Vitesse Energy, Inc. (NYSE:VTS) Q4 2025 Earnings Call Transcript

Vitesse Energy, Inc. (NYSE:VTS) Q4 2025 Earnings Call Transcript March 3, 2026

Operator: Greetings and welcome to the Vitesse Energy, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference call is being recorded. I will now turn the conference over to the Director of Investor Relations and Business Development at Vitesse Energy, Inc., Ben Messier. Thank you. You may begin.

Ben Messier: Good morning, everyone, and thanks for joining. Today, we will be discussing our 2025 results and our expectations for 2026. Our October earnings release and acquisition announcements were released yesterday after market close, and an updated investor presentation can be found on the Vitesse Energy, Inc. website. I am joined this morning by our Chairman and CEO, Robert W. Gerrity; our President, Brian J. Cree; and our CFO, James P. Henderson. Before we begin, please be reminded that this call may contain estimates, projections, and other forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control.

These risks and uncertainties can cause actual results to differ materially from our current expectations. Please review our earnings release and risk factors discussed in our filings with the SEC for additional information. In addition, today’s discussion may reference non-GAAP financial measures. For a reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10-Ks and earnings release. I will now turn the call over to Vitesse Energy, Inc.’s Chairman and CEO, Robert W. Gerrity.

Robert W. Gerrity: Thank you, Ben. Good morning, everyone, and thanks for joining today’s call. In 2025, we continued to return capital to shareholders. We distributed $2.25 per share during the year and have now paid $6.325 per share since our spin-off in January 2023. We are committed to continuing that track record of returning capital across commodity cycles. We accomplished a great deal in 2025. We continued to convert our undeveloped asset base to producing wells, closed and fully integrated the Lucero acquisition, which is performing as expected, successfully settled a multiyear lawsuit, and maintained a conservative balance sheet, all while navigating a volatile oil market. Last Sunday, we signed a definitive agreement to acquire non-operated assets in the Powder River Basin of Wyoming for $35 million of Vitesse Energy, Inc.

shares effective 01/01/2026. These assets consist of over 6,000 net acres and 29 net undeveloped locations, producing an anticipated average of 1,400 net BOE per day in 2026, with EOG and Continental serving as the primary operators. We expect to close this accretive acquisition at the beginning of the second quarter. Last week, our Board declared a first quarter dividend at an annual rate of $1.75 per share. With the majority of our 2026 oil production hedged at prices that support this distribution and a capital-efficient drilling program, we believe this dividend allows us to allocate capital to high-return investment opportunities while keeping our balance sheet conservative. For the first time, our 2025 dividends were classified as return of capital for tax purposes.

We expect the majority of our 2026 dividends to be treated the same. I will now turn the call over to my partner and company President, Brian J. Cree, to provide more detail on our operations.

Brian J. Cree: Good morning, everyone, and thanks, Bob. Production for the quarter averaged 17,653 barrels of oil equivalent per day, bringing our annual production to 17,444 barrels of oil equivalent per day. As of 12/31/2025, we had 22 net wells in our development pipeline, including 6.1 net wells that were either drilling or completing and another 15.9 net locations that have been permitted for development. Since the beginning of 2025, over half of our AFEs received have been three- or four-mile laterals, leading to our highly capital-efficient guidance for 2026. At year-end, proved reserves were 47.8 million barrels of oil equivalent, up 19% from 2024, driven primarily by the Lucero acquisition. PV-10 was $472.7 million, with 88% proved developed.

The year-over-year reserve value was impacted by a nearly $10 per barrel decline in SEC pricing for oil. We also believe our acreage includes extensive locations not currently classified as proved under SEC guidelines. With the hostilities in the Middle East over the weekend and continuing, we opportunistically layered on hedges. For 2026, we have approximately 64% of our oil production hedged through swaps and collars. Our swaps have a weighted average fixed price of $64.95 per barrel and our collars have a weighted average floor of $58.64 and a ceiling of $67.50 per barrel. For gas, we have just under half of 2026 natural gas production hedged with attractively priced collars at a weighted average floor of $3.73 and a ceiling of $4.91 per MMBtu.

Both percentages of hedged oil and gas are based on the midpoint of our annual guidance. Thanks for your time. I will now hand the call over to our CFO, James P. Henderson.

James P. Henderson: Good morning, everyone. Thanks, Brian. I want to highlight a few items from our financial results for the fourth quarter and full year of 2025. Please refer to the earnings release and 10-Ks, which were filed last night, for further details. As Brian mentioned, our production for the year was at the top end of our guidance at 17,444 BOE per day, with a 65% oil cut. For the year, adjusted EBITDA was $179.3 million and adjusted net income was $30.4 million, while GAAP net income was $25.3 million. Free cash flow for the year was $48.9 million after development capital expenditures of $121 million. You can see the reconciliation in our press release filed last night. Cash CapEx and acquisition costs for the quarter were $29.8 million, bringing the full-year cash cost to $127.7 million, which was just above our guidance, mainly due to the timing of capital expenditure payments.

These costs were funded all within our operating cash flows. At the end of the year, we had total debt of $124.5 million, giving us net debt to adjusted EBITDA of 0.69x. We are also providing guidance for 2026. On a two-stream basis, we anticipate production in the range of 16,000 to 17,500 BOE per day for the full year of 2026, with an anticipated oil cut of 60% to 64%. Cash CapEx for the year is anticipated to be $50 million to $80 million. This decrease from 2025 reflects both the commodity price-driven reduction in operator activity, their focus on drilling their most economic inventory, and the timing of capital payments, as we have accelerated some payments of certain accrued development costs into 2025. This guidance includes the Powder River Basin acquisition discussed earlier, but it excludes the impact of any additional near-term development acquisitions, which we are continually evaluating and pursuing once they meet our return hurdles.

With the recent uptick in oil prices, we are hopeful to see even more development on our assets, which will drive our CapEx spending higher. With that, let me now pass the call back to the operator for Q&A.

Q&A Session

Operator: Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from Chris Baker with Evercore. Your line is now live.

Chris Baker: Good morning. Just hoping, Bob, you could maybe step back and just walk through the updated sort of decision tree. Obviously, the dividend getting reset lower, along with lower capital, looks like it is about free cash flow this year, but just maybe frame up how those moves kind of support the sustainability. And then it sounds like a platform for continued M&A here would be great. Thanks.

Robert W. Gerrity: Yes. Thanks, Chris. Thanks for joining the call. So when we spun, we started with a $2 dividend, and we were able to comfortably maintain that through this whole period. We—well, let us step back a second. Gwen, Brian, and I founded this thing in 2010, and most other companies that got formed during that time are not here anymore, and a large reason for that is they had too much debt. So first and foremost in our mind is our balance sheet, and we want to make sure that is always conservative, which gives us an operating—which gives us life. So that is the number one goal. It was a Board decision to drop the dividend last week simply to preserve that balance sheet. So that took precedent, Chris. And with regards to the capital spend, we spent a lot more capital last year than we had anticipated.

Most of that was because our operators, especially Chord, started drilling three- and four-mile laterals in areas where we had a high concentration of acreage. Very efficient capital spend. We are thrilled with the three- and four-mile laterals, and we think that trend will increase continuously. That said, we do not have really good visibility of what the capital spend will be from the operators in 2026. So we are taking a very conservative look at 2026. The capital, as Ben said, that they are spending has a terrific rate of return, especially now that the AFE costs have been reset. So in terms of M&A and that landscape, 2025 was the year that we looked at more deals than we had at any time in our history. We were very disciplined on leaning into making acquisitions, both primarily for shares and also for cash.

The landscape out there, Chris, is there is a lot of money chasing deals, and there is some ABS financing, there is some private financing. That makes the deal landscape very competitive. We do not know if that is going to continue. We were able to do this $35 million deal with a very sophisticated seller over the weekend. We would love to do more of those deals, but I tell you, capital discipline, clean balance sheet, return cash to the shareholders—that is how we view the world. So M&A for 2026, Chris, we have got a lot of different deals in the shop. We would love to do this $35 million deal in scale. But again, discipline.

Chris Baker: That is great. Thanks, Bob. And then to your point, obviously, a lot of volatility makes sense to set a pretty wide range in terms of production expectations for the year. Can you just maybe drill down in terms of the top two or three variables that are kind of in the high and low end of that range?

Robert W. Gerrity: Brian, do you want to handle that one?

Brian J. Cree: Sure. Absolutely. I would love to. So, Chris, obviously, a big chunk of our guidance is going to be based off what we think operators are going to do. And as Bob mentioned, there has been a lot more development activity in our areas of the field where we own higher working interest, and so we look forward to seeing more of that. But look, the rig count is in the upper twenties right now in the Bakken, and even though we have a very high percentage of those rigs running on our acreage, we cannot know exactly what our operator is going to do, especially given what happened over the weekend. From our perspective, we would certainly welcome as much CapEx as our operators want to provide. If you look at 2025, we had a very high CapEx profile; a lot of that had to do with some of the large near-term development acquisitions we made in 2024 that carried into 2025.

If you look at our activity in 2025 from an acquisition standpoint of near-term development, I think we spent $6 million compared to mid-20s in 2023 and 2024. It is a situation that, as Bob mentioned, there is a lot of capital competing for those acquisitions. We have remained very disciplined. At this point in time, we just did not want to feel like we should put too much emphasis on how much near-term development acquisitions we would be able to make in 2026. But the combination of how much we can acquire from near-term development and how much our operators will continue to accelerate drilling if these prices remain higher is why we have a pretty good range.

Operator: Our next question comes from Lloyd Byrne with Jefferies Group. Your line is now live.

John White: Sorry about that. I was on mute. You have John on for Lloyd. Just congrats on getting the deal across, team. Seems like it was at a pretty attractive valuation. Just wanted to get some further details on what sort of activity you anticipate for this year on that acreage, and then what you would anticipate any sort of changes to your maintenance run rate would be from the additional production activity? Thanks.

Ben Messier: Hi, John. You have got Ben here. Thanks for joining our call. Look, we expect this asset we acquired in the Powder River Basin to have fairly flat production for the next few years, with anywhere from $4 million to $6 million of CapEx per year. It is a great asset. It comes with 29 net locations in the formations that are already proved and have nearby drilling activity. We believe there is upside to that if some of the stacked pay in the Powder River Basin, the Shannon and the Sussex, end up coming to fruition. So we think this asset blends really well with the rest of our story of having exposure to technology upside down the road. In terms of maintenance CapEx, I would say that has not really changed from the $85 million to $90 million range to hold our Q4 production from 2025 flat.

As things get more efficient with time, I would expect that to go down as we see more of these three- and four-mile laterals. But for a current outlook, I would say $85 million to $90 million, which is why you see a really capital-efficient program this year at the midpoint with slight production decline from last year. But again, it just depends on what production level you are trying to hold flat.

John White: I think that makes sense. Thanks. And then, just on the update from the hedge book—was pretty positive. Just thoughts around what we are looking at from here. Is there a goal that you guys would like to hit in terms of a maximum and then, as you get more capital efficient, does that number change going forward? Lower reinvestment rate, you might not need to cover as much of your base capital. Thanks.

Ben Messier: We reset the dividend last week to a level that we are really happy with in this current commodity price environment. Our goal with our hedging program is to protect that and to reduce, really, volatility in our share price. We have some room in 2026 on our PDP capacity—we can only hedge up to 85% of our PDP at any given time—so we are being patient with the last remaining piece of that, really to see what happens with the Strait and the situation in Iran. But we would look to add more hedges, which would really max it out, just depending on how that situation evolves. And then we were fortunate to add hedges on Sunday right when the market opened, really through 2027, and got good prices on that. And so we will look to extend into 2027 as well, as long as we are happy with the price level there.

Robert W. Gerrity: Great. Thanks. Yeah, John. This is Bob. Hedging always has been and will always be a fundamental core value of ours. So we love to be hedged out as far as we can, and we look at the hedge book pretty much every day. So—

John White: Great. Appreciate the color.

Operator: Our next question comes from Jeffrey Scott Grampp with Northland Capital Markets. Your line is now live.

Jeffrey Scott Grampp: Good morning. Was curious—hey, Bob—on the proportion of these four-mile laterals that you guys are seeing, I was curious if you have any data or longevity of production histories from some of those to kind of quantify, I guess, in terms of the better economics, in terms of rate of return or F&D cost basis. Do we have that data, and how material of a benefit are those for the economics of your capital program?

Robert W. Gerrity: I will let Brian answer it a little bit more specifically, but Chord themselves say that the economics that they are getting in the three- and four-mile laterals in the outer part of the field are as good or better than their two-mile laterals in the core, and we are seeing that. Again, from an IRR standpoint, they are improved, but from an ROI standpoint, they are substantially improved. This is going to be the trend in the Bakken, and you are going to see a lot of companies swapping acreage to be able to drill the three-mile, four-mile wells. We have actually started seeing some U-turns in two-mile acreage to pick up a four-mile lateral. So this is going to be a trend, Jeff. Brian, do you want to expand on that?

Brian J. Cree: Yes. Good comment, Bob. Jeff, what I would say is that early on, we were cautious when they were drilling the three miles. We wanted to make sure that we felt like the story behind a flatter decline curve was actually going to be seen. And so, for us, that certainly played out for the three mile. The four-mile development—a lot of those wells we were in—some of those are pretty new in the Bakken. The first wells came on in 2025. We have been watching the production from very early on, and they look really good. So we are probably less cautious on the four mile than we were on the three mile and think that those four-mile results so far have looked good. And what I can tell you is that the operators are really starting to dial in the AFE costs. Early on, those AFE costs were really high for both three mile and four mile. They have come down substantially. So the economics of the three- to four-mile development that we are seeing are really strong.

Jeffrey Scott Grampp: For my follow-up on the CapEx side of things, I just wanted to clarify on the guide: Do you guys have kind of a rough split of organic D&C versus near-term acquisition assumptions? I thought maybe I heard you in the prepared remarks mention that there was not any kind of near-term acquisition assumptions in the CapEx guidance. I want to clarify what is baked and what is upside.

James P. Henderson: Yes, Jeff, this is Jimmy. That is correct. We have very minimal near-term development CapEx built into the budget. I think Brian described it pretty well. It has been so competitive, and we are very disciplined about the rates of return that we target. We hope to see that market return to something that makes sense for us. We will add to it as we go. But where we sit coming into the year, we did not want to give guidance assuming that we would be able to return to what we have seen in the past in that market. But we are a very active participant. Our team is a very well-oiled machine looking at those transactions. We have weekly meetings to walk through everything that is available. So we are hopeful, and we think that we will have near-term development activity as we go through the year; we just did not want to start off with that in our guidance.

Operator: Our next question comes from Noel Parks with Tuohy Brothers. Your line is now live.

Noel Augustus Parks: Hi, good morning. Hey, well, I had a few questions about the transaction in the Powder River Basin, and I was wondering if you could just talk a little bit about the state of play out there. You mentioned in the release that EOG and Continental are among the operators, and I think of EOG having at times placed the Powder kind of at the top of the heap of its plays and then not talked about it for a while. I just wonder what you are seeing out there as far as ongoing development.

Brian J. Cree: Sure. I will take the first crack at that. Again, I am going to circle back to our review of acquisitions and near-term development opportunities. I think what I would tell you is that every week we are probably looking at an AFE or some type of development opportunity in the Powder River Basin, and over the last couple of years, we have not added to that Powder River Basin position because it has been challenging. This is a PDP acquisition that has some great potential upside. There are really good operators—you just mentioned EOG, Continental, Devon, others—that are absolutely working very hard to break the code. And EOG has, interestingly enough to us, probably spent more capital in the Powder than they have in the Bakken, where we think they still have some great development opportunities.

So this was a great chance for us to add to our exposure to the Powder River Basin with a good PDP profile, fairly flat. Ben mentioned that he thinks that with the continued development that we have got right now built into it, which again I think is conservative, we should be able to remain pretty flat on a production basis there. But what is exciting to me is all those undeveloped locations. So if that Niobrara and that Mowry formation, kind of technological breakthrough, happens, we are going to have some great locations up there.

Noel Augustus Parks: Gotcha. Thanks. And speaking of the technological learning curve, my impression is that the play—I guess it depends on area to a degree—featured a lot of customization, I believe on the completion side, as well as to work which formations work where. I think, I guess, Niobrara, Mowry, and then Turner as being pretty variable. So do you—maybe in terms of inning towards that sort of cracking the code—do you think what is this particular inning that the industry is in with the Powder these days?

Robert W. Gerrity: Yeah. Noel, this is Bob. Very, very good question. We valued this acquisition purely from a PDP standpoint. We put zero value on the undeveloped, even though we know that there is a lot of value there. You are absolutely right. The Powder is a customization basin. You just cannot do the same thing on every well. So that is why we leaned in strongly with Continental and EOG, and as Brian said, EOG has spent a ton of money up here, and the wells that they have drilled that we are owners in now have done extremely well. But you cannot value the undeveloped like you can with the Bakken, which is pretty much a blanket formation. So it is a very good question. We did not value the undeveloped.

Noel Augustus Parks: Okay. Great. And I guess just my last one—maybe I will talk a little bit about the transaction. It does seem notable that it is an all-stock transaction. I just wondered, of those potential transactions you are seeing these days, are you seeing sellers increasingly willing to accept stock, or is it more of a traditional, they have an interest, they want to cash out, and that is their motivation?

James P. Henderson: Hey, Noel, this is Jimmy. We see both, clearly. It just depends on the seller. In this case, a very sophisticated seller saw value in our stock and will become a shareholder for the foreseeable future, and so they saw upside. Now, obviously, we negotiated this transaction prior to the events over the weekend, and we do have sellers like that that want to ride the upside of the shares they are getting and have exposure and are not ready to cash out. But there are always others that are more cash focused and want to get their returns, meet their hurdles, etcetera. So we look at both. We love using stock in these kinds of transactions because it is a very efficient use of our equity, but we are not dedicated to only that style of transaction. We look at everything, frankly.

Noel Augustus Parks: Great. Thanks a lot. Thanks, Sean.

Operator: There are no further questions at this time. At this point, I would like to turn the call back over to Robert W. Gerrity for closing comments.

Robert W. Gerrity: Again, thanks, everybody, for joining. Ben Messier is available to answer any other questions, and the management team would be happy to talk to anybody. Thank you very much for your support.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.