OXY - Vital Energy: Raising The Bar

2024-03-21 13:55:47 ET

Summary

• Vital Energy is focusing on acquiring acreage that other large companies are not interested in, which is cheaper and more profitable for the company.
• The management's ability to capture cost savings and efficiencies has exceeded expectations, leading to increased profitability.
• The company plans to test and potentially exploit "iffy" intervals on their acreage, and if unsuccessful, they can wait for technology advancements to change the outcome.
• This new acreage performs better than the company legacy acreage.
• Management has done an excellent job turning negative cash flow into positive cash flow while positioning the company to take advantage of the coming divestment wave.

Management of Vital Energy ( VTLE ) noted that they're raising the acquisition bar. What appears to be the focus is the possible sale of noncore acreage by some of the acquiring companies like Diamondback Energy ( FANG ) and Occidental Petroleum ( OXY ). What's making this even a consideration is all the deals done for equity as mentioned in the last article . The acreage likely to be sold will be noncore to the seller and likely small "patches." But those small acreage positions may be located in better areas than anything Vital now has and what is small to those sellers could turn out to be a game changer for Vital. These coming sales are definitely worth being ready for....

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