The sad thing here is that Josh's comment on it being discounted was entirely right, but the company went ahead and diluted stock to massively since this was posted.
When Josh posted this:
- Market Cap : $949M
- Stock Price: $51.6
- Outstanding Shares: ~16,717M as per Q1'23 results
As a side note - it is worth mentioning how companies can create shares out of thin air (and as long as those shares aren't sold on the market, and investors aren't spooked) that prop up the market cap and ironically make the stock less investable.
The deep discount simply no longer applies! They are projecting a $350M adjusted FCF for 2024, which is just 18% FCF Yield, in line with the average small cap shown in this report.
But who would believe their FCF? In Q2'22 they projected $560M FCF in FY23, but only got $217.
In Q2'22 they targeted <1.00 Net Debt/EBITDAX, but they're still at 1.09 today targetting only to get it to 1 in FY24
In FY'22 they said they plan to invest $625-675M in the upcoming year, yet did $1.6B in 2023.
These guys may be a decent acquisition target, and may have upside if they get acquired - but given management hasn't kept promises in its earnings and is diluting crazily with what I'm not sure is "accretive" acquisitions... is this worth the risk?
This isn't a complete analysis by me, and I very well may be missing something (I hope).
If anything, since the stock price hasn't materially moved since doubling the shares and the market cap has doubled (i.e the underpriced aspect has worsened)... isn't there a great risk of downside here if the market chooses to revert back to its previous valuation?
At this point, one should ask themselves - is it worth staying?
is a public junior oil and gas company based in Calgary, Alberta, focused on conventional crude oil exploration, development and production in Western Canada.
The sad thing here is that Josh's comment on it being discounted was entirely right, but the company went ahead and diluted stock to massively since this was posted.
When Josh posted this:
- Market Cap : $949M
- Stock Price: $51.6
- Outstanding Shares: ~16,717M as per Q1'23 results
Today:
- Market Cap: $1.89
- Stock Price: $51.6
- Outstanding Shares: 36,800M as per Yahoo
Most recently they continue to fund more acquisitions (didn't completely understand this - https://investor.vitalenergy.com/news-releases/news-release-details/vital-energy-closes-second-transaction-acquire-additional) - via 879k common stock and 980k of a "2% cumulative mandatorily convertible preferred securities".
As a side note - it is worth mentioning how companies can create shares out of thin air (and as long as those shares aren't sold on the market, and investors aren't spooked) that prop up the market cap and ironically make the stock less investable.
The deep discount simply no longer applies! They are projecting a $350M adjusted FCF for 2024, which is just 18% FCF Yield, in line with the average small cap shown in this report.
But who would believe their FCF? In Q2'22 they projected $560M FCF in FY23, but only got $217.
In Q2'22 they targeted <1.00 Net Debt/EBITDAX, but they're still at 1.09 today targetting only to get it to 1 in FY24
In FY'22 they said they plan to invest $625-675M in the upcoming year, yet did $1.6B in 2023.
Another negative not mentioned is that they're just 47% oil, and gas prices are at a bottom, while producers continue to drill wells in liquid rich areas: https://x.com/Josh_Young_1/status/1770061946672357662?s=20
These guys may be a decent acquisition target, and may have upside if they get acquired - but given management hasn't kept promises in its earnings and is diluting crazily with what I'm not sure is "accretive" acquisitions... is this worth the risk?
This isn't a complete analysis by me, and I very well may be missing something (I hope).
If anything, since the stock price hasn't materially moved since doubling the shares and the market cap has doubled (i.e the underpriced aspect has worsened)... isn't there a great risk of downside here if the market chooses to revert back to its previous valuation?
At this point, one should ask themselves - is it worth staying?
Sources:
- https://finance.yahoo.com/quote/VTLE/
- https://investor.vitalenergy.com/news-releases/news-release-details/vital-energy-reports-first-quarter-2023-financial-and-operating
- https://www.tradingview.com/chart/z1iDOLzD/?symbol=NYSE%3AVTLE
Be careful! there is also Vital Energy inc (VUX.V) https://www.vitalenergyoil.com/
is a public junior oil and gas company based in Calgary, Alberta, focused on conventional crude oil exploration, development and production in Western Canada.
Do you have any view on maintenance/growth Capex needs going forward to sensitize FCF and prospects of debt reduction / share buybacks ?