RE:SPECIAL DIVIDEND
Well I do want VET to get rerated, I know it will happen soon. The balance sheet is great no issues, the share count is going down quickly, and the debt issue is behind them.
VET has paid off 409 million of debt so far this year, interest oon debt 5.625% that will reduce interest costs per year by about 23 million dollars. ( year 2025)
I hope that they buy back 12 million shares in total in 2024, which would save them in future years the paying of a dividend on 12 million shares at 48 cents a share dividend roughly 6 million dollars less in terms of dividend obligation.
So the way i look at it is like this, the Interest + dividend savings gives VET 29 million dollars of room on the balance sheet to increase dividends with no impact to the operating metrics, and no consideration regarding improved production enviroment.
So if at the end of year share count is 151 million shares, they could raise the dividend by 19 cents per share annualy using the interest and dividend savings, they have a lot of flexibility the way I see it.
Historically
VET paid 23 cents a month dividends, $2.76 a year in dividends, I talked to the IR guy who told me a lot of shareholder held VET for its dividends, VET might be feeling a little shareholder pressure.
I also think the FCF and FFO will improve in 2025 and they have a lot of Europe Gas hedged, and some big wells coming on.
I am not opposed to special dividends, and in Q4 i think they will have a bangup quarter, and could easily do a10 cent special dividend, its really not a lot (Kind of on the cheap side if you ask me).
I suggest 25 cent special divided to the IR guy because you want to draw the markets attention, that would cost about 37 million and i think they could do that and you would get some happy shareholders.
I also still advocate for a dividend increase to 15 cents a share a quarter, because that would cost 12 cents a share (18.12 million) and they have already removed 19 cents a share (29 million) in balance sheet obligations and dividends.
I think VET metrics as well are way more compelling than North American oil and gas producers, the realized price for gas, and the value of everyone of VETA boe is higher, just like their netbacks.
Really instead of trading at a discount VET should be trading at a premium to other producers. The management has gas in Germany Gas to come on in 2025, and my guess is more gas in Croatia. They will have 4 wells on SA-07 BLOCK to tied in with Europe Gas commody prices at a all very high prices, my guess this looks like low hanging fruit to me.
My Feelings
I agree with the special dividend but would make is 25 cents. (37 million)
I also think a dividend increase as well and I would make if 15 cents a quarter.
The special dividend will only have a one quarter impact. About 50% of the FCF is going to debt reduction, their average FCF in a quarter over the last 4 quarters is 188 million a quarter, so roughly 94 million a quarter to debt reduction. So 37 million special dividend still allows 50 million in debt reduction. (They have already hit their debt target)
VET balance sheet is perfect, and they are really in an opportunistic moment regarding share buybacks, but maybe the management can pretend to be Justin Trudeau, and hand out a Christmas bonus to all the shareholders.
Your thinking is good, VET is generating a crazy amount of cash and need to drive a rerating in the share price, it is way to cheap.
IMHO
MHP