• Net Debt Reduction: Reduced by $135 million.

• Adjusted Free Cash Flow: Exceeded Street consensus, contributing to debt reduction.

• Revenue from Hedge Position: Added more than $20 million.

• Non-Core Asset Sale: Generated $20.5 million.

• Lease Operating Expense (LOE): Reduced from $121 million in Q4 2024 to an anticipated $115 million per quarter for 2025.

• General and Administrative Expenses (G&A): Projected to be below $22 million per quarter for 2025, down from slightly over $23 million in Q4 2024.

• Adjusted Free Cash Flow Projection for 2025: Approximately $265 million.

• Net Debt Reduction Target for 2025: $300 million, including non-core asset sales.

• Oil Hedging: 90% hedged at $70.61 per barrel WTI for the remainder of the year.

• Capital Efficiency Improvement: 30% year-over-year improvement in the Delaware Basin.

• Warning! GuruFocus has detected 4 Warning Signs with VTLE.

Release Date: May 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Vital Energy (NYSE:VTLE) exceeded Street expectations with key financial results in the first quarter.

• The company reduced net debt by $135 million, supported by higher-than-expected adjusted free cash flow.

• Vital Energy's hedge position added more than $20 million to revenues, providing financial stability.

• The company successfully reduced lease operating expenses and general and administrative expenses by approximately 5%.

• Vital Energy's operations team improved Delaware Basin capital efficiency by 30% year-over-year.

Negative Points

• Vital Energy faces potential non-cash impairments if oil prices remain low, with a possible impact of a couple of hundred million dollars next quarter.

• The company anticipates increased water volumes, which could drive lease operating expenses higher in the remainder of the year.

• Vital Energy's hedging strategy for 2026 remains uncertain, with no hedges currently in place for that year.

• The company may face challenges in maintaining production levels into 2026 due to a drop in capital expenditure later this year.

• Vital Energy is not immune to market challenges and may need to adjust activities if conditions worsen.

Q & A Highlights

Q: With the benefit of your latest drilling and completion efficiencies, where would your maintenance capital be once some of your higher-priced service contracts roll off? A: Our plan is to maintain flat production year over year and remain cash flow positive. All major service contracts expire in March 2026, providing flexibility. Service costs could decrease by 10% in a sustained $60 environment, potentially saving $90 million and reducing our breakeven from $57 to $53 per barrel. Continued reductions in lease operating expenses (LOE) and general and administrative (G&A) expenses could push it closer to $50 per barrel. - Mikell Jason Pigott, CEO