Vital Energy (VTLE) Q1 Results

[dan_s]

First-Quarter 2025 Highlights

Reported a net loss of $18.8 million, Adjusted Net Income of $89.5 million and cash flow from operating activities of $351.0 million. < Adjusted Net Income beat my forecast of $57.2 million. See note below that explains the Reported Net Loss and why it is misleading.

Adjusted Operating Cash Flow of $317.2 million beat my forecast of $264.5 million.

Generated Consolidated EBITDAX of $359.7 million and Adjusted Free Cash Flow of $64.5 million

Reported in-line capital investments of $252.7 million, excluding non-budgeted acquisitions and leasehold expenditures

Reported lease operating expense ("LOE") of $103.5 million or $8.20 per BOE, beating guidance < Compares to the LOE rate of $9.50/boe that I used in my forecast.

Produced 140.2 thousand barrels of oil equivalent per day ("MBOE/d") and oil of 64.9 thousand barrels of oil per day ("MBO/d"), within guidance < Compares to my forecast of 136,000 boepd, and 63,920 bpd of oil.

Reduced total and Net Debt by $145.0 million and $133.5 million, respectively, through free cash flow, net changes in working capital, and the sale of non-core assets < Reducing debt is what will have the most impact on the share price.

"Our first quarter performance highlights the quality of our inventory and the ongoing success of our optimization efforts," said Jason Pigott, President and Chief Executive Officer. "Our team is focused on generating sustainable efficiency gains and lower costs across our business and delivering on our targets for Adjusted Free Cash Flow and debt reduction."

"Our hedge position for the remainder of the year has reduced our near-term price risks and today we have about 90% of our expected oil production swapped at around $71 per barrel WTI," continued Pigott. "The quality of our assets and structure of our services contracts provide tremendous flexibility in how we choose to allocate future capital. We are closely monitoring commodity prices and services costs and have multiple options to quickly adjust our plans."
--------------------------------------
Here is why the Report Net Loss is misleading. SEC / GAAP accounting rules for the Ceiling Test are misleading because (a) they use previous oil & gas prices (b) only reserves expected to be produced in the next 5-years are included in proved reserves and (c) ignores the Company's hedges.

Financial Results. The Company had a net loss of $18.8 million, or $(0.50) per diluted share. Results were impacted by a non-cash pre-tax impairment loss on oil and gas properties of $158.2 million. Adjusted Net Income was $89.5 million, or $2.37 per adjusted diluted share. Cash flows from operating activities were $351.0 million and Consolidated EBITDAX was $359.7 million.

The impairment was the result of the full cost ceiling limitation, driven in part by the decline in the trailing 12-month oil price calculation, and excludes the value of $145.9 million for the Company's commodity derivative positions and only includes the 185 proved undeveloped locations in the Company's reserve report out of approximately 925 inventory locations.

[dan_s]

TipRanks: "In the last 3 months, 10 ranked analysts set 12-month price targets for VTLE. The average price target among the analysts is $24.20." < The 10 price targets range from $9 (by Bank of America) and $47 by Neal Dingmann at Truist Financial, who I have a lot of respect for. The next lowest price target is $23 by Mark Lear at Piper Sandler, who seems to be using low oil & gas prices in all of his forecast models.

At the time of this post VTLE is trading at $17.68, up more than 4% the day after releasing Q1 results.

For some reason that I cannot explain, a few of the Wall Street Gang have Vital in the "Penalty Box".

Vital does have some work to do on the balance sheet, but the Company should continue to generate more than enough operating cash flow to cover all of their 2025 capital program. Q1 2025 free cash flow beat my forecast.