Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen, and welcome to Vital Energy, Inc.'s Second Quarter 2023 Earnings Conference Call. My name is Justin, 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 results addition, included at Reconciliations in reference second press The for our we presentation non-GAAP are to release press financial detailing and presentation quarter be website XXXX. we'll measures. our be and accessed making on the issued www.vitalenergy.com. release measures operating GAAP can and financial yesterday to financial

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

Jason Pigott

Financial Thanks, Ron. results everyone. for first Thank in you Good us morning, of year outstanding. have and the been operating half the today. joining

have accretive extend and oil-weighted inventory acquisitions oil through strengthened production. our our enhance that We business

record a the capital was result, the company above end investments guidance As with guidance. a setting were again of below of low oil end high production and

oil-weighted the are and for momentum We XXXX, closed on X accretive half second our XXXX. acquisitions, into of well positioned expect maintain to

generating flow, program, solutions. our cash advancing XXXX strategies, focused discipline, digital and acquisitions, on capital remain targeting integrating about we think we As debt free sustainability, and accretive core maintaining reducing leverage, our

acquired flat of this production we compared relatively to volumes For XXXX, inclusive are quarter. targeting XXXX,

grow XXXX, cash full this debt accomplish enabling flow year at versus we XXXX believe levels we year Importantly, to similar reduction. continued full can free and investment

across Basin, development our acreage XXXX in expected developing our Permian Delaware of in acreage recently Basin. from Upton high-return strategy acquiring County oil-weighted and the quickly planned acquired and reinforcing benefits Our budget

of years, what of strategy execute thus accomplished our the the are acquired far production and last from and organization in to proud value. we comes additional over Today, continuing over properties XXXX, has build our XX% X on focused shareholder

turn for our now the strong will I over details to additional operational on call performance. Katie

Katie Hill

Jason. you, great like These optimize in supply throughout costs capital acquisitions. morning are continuing efficiencies, and instrumental our teams chain well half the the of by work and to operations integrate recognizing outperformance doing productivity, I'd been to this teams Thank drive start our the first lower year. have new

on quarter, driven base second wells. In we by outperformance from and new volumes primarily the production delivered the oil production higher-than-expected accelerated

frac we on quarter, and mechanical production. the reduced base impact downtime During

and solutions compression performance improvements process the digital assets. adoption Additionally, of have lift our artificial uptime on improved and both

record a As mentioned, company production. for oil in we Jason second quarter set the

Forge Driftwood quarter. in record Following the anticipate average and third we for our oil oil rate have the the close the acquisitions, of for production new the early production us a will quarter history. be hit subsequently average our in We highest

minimize midpoint of schedule third and than We and the planned oil the optimizing have is This package the our assets, fourth completing are ground County is X-well running quarter future to quarter package in our Upton Delaware. already of updated production lower In in both new midpoint. a a the how on a reflection development parent-child X-well hit impacts. we guidance, production

quarter March early at where are in fourth expected completions and drilling in complete of operations Glasscock Western start XX-well the the beginning package XXXX. of we Currently are a to

second increasing quarters reflected brought of production on Glasscock XXXX Production a package. there and very fourth XX-well bring For the X-month is which as expected will wells third range. quarter quarter flat fully is the our the the in in in to remain online, result, few period before where is relatively we be first

efficiency gains, the our expenditures capital quarter, newly we leasehold. acquired were expectations including In second in the below maintain as

are market. OCTG We moderating benefiting for from the pressures in inflationary especially services, also

both seeing are completion and rigs prices services. for high-spec drilling come down We

both converting of during rates and to drilling line phase. the Midland efficiency drilling operating By further high our reduce emissions power, improve cost we

by operational Our outlook underpinned success. is our XXXX

As our optimizing recently and to our acquired to operational continue apply platform leasehold, we plan operating improve productivity we efficiencies. well

XXXX, team cost reductions does a done current can has additional fantastic cost factor to additional Our in XXXX we savings outlook beyond we we've mitigating find achieved are not job and pressures in optimistic date. our in what although

over call update. financial the turn a now provide to to I'll Bryan

Bryan Lemmerman

Operational Thank acquired and for recently remainder Driftwood XXXX you, outlook driving full and strong assets of year efficient XXXX. the performance of Katie. the our integration Forge and is

exceptional lowered improvements again year for development the million range are of and the result inflationary decreasing and base a also performance the operational by our year, to range the $XXX the million new bringing $XXX from moderating production end for of and high of guidance performance and capital million, $XX the increasing midpoint the in teams. second from of full expectations down We half year incorporating production XXXX, excellent for expectations our from further

robust envisions production $XXX increasing Jason activity supported expected our even by basis, a months XX to associated with free production maintained both cash million, levels book. net initial outlook levels for after be full on hedge a similar As flow next is fairly mentioned, the acquisitions. relatively XXXX over around Resulting year XXXX

strengthen to cash quarter, of second lock income continue free the our asset. deferred related opportunities the company book will valuation in that of allowance to In tax for to will flow to our to the $XXX million the down recorded paying reduction look against be the RBL. hedge We gross directed

XXXX X billion current years, offset $X.X resulting currently being structured income our around another is earliest. commodity to the us prices, As in federal at a the taxpayer for will X NOL we expect at and company

to comments. I will call Jason now turn back the closing for

Jason Pigott

quarter have first integrate the In half about enough teams transform together costs us. Thank another our year. control you, and deliver strong a Bryan. this our to can't for the of I closing, strong how was worked say company, acquisitions,

now questions. call will Operator, we open up for the

Operator

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

Derrick Whitfield

solid Congrats another on quarter.

Jason Pigott

Derrick. Thanks,

Derrick Whitfield

question, in and schedule how profile production as first should QX your outlook. half referencing light 'XX larger you're first wanted QX package on your about focus In XXXX your QX think we XXXX, My lighter well of half XXXX? shape in the through the guidance of and to TIL I second of as and the of

Jason Pigott

Yes, it's a deck TIL areas. on for the of X off, we're TILs coming again, 'XX Slide our out good question. we operated Again, have our do schedule there, and

taking over they Additionally, just running X we rigs were prior rig. were us to X running and Forge,

quarter. into X things those production fourth So the to kind of dip will cause

record of TILs coming as call, but fourth quarter, lack will for quarter I the going mentioned in quarter drive we're 'XX the third on of hit guess, this the production. early in kind dip first Katie and to a of

large packages like that a Western wells and we're a have Typically, are Glasscock, Additionally, XX much larger is do. package completing drilling at time. we completing more typically -- which our than XX-well in we

So coming that's again defer also going online to ramp the or production into XXXX.

So fairly flat you 'XX, are will XQ, production these see XQ then a should wells as start for dip all for rising and online. of coming

Derrick Whitfield

confirm would acquisitions? your her into for process not if optimization Great. also And to thoughts follow-up, ask Forge could take my factored your Driftwood the optimization long on into work offer base and it Katie, guidance and how integrate she is to I the wanted

Katie Hill

Basin So go-forward our forecast. included I of Midland most would has on been the base in say optimization work the

X deployed X the able leverage hardware to we've probably We which we'll asset Delaware done. on all AI from upon to months having work platform the the be that are

So acquisitions. I'd to pull XXXX that to into expect start for new

area. to to that platform deploy excited be able that in pretty So

Derrick Whitfield

relative could. respect I if of now upside you With last, thoughts that one And broad Forge, assessment to share the you in-house? your have to initial your on asset areas could

Katie Hill

Yes.

So and that been asset. getting team well. the in the work with beginning to We're into about a the has gone transition, great really it's month new

some purchasing capital related our think already opportunities we've that activity and I identified expense. new are the power operating and for of scale to primarily both

be down I a we months. X XX deploy excited the costs, next platform strong mentioned, AI We'll probably to over to we're drive have to really also, that able as

area. our I structure improvement optimization base So we'll then both see and cost think in on overall the production

Jason Pigott

Yes.

I again, you consistency for have will opportunities some down. completion crew to which provide mentioned we're our to and get the the when more longer we release, X period there, frac time, bringing costs in As you going also crew a think, so think get I of accelerate working

Derrick Whitfield

That's great. Thanks for your time and responses.

Operator

from next Parham comes the Zach JPMorgan. Your line of question from

Zachary Parham

in spread first asset well on that's you how Glasscock some I County, guess, Howard your XX of in package turn-in-lines base planned be on Most just you can half give those know color will split to I XX mentioned in on of levels year. in XX your you first, for some detail us 'XX. can your year? Western next activity activity across But just XXXX. be 'XX is will us activity how your the give in the the

Kyle Coldiron

this Kyle take that. I Coldiron, is Yes, can

the So the the Southern Western Driftwood County end to develop is Glasscock. have then between towards half the back in bounce X our And of I Midland to there and down we Howard guess Western first returning in assets at year start that and and Basin. half go year. Howard And 'XX, and of County the we Glasscock revisit of kind the of sections back we're we forth when essentially before going developing

be of say development in our of we've would looking I'd kind at probably County. X/X here, got schedule So the Howard

be in South our would Western Midland Basin it would and then of Glasscock. X/X remainder in the be

Jason Pigott

also right the in running Basin time is parallel got Delaware in to We a Delaware. now. full rig the rig dedicated One

Kyle Coldiron

Right.

Zachary Parham

Got it.

year a dozen roughly that is So turn-in-lines Delaware? the in next

Kyle Coldiron

running between Delaware year. Yes. full wells rig and time anywhere is the XX One a in XX

Zachary Parham

what's costs. and my expected closer is but half operating run on $X, we thinking XQ just follow-up guidance LOE in second us $X at expect in XQ trend about that? for using of be when And $X good it. Got modeling we're half the Can give should color year some you the just LOE 'XX, has around you how move BOE to on to first a it's guidance. been maybe the the based to on in per rate

Katie Hill

Katie. is This

with relatively 'XX 'XX, about dollar will QX moderate to per production. into that, go think BOE going record decline hitting remainder production bit. LOE water expect we BOE the then and And a but And We're again, see little XXXX dollar for will and QX the the through the go As you per we flattening we'll with spend into total total a into spend and of company. stay flat, BOE we in increased up drive see up. and QX, total as volumes

to next look total expect this year X quarters. We similar it year year very average you as to the across

Operator

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

Gregg Brody

you I think it's weren't Gregg Brody, sure. if

Or year? the X active completed transactions. Obviously, just be Just you're the Curious thinking about you the the about can you rest recent of you've for a M&A this you'll digest acquisitions? today. landscape, most how of bit if you'll little be talk sort you think on as sidelines that

Jason Pigott

built Yes. We've to really this the team company scale. and

integrated, to mentioned, Katie already amount assets much of a they've integrated. done get work Driftwood fully pretty is As large the

think I really an break the So having teams us. for is don't take to of just a because issue

this they available, successful more smaller to the kind come really them. where more year, opportunities million in It's that And and been million we they're at we've are $XXX digestible pivoted available to of when that we and look when evaluate deals range. $XXX again, doing

to has doing in been that we opportunities of more us moved oilier build Delaware inventory on over see because the there. focus we potentially the Our for acquisitions accretive in basin, parts

to So at we'll look them. continue

of bit this to get strategy less basin and works bid little I coming for again, the from larger doing acquisitions working opportunities this the smaller think for these where some you even companies a has outside so to been year shift, these, us us, on for competitive far. than our are

that else. things prohibit got telecommunications Again, like smart. integrated. that doing The are but But wouldn't virtually again, want assets from that to to we've something we we are upgrade, things need us do

oil been the the schedule, oil returns we've rig at production got to we and able front help on grow grow these company us time. you better acquired the bring we acquisitions where XX%, of almost look over that's If of to of since and our kind doing the heels they've that XXXX, wells

to continue done of we've expect we so this far deals to like So do kind year.

Gregg Brody

the have Permian? And for it you're going Is obviously you still Permian into are probably outside the fair to focused you in opportunities? possibly Delaware -- thinking moved the recently. Or more say you're about

Jason Pigott

which, again, said Ford at. that primarily Texas things we look We've Eagle oil, Permian, Yes. the are

where So we again, we're done. would in itself we've -- got We hard at can of Basin the acquisitions at looking -- to expand on -- and from kind existing footprint. where Permian everything be our can look have an

with North kind perimeter and the Southern of Howard Midland into to and along Delaware We've Basin gone and from the then through Eastern the Midland Basin.

that's for the where privates many would focus There But be just They've gobbled available. not Permian we're getting So as up. now. been are places operating. the comfortable

today, focus. some we need Permian again, So it's is point, at pivot. But oil may to the primary

Gregg Brody

amount then the how on you free of you of generation us have of your your through And XX liquidity the highlighted curious which of of revolver. But credit you're away? just about is to 'XXs in Can that about sort just you flow obviously what's expect what's context right just have I'm the your refinancing cash and months through liquidity your and your helps -- next do maturity you year, you not sort picture. how thinking the the 'XX walk think

Bryan Lemmerman

Sure.

looking of and if on options those our for company. off. hope the In to that. take best base, lot flow looking the But of short the borrowing different the long-term put using the and we every of a something can outcome revolver to term, the at including do along we free it care pay to, better of with we than day cash We we're all XXXXs, have refinancing to needed them

a think how as cash a a or place bonds, months of we've is flow or generally okay inefficiently XX we having said long-term have it. level that location that As generally without free the with to on that's like cash far way to to free we'd XX put be flow at having balance, a call about we so which RBL revolver

now we like where would relative balance RBL them. a to right is to have little high the So

Gregg Brody

just last question. And my

obligation this partnership with Gas if with from to to I you respect And bit how us capital out. but an a to they the acquisition. curious drilling and just committed approach do? that them. with just they So remind if you know this. -- support recent this different I'm Oil have historically, any typically Can most is Northern want on you But to how there's is little outs what plan their had

Bryan Lemmerman

Yes.

I'm So transaction, But partner. for working to you're the referring up they not heads transactions past. which sure straight of ones in them are a interest our

drill. no we we they other other well different in that interest So any every have than working partner are

Gregg Brody

wells Got that and not it, can consent they if on choose or they to? choose non-consent they to,

Bryan Lemmerman

as Yes, they interest consent non-consent. can working or a partner,

Gregg Brody

that have and in would at be partnership, of How did I much how you guess be there of your you? they made about think done how identify that sense, -- there? a they Or your alongside inventory long when that you would sort much -- sense a you -- planning program is are you

Bryan Lemmerman

drill I Well, they whatever so our XXX%. expect inventory we they're of wells would these I the at front If think reason schedule. would them non-consented, for -- are

anything this they fund or these, extremely is So this transactions so XXX% commitment people, a them, not up partnership. with drilling working interest straight like But is I'm may the than want have different I done or those. comment with familiar drilling that. on -- on a don't resemble other does a to and This not but

into manner did, the difference is the in only same we asset the bought operator. exact we're the that They

Gregg Brody

similar past. I that's the have what think to they in

you. So, okay. Thank

Operator

the question line Nicholas from Research. of Last Pope comes Seaport from

Nicholas Pope

you with. you or going was like Southern But And at understand across Midland different are look know it's and basis Delaware, could comfortable aggregate, you're total look costs. to trying areas to the of I now? per compare on Midland, drilling and that's those whatever complete, kind hoping that's where -- right for Glasscock foot across if if how well your I Northern don't expectations

Katie Hill

Sure.

in are costs pressure with area. the bottom trending generally well Our hole

as over the bit into than little cost Basin. a And higher south see as we the County higher bit move move in you'll Delaware, our XXXX. little we in Midland So development Howard costs a

Nicholas Pope

not that Midland terms are Is there there? a big the expectations like costs Delaware versus where in of spread or between of

Katie Hill

no. Generally,

little I compared operator. the we'll have one to scale that Basin have that historical So we better in opportunities think area Delaware previous that the a of the in spend compared bit to

to continuing the deliver in lower the as in running what able learned development area think have across we expect plan. a both capital we program that Basin previous they We're wells and working I we've were Delaware area. at previous the our operations that to So little we're the through that experience than apply to in those Midland team the bit be

Jason Pigott

lots like, Howard think so square County again, of to or $X,XXX a $X,XXX as I But be improve. per Delaware now. well well again, said, would Katie $X,XXX, foot versus for right opportunity

first our drilled We've yet. them. opportunity think completed our But haven't good fully We again, wells there. I there's

Nicholas Pope

at operating outlook a very That's the the gave of LOE it. little of Got on you And clarity the XXXX, for remainder looking helpful. costs. component

Looking is year things -- that $X.XX, be and that fairly should marketing, through 'XX. progressing into this you the how are thinking and we just transportation that to in at expect about stable

Benjamin Klein

Klein. Yes. place line on item to that arrangements This Oak in transportation. Pipeline. marketing we oil transportation transport quantity is and on The fixed Gray are that of Ben crude we have crude a That's related are reflected

And be so should period-over-period. absolute dollars flat relatively

cost going Your production. is obviously unit fluctuate with to total

Operator

There no time. turn Hagood, call the back to Mr. this you. over further are at questions I

Ron Hagood

Well, morning's in this thank morning. us interest appreciate Vital you and for your joining concludes We this call. this Energy,

Operator

Thank for call. concludes today's This joining. conference you

may You disconnect. now

Vital Energy (VTLE) 9 Aug 232023 Q2 Earnings call transcript