Veren Inc T.VRN

RBC

[retiredcf]

July 25, 2024

Veren Inc.
Q2/24 - AFFO Slightly Ahead of Street

TSX: VRN | CAD 10.49 | Outperform | Price Target CAD 13.00

Sentiment: Neutral

VRN's Q2/24 results were slightly better than the Street expectations, with the 2024 budget intact and focused on continued returns to shareholders combined with Montney and Duvernay development. We continue to expect 2024 to be operationally focused with minimal M&A, reflective of an active 2023 on the deal front.

Conference Call:

• Time: 10:00 am MT on July 25 • Dial-in: 1-800-390-0605

Key Points:

• VRN reported Q2/24 production of 192,648 boe/d (RBC: 192,106 boe/d; Street: 192,754 boe/d) driving AFFO (f.d.) of $0.99 (RBC/Street: $0.92/0.97). Capital expenditures came in at $351mm (RBC/Street: $400mm/$360mm).

• In Q2, the company has repurchased and cancelled 3.6mm shares for a total consideration of $42mm; buybacks are expected to be weighted to H2/24 reflective of capital cadence. After the company reaches its debt target of $2.2bn, returns could potentially increase to 75%+ of FCF (currently 60%).

• VRN has left 2024 guidance unchanged at 195 mboe/d (midpoint) on $1,490mm (midpoint) of capital with 45% of its budget allocated to the Alberta Montney, 40% toward the Kaybob Duvernay and 15% to Saskatchewan while returning 60% of its FCF.

• Operations update: (1) At Karr West, one pad was brought onstream achieving a Pad IP30 of 1,300 boe/d (65% liquids); (2) at Gold Creek, VRN will bring on 11 wells that were completed in Q2 for the remainder of 2024; (3) VRN has seen drilling efficiencies in Gold Creek drilling a pacesetter in 9 days (8-well pad avg. 11.3 days); (4) VRN expects to bring on an additional 22 wells onstream in the Alberta Montney through the remainder of 2024; (5) VRN brought on three pads within the Kaybob Duvernay, one of which had an avg IP30 rate (per well) of 1.3 mboe/d (75%) liquids with plans on bringing 22 wells onstream in the area for remainder of 2024; (6) in SE Sask, the company remains on track to convert 70 producing wells into water injection wells to support its base decline rate.