Financial Performance & Outlook - Vital Energy reported 2Q-25 Adjusted Free Cash Flow of $36 million[10] - 2Q-25 Consolidated EBITDAX was $338 million[10] - The company is reaffirming its 2025 outlook for Adjusted Free Cash Flow of approximately $305 million[19] - Vital Energy anticipates reducing net debt by approximately $310 million by year-end 2025[36] Production & Capital Investments - 2Q-25 total production was 137900 MBOE/d, exceeding the midpoint of guidance[10] - 2Q-25 oil production was 62100 MBO/d[10] - Capital investments for 2Q-25 totaled $257 million[10] - The company expects FY-25 total production to be between 136500 and 139500 MBOE/d, with oil production between 63300 and 65300 MBO/d[7] Cost Optimization & Efficiency - Vital Energy has optimized its cost structure, reducing ongoing expenses by approximately 6% versus initial expectations[12] - The company reduced employee/contractor headcount by approximately 10% in June 2025[17] - The company is improving capital efficiency in the second half of 2025 with reduced DC&E capital costs[24, 25, 26] Hedging & Debt Management - Approximately 95% of expected 2H-25 oil production is hedged at approximately $69 per barrel WTI[55] - The company's total liquidity as of June 30, 2025, was $685 million[33] Inventory & Development - Vital Energy has approximately 920 inventory locations[7] - The company is enhancing capital efficiency with Horseshoe and J-Hook well designs[55] - The company has approximately 11 years of high-quality Permian Basin inventory[47]

Core Insights - Vital Energy reported a revenue of $429.63 million for the quarter ended June 2025, marking a year-over-year decline of 9.8% and a surprise of -13.97% compared to the Zacks Consensus Estimate of $499.41 million [1] - The earnings per share (EPS) for the same period was $2.02, which is an increase from $1.46 a year ago, resulting in an EPS surprise of +2.02% against the consensus estimate of $1.98 [1] Financial Performance Metrics - Average daily oil equivalent sales volumes were 137,864.00 BOE/D, slightly above the estimated 135,978.80 BOE/D [4] - Average sales prices for NGL were $14.29, lower than the estimated $15.39 [4] - Natural gas sales volumes were 19,908.00 MMcf, exceeding the estimate of 19,849.25 MMcf [4] - NGL sales volumes were 3,573.00 MBBL, surpassing the estimate of 3,338.20 MBBL [4] - Oil equivalent sales volumes were 12,546.00 MBOE, above the estimate of 12,374.79 MBOE [4] - Oil sales volumes were 5,655.00 MBBL, slightly below the estimate of 5,728.32 MBBL [4] - Average sales prices for natural gas were $0.53, lower than the estimated $0.80 [4] - Average sales prices for oil were $64.65, compared to the estimate of $64.46 [4] - Revenues from natural gas were $10.63 million, significantly lower than the estimated $33.34 million, representing a -297.9% change year-over-year [4] - Revenues from NGL were $51.05 million, slightly below the estimate of $54.11 million, but showing a year-over-year increase of +28% [4] - Revenues from oil were $365.61 million, below the estimate of $397.85 million, reflecting a -17.2% change year-over-year [4] Stock Performance - Shares of Vital Energy have returned -11.7% over the past month, contrasting with the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Vital Energy reported quarterly earnings of $2.02 per share, exceeding the Zacks Consensus Estimate of $1.98 per share, and showing an increase from $1.46 per share a year ago, indicating a positive earnings surprise of +2.02% [1][2] Financial Performance - The company posted revenues of $429.63 million for the quarter ended June 2025, which was 13.97% below the Zacks Consensus Estimate and a decrease from $476.37 million in the same quarter last year [2] - Over the last four quarters, Vital Energy has surpassed consensus EPS estimates four times but has not beaten revenue estimates during this period [2] Stock Performance - Vital Energy shares have declined approximately 46.1% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is $1.84, with expected revenues of $493.59 million, and for the current fiscal year, the EPS estimate is $8.04 on revenues of $2.03 billion [7] Industry Outlook - The Alternative Energy - Other industry, to which Vital Energy belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Vital Energy's stock performance [5][6]

[Glossary of Oil and Natural Gas Terms and Certain Other Terms](index=4&type=section&id=Glossary%20of%20Oil%20and%20Natural%20Gas%20Terms%20and%20Certain%20Other%20Terms) Defines key oil and natural gas terms and financial reporting terminology used in the Quarterly Report - This section defines key terminology used throughout the Quarterly Report on Form 10-Q, covering terms related to oil and natural gas exploration, production, and financial reporting, such as 'Bbl', 'BOE', 'Benchmark Prices', 'Realized Prices', 'Proved reserves', and 'Senior Secured Credit Facility'[7](index=7&type=chunk)[8](index=8&type=chunk)[17](index=17&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=7&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) Highlights risks and uncertainties associated with forward-looking statements, including commodity price volatility and operational challenges - The report contains forward-looking statements concerning operations, performance, business strategy, reserves, capital expenditures, and liquidity, which are subject to various risks and uncertainties that could cause actual results to differ materially[22](index=22&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - Key risks include **commodity price volatility**, changes in global supply and demand, economic conditions, ability to execute strategies and integrate acquisitions, transportation capacity constraints, and regulatory changes[22](index=22&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - Reserve estimates are inherently uncertain, relying on data interpretation and price/cost assumptions, and may be revised based on drilling and production activities[23](index=23&type=chunk)[25](index=25&type=chunk) - The company cautions against undue reliance on these statements and disclaims any duty to update them[23](index=23&type=chunk)[25](index=25&type=chunk) [Part I](index=9&type=section&id=Part%20I) [Item 1. Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents Vital Energy, Inc.'s unaudited consolidated financial statements and condensed notes for Q2 2025 [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) Summarizes the company's financial position, including assets, liabilities, and equity, as of June 30, 2025 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total current assets | $430,430 | $466,556 | $(36,126) | -7.7% | | Property and equipment, net | $4,518,965 | $4,997,897 | $(478,932) | -9.6% | | Total assets | $5,100,451 | $5,878,946 | $(778,495) | -13.2% | | Total current liabilities | $545,503 | $601,139 | $(55,636) | -9.3% | | Long-term debt, net | $2,321,294 | $2,454,242 | $(132,948) | -5.4% | | Total liabilities | $2,994,873 | $3,178,375 | $(183,502) | -5.8% | | Total stockholders' equity | $2,105,578 | $2,700,571 | $(594,993) | -22.0% | [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income (loss) for the three and six months ended June 30, 2025 Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $429,627 | $476,371 | $941,807 | $958,710 | | Total costs and expenses | $794,286 | $358,572 | $1,320,606 | $703,604 | | Operating income (loss) | $(363,404) | $117,835 | $(377,434) | $255,272 | | Net income (loss) | $(582,572) | $36,702 | $(601,409) | $(29,429) | | Basic EPS | $(15.43) | $1.00 | $(15.97) | $(0.84) | | Diluted EPS | $(15.43) | $0.98 | $(15.97) | $(0.84) | - The company reported a significant **net loss of $(582.6) million** for the three months ended June 30, 2025, and **$(601.4) million** for the six months ended June 30, 2025[31](index=31&type=chunk) - This loss was primarily driven by a substantial **impairment expense of $427.0 million** (Q2 2025) and **$585.3 million** (YTD Q2 2025) and income tax expense related to a valuation allowance on deferred tax assets[31](index=31&type=chunk) [Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in stockholders' equity, including common stock and accumulated deficit, for the period Changes in Stockholders' Equity (in thousands) | Metric | December 31, 2024 | June 30, 2025 | Change ($) | | :-------------------------- | :---------------- | :------------ | :--------- | | Common stock (shares) | 38,144 | 38,688 | 544 | | Common stock (amount) | $381 | $387 | $6 | | Additional paid-in capital | $3,823,241 | $3,829,651 | $6,410 | | Accumulated deficit | $(1,123,051) | $(1,724,460) | $(601,409) | | Total stockholders' equity | $2,700,571 | $2,105,578 | $(594,993) | - The **accumulated deficit significantly increased by $601.4 million** from December 31, 2024, to June 30, 2025, primarily due to the net loss incurred during the period[34](index=34&type=chunk) - Common stock shares outstanding increased due to restricted stock awards and other equity-based compensation[34](index=34&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $603,326 | $496,991 | $106,335 | 21.4% | | Net cash used in investing activities | $(471,423) | $(432,335) | $(39,088) | -9.0% | | Net cash used in financing activities | $(141,888) | $(22,153) | $(119,735) | -540.5% | | Net increase (decrease) in cash | $(9,985) | $42,503 | $(52,488) | -123.5% | | Cash and cash equivalents, end of period | $30,194 | $56,564 | $(26,370) | -46.6% | - **Operating cash flows increased significantly by $106.3 million** year-over-year, primarily due to changes in net settlements received for matured derivatives[36](index=36&type=chunk) - Increased capital expenditures for oil and natural gas properties led to higher cash used in investing activities[36](index=36&type=chunk) - Substantial net payments on the Senior Secured Credit Facility resulted in a large increase in cash used in financing activities, leading to a **net decrease in cash and cash equivalents**[36](index=36&type=chunk) [Condensed Notes to the Consolidated Financial Statements](index=13&type=section&id=Condensed%20Notes%20to%20the%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies, significant transactions, and financial performance [Note 1—Organization and basis of presentation](index=13&type=section&id=Note%201—Organization%20and%20basis%20of%20presentation) Describes Vital Energy's business focus and the basis for preparing its unaudited consolidated financial statements - Vital Energy, Inc. is an independent energy company focused on the acquisition, exploration, and development of oil and natural gas properties in the Permian Basin of West Texas[38](index=38&type=chunk)[39](index=39&type=chunk) - The unaudited consolidated financial statements are prepared in accordance with GAAP, reflecting historical financial position, results of operations, and cash flows, with all material intercompany transactions eliminated[38](index=38&type=chunk)[39](index=39&type=chunk) [Note 2—New accounting standards](index=13&type=section&id=Note%202—New%20accounting%20standards) Discusses the impact of recently issued accounting standards on the company's financial reporting - No new Accounting Standards Updates (ASUs) were adopted during the six months ended June 30, 2025[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures) are effective for fiscal years beginning after December 15, 2026, and December 15, 2024, respectively[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - Both ASUs are expected to result in additional disclosures but will not impact the Company's consolidated financial position, results of operations, or cash flows[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) [Note 3—Acquisitions](index=14&type=section&id=Note%203—Acquisitions) Details the PEP Acquisition, including consideration paid and its impact on the company's properties - On February 2, 2024, Vital Energy completed the PEP Acquisition, purchasing additional working interests in producing properties for an aggregate price of **$77.6 million**[49](index=49&type=chunk) - The consideration included **878,690 shares of Common Stock ($37.1 million)** and **980,272 shares of Preferred Stock ($41.3 million)**, which were later converted to Common Stock[49](index=49&type=chunk) [Note 4—Property and equipment](index=14&type=section&id=Note%204—Property%20and%20equipment) Reports full cost ceiling impairment expenses and details benchmark and realized prices for calculations - The company incurred **full cost ceiling impairment expense of $427.0 million** for the three months ended June 30, 2025, and **$585.3 million** for the six months ended June 30, 2025[51](index=51&type=chunk) - This impairment occurred as the unamortized cost of evaluated oil and natural gas properties exceeded the full cost ceiling, with no such impairment recorded in the comparable 2024 periods[51](index=51&type=chunk) Benchmark and Realized Prices for Full Cost Ceiling Calculation ($/Bbl or $/MMBtu) | Commodity | June 30, 2025 (Benchmark) | June 30, 2025 (Realized) | June 30, 2024 (Benchmark) | June 30, 2024 (Realized) | | :---------------- | :------------------------ | :----------------------- | :------------------------ | :----------------------- | | Oil | $70.48 | $71.47 | $79.00 | $80.31 | | NGL | $70.48 | $15.65 | $79.00 | $14.10 | | Natural gas | $2.86 | $0.98 | $2.32 | $0.90 | - In Q1 2025, the Company sold working interests in certain oil and natural gas properties for **net proceeds of $20.5 million**, with proceeds and asset retirement obligations recorded as adjustments to oil and natural gas properties[54](index=54&type=chunk) [Note 5—Debt](index=15&type=section&id=Note%205—Debt) Provides details on long-term debt, including senior unsecured notes and the Senior Secured Credit Facility Long-Term Debt, Net (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | 7.750% senior unsecured notes due 2029 | $298,214 | $298,214 | | 9.750% senior unsecured notes due 2030 | $302,364 | $302,364 | | 7.875% senior unsecured notes due 2032 | $1,000,000 | $1,000,000 | | Senior Secured Credit Facility | $745,000 | $880,000 | | Total long-term debt | $2,345,578 | $2,480,578 | | Total long-term debt, net | $2,321,294 | $2,454,242 | - As of June 30, 2025, the Senior Secured Credit Facility had an outstanding balance of **$745.0 million** (down from $880.0 million at Dec 31, 2024) with a weighted-average interest rate of **7.171%** and a borrowing base of **$1.4 billion**[56](index=56&type=chunk) - The company was in compliance with all covenants[56](index=56&type=chunk) - In Q1 2024, the company issued **$1.0 billion in 7.875% senior unsecured notes due 2032**, using proceeds to extinguish 10.125% senior unsecured notes due 2028 and reduce 9.750% senior unsecured notes due 2030 and Senior Secured Credit Facility borrowings[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - No debt extinguishment loss was recorded in Q2 2025, compared to **$40.3 million** in Q2 2024[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [Note 6—Equity Incentive Plan](index=16&type=section&id=Note%206—Equity%20Incentive%20Plan) Summarizes equity-based compensation awards activity and related expenses for the period Equity-Based Compensation Awards Activity (in thousands) | Award Type | Outstanding as of Dec 31, 2024 | Granted | Forfeited | Vested | Outstanding as of June 30, 2025 | | :-------------------------------- | :----------------------------- | :------ | :-------- | :------- | :------------------------------ | | Restricted stock awards | 665 | 675 | (113) | (327) | 900 | | Share-settled performance share unit awards | 48 | — | — | (48) | — | | Cash-settled performance share unit awards | 215 | 192 | (4) | — | 403 | - As of June 30, 2025, total unrecognized cost related to equity-based compensation awards was **$30.1 million**, with **$3.9 million** attributable to cash-settled liability awards, to be recognized over an expected weighted-average period of **2.12 years**[67](index=67&type=chunk) Equity-Based Compensation Expense, Net (in thousands) | Expense Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total share-settled, net | $3,233 | $3,934 | $6,837 | $7,435 | | Total cash-settled, net | $(127) | $453 | $(372) | $2,213 | | Total equity-based compensation, net | $3,106 | $4,387 | $6,465 | $9,648 | [Note 7—Net income (loss) per common share](index=18&type=section&id=Note%207—Net%20income%20(loss)%20per%20common%20share) Presents basic and diluted net income (loss) per common share, including factors affecting calculations Net Income (Loss) Per Common Share | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) available to common stockholders (in thousands) | $(582,572) | $36,399 | $(601,409) | $(30,081) | | Basic EPS | $(15.43) | $1.00 | $(15.97) | $(0.84) | | Diluted EPS | $(15.43) | $0.98 | $(15.97) | $(0.84) | | Weighted-average common shares outstanding (Basic) | 37,761 | 36,381 | 37,670 | 35,973 | | Weighted-average common shares outstanding (Diluted) | 37,761 | 37,605 | 37,670 | 35,973 | - Due to net losses in the current periods, non-vested equity-based compensation awards and outstanding preferred stock were excluded from diluted EPS calculations as their effect would be anti-dilutive[71](index=71&type=chunk)[72](index=72&type=chunk) [Note 8—Derivatives](index=18&type=section&id=Note%208—Derivatives) Explains the company's use of commodity derivatives to manage price risk and their financial impact - Vital Energy uses commodity derivatives (puts, swaps, collars, basis swaps) to hedge price risk and mitigate cash flow volatility, settling based on WTI NYMEX for oil, Mont Belvieu OPIS for NGL, and Waha Inside FERC for natural gas[73](index=73&type=chunk)[77](index=77&type=chunk) - Derivatives are not designated as hedges for accounting purposes, with fair value changes recognized in non-operating income/expense[73](index=73&type=chunk)[77](index=77&type=chunk) Gain (Loss) on Derivatives, Net (in thousands) | Derivative Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commodity | $51,571 | $9,425 | $104,249 | $(146,410) | | Contingent consideration | $17,422 | $(1,767) | $8,915 | $1,921 | | Total | $68,993 | $7,658 | $113,164 | $(144,489) | Open Commodity Derivative Positions as of June 30, 2025 | Commodity/Type | Remaining Year 2025 Volume (Bbl/MMBtu) | Remaining Year 2025 Wtd-Avg Price ($) | Year 2026 Volume (Bbl/MMBtu) | Year 2026 Wtd-Avg Price ($) | Year 2027 Volume (Bbl/MMBtu) | Year 2027 Wtd-Avg Price ($) | | :----------------------------- | :------------------------------------- | :------------------------------------ | :--------------------------- | :-------------------------- | :--------------------------- | :-------------------------- | | Oil (WTI NYMEX - Swaps) | 11,279,200 Bbl | $68.82/Bbl | 13,306,500 Bbl | $64.02/Bbl | 3,285,000 Bbl | $61.07/Bbl | | Oil (WTI NYMEX - Collars) | — | — | 1,086,000 Bbl | Floor $60.00, Ceiling $71.02 | — | — | | NGL (Non-TET Propane - Swaps) | 1,748,000 Bbl | $34.16/Bbl | — | — | — | — | | NGL (Non-TET Ethane - Swaps) | 2,208,000 Bbl | $11.04/Bbl | — | — | — | — | | Natural gas (Waha Inside FERC - Swaps) | 32,238,000 MMBtu | $2.32/MMBtu | 51,830,000 MMBtu | $2.41/MMBtu | 43,800,000 MMBtu | $2.70/MMBtu | - The company holds a contingent consideration derivative from a 2021 asset sale, with an estimated fair value of **$25.2 million** as of June 30, 2025, representing potential payments up to **$93.7 million** through June 2027[79](index=79&type=chunk)[81](index=81&type=chunk) [Note 9—Fair value measurements](index=20&type=section&id=Note%209—Fair%20value%20measurements) Details fair value measurements for derivative assets and liabilities, including Level 3 valuations Net Derivative Asset (Liability) Positions (in thousands) | Classification | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Current Derivatives (Asset) | $129,444 | $101,474 | | Noncurrent Derivatives (Asset) | $33,165 | $34,564 | | Current Derivatives (Liability) | $0 | $0 | | Noncurrent Derivatives (Liability) | $(19,466) | $(5,814) | | Net derivative asset (liability) positions | $143,143 | $130,224 | - The Sixth Street Contingent Consideration is categorized as a **Level 3 fair value measurement**, with its fair value determined using cash flow projections provided to a third-party valuation specialist[81](index=81&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The fair value increased from **$16.3 million** at December 31, 2024, to **$25.2 million** at June 30, 2025[81](index=81&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) Debt Carrying Amounts and Fair Values (in thousands) | Debt | June 30, 2025 (Carrying Amount) | June 30, 2025 (Fair Value) | December 31, 2024 (Carrying Amount) | December 31, 2024 (Fair Value) | | :--- | :------------------------------ | :------------------------- | :---------------------------------- | :----------------------------- | | Total Debt | $2,345,578 | $2,139,443 | $2,480,578 | $2,455,032 | [Note 10—Commitments and Contingencies](index=22&type=section&id=Note%2010—Commitments%20and%20Contingencies) Outlines significant contractual commitments and ongoing legal proceedings - The company is subject to various legal proceedings in the ordinary course of business, but management believes these will not have a material adverse effect[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - Significant contractual commitments include **$77.2 million** for firm product sales/transportation, **$228.4 million** for electricity purchases through 2032, and **$31.1 million** for processed sand purchases through 2026[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) [Note 11—Supplemental Cash Flow and Non-Cash Information](index=23&type=section&id=Note%2011—Supplemental%20Cash%20Flow%20and%20Non-Cash%20Information) Provides additional details on cash flow items and non-cash transactions for the period Supplemental Cash Flow and Non-Cash Information (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for interest, net | $97,199 | $96,711 | | Right-of-use assets obtained in exchange for operating lease liabilities | $15,875 | $33,874 | | Change in accrued capital expenditures | $14,251 | $(873) | | Equity issued for acquisition of oil and natural gas properties | $0 | $74,928 | [Note 12—Income Taxes](index=23&type=section&id=Note%2012—Income%20Taxes) Details income tax benefit (expense), including the impact of valuation allowances on deferred tax assets Income Tax Benefit (Expense) (in thousands) | Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Current | $(1,070) | $(1,062) | $(1,832) | $(2,237) | | Deferred | $(238,100) | $(9,347) | $(236,289) | $7,577 | | Total | $(239,170) | $(10,409) | $(238,121) | $5,340 | - The company recorded a significant income tax expense for Q2 2025 and YTD Q2 2025, primarily due to a **$237.9 million discrete charge** related to establishing a valuation allowance against its federal net deferred tax asset[97](index=97&type=chunk)[99](index=99&type=chunk) - This was driven by anticipated cumulative three-year pre-tax losses resulting from full cost ceiling impairments[97](index=97&type=chunk)[99](index=99&type=chunk) - As of December 31, 2024, federal net operating loss carryforwards totaled **$897.0 million**[100](index=100&type=chunk)[105](index=105&type=chunk) - The recently signed OBBB Act, effective for tax years beginning after December 31, 2024, will permanently restore EBITDA-based Section 163(j) calculations and 100% bonus depreciation, with impacts to be assessed in Q3 2025[100](index=100&type=chunk)[105](index=105&type=chunk) [Note 13—Related Parties](index=25&type=section&id=Note%2013—Related%20Parties) Discloses transactions and balances with related parties, such as Halliburton Company - The company has a lease agreement with Halliburton Company for an electric fracture stimulation crew, with a lease liability of **$12.2 million** as of June 30, 2025[106](index=106&type=chunk)[107](index=107&type=chunk) - Capital expenditures paid to Halliburton for oil and natural gas properties were **$40.2 million** for the six months ended June 30, 2025[106](index=106&type=chunk)[107](index=107&type=chunk) [Note 14—Segment Reporting](index=25&type=section&id=Note%2014—Segment%20Reporting) Confirms Vital Energy operates as a single reportable segment focused on the Permian Basin - Vital Energy operates as a single reportable segment, focusing on the exploration and development of oil and natural gas properties in the Permian Basin of West Texas[108](index=108&type=chunk) - Net income (loss) is the primary metric used by the Senior Executive Team to evaluate performance and make capital allocation decisions[108](index=108&type=chunk) [Note 15—Organizational Restructuring](index=25&type=section&id=Note%2015—Organizational%20Restructuring) Reports one-time expenses incurred due to a workforce reduction and related equity award forfeitures - During the three months ended June 30, 2025, the company incurred **$4.6 million** in one-time organizational restructuring expenses due to an approximate **10% workforce reduction**, leading to the forfeiture of non-vested equity-based compensation awards for affected employees[109](index=109&type=chunk) [Note 16—Subsequent Events](index=26&type=section&id=Note%2016—Subsequent%20Events) Details significant events occurring after June 30, 2025, including debt and derivative updates - Subsequent to June 30, 2025, the company borrowed **$40.0 million** and repaid **$30.0 million** on its Senior Secured Credit Facility, resulting in an outstanding balance of **$755.0 million** as of August 6, 2025[111](index=111&type=chunk) - The company updated its open commodity derivative positions as of August 5, 2025, including new Waha Inside FERC to Henry Hub NYMEX basis swaps for **14,600,000 MMBtu in 2027** at a weighted-average differential of **$(0.97)/MMBtu**[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, results of operations, and key drivers for the periods ended June 30, 2025 and 2024 [Executive Overview](index=27&type=section&id=Executive%20Overview) Provides an overview of Vital Energy's business, strategic acquisitions, and key financial highlights for Q2 2025 - Vital Energy is an independent energy company focused on oil and natural gas properties in the Permian Basin, with growth primarily through strategic acquisitions since 2023[115](index=115&type=chunk)[116](index=116&type=chunk) - Capital expenditures for full-year 2025 are projected between **$850.0 million and $900.0 million**, with **$509.7 million** incurred in the first half[115](index=115&type=chunk)[116](index=116&type=chunk) - Second quarter 2025 highlights include a **net loss of $582.6 million**, driven by **$427.0 million non-cash full cost ceiling impairment** and **$239.2 million income tax expense** for a valuation allowance[118](index=118&type=chunk) - Oil, NGL, and natural gas sales totaled **$427.3 million**, with oil production at **62,140 Bbl/d** and total production at **137,864 BOE/d**[118](index=118&type=chunk) - Recent developments include volatility in WTI crude prices due to Middle East conflicts, U.S. tariff policies, increased OPEC+ production, and global recession concerns[117](index=117&type=chunk)[119](index=119&type=chunk) - New or threatened tariffs could increase costs and reduce oil demand, adversely affecting financial results[117](index=117&type=chunk)[119](index=119&type=chunk) [Commodity Prices, Reserves and Full Cost Ceiling Test](index=29&type=section&id=Commodity%20Prices,%20Reserves%20and%20Full%20Cost%20Ceiling%20Test) Discusses commodity price volatility, its impact on reserves, and the full cost ceiling impairment recorded - Commodity prices, particularly WTI crude, experienced volatility in Q2 2025, falling below **$60/barrel** at one point, influenced by geopolitical events, tariffs, OPEC+ production increases, and economic concerns[119](index=119&type=chunk)[120](index=120&type=chunk) - Natural gas prices in the Permian Basin remained low, sometimes negative, due to transportation capacity constraints[119](index=119&type=chunk)[120](index=120&type=chunk) - The company uses commodity derivatives to minimize price volatility, but continued declines could impact drilling project viability and reserve valuations[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - A **full cost ceiling impairment of $427.0 million** was recorded for Q2 2025 (**$585.3 million YTD**) due to unamortized costs exceeding the ceiling[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - This was based on Realized Prices of **$71.47/Bbl for oil**, **$15.65/Bbl for NGL**, and **$0.98/Mcf for natural gas** as of June 30, 2025[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Hypothetical impairment analysis for Q3 2025, considering a drop in July 2025 oil prices to **$65.45/Bbl** from **$83.38/Bbl** in July 2024, suggests a potential additional impairment of **$300 million to $400 million** if current price levels persist[128](index=128&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenues, costs, and non-operating items [Revenues](index=31&type=section&id=Revenues) Details oil, NGL, and natural gas sales volumes, revenues, and average prices, including derivative impacts Oil, NGL, and Natural Gas Sales Volumes, Revenues, and Prices | Metric | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :----------------------------------- | :------ | :------ | :---------- | :---------- | | **Sales Volumes:** | | | | | | Oil (MBbl) | 5,655 | 5,388 | 11,495 | 10,715 | | NGL (MBbl) | 3,573 | 3,173 | 7,057 | 6,107 | | Natural gas (MMcf) | 19,908 | 19,264 | 39,650 | 37,798 | | Oil equivalent (MBOE) | 12,546 | 11,771 | 25,160 | 23,121 | | **Sales Revenues (in thousands):** | | | | | | Oil | $365,605 | $441,667 | $787,937 | $857,451 | | NGL | $51,046 | $39,870 | $112,785 | $86,945 | | Natural gas | $10,631 | $(5,371) | $37,969 | $12,874 | | Total | $427,282 | $476,166 | $938,691 | $957,270 | | **Average Sales Prices ($/Bbl or $/Mcf):** | | | | | | Oil (without derivatives) | $64.65 | $81.97 | $68.55 | $80.03 | | NGL (without derivatives) | $14.29 | $12.57 | $15.98 | $14.24 | | Natural gas (without derivatives) | $0.53 | $(0.28) | $0.96 | $0.34 | | Average sales price ($/BOE, with derivatives) | $40.40 | $39.66 | $41.29 | $40.61 | - Total oil, NGL, and natural gas sales revenues decreased by **10% in Q2 2025** and **2% YTD Q2 2025**, primarily due to lower average oil sales prices, despite increases in sales volumes across all product types[131](index=131&type=chunk)[135](index=135&type=chunk)[139](index=139&type=chunk) - Natural gas sales revenues saw a significant increase due to a shift from negative to positive average sales prices[131](index=131&type=chunk)[135](index=135&type=chunk)[139](index=139&type=chunk) Net Settlements Received (Paid) for Matured Commodity Derivatives (in thousands) | Commodity | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :---------- | :------ | :------ | :---------- | :---------- | | Oil | $53,513 | $(27,309) | $73,750 | $(43,887) | | NGL | $2,306 | $(754) | $113 | $(1,132) | | Natural gas | $23,739 | $18,801 | $26,382 | $26,757 | | Total | $79,558 | $(9,262) | $100,245 | $(18,262) | [Costs and Expenses](index=35&type=section&id=Costs%20and%20Expenses) Breaks down various operating and non-operating costs, highlighting the impact of impairment and restructuring Total Costs and Expenses (in thousands) | Expense Type | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :----------------------------------- | :------ | :------ | :---------- | :---------- | | Lease operating expenses | $107,750 | $113,742 | $211,235 | $219,470 | | Production and ad valorem taxes | $26,356 | $27,079 | $59,581 | $57,693 | | Oil transportation and marketing expenses | $10,649 | $12,199 | $20,769 | $22,032 | | Gas gathering, processing and transportation expenses | $5,380 | $5,088 | $12,136 | $7,464 | | General and administrative (excluding LTIP and transaction expenses) | $21,055 | $19,616 | $40,746 | $43,585 | | Organizational restructuring expenses | $4,627 | $0 | $4,627 | $0 | | Depletion, depreciation and amortization | $186,424 | $174,298 | $376,324 | $340,405 | | Impairment expense | $427,046 | $0 | $585,287 | $0 | | Total costs and expenses | $794,286 | $358,572 | $1,320,606 | $703,604 | - Total costs and expenses significantly increased by **122% in Q2 2025** and **88% YTD Q2 2025**, primarily due to the **$427.0 million (Q2 2025)** and **$585.3 million (YTD Q2 2025) full cost ceiling impairment expense**[141](index=141&type=chunk)[143](index=143&type=chunk)[156](index=156&type=chunk) - An additional **$4.6 million** in organizational restructuring expenses also contributed to the increase[141](index=141&type=chunk)[143](index=143&type=chunk)[156](index=156&type=chunk) - Lease operating expenses (LOE) decreased by **5% in Q2 2025** and **4% YTD Q2 2025**, and by **11% per BOE sold** for both periods, driven by operational efficiencies and reduced workover expenses[144](index=144&type=chunk)[148](index=148&type=chunk) - Gas gathering, processing, and transportation expenses increased due to contracts from a Q3 2024 acquisition[144](index=144&type=chunk)[148](index=148&type=chunk) - Depletion expense per BOE sold remained relatively flat, with factors including decreased reserves due to commodity prices and acquisition impacts, offset by full cost ceiling impairments[153](index=153&type=chunk) [Non-Operating Income (Expense)](index=39&type=section&id=Non-operating%20income%20(expense)) Summarizes gains/losses on derivatives, interest expense, and other non-operating items Total Non-Operating Income (Expense), Net (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :----------------------------------- | :------ | :------ | :---------- | :---------- | | Gain (loss) on derivatives, net | $68,993 | $7,658 | $113,164 | $(144,489) | | Interest expense | $(49,854) | $(40,690) | $(100,234) | $(84,111) | | Loss on extinguishment of debt, net | $0 | $(40,301) | $0 | $(66,115) | | Other income (expense), net | $863 | $2,609 | $1,216 | $4,674 | | Total non-operating income (expense), net | $20,002 | $(70,724) | $14,146 | $(290,041) | - Net gain on derivatives significantly improved, shifting from a loss of **$(144.5) million YTD Q2 2024** to a gain of **$113.2 million YTD Q2 2025**, primarily due to non-cash gains from decreasing market prices and positive settlements for matured derivatives[157](index=157&type=chunk) - Interest expense increased due to higher borrowings on the Senior Secured Credit Facility for a Q3 2024 acquisition, partially offset by lower interest obligations on new senior unsecured notes issued in H1 2024[160](index=160&type=chunk) [Income Tax Benefit (Expense)](index=41&type=section&id=Income%20Tax%20Benefit%20(Expense)) Explains income tax expense, including the valuation allowance on deferred tax assets - Income tax expense for Q2 2025 and YTD Q2 2025 reflects a **$237.9 million discrete charge** for a valuation allowance on the federal net deferred tax asset, making the effective tax rate not meaningful[162](index=162&type=chunk)[163](index=163&type=chunk) - This allowance was recorded due to the expectation of a cumulative three-year pre-tax loss[162](index=162&type=chunk)[163](index=163&type=chunk) - As of December 31, 2024, federal net operating loss carryforwards totaled **$897.0 million**[163](index=163&type=chunk) - The company expects to utilize **$175 million to $225 million in 2025**, but these deferred tax assets are fully offset by a valuation allowance as of June 30, 2025[163](index=163&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet short-term and long-term obligations and fund operations [Cash Requirements for Known Contractual and Other Obligations](index=42&type=section&id=Cash%20Requirements%20for%20Known%20Contractual%20and%20Other%20Obligations) Details significant short-term and long-term contractual cash obligations as of June 30, 2025 Significant Cash Requirements for Contractual Obligations as of June 30, 2025 (in thousands) | Obligation Type | Short-term | Long-term | Total | | :-------------------------- | :--------- | :---------- | :---------- | | Senior unsecured notes | $131,342 | $2,286,631 | $2,417,973 | | Senior Secured Credit Facility | $0 | $745,000 | $745,000 | | Electricity purchase commitments | $47,824 | $180,547 | $228,371 | | Operating lease commitments | $37,953 | $45,205 | $83,158 | | Asset retirement obligations | $5,432 | $75,620 | $81,052 | | Firm transportation commitments | $18,264 | $13,711 | $31,975 | | Sand purchase commitments | $20,253 | $10,848 | $31,101 | | Total | $261,068 | $3,357,562 | $3,618,630 | [Cash Flows](index=42&type=section&id=Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities and capital investments Cash Flow Summary (in thousands) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $603,326 | $496,991 | $106,335 | 21% | | Net cash used in investing activities | $(471,423) | $(432,335) | $(39,088) | -9% | | Net cash used in financing activities | $(141,888) | $(22,153) | $(119,735) | -540% | | Net increase (decrease) in cash | $(9,985) | $42,503 | $(52,488) | -123% | - Operating cash flows increased by **$106.3 million**, primarily due to higher net settlements from matured derivatives[172](index=172&type=chunk)[173](index=173&type=chunk) - Investing activities used more cash, increasing by **$39.1 million**, driven by a **$70.8 million rise in capital expenditures** for oil and natural gas properties, partially offset by **$22.1 million from divestitures**[172](index=172&type=chunk)[173](index=173&type=chunk) - Financing activities used significantly more cash, increasing by **$119.7 million**, mainly due to **$500.0 million in payments** on the Senior Secured Credit Facility, partially offset by **$365.0 million in borrowings**[177](index=177&type=chunk) Capital Investments (excluding non-budgeted acquisition costs, in thousands) | Investment Type | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Oil and natural gas properties | $505,459 | $418,786 | $86,673 | 21% | | Midstream and other fixed assets | $4,237 | $9,124 | $(4,887) | -54% | | Total | $509,696 | $427,910 | $81,786 | 19% | [Sources of Liquidity](index=45&type=section&id=Sources%20of%20Liquidity) Identifies available cash, credit facility capacity, and other sources of funding - As of June 30, 2025, Vital Energy had **$30.2 million in cash and cash equivalents** and **$655.0 million in available capacity** under its Senior Secured Credit Facility, totaling **$685.2 million in liquidity**[167](index=167&type=chunk)[179](index=179&type=chunk) - The facility has a **$1.4 billion borrowing base** and **$745.0 million outstanding**[167](index=167&type=chunk)[179](index=179&type=chunk) - The company's wholly-owned subsidiary, Vital Midstream Services, LLC, fully and unconditionally guarantees all outstanding senior unsecured notes, which totaled approximately **$1.6 billion** as of June 30, 2025[181](index=181&type=chunk) [Critical Accounting Estimates](index=45&type=section&id=Critical%20accounting%20estimates) Confirms no changes to critical accounting estimates, emphasizing judgments in reserve and impairment calculations - There have been no changes to the company's identified critical accounting estimates during the six months ended June 30, 2025[184](index=184&type=chunk)[185](index=185&type=chunk) - These estimates, including those for oil, NGL, and natural gas reserve quantities and the full cost ceiling calculation, involve significant judgments and assumptions that could materially affect reported amounts[184](index=184&type=chunk)[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details exposure to market risks from commodity price and interest rate fluctuations, and derivative hedging strategies - Vital Energy uses commodity derivative transactions (puts, swaps, collars, basis swaps) to hedge price risk for anticipated sales volumes of oil, NGL, and natural gas, aiming to mitigate cash flow variability[187](index=187&type=chunk) Sensitivity Analysis of Commodity Derivative Asset Position (in thousands, as of June 30, 2025) | Metric | Amount | | :---------------------------------------- | :------- | | Commodity derivative asset position | $117,913 | | Impact of a 10% increase in forward commodity prices | $(205,563) | | Impact of a 10% decrease in forward commodity prices | $205,595 | - The company's Senior Secured Credit Facility bears interest at a floating rate (**7.171% as of June 30, 2025**), exposing it to interest rate risk, while its senior unsecured notes bear fixed rates[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control - Vital Energy's management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were **effective as of June 30, 2025**[190](index=190&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal controls[191](index=191&type=chunk) [Part II](index=48&type=section&id=Part%20II) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) Discusses ongoing legal proceedings and management's assessment of their potential impact on the company - Vital Energy is subject to various legal proceedings arising in the ordinary course of business, including those related to federal, state, and local laws, personal injury, title disputes, royalty disputes, contract claims, contamination claims, and environmental claims[193](index=193&type=chunk) - Despite inherent uncertainties, the company believes that any adverse outcomes from these legal proceedings will not have a material adverse effect on its business, financial position, results of operations, or liquidity[193](index=193&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting tariffs and commodity price volatility as key threats to financial results and property valuations - New or increased tariffs imposed by the U.S. government and potential retaliatory measures could raise the company's supply chain costs or reduce demand for oil and natural gas, adversely affecting results of operations, financial position, and cash flows[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Due to the volatility in oil, NGL, and natural gas prices, the company has incurred and may continue to incur significant non-cash full cost ceiling impairments on its properties[198](index=198&type=chunk)[199](index=199&type=chunk) - Impairments of **$158.2 million (Q1 2025)** and **$427.0 million (Q2 2025)** were recorded, following a **$481.3 million impairment in 2024**[198](index=198&type=chunk)[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered equity sales and details common stock repurchases for tax withholding obligations - No unregistered sales of equity securities occurred during the period[202](index=202&type=chunk) Issuer Repurchases of Equity Securities (Common Stock) | Period | Total shares purchased | Weighted average price paid per share | | :----------------------------- | :--------------------- | :------------------------------------ | | April 1, 2025 - April 30, 2025 | 694 | $20.11 | | May 1, 2025 - May 31, 2025 | 1,298 | $14.60 | | June 1, 2025 - June 30, 2025 | — | — | | Total | 1,992 | | - The repurchased shares represent those withheld by the company to satisfy tax withholding obligations upon the lapse of restrictions on certain equity-based compensation awards[203](index=203&type=chunk) - No shares were repurchased under the **$237.3 million share repurchase program** during Q2 2025[203](index=203&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms no defaults occurred on senior securities during the quarterly period - There were no defaults upon senior securities during the quarterly period ended June 30, 2025[204](index=204&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to Vital Energy, Inc[205](index=205&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) Reports no changes in Rule 10b5-1 trading arrangements by directors or officers - None of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarterly period ended June 30, 2025[206](index=206&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including key organizational and certification documents - The exhibits include the Second Amended and Restated Certificate of Incorporation, Fourth Amended and Restated Bylaws, various indentures for senior unsecured notes, certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1), and Inline XBRL financial information (Exhibits 101, 104)[207](index=207&type=chunk) [Signatures](index=52&type=section&id=Signatures) Certifies the report's compliance with the Securities Exchange Act of 1934, signed by key executives - The report is duly signed on August 6, 2025, by Jason Pigott (President and Chief Executive Officer), Bryan J. Lemmerman (Executive Vice President and Chief Financial Officer), and Stephen L. Faulkner, Jr. (Vice President and Chief Accounting Officer), certifying its compliance with the Securities Exchange Act of 1934[212](index=212&type=chunk)[214](index=214&type=chunk)

[Second-Quarter 2025 Highlights](index=1&type=section&id=Second-Quarter%202025%20Highlights) CEO Jason Pigott emphasized cost reduction, asset optimization, and capital discipline to enhance returns, highlighting progress in streamlining operations and strengthening the balance sheet [CEO Statement](index=1&type=section&id=CEO%20Statement) CEO Jason Pigott highlighted the company's focus on cost reduction, asset optimization, and industry leadership in well design to enhance returns and strengthen the balance sheet - Ongoing efforts to **lower costs** and **optimize assets** to enhance returns[3](index=3&type=chunk) - Substantial progress in sustainably reducing **operating, personnel, and corporate costs**[3](index=3&type=chunk) - Leading the industry in **optimized well designs**, including J-Hook and horseshoe wells[3](index=3&type=chunk) - Commitment to **capital and cost discipline** for sustainable Adjusted Free Cash Flow[3](index=3&type=chunk) [Second-Quarter 2025 Financial and Operations Summary](index=1&type=section&id=Second-Quarter%202025%20Financial%20and%20Operations%20Summary) Vital Energy reported a **net loss of $582.6 million** due to impairment and tax allowance, while **Adjusted Net Income was $76.1 million** [Financial Results](index=1&type=section&id=Financial%20Results) Vital Energy reported a **net loss of $582.6 million** and **Adjusted Net Income of $76.1 million**, impacted by significant non-cash impairment and tax allowance Q2 2025 Financial Highlights | Metric | Q2 2025 Value | | :-------------------------------- | :-------------- | | Net Loss | $(582.6) million | | Net Loss per diluted share | $(15.43) | | Adjusted Net Income | $76.1 million | | Adjusted Net Income per diluted share | $2.02 | | Cash flow from operating activities | $252.3 million | | Consolidated EBITDAX | $338.1 million | | Adjusted Free Cash Flow | $36.1 million | - Non-cash pre-tax impairment loss on oil and gas properties totaled **$427.0 million**, driven by a decline in SEC mandated oil price calculation[4](index=4&type=chunk)[6](index=6&type=chunk) - Valuation allowance against federal net deferred tax asset amounted to **$237.9 million**[5](index=5&type=chunk)[6](index=6&type=chunk) [Production](index=2&type=section&id=Production) Total production averaged **137,864 BOE/d** and oil production **62,140 BO/d**, within guidance despite minor weather and curtailment impacts Q2 2025 Production Metrics | Metric | Q2 2025 Value | Guidance Range | | :-------------------- | :-------------- | :-------------------- | | Total Production | 137.9 MBOE/d | 133.0-139.0 MBOE/d | | Oil Production | 62.1 MBO/d | 61.0-65.0 MBO/d | - Production negatively impacted by **780 BOE/d** (**500 BO/d oil**) due to weather and temporary curtailments[7](index=7&type=chunk) - Commenced production from the company's first two **J-Hook wells**[4](index=4&type=chunk) [Capital Investments](index=2&type=section&id=Capital%20Investments) Total capital investments reached **$257 million**, exceeding guidance due to **$13 million** in drilling overruns and **$11 million** in accelerated development, primarily in drilling and completions Q2 2025 Capital Investments | Metric | Q2 2025 Value | Guidance Range | | :------------------------------------------------ | :-------------- | :-------------------- | | Total Capital Investments (excl. non-budgeted) | $257.0 million | $215-$245 million | - Capital investments included **$13 million** for drilling cost overruns and **$11 million** to accelerate development activity into the second quarter[8](index=8&type=chunk) - Second quarter investments included **$216 million** in drilling and completions, **$27 million** in infrastructure, **$8 million** in other capitalized costs, and **$6 million** in land, exploration, and data-related costs[8](index=8&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) Lease Operating Expenses (LOE) were **$107.8 million**, **6% below guidance midpoint**, driven by lower costs on acquired assets and optimization in Midland and Delaware basins Q2 2025 Operating Expenses | Metric | Q2 2025 Value | Guidance Range | | :-------------------- | :-------------- | :-------------------- | | Lease Operating Expense | $107.8 million | $112-$118 million | - **LOE was 6% lower** than the midpoint of guidance[9](index=9&type=chunk) - Driven by lower costs on recently acquired Point Energy assets and ongoing cost optimization in the Midland and Delaware basins, including reduced field power generation and chemicals costs[9](index=9&type=chunk) [G&A Expenses](index=2&type=section&id=G%26A%20Expenses) Total General and Administrative (G&A) expenses were **$23.8 million**, **7% below guidance midpoint**, reflecting continued efforts to reduce employee and professional costs Q2 2025 G&A Expenses | Metric | Q2 2025 Value | Guidance Range | | :-------------------------------- | :-------------- | :-------------------- | | Total General and Administrative | $23.8 million | $24.6-$26.7 million | - **G&A expenses were 7% below** the midpoint of guidance[9](index=9&type=chunk) - Company continued to reduce **employee and professional costs**[9](index=9&type=chunk) [Adjusted Free Cash Flow and Net Debt](index=2&type=section&id=Adjusted%20Free%20Cash%20Flow%20and%20Net%20Debt) Adjusted Free Cash Flow was **$36 million**, with expense reductions offsetting drilling outspend, while Net Debt increased by **$8 million** due to operating asset changes Q2 2025 Adjusted Free Cash Flow and Net Debt | Metric | Q2 2025 Value | | :---------------------- | :-------------- | | Adjusted Free Cash Flow | $36 million | | Net Debt Change | Increased by $8 million | - Sustainable expense reductions largely offsetting **drilling outspend**[10](index=10&type=chunk) - Net Debt increased due to a **$41 million decrease** in net changes in operating assets and liabilities[10](index=10&type=chunk) [Liquidity](index=2&type=section&id=Liquidity) As of June 30, 2025, the company had **$745 million outstanding** on its **$1.4 billion** credit facility and **$30 million** in cash and cash equivalents Q2 2025 Liquidity Position | Metric | Value (as of June 30, 2025) | | :-------------------------------- | :-------------------------- | | Senior Secured Credit Facility Outstanding | $745 million | | Senior Secured Credit Facility Capacity | $1.4 billion | | Cash and Cash Equivalents | $30 million | [2025 Outlook](index=2&type=section&id=2025%20Outlook) The company anticipates increased production from 38 new wells in late Q3/early Q4, narrowing full-year guidance for total and oil production [Production Outlook](index=2&type=section&id=Production%20Outlook) Production volumes are expected to increase from **38 wells** completed in late Q3/early Q4, with full-year guidance narrowed to **136.5-139.5 MBOE/d** total production - Planned completion of **38 wells** in late third quarter/early fourth quarter is expected to meaningfully increase production volumes[11](index=11&type=chunk) Full-Year 2025 Production Guidance (Narrowed) | Metric | Full-Year 2025 Guidance | | :-------------------- | :---------------------- | | Total production | 136.5-139.5 MBOE/d | | Oil production | 63.3-65.3 MBO/d | [Capital Investments Outlook](index=2&type=section&id=Capital%20Investments%20Outlook) Q3 2025 capital investment expectations reduced by **$25 million** to **$235-$265 million** due to Q2 acceleration, narrowing full-year guidance to **$850-$900 million** - Reduced expectations for third quarter investments by **$25 million** to **$235-$265 million**, partly reflecting accelerated capital into Q2[12](index=12&type=chunk) - Full-year 2025 capital expectations were narrowed to **$850-$900 million**[14](index=14&type=chunk) - Guidance for the fourth quarter is **unchanged**[14](index=14&type=chunk) [Operating Expenses Outlook](index=4&type=section&id=Operating%20Expenses%20Outlook) Recent operating expense improvements are expected to be sustainable, with Q3 LOE projected at **$109-$115 million** and Q4 at **$107-$113 million** - The company expects recent improvements in **operating expenses to be sustainable**[14](index=14&type=chunk) 2025 Operating Expense Outlook | Metric | Q3 2025 Expectation | Q4 2025 Expectation | | :---------------------- | :-------------------- | :-------------------- | | Lease operating expenses | $109-$115 million | $107-$113 million | [G&A Expenses Outlook](index=4&type=section&id=G%26A%20Expenses%20Outlook) Following a **10% headcount reduction**, G&A expenses are expected to sustainably decline by approximately **12% from Q2 2025** to **$20.0-$22.0 million** in Q3 and Q4 - Reduced combined employee and contractor headcount by approximately **10% in June**, resulting in sustainably lower G&A expense[15](index=15&type=chunk) 2025 G&A Expenses Outlook | Metric | Q3 2025 Expectation | Q4 2025 Expectation | | :---------------------------------------------------------------- | :-------------------- | :-------------------- | | Total G&A (approx. 12% decline from Q2 2025) | $20.0-$22.0 million | $20.0-$22.0 million | [Non-core Divestitures](index=4&type=section&id=Non-core%20Divestitures) In July 2025, Vital Energy sold **3,800 net non-core acres** for **$6.5 million**, with year-to-date non-core asset sales totaling **$27 million** and no production impact - Closed on the sale of approximately **3,800 net acres** in Crane and Upton counties for **$6.5 million** in July 2025[16](index=16&type=chunk) - The sale included five inventory locations in the Barnett formation with **no impact to production**[16](index=16&type=chunk) - Year-to-date, Vital Energy has closed on non-core asset sales totaling **$27 million**[16](index=16&type=chunk) [Adjusted Free Cash Flow and Net Debt Outlook](index=4&type=section&id=Adjusted%20Free%20Cash%20Flow%20and%20Net%20Debt%20Outlook) Full-year 2025 Adjusted Free Cash Flow is projected at **$305 million**, with Net Debt expected to reduce by approximately **$310 million** through H1, Q3, and Q4 reductions - For full-year 2025, the company expects to generate approximately **$305 million** of Adjusted Free Cash Flow at **~$67 per barrel WTI**, inclusive of hedging proceeds[17](index=17&type=chunk) - Expects to reduce Net Debt by approximately **$310 million** for full-year 2025[17](index=17&type=chunk) 2025 Net Debt Reduction Outlook | Period | Net Debt Reduction Expectation | | :-------------------- | :----------------------------- | | Through H1 2025 | $125 million | | Q3 2025 | Approximately $25 million | | Q4 2025 | Approximately $160 million | [Third-Quarter 2025 Guidance](index=4&type=section&id=Third-Quarter%202025%20Guidance) Q3 2025 guidance forecasts total production of **128.0-134.0 MBOE/d** and capital investments of **$235-$265 million** [Production and Capital Investments Guidance](index=4&type=section&id=Production%20and%20Capital%20Investments%20Guidance) Q3 2025 guidance projects total production at **128.0-134.0 MBOE/d** and capital investments, excluding non-budgeted acquisitions, at **$235-$265 million** Q3 2025 Production and Capital Investments Guidance | Metric | 3Q-25E Guidance | | :------------------------------------------------ | :-------------- | | Total production (MBOE/d) | 128.0 - 134.0 | | Oil production (MBO/d) | 58.0 - 62.0 | | Capital investments, excluding non-budgeted acquisitions ($ MM) | $235 - $265 | [Revenue and Expense Guidance](index=5&type=section&id=Revenue%20and%20Expense%20Guidance) Q3 2025 guidance details sales price realizations, net settlements from commodity derivatives, and key expenses including LOE at **$109-$115 million** and G&A at **$16.9-$18.4 million** Q3 2025 Revenue and Expense Guidance | Metric | 3Q-25E Guidance | | :---------------------------------------------------------------- | :-------------- | | **Average sales price realizations (excluding derivatives):** | | | Oil (% of WTI) | 101% | | NGL (% of WTI) | 21% | | Natural gas (% of Henry Hub) | 23% | | **Net settlements received (paid) for matured commodity derivatives ($ MM):** | | | Oil | $11 | | NGL | $5 | | Natural gas | $20 | | **Selected average costs & expenses:** | | | Lease operating expenses ($ MM) | $109 - $115 | | Production and ad valorem taxes (% of sales revenues) | 6.40% | | Oil transportation and marketing expenses ($ MM) | $10.7 - $11.7 | | Gas gathering, processing and transportation expenses ($ MM) | $5.5 - $6.5 | | General and administrative (excluding LTIP and transaction expenses, $ MM) | $16.9 - $18.4 | | General and administrative (LTIP cash, $ MM) | $0.4 - $0.5 | | General and administrative (LTIP non-cash, $ MM) | $2.7 - $3.1 | | Depletion, depreciation and amortization ($ MM) | $168 - $178 | [Company Information](index=5&type=section&id=Company%20Information) This section provides details on Vital Energy's upcoming conference call and an overview of the company's core business operations in the Permian Basin [Conference Call Details](index=5&type=section&id=Conference%20Call%20Details) Vital Energy will host a conference call on **August 7, 2025, at 7:30 a.m. CT** to discuss Q2 2025 results, with webcast access available online - Conference call planned for **7:30 a.m. CT, Thursday, August 7, 2025**[1](index=1&type=chunk)[21](index=21&type=chunk) - Webcast available through the company's website at **www.vitalenergy.com** under "Investor Relations | News & Presentations | Upcoming Events"[1](index=1&type=chunk)[21](index=21&type=chunk) [About Vital Energy](index=5&type=section&id=About%20Vital%20Energy) Vital Energy, Inc. is an independent energy company based in Tulsa, Oklahoma, focused on oil and natural gas properties in the Permian Basin - Vital Energy, Inc. is an independent energy company with headquarters in **Tulsa, Oklahoma**[21](index=21&type=chunk) - Business strategy focuses on the acquisition, exploration, and development of **oil and natural gas properties** in the **Permian Basin of West Texas**[21](index=21&type=chunk) [Legal Disclosures](index=5&type=section&id=Legal%20Disclosures) This section outlines the company's forward-looking statements and disclaimers regarding non-GAAP financial measures, emphasizing inherent risks and limitations [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) Forward-looking statements are based on current beliefs, subject to risks including commodity price volatility, economic conditions, and regulatory changes, with no obligation for updates - All statements addressing future activities, including assumptions, plans, expectations, and beliefs, are considered **forward-looking statements**[23](index=23&type=chunk) - Statements are not guarantees of future performance and involve risks, assumptions, and uncertainties, including **commodity price volatility**, **economic conditions**, and **regulatory changes**[23](index=23&type=chunk)[25](index=25&type=chunk) - Vital Energy disclaims any obligation to correct, update, or revise any forward-looking statement, except as required by applicable law[25](index=25&type=chunk) [Non-GAAP Financial Measures Disclaimer](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20Disclaimer) The press release includes non-GAAP financial measures useful to management but not GAAP replacements, and forward-looking non-GAAP measures are not reconciled due to forecasting difficulties - Includes non-GAAP financial measures such as **Adjusted Free Cash Flow**, **Adjusted Net Income**, **Net Debt**, and **Consolidated EBITDAX**[26](index=26&type=chunk) - Such measures are useful for investors but should not replace financial measures in accordance with GAAP[26](index=26&type=chunk) - No reconciliations of forward-looking non-GAAP measures to GAAP are available without unreasonable efforts due to inherent forecasting difficulty[41](index=41&type=chunk) [Selected Operating Data](index=8&type=section&id=Selected%20operating%20data) This section presents detailed sales volumes, average sales prices (with and without derivatives), and selected average costs and expenses per BOE sold for Q2 2025 and 2024 [Operating Data Table](index=8&type=section&id=Operating%20Data%20Table) This section details sales volumes, average sales prices (with and without derivatives), and selected average costs and expenses per BOE sold for Q2 2025 and 2024 Selected Operating Data | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | **Sales volumes:** | | | | | | Oil (MBbl) | 5,655 | 5,388 | 11,495 | 10,715 | | NGL (MBbl) | 3,573 | 3,173 | 7,057 | 6,107 | | Natural gas (MMcf) | 19,908 | 19,264 | 39,650 | 37,798 | | Oil equivalent (MBOE) | 12,546 | 11,771 | 25,160 | 23,121 | | Average daily oil equivalent sales volumes (BOE/d) | 137,864 | 129,356 | 139,005 | 127,038 | | Average daily oil sales volumes (Bbl/d) | 62,140 | 59,209 | 63,509 | 58,872 | | **Average sales prices (excluding derivatives):** | | | | | | Oil ($/Bbl) | $64.65 | $81.97 | $68.55 | $80.03 | | NGL ($/Bbl) | $14.29 | $12.57 | $15.98 | $14.24 | | Natural gas ($/Mcf) | $0.53 | $(0.28) | $0.96 | $0.34 | | Average sales price ($/BOE) | $34.06 | $40.45 | $37.31 | $41.40 | | **Average sales prices (with commodity derivatives):** | | | | | | Oil ($/Bbl) | $74.12 | $76.90 | $74.96 | $75.93 | | NGL ($/Bbl) | $14.93 | $12.33 | $16.00 | $14.05 | | Natural gas ($/Mcf) | $1.73 | $0.70 | $1.62 | $1.05 | | Average sales price ($/BOE) | $40.40 | $39.66 | $41.29 | $40.61 | | **Selected average costs and expenses per BOE sold:** | | | | | | Lease operating expenses ($/BOE) | $8.59 | $9.66 | $8.40 | $9.49 | | Production and ad valorem taxes ($/BOE) | $2.10 | $2.30 | $2.37 | $2.50 | | Oil transportation and marketing expenses ($/BOE) | $0.85 | $1.04 | $0.83 | $0.95 | | Gas gathering, processing and transportation expenses ($/BOE) | $0.43 | $0.43 | $0.48 | $0.32 | | General and administrative (excl. LTIP and transaction expenses) ($/BOE) | $1.68 | $1.67 | $1.62 | $1.89 | | Total selected operating expenses ($/BOE) | $13.65 | $15.10 | $13.70 | $15.15 | | Depletion, depreciation and amortization ($/BOE) | $14.86 | $14.81 | $14.96 | $14.72 | [Consolidated Financial Statements](index=9&type=section&id=Consolidated%20Financial%20Statements) This section presents Vital Energy's consolidated balance sheets, statements of operations, and cash flows for the periods ended June 30, 2025, and 2024 [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20balance%20sheets) As of June 30, 2025, total assets decreased to **$5.10 billion** from **$5.88 billion**, driven by reduced oil and gas properties and deferred income taxes, while equity also declined Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | **Assets** | | | | Total current assets ($) | $430,430 | $466,556 | | Oil and natural gas properties, net ($) | $4,396,943 | $4,863,632 | | Deferred income taxes ($) | $3,396 | $239,685 | | Total assets ($) | $5,100,451 | $5,878,946 | | **Liabilities** | | | | Total current liabilities ($) | $545,503 | $601,139 | | Long-term debt, net ($) | $2,321,294 | $2,454,242 | | Total liabilities ($) | $2,994,873 | $3,178,375 | | **Stockholders' Equity** | | | | Total stockholders' equity ($) | $2,105,578 | $2,700,571 | [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20statements%20of%20operations) Q2 2025 saw a **net loss of $582.6 million**, a significant decline from Q2 2024 net income, due to lower revenues, a **$427.0 million** impairment, and **$239.2 million** income tax expense Consolidated Statements of Operations (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues ($) | $429,627 | $476,371 | $941,807 | $958,710 | | Total costs and expenses ($) | $794,286 | $358,572 | $1,320,606 | $703,604 | | Impairment expense ($) | $427,046 | — | $585,287 | — | | Operating income (loss) ($) | $(363,404) | $117,835 | $(377,434) | $255,272 | | Gain (loss) on derivatives, net ($) | $68,993 | $7,658 | $113,164 | $(144,489) | | Interest expense ($) | $(49,854) | $(40,690) | $(100,234) | $(84,111) | | Income tax benefit (expense) ($) | $(239,170) | $(10,409) | $(238,121) | $5,340 | | Net income (loss) ($) | $(582,572) | $36,702 | $(601,409) | $(29,429) | | Net income (loss) per diluted share ($) | $(15.43) | $0.98 | $(15.97) | $(0.84) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20statements%20of%20cash%20flows) Q2 2025 net cash from operating activities decreased to **$252.3 million**, while net cash used in investing activities increased, and financing activities improved significantly Consolidated Statements of Cash Flows (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by (used in) operating activities ($) | $252,341 | $338,401 | $603,326 | $496,991 | | Net cash provided by (used in) investing activities ($) | $(259,301) | $(226,671) | $(471,423) | $(432,335) | | Net cash provided by (used in) financing activities ($) | $8,505 | $(478,491) | $(141,888) | $(22,153) | | Net increase (decrease) in cash and cash equivalents ($) | $1,545 | $(366,761) | $(9,985) | $42,503 | | Cash and cash equivalents, end of period ($) | $30,194 | $56,564 | $30,194 | $56,564 | - Key adjustments to reconcile net income (loss) to operating cash flow include **$427.0 million** impairment expense and **$238.1 million** deferred income tax expense in Q2 2025[38](index=38&type=chunk) [Supplemental Reconciliations of GAAP to Non-GAAP Financial Measures](index=12&type=section&id=Supplemental%20reconciliations%20of%20GAAP%20to%20non-GAAP%20financial%20measures) This section provides reconciliations for non-GAAP financial measures including Adjusted Free Cash Flow, Adjusted Net Income, Consolidated EBITDAX, and Net Debt [Adjusted Free Cash Flow](index=12&type=section&id=Adjusted%20Free%20Cash%20Flow) Adjusted Free Cash Flow (non-GAAP) is defined as net cash from operating activities, adjusted for operating assets/liabilities and transaction expenses, less capital investments - Adjusted Free Cash Flow is defined as net cash provided by (used in) operating activities (GAAP) before net changes in operating assets and liabilities and transaction expenses related to non-budgeted acquisitions, less capital investments, excluding non-budgeted acquisition costs[40](index=40&type=chunk) Adjusted Free Cash Flow Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by (used in) operating activities ($) | $252,341 | $338,401 | $603,326 | $496,991 | | Less: Net changes in operating assets and liabilities ($) | $(40,774) | $83,712 | $(6,953) | $(18,614) | | Total capital investments, excluding non-budgeted acquisition costs ($) | $257,025 | $210,010 | $509,696 | $427,910 | | Adjusted Free Cash Flow (non-GAAP) ($) | $36,090 | $44,694 | $100,583 | $88,042 | [Adjusted Net Income](index=13&type=section&id=Adjusted%20Net%20Income) Adjusted Net Income (non-GAAP) is calculated by adjusting GAAP net income for items like mark-to-market on derivatives, impairment expense, and income taxes - Adjusted Net Income is defined as net income or loss (GAAP) plus adjustments for mark-to-market on derivatives, premiums paid or received for commodity derivatives that matured during the period, organizational restructuring expenses, impairment expense, gains or losses on disposal of assets, income taxes, other non-recurring income and expenses and adjusted income tax expense[44](index=44&type=chunk) Adjusted Net Income Reconciliation (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) ($) | $(582,572) | $36,702 | $(601,409) | $(29,429) | | Plus: Impairment expense ($) | $427,046 | — | $585,287 | — | | Plus: Income tax (benefit) expense ($) | $239,170 | $10,409 | $238,121 | $(5,340) | | Adjusted Net Income (non-GAAP) ($) | $76,113 | $54,967 | $165,627 | $123,048 | | Adjusted Net Income per common share (Diluted) ($) | $2.02 | $1.46 | $4.39 | $3.30 | [Consolidated EBITDAX](index=15&type=section&id=Consolidated%20EBITDAX) Consolidated EBITDAX (non-GAAP) is defined in the Senior Secured Credit Facility as net income adjusted for various non-cash and non-operating items, used for performance measurement and covenant compliance - Consolidated EBITDAX is a non-GAAP financial measure defined in the Company's Senior Secured Credit Facility as net income or loss (GAAP) plus adjustments for share-settled equity-based compensation, depletion, depreciation and amortization, impairment expense, organizational restructuring expenses, gains or losses on disposal of assets, mark-to-market on derivatives, accretion expense, interest expense, income taxes and other non-recurring income and expenses[47](index=47&type=chunk) - Used by investors to measure operating performance without regard to items that can vary substantially from company to company depending upon accounting methods, the book value of assets, capital structure and the method by which assets were acquired[50](index=50&type=chunk) Consolidated EBITDAX Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) ($) | $(582,572) | $36,702 | $(601,409) | $(29,429) | | Plus: Depletion, depreciation and amortization ($) | $186,424 | $174,298 | $376,324 | $340,405 | | Plus: Impairment expense ($) | $427,046 | — | $585,287 | — | | Plus: Interest expense ($) | $49,854 | $40,690 | $100,234 | $84,111 | | Plus: Income tax (benefit) expense ($) | $239,170 | $10,409 | $238,121 | $(5,340) | | Consolidated EBITDAX (non-GAAP) ($) | $338,069 | $290,429 | $697,748 | $591,761 | [Net Debt](index=15&type=section&id=Net%20Debt) Net Debt (non-GAAP) is defined as long-term debt plus outstanding letters of credit, less capped cash and cash equivalents, used for financial leverage assessment - Net Debt is a non-GAAP financial measure defined in the Company's Senior Secured Credit Facility as the face value of long-term debt plus any outstanding letters of credit, less cash and cash equivalents, where cash and cash equivalents are capped at $100 million when there are borrowings on the Senior Secured Credit Facility[52](index=52&type=chunk) Net Debt Calculation (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :------------------ | | Total long-term debt ($) | $2,345,578 | $2,480,578 | | Less: cash and cash equivalents ($) | $30,194 | $40,179 | | Net Debt (non-GAAP) ($) | $2,315,384 | $2,440,399 | [Net Debt to Consolidated EBITDAX](index=15&type=section&id=Net%20Debt%20to%20Consolidated%20EBITDAX) Net Debt to Consolidated EBITDAX is a non-GAAP measure defined in the Senior Secured Credit Facility, used by management for performance evaluation and covenant compliance - Net Debt to Consolidated EBITDAX is a non-GAAP financial measure defined in the Company's Senior Secured Credit Facility as Net Debt divided by Consolidated EBITDAX for the previous four quarters, which requires various treatment of asset transaction impacts[54](index=54&type=chunk) - Used by the Company's management for various purposes, including as a measure of operating performance, in presentations to its board of directors and as a basis for strategic planning and forecasting[54](index=54&type=chunk) [Investor Contact](index=15&type=section&id=Investor%20Contact) This section provides essential contact information for investor relations inquiries [Investor Contact Information](index=15&type=section&id=Investor%20Contact%20Information) This section provides contact information for investor relations inquiries - Investor Contact: **Ron Hagood**[55](index=55&type=chunk) - Phone: **918.858.5504**[55](index=55&type=chunk) - Email: **ir@vitalenergy.com**[55](index=55&type=chunk)

Core Insights - Vital Energy reported a net loss of $582.6 million for Q2 2025, primarily due to a non-cash impairment loss of $427 million on oil and gas properties and a valuation allowance against federal net deferred tax assets of $237.9 million [5][6][11] - The company achieved an Adjusted Net Income of $76.1 million, with cash flows from operating activities amounting to $252.3 million and Consolidated EBITDAX of $338.1 million [5][11] - Production averaged 137,864 BOE/d, with oil production at 62,140 BO/d, slightly impacted by weather and temporary curtailments [7][9] Financial Results - The net loss per diluted share was $(15.43), while Adjusted Net Income per adjusted diluted share was $2.02 [5][11] - Total revenues for Q2 2025 were $429.6 million, down from $476.4 million in Q2 2024 [36] - Lease operating expenses (LOE) were reported at $107.8 million, which was 6% lower than the midpoint of guidance [9][10] Production and Operations - Vital Energy's total production for the quarter was 137,864 BOE/d, with oil production at 62,140 BO/d, both within guidance [9][10] - The company commenced production from its first two J-Hook wells and is on schedule to TIL all 38 second-half 2025 wells by early October [9][10] - The average daily production was negatively impacted by 780 BOE/d due to weather and equipment installation [7] Capital Investments - Total capital investments for Q2 2025 were $257 million, exceeding guidance of $215-$245 million [9][10] - The company allocated $216 million for drilling and completions, $27 million for infrastructure, and $6 million for land and exploration costs [8][9] G&A and Operating Expenses - General and administrative (G&A) expenses were reported at $23.8 million, which is 7% below the midpoint of guidance [10] - The company reduced its employee and contractor headcount by approximately 10%, leading to sustainably lower G&A expenses [16] Outlook - For full-year 2025, production is expected to range between 136.5-139.5 MBOE/d and 63.3-65.3 MBO/d for oil [13] - Capital investment expectations for Q3 2025 have been reduced to $235-$265 million, while full-year expectations are narrowed to $850-$900 million [14] - The company anticipates generating approximately $305 million of Adjusted Free Cash Flow at current oil prices and reducing Net Debt by approximately $310 million [18]

Core Viewpoint - The market anticipates that Vital Energy (VTLE) will report a year-over-year increase in earnings driven by higher revenues when it releases its quarterly results for June 2025 [1][2]. Earnings Expectations - The upcoming earnings report is expected to be released on August 6, with a consensus EPS estimate of $1.98, reflecting a year-over-year increase of +35.6%. Revenues are projected to be $499.41 million, up 4.8% from the previous year [3][2]. - The consensus EPS estimate has been revised 14.88% higher in the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Vital Energy is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.94%, suggesting a bearish outlook from analysts [12]. - The stock currently holds a Zacks Rank of 3, making it challenging to predict a beat on the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, Vital Energy was expected to post earnings of $2.11 per share but exceeded expectations with actual earnings of $2.37, resulting in a surprise of +12.32% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates three times [14]. Conclusion - Vital Energy does not appear to be a strong candidate for an earnings beat based on current estimates and rankings, but investors should consider other factors before making investment decisions [17].

Group 1 - Vital Energy (VTLE) is currently trading at a low valuation of 2.7 times its projected free cash flow for 2025, indicating a potentially attractive investment opportunity [1] - The stock is also trading at a significant discount of 73% to its book value, further highlighting its undervaluation in the market [1]

Group 1 - Vital Energy (NYSE: VTLE) has initiated a cost reduction program aimed at transforming negative cash flows from previous asset sales into a sustainable free cash flow model that is approved by the market and debt holders [2] - The oil and gas industry is characterized as a boom-bust, cyclical sector, requiring patience and experience for successful investment [2] Group 2 - The analysis provided in the article focuses on the balance sheet, competitive position, and development prospects of oil and gas companies, specifically highlighting the undervalued opportunities within the sector [1]

Core Viewpoint - Vital Energy, Inc. is set to report its second-quarter 2025 financial and operating results on August 6, 2025, after market close, with a conference call scheduled for August 7, 2025, at 7:30 a.m. CT to discuss the results [1]. Company Overview - Vital Energy, Inc. is an independent energy company headquartered in Tulsa, Oklahoma, focusing on the acquisition, exploration, and development of oil and natural gas properties in the Permian Basin of West Texas [2].