now in hand, we can confirm that not only did VRN report no impairments, but it reported significant reserve extensions, as well as positive technical revisions. The alleged problem area—VRN’s Montney acreage—contributed 65% to the reserve additions, with the remaining coming from its Duvernay position.
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Bottomline: Veren Energy (VRN) is a Canadian mid-cap (190,000 Boepd of current production) that is profitable, should generate approximately $700Cdn million of free cash flow in 2025, pays a decent dividend and has a lot of high-quality "Running Room" in Western Canada. The current share price is just over 2X my operating CFPS forecast for 2025.