Vitesse Energy(US:VTS)2023-08-05 18:09Financial Data and Key Metrics Changes - The company's net income for Q2 2023 was $9.6 million, with adjusted net income at $11.4 million, and adjusted EBITDA decreased to $34.8 million from $40.1 million in Q1 due to lower commodity prices, particularly for natural gas and NGLs [14][15] - Cash flow from operations was $39 million, and free cash flow was $16.1 million, which was utilized for dividends, reducing credit facility balance, and making drilling acquisitions [14][15] - Production increased by 16% year-over-year, totaling 11,359 barrels of oil equivalent per day, with oil comprising 67% of production and 94% of total revenue [15] Business Line Data and Key Metrics Changes - The company had 8.5 net wells in various stages of drilling and completion as of June 30, 2023, with an additional 11 net wells permitted for development [11] - Capital spending for the first half of 2023 was $43.3 million, expected to exceed the upper end of the annual CapEx guidance [11] Market Data and Key Metrics Changes - Lease operating expenses increased by 3% compared to Q1 2023 on a per BOE basis, while general and administrative expenses decreased by 59% on a per-unit basis due to lower one-time costs [16] - The company layered in additional oil swaps through Q1 2024 to capitalize on increased oil prices [16] Company Strategy and Development Direction - The company emphasizes a dividend-first strategy, with a focus on capital efficiency and deal flow to support dividend payments [7][14] - The management is optimistic about the development pipeline and the potential for future production growth, although they acknowledge the lag between CapEx and production [11][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is a positive trend in cost deflation for services, it is not a large trend but rather a gradual improvement [22] - The company is actively seeking larger-scale acquisitions but has not yet secured any, despite bidding on several transactions [24][37] Other Important Information - The company reaffirmed its previously issued 2023 annual guidance [17] - The management highlighted the importance of technology and efficiency improvements in driving future capital efficiency [29] Q&A Session Summary Question: Clarification on CapEx guidance and 2024 production growth - Management confirmed that increased CapEx reflects good deal flow and is a positive indicator for future opportunities, but they cannot provide specific guidance for 2024 production growth at this time [20][36] Question: Insights on capital efficiency and cost per foot in Bakken - Management noted an increase in 3-mile laterals and refracs, indicating improved capital efficiency, but emphasized that the trend is still developing [28][29] Question: Deferred taxes and future tax rates - The company expects a tax rate of 17% to 20% on current net income going forward, following a significant charge taken in Q1 [31] Question: Hedging strategy for 2025 and 2026 - Management stated that hedging is crucial for protecting dividends and they plan to continue hedging at attractive prices as they approach 2025 and 2026 [43][44]