Veren Inc. Price & Performance (VRN)

Barron was successful in 2024 on many fronts. We safely integrated our Alberta, Montney assets into our corporate We generated over $640,000,000 of excess cash flow realizing nearly a third in Q4. We returned 60% of our excess cash flow to shareholders through the base dividend and share repurchases. We reduced our net debt by 35% or $1,300,000,000 We delivered strong reserve additions across all categories. We successfully disposed of non core assets and entered into a strategic long term infrastructure partnership. And we achieved an investment grade credit rating, which allowed us diversify our capital structure and improve our overall cost of capital. In 2024, we generated annual average production of 191,000 BOE per day, including fourth quarter production of 189,000 BOE per day. Our Montney and Duvernay assets in Alberta accounted for nearly 80% of our Q4 production equating to 10% growth compared to Q1.

Our 2024 independent reserves report demonstrates why we continue to be excited about the quality of our asset base. We organically replaced 173% of our 2024 production on 2P basis and achieved positive technical revisions. The majority of our 2P additions came from the Alberta Montney with the remainder coming from the Kevork Duvernay.

We replaced our production our 2P F and D costs, including change in FDC We continue to believe in the long term sustainability and the future potential of our asset base with over 65% of our premium drilling locations in the Alberta Montney and Cabot, Duvernay remaining unbooked In the Alberta Montney, we continue to test the single point entry completions designs in Carr. We are pleased with the initial results from the two multi well pads we brought on stream in the late fourth quarter using this design, these paths generate an average peak thirty day rate of twelve seventy BOE per day per well which is 30% above the area type well. These wells also featured a high oil cut of 80% We continue to invest in our gas egress to increase our operational flexibility, minimize future downtime and enhance our ability to grow. We anticipate realizing future operational efficiencies through both this investment and our previously announced strategic long term partnership with Pembina Gas Infrastructure. In the Kebok Duvernay, we are pleased by the consistent results we are generating. We brought on stream two multi well pads in the fourth quarter that generated an average peak thirty day rate of 1,000 BOE per day per well which is 25% above the area type well.

These wells also featured a high condensate rate of 70% We drilled several successful delineation wells in 2024 on both the east and west boundaries of our lands in Kebab. Derisking future drilling inventory in the area. Our 2025 program includes additional delineation in the liquids rich and lean gas We've built an asset portfolio that is a strategic combination of quick pay out, short cycle assets in Alberta, with our long cycle Saskatchewan properties that provide dependable excess cash flow, Our annual production guidance for 2025 is $188,000,000 to 196,000 BOE per day. We've had a strong start to the year delivering January production of 191,000 BOE Our production growth is weighted to the second half of the year. This is driven by plant facilities downtime in the early part of the year, and the timing of bringing on our multi well pads Our capital expenditures guidance of $1,480,000,000 to $1,580,000,000 is weighted to the first half of the year and includes $240,000,000 or 15% directed to facilities as discussed earlier. This investment further solidifies our infrastructure needs to support our long term growth We anticipate generating significant excess cash flow of $625,000,000 to $825,000,000 this year. Based on $70 to $75 per barrel WTI pricing and $2.25 per Mcf AECO.

We continue to return 60% of our excess cash flow through our base dividend and share repurchases with the goal of increasing our returns over time. We are confident about our 2025 outlook and remain focused on operational execution, strengthening our balance sheet and returning capital back to our shareholders. I'd like to thank everyone for their ongoing support and I look forward to taking any questions. I'll now turn the call back to the operator to begin the Q and A. Thank you. As a reminder for the members of the investment community, And we will now take the first question. And this comes from the line of Amir Arif from ATB Capital. Please go ahead. Your line is now open.

Thanks. Good morning, guys. Just a few quick questions for you, Craig. Just first of all, just on the sliding sleeve [indiscernible] Is there any additional color you can share for us in terms of how those wells are holding up and if you feel that this has cracked the code in terms of how you want to do completions going forward?

Good morning, Amir, and thanks for the question. So can give you some color and I do have Justin here as well too, so he could provide some color. But obviously, like we talked, the rates and you know me Amir, I'm a bit of a rounder. So let's say 1,300 ish BOE per day per for the average of the six wells. We're very excited about that. We'll continue to optimize completion as we go forward both using single point entry and plug and perf we look across the field. But certainly with what we've seen from initial results on these, very strong. The other thing about them, Ameer, is keep in mind the oil cuts on these have been significant too when you're in that realm of 80 ish percent So really big oil wells and it's been positive on that front. When you look at the assets or sorry, these first couple pads here over call it a forty five-sixty day. We're certainly happy with they've been hanging in and how the decline performance has been on that.

And as you and I have discussed in the past, one of the other potentials about the single point entry is is not only some of that initial results, but also what does it do for the shallowing of the decline over the long term. So to date, excited and be really happier about how the two paths have come online.

Appreciate that. Color. And then just second question on the operating costs, they dropped nicely just quarter over quarter. Just curious, some of that is just due to the higher volumes and of that is due to some of the plant debottlenecks and facility upgrades you Veren doing? Or I'm just curious if that's still coming in terms of further operating cost reduction? From some of the facility optimization work? So a lot of that Amir is obviously you've got a big component of the field costs that we have are fixed. Right? So as those volumes are coming where you'd expect them to be, that does bring down the OpEx on the per BOE basis. So happy with that. The other thing that you alluded to is the debottlenecking work that we really started really started last year in about August, September and we've been working diligently at that.

We are starting to see some of the benefits of that on those that base level performance. As you bleed off the pressures across the field, you can now flow more into not only into the facilities, but also into those pipes facility. So that's starting to show through and then that starts to show through in that that OpEx as it comes through in the the dollars per BOE So we'll continue to do that here. We've got big plans for Q1 and then into Q2 on debottlenecking. So ideally, we start to see some consistent performance on that. Sounds good. And then just one final question. Yes. And then just one final question, if I can, on just the capacity expansion at Gold Creek West. Is that is that progressing on time for the six to seven pad to be tied in into March or is that six zero seven pad going to be into a new facility because I thought you were also building a new facility in that area? Or maybe No, you've got some of the color right there for sure Amir.

So So the 6,007 pad itself, so Phase three we're talking about here we'll be coming on call it mid March.

That flows into our three twenty six facility, Gold Creek West facility.

And that expansion work has been going on through Q4 and into [indiscernible] from that standpoint look good as far as timing. So we'll be in good shape as far processing capacity for that path.

So I don't expect any delays. And you know what really helped us, Sameer, I mean, let's be honest, not very often you get a January where a cold day is minus 20, right? So that certainly helped as far as some of that work on. But no, everything looks good as far as on time. And there is a little a bit more facilities work that we're going to continue to do through Gold Creek through the front half the year.

Extremely excited about that area. [indiscernible] Just the potential of some of those wells. So we've got a bit more work to do, but facility itself is on time.

Perfect. Okay. Thanks and congrats on a great quarter.

Thanks for the questions.

Thank you. And the next question comes from the line of Jeremy MacRae from BMO Capital Markets. Please go ahead. Your line is now open. Harry, this relates to just some of the recent wells here coming on with the single point entry. So these wells are coming on 30% better on a BOE, 50% better on an oil basis.

At what point do you look at your guidance and say, if all of our wells start to come to form like that, do we need to potentially look at revising our numbers up? How many wells would you like to see before you see that? Or what are some of the metrics you're looking for on that? [indiscernible] Yes. So thanks for the question, Jeremy, and good morning. So it's Craig here. And again, Justin is with me if he provide any color, but again, Jeremy, we're really into February in the year.

Extremely happy with how we entered the year and then how January looked on a production basis and really happy with the performance of these these first two pads.

And we'll see how things play out for the remainder of the year. And what that means. Veren comfortable with the market guidance that we have out now.

The $188,000,000 to the 196,000,000 Things look certainly on track to be at those levels. So we'll see how things play out. We've got a couple of pad coming up here and I know you're aware of over the next little bit we have in March we have the six to seven Phase three pad which we're excited about.

We also have a twelvethirty six pad that is it's kind of north car area Jeremy, if you're familiar with that one on the map. So that one will be coming on in April and that's a blend mainly single point entry, but we do have a couple plug in person there too. So it's a good data set for us on a go forward basis. And then in the Duvernay, we've got a couple of pads here coming on just over the next month or so. So So let's see how things go, but so far so good both on a [indiscernible] a well results basis as well as just overall production levels [indiscernible] So, so far so good. Okay.

And maybe just a bit of a catchall just in terms of different M and A going on throughout the Montney. Is this something you guys are still interested in or just very happy with your current money dividend position and maybe you're more likely yet finalizing some of this main dispositions Jeremy, our stance really hasn't changed on that over the last twelve months. If you remember, we've been everybody know that we're going to take a good solid pause as far as acquisitions and divest We're extremely excited about the asset base that we were able to put together Love the Duvernay, love the Montney, love how it pairs with the long cycle assets and lots of opportunity in front of us We've got a good five year plan that we feel really good about. So I think what we really need to do is to continue to demonstrate to the market the quality of the assets and the quality of our execution So that's my way of saying don't look for us to be doing anything on in the near term. Very happy with how things have been moving here into the New Year.

Okay. Perfect. And nice to see the stock moving here today. This morning as well. Thanks, Jeremy. Thank you. And the next question comes from the line of Michael Spiker from HTM Research. Your line is now open. Please go ahead and ask your question. Thank you. Good morning, guys. Good quarter, a little more pep in the step. This morning. It's good to see. I've got one question only got a few. So you can tell me if I'm getting two into the weeds. [indiscernible] looking at some of the gas oil ratios on the Gold Creek seven to seventeen and fifteen to 16 pads, they've been lower initially and during early time production. So is that a function of shorter frac growth not penetrating the upper part of of the gasier sequence and so you get less gas drive. How do you rationalize that kind of difference in early time gas oil ratios And just generally, is there anything kind of notable you guys have noticed over the past few months producing these pads that have furthered NCS sleeve single point entry thesis because the declines are a lot than you would have expected. So I'm just kind of curious what the learnings have been over the last three months or so?

Thanks for the question, Michael. And so You noted two of those pads from Q4 where we did the the plug and trials One thing I would tell you that we're really encouraged about is how those [indiscernible] or how those pads have continued to increase in production and have it recently running fairly flat in that 500 to 600 ish boe per day range and then a much higher oil cut.

So we've been excited to see how those things have performed. And I think at some point in time, they'll When you think of a cum time plot, these wells will end up probably cuming where they should be against that relative or initial type well. So we're excited about how they've played out. As far as the GOR, you're right, the GOR is a little bit lower. We do think where the wells Veren landed and that style of completion may not aided in the height growth and really penetrated into a little bit of that gas. But these are early time results and we continue to analyze that, but certainly have been encouraged with how they have [indiscernible] All that said, our next batch in that area, we will try or we will move back to the single point entry system in there and see how those do on a relative basis. But it's certainly with 70 of those in the area, feel pretty good about the results that we'll expect from that under the single point system. And just to add a little color here is to Sorry, Michael. Just on your question on GORs being a little bit lower.

One thing we have noticed with those seven to 17 wells is actually our flow and bottom hole pressure or the percent drought, the percent drawdown on those wells has been quite low. So those wells we are looking at [indiscernible] to help encourage that reservoir gas to come out. So Again, look forward here in the next few months, next quarter or two for us to get those wells optimized and try to get that gas to come out And then then the last thing I would say, Michael, even though you do those plug and perf trials, we use we still use basically three tons a meter and similar fluid rates so that that fluid and proppant went went into that reservoir It's just maybe it didn't maximize the height growth what we needed, but [indiscernible] certainly has obviously got a good stimulation on those wells and they are performing better than we had hoped.

Or thought.

Okay. That's super helpful. I guess kind of just a follow-up on that. I'm getting a little ahead of timelines Veren, but would there be an opportunity in the future possibly to replicate that NCS sleeve with extreme limited entry plug in perf. I know Shell did some of those kind of a few years ago. And get the cost savings and maybe kind of try to pump harder with higher tier equipment, Has that been a discussion down the road or kind of just focused on getting MCS back on track and proving those results first? Yes. No, I mean, absolutely, you're thinking the same way we are. We always want to continue to optimize our completions design and it's going to end up being different, I'm sure, for different areas. We also always want to continue to optimize our cost structure and pound that down.

And if you one of the learnings that we did have early on Michael, was in that quarter as we could see the completions on that [indiscernible] the performance wasn't what we had hoped. We did make that change on the twelvethirty six pad where we ended up going to three perf clusters per stage. So we're already starting to get a little bit more of a limited entry. And getting that fluid rate per entry point a little bit higher. Certainly, you can go down to where you have one per per sorry, one per cluster per stage, but that's where you start to get a little bit dilutive on your cost structure, right? So at that point in time, it doesn't make sense to do that. It makes a lot more sense to use the single point system. So these are things that we need to continue to work through. We're going to continue to get better from a production standpoint and a cost structure standpoint. So So that's why we're excited about how things have really started to play out here for us in January and how this coming into the New Year.

Okay. That's awesome. I appreciate that. I got one more. And it might be a little [indiscernible] but I just understand the outsourcing. Okay.

I guess no pun intended on the grittiness, but I've seen some evolution of Poppett mix, thirty-fifty heavy on the five-twenty three and then thirty-fifty and 100 mesh or I guess fifty-one 40.

On the two of 10. Is that a function of just sand sourcing or are you guys seeing different results with different kind of profit blends It's Justin here again. So we have transitioned in some cases to use some smaller sand to see if we can more effectively place that sand. And more effectively get that prop type growth that we want that we think we need to get. So still an evolution there on on sand profit sizing. As well, Michael. Okay, guys. I appreciate that so much. Veren excited for the rest of the year.

Good job on the quarter. That was well done.

Turn it back to you guys now. Thanks, Michael.

Thank you. And the next question comes from the line of Dennis Fong from CIBC World Markets. Your line is now open. Please go ahead.

Hi, good morning, everyone, and congrats on a a great quarter there, Craig and team. My first question here is just related a little bit towards kind of a similar line of questioning. So given the incremental liquids content that you're seeing coming from the single point entry design, And I think Justin maybe partially alluded to it. How do you think that maybe plays into or maybe how do you think about adjusting the build out or utilization of gas lift in your operations as well as how you think about the development of the field or optimization of the field as you progress development, especially with the higher liquids content?

Hey, Dennis, it's Justin again here. So yes, I mean, through the acquisition process and Spartan Delta and Hammerhead, we acquired a couple of different theories on their gas lift and how they set up their pads We're looking to push gas lift first of all out to the pad level And then secondly, where we where we can utilize it, transition to high pressure gas lift to be able to draw these wells down quicker. Now when we do get even higher on the liquids content, we will be looking at possibly using ESPs There are a couple in the field that are running and have run effectively over the years. In the past in our predecessor companies that Veren operating these fields. So again, I think it's instead of a standard operation or a standard fit for artificial lift, It's definitely something that's going to involve and be a pad by pad evaluation for us going forward.

Great. Really appreciate that incremental color there, Justin.

My second question maybe shifting towards net debt. You've obviously made a lot of progress through 2024. I guess this might be also addressed at the Ken.

Can you talk towards maybe your comfort level with your balance sheet today? And if kind of the like obviously organic deleveraging kind of the primary way of lowering outstanding debt. But are there any other options that you're looking at to maybe accelerate that process how should we be thinking about kind of your comfort level with where it stands today? Obviously, I understand you've made a lot of progress thus far.

Yes. It's Craig here, Dennis. So thanks for the question. I'm going to I'll pass Ken, but the one thing I would note is, we did make significant progress on on our overall debt reduction last year. We did manage to get our balance sheet down to call it that $2,500,000,000 ish billion dollars of absolute debt, which is down 35% year over year And as we've noted in the past, our near term debt target on an absolute level is about $2,200,000,000 and we see ourselves getting there Veren over the next call it, twelve ish months when you think of just the excess cash flow generation from our organization and that retained amount that we keep But ideally, and Dennis, you know as well, and I mean, it's you talked to Ken and I, When you think of the business for the long term, we'd like to be somewhere in that neighborhood about 1.5 or $1,600,000,000 ish of absolute debt. So we'll continue to work towards that. And Ken is here and he'll give you some color just as how we're thinking too. Yes. I echo the same comments as Craig. And then obviously what we're really excited about here when we look at '25 and then you look at the five year plan, it's just the amount of excess cash generation and then obviously as a function of that how much we're able to retain.

So So if I look forward into 2025 here, I mean, we've got organic deleveraging at $250,000,000 at a Seventy Dollars U. S. WTI. So obviously these are good numbers. And we're able to bring that cash flow or that leverage down. I mean, how comfort are we are today? We're very comfortable at a one basically a one time set of cash flow.

To Craig's comments, obviously, we want to drive that lower And so yes, I think the real setup here as we look at this year and then look beyond not only we are growing our production on 7% CAGR, but we're growing our excess cash by 15%.

And so year over year, even with the growth program that we've got, we're building our excess cash generation and that's just going to accelerate the debt reduction and deleveraging. So happy with the setup. Obviously, we're going to main remain committed to it. We'll have our base dividends there which is sustainable here at lower oil prices. Every dollar in the return of capital and above that is going to go to share repurchases. And then obviously, keeping that 40% for the balance sheet and strengthening that. So like the setup and that's how we're going to go forward. Thanks, Dennis.

Appreciate that color. I'll turn it back.

Thanks. Thank you. And the next question comes from the line of Luke Davis from Raymond James. Your line is now open. Please go ahead.

Yes, thanks. Good morning guys. Wondering if you can expand a little bit on some of the prior questions. First being related to your guidance, looking a little bit conservative given how strong volumes have have come on year to date and some of the improvements we're seeing portfolio. So just wondering if you can provide a little more detail around the parameters on the low end and the high end of the range and what's currently baked in there? Yes. So So again, our guidance is the $188,000,000 to 196,000,000 I think if you break it into halves, On the year, we'll be in the neighborhood of 187 on the front half of the year, and around 197 in the back half of the year on average. So if you think of it from a quarter perspective, we're going to be somewhere in the neighborhood of we're saying 183 in Q1 and about 200 ish to a little bit over 200 in the back half of the year. Keep in mind, Luke, we've got a couple of things going on here. In the backdrop. One, with the capital program being a little bit more heavily weighted to the front half of the year, And then with Pat timing, you're spending all this money upfront here in the front drilling these wells and getting these pads on, but we don't see a lot of that production coming to the back half of the year.

So that puts a little bit of a downward pressure on the front. And then the other thing, do know is, as we alluded to a little bit earlier, we've got quite a bit of facilities work going on here in the backdrop. So Veren if you look into February, for example, we did have some facilities that we had shut down to do some work on and all that plays into your numbers. So I guess it's my way of saying we are comfortable with the range that we put out Happy with the start we've had in January. [indiscernible] keep in mind, it's only February. So let's see how [indiscernible] things continue to progress, but the setup is so far so good on that front.

I appreciate that. Does that help? [indiscernible] Yes, no, super helpful. Just one follow-up. A lot of focus obviously in Montney and Duvernay, but I'm wondering if you can speak a little bit to the Saskatchewan side of the portfolio. Speak to some of the changes you're making down there, things you like And related to M and A, a prior question was asked on the Montney specifically, but anything you can do there to kind of bulk that up or generally just how you're thinking about that side of the business? [indiscernible] Luke, again on that, I mean, super happy with how the portfolios come together, especially when you think of where we were call it five years ago and the portfolio, what it looks like today The inventory, the short cycle assets in front of us, between the Montney and the Duvernay, which we love both of them. And the other thing to keep in mind is the liquids in our play or our assets relative to some of the other ones out there, We're in that phase envelope in that 75% to 85% whether it's condensate or oil. So love the inventory set up in front of us between those two.

And then we really like that pairing of the long cycle assets in Saskatchewan. So So I wouldn't look for us to do anything on the M and A front. Obviously, Luke, there's always little what I would call, base business things that you do around this swaps and small little tuck ins and that thing that you always love to build out and on the assets. But anything big, I wouldn't say is it's going to occur. And then you look at Saskatchewan, what we love about Saskatchewan is It's a little bit longer stage of its life cycle. It's now shifted really into that EUR phase and whether it's the water flood or the polymer floods, we continue to advance that and things on that front have looked good. It's just a nice low decline excess cash flow asset that pairs well with the short cycles that we have.

And so with that in mind, we do have a little bit of a drilling program going on out there now And we bob and weave between somewhere between one and call it three ish drilling rigs.

Not only throughout the year, but also throughout the five year plan. And And some of that is just the timing of breakup where you're familiar with those loop where they're generally single well pads. It's not like you can get on a big pad and run through breakup. So Saskatchewan as a whole has been performing really well. And I think apart aside from polymer and the water floods, The other thing that we've been doing is the open hole multilaterals in mainly in the Bufeld area and that's been exciting for been a good steady consistent production base and it's been just a good steady consistent execution on that program. So no real surprises there. Look, That's great. Appreciate it. That's it for me.

Thanks for the questions.

Thank you. And there no further questions on the line. Verint's Investor Relations department can be reached at 767-6923. Thank you, and have a good day.