“Vital Energy delivered across the board in the third quarter,” stated Jason Pigott, President and Chief Executive Officer. “We had the powerful combination of higher-than-expected production and lower-than-planned capital investments. These exceptional results translated directly to strong financial performance, driving $91 million of Free Cash Flow.”
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“Our success has been fueled by our proven strategy of acquiring and efficiently integrating high-value acquisitions,” continued Pigott. “This year we have captured five opportunities that increase our scale in the Permian Basin, reduce leverage and generate a highly-competitive Free Cash Flow yield.”
Third-Quarter 2023 Financial and Operations Summary
Financial Results. The Company reported net income attributable to common stockholders of $4.9 million, or $0.26 per diluted share, and Adjusted Net Income of $95.8 million, or $5.16 per adjusted diluted share. Cash flows from operating activities were $214.2 million and Consolidated EBITDAX was $286.5 million.
Production. Consistent with preliminary volumes disclosed in October, Vital Energy’s third quarter oil and total production set Company records, averaging 48,996 BO/d and 101,746 BOE/d, respectively. Quarterly outperformance was driven by strong productivity from recently completed wells across the Company’s assets. Wells completed by Vital Energy on the recently integrated Driftwood and Forge assets are currently outperforming historical oil production results by 7% and 29%, respectively.
Capital Investments. Total capital expenditures, excluding non-budgeted acquisitions and leasehold expenditures, were lower than anticipated at $158 million, consistent with preliminary amounts disclosed in October. Capital efficiencies were primarily related to savings on facilities investments on recently acquired assets. Vital Energy turned-in-line (“TIL”) 10 wells during third-quarter 2023. Investments included $133 million for drilling and completions, $12 million in infrastructure investments (including Vital Midstream Services), $4 million in land, exploration and data related costs and $9 million in other capitalized costs.
Operating Expenses. Lease operating expenses (“LOE”) during the period were $7.05 per BOE, slightly higher than expectations, due to the acceleration of high-return workover activity.
General and Administrative Expenses. General and administrative (“G&A”) expenses, excluding long-term incentive plan (“LTIP”) and transaction expenses, for third-quarter 2023 were $2.16 per BOE, higher than guidance, primarily related to higher compensation related expenses. Cash LTIP expenses, reflecting price appreciation of Vital Energy’s common stock, were $0.29 per BOE. Non-cash LTIP expenses were slightly lower than expectations at $0.28 per BOE.
Liquidity. At September 30, 2023, the Company had no balance on its $1.0 billion senior secured credit facility (with the full $1.0 billion available for future borrowings) and cash and cash equivalents of $590 million.
At November 1, 2023, the Company’s senior secured credit facility remained undrawn and cash and cash equivalents were $611 million.
Senior secured credit facility and cash balances reflect the application of the Company’s net proceeds of $1.04 billion from its issuance of common stock and senior unsecured notes in September 2023. The Company expects to utilize borrowings under the senior secured credit facility and all of its available cash, in the aggregate amount of approximately $765 million, to close previously announced acquisitions and discharge all outstanding 2025 senior notes. Upon the expected closing of all previously announced acquisitions, the elected commitment on the senior secured credit facility will increase to $1.25 billion.
Sustainability
Vital Energy recently published its 2023 Sustainability Report and an inaugural Climate Risk and Resilience Report. Both reports detail the Company’s performance against its sustainability targets. Two Company targets (Scope 1 GHG emissions intensity and methane emissions reductions) were achieved as of year-end 2022, three years ahead of schedule.
Vital Energy was the first Permian operator to receive the third-party TrustWell certification for responsible operations, placing the Company in the top-quartile of U.S. onshore operators. In 2023, Vital Energy expanded this certification to approximately 60% of its gross operated oil production and became the first company to receive the TrustWell Low Methane Rating.
Fourth-Quarter 2023 Guidance
Production. The Company increased its fourth-quarter 2023 guidance for both total and oil production from those initially provided with the acquisition announcements in September. Total production guidance was increased by 3.8 MBOE/d (previously 98.0 – 102.0 MBOE/d), comprised of 0.9 MBOE/d for increased productivity assumptions and 2.9 MBOE/d for earlier transaction closing dates. Oil production guidance was increased by 1.4 MBO/d (previously 46.5 – 49.5 MBO/d), comprised of 0.3 MBO/d for increased productivity and 1.1 MBO/d for earlier transaction closing dates.
Capital Investments. Vital Energy updated its fourth-quarter 2023 capital investment guidance to $175 – $190 million (previously $195 – $210 million, provided with acquisition announcements in September). Lower than expected investments are related to the earlier completion of acquired wells and the impact of including their capital in purchase price adjustments.
2023 Outlook
Production. The Company increased its outlook for full-year 2023 production to incorporate higher third-quarter volumes, increased expectations for fourth-quarter 2023 well productivity, and production associated with revised closing date assumptions for recently announced acquisitions.
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