VUX – Vital Energy Inc.

Vital Energy Earns $9 Million In 2021 – $0.11c EPS

Vital Energy Inc. (Audited Year End Results). All Information Can Be Found On Sedar.

Ticker Symbol: VUX
Price: $0.39
Common Shares: 82,249,971
Warrants: Nil
Options: 1,250,000 @ $0.25
Market Cap: $32 million
Insider Holdings: 55,311,353 or 67.3% of the float

*Note* Q1 2022 Results (January – March) will be out end of May 2022.
Financials (Ending December 31, 2021)

ASSETS
Cash: $1,456,841
Short Term Investments: $205,022
Receivables: $2,050,711
Prepaid Expenses: $17,146
Deposits: $564,101
Exploration & Evaluation Assets: $66,273
Right Of Use Assets: $190,725
Property & Equipment: $11,731,118
Total Assets: $16,281,937

LIABILITIES
Accounts Payable & Accrued Liabilities: $792,568
Contract Liabilities: $1,288,648
Portion Of Lease Liability: $49,773
Portion Of Decommissioning Liability: $258,574
Bank Loan: $60,000
Lease Liability: $143,254
Decommissioning Liability: $1,552,428
Total Liabilities: $4,145,245

Asset/Debt Ratio – 3.93:1

2021 Performance
Revenue: $15,066,687
Net Income: $8,945,770
Earnings per Share: $0.11

2021 Reserves (51-101) Available On Sedar – Oil Pricing under $70 & Gas Under $4
Light Oil – 537,400 Barrels NET
Heavy Oil – 306,900 Barrels NET
Natural Gas – 493,700 Barrels NET
Natural Gas Liquids – 2,100 Barrels NET
Total Net Barrels: 1,340,100

Management Discussion and Analysis Highlights

Overall Performance

Highlights

· The Company reported net income of $8,945,770 in 2021 as compared to a net loss of $7,564,554 in 2020.
· Revenue was $15,066,687 in 2021 as compared to 2020 revenue of $4,940,701, an increase of $10,125,986.
· The 2021 realized oil price was $71.33 as compared to $36.22 in 2020.
· Production increased to 579 boe/d in 2021 from 373 boe/d in 2020 with the increase being mainly attributable to improvements in operations at Sullivan Lake and the commencement of production of three new horizontal wells at Lampman.
· The Company exited the 2021 year with production of 809 boe/d.
· A loan payable of $3,800,643 was repaid in the year

Properties

In Q3 2021, the Company completed three horizontal wells at Lampman with production from all wells commencing in September. In the first nine months of 2021, the Company completed a review of their other properties. As a result, workovers were performed at eleven (11) wells including 3 wells at Gull Lake, 3 wells at Pennant, 4 wells at Baxter Lake, and 1 well at Standard Hill. The Company also replaced the desulfurization tower at Sullivan Lake with a desulfurization tower with increased capacity. This assisted in the resumption of operations and allowed the Company to maintain a stable production.

Core Properties

Lampman

The Company purchased a quarter section of crown land in Saskatchewan in Q3 2020. In order to confirm the Frobisher reservoir quality and the potential in the deeper Winnipegosis zone, a vertical pilot hole 1-4- 6-5-W2 was designed and drilled. The results indicated the Frobisher reservoir was promising and the Winnipegosis zone was uneconomic. The pilot hole was abandoned in the deeper section and was plugged back. This existing vertical well bore was utilized to drill Hz C7-4-6-5W2 in the Frobisher zone from 1-4 to 7-4 (second event for the pilot well 1-4). The other two Frobisher horizontal wells were drilled in July 2021 from the same surface pad as the pilot hole and were completed in August 2021. The Company produced 709 bbl/d of sweet light oil (API ranging from 32.5 -36.0) from these multiple well projects in Q4 2021.

Sullivan Lake

The successful appraisal development well, 10-1, was drilled in the Banff limestone reservoir in December 2019 and two additional horizontal wells were drilled in 2020 and all are now on production. The 10-1well was shut down for several months in 2020 and 2021 because of the Covid-19 pandemic and low crude oil prices. In addition, gas with small amounts of H2S was discovered. As the Sullivan Lake desulfurization tower was replaced with a larger desulfurization tower with more capacity, the Company believes it has resolved the long-standing production and operating issues. This area produced 37,630 boe in 2021 and produced 99 boe/d in Q4 2021. The Company has built production facilities at Sullivan Lake with a capacity of 300 boe/d.

Gull Lake

In one of the Company’s core areas of operations, Gull Lake, Saskatchewan, Vital is the designated operator and maintains a 50% working interest. The property is covered with 3D seismic data and has 9 wells producing, or capable of producing, crude oil from the Roseray , Cantuar and Upper Shaunavon formations. This project has a salt-water disposal facility and a gas collection pipeline system. In the Company’s opinion, future drilling opportunities remain on these lands. At Gull Lake, Vital’s net daily oil and natural gas production for the year ended December 31, 2021 was 209 boe/d (2020 – 223 boe/d). The decrease in production was attributable to natural declines in the property. In order to better evaluate the oil development potential, the Company has utilized the 3D seismic survey which covers all of its Gull Lake lands. As of December 31, 2021, the reserves evaluator, Trimble Engineering, assigned 160,400 (2020 – 216,200) boe of proven oil and natural gas reserves net to the Company and 79,400 (2020 – 116,700) boe of probable oil reserves net to the Company.

Pennant

Vital is the Operator and maintains a 100% working interest in 12 contiguous sections of land. To date one (1) vertical well and six (6) horizontal wells have been drilled. Four of the horizontal wells and the vertical well have had production. The Company has commenced abandonment and reclamation work on some well sites. 3D seismic coverage on about 35% of Vital’s lands indicates the potential for additional drilling locations. The company’s crude oil production was 34 bbls/d in 2021 as compared to 17 bbls/d in 2020 when the property was shut-in for a considerable time period due to depressed oil prices.

Non-core Properties

Baxter Lake

The Company performed remedial work in 2021 to reactivate certain wells in the Baxter Lake area as oil prices have improved.

Ante Creek

The Company purchased 2.5 sections of crown land in Alberta in Q1 2021 and is currently working on a detailed geology study and development plan. This may allow the drilling of up to 25 horizontal Montney development wells.

Pembina

The Company purchased a quarter section of crown land in Alberta in Q2 2021 and is currently working on a detailed geology study and development plan. This may allow the drilling of up to 4 horizontal Cardium development wells.

Hume

The Company purchased 2 LDS of crown land in Saskatchewan in Q4 2021 and is currently working on a detailed geology study and development plan. This may allow the drilling of up to 2 horizontal Frobisher development wells.

Outlook

The company plans to continue to acquire crown lands from upcoming crown land sales. The company will continue to optimize production from the existing properties and from the plan to drill 4 to 6 wells in 2022.

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