Dividend-Focused Business Model
We hosted a fireside chat with Chairman and CEO Bob Gerrity and President Brian Cree on December 7, 2023. The event can be accessed here. Vitesse’s capital allocation model revolves around positioning the company to pay fixed dividends to common stockholders. The current annualized dividend is $2.00 per share, equating to a 9.0% yield. Vitesse was founded on a thesis of Deeper, Denser, Cheaper, Better, Expanded. The thesis is based on the premise that evolving technology will contribute to increased hydrocarbon recovery and core area expansion in unconventional reservoirs over time. Management put the thesis to work more than 10 years ago, acquiring undeveloped assets that were “ahead of the drillbit” in the Williston Basin’s Bakken/Three Forks play. Vitesse’s assets consist of non-operated working and mineral interests. The company owns an average working interest of 2.8% in ~7,000 gross wells. Management estimates its acreage holds more than 200 net undeveloped drilling locations, of which only 36.3 were included in proved undeveloped reserves at year-end 2022. The fixed dividend is the centerpiece of management’s capital allocation framework. The company’s assets support an organic development capital program as operators propose new wells in units where Vitesse owns interest. Management also seeks to acquire drillbit-ready non-operated working interests as the linchpin of its near-term development acquisition effort. Vitesse’s assets are operated by a diverse set of public and private operators in the Williston Basin. The company owns interests in acreage operated by nearly 40 individual companies. Vitesse’s non-operated business model is G&A light, allowing the company to scale assets without adding significant overhead costs. Management developed its proprietary Luminis data management system to aggregate drilling/completion, well performance, and capital/operating cost data across its asset footprint. The system allows Vitesse to monitor performance and cost trends to high-grade investment decisions. Conservative balance sheet leverage is a critical element to support the fixed-dividend strategy. Management’s goal is to maintain a leverage ratio below 0.5x.
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