Vitesse Energy(VTS) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Vitesse Energy's unaudited condensed consolidated financial statements as of June 30, 2025, show total assets at $951.5 million driven by the Lucero acquisition, with six-month net income surging to $27.3 million from $8.7 million due to derivative gains and a litigation settlement, and operating cash flow increasing to $83.5 million Condensed Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $67,977 | $50,911 | | Total oil and gas properties, net | $873,734 | $751,976 | | Total assets | $951,504 | $810,893 | | Total current liabilities | $71,770 | $100,329 | | Revolving credit facility | $106,000 | $117,000 | | Total liabilities | $279,629 | $310,559 | | Total equity | $671,875 | $500,334 | Condensed Consolidated Statements of Operations Summary (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 revenue | $81,755 | $66,598 | $147,925 | $127,792 | | Operating Income | $18,656 | $16,814 | $24,034 | $29,893 | | Commodity derivative gain (loss), net | $18,451 | $379 | $18,279 | $(13,445) | | Net Income | $24,659 | $10,928 | $27,327 | $8,742 | | Net income per common share – diluted | $0.60 | $0.33 | $0.72 | $0.27 | Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash from Operating Activities | $83,505 | $74,580 | | Net cash from Investing Activities | $(66,118) | $(69,876) | | Net cash from Financing Activities | $(18,392) | $(5,135) | | Net decrease in cash | $(1,005) | $(431) | - On March 7, 2025, the Company completed the acquisition of Lucero Energy Corp., issuing 8,169,839 shares of common stock as consideration, valued at approximately $194.3 million; the acquisition is accounted for as a business combination, and the purchase price allocation is still preliminary[63][64] - The company resolved litigation with Hess, receiving a one-time cash payment of $24 million in Q2 2025, recorded as a $3.3 million increase to oil revenue, a $13.6 million increase to gas revenue, and a $7.1 million reduction to general and administrative expenses[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 23% year-over-year revenue growth in Q2 2025 to a 40% increase in production volumes, primarily from the Lucero acquisition, which offset a 13% decrease in realized commodity prices, with net income significantly boosted by a $24 million litigation settlement and an $18.5 million commodity derivative gain, while maintaining strong liquidity with $144.0 million available under its revolving credit facility and investing $66.1 million in capital expenditures Executive Overview and Business Strategy The company's strategy focuses on acquiring and developing oil and gas assets, primarily in the Williston Basin, to generate returns and distribute dividends, with Q2 2025 highlights including 18,950 BOE/day production, $24.7 million net income, and a $0.5625 per share quarterly dividend, incorporating Lucero Energy's operations post-acquisition - The company's business strategy is centered on creating stockholder value through the acquisition, development, and production of oil and gas assets, with a focus on the Bakken and Three Forks formations in the Williston Basin[126] Q2 2025 Financial and Operating Highlights | Metric | Value | | :--- | :--- | | Production | 18,950 BOE/day | | Total Revenue | $81.8 million | | Net Income | $24.7 million | | Cash Flow from Operations | $66.0 million | | Capital Investment | $35.7 million | | Quarterly Dividend | $0.5625 per share | | Total Debt (at June 30, 2025) | $106.0 million | Results of Operations For Q2 2025, total revenue increased 23% to $81.8 million due to a 40% production volume increase from the Lucero acquisition, despite a 20% drop in realized oil prices, while general and administrative expenses fell 93% due to a $7.1 million legal settlement reimbursement, and for the six-month period, revenue grew 16% to $147.9 million, with net income surging to $27.3 million from $8.7 million aided by the settlement and a significant derivative swing Comparison of Three Months Ended June 30, 2025 and 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $81.8M | $66.6M | 23% | | Combined Volumes (MBoe) | 1,724 | 1,229 | 40% | | Avg. Realized Price/Boe (pre-hedge) | $47.41 | $54.20 | (13%) | | Lease Operating Expense/Boe | $11.38 | $9.99 | 14% | | General & Admin Expense | $0.3M | $4.7M | (93%) | | Commodity Derivative Gain, Net | $18.5M | $0.4M | * | Comparison of Six Months Ended June 30, 2025 and 2024 | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $147.9M | $127.8M | 16% | | Combined Volumes (MBoe) | 3,072 | 2,371 | 30% | | Avg. Realized Price/Boe (pre-hedge) | $48.16 | $53.89 | (11%) | | General & Admin Expense | $12.4M | $10.1M | 23% | | Commodity Derivative Gain (Loss), Net | $18.3M | $(13.4M) | 236% | - The significant decrease in General and Administrative expense in Q2 2025 was primarily due to a $7.1 million reimbursement of litigation costs from a legal settlement; excluding this and Lucero transaction costs, G&A per BOE decreased due to higher production volumes[158] Liquidity and Capital Resources As of June 30, 2025, the company had $2.0 million in cash and $144.0 million available under its revolving credit facility, ensuring sufficient liquidity for the next twelve months, with the working capital deficit improving to $3.8 million from $49.4 million at year-end 2024 due to paying down accrued capital expenditures, while generating $83.5 million in operating cash flow and investing $66.1 million in capital expenditures during the first six months of 2025 - At June 30, 2025, the company had $2.0 million in cash and $144.0 million available under its Revolving Credit Facility; management expects these sources, along with operating cash flow, to be sufficient to fund material cash requirements for the next twelve months[192] Cash Flow Summary for Six Months Ended June 30 (in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $83,505 | $74,580 | | Net cash from investing activities | $(66,118) | $(69,876) | | Net cash from financing activities | $(18,392) | $(5,135) | - The working capital deficit improved from $49.4 million at Dec 31, 2024, to $3.8 million at June 30, 2025, primarily due to a $28.5 million decrease in accounts payable and accrued liabilities from paying down accrued oil and gas development costs[194] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to commodity price and interest rate risks, mitigating commodity price volatility through derivative contracts to hedge anticipated production, where a hypothetical $1 change in NYMEX WTI strip price would impact the net commodity derivative position by approximately $2.5 million, and a 1% change in interest rates on its floating-rate revolving credit facility would impact annual interest expense by approximately $1.2 million - The company's primary market risk is commodity price volatility for oil and natural gas; it utilizes derivative contracts to reduce this exposure and achieve more predictable cash flow[216][217] - A hypothetical $1 increase or decrease in the NYMEX WTI strip price would change the fair value of the company's net commodity derivative position by approximately $2.5 million as of June 30, 2025[220] - The company is exposed to interest rate risk via its floating-rate Revolving Credit Facility; a 1% change in the average interest rate would result in an approximate $0.6 million change in interest expense for the six-month period[221] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with the assessment of internal control over financial reporting excluding the recently acquired Lucero business, which accounted for approximately 22% of total assets, and no other material changes to internal controls were reported - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[222] - Management's assessment of internal control over financial reporting as of June 30, 2025, excluded the recently acquired Lucero business, acquired on March 7, 2025, which represented 22% of total assets and 12% of total revenue for the six-month period[223] PART II OTHER INFORMATION Item 1. Legal Proceedings The company resolved a previously disclosed dispute with Hess regarding post-production revenue deductions, receiving a one-time cash payment of $24 million as part of the settlement effective May 28, 2025, and does not believe any other pending legal proceedings will materially affect its business - The company settled a legal dispute with Hess concerning post-production revenue deductions; the settlement, effective May 28, 2025, included a one-time cash payment of $24 million to Vitesse[227] Item 1A. Risk Factors No material changes occurred to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K, except for a newly detailed risk concerning the potential adverse effects of tariffs and other trade measures on operations, costs, and business - A new risk factor was disclosed regarding the potential adverse impact of U.S. government tariffs and other trade measures, which could increase operational costs and affect the business[230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a board-authorized stock repurchase program for up to $60 million of its common stock, under which no shares were repurchased during the three months ended June 30, 2025, leaving approximately $59.8 million authorized for repurchase - The company did not repurchase any of its common stock during the three months ended June 30, 2025; approximately $59.8 million remains available for repurchase under the existing program[233][235] Other Items (Items 3, 4, 5, 6) The company reported no defaults upon senior securities (Item 3) or mine safety disclosures (Item 4), and no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements (Item 5), with Item 6 listing the exhibits filed with the report - No defaults upon senior securities or mine safety disclosures were reported for the period[236][237] - No director or officer of the company adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[238]