Vitesse Energy, Inc. (NYSE:VTS) Q3 2023 Earnings Call Transcript
Vitesse Energy, Inc. (NYSE:VTS) Q3 2023 Earnings Call Transcript November 3, 2023
Operator: Greetings, and welcome to the Vitesse Energy Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Ben Messier, Director of Investor Relations and Business Development. Thank you. You may begin.
Ben Messier: Good morning, and thank you for joining. Today, we will be discussing our financial and operating results for the third quarter of 2023, which we released yesterday after market close. You can access our earnings release and presentation in the Investor Relations section of our website. We filed our Form 10-Q with the SEC yesterday. I am here this morning with Vitesse's Chairman and CEO, Bob Gerrity; our President, Brian Cree; and our CFO, Jimmy Henderson. Our agenda for today's call is as follows. Bob will provide opening remarks in the quarter. After Bob, Brian will give you an operations update. Jimmy will review our third quarter financial results. After the conclusion of our prepared remarks, the executive team will be available to answer any questions.
Before we begin, let's cover our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to the risks and uncertainties, some of which are beyond our control, that could cause actual results to be materially different from the expectations contemplated by these forward-looking statements. Those risks include, among others, matters that we've described in our earning release and periodic filings. We disclaim any obligation to update these forward-looking statements, except as maybe required by applicable securities laws. During our conference call, we may discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, net debt, net debt to adjusted EBITDA ratio, and free cash flow.
Reconciliations of these measures to the closest GAAP measures can be found in the earnings release that we issued yesterday. Now, I will turn the call over to our Chairman and CEO, Bob Gerrity.
Bob Gerrity: Thanks, Ben. Good morning, everybody. Thanks so much for being on our call. With Brian Cree and I, today is Jimmy Henderson, who joined us two months ago, and we are thrilled. He's had a wonderful successful career as a CFO in the oil business, which is rare. And Jimmy not only brings a deep skill set to Vitesse, he's a wonderful guy and just has fit in wonderfully. So, it's really moved the needle in improving our capacity. So, welcome Jimmy. Vitesse is a return of capital company. Not the first time you've heard that from me, won't be the last time you heard it from me. And payment of our fixed dividend is our top priority. We paid our third quarter cash dividend of $0.50 per share in September. And earlier this week, the Board declared our fourth quarter cash dividend of $0.50 to be paid in December.
We continue to look at a lot of near-term development drilling deals and larger asset acquisitions that continue to be supportive of our dividend. During the third quarter, we are able to complete several impactful acquisitions that meet our very high return hurdles. As previously discussed, we buy whatever we can within our stringent economic parameters, and we're not limited by a budget. We are only limited by opportunity and economics. We put hedges in place to protect these returns when the opportunities present themselves. With that, I'm going to turn this over to Brian Cree, my longtime partner and President of Vitesse. So, Brian?
Brian Cree: Thanks. Good morning, everyone. As Bob mentioned, we acquired additional oil and gas interests through our near-term drilling acquisition program during the third quarter that will result in approximately $50 million of additional CapEx, primarily in the second half of 2023. These acquisitions exceeded our internal hurdle rates and are expected to provide material increases to production and cash flow in both Q4 '23 and across 2024. The wells associated with these acquisitions have either already started producing or are in the process of being turned on to production in the fourth quarter. So, the time between CapEx spend and revenue receipt will be shorter than our typical acquisition. Additionally, we seek-- we continue to see consistent pace of development on our existing assets.
The organic conversion of our inventory of undeveloped locations remains core to our business model. Since we like to provide insight into our pipeline of drilling and completion opportunities, as of September 30, 2023, we had 7.7 net wells that were either drilling or in the completing phase, and another 10 net wells that had been permitted for development by our operators. I want to touch a little bit on hedging. Over the last two months, we added to our oil hedges for the remainder of 2023, for all of 2024, and for the first half of 2025. We now have approximately 50% of our estimated fourth quarter 2023 oil production and close to 40% of our estimated full-year 2024 oil production hedged at $79 per barrel. Thanks for your time. Now, I will turn it over to our new CFO, Jimmy Henderson, to review our financial highlights.
Welcome aboard, Jimmy. Great to have you here.
Jimmy Henderson: Thanks, Brian, and thanks, Bob, for all the kind words. I'm certainly happy to be here. And good morning everyone that's listening in today. It is great to be back and involved in this industry that I continue to feel so important and provide a vital resource. It's been wonderful reconnect with many of you in the investment - in the banking and research arenas, as we continue to tell the exciting Vitesse story. Especially, I want to thank the Vitesse team for making me feel welcome and helping me get up to speed since I joined. And, lastly, congratulations to the Texas Rangers on the exciting win in World Series last night. Now on to a quick review of the financial results for the quarter and our financial status.
I assume you all can refer to our earnings release and our 10-Q, which were filed last night, for all the details on the quarterly and year-to-date results. So, I won't bother repeating all the details that are included in those documents, but I'd just highlight a few items. As both Bob and Brian described, we've continued our return of capital program through the dividend and strengthened our future cash flows with several acquisitions, which obviously supports the dividend. Both activities continue to be cornerstones of our strategy. As for the results in the quarter, our production levels remained fairly consistent at just over 11,000 Boe per day with about 67% of that being oil. As we've previously reported, we expect the fourth quarter of this year to increase to 12,300 to 13,000 Boe per day with further increases in production next year in 2024, primarily due to the recent acquisitions that we announced.
Likewise, adjusted EBITDA was flat sequentially at $34.7 million and adjusted net income was $11.1 million. GAAP net income was a loss of $1.5 million, and you can see the reconciliation of those numbers in that press release that we filed last night. Cash CapEx and acquisition costs in the quarter were approximately $34.1 million. We funded this investment with operating cash flows and withdrawals on the credit facility. This resulted in outstanding debt increasing by $15 million in the quarter, which puts us at $56 million drawn as of September 30. We do expect further outspend in Q4 as we fund the remaining CapEx and acquisition costs, as we disclosed a couple of weeks ago. We'll continue to fund these costs as well as our dividend through operating cash flow and on our credit facility.
With that, let me turn it over to the operator for any Q&A that we might have today. Thank you, all.
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