Earnings call transcript Q4 2022

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Operator

Good day, ladies and gentlemen, and welcome to Vital Energy, Inc.’s Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Mandeep, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

It is now my pleasure to introduce Mr. Ron Hagood, Vice President, Investor Relations.

sir. proceed, may You

Ron Hagood

good and morning. you, Thank

Operations; are Joining team. Executive Officer; President additional President, Chief Pigott, Bryan me Katie of Lemmerman, management Vice Financial today Officer; Chief Senior and and as Jason Vice our well as Hill, members President

of provisions call, Litigation be covered making by beliefs, XXXX. those our These including forward-looking be Reform we will today’s intended expectations, to forecasts statements. of the goals, describing Securities and During the Act harbor Private statements, safe assumptions, are

may our results forward-looking for actual these Our differ of statements a from many reasons, which variety control. of are beyond

In operating addition, are website measures. included making for The XXXX. results detailing presentation and to measures Reconciliations press the non-GAAP yesterday, release and fourth can our quarter we financial on will release be be accessed in we at press financial and to presentation financial GAAP www.vitalenergy.com. issued reference our

I’ll now Executive over Chief call Jason and President to Pigott, turn the Officer.

Jason Pigott

good everyone. year us Ron, XXXX Thanks, full the foundation you value results We and and our posted of joining morning. build this of acquisitions portfolio. on quality morning, the quarter efficient and oil-weighted strong a and in fourth recent We development appreciate

a to generated from For consolidated cash of XX% stock, we with XXXX, debt $XX had highlights. term purchased multiple and $XXX We We reducing leverage X.XXx year million EBITDAX. common full and following $XXX $XXX year the free of of our million strong flow X.XXx. million million of

XXXX. also XX% We full grew production to compared year

more million face-value almost of for $XX we quarter, common During and sold generated almost $XXX $XX nonoperated we properties of repurchased million, we stock. the $XXX million, debt million free flow cash term and fourth than

production of disrupted showed of production severe in oil the high XXXX Basin the capital with guidance. late weather limited operators. many expectations. and discipline, our above were expenditures below capital Permian that Operationally, impact severely We We continued total end

prices and softening about flow. and find months, few cash over industry, high, for take and This History with a remaining the some service margins gas will time is that, our Now lower let’s this challenging costs last but says XXXX. talk oil in will time. resulting equilibrium, an too,

today to is seeing focused designed so what highest our are largely acquisition, flow, balance plan, maintaining most worked control. on the Howard have acreage cash maximize emphasis with return is North XXXX to sheet recently our Driftwood free that hard plan production. in achieve. announced oil focused developing assets the on ‘XX are We where productive can on County, and excluding we we strong strong we

our than inventory, expected free reductions bolster offset development drilling prices, is to Wolfcamp our X years D organically generate Development that in XXXX Wolfcamp adding of as Glasscock commodity oil-weighted to County about locations more have our plan, B Current of we cash $XX inventory. inventory in maintained continues million flow.

the past drilling locations results, XX around years, D have our growing previous Glasscock underpin of X own These in in observed Wolfcamp acreage. Wolfcamp County. with For our we the addition combined Glasscock D industry County the results, activity

in the activity D wells and completions. Slide from the On show Wolfcamp developed results modern have industry presentation, we we our earnings of around our with plot X leasehold that

high-margin acquisition Upton County, we week, high-oil production. Energy. of the about cut part a oil-weighted acquisition Driftwood of that prolific and for gives a a assets Last agreement purchase locations in of signed announced we foothold This adding the XX us

Energy. are with for will rewarded it disciplined scale for creating that material future Vital we transaction, value was this Our and approach generate accretive confident

over to Howard activity several this levels. County. show We develop the the On increasing acquired portions asset X, the the believe I PDP we be productivity competitive with of wells. undeveloped years will plan next Slide locations without of

XXXX confidence in high plan. have our We

pace plan will margins and of to executing synergies high prioritized Our well allow flow, to is and cash balance capital maintaining a us We strong have Financially, steady today. development free efficiencies. capital that we and a team extremely sheet. maintain capture discipline

Now I’ll turn the call over to a financial Bryan for update.

Bryan Lemmerman

Jason. budget. start capital around you, some our comments I’ll Thank with

investments few XXXX XXXX $XXX takes million have have fallen capital between We million. are know to service to approximately $XXX expected and over levels. the XX% in months, and have we Prices adjust. yet inflation be Our but time, costs this last over factored average

loaded quarter, year. the to slightly the capital the be taking expenditures of at around front-end Capital XXXX, release of the a expected X remainder first completions plan to down half to crew, second us the invested for crew of the which Currently with are first in XX% utilizing in we of end year.

drilling operate continued stay drilling throughout year, crew. to completions operations X ahead our of allow gains We expect our them the efficiency as to rigs and

We announced acquisition our of last Driftwood. week

We is in which of expect production early April, it PDP X add BOE the this and oil, per transaction will close X,XXX year. approximately months of of the day, XX% to last

the at transaction. update will guidance closing We the combined our of production

received we of also that will schedule Upton our worked purchase, As part DUCs Driftwood X the year. be in completion into County this

will we capital not XXXX projections. currently anticipate to the our any So add do acquisition

expect January week. draw February, our deposit. of from Driftwood received semiannual our $XXX current revenue offsetting X we This later our includes will and a decrease approximately no this of from acquisition It net million. payments and which Finally, the includes also in for RBL draw payables weeks mid-February interest net amount be

quarter-end the increases net expect deposit. We interest the to borrowings payments in mainly and reflect

the Operations. us call President, I last Hill, as Katie year to turn who Vice over joined now will

Katie Hill

Thank you, Bryan.

the of the we freeze events. In returned December ranges, production guidance end high operating late at despite quarter, performance oil Both to fourth our expectations. exceeded total our and high

optimization ESPs was uptime, by larger increasing improving deployment production and technology. upsizing outperformance to of driven our Our

new ESPs, oil production frac previous efficiently, returned upside online wells brought wells more we and quickly performance. production unloaded more sooner With to hit

delivered throughout preparation operations Our fourth the weather-resilient winterization quarter.

digital of cultural deployment of to and the optimization multiyear operations we We bottom realize improve pressure our drawdown and production field-wide technology to hole continued production uptime, transformation. began impact

our XXXX. the year reflected Based performance guidance peak anticipate first also current production will of year. This QX schedule, we quarter on production production exhibit number for to continue development timing the for to volumes volatility driving in due is to new for some the Oil in our daily wells. and

primary Increasing production fluid total operating in-field components efforts development in oil-weighted production increase reflects This fleet XXXX continued per-barrel plan, water our operational infrastructure guidance year-over-year, our infrastructure development water plan will an cost impact other additional increase The costs. high-margin and compression. development. of will including our from support electrical LOE to frac electrify handling and

the open please for line Operator, questions.

Operator

Stifel. question [Operator first comes Instructions] from line Our of from Derrick Whitfield the

Derrick Whitfield

on strong year-end. Congrats a

that into Upton wanted inventory the expanded Wolfcamp and on I question, focus Vital added D. organic bigger you’ve first my For to now into picture for you’ve

With attain on the of in what’s C in area, potential interval degree the to right in you’ll years you comment date been X the the announced you’ve Deadwood to on confidence and of depth peer could your and outlined multiple? what’s inventory a share likely thoughts the have fair your Wolfcamp

Jason Pigott

to Great bit tell about question. a the first development more what I’ll for little it part, plans the our answer Kyle and to turn area. I’ll you over then Driftwood

well we’re have again, and started, when B the we Howard I us, we’ll or the continue Again, have done the organically slate much as years or today, Spraberry acquisitions on D we’ve the pretty do. Wolfcamp sorry, by -- and that inventory new we’ve built added. testing inventory Wolfcamp the and to X For about we formations County Middle we the good clean wiped in the both -- feel like that as Howard

to It’s $XXX I for for million to The million acquisitions. we So to will us in PDP. continue acquisition is want build $XXX us, think probably scale, do is locations. what $XXX bring XX It $XXX in XXX ideal to million continue do to to million.

quarter. years, So X the or feed inventory in eventually rig continue we that do grow move X give and try will do third And wells each think significantly we start but quarter, X a bringing our and to XX them down up bring inventory -- ultimately, ideal to a -- half those things in and, stability crew which again, pretty not per will production to completion year, completion are if to when that crews, inventory. we we that extending again, us more can will volumes we’ll XX a

allow wells that production roll us grow. drilling we allows and as the to year, forecast. But It more XXX the are dice in stability per

to as have much do those that things ultimately the are the think didn’t Again, this will start we while XXXX. year, multiples. for and us higher for we’ve We but I the lead last had works So it a strong of consistently. a doing in kind been one

Kyle to to little about turn just bit I’ll the a talk now Driftwood.

Kyle Coldiron

Yes.

X wells assumption the on with Wolfcamp the a acquisition section. conservative we and Driftwood, our per B. of targets, are upper Wolfcamp wells underwrote So the lower, used spacing inventory so primary that X intervals, X targeted and we B in per There

in to beyond really, release. inventory wells, already that the is about all There pay wells that what here, into in that as our we’ve at even the a are inventory upside this environment. the all -- Wolfcamp But future talking be Northwest. B. South, C target mentioned, Wolfcamp as you XX So we’ll view stack we’re an to We there closely our are add stated our looking is

Derrick Whitfield

follow-up, base your could is how guidance, the your for impact industry? to approach expand light production in performance you is and the having QX Katie, and my optimization of and perhaps on production Terrific. stronger-than-expected technology And XXXX as on differentiated production relative

Jason Pigott

Yes.

turn then operations. over the Derrick. I’ll Katie it the question, about to of and to this first great Another talk take part

everything When mindset. of data infrastructure of We’ve kind I much a taken our want with started operations place put of Amazon’s scrapped lake that. existing this our in and the We digital-first off and pretty really took we lot cloud our to IT it. run and company, to

does our use algorithms, is allow to production. learning AI to what that machine optimize us And

hold XX,XXX change our to pumps, we’re get well. of things the on frequency example, and For learning like more extend of the production pumps, day and them using pressure machine the on to XX,XXX per we life out are of both barrels submersible the

that in tell Katie, she so routes over think a little what we that day. respect. we none I can things of optimize are one they’re we’re it, run it leader But are doing to a about are So how -- peers every you bit I’ll the doing that our our those no to and doing turn

Katie Hill

and Thanks, Derrick. morning, good Jason,

in demonstration I focus technology achieved our operational talked really and repeatable XXXX, moving lot from about. some a I Jason success of categorize our technology optimization think that would implementing of routing our We as in design base the dynamic into phase. this

helped QX, our on our primarily times by expand response as for expectations, These specifically you to preventing production us increasing uptime lift failures, to although operators, ESPs, reducing and we’re excited for our tools other artificial that subsurface types. saw on have over-deliver production

on the where focusing as across the lift continuing technology anticipate I the deploy we are particularly to we depending types the we to from assets, move away continue different technology would evolve in ESPs, as area. on

Operator

Our of next question Bank line Brody from America. Gregg from the of comes

Gregg Brody

Just questions a couple of for you.

a update debt First, could your us you’re how reduction at an as the of Has give you Driftwood changed plan? long-term acquisition? all about result that on just thinking

Bryan Lemmerman

No, part that below Xx, and reduction getting of is navigate below just so This that. to a that our hasn’t M&A mean, on focus primary and is that. focus. in have and we continue and be our you’ll around couple we’ll been of plays see Bryan. changed. X.Xx, I and debt that for business, years, debt a a our down has focus But achieving our is to obviously ratio debt leverage it continue

Gregg Brody

an think I that target in also Has there. at implied debt changed And you all? had

Bryan Lemmerman

last debt implied year. million target had $XXX Yes. an of We approximately

I will a $XX basically change That to level think at EBITDA an price targeting one with environment. $XX that modestly acquisitions. was

as along lines. same it for directionally projections acquisitions, probably change see we our update those So you’d

Gregg Brody

-- about how just then which the curious of refinancing you the sort capital have thinking any them. And -- in general? it. your you’re [XX] Got structure Or there,

Bryan Lemmerman

Yes.

ways at to pay looking those to We’re down. continue

the cash have call them the ability pay under with revolver down to and We them flow.

progresses, the success markets. but will on lot evaluate M&A we’re on it the markets of we’ll A have the So we what keeping and everything. year eye there, all as depend an

Gregg Brody

question for you. Just last

quarter, you to number the that costs will number year operating assume this You on for change on in first that you all? see, for the Or a fair at that is I does for the the side. gave increase year? guidance that commented -- expect

Katie Hill

think year. I it’s for directionally accurate the

Howard in those grow we to production. we’re our some total bring online, really, increasing fluid wells high-margin of continue to excited as are And County. oil-weighted, We

infrastructure cost electrical So build Howard development. our continuing support to reflects County that and operating to water out

Jason Pigott

Yes. Katie LOE. referring is to

that weighted quarter. extra heavily we’re capital that the will be first frac just because again, On crew capital that’s quarter come side, going more as to for released. And in in running quarters then is crew down the of future the first

Operator

Pope Nicholas Seaport from Research. from Our question final comes

Nicholas Pope

I was hoping you about bit I -- parts a little could talk X guess, here.

curious you in kind hierarchy kind Howard the Driftwood of fit Glasscock. whole and what think the returns the how asset, in into of you With of have

look just of And -- lateral asset there the and kind Upton in also and the expecting same have Glasscock? size look at at new of Driftwood well to wells what Howard this as in kind we as you -- same new kind this in well really you compared hand in cost, of assets, you down costs length, of Upton the are

Jason Pigott

Yes, of that’s our County, Western Howard production sorry, sorry, wrong I’m wells On new Slide online, have deck. published Glasscock. Driftwood a comparison great the we I have a a that’s -- got X, question. deck versus X, On here. from we on Slide the a

just then side working like is production the And wells wells optimization Driftwood and what are Howard to in our we’re So at Central now comparable County. completion things through that. on the very

for over Kyle color of how I’ll it a about So thinking kind we’re little that. more turn to on

Kyle Coldiron

Yes.

capital So lot say wells Reagan. what from a Upton there’s we’re for I similarity our perspective, would Howard and and here of between a cost modeling County

we that very similar inventory, asked Howard all that the about XX wells our base XX,XXX-foot You in so of about and Glasscock. question are we’re Western to lateral all development a County laterals, talking length, in the plan have

similarity I difference cost, between a capital of So material say the the a in would lot two. not

Nicholas Pope

the in geometry able think type of able problem foot there’s laterals all standpoint, footprint that kind there’s to kind Howard. from I in been to with of Are get And -- XX,XXX-plus the averaging no XX,XXX have you Upton? you a up you’ve -- being

Kyle Coldiron

we upon in really we what because we’re have reason or sprinkled Those all Upton, drill. foot is is footprint. of into we kind kind So development of the kind are up that is Upton, XX,XXX laterals. it base XX,XXX-foot Howard laterals based XXs. our of that that typically The and often But XX,XXX of averaging planning XXs X design But is plan. types in kind either of typically, are our XX,XXX-foot the drill on we’re designs it in

Operator

concludes Ron for That over to questions. closing turn remarks. to now would like Hagood call I today’s the

Ron Hagood

to thank interest joining and today’s this we in morning, your concludes appreciate Vital for I’d call. you us like This Energy.

Operator

this today’s you and gentlemen, your for Thank participation. Ladies does conclude call.

You may disconnect. now

Vital Energy (VTLE) 22 Feb 232022 Q4 Earnings call transcript