Houston, Texas – Vital Energy, Inc. reported robust production numbers in its latest quarter, showcasing consistent outperformance from its newer wells. This positive trend instills confidence that the company will likely surpass the midpoint of its full-year production forecast.
Furthermore, to bolster its financial position, Vital issued $1 billion in 7.875% unsecured notes due 2032. This move enabled the company to fully redeem its high-interest unsecured notes, thereby reducing its interest expenses and extending the maturity of its next debt payment to 2029.
Despite its strong production numbers, Vital faced elevated costs associated with its acquired assets in the Delaware Basin, leading to higher-than-expected lease operating expenses in the first quarter of 2024. The company anticipates significant cost reductions by the second half of the year.
The company’s quarterly results showed total production of approximately 124,700 barrels of oil equivalent per day (BOEPD), with oil production at 58,500 barrels per day – both surpassing the midpoint of Vital’s guidance. However, lower-than-expected prices for non-oil production impacted revenue.
Vital attributed the increase in lease operating expenses to inefficiencies in chemical usage and elevated water production in its Delaware Basin assets. It is currently implementing measures to decrease costs, including temporarily shutting in some wells to optimize operations.
Looking ahead, Vital’s financial outlook includes generating around $291 million in free cash flow for 2024, with expectations of improved performance in the second half of the year. The company’s valuation has been adjusted to $63 per share, considering the evolving market conditions and cost management strategies.
In conclusion, Vital Energy’s strong production performance and strategic financial decisions position the company for continued success. Despite facing challenges with operating costs, Vital remains focused on enhancing operational efficiency to drive long-term value for its shareholders.
