Executive Summary / Key Takeaways

• Vitesse Energy ($VTS) is strategically transforming its business model from a predominantly non-operated E&P to a hybrid model, significantly enhanced by the Lucero Energy acquisition, which introduces an "operated leg" for greater capital control and decision-making flexibility.
• The company demonstrates robust financial health, marked by strong production growth (up 40% in Q3 2025 year-over-year) driven by strategic acquisitions and efficient development of extended laterals, alongside a disciplined capital allocation approach that prioritizes shareholder returns.
• Vitesse leverages advanced technological capabilities, including its proprietary "Luminis" data engine and a focus on economically superior 3- and 4-mile laterals, to optimize asset performance, reduce costs, and identify high-return opportunities across its Bakken and Central Rockies acreage.
• A conservative balance sheet, low leverage (0.65x net debt to adjusted annualized EBITDA in Q3 2025), and a disciplined hedging program (60% of Q4 2025 oil production hedged at nearly $70/barrel) underpin a reliable and growing dividend, currently at an annualized rate of $2.25 per share.
• The company's outlook for 2025 anticipates continued production growth (17,000-17,500 Boe/day) and strategic capital expenditures ($110-$125 million), with management actively pursuing accretive "chunky" acquisitions, particularly when oil prices are in the $60s, to further bolster shareholder value.

The Hybrid Model: A New Chapter for Vitesse Energy

Vitesse Energy, Inc. ($VTS) has carved a distinct niche in the North American oil and natural gas landscape, evolving from its 2023 spin-off from Jefferies Financial Group (JEF) into a dynamic energy producer. Initially focused on acquiring, owning, and developing non-operated working and royalty interests primarily in the prolific Bakken and Three Forks formations of the Williston Basin, Vitesse has strategically expanded its operational footprint. This evolution culminated in the pivotal acquisition of Lucero Energy Corp. on March 7, 2025, a move that introduced an "operated leg" to Vitesse's strategy, fundamentally reshaping its business model and enhancing its control over capital deployment and operational decisions. This strategic shift positions Vitesse as a more agile and opportunistic player in an industry often characterized by cyclical volatility.

The company's core strategy revolves around creating long-term stockholder value through profitable asset acquisition, development, and production, all while maintaining a strong balance sheet and delivering a meaningful dividend. Vitesse’s asset base extends beyond the Williston Basin to include non-operated interests in the Central Rockies, specifically the Denver-Julesburg and Powder River Basins. This diversified geographic presence, coupled with its hybrid operational model, allows Vitesse to adapt quickly to the changing macro environment, a critical capability in the highly cyclical oil and gas industry.

Technological Edge: The Power of Luminis and Extended Laterals

A key differentiator for Vitesse lies in its sophisticated technological approach to asset management and development. The company leverages its proprietary data engine, "Luminis," which scrapes and analyzes vast amounts of data from various basins, including the Bakken, Haynesville, Mid-Con, Permian, DJ, and Powder River. This powerful tool enables Vitesse to analyze deals involving thousands of wells within days, providing a significant advantage in identifying and evaluating high-return acquisition opportunities. The strategic intent behind Luminis is to enhance decision-making speed and accuracy, contributing directly to Vitesse's competitive moat by allowing it to act decisively on economic opportunities that might be overlooked by less technologically advanced competitors.

Vitesse also benefits significantly from advancements in drilling and completion technologies, particularly the increasing prevalence of extended laterals. Approximately half of the Authorization for Expenditure (AFE) proposals Vitesse received over the past year have been for 3- and 4-mile laterals, with 1-mile laterals no longer common. These extended laterals are delivering strong economic results through lower drilling and completion costs per lateral foot, enhancing the value of Vitesse's assets. For instance, AFE costs on 2-mile laterals declined about 5% and on 3-mile laterals about 8% between Q4 2024 and Q1 2025. This technological efficiency is crucial for Vitesse, as it allows the company to generate returns comparable to those historically seen in the core Bakken, even as drilling activity progresses into areas where Vitesse holds concentrated positions outside the traditional core. The company estimates it has over 2 million net lateral feet of development remaining on its asset, translating to more than 200 net 2-mile equivalent wells. This extensive inventory, coupled with efficient drilling techniques, underpins Vitesse's long-term production potential and capital efficiency.

Strategic Evolution and Operational Milestones

The Lucero Energy acquisition on March 7, 2025, marked a transformative moment for Vitesse. This stock-for-stock transaction was immediately accretive to key financial metrics, bolstering the dividend and strengthening the balance sheet. Lucero brought an average working interest of 75% to 80% in its producing wells, significantly higher than Vitesse's legacy average of approximately 3% across its 7,000 properties. This increased operational control allows Vitesse to "toggle our activity in a new way," providing additional flexibility in capital spending.

A testament to the successful integration of Lucero assets, Vitesse's operating team turned to production two gross, 1.9 net drilled but uncompleted wells (DUCs) in late September 2025. These wells are exceeding initial oil and natural gas production expectations and were completed approximately $2 million, or 15%, under budget. This operational success highlights Vitesse's capability to execute on its operated strategy efficiently. The company continues to evaluate a broader operated drilling plan for 2026 and 2027, emphasizing that any development will proceed only at a cadence and return thresholds that strengthen the dividend.

Further enhancing its operational and financial position, Vitesse successfully settled a multi-year lawsuit with Hess (HES), a key operating partner, effective May 28, 2025. This settlement resulted in a one-time cash payment of $24 million, which was recorded as an increase to oil and gas revenue and a reduction to general and administrative expenses. More strategically, Vitesse elected to take virtually all of its gas production from Hess-operated wells in-kind starting July 1, 2025, and entered into long-term gas gathering, processing, and marketing agreements with Hess affiliates. This move is expected to improve realized natural gas prices, with an estimated improvement of $2.5 million to $3 million for the first half of the year.

Financial Performance and Robust Health

Vitesse Energy's financial performance in the first nine months of 2025 reflects the positive impact of its strategic initiatives and operational execution. Total revenue for the three months ended September 30, 2025, increased by 16% year-over-year to $67.44 million, driven by a 40% increase in production volumes. For the nine months ended September 30, 2025, total revenue also grew by 16% to $215.37 million, supported by a 33% increase in production volumes. This production growth was a direct result of acquisition and development activity, including the Lucero acquisition.
While average realized prices per Boe before hedging decreased by 17% and 13% for the three and nine months ended September 30, 2025, respectively, the increase in production volumes largely offset this, contributing approximately $19.10 million and $53.40 million to revenue for the respective periods. The company reported a net loss of $1.31 million for the third quarter of 2025, but a net income of $26.02 million for the nine months ended September 30, 2025. Adjusted EBITDA for Q3 2025 was $41.6 million, and for Q2 2025, it was $61.1 million, reflecting the impact of the legal settlement.

Operating expenses show a nuanced picture. Lease operating expense (LOE) per Boe increased to $11.05 in Q3 2025 from $9.71 in Q3 2024, partly due to workover costs and transportation expenses. However, management anticipates LOE to be "slightly lower" going forward as workovers conclude. General and administrative (G&A) expense, while increasing in absolute terms due to incremental costs associated with becoming an operator, decreased on a per Boe basis to $3.44 in Q3 2025 from $4.37 in Q3 2024, benefiting from economies of scale due to a 40% production increase. Excluding litigation and Lucero acquisition transaction costs, G&A per Boe for the nine months ended September 30, 2025, decreased to $3.64 from $4.30. The depletion, depreciation, amortization, and accretion (DDA) rate also saw a favorable decrease to $19.95 per Boe for the nine months ended September 30, 2025, driven by the properties acquired in the Lucero Acquisition.

Vitesse maintains a strong balance sheet and robust liquidity. As of September 30, 2025, the company held $5.60 million in unrestricted cash and had $136 million available under its Revolving Credit Facility. The working capital deficit significantly improved to $9.70 million at September 30, 2025, from $49.40 million at December 31, 2024, primarily due to an increase in current commodity derivatives and cash, and a decrease in accounts payable and accrued liabilities.

Cash flows from operating activities for the nine months ended September 30, 2025, were $132.90 million, a $12.60 million increase year-over-year. The company's total debt stood at $114 million, with a net debt to adjusted annualized EBITDA of a conservative 0.65x at the end of Q3 2025. The Lucero acquisition further strengthened the balance sheet by adding approximately $50 million in net cash.

Competitive Landscape and Strategic Positioning

Vitesse operates in a competitive upstream oil and gas market, primarily in the Bakken Field, where it contends with larger, more diversified players such as Continental Resources (CLR), Devon Energy (DVN), EOG Resources (EOG), and ConocoPhillips (COP). While these competitors boast greater operational scale, broader asset diversification, and often higher R&D investment, Vitesse distinguishes itself through a specialized, agile, and risk-mitigated approach.

Vitesse's focus on non-operated interests, historically a cornerstone of its strategy, provides tangible benefits in terms of reduced direct operational risks and potentially superior capital efficiency. This model allows Vitesse to maintain better margins and pricing power in volatile markets by selectively participating in high-return wells without bearing the full burden of operational overhead. Its deep regional expertise in the Bakken, augmented by the Luminis data engine, enables superior execution in asset management and faster adaptation to local conditions, a qualitative advantage against competitors with more expansive, less localized operations.

However, Vitesse's smaller scale and regional dependence present vulnerabilities. Its financial performance, including growth rates, profitability, and cash flow, may lag behind that of its larger rivals who benefit from economies of scale and diversified portfolios. For instance, while Vitesse's EBITDA Margin (TTM) is strong at 57.35%, direct comparisons with larger, more integrated players like CLR (Gross Profit Margin 92%, Operating Profit Margin 37%, Net Profit Margin 27% in 2024) highlight the different operational structures and scale advantages. Vitesse's strategic response to these competitive pressures involves disciplined capital allocation, opportunistic "chunky" acquisitions, and leveraging its hybrid model to enhance flexibility. The company's ability to operate (post-Lucero) broadens its acquisition lens, allowing it to consider gas assets and opportunities outside the Bakken, further diversifying its portfolio and mitigating regional dependence.

Outlook, Guidance, and Shareholder Returns

Vitesse Energy's outlook for 2025 reflects a commitment to disciplined growth and consistent shareholder returns. The company increased its full-year 2025 production guidance to a range of 17,000 to 17,500 Boe per day, with an anticipated oil cut of 65% to 67%. Cash capital expenditures for the year are now projected to be between $110 million and $125 million. This upward revision in guidance, following the successful completion of Lucero DUCs and increased participation in extended laterals, underscores management's confidence in its asset base and operational capabilities.

The company's hedging program remains a critical component of its risk management strategy, aiming to mitigate commodity price volatility and ensure predictable cash flows. For the remainder of 2025, approximately 60% of Vitesse's oil production is hedged at nearly $70 per barrel, and just under half of its natural gas production is hedged with attractively priced collars. For 2026, Vitesse has over 3,300 barrels per day of oil production hedged at $66.43 per barrel and 12,700 MMBtu per day of natural gas production hedged through a costless collar of $3.72 by $4.99 per MMBtu. This proactive hedging strategy provides a significant buffer against commodity price fluctuations, supporting the company's financial stability.

Vitesse's commitment to returning capital to shareholders is unwavering. On October 27, 2025, the Board declared a regular quarterly cash dividend of $0.56 per share, to be paid on December 31, 2025. This translates to an annualized rate of $2.25 per share, representing a 7% sequential increase. Management firmly believes that the dividend is "solid" within an oil price band of $55 to $85, citing the dynamic relationship between commodity prices and drilling and completion costs. The company also has a stock repurchase program authorizing up to $60 million of common stock repurchases, though no repurchases were made in the first nine months of 2025.

The M&A landscape is a key area of focus for Vitesse. Management views oil prices in the $60s as "very advantageous" for acquisitions and has observed a significant amount of "chunky" deal flow. The company maintains high hurdle rates for acquisitions, ensuring they are dividend-supportive or accretive. This opportunistic approach, combined with its enhanced operational capabilities post-Lucero, positions Vitesse to capitalize on attractive opportunities that may arise from market disruptions or private company stress.

Conclusion

Vitesse Energy stands at an inflection point, having successfully transitioned to a hybrid operational model that marries its proven non-operated expertise with the strategic flexibility of operated assets. This evolution, spearheaded by the Lucero acquisition, strengthens its core investment thesis: a disciplined, returns-focused E&P company committed to generating shareholder value through a robust dividend. The company's technological prowess, particularly its Luminis data engine and efficient execution of extended laterals, provides a tangible competitive edge, enabling superior asset performance and cost optimization.

While operating in a competitive environment dominated by larger players, Vitesse's strategic focus on high-return opportunities, conservative financial management, and proactive hedging positions it for sustained profitability and resilience. The company's consistent dividend, underpinned by a strong balance sheet and adaptable capital allocation, remains a central pillar of its appeal. As Vitesse continues to leverage its hybrid model and opportunistic M&A strategy, it is well-positioned to unearth further value for discerning investors, even amidst the inherent volatility of the energy markets.