Bullish, 9%-Yield Vitesse Energy Stock Has 30% Upside
March 22, 2024
Why Outlook for VTS Stock Is Robust
Disruptions to seaborne trade due to the crisis in the Red Sea, an oil supply deficit, and the upcoming summer driving season have prompted analysts to make upward revisions to their forecasts for summer peak oil prices.
For instance, Goldman Sachs Group Inc (NYSE:GS) now projects that Brent crude oil prices will climb to a peak of $87.00 per barrel this summer. That’s up by $2.00 from its earlier projection. (Source: “Goldman Raises Forecast of Brent Oil Summer Price to $87,“ OilPrice.com, February 26, 2024.)
Meanwhile, Statista Inc. expects the price of West Texas Intermediate (WTI) crude oil to hit an average of $82.15 per barrel in 2024. In 2023, weekly crude oil prices averaged between $70.00 and $80.00 per barrel. (Source: “West Texas Intermediate With Crude Oil Prices From 2022 to 2023, With a Forecast Until 2025,” Statista, March 13, 2024.)
These estimates, coupled with high cash flow, are why Vitesse Energy Inc (NYSE:VTS) should be on the radar of energy bulls and passive income investors.
Most investors probably aren’t familiar with Vitesse Energy, and that’s because it only went public in early 2023.
The Colorado-based company is a non-operated working and mineral interest owner of oil and natural gas assets, which are mainly in the Bakken oil field of North Dakota. Its assets consist of approximately 50,000 net acres and interests in more than 6,870 producing wells. (Source: “Investor Presentation: February 2024,” Vitesse Energy Inc, last accessed March 19, 2024.)
Diversification across more than 30 operators and more than 6,800 producing wells means no single well can make or break the company. Vitesse Energy participates in 30% to 50% of the rigs that drill in the Bakken formation, effectively creating a Bakken exchange-traded fund (ETF).
A few of the 30+ operators that Vitesse Energy works with are Chord Energy Corp (NASDAQ:CHRD), Exxon Mobil Corp (NYSE:XOM), Hess Corp (NYSE:HES), and Marathon Oil Corp (NYSE:MRO).
The company’s proved developed reserves at the end of 2023 were up by five percent from the end of 2022, at 28.5 million barrels of oil equivalent (BOE). Its total proved reserves at the end of 2023 were down by seven percent, at 40.6 BOE. (Source: “Vitesse Energy Announces Full Year 2023 Results and Declares $0.50 Quarterly Cash Dividend,” Vitesse Energy Inc, February 26, 2024.)
The decrease in the company’s total proved reserves was a result of the company removing drilling locations related to the pace of development in North Dakota.
Why were those locations removed? According to U.S. Securities and Exchange Commission (SEC) guidelines, “proved undeveloped reserves” can only include locations that are expected to be developed over the next five years.
Overall, Vitesse Energy’s deep inventories are mostly made up of undeveloped locations (80%). And thanks to leveraged technology, those undeveloped locations have continued to become more capital-efficient. More than 200 of the locations are in the Bakken formation.
Adjusted Net Income of $53.6 Million in 2023
For full-year 2023, Vitesse Energy Inc reported a net loss of $19.7 million and adjusted net income of $53.6 million. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $157.0 million. (Source: Ibid.)
The company also reported full-year cash from operations of $141.9 million and free cash flow (FCF) of $60.7 million.
In 2023, Vitesse Energy produced 11,889 BOE per day (68% oil), a 15% increase from 2022. In the fourth quarter of the year, it produced 13,652 BOE per day (72% oil). This represented 24% growth on a sequential basis.
Commenting on the results, Bob Gerrity, Vitesse Energy Inc’s chairman and CEO, said, “Our allocation of capital to the highest return opportunities also resulted in production growth during the year, while maintaining our conservative leverage profile.” (Source: Ibid.)
He added, “Going forward, we believe our significant inventory of organic development locations and access to attractive self-sourced deal flow position us to both continue the return of capital strategy and pursue accretive growth opportunities.”
After Vitesse Energy reported earnings per share (EPS) of $1.81 for 2023, analysts expect the company to report EPS of $1.89 for 2024 and EPs of $1.98 for 2025. (Source: “Vitesse Energy, Inc. (VTS),” Yahoo! Finance, last accessed March 19, 2024.)
Quarterly Dividends of $0.50 Per Share
Vitesse Energy stock paid total dividends of $2.00 per share in 2023 and declared a cash dividend of $0.50 per share for the first quarter of 2024. (Source: “VTS Dividend History,” Nasdaq, last accessed March 19, 2024.)
As of this writing, that works out to a yield of 8.5%.
Vitesse Energy Inc noted in its February investor presentation that its dividend is fixed at $0.50 per share. So, you know the distributions will be stable and reliable.
And if you can judge the success of a company by its share price, Vitesse Energy has been doing well. As of this writing, VTS stock is up by 51% since going public in January 2023, up by 49% year-over-year, and up by 10% year-to-date.
Chart courtesy of StockCharts.com
The outlook for VTS stock’s price is robust.
Wall Street analysts have provided a 12-month share-price forecast between $27.00 and $30.50. This points to potential gains in the range of approximately 15% to 30%.
The Lowdown on Vitesse Energy Inc
Vitesse Energy stock has emerged as a top dividend stock.
Vitesse Energy Inc, a non-operator in the oil and gas industry, has a high-quality, long-duration asset base, with more than 80% made up of undeveloped locations. It also has a history of strategic acquisitions; it has made nearly 200 acquisitions, for a total of $580.0 million.
The company generates reliable FCF, which helps maintain VTS stock’s fixed quarterly distribution of $0.50 per share. The company also returns value to its shareholders through its $60.0-million share repurchase program.
Moreover, company insiders own more than 20% of Vitesse Energy’s outstanding shares, which means they have a vested interest in seeing the business succeed.
All this, of course, bodes well for Vitesse Energy stock’s price and high-yield dividends.
