Water Tower Research Publishes Initiation of Coverage Report on Vitesse Energy, Inc. Titled, “Turning Oil into Dividends”

November 8, 2023, ST. PETERSBURG, FL – Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on Vitesse Energy, Inc. (NYSE: VTS) titled, “Turning Oil into Dividends”. The report can be accessed here.

Vitesse’s business mission is to return capital to stockholders from free cash flow generated from its capital allocation model targeting non-operated interests in oil & gas assets in major onshore US producing regions. Favored assets are located in plays where advancing technology can positively affect future returns. A fixed common stock dividend is management’s preferred vehicle to return capital to stockholders. The current quarterly dividend is $0.50/share and will be paid on December 29, 2023, to shareholders of record on December 15, 2023. Vitesse’s senior management owns 23% of the common shares outstanding, aligning its interests with shareholders.

The company’s asset base is concentrated in the core areas of the Bakken oil play in the Williston Basin of North Dakota. YE22 proved reserves totaled 45.9 MMBOE. The Bakken accounted for ~90% of YE22  proved reserves and ~92% of 3Q23 production. Growth in the underlying asset base is fueled by acquisitions of non-operated interest in near-ready drilling opportunities and producing assets. Management relies on a proprietary data-management system fed by lease and well statistics to high-grade its capital allocation process and drive returns.

The midpoint of Vitesse’s FY23 and preliminary FY24 production outlook implies ~12% Y/Y growth in both years. The company’s asset base is leveraged to oil. Oil accounts for 69% and 92% of our FY24 production and revenue estimates. Our FY24 adjusted EBITDA estimate is $182 million based on an $80/bbl average NYMEX oil price.

Low leverage is a key element of Vitesse’s business strategy. At the close of 3Q23, net debt totaled $54.2 million, representing an annualized leverage ratio of 0.4x. Our estimates suggest Vitesse could generate substantial free cash flow through YE24 to support management’s capital return ambitions. Assuming $80/bbl NYMEX oil, our FY24 estimates imply a dividend coverage ratio of 1.7x. Vitesse trades at 5.2x and 4.1x our FY23 and FY24 adjusted EBITDA estimates, respectively. The current dividend yield is 8.4%.

About Water Tower Research 

Water Tower Research is modernizing Investor Relations through research-driven communications and Investor Engagement. Sound investment research begins with good information. At WTR, we help companies and investors connect by creating expert information flow and strategies that are the foundation of a successful modern investor relations platform. Our analysts and capital markets professionals bring decades of unrivaled Wall Street experience and insight to a new digital world of investor communications and engagement. Our research and investor content is distributed across traditional research aggregators like Bloomberg, FactSet, etc., proprietary direct distribution lists, social media, search engines, and our website. As a result, every institutional and retail investor has equal access to our high-quality company research. Our mission is to help companies take control of their IR program and proactively reach investors while bringing investors a consistent flow of quality information to help them understand our clients’ businesses, industries, and the investment opportunities they present.

Tags: dividend, oil industry consolidation, Bakken/North Dakota, Low leverage, oil & gas producer, Attractive yield