Energy Prospectus

Outstanding Q4 Results.

Veren reported some disappointing results on a handful of wells in the 3rd quarter and the unforgiving Wall Street Gang caused the stock to be grossly oversold. I expect VRN to be one of the top performing stocks in the Sweet 16 when the FEAR of Trump Tariffs fades, which it will.
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This morning Veren Inc. ("Veren" or the "Company") (TSX: VRN) (NYSE: VRN) announced its operating and financial results for the fourth quarter and full year ended December 31, 2024.

KEY HIGHLIGHTS

Generated significant excess free cash flow of $642 million in 2024, through focused development of a high-quality asset base.

Returned $386 million, or 60 percent of excess cash flow, to shareholders through dividends and share repurchases.

Reduced net debt by 35 percent through a combination of excess cash flow generation and proceeds from dispositions.

Replaced 173 percent of 2024 production on a 2P reserves basis, primarily driven by additions in the Alberta Montney.

Expect to generate excess cash flow of $625 million to $825 million in 2025 based on US$70/bbl to US$75/bbl WTI.

"Last year marked a continued advancement in the execution of our long-term strategy as we significantly strengthened our balance sheet, consistently returned meaningful capital to our shareholders and achieved strong reserve additions," said Craig Bryksa, President and CEO of Veren. "We are off to a great start in 2025 and remain focused on maximizing the long-term potential of our assets, supporting our commitment to shareholder returns and maintaining a strong financial position."

FINANCIAL HIGHLIGHTS

Fourth Quarter 2024

Adjusted funds flow totaled $619.6 million, or $1.01 per share diluted, driven by a strong operating netback of $36.56 per boe. < This stock is trading for less than 2X annualized operating cash flow per share, which is insane for a company of this size and quality.

Development capital expenditures, which included drilling and development, facilities and seismic costs, totaled $363.0 million. This included capital spending on facilities projects and improvements to further optimize the Company's completions design in the Alberta Montney.

The Company generated excess cash flow of $203.8 million, or $0.33 per share diluted. < Double digit free cash flow multiple.

Veren closed its previously announced strategic sale of certain infrastructure assets in the Alberta Montney and directed net cash proceeds of $400 million to further strengthen the balance sheet. As at December 31, 2024, Veren's net debt was $2.48 billion, or 1.0 times annualized adjusted funds flow, reflecting a reduction of $481.5 million in the quarter.

The Company reported adjusted net earnings from operations of $247.0 million, or $0.40 per share diluted. < Crushed my forecast of $127.3 million Adjusted Net Income.

Shareholder Returns

Veren returned $105.7 million to shareholders during the quarter. The Company paid a base dividend of $0.115 per share, or $70.7 million, and repurchased 4.6 million shares for $35.0 million through its normal course issuer bid during the quarter. < Dividend yield over 6%.

Subsequent to the quarter, Veren's Board of Directors declared a quarterly cash base dividend of $0.115 per share payable on April 1, 2025, to shareholders of record on March 15, 2025.

OPERATIONAL HIGHLIGHTS

Fourth Quarter 2024

Veren achieved fourth quarter average production of 188,721 boe/d, comprised of 64 percent oil and liquids, including strong December production of 190,296 boe/d. The Company's Alberta Montney and Kaybob Duvernay assets contributed 77 percent of total production in the fourth quarter, with production from these key assets growing by 10 percent as compared to the first quarter of 2024.

Veren brought two multi-well pads on stream in late fourth quarter in the Karr South area of its Alberta Montney asset which were completed using the single-point entry ("SPE") design. These pads generated an average 30-day initial production ("IP30") rate which exceeded the average type wells in the area by 30 percent, while producing at a strong light oil rate of 80 percent. < Timing of these well completions should push Q1 2025 production over 190,000 Boepd.

During the fourth quarter, Veren initiated the capacity expansion of its Gold Creek West facility in the Alberta Montney to accommodate an expected increase in production from future pads. The Company also invested in significant gas egress infrastructure in the area and has successfully connected to multiple third-party gas plants to minimize future downtime. Building on Veren's strong results from wells brought on stream in Gold Creek West in early 2024, the Company expects to bring a multi-well pad on stream in the area in late first quarter 2025.

In the Kaybob Duvernay, the Company brought two multi-well pads on stream in the fourth quarter. These pads generated an average IP30 rate which exceeded the average type wells in the area by 25 percent, while producing at a strong condensate rate of 70 percent.

Veren achieved responsibly sourced gas (RSG) certification under Equitable Origin's EO100™ Standard for Responsible Development for its Alberta Montney asset's natural gas production. The Company obtained this rigorous certification following an independent assessment of Veren's performance targets within five areas: corporate governance, transparency and ethics; human rights, social impacts and community development; Indigenous Peoples' rights; fair labour and working conditions; and climate change, biodiversity and environmental.

2025 Guidance

Veren has had a strong start to 2025, generating 191,000 boe/d of production in January. The Company remains on track to meet its previously released full year annual average production guidance of 188,000 to 196,000 boe/d (65% oil and liquids), based on its development capital expenditures budget of $1.48 billion to $1.58 billion. Veren's capital program is weighted to the first half of 2025, while its production is weighted to the second half of the year due to the timing of its development program and planned facilities downtime in early 2025. The Company will remain disciplined in the execution of its capital program, with the flexibility to adjust spending in response to market conditions in order to maximize long-term shareholder value. < Based on my forecast, Veren should have a production exit rate in December, 2025 above 195,000 Boepd.

Approximately 85 percent of the Company's 2025 budget is allocated to its short-cycle Alberta Montney and Kaybob Duvernay assets, which provide top quartile returns, scalability and quick well payouts. Veren's remaining capital is allocated to its long-cycle, low-decline Saskatchewan assets, which generate significant excess cash flow.

The Company continues to hedge a portion of its production as part of its ongoing commodity marketing and diversification program. Veren has hedged 35 percent of its oil and liquids production and 35 percent of its natural gas production for 2025, net of royalty interest. The Company has also diversified its natural gas pricing exposure, resulting in the majority of its production through 2026 receiving a combination of fixed prices and pricing related to major U.S. markets. < This is very good to know.

Veren expects to generate excess cash flow of $625 million to $825 million (US$70/bbl to US$75/bbl WTI and $2.25/Mcf AECO) in 2025, which is weighted to the second half of the year based on the timing of its development program and expected production growth. < This agrees with my forecast.

The Company will continue to target the return of 60 percent of its annual excess cash flow to shareholders through the base dividend and share repurchases, with the remaining 40 percent directed toward the balance sheet. Veren plans to increase the percentage of excess cash flow returned over time as the balance sheet strengthens further.

Prior to today's strong results and guidance, my valuation was $15.00Cdn per share, which is almost double where the stock closed today.

Note from HFI Research:

"Thursday morning, Veren reported fourth-quarter results. Its operating and financial performance caused its stock to trade 8.9% higher. Even after yesterday’s pop, Veren’s shares are among the most attractive in the North American oil patch. Investors can obtain a 6% dividend yield and the prospect of more than a double in the share price over the next two years.
Q4 Operating Results Shine: Veren’s fourth-quarter operating results were supportive of my investment thesis, which I outlined in previous articles."