Vitesse Energy Inc

Previous wording

Our business strategy is focused on creating long-term stockholder value through the profitable acquisition, development and production of oil and natural gas assets at attractive rates of return, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in non-operated minority working and mineral interests in oil and natural gas properties with our core area of focus currently in the Bakken and Three Forks formations of the Williston Basin of North Dakota and Montana. We also have interests in wells in the Denver-Julesburg Basin located in Colorado and Wyoming and the Powder River Basin located in Wyoming. As of June 30, 2024, we had a working interest in 5,864 gross (162.7 net) productive wells and 263 gross (11.1 net) wells that were being drilled or completed, and an additional 319 gross (8.7 net) wells that had been permitted for development by our operators.

Current wording

Our business strategy is focused on creating long-term stockholder value through the profitable acquisition, development and production of oil and natural gas assets that provide an attractive return on invested capital, while maintaining a strong balance sheet and distributing a meaningful dividend to our stockholders. We invest in non-operated minority working and mineral interests in oil and natural gas properties with our core area of focus currently in the Bakken and Three Forks formations of the Williston Basin of North Dakota and Montana. We also have interests in wells in the Denver-Julesburg Basin located in Colorado and Wyoming and the Powder River Basin located in Wyoming. As of September 30, 2024, we had a working interest in 5,959 gross (163.7 net) productive wells and 255 gross (11.3 net) wells that were being drilled or completed, and an additional 357 gross (8.8 net) wells that had been permitted for development by our operators. In addition, we had a royalty only interest in 1,167 gross (2.8 net) productive wells.

Previous wording

■Production of 13,504 BOE/day with 70% of production from oil.

Current wording

■Production of 13,009 BOE/day with 68% of production from oil.

Previous wording

■Invested $37.6 million in capital development and acquisitions.

Current wording

■Invested $17.2 million in capital development and acquisitions.

Previous wording

Impairment expense. Under the successful efforts method of accounting, we review our oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Whenever we conclude the carrying value may not be recoverable, we estimate the expected undiscounted future net cash flows of our oil and natural gas properties using proved and risked probable and possible reserves based on our development plans and best estimate of future production, commodity pricing, reserve risking, gathering, processing and transportation deductions, production tax rates, lease operating expenses and future development costs. We compare such undiscounted future net cash flows to the carrying amount of the oil and natural gas properties in each depletion pool to determine if the carrying amount is recoverable. If the undiscounted future net cash flows exceed the carrying amount of the aggregated oil and natural gas properties, no impairment is recorded. If the carrying amount of the oil and natural gas properties exceeds the undiscounted future net cash flows, we will record an impairment expense to reduce the carrying value to fair value as of the balance sheet date. The factors used to determine fair value may include, but are not limited to, recent sales prices of comparable properties, indications from marketing activities, the present value of future revenues, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the projected cash flows.

Current wording

Impairment expense. Under the successful efforts method of accounting, we review our oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Whenever we conclude the carrying value may not be recoverable, we estimate the expected undiscounted future net cash flows of our oil and natural gas properties using proved and risked probable and possible reserves based on our development plans and best estimate of future production, commodity pricing, reserve risking, gathering, processing and transportation deductions, production tax rates, lease operating expenses and future development costs. We compare such undiscounted future net cash flows to the carrying amount of the oil and natural gas properties in each depletion pool to determine if the carrying amount is recoverable. If the undiscounted future net cash flows exceed the carrying amount of the aggregated oil and natural gas properties, no impairment is recorded. If the carrying amount of the oil and natural gas properties exceeds the undiscounted future net cash flows, we will record an impairment expense to reduce the carrying value to fair value as of the balance sheet date. The factors used to determine fair value may include, but are not limited to, recent sales prices of comparable properties, indications from marketing activities, the present value of future revenues, net of estimated operating and development costs using estimates of reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the projected cash flows. The Company has not incurred impairment expense during the periods presented.

Previous wording

The average second quarter 2024 oil price was $80.55 per barrel or 9% higher than the average oil price per barrel in the second quarter of 2023. Our settled derivatives decreased our realized oil price per barrel by $1.21 in the second quarter of 2024 and increased our realized oil price per barrel by $2.28 during the second quarter of 2023. Our average second quarter 2024 realized oil price per barrel after reflecting settled derivatives was $73.42 compared to $72.18 during the same period in 2023. The average second quarter 2024 NYMEX natural gas price was $2.07 per MMBtu, or 4% lower than the average NYMEX price per MMBtu in the second quarter of 2023. In the second quarter 2024 and 2023, we had no natural gas price derivatives in place and our realized natural gas price was $1.11 per Mcf and $1.41 per Mcf, respectively.

Current wording

The average third quarter 2024 oil price was $75.26 per barrel or 8% lower than the average oil price per barrel in the third quarter of 2023. Our settled derivatives increased our realized oil price per barrel by $1.77 in the third quarter of 2024 and decreased our realized oil price per barrel by $2.10 during the third quarter of 2023. Our average third quarter 2024 realized oil price per barrel after reflecting settled derivatives was $71.20 compared to $76.35 during the same period in 2023. The average third quarter 2024 NYMEX natural gas price was $2.11 per MMBtu, or 21% lower than the average NYMEX price per MMBtu in the third quarter of 2023. In the third quarter 2024 and 2023, we had no natural gas price derivatives in place and our realized natural gas price was $0.90 per Mcf and $0.88 per Mcf, respectively.

Previous wording

The average year-to-date 2024 oil price was $78.72 per barrel or 5% higher than the 2023 average year-to-date oil price per barrel. Our settled derivatives decreased our average year-to-date 2024 realized oil price per barrel by $0.12 and increased our realized oil price per barrel by $1.68 during the same period in 2023. Our average year-to-date 2024 realized oil price per barrel after reflecting settled derivatives was $72.56 compared to $73.10 during the same period in 2023. The average year-to-date 2024 NYMEX natural gas price was $2.11 per MMBtu, or 12% lower than the 2023 average year-to-date price per MMBtu. During the six months ended June 30, 2024 and 2023, we had no natural gas price derivatives in place and our realized natural gas price was $1.50 per Mcf and $2.53 per Mcf, respectively.

Current wording

The average year-to-date 2024 oil price was $77.53 per barrel or $0.25 higher than the 2023 average year-to-date oil price per barrel. Our settled derivatives increased our average year-to-date 2024 realized oil price per barrel by $0.50 and increased our realized oil price per barrel by $0.45 during the same period in 2023. Our average year-to-date 2024 realized oil price per barrel after reflecting settled derivatives was $72.12 compared to $74.17 during the same period in 2023. The average year-to-date 2024

Previous wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $66.6 million for the three months ended June 30, 2024 from $51.6 million for the three months ended June 30, 2023. The increase in oil and natural gas revenue was due to a 19% increase in production volumes, driven by acquisition and development activity, and a 9% increase in the average realized prices per Boe before hedging for the three months ended June 30, 2024. The increase in production volumes and average realized prices per Boe before hedging increased oil and natural gas revenue by approximately $10.6 million and $4.4 million, respectively.

Current wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $58.3 million for the three months ended September 30, 2024 from $55.1 million for the three months ended September 30, 2023. The increase in oil and natural gas revenue was due to a 18% increase in production volumes, driven by acquisition and development activity, partially offset by a 10% decrease in the average realized prices per Boe before hedging for the three months ended September 30, 2024. The increase in production volumes and decrease in average realized prices per Boe before hedging increased and decreased oil and natural gas revenue by approximately $9.0 million and $5.7 million, respectively.

Previous wording

Our oil price differential to the weighted average benchmark price during the three months ended June 30, 2024 was negative $5.90 per barrel, as compared to a negative $3.78 per barrel during the three months ended June 30, 2023, primarily due to less favorable local market pricing as compared to the benchmark price due to regional supply and demand imbalances. Our net realized natural gas price during the three months ended June 30, 2024 was $1.11 per Mcf, representing a 52% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $1.41 per Mcf during the three months ended June 30, 2023, representing a 65% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Current wording

Our oil price differential to the weighted average benchmark price during the three months ended September 30, 2024 was negative $5.80 per barrel, as compared to a negative $4.30 per barrel during the three months ended September 30, 2023, primarily due to less favorable local market pricing as compared to the benchmark price due to regional supply and demand imbalances. Our net realized natural gas price during the three months ended September 30, 2024 was $0.90 per Mcf, representing a 43% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $0.88 per Mcf during the three months ended September 30, 2023, representing a 34% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Previous wording

Lease Operating Expense. Lease operating expense increased to $9.99 per Boe for the three months ended June 30, 2024 from $9.01 per Boe for the three months ended June 30, 2023. The increase per Boe for the three months ended June 30, 2024 compared with the three months ended June 30, 2023 was due in part to the blend of production during the three months ended June 30, 2024 with a higher percentage of production from older vintage wells with higher cost structures.

Current wording

Lease Operating Expense. Lease operating expense decreased to $9.71 per Boe for the three months ended September 30, 2024 from $9.86 per Boe for the three months ended September 30, 2023. The decrease per Boe for the three months ended September 30, 2024 compared with the three months ended September 30, 2023 was due to reduced workover costs and the blend of production during the three months ended September 30, 2024 with a higher percentage of production in the quarter from newer vintage wells with lower cost structures.

Previous wording

Production Tax Expense. Total production taxes increased to $5.4 million for the three months ended June 30, 2024 from $4.9 million for the three months ended June 30, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 8.1% and 9.5% for the three months ended June 30, 2024 and 2023, respectively. The decrease in the production tax rate for the three months ended June 30, 2024 was due to operators correcting withholding based on recent actual tax filings.

Current wording

Production Tax Expense. Total production taxes increased to $5.3 million for the three months ended September 30, 2024 from $5.2 million for the three months ended September 30, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 9.1% and 9.4% for the three months ended September 30, 2024 and 2023, respectively. The decrease in the production tax rate for the three months ended September 30, 2024 was due to a higher percentage of revenue coming from gas, which is generally taxed at a lower rate than oil.

Previous wording

General and Administrative Expense. General and administrative expense increased to $4.7 million for the three months ended June 30, 2024 from $4.5 million for the three months ended June 30, 2023. General and administrative expense on a per Boe basis decreased to $3.84 for the three months ended June 30, 2024 from $4.32 for the three months ended June 30, 2023. The increase in total general and administrative expense was primarily due to costs of becoming a public company.

Current wording

General and Administrative Expense. General and administrative expense increased to $5.2 million for the three months ended September 30, 2024 from $3.8 million for the three months ended September 30, 2023. General and administrative expense on a per Boe basis increased to $4.37 for the three months ended September 30, 2024 from $3.77 for the three months ended September 30, 2023. The increase in total general and administrative expense was due to increased legal and employee related costs.

Previous wording

DD&A. DD&A increased to $25.3 million for the three months ended June 30, 2024 compared with $18.7 million for the three months ended June 30, 2023. The increase was the result of a 19% increase in production and a $2.46 per Boe increase in the DD&A rate for the three months ended June 30, 2024 compared with the three months ended June 30, 2023. The higher DD&A rate was driven by changes to reserves due to declining oil and gas prices and higher acquisition and development costs in 2024. The increase in production accounted for a $4.0 million increase in DD&A expense while the increase in the DD&A rate accounted for a $2.5 million increase in DD&A expense.

Current wording

DD&A. DD&A increased to $24.9 million for the three months ended September 30, 2024 compared with $19.0 million for the three months ended September 30, 2023. The increase was the result of a 18% increase in production and a $2.05 per Boe increase in the DD&A rate for the three months ended September 30, 2024 compared with the three months ended September 30, 2023. The higher DD&A rate was driven by changes to reserves and higher acquisition and development costs in 2024. The increase in production accounted for a $3.8 million increase in DD&A expense while the increase in the DD&A rate accounted for a $2.1 million increase in DD&A expense.

Previous wording

For the three months ended June 30, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.45 per Boe compared with $17.98 per Boe for the three months ended June 30, 2023.

Current wording

For the three months ended September 30, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.67 per Boe compared with $18.61 per Boe for the three months ended September 30, 2023.

Previous wording

Equity-Based Compensation. During the three months ended June 30, 2024, equity-based compensation expense increased to $2.0 million from $1.4 million during the three months ended June 30, 2023. Equity-based compensation expense was primarily higher in 2024 due to additional LTIP RSUs and PSUs awarded to employees and directors at a higher grant date price.

Current wording

Equity-Based Compensation. During the three months ended September 30, 2024, equity-based compensation expense increased to $2.2 million from $1.1 million during the three months ended September 30, 2023. Equity-based compensation expense was primarily higher in 2024 due to additional LTIP RSUs and PSUs awarded to employees and directors in 2024 at a higher grant date price.

Previous wording

Interest Expense. Interest expense increased to $2.6 million for the three months ended June 30, 2024 from $1.1 million for the three months ended June 30, 2023. The increase for the three months ended June 30, 2024 was due to the debt balance increasing to $115.0 million from $41.0 million at June 30, 2023.

Current wording

Interest Expense. Interest expense increased to $2.7 million for the three months ended September 30, 2024 from $1.2 million for the three months ended September 30, 2023. The increase for the three months ended September 30, 2024 was primarily due to the debt balance increasing to $105.0 million from $56.0 million at September 30, 2023.

Previous wording

Commodity Derivative Gain, Net. The commodity derivative gain was $0.4 million for the three months ended June 30, 2024 compared with a gain of $4.8 million for the three months ended June 30, 2023. Gain on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Current wording

Commodity Derivative Gain (Loss), Net. The commodity derivative gain was $17.4 million for the three months ended September 30, 2024 compared with a loss of $17.1 million for the three months ended September 30, 2023. Gain (Loss) on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Previous wording

In the three months ended June 30, 2024, approximately 62% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized loss on oil derivatives of $1.0 million. In the three months ended June 30, 2023, approximately 50% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $1.6 million.

Current wording

In the three months ended September 30, 2024, approximately 63% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $1.4 million. In the three months ended September 30, 2023, approximately 52% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized loss on oil derivatives of $1.4 million.

Previous wording

At June 30, 2024, all of our derivative contracts were recorded at their fair value, which was a net liability of $2.1 million, a decrease in value of $13.2 million from the $11.1 million net asset recorded as of December 31, 2023. The decrease was primarily due to increases in forward commodity prices relative to prices on our open commodity derivative contracts.

Current wording

At September 30, 2024, all of our derivative contracts were recorded at their fair value, which was a net asset of $13.8 million, an increase in value of $2.7 million from the $11.1 million net asset recorded as of December 31, 2023. The increase was primarily due to decreases in forward commodity prices relative to prices on our open commodity derivative contracts.

Previous wording

Income Tax Expense. For the three months ended June 30, 2024, we recorded an income tax expense of $3.7 million related to federal and state income taxes compared to an income tax expense of $6.8 million for the three months ended June 30, 2023.

Current wording

Income Tax Expense. For the three months ended September 30, 2024, we recorded an income tax expense of $6.2 million related to federal and state income taxes compared to an income tax benefit of $0.8 million for the three months ended September 30, 2023.

Previous wording

Oil and Natural Gas Revenue and Volumes. Oil and natural gas revenue increased to $127.8 million for the six months ended June 30, 2024 from $109.5 million for the six months ended June 30, 2023. The increase in oil and natural gas revenue was due to a 14% increase in production volumes, driven by acquisition and development activity, and a 2% increase in the average realized prices per Boe before hedging for the six months ended June 30, 2024. The increase in production volumes and average realized prices per Boe before hedging increased oil and natural gas revenue by approximately $16.2 million and $2.1 million, respectively.

Current wording

Oil and Natural Gas Revenue and Volumes. Total oil and natural gas revenue increased to $186.1 million for the nine months ended September 30, 2024 from $164.6 million for the nine months ended September 30, 2023 with oil revenue increasing while natural gas revenue declined. The net increase in total oil and natural gas revenue was due to a 16% increase in production volumes, driven by acquisition and development activity, net of a 2% decrease in the average realized prices per Boe before hedging for the nine months ended September 30, 2024. The increase in production volumes and decrease in average realized prices per Boe before hedging increased and decreased oil and natural gas revenue by approximately $25.2 million and $3.8 million, respectively.

Previous wording

Our oil price differential to the weighted average benchmark price during the six months ended June 30, 2024 was negative $6.18 per barrel, as compared to a negative $3.45 per barrel during the six months ended June 30, 2023, primarily due to less favorable local market pricing as compared to the benchmark price due to regional supply and demand imbalances. Our net realized natural gas price during the six months ended June 30, 2024 was $1.50 per Mcf, representing a 73% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $2.53 per Mcf during the six months ended June 30, 2023, representing a 104% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Current wording

Our oil price differential to the weighted average benchmark price during the nine months ended September 30, 2024 was negative $6.05 per barrel, as compared to a negative $3.74 per barrel during the nine months ended September 30, 2023, primarily due to less favorable local market pricing as compared to the benchmark price due to regional supply and demand imbalances. Our net realized natural gas price during the nine months ended September 30, 2024 was $1.29 per Mcf, representing a 62% realization relative to the weighted average NYMEX natural gas price, compared to a net realized natural gas price of $1.99 per Mcf during the nine months ended September 30, 2023, representing a 80% realization relative to weighted average NYMEX natural gas price. Fluctuations in our natural gas price differentials and realizations are due to several factors such as NGL value net of processing costs, gathering and transportation fees, takeaway capacity relative to production levels, regional storage capacity, and seasonal refinery maintenance temporarily depressing demand. The exact impact of each of these items is difficult to quantify as each of our operators pass through these costs in a different manner.

Previous wording

Lease Operating Expense. Lease operating expense increased to $10.15 per Boe for the six months ended June 30, 2024 from $8.88 per Boe for the six months ended June 30, 2023. The increase per Boe for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 was related to higher service costs throughout the six months ended June 30, 2024, due to higher operating costs associated with inclement weather in January 2024 and the blend of production with a higher percentage of production from older vintage wells with higher cost structures.

Current wording

Lease Operating Expense. Lease operating expense increased to $10.00 per Boe for the nine months ended September 30, 2024 from $9.20 per Boe for the nine months ended September 30, 2023. The increase per Boe for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 was related to higher service costs throughout the nine months ended September 30, 2024, due to higher operating costs associated with inclement weather in January 2024 and the blend of production with a higher percentage of production from older vintage wells with higher cost structures.

Previous wording

Production Tax Expense. Total production taxes increased to $11.2 million for the six months ended June 30, 2024 from $10.2 million for the six months ended June 30, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 8.8% and 9.3% for the six months ended June 30, 2024 and 2023, respectively. The decrease in the production tax rate for the six months ended June 30, 2024 was due to operators correcting withholding based on recent actual tax filings.

Current wording

Production Tax Expense. Total production taxes increased to $16.6 million for the nine months ended September 30, 2024 from $15.3 million for the nine months ended September 30, 2023. Production taxes are primarily based on oil revenue and natural gas production, excluding gains and losses associated with hedging activities. Production taxes as a percentage of oil and natural gas sales before hedging adjustments were 8.9% and 9.3% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in the production tax rate for the nine months ended September 30, 2024 was primarily due to operators adjusting withholding based on actual tax filings.

Previous wording

General and Administrative Expense. General and administrative expense decreased to $10.1 million for the six months ended June 30, 2024 from $15.3 million for the six months ended June 30, 2023. General and administrative expense on a per Boe basis decreased to $4.26 for the six months ended June 30, 2024 from $7.40 for the six months ended June 30, 2023. The decrease in general and administrative expense was primarily due to costs in the first half of 2023 related to the Spin-Off of $6.8 million. Excluding costs related to the Spin-Off the per Boe rate for the six months ended June 30, 2023 would have been $4.11. The increase in per BOE cost is associated with becoming a public company.

Current wording

General and Administrative Expense. General and administrative expense decreased to $15.3 million for the nine months ended September 30, 2024 from $19.1 million for the nine months ended September 30, 2023. General and administrative expense on a per Boe basis decreased to $4.30 for the nine months ended September 30, 2024 from $6.21 for the nine months ended September 30, 2023. The decrease in general and administrative expense was primarily due to costs in the first half of 2023 related to the Spin-Off of $6.8 million. Excluding costs related to the Spin-Off the per Boe rate for the nine months ended September 30, 2023 would have been $4.00. The increase in per BOE cost is associated with increased legal and employee related cost.

Previous wording

DD&A. DD&A increased to $48.9 million for the six months ended June 30, 2024 compared with $37.2 million for the six months ended June 30, 2023. The increase was the result of a 14% increase in production and a $2.63 per Boe increase in the DD&A rate for the six months ended June 30, 2024 compared with the six months ended June 30, 2023. The higher DD&A rate was driven by changes to reserves due to lower oil and gas prices and higher acquisition and development costs in 2024. The increase in production accounted for a $6.2 million increase in DD&A expense while the increase in the DD&A rate accounted for a $5.4 million increase in DD&A expense.

Current wording

DD&A. DD&A increased to $73.8 million for the nine months ended September 30, 2024 compared with $56.2 million for the nine months ended September 30, 2023. The increase was the result of a 15% increase in production and a $2.44 per Boe increase in the DD&A rate for the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023. The higher DD&A rate was driven by changes to reserves and higher acquisition and development costs in 2024. The increase in production accounted for a $10.0 million increase in DD&A expense while the increase in the DD&A rate accounted for a $7.5 million increase in DD&A expense.

Previous wording

For the six months ended June 30, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.45 per Boe compared with $17.82 per Boe for the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, the relationship of capital expenditures, proved reserves and production from certain producing fields yielded a depletion rate (excluding depreciation, amortization and accretion) of $20.52 per Boe compared with $18.08 per Boe for the nine months ended September 30, 2023.

Previous wording

Equity-Based Compensation. During the six months ended June 30, 2024, equity-based compensation expense decreased to $3.7 million from $29.4 million during the six months ended June 30, 2023. Equity-based compensation expense was primarily higher in 2023 due to retirement vesting provisions in some of the awards resulting in 1,863,000 restricted stock units being expensed upon award. The retirement vesting provisions were responsible for $26.8 million of expense during the six months ended June 30, 2023.

Current wording

Equity-Based Compensation. During the nine months ended September 30, 2024, equity-based compensation expense decreased to $5.9 million from $30.5 million during the nine months ended September 30, 2023. Equity-based compensation expense was primarily higher in 2023 due to retirement vesting provisions in some of the awards resulting in 1,863,000 restricted stock units being expensed upon award. The retirement vesting provisions were responsible for $26.8 million of expense during the nine months ended September 30, 2023.

Previous wording

Interest Expense. Interest expense increased to $4.8 million for the six months ended June 30, 2024 from $2.3 million for the six months ended June 30, 2023. The increase for the six months ended June 30, 2024 was due to the debt balance increasing to $115.0 million at June 30, 2024 from $41.0 million at June 30, 2023.

Current wording

Interest Expense. Interest expense increased to $7.5 million for the nine months ended September 30, 2024 from $3.5 million for the nine months ended September 30, 2023. The increase for the nine months ended September 30, 2024 was primarily due to the debt balance increasing to $105.0 million at September 30, 2024 from $56.0 million at September 30, 2023.

Previous wording

Commodity Derivative (Loss) Gain, Net. The commodity derivative loss was $13.4 million for the six months ended June 30, 2024 compared with a gain of $12.2 million for the six months ended June 30, 2023. (Loss) Gain on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Current wording

Commodity Derivative Gain (Loss), Net. The commodity derivative gain was $3.9 million for the nine months ended September 30, 2024 compared with a loss of $4.9 million for the nine months ended September 30, 2023. Gain (Loss) on Commodity Derivatives is comprised of (1) cash gains and losses we recognize on settled commodity derivative instruments during the period, and (2) unsettled gains and losses we incur on commodity derivative instruments outstanding at period-end.

Previous wording

The mark-to-market fair value of the unsettled commodity derivative instruments will generally be inversely related to the price movement of the underlying commodity. If commodity price trends reverse from period to period, prior unrealized gains may become unrealized losses and vice versa. These unrealized gains and losses will impact our net income in the period reported. The mark-to-market fair value can create non-cash volatility in our reported earnings during periods of commodity price volatility. We have experienced such volatility in the past and are likely to experience it in the future. Gains on our derivatives generally indicate lower oil revenues in the future while losses indicate higher future oil revenues. Oil prices rose during the six months ended June 30, 2024 as compared to oil price declines during the six months ended June 30, 2023.

Current wording

The mark-to-market fair value of the unsettled commodity derivative instruments will generally be inversely related to the price movement of the underlying commodity. If commodity price trends reverse from period to period, prior unrealized gains may become unrealized losses and vice versa. These unrealized gains and losses will impact our net income in the period reported. The mark-to-market fair value can create non-cash volatility in our reported earnings during periods of commodity price volatility. We have experienced such volatility in the past and are likely to experience it in the future. Gains on our derivatives generally indicate lower oil revenues in the future while losses indicate higher future oil revenues. Oil prices declined during the nine months ended September 30, 2024 as compared to an oil price increase during the nine months ended September 30, 2023.

Previous wording

In the six months ended June 30, 2024, approximately 56% of our oil volumes and none of our natural gas volumes were subject to financial hedges, which resulted in a realized loss on oil derivatives of $0.2 million. In the six months ended June 30, 2023, approximately 50% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $2.3 million.

Current wording

In the nine months ended September 30, 2024, approximately 58% of our oil volumes and none of our natural gas volumes were subject to financial hedges, which resulted in a realized gain on oil derivatives of $1.2 million. In the nine months ended September 30, 2023, approximately 51% of our oil volumes and none of our natural gas volumes were covered by financial hedges, which resulted in a realized gain on oil derivatives of $0.9 million.

Previous wording

At June 30, 2024, all of our derivative contracts were recorded at their fair value, which was a net liability of $2.1 million, a decrease in value of $13.2 million from the $11.1 million net asset recorded as of December 31, 2023. The decrease was primarily due to increases in forward commodity prices relative to prices on our open commodity derivative contracts.

Current wording

At September 30, 2024, all of our derivative contracts were recorded at their fair value, which was a net asset of $13.8 million, an increase in value of $2.7 million from the $11.1 million net asset recorded as of December 31, 2023. The increase was primarily due to decreases in forward commodity prices relative to prices on our open commodity derivative contracts.

Previous wording

Income Tax Expense. During the six months ended June 30, 2024, we recorded an income tax expense of $2.9 million related to federal and state income taxes.

Current wording

Income Tax Expense. During the nine months ended September 30, 2024, we recorded an income tax expense of $9.2 million related to federal and state income taxes.

Previous wording

During the six months ended June 30, 2023, the Predecessor was contributed into Vitesse resulting in a change in tax status and the recording of a $44.1 million deferred tax liability related to the temporary difference between the tax and GAAP basis of the assets of the Predecessor and an offsetting charge to income tax expense. Additionally, we recorded an income tax expense of $3.1 million for the six months ended June 30, 2023 related to federal and state income taxes.

Current wording

During the nine months ended September 30, 2023, the Predecessor was contributed into Vitesse resulting in a change in tax status and the recording of a $44.1 million deferred tax liability related to the temporary difference between the tax and GAAP basis of the assets of the Predecessor and an offsetting charge to income tax expense. Additionally, we recorded an income tax expense of $2.3 million for the nine months ended September 30, 2023 related to federal and state income taxes.

Previous wording

The provision for income taxes for the six months ended June 30, 2024 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to §162(m) limitations on certain covered employee compensation and state income taxes.

Current wording

The provision for income taxes for the nine months ended September 30, 2024 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily due to §162(m) limitations on certain covered employee compensation and state income taxes.

Previous wording

The provision for income taxes for the six months ended June 30, 2023 differs from the amount that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book loss primarily due to (i) deferred tax expense reflected as a discrete item related to the change in tax status of Vitesse Energy from a partnership to a corporation as part of the Spin-Off, (ii) §162(m) limitations on certain covered employee compensation, and (iii) state income taxes.

Current wording

The provision for income taxes for the nine months ended September 30, 2023 differs from the amount that would be provided by applying the U.S. federal statutory rate of 21% to pre-tax book loss primarily due to (i) deferred tax expense reflected as a discrete item related to the change in tax status of Vitesse Energy from a partnership to a corporation as part of the Spin-Off, (ii) §162(m) limitations on certain covered employee compensation, and (iii) state income taxes.

Previous wording

Overview. At June 30, 2024, we had $0.1 million of unrestricted cash on hand and $130.0 million available under the borrowing base in our Revolving Credit Facility. We expect that our liquidity going forward will be primarily derived from cash flows from our operations, cash on hand and availability under the Revolving Credit Facility and that these sources of liquidity will be sufficient to provide us the ability to fund our material cash requirements for the next twelve months, as described below, including our planned capital expenditures program, as well as dividends and our share repurchase program. We may need to fund acquisitions or other business opportunities that support our strategy through additional borrowings under our Revolving Credit Facility or the issuance of equity or debt. Our primary uses of capital have been for the acquisition and development of our oil and natural gas properties and dividend payments. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

Current wording

Overview. At September 30, 2024, we had $2.4 million of unrestricted cash on hand and $140.0 million available under the borrowing base in our Revolving Credit Facility. We expect that our liquidity going forward will be primarily derived from cash flows from our operations, cash on hand and availability under the Revolving Credit Facility and that these sources of liquidity will be sufficient to provide us the ability to fund our material cash requirements for the next twelve months, as described below, including our planned capital expenditures program, as well as dividends and our share repurchase program. We may need to fund acquisitions or other business opportunities that support our strategy through additional borrowings under our Revolving Credit Facility or the issuance of equity or debt. Our primary uses of capital have been for the acquisition and development of our oil and natural gas properties and dividend payments. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.

Previous wording

At June 30, 2024, we had a working capital deficit of $10.2 million, compared to a deficit of $2.1 million at December 31, 2023. Current assets decreased by $9.4 million while current liabilities decreased by $1.2 million at June 30, 2024, compared to December 31, 2023. The decrease in current assets during the six months ended June 30, 2024 was primarily due to a decrease of $9.9 million in our current commodity derivative instruments due to the change in fair value. The decrease in current liabilities during the six months ended June 30, 2024 was mostly due to a decrease of $3.6 million in accounts payable and accrued liabilities as a result of paying accrued oil and gas development costs and accrued employee compensation, partially offset by an increase of $2.5 million in current derivative instrument liabilities as a result of forward oil price increases.

Current wording

At September 30, 2024, we had a working capital deficit of $18.4 million, compared to a deficit of $2.1 million at December 31, 2023. Current assets decreased by $4.1 million while current liabilities increased by $12.3 million at September 30, 2024, compared to December 31, 2023. The decrease in current assets during the nine months ended September 30, 2024 was primarily due to a decrease of $8.6 million in our revenue receivable, partially offset by a $2.2 million increase in current commodity derivative instruments due to the change in fair value and a $1.9 million increase in cash. The increase in current liabilities during the nine months ended September 30, 2024 was mostly due to an increase of $12.5 million in accounts payable and accrued liabilities primarily as a result of increased accrued oil and gas development costs.

Previous wording

Cash Flows. Our cash flows for the six months ended June 30, 2024 and 2023 are presented below:

Current wording

Cash Flows. Our cash flows for the nine months ended September 30, 2024 and 2023 are presented below:

Previous wording

During the six months ended June 30, 2024, we generated $74.6 million of cash from operations, a $3.7 million decrease from the six months ended June 30, 2023. Cash flows from operating activities are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and by changes in working capital. Any interim cash needs are funded by cash on hand, cash flows from operations or borrowings under our Revolving Credit Facility. We typically enter into commodity derivative transactions covering a substantial, but varying, portion of our anticipated future oil production for the next 12 to 24 months. A minimum level of derivative coverage is required by certain debt covenants. See Part I, Item 3, “ Quantitative and Qualitative Disclosures about Market Risk.”

Current wording

During the nine months ended September 30, 2024, we generated $120.3 million of cash from operations, a $10.0 million increase from the nine months ended September 30, 2023. Cash flows from operating activities are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivative contracts, and by changes in working capital. Any interim cash needs are funded by cash on hand, cash flows from operations or borrowings under our Revolving Credit Facility. We typically enter into commodity derivative transactions covering a substantial, but varying, portion of our anticipated future oil production for the next 12 to 24 months. A minimum level of derivative coverage is required by certain debt covenants. See Part I, Item 3, “ Quantitative and Qualitative Disclosures about Market Risk.”