Executive Summary / Key Takeaways

• Strategic Evolution and Operational Control: Vitesse Energy has strategically transformed from a purely non-operated model to a hybrid E&P company through the Lucero acquisition, gaining critical operational control and enhancing capital allocation flexibility in the Bakken and beyond.
• Robust Financial Performance and Deleveraging: The company delivered strong Q2 2025 results, with total revenue increasing 22.76% year-over-year to $81.75 million and net income reaching $24.7 million, bolstered by a $24 million legal settlement. This performance, coupled with disciplined capital deployment, reduced total debt to $106 million, achieving a low net debt to adjusted annualized EBITDA of 0.4x.
• Unwavering Dividend Commitment: Vitesse maintains a steadfast commitment to its $2.25 per share annualized dividend, supported by a strong balance sheet, a disciplined hedging strategy (71% of remaining 2025 oil production hedged at $69.83/bbl), and a flexible capital expenditure approach.
• Technological Edge with Luminis: Vitesse leverages its proprietary Luminis data system, a powerful analytical tool capable of rapidly evaluating thousands of wells across multiple basins, providing a significant competitive advantage in identifying and executing high-return acquisition and development opportunities.
• Opportunistic Growth in Volatile Markets: Positioned for opportunistic growth, Vitesse's flexible CapEx and stringent return hurdles enable it to capitalize on attractive acquisition opportunities, particularly in a commodity price environment where oil in the $60s is considered a "sweet spot" for deal flow.

Vitesse's Evolving Playbook in the Bakken

Vitesse Energy, Inc. (VTS) has rapidly carved out a distinctive niche in the dynamic oil and gas exploration and production (E&P) landscape since its spin-off from Jefferies Financial Group in January 2023. Initially focused on acquiring and developing non-operated working and royalty interests, primarily in the prolific Bakken and Three Forks formations of the Williston Basin, Vitesse has consistently prioritized returning capital to shareholders through a meaningful dividend. This foundational strategy has been tested and refined amidst the inherent volatility of commodity markets, geopolitical shifts, and evolving industry dynamics.

The E&P sector, particularly in shale plays like the Bakken, is characterized by cyclical commodity prices, intense competition for acreage, and a continuous drive for capital efficiency. Vitesse's early success stemmed from its asset-light, non-operated model, which allowed it to participate in high-quality drilling programs without the full operational burden. However, the company recognized the strategic imperative of greater control and adaptability. This led to a "step change" in March 2025 with the completion of the Lucero Energy Corp. acquisition, a stock-for-stock transaction that introduced an "operated leg" to Vitesse's business. This strategic pivot provides Vitesse with additional affirmative decision-making ability and enhanced control over its capital spending, allowing it to "toggle its activity in a new way" to adapt quickly to the macro environment.

The Luminis Advantage: Technology as a Competitive Moat

At the heart of Vitesse's strategic agility and competitive differentiation lies its proprietary data system, Luminis. This advanced technological platform is not merely a data aggregator; it is a powerful analytical engine that scrapes and processes vast amounts of well data from various basins, including the Haynesville, Mid-Con, Permian, Denver-Julesburg (DJ), and Powder River. Luminis enables Vitesse to analyze deals involving thousands of wells literally within days, a speed and scale that few competitors can match.

The tangible benefits of Luminis are profound and quantifiable for investors. It significantly enhances Vitesse's ability to identify and evaluate high-return acquisition and development opportunities with exceptional efficiency. This rapid, data-driven assessment minimizes due diligence time and costs, allowing Vitesse to be highly selective and opportunistic in its capital allocation. For instance, in a consolidating market where deal flow is abundant, Luminis provides a critical edge, ensuring that Vitesse can quickly discern the "fat pitches" that meet its stringent return hurdles, thereby optimizing its capital deployment and supporting its dividend-focused strategy. This technological moat underpins Vitesse's ability to maintain capital efficiency and make informed decisions that directly contribute to its financial performance and long-term growth.

A Strategic Pivot: The Lucero Acquisition and Hybrid Model

The Lucero acquisition, finalized on March 7, 2025, marked a pivotal moment in Vitesse's evolution. This transaction was not merely an expansion of acreage; it was a strategic integration that fundamentally altered Vitesse's operational capabilities. Lucero's assets, performing as underwritten, brought a significant operated component to Vitesse's portfolio, with an average working interest of 75%-80% in its producing wells, a stark contrast to Vitesse's legacy average of approximately 3%. This hybrid model offers Vitesse unprecedented flexibility, allowing it to leverage its non-operated portfolio to enhance the value of its operated assets through strategic trading and development.

The integration has already yielded positive results, with Vitesse realizing "better G&A synergies than we underwrote." This operational control extends Vitesse's acquisition lens, enabling it to pursue a broader range of opportunities, including gas assets, which were not a primary focus in the past. The Lucero acquisition added approximately 25 net locations, equating to about 10 years of inventory life, further solidifying Vitesse's long-term development pipeline and enhancing its risk management capabilities through a more diversified asset base.

Financial Resilience and Operational Strength

Vitesse's financial performance in the second quarter of 2025 underscored the resilience of its asset base and the discipline of its team. The company reported total revenue of $81.75 million for the three months ended June 30, 2025, a substantial 22.76% increase from the same period in 2024. This growth was primarily driven by a 40% increase in production volumes, largely attributable to the Lucero acquisition and ongoing development activities. Oil revenue stood at $66.61 million, while natural gas revenue saw an impressive 512.87% year-over-year surge to $15.14 million. Net income for the quarter reached $24.7 million, with adjusted EBITDA at $61.1 million.

A significant highlight was the successful settlement of a multi-year lawsuit with Hess (HES), a key operating partner, which resulted in a one-time cash payment of $24 million. This settlement positively impacted the financials, contributing $3.3 million to oil revenue, $13.6 million to gas revenue, and a $7.1 million reduction in general and administrative (G&A) expenses. The legal resolution also led to improved realized natural gas prices, achieving a 130% realization relative to NYMEX in Q2 2025, compared to 52% in Q2 2024. While lease operating expenses (LOE) per Boe increased due to Lucero integration and workover costs, G&A expenses are expected to decline to the "mid-3s" per Boe as production scales, leveraging the existing team. Depletion, depreciation, amortization, and accretion (DDA) increased with higher production, but the rate per Boe decreased, driven by the newly acquired Lucero properties.

Vitesse's balance sheet remains robust. Total debt was reduced to $106 million in Q2 2025, resulting in a low net debt to adjusted annualized EBITDA ratio of just 0.4x.

The working capital deficit significantly improved from $49.4 million at December 31, 2024, to $3.8 million at June 30, 2025, reflecting increased current commodity derivatives and revenue receivables, alongside decreased payables. The company's Revolving Credit Facility boasts a $315 million borrowing base and $250 million in elected commitments, with only $106 million outstanding, providing ample liquidity for future operations and strategic initiatives.

Competitive Landscape: Carving a Niche in a Consolidating Basin

Vitesse operates within a highly competitive E&P sector, primarily in the Bakken, where it positions itself as a specialized, agile player. The Bakken basin has experienced significant consolidation, with the number of operators Vitesse works with decreasing from approximately 40 to around 30. Currently, five key operators account for roughly 75% of Vitesse's total production, indicating a more concentrated operational environment. Larger, more integrated players like Continental Resources (CLR), Hess Corporation, Marathon Oil (MRO), and EOG Resources (EOG) dominate the broader E&P landscape.

Compared to these industry giants, Vitesse's competitive advantages stem from its strategic adaptability, asset-light model, and the analytical power of Luminis. Its focus on non-operated interests, now complemented by operated assets, allows for efficient capital deployment and reduced direct operational risks. Vitesse's TTM dividend yield of 8.30% significantly outpaces CLR (0.000087%), HES (1%), MRO (2%), and EOG (3%), making it particularly attractive to income-focused investors. However, Vitesse's smaller scale and newer market presence mean it generally lags these larger competitors in overall growth rates, market share capture, and certain profitability metrics. For instance, Vitesse's TTM gross profit margin of 26.82% and operating profit margin of 13.40% are lower than CLR (92% gross, 37% operating), HES (79% gross, 37% operating), MRO (42% gross, 35% operating), and EOG (43% gross, 35% operating).

The industry is also seeing trends towards enhanced capital efficiency through technologies like 3-mile and 4-mile laterals and refrac programs, which Vitesse's operators are adopting. The potential impact of Chevron (CVX) taking control of Hess assets in the Bakken is viewed with optimism by Vitesse, given Chevron's strong performance in other basins. While the Bakken's oil takeaway capacity is robust, there remains a need for more gas processing and NGL takeaway capacity. Indirect competition from the clean energy sector, exemplified by companies like MYR Group (MYRG), poses a long-term demand shift risk for all fossil fuel producers, though Vitesse's focus on high-return assets and efficient operations aims to mitigate this.

Outlook and Shareholder Value: The Dividend as a Cornerstone

Vitesse's outlook for 2025 reflects a continued commitment to its core strategy of capital efficiency and shareholder returns. The company's annual guidance for 2025 production remains unchanged at 15,000 to 17,000 BOE per day, with an anticipated oil cut of 64% to 68%. Cash capital expenditures for the year are projected to be $80 million to $110 million, weighted towards the first half. This guidance, initially revised in Q1 2025, reflects a 32% reduction in CapEx at the midpoint for only a 9% decline in production, showcasing Vitesse's capital discipline in response to commodity price volatility.

The company's dividend remains a cornerstone of its value proposition. The Board declared a quarterly cash dividend of $0.5625 per share for Q3 2025, maintaining an annualized rate of $2.25 per share. This commitment is buttressed by a robust hedging program, with approximately 71% of remaining 2025 oil production hedged at a weighted average price of $69.83 per barrel. Additionally, nearly half of the remaining 2025 natural gas production is hedged with attractively priced collars, with a weighted average floor of $3.73 and a ceiling of $5.85 per MMBtu. Significant hedges are also in place for 2026 and Q1 2027, providing substantial revenue visibility and stability.

Management emphasizes that Vitesse is not bound by a fixed capital budget, instead allocating capital based on a strict returns-driven hierarchy. This flexibility allows the company to be opportunistic, especially when oil prices are in the $60s, which is considered a "sweet spot" for acquisitions. The company is actively pursuing both near-term development deals and larger, "chunkier" asset acquisitions that are dividend-supportive or accretive, maintaining high hurdle rates. This strategic posture, combined with a strong balance sheet, positions Vitesse to capitalize on market disruptions and consolidation trends, ensuring long-term value creation for its shareholders.

Conclusion

Vitesse Energy, Inc. has demonstrated a remarkable evolution, transforming from a focused non-operated entity into an agile, hybrid E&P player. This strategic shift, spearheaded by the accretive Lucero acquisition, has provided Vitesse with invaluable operational control and enhanced flexibility in capital allocation. Bolstered by robust financial performance, a disciplined approach to debt reduction, and a steadfast commitment to its substantial dividend, Vitesse is well-positioned to thrive in a volatile commodity market.

The company's proprietary Luminis technology provides a distinct competitive advantage, enabling rapid, data-driven identification of high-return opportunities. This technological edge, combined with a flexible capital expenditure philosophy and a proactive hedging strategy, underpins Vitesse's ability to generate consistent shareholder returns. As the E&P landscape continues to consolidate, Vitesse's unique blend of operational control, financial prudence, and technological prowess positions it as a compelling investment for those seeking both income and opportunistic growth in the energy sector.