Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Veren Inc (VRN, Financial) produced 192,500 BOE per day, with 65% oil and liquids, demonstrating strong operational performance.
- The company generated $195 million in excess cash flow for the quarter, returning 60% to shareholders through share repurchases and dividends.
- Veren Inc (VRN) reduced its net debt by almost $800 million since the beginning of the year, aiming to exit the year with $2.8 billion of net debt.
- The company received an investment grade rating of BBB low with a stable trend from Morningstar DBRS, allowing access to the public debt market.
- Veren Inc (VRN) issued $1 billion of senior notes at favorable rates, using the proceeds to repay existing debt and fully retire its bank term loan.
Negative Points
- Despite strong operational performance, Veren Inc (VRN) faces the challenge of maintaining production levels and optimizing well performance over the long term.
- The company has a significant amount of debt, with plans to reduce it to $2.2 billion, which may take time and depend on commodity prices.
- There is uncertainty around the successful implementation of revised well designs and completion strategies, which could impact future production and cash flow.
- The company is taking a pause on upstream acquisitions, which may limit growth opportunities in the near term.
- Veren Inc (VRN) is exploring infrastructure partnerships, which could be complex and time-consuming, potentially delaying benefits to the balance sheet.
Q & A Highlights
Q: As we look in the back half, it looks like you have about 44 wells to be brought on. Can you talk to us a little bit about the cadence of bringing on that production and how that sets you up for 2024 on production?
A: We have a fairly consistent capital program with about 48% of our capital remaining for the year. We are running a three-rig program in the Montney and a two-rig program in the Duvernay. We expect to be in the low 190,000 BOE per day in Q3, growing to high 190,000 BOE per day in Q4, and over 200,000 BOE per day in 2025.
Q: Can you talk about optimizing well design, completion design, placement of wells, and well spacing? What should we look for to deem the successful implementation of your revised completion design?
A: We are excited about our first pad with the new well spacing and completion design, showing strong results. We are looking for consistency and steadiness in production levels. We have several pads coming online across different areas, providing more data points. We need to see data for 3-9 months before making material revisions to type wells.
Q: Can you talk about your comfort in terms of the pace of deleveraging and how much comfort you feel around that?
A: We started the year with about $3.7 billion of debt and have reduced it to around $3 billion. We are happy with the investment grade rating and favorable terms for our notes. We aim to get the absolute debt level down to around $2.2 billion. We expect to be around $2.8 billion by the end of the year, with significant excess cash flow generation in the second half.
Q: Can you provide more details on the types of infrastructure you are considering for potential sales or partnerships?
A: We are looking at infrastructure that could harmonize our operations, such as the Hammerhead asset base. We aim to maintain operatorship, reduce fees, lower costs, and secure capacity for our 5-year plan. We are also considering future infrastructure partners for larger capital projects.
Q: Any timelines on infrastructure negotiations and finalizations?
A: We are working through it and will see how the remainder of the year plays out. These negotiations take time, especially when ensuring all necessary criteria are met. We will update the market as things progress.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
