Vitesse Energy, Inc. (VTS) is a leading non-operated oil and gas company focused on creating long-term value for its shareholders through the strategic acquisition and development of high-quality assets in the Williston Basin and other key basins across the United States. The company's commitment to disciplined capital allocation and operational efficiency has enabled it to consistently deliver strong financial and operational results, even in the face of volatile commodity price environments.

Financials

For the full year 2023, Vitesse reported annual revenue of $233.9 million, a testament to the company's ability to generate robust cash flows from its diversified portfolio of non-operated working interests. Despite the challenges posed by the COVID-19 pandemic and geopolitical tensions, Vitesse's annual net income came in at -$19.7 million, reflecting the company's prudent approach to managing its balance sheet and mitigating risk. The company's annual operating cash flow of $141.9 million and annual free cash flow of $21.3 million further underscore its financial strength and flexibility.

In the first quarter of 2024, Vitesse continued to build on its track record of success, reporting quarterly revenue of $61.2 million and a net loss of $2.2 million. The company's production during the quarter averaged 12,557 barrels of oil equivalent per day (Boe/d), with oil accounting for 71% of the total. Lease operating expenses for the quarter came in at $11.8 million, or $10.32 per Boe, reflecting the impact of severe winter weather in North Dakota, as well as elevated workover activity.

Business Overview

Vitesse's strategic focus on non-operated working interests has allowed the company to capitalize on the ongoing consolidation and optimization efforts within the Williston Basin. In the first quarter of 2024, the company announced the acquisition of several near-term development opportunities, which are expected to contribute over $40 million in incremental capital expenditures and drive material increases in production and cash flow, primarily in the fourth quarter of 2024 and into 2025.

These acquisitions, which are predominantly located in the core of the Williston Basin, are characterized by higher working interests (typically over 20%) compared to Vitesse's overall portfolio average of around 3%. The company's long-standing relationships with key operators in the region and its disciplined approach to evaluating and executing on these opportunities have been instrumental in its ability to source and secure these accretive transactions.

Capital Return

Vitesse's commitment to returning capital to shareholders is evidenced by its recently announced increase in the quarterly dividend to $0.525 per share, up 5% from the previous quarter. This decision reflects the company's confidence in the accretive nature of its recent acquisitions and its ability to generate sustainable free cash flow to support its dividend program.

Liquidity

The company's balance sheet remains strong, with total debt of $98.0 million as of March 31, 2024, and a leverage ratio of just 0.6x on a trailing 12-month EBITDA basis. Vitesse's Revolving Credit Facility, which was recently amended and upsized, provides ample liquidity to fund its ongoing acquisition and development activities, with $147.0 million in available borrowing capacity as of the end of the first quarter.

Risk Management

Vitesse's hedging program continues to play a crucial role in protecting its cash flows and supporting its dividend. As of March 31, 2024, the company had oil swaps in place covering approximately 60% of its remaining 2024 oil production at a weighted average price of $78 per barrel, as well as a portion of its 2025 oil production hedged at over $74 per barrel. This proactive approach to risk management helps to insulate Vitesse from the volatility inherent in commodity markets.

Outlook

Looking ahead, Vitesse has increased its full-year 2024 production guidance to a range of 13,000 to 14,000 Boe/d, with a 67% to 71% oil cut. The company has also raised its 2024 capital expenditures guidance to $130 million to $150 million, reflecting the incremental investment associated with the recently announced near-term development acquisitions.

Conclusion

Vitesse's proven track record of value creation, disciplined capital allocation, and commitment to shareholder returns make it a compelling investment opportunity in the current energy landscape. The company's strategic focus on non-operated working interests, coupled with its ability to identify and execute on accretive acquisition opportunities, positions it well to continue delivering consistent returns to its shareholders.