VTLE - Earnings call transcript Q2 2024

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Operator

Good day, ladies and gentlemen, and welcome to the Vital Energy, Inc.

Second Quarter 2024 Earnings Conference Call. My name is Dee, and I will be your conference operator for today. (Operator Instructions) At this time, all participants are in listen-only mode.

We will be conducting a question-and-answer session after the financial and operations report.

conference recorded this replay reminder, a is for being purposes. As introduce now my is Mr. pleasure It to Ron Hagood, Investor Vice President, Relations.

You may proceed, sir.

Ron Hagood

Thank you, morning. and good

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

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

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

included In be be and financial to reference release www.vitalenergy.com. Jason Pigott, Reconciliations afternoon. in presentation Officer. the addition, we non-GAAP and now issued are Executive our over press on to I can the making presentation will will release and turn Chief yesterday press to we at measures. website The accessed measures GAAP President financial call

Mikell Pigott

capital Good for breakeven on integrating joining focused Vital remains flow Energy cash a free maximizing recent you and maintaining strong and acquisitions, adding our thank inventory, us low today. morning, structure. by

helped results continued and Delaware production basins the the to team records free in reduce the we the used Midland strong in flow quarter drive both quarter, production production cash million trend for debt. oil line of are quarter. turned Our expectations. Total production packages second during of and as which company set during $XX Strong the exceeding

third both which to of equivalent for to XXXX per guidance Point current operations acquisition the oil and XXX,XXX quarter. close end of our Energy outperformance increasing year our full midpoint are production of the expected Partners, of We day at is to incorporate our barrels total

and Delaware XX,XXX of of increasing due in quarter also from fourth acquisition. the the year the as well equivalent outperformance to full County raising wells barrels as per Howard oil are expected midpoint guidance, Basin oil volumes our XXXX Point production to day the We

Investments the primarily were capital. on shift we our the these below to quarter quarter. was and activity This expect third guidance the timing, $XX to almost dollars million based to in of Turning midpoint range.

year, the we $XXX midpoint million, investment incorporating of For capital expected midpoint capital the to adjusted million have for our previous full the fourth quarter from Point. $XXX

than nearly by power expected the which to higher and than was projected BOE. efforts rate close. after assets to May, the HXS $X we Midland. at acquired reduced we and have Since per higher chemical This, our the spend capabilities For across basins, May in new In operating million per expenses approximately QX LOE at due BOE. on increased production quarter, $X.XX our in shared exiting call, per additional run the were $X.XX accomplished improving was wells, generation led the both month, along with shutting by optimization uneconomical applying water

quarter. While crossed the QX QX acquisition April reduced to billing costs we the were peak transition process, and delayed run rate subsequently in higher due over driven throughout the and throughout

lower BOE to we to inclusive company LOE total for LOE BOE acquisition expect fourth In remain half around second increase per our $X.XX base quarter, business, the expect the production We of $X.XX around to on quarter. closes. Point per third the volumes when

properties. operations optimizing We value creating on and acquired focused intensely are additional from our

XX% we and line been in the our have believe lowering closing Basin. future. improving reductions we sight in to of capital have and Since the acquisition in capital productivity another costs have recognized cost in Delaware We the of successful X% initial basin, reduction

Southern productivity Delaware on enhancing previous our continues the deliver gains operator Our capital strategy of widening further spacing position, versus to efficiency.

pace. current XX acquisition horseshoe organic X of our years now locations our these the the been wells and our approximately Energy. these wells across taken lateral growth lateral breakeven Recently, our XX oil-weighted both implementation providing $XX low primarily significantly strategic converted past long to have reducing successful Point Delaware bolstered the and short in locations. XX inventory leasehold. organic horseshoes, has steps locations to at growth strategy of through By developing has the the long years, Midland of driven acquisition XX we of portfolio enhance our Basin, below by we've into of breakeven lateral Over further development for This

turned-in-line a after inventory capabilities. look to portfolio promising, $XX more is Wolfcamp expand strong on generation we our Energy sub results strengthen new have and forward resilient the this low-cost more we Maintaining Moreover, assets, we capital gather are Point production expenditures Thanks were as our this in flow to Additionally, We excluded been structure wells, additional recently to were scale than associated have free to long anticipate we've acquisition which updated proposition development further locations testing C our The details months. recognizing additions add and into our the integrated placed executing inventory locations. ESP monitoring and production on capital and formation, our ever our months inventory, breakeven and sharing ongoing Barnett The laterals. XX activities, before. now due performance providing coming long-term our In cash free inventory previously to is lateral promising horseshoe of guidance. of the key on a early are fully the we initiated to of short these identified potential capital and inventory, and that in an our to efforts organic flow. of production added economics our program which information deeper data. and value X opportunity closely more

positioned in XXXX on million at hedges for for and our hedged significant XXXX we well approximately balance almost barrels sheet the barrels more X facilitated the strong Energy related Our Vital to million accretion driving future. facility, debt acquisition, in barrel. liquidity added To of have purchase than of $XX the Point now position per shareholders. share per support our repayment oil is exceptionally and XX credit

our both flow focused is to strategy building free through Our capacity deliver and cycles. volatile on durability cash price economics oil well in

have scale the both Delaware basins. We and built Midland in

demonstrated expenses. operations and multiple and have both We both costs pursuing improve operating progress in our are capital initiatives new basins great in improving to

have We a inventory, which decade of oil-weighted $XX built XX% below of barrel. per even breaks

cash strong deliver the We have XXXX. for Operator, sustained are until well generation line creation capital to come. term short, flow and long-term please a equipped structure debt we maturities no open with free questions. years to for In value

Operator

you. Thank

Truist Neal question-and-answer the And session. We Instructions) will the Dingmann comes question Securities. the from first (Operator from now line begin of

Neal Dingmann

when total first again, the XX-plus $XX think is years of looks and question a I number there, look a all of around just, XX it out you at project breakevens of as it's are for even locations I these my like the boosted horseshoe inventory Jason, is completion spacing areas specifically, versus on typical would organic wells? -- of type incremental the you you My think targeting speak planning what horizontal? just about techniques And you potential could you these and wells around question addition. to how result

Mikell Pigott

longer a a known laterals. are technique we priority A specifically. efficient. technique technique laterals drill unique where Slide it anywhere X, target is we for of way Point position. drilling well that great use to this That's Neal. laterals of We this lean more all us for on was long It's have This highlight short and big how map there's horseshoe acreage example the with a our into On locations. we current us,

on wells we which spacing, And wells proposition -- lateral, really XX when away traditionally about from have. X these just spacing are unique that back, that come wells Whether as you long. you section X have planned that space. so design return a that would that transaction per go We come your when feet back created you section, you and we develop you like on wells The that think per would process. XX,XXX or believe starting point, we straight value part we of wells same inbound we you on lateral

Neal Dingmann

costs question notable I'm you future definitely you And recent can just might on impact when current what at steps the further taking as I'm be cost? around to to to the reduced, D&C cycle really, during wells. reduced times look or the quarters. speak the is you my second just details. these speak are wondering, Great the wondering, you're costs might not some costs, reduce just what And all have maybe then

Mikell Pigott

job done that, contracts suggest. and the down. getting done progress it of operating Part in costs job team made looking tremendous to but I'll The just you a Katie. just areas. new turn it like great And at a great things is like of has these have over They've

Katie Hill

on closing stagger additional through about line to acquisitions, Delaware our market. that continuing cost morning, down, Good operating of We've X% XX% softening both efficiency really in contracts costs Strategically, on reduced a drive and an dampen through by Neal. we and fluctuation. tend costs we well in area. sight long-term the per since operating service to We're already have to those

However, currently negotiating an that contracts take be another about additional we'll It's negotiation well. in towards service rigs Point the we'll X QX, year, in extension the end of able really we're base the X X we're advantage so market. excited reason for our have current an as and to of acquisition of the

allowed work to highlight year, We're And Jason us to an end important comments, the and across excited great We like this I a with is, where continue to assets Delaware guidance opportunity a the work which towards the continue integrated without to add activity add to again time Great have capital what's is. team. efficiency incremental these opening his market change. our year, is to has in activity of mentioned the to down. costs think get

Operator

Parham the comes Our question from next Zach JPMorgan. with of line

Zachary Parham

you follow much normal that view horseshoe color talk the on the wanted X-mile give Can over inventory? be added versus horseshoe could wells development. up next versus you us few you your just the of some wells. horseshoe how economics I current about on to years the And laterals these new program maybe of how

Mikell Pigott

really that couple Slide to XXXX. higher XXXX? are we productivity is well. is basins almost technology technique over have But in capital the next is return. wells That's do If horseshoe bucket we we're try the the testing X as XXX what inventory that's budget or sort we'd wells of years. We'll XXX years breakevens what for about wells the breakeven using we've now, we on as wells, going wells zones the from lower can. shaped reduce have you that evenly call wells to that breakeven is get more team Those wells. distributed is great return per wells breakevens. We team sub-$XX that wells with mentioned to optimize we and for sub-$XX the lower have The as this big how be maybe There horseshoe as evenly to a of as What sub-$XX our in our lumped the XX on year. the what look extended and wells our new forecast life it amongst drill what costs X for XXX our challenge we've return and for rank we've sub-$XX into bring breakeven in quickly of new drill breakevens of and They're budget The that that skyline as are sub-$XX-$XX Delaware there. we really doing our extended to codevelop gone year. wells, last We've going also I as highlighted everything we highest excited job. them. distributed breakevens to we to with we a roughly What that deck. color That's distributed the targets lower is and are with at They're forward there. do

Zachary Parham

they're kind of initial a I Thanks, well? versus a I wells of on initiated Jason. thoughts a maybe cost you those those you lot Basin wanted And the But testing any bit cost? that on my your didn't Midland follow-up core on to give of there, ask, can detail program. I you give you know little but could what us think just wells just thoughts know a Barnett, had deeper,

Mikell Pigott

is focus a of cost. to of quality Barnett our to in that inventory, been company's example inventory of length trying on one approaching has the bring A The at we're and multiple our and lower where majority we're Yes. extend fronts.

in Barnett being multiple are wells us the starting great data tested we designs help our and These flowback. wells optimize We provide to will speak completion as have future. that

idea know are drilled. I We're and be They've don't than well single well less The -- first reduce a more putting they've rate on the continued and so cost every tests what will the frac. zipper a fracking at to one have expensive. in our traditional great that of we it's time, efficient coming run a process the future. in

these that We of We've those, higher you our XX,XXX risk first done, again, opportunity they're we The think but not the of would the want is going these the weren't updating they're, the And you for a and things versus future. is, new and we'll more will because to because our for expensive guidance to these what zones production great the also, also as under the we put on we existing and look the we look Barnett were isolation. team to If highlight because we we've end are guidance wells a wells be one-off drill, footprint. on competitive, wells We've program it in got day. great to cost we so absorbed it's them capital It's wells one in are the that. steady healthy get more first in, kind at that it's down guidance, factor job, of the at forward predictable to doing XQ curtain inclusive I guidance, our it's of but did that acquired hard did a have cost wanted have just and XQ they highlight in bore that production I higher these kind but us. wells the drilled say to to of production wells. When the to heavily a acres in is risked tests more our that's just when get tries. be

Operator

from of the with question Citi. next Diamond line comes Paul Our

Paul Diamond

there one Just of what additional on Barnett. quick set the locations or thoughts inventory from the are following opportunity your notional a up kind Outside on adds? the economics,

Mikell Pigott

on These about low opportunity through X of on is wells to are the is industry to There's oily not drive we inventory. around because future is kind ultimately now wells wells They being the where Dallas a is just our is their came very drilling. the now, drilled early. so like Barnett it's wells are acreage would so some excited it. that report competitive, there's acreage yields, There of I underneath SM good at with things bought we right think not well Glasscock keeping tight, I competitive areas there will position, Because out count. we're it show add so We've of as something out It's a us We're one really developed spacing, Western what I potential west X have and our we They additional wells for don't working mentioned, like in excitement. some got, it's the the of above beyond X -- per but -- That's Oxy section. wells. information And are that. map. you water are right described acres. great These with XX,XXX But is what which to a today. is low-cost it area. places the it's the be going other for

Paul Diamond

that quarter run gains? shift with with movement basis, cadence, Or And do of quick should probably On kind with And the pretty between Point operational we in numbers? rate wells rig one. on talk and you Delaware expect Or that that some X, expect that per Midland, there efficiency in split of year. just just the sticky? is being being any of per kind kind one of those is rig rigs added kept additional Slide fourth cadence the that about and a you

Mikell Pigott

we that The working teams speak. are as

say bit in just less less Delaware, cost drilling Midland that we a Delaware. team both wells we've wells, a reduce the wider more been bent In with higher are are the Delaware As well, With we highlighted like Delaware her expensive and you a have as and the that would but mentioned, the wells Katie both little low for opportunities and team in economics there we've working costs through balancing horseshoe get I have great things positive Midland you got of, shaped savings the In completing have activity spacing, and area out a Basin, right that is more now. production, to all more for there's experience again, expensive And past. get productivity. but little by we'll would XX%. outperforming guidance that we because continuing in February. higher as breakevens, they've area. definitely the The productivity. better the the

Operator

comes from of Bank with America. Our question of next Hungness Noah line the

Noah Hungness

just to I those you lateral? have the more runway and here cycle What the think just on given wanted do newer reducing costs they're a U-laterals. again you times improving relatively of X-mile ask for kind guys than standard

Mikell Pigott

look of cost If the money those the saves you can Katie. you lateral you working bottom, turn to over give this Slide on versus But and the that on short things individual drilling X how are gains we out it was did little her. time and efficiency She I'll a break one at how for color more two wells.

Katie Hill

a about think designed well I can improve to When for an us it projects. our the lateral looks Noah. other efficiency really Delaware those be Midland capital morning, to that would cost wells, through economics alternative similar reduction consider extension. horseshoe From and opportunity, I Good

design. generally of laterals part in the cost we're service of the that improvements we Delaware type We basin. see have newer the conventional because with that same a would But and horseshoe speaking, a opportunity efficiency would little bit in more straight expect the

Noah Hungness

learnings start implement you'll a these for you U-laterals? able guess larger do think be any times was you wondering improve really the to these guys at to I cycle take scale, and I Well, as too,

Katie Hill

with We Midland, do conventional in as it. execute continue design the alternative really Delaware have similar we see our we Where to the see with and proven zones. in cycle opportunity expansion to improvement that a steering design can lateral high we more we and strategy. is times deploy as in this straight this We've may already confidence ability test

of how and application. that, I across really efficiency opportunity cycle horseshoe the it these is think time limit designs. about the to all well wouldn't again, we're thinking just I capital

Mikell Pigott

single do the drilling our we get We improvement -- there so to and to the continue we'll it, opportunities. definitely we faster, going costs every down performance more be are was were pad, Allison getting When breakevens. well improve

Noah Hungness

Really my as And you. hoping Got just service you appreciate with a then that. could providers. kind your of was bit little conversations question, second I the on Katie, expand

As are kind month now, how negotiations maybe today conversations changed are you of that's of guys you how a ago? about kind contracts versus those in with talk could and

Katie Hill

year. impact right into really technically into with And crews, make incremental market the and some is midyear experiencing frac market through The again, rig The for the to of the the We're we're is right of rigs as towards is last volatility of today high-spec completely say able looking a of advantage over half just markets. to that good impact. of always and we and advanced partnerships shift consistent to was are consolidation, peak and our now the volatile the sure the from now month, term great. know. probably would we're have you enter working end grab second I pricing us stable opportunity frac 'XX. from tied take long-term seeing opportunity in enter a inflationary commodity That to that that the we pricing not to are long hold can dampen any agreements pricing absolutely which

Operator

Abbott next with from comes Research. Wolfe the line Our John question of

John Abbott

scale your and I guess borrowings for do that focus in Jason, it over on the time under view question is at how point really hand, the next in reducing like assets the also, the you at on your this revolver Energy? Vital probably of importance sounds is, have here the size this and point, you year.

Mikell Pigott

to there through generation. past. there a going putting that going wells the little at of to really opportunities less cash We're We've -- lower here with little simul-frac. see us, costs pivot M&A that I pause M&A a will the will some For get of great of have in us compared and loadings jump on When landscape, down. like are We bit look got more ahead a that today. going we we're were of can the fluid of less where our believe. we're low things forward inventory some I inventory focus to the we capital bit continue the really pump on flow out breakeven opportunities we've in to a added

on a ahead the things the flow, XQ we've to for tested us to that for term. workovers infrastructure improving growth the projects, to resizing what AI this or of we've these the and That and On which the there operating cash LOE be capital Point using long it's be Of going Point that little you prove we're chemical there of machine of year I expenses the front, wells allow is of economics future Howard learning and see breakeven free on will things that the expenses haul. front, got emphasis rate don't so has we're focus cost year. over it and long think Basin. like that excited continue And really and over LOE. for There's landscape, us lot opportunities generation attacking of but over a of shift front, looking is are believe LOE a horseshoe we're today, believe exciting for where the about in backyard is to things together, for We're will to will and the move next is just requirement low reduce pump cash lives next inventory expenses, a higher year Delaware process going flow of can the at and in of our technology extend our that see to asset. be result team, LOE our technology submersible much workover really pumps, in like just to where the pumps because as County the more our Point got there we increase we've as that I our going don't out any many bit jump representative But come is exit to asset. in improve all I XQ

John Abbott

I appreciate really just then it. And a follow-up. quick

in For you think think you the your commodity you as hedges, How some hedges have volatility? of you place. sort already to XXXX, given want be do year to about just the extent that next hedged

Mikell Pigott

If hedged see you we the oil past, you hedge look advance. are -- see to table, prices on $XX. work but year we've believe usually done at volatility XX% just at we the on In job our hedges, when can good we'll layer tended they've What that team has a $XX and been some range. hedges to I in is putting rising, that a gets be when

put higher, add see on spikes and range. hedges than but I to normally to would that were in we our we that wouldn't free $XX knowing saw jump the We're result the we Point we and more was position. big the acquisition, cash hedge flow hunt That we a to a deal. lock hedge in in, wanted wouldn't the additional position and the layers at in in You higher in oil -- ultimately a hesitate be of economics the of on if

Operator

back for I Ron This session. Q&A Hagood concludes Mr. remarks. closing turn to will the now over conference our

Ron Hagood

us. for joining you Thank

this As appreciate call. always, concludes interest Energy, we your Vital this and morning's in

Operator

concludes Ladies gentlemen, call. today's Thank and you all for that joining.

disconnect. now may You

Vital Energy (VTLE) 8 Aug 242024 Q2 Earnings call transcript