Have a $1500 target. GLTA
VEREN INC First Look: Q2/24 In Line With Our Estimates And Consensus
Veren reported Q2/24 results that were in line with our estimates and
consensus. Variances to our estimates stemmed primarily from modestly
lower-than-expected production and realizations, partially offset by lower-
than-expected operating costs. Key takeaways from the quarter include
continued strong results out of the Alberta Montney and Duvernay including
the first fully operated pad using the company’s new drilling completions and
well spacing design at Karr West with a peak 30-day rate of 1,300 Boe/d
(67% liquids), a confirmation of 2024 full-year guidance, and that 3.6 million
shares were repurchased in Q2 for $42.4 million (5.4 million shares year-to-
date in 2024).
Financial And Operating Takeaways:
• Q2/24 results. Production of 192,648 Boe/d was in line with our estimate
of 194,942 Boe/d and consensus of 192,754 Boe/d. Adjusted FFO per
share of $0.99 was modestly below our estimate of $1.04 and in line with
consensus at $0.97 (range of $0.92 to $1.04). Capex of $350.6 million
was below our estimate of $386.7 million and consensus of $366.5
million.
• Alberta Montney update. The company drilled a new pacesetter well at
Gold Creek in 9.0 drill days, compared to an average of 11.3 days per
well for the pad. Veren continues to focus on efficiency improvements
through drilling optimization, consistent rig utilization and knowledge
transfer. In Karr West, Veren brought on-stream the first fully-operated
pad utilizing Veren’s well design including optimizations in drilling and
completion technique and inter-well spacing. These wells saw an
average peak 30-day rate of 1,300 Boe/d. Veren plans to bring on-
stream an additional 22 wells in Alberta Montney.
• Kaybob Duvernay update. Veren brought on-stream three pads in the
Duvernay volatile oil window. The first well pad showed a peak 30-day
rate of 1,300 Boe/d (75% liquids). Veren plans to bring on-stream an
additional 22 wells in Kaybob Duvernay.
• Saskatchewan update. Veren continues to advance its decline
mitigation projects and remains on track to convert ~70 producing wells
to water injection wells in 2024, supporting its current base decline rate
of ~15% in Saskatchewan.
• 2024 full-year guidance. Veren confirmed its full-year guidance of
191,000 Boe/d-199,000 Boe/d on capital spending of $1.4 billion to $1.5
billion. As the company continues to execute its capital program this year
and if the new well design drives consistent improvements in costs and
well productivity through the end of this year, we expect there could be
upward revisions to the company’s five-year plan.
• Valuation. Veren trades at a 2025E EV/DACF of 3.3x and a 2024E FCF
yield of 16% vs. the oil-weighted SMID cap group at 3.0x and 16%,
respectively.