Vitesse Energy (VTS -0.33%), which holds non-operating interests in various oil and natural gas fields, announced its third-quarter results on Nov. 4. The company earnings per diluted share of $0.53 well exceed analysts' expectations of $0.32. However, the company missed on revenue, reporting $58.28 million versus expectations of $64.91 million.
| Metric | Q3 2024 Result | Q3 2024 Analyst Estimate | Q3 2023 Result | % Change YOY |
|---|---|---|---|---|
| Earnings per share (diluted) | $0.53 | $0.32 | ($0.05) | N/A |
| Total revenue | $58.3 million | $64.9 million | $55.1 million | 5.9% |
| Net income | $17.4 million | N/A | ($1.5 million) | N/A |
Source: Analyst estimates for the quarter provided by FactSet.
Overview of Vitesse Energy's Business Model
Vitesse Energy operates by buying non-operating interests in oil and natural gas wells, which means it invests in their development without directly managing the assets. This model allows Vitesse to leverage the expertise of its partners while avoiding the capital-intensive aspects of running fossil fuel extraction operations. This also reduces its exposure to typical operational risks.
In recent years, Vitesse has maintained a diversified asset base in regions like the Williston Basin and the Central Rockies. This strategy mitigates capital and operational risks, and provides it with the flexibility to weather shifts in market demand. Financially, Vitesse prioritizes liquidity and returning value to shareholders through dividends.
Notable Developments in the Quarter
During the third quarter, Vitesse Energy reported an average daily production of 13,009 barrels of oil equivalent per day, with crude oil making up 68% of that output. With hedging, its realized oil price was $71.20 per barrel. That was down from $76.35 per barrel in the prior-year period. The company has secured 43% of its 2025 production at a weighted average price of $73.21 per barrel.
Vitesse declared its next quarterly dividend, to be distributed in December, would be $0.525 per share -- the same as last quarter's payout. However, the quarter also saw rising operational costs, notably a 37% increase in general and administrative expenses, which could put pressure on profit margins. The company invested $16.4 million in development capital and $800,000 in property acquisitions, supporting its acquisition-driven growth strategy that aims to enhance production and cash flow in upcoming periods.
The company faced some challenges, notably in its failure to meet revenue expectations, attributed in part to lower realized oil prices compared to Q3 2023. Additionally, there are looming pressures from its increased general and administrative spending and higher interest expenses. Vitesse's conservative balance sheet and hedging strategy aim to mitigate these impacts as it continues to invest in its asset base.
Looking Ahead
Vitesse has revised its 2024 guidance, slightly reducing its expected production and more substantially cutting its expected capital expenditures. However, its preliminary outlook for 2025 points to an increase in production that year. Management has committed to a balance between further acquisitions and controlled expenditure, ensuring financial health and potential growth opportunities.
With a significant portion of its future production hedged, Vitesse aims to shield itself against market fluctuations. Investors should keep an eye on management's execution of this strategy, and on any market changes that could impact Vitesse's earnings potential.
