It was also encouraging to see that Michael Burry has held onto the shares of Vital Energy he bought a while ago. He might believe that also that it is undervalued in the market. Thanks for the heads-up article!
Hard not to like a company that continues to build its "reserve/land portfolio" and even with a 70% haircut to implied valuation, you're still looking at 100% upside - and that's with oil at $75.
Wouldn’t Callon Petroleum implied acquisition multiple be more appropriate for VTLE (similar size business)? In that case potential upside is much more limited.
Even that one implied close to 100% upside for VTLE. Except Vital has done more over the past few years to build its inventory position and improve its operating results than Callon had. Vital is most similar to CrownRock of the set of transactions referenced here, in my view.
Probably one of the owners of the assets Vital bought recently. Private equity funds often sell shares of public companies when they can, not necessarily at optimal times.
Very good note, thank you! Quick question - rough math tells me that Vital reserve life is around 7 years, whereas Endeavour's reserves seem to have 30 years (according to some Fitch report from two years ago). Is that correct and if so, should we be using that metric to compare the two?
Vital has been very conservative in their reserve bookings and inventory claims. They "found" 6 years of inventory this year through cost effective development and delineation, which other companies may have just claimed upfront in prior years. I don't think the narratives around these companies accurately represent their actual situations, often in both directions. I like using $/boepd, $/acre, ev/ebitda, capital efficiency, ev/reserve value etc to try to triangulate to a reasonable estimation of value and evaluation of actual situation of an upstream business. In this case, Vital seems unduly hated and discounted.
It was also encouraging to see that Michael Burry has held onto the shares of Vital Energy he bought a while ago. He might believe that also that it is undervalued in the market. Thanks for the heads-up article!
Hard not to like a company that continues to build its "reserve/land portfolio" and even with a 70% haircut to implied valuation, you're still looking at 100% upside - and that's with oil at $75.
Wouldn’t Callon Petroleum implied acquisition multiple be more appropriate for VTLE (similar size business)? In that case potential upside is much more limited.
Even that one implied close to 100% upside for VTLE. Except Vital has done more over the past few years to build its inventory position and improve its operating results than Callon had. Vital is most similar to CrownRock of the set of transactions referenced here, in my view.
Thanks.
The simple question is who would sell at cheap prices at this point? Deals will come, but whatever remain will come with a healthier price tag.
Who/why is someone selling 1.9 million shares/ SEC filing?
Probably one of the owners of the assets Vital bought recently. Private equity funds often sell shares of public companies when they can, not necessarily at optimal times.
Very good note, thank you! Quick question - rough math tells me that Vital reserve life is around 7 years, whereas Endeavour's reserves seem to have 30 years (according to some Fitch report from two years ago). Is that correct and if so, should we be using that metric to compare the two?
I don't think an Endeavor reserve report has been publicly released. If so, can you point me to it?
I think you're right - I haven't seen any data from the company, but I found an estimate of 30 years of inventory life in this Fitch report: https://www.fitchratings.com/research/corporate-finance/endeavor-energy-resources-lp-04-11-2022. No idea how reliable this is, and whether inventory life is a good approximation of reserve life?
Vital has been very conservative in their reserve bookings and inventory claims. They "found" 6 years of inventory this year through cost effective development and delineation, which other companies may have just claimed upfront in prior years. I don't think the narratives around these companies accurately represent their actual situations, often in both directions. I like using $/boepd, $/acre, ev/ebitda, capital efficiency, ev/reserve value etc to try to triangulate to a reasonable estimation of value and evaluation of actual situation of an upstream business. In this case, Vital seems unduly hated and discounted.