ALL NUMBERS ARE IN CAD! INCLUDING OIL PRICES! American ticker is SNYXF
Vital Energy is a small time oil producer that recently significantly expanded production by drilling 3 new wells last summer that added 630bpd and reached 911 bpd average during Q4 2021.
They brought in revenue of $7 million for the quarter with $516k of royalties paid and $650k operating costs for cash flow of $5.8 million. During Q4 Western Canadian Select oil averaged $78.82. The company used most of these proceeds to pay off its $3.8 million line of credit and become debt free.
Q1 2022 WCS averaged a massive $120.42! Royalties will increase with higher prices but operating costs remain the same. Assuming there was no more growth in Q1 at 911bpd revenue will be $9.9 million! Royalties will be $750k and $650k operating costs will leave $8.4 million cash flow! In a year that’s $33.6 million cash flow. Almost equal to the current market cap of $34.54 million.
Most companies trade at a 15-20x PE, but the entire oil sector has been considered undervalued for the past year with many blue chips like MEG, SU trading at only 4-6x free cash flow. So at CURRENT production there is 4-6x upside easily.
In the last oil boom of 2011 VUX had a different name and near $4 share price. It struggled for a decade and lost $57 million. There is currently still $51 million in losses that can be used against taxes. So all income this year and part of next will be completely tax free.
CATALYSTS FOR MORE UPSIDE:
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Q1 Financials end of May, large possibility for dividends. Management have been bag holding for years and will want to finally get compensated. No insider sells yet even with SP up 600% in a year.
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Current variety of properties have much upside and can add many additional wells. In the April 27th MD&A it states they plan to add 4-6 additional wells in 2022. On March 16th joint venture partner CBV MD&A said they committed capital for two new wells on the currently producing Gull lake properties. VUX is the operator and owns 85%. This little hint let’s us know that by the time we get Q1 fins we could possibly have two more wells producing! With the vast amount of capital available exceeding 6 wells and 1500bpd should be no problem for VUX. The montney property is very expensive to build wells on, in excess of $4 million per. Once they have a nice cash cushion to afford the risk each well can produce 2000bpd. This is what will propel VUX to the big league as there are 25 possible wells to be drilled on their claim.
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Exposure to the markets. VUX currently doesn’t do NR’s, only a quarterly SEDAR MD&A with financials. The website hasn’t been updated for 3 years and is being taken care of now. Very few investors know this company exists. They will likely start paying for analysts etc to gain exposure that will drive up share price.
Share structure:
82.25 million shares outstanding
1.2 million options for management
83.45 million fully diluted
CEO owns over 50% of VUX through an investment firm
One director owns 1.2 million shares and another 1.6 million
After running over 600% in the last year there still hasn’t been a single insider sell.
This float is TIGHT! It is very difficult to buy large amounts of shares with only 37k average volume. I waited on the bid for a week waiting for it to dip to mid $0.30s and didn’t get any. After waiting for market direction from FOMC I went ahead and slapped the ask for 53,000 shares at $0.42, with more on the bid that didn’t fill. It won’t take long for this to run high up. Here’s a glimpse at how thin Level 2 is after I bought. When this gets noticed it will move fast.
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