Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (March 2019)
104 slides from Vermilion Energy's investor presentation, March 2019
Slide 1: Internationally Diversified Sustainable Growth and Income
INTERNATIONALLY DIVERSIFIED SUSTAINABLE GROWTH AND INCOME MARCH 2019
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► International E&P with leading positions in Europe, North America and Australia ► Self-funded growth-and-income model ► Supported by business units that deliver high margins, low decline rates and strong capital efficiencies ► Each major business unit generates free cash
Slide 3: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (February 27, 2019) $33.80 (TSX), $25.66 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (December 31, 2018) 152.7 million Average Daily Trading Volume (shares) 1.3 million Monthly Dividend $0.23/share Dividend Yield 8.2% Director and Emp
Slide 4: Core Operating Areas
CORE OPERATING AREAS 2019E PRODUCTION* EUR NORTH 33% N.A. AMERICA 62% AUS 5% EUROPE EUR N.A. FFO* 40% 51% AUS 9% AUSTRALIA N.A. FCF* EUR 40% 49% AUS 11% VERMILION IS FOCUSED IN THREE STABLE REGIONS * Company 2019 estimates as at February 22, 2019. 2019 strip as at February 22, 2019: Brent (US$/bbl)
Slide 5: Vermilion History
VERMILION HISTORY Launched as an Alberta-based oil & gas exploration and production company Converted to Vermilion Energy Trust Issued senior IPO in April 1994 at $0.30 per share unsecured notes in US Converted from an income Listed High Yield market trust structure to a corporation on the NYSE 1994
Slide 6: Strategy
STRATEGY ► Self-funded production and dividend growth model ► Targeting free cash flow and dividend yield compression through per-share growth and risk reduction (low financial and Capital Markets Model operating leverage, consistent dividend history, and diversification) ► Cost reductions and inven
Slide 7: Environmental Sustainability
ENVIRONMENTAL SUSTAINABILITY ► We recognize the energy transition is occurring, and we are a part of the transition ► At the same time, we are realistic that oil and gas consumption will continue during the transition, and will in fact increase over the next few decades ► Our strategy focuses on red
Slide 8: Production Growth and Capex
PRODUCTION GROWTH AND CAPEX ANNUAL PRODUCTION VS E&D CAPITAL EXPENDITURES 120 800 105 15% CAGR 700 90 600 MBOE / D 75 500 $ MM 60 400 45 6% CAGR 300 30 200 15 100 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E* PPS -12% 7% 5% 11% -1% -8% -11% 0% 0% 5% 16% 7
Slide 9: Production and Reserves Per Share
PRODUCTION AND RESERVES PER SHARE PRODUCTION PER SHARE RESERVES PER SHARE 250 3.5 8% CAGR 3.0 2P RESERVES (BOE) PER SHARE 200 11% CAGR BOE PER THOUSAND SHARES 2.5 150 2.0 1.5 100 1.0 50 0.5 0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E* 2003 2004 2005 20
Slide 10: Production Growth Per Share
PRODUCTION GROWTH PER SHARE DEBT-AND-DIVIDEND-ADJUSTED INDEXED PRODUCTION PER SHARE (BASE VALUE = 100)* COMPANY 250 (% OF PRODUCTION FROM N.A. GAS)** VII* (41%) 200 PXT (0%)* TOU (84%) VET (24%) PEY (91%) 150 ARX (71%) BIR (79%) ERF (52%) 100 NVA (60%) WCP (18%) TOG (12%) 50 BNE (31%) CPG (10%) BNP
Slide 11: E&D Capital Budget
E&D CAPITAL BUDGET Capital Expenditures by Country 2014 Actuals 2015 Actuals 2016 Actuals 2017 Actuals 2018 Actuals 2019 Budget* ($MM) ($MM) ($MM) ($MM) ($MM) ($MM) Canada 336 202 62 149 278 302 France 148 92 69 73 80 74 Netherlands 62 47 24 31 17 31 Germany 3 5 4 9 16 24 Ireland 94 67 9 1 1 1 Austr
Slide 12: FFO / FCF
FFO / FCF FFO FCF (CORPORATE ERA) $1,200 $500 $1,000 $400 FFO LESS E&D CAPEX* ($MM) $800 $300 FFO ($MM) $600 $200 $400 $100 $200 $0 $0 -$100 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E* 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E* LONG-TERM FFO AND FR
Slide 13: FFO and FCF Per Share
FFO AND FCF PER SHARE FFO PER SHARE FCF PER SHARE $8.00 $3.50 $7.00 $3.00 $2.50 FCF PER SHARE ($/SHARE)** $6.00 FFO PER SHARE ($/SHARE) $2.00 $5.00 $1.50 $4.00 $1.00 $3.00 $0.50 $2.00 $0.00 $1.00 -$0.50 $0.00 -$1.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E* 2010 2011 2012 2013 2014 2015 20
Slide 14: FFO Sensitivity
FFO SENSITIVITY 2019 FORECAST FFO (C$MM)* COMMODITY ASSUMPTIONS (STRIP)*** WTI (US$/BBL) 2019E 40 45 50 55 60 65 TTF (C$/MMBTU) Brent (US$/bbl) $65.41 8.00 727 806 882 958 1,034 1,104 WTI (US$/bbl) $57.86 9.00 739 818 894 970 1,046 1,116 LSB = WTI less (US$/bbl)**** $3.48 10.00 745 824 900 976 1,052
Slide 15: Free Cash Flow Yield
FREE CASH FLOW YIELD 2019E DEBT-ADJUSTED FREE CASH FLOW (DAFCF) TO ENTERPRISE VALUE (EV) 12% 10% 2019E DAFCF YIELD * 8% 6% 4% 2% 0% FRU CNQ TOG WCP MEG SU ATH VET HSE IMO TVE ERF ARX CVE BTE CPG TOU VII PEY OBE BNP NVA CR POU AAV LXE PNE PONY ATTRACTIVE VALUATION BASED ON FCF COMPARED TO PEERS * Des
Slide 16: Comparison to Canadian Seniors
COMPARISON TO CANADIAN SENIORS DIVIDEND YIELD 2019E FREE CASH FLOW (FCF) TO MARKET CAPITALIZATION 10% 16% 14% 2019E FCF YIELD ** 8% DIVIDEND YIELD * 12% 6% 10% 8% 4% 6% 4% 2% 2% 0% 0% VET CNQ SU HSE IMO CVE VET CNQ CVE HSE SU IMO 3-YEAR PRODUCTION COMPOUND ANNUAL GROWTH RATE (CAGR) CASH FLOW SENSITI
Slide 17: Dividends
DIVIDENDS 17
Slide 18: Reliable and Growing Dividends
RELIABLE AND GROWING DIVIDENDS CUMULATIVE DIVIDENDS PAID OF $3.3B ($36.87 PER SHARE) FROM 2003 THROUGH Q4 2018 $0.25 10% $0.23 9% $0.215 8% MONTHLY DIVIDENDS $0.20 7% $0.20 DIVIDEND YIELD $0.19 6% $0.17 5% 4% $0.15 3% 2% 1% $0.10 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20
Slide 19: Total Payout Ratio
TOTAL PAYOUT RATIO 200% 175% 150% 162% TOTAL EXPENDITURES / FFO* 140% 125% 121% 117% 121% 104% 108% 111% 109% 111% 100% 93% 88% 75% 81% 74% 73% 70% 50% 59% 25% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Cash Dividends E&D Capex New Venture Land DRIP PDRI
Slide 20: 2019 Sustainability
2019 SUSTAINABILITY ► 2019 E&D capital budget of $1,200 $530MM includes both sustaining US$60 WTI and growth capital $1,000 US$50 WTI ► 2019E sustaining capital is $800 US$40 WTI estimated at $365MM** FFO ($MM) $600 ► Dividend and sustaining capital covered at ~US$40 WTI and growth $400 capital cove
Slide 21: Total Capital Returned to Shareholders
TOTAL CAPITAL RETURNED TO SHAREHOLDERS TOTAL CAPITAL RETURNED PER BOE* DIVIDENDS PER BOE* (DIVIDENDS & SHARE BUYBACKS) Q3 2018 YTD Q3 2018 YTD HES VET IMO OXY DVN XOM APC CVX SU SU OXY TOG VET WCP XOM ARX CVX IMO COP CNQ COG HES CNQ VET RETURNED C$ / NRI BOE C$ / NRI BOE COP WCP HSE TOG NBL $13.74 /
Slide 22: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL 22
Slide 23: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL SELF-FUNDED GROWTH-AND-INCOME MODEL 1. High Margins 2. Low Base Production Decline Rates 3. Strong Capital Efficiencies Profitability on a per boe basis Required production replacement before growth Cost per boe/d to replace and grow production ► High margins provide in
Slide 24: Netbacks
NETBACKS 2018 Netbacks by Country Total Canada France Netherlands Germany Ireland Australia United States ($/BOE*) Company Sales $37.81 $89.44 $58.44 $61.47 $61.12 $95.11 $52.90 $52.95 Royalties (4.77) (11.60) (1.12) (4.94) - - (13.85) (4.80) Operating Cost (10.00) (13.56) (9.40) (17.18) (4.58) (33.
Slide 25: Relative Netbacks
RELATIVE NETBACKS 2019E FIELD NETBACKS (EXCLUDING HEDGING) $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 PSK ECA NVA VET HSE CVE DEE BIR BXE PEY CPG FRU SU ATH MEG ERF BTE KEL PMT OBE BNE CR ARX TOG CJ TOU AAV BNP WCP CNQ PONY SGY IMO PGF POU VII OIL MIXED GAS VET TOP DECILE NETBACK AMONGST BOTH OIL AND GAS
Slide 26: Base Production Decline Rates
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET ONLY CORPORATE France 8% 8% 40% DECLINE NATURAL DECLINE VET Netherlands 1% 19% CORPORATE 30% EFFECTIVE Germany 7% 7% DECLINE Ireland 15% 15% 20% Australia 14% 14% 10% Canada 23% 27% 0% United State
Slide 27: Drilling Projects
DRILLING PROJECTS Economics at US$55 WTI DCET Well IP365 EUR Prod. Efficiency Net Well 2019E Net Investment Cost (C$M) (BOE/D) (MBOE) (IP365 $/BOED) ATAX Recycle ATAX Payout Inventory* Wells Planned ROR Ratio (Years) European Gas Netherlands Exploration & Development $9.4 1,260 1,350 $7,500 >100% 7.
Slide 28: Cost Reduction
COST REDUCTION OPERATING EFFICIENCY CAPITAL EFFICIENCY 14.00 12% Reduction 40.00 (31% in USD) 12.00 35.00 78% Reduction 30.00 (83% in USD) 10.00 19% Reduction 25.00 8.00 from 2014 Peak $ / BOE $ / BOE (31% in USD) 20.00 6.00 29% Reduction 50% Reduction 15.00 from 2014 Peak (60% in USD) 4.00 10.00 (4
Slide 29: Reserves / Resources
RESERVES / RESOURCES 29
Slide 30: Reserves and Resource Base
RESERVES AND RESOURCE BASE RESERVES* 2018 RESOURCES* 550 RESOURCE CONVERSIONS 400 CONTINGENT PROSPECTIVE 500 (MBOE) (MBOE) 2014 20,400 2,500 450 2015 17,500 500 2016 5,450 - 300 400 2017 20,456 1,734 350 2018 17,000 - MMBOE 300 200 MMBOE 250 200 150 100 100 50 0 0 2003 2004 2005 2006 2007 2008 2009
Slide 31: Recycle Ratio
RECYCLE RATIO Including FDC RECYCLE RATIO (F&D incl. FDC) 2018 F&D / FD&A Costs* ($/BOE) 6.0x 2016-2018 F&D (E&D CAPEX) $7.79 3 Yr Avg – 3.8x 5.0x FD&A (Total CAPEX, $14.99 including acquisitions) 4.0x F&D Operating Recycle Ratio 4.1x 3.0x ► 13.2 year Proved + Probable reserve life index** 2.0x ► In
Slide 32: Relative PDP Recycle Ratio
RELATIVE PDP RECYCLE RATIO 3-YEAR PROVED DEVELOPED PRODUCING (PDP) FD&A RECYCLE RATIOS* 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET BNE ARX BIR AAV PEY TOU SRX YGR CR WCP NVA RRX CPG VII BTE PONY SPE TVE KEL GXE ERF LXE TOP RECYCLE RATIOS AMONGST OUR PEER GROUP * AltaCorp Capital research, March 2018. Proved
Slide 33: International Diversification
INTERNATIONAL DIVERSIFICATION 33
Slide 34: Organizational Model
ORGANIZATIONAL MODEL ► Vermilion uses a decentralized business unit structure to manage our diverse global portfolio ► Country-based business units are grouped into three regions: Vermilion Energy Inc. Europe, North America and Australia (Calgary Corporate HQ) ► Each business unit has integrated eng
Slide 35: Commodity Mix
COMMODITY MIX PRODUCTION (2019E)* ESTIMATED FFO CONTRIBUTION (2019E)* ESTIMATED FCF CONTRIBUTION (2019E)** France Australia Germany Australia Australia 11% United 9% France 4% Ireland France 11% 5% 8% States 18% United 5% 17% Netherlands States Germany 9% Germany 6% OIL (BRENT) 2% 18% OIL (BRENT) 2%
Slide 36: Commodity Price Diversification
COMMODITY PRICE DIVERSIFICATION PORTFOLIO MIX STANDARD DEVIATION* 60% ANNUALIZED STANDARD 50% DEVIATION (%) 40% 30% 20% 10% 0% VET ERF TVE OBE BNE KEL NVA BTE WCP ARX BNP CPG BIR TOU PEY ► Diversified commodity exposures reduce volatility due to imperfect Commodity Price Brent WTI NYMEX NBP price co
Slide 37: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE ► Approximately 36% of Vermilion’s crude oil production is priced with reference to Dated Brent* March 2019 VET ► Vermilion’s Australian crude was sold at an average premium of Oil Price 2019E Premium / (Discount) US$3-5 to Dated Brent from 2012 to 2018 Benchmark C
Slide 38: European Natural Gas Pricing – Summary
EUROPEAN NATURAL GAS PRICING – SUMMARY NATURAL GAS* $12 ► Futures markets continue to reflect a significant premium for European $10 natural gas versus AECO and Henry Hub GAS PRICE (C$/MMBTU) $8 COAL FLOOR $6 ► Realized prices are influenced by a number of factors, including increasing competition i
Slide 39: European Natural Gas – LNG & CTG Switching
EUROPEAN NATURAL GAS – LNG & CTG SWITCHING LNG Costing from U.S. Gulf Coast To Europe To Asia ($US/mmbtu) ► Europe’s large consumer base and infrastructure capable of absorbing available LNG, Source gas* 3.00 3.00 particularly in the power sector where gas-fired power generation is significantly und
Slide 40: European Natural Gas – Summer 2019 Outlook
EUROPEAN NATURAL GAS – SUMMER 2019 OUTLOOK €/mwh TTF & NBP FORWARD CURVES 25.00 ► European gas prices are trading lower as we approach the end of 23.00 what has been a warmer than normal winter 21.00 19.00 ► European carbon prices (EUA’s) are trading at elevated levels 17.00 relative to last year, w
Slide 41: European Natural Gas – Long Term Outlook
EUROPEAN NATURAL GAS – LONG TERM OUTLOOK Net Importing Regions to 2040: EU Remains the Largest Net Importer ► Declining European domestic production results in higher dependence on Net Imports (bcf/d) As % Share of Demand imports 2016 2025 2040 2016 2025 2040 ► Groningen production is expected to be
Slide 42: Risk Management / Balance Sheet
RISK MANAGEMENT / BALANCE SHEET 42
Slide 43: Annual Commodity Hedge Position
ANNUAL COMMODITY HEDGE POSITION Full Year 2019 Full Year 2020 WTI Percent of Production Hedged 7% - Average Floor / Ceiling / Swap ($/bbl) $71.51 / $82.38 / $78.47 -/-/- Brent Percent of Production Hedged 15% - Average Floor / Ceiling / Swap ($/bbl) $87.14 / $97.38 / $93.47 -/-/- Total Oil – Percent
Slide 44: Quarterly Commodity Hedge Position
QUARTERLY COMMODITY HEDGE POSITION OIL HEDGES NATURAL GAS HEDGES ($/bbl) ($/mmbtu) Q1 2019 $70.81- $74.71 $81.97 $92.00 $89.03- European Gas North American Gas $98.82 Q1 2019 $8.46 $6.59-$7.62 Q1 2019 $5.19 $69.75- $88.16- Q2 2019 $80.79 $93.39 $97.99 $81.53 Q2 2019 $7.70 $6.42-$7.36 Q2 2019 $72.75-
Slide 45: Conservative Balance Sheet
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C$2.5 BILLION LEVERAGE RATIOS* AS AT JANUARY 31, 2019 4.0 $0.7 B 3.0 $0.4 B 2.0 $1.4 B 1.0 0.0 REVOLVING CREDIT FACILITY 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Bank Debt US$ Senior Notes Moody’s: B2 NET DEBT TO
Slide 46: Relative Leverage
RELATIVE LEVERAGE 2019E DEBT TO CASH FLOW 6.0x 5.0x 4.0x 3.0x CANADIAN AVERAGE US AVERAGE 2.0x 1.0x 0.0x MEG OAS FANG ECR PXX BXE CQE DEE BTE CPG ATH NVA FRU KEL JOY OBE PPR CPE BIR PE KOS VET CRK CR PONY BNP DNR BNE WCP CRZO PDCE ARX CKE PGF POU YGR TVE WPX QEP LPI US CANADA VET RELATIVELY LOW LEVE
Slide 47: Credit Metrics
CREDIT METRICS YE 2013 YE 2014 YE 2015 YE 2016 YE 2017 YE 2018 Credit Facility ($ millions) 1,200 1,750 2,000 2,000 1,400 1,800 Undrawn 1 425 727 812 618 493 408 Liquidity 2 815 848 853 681 540 419 Subordinated Debt ($ millions) 225 225 225 - 371 404 Consolidated EBITDA 3 ($ millions) 930 1,020 636
Slide 48: European Assets
EUROPEAN ASSETS 48
Slide 49: European Core Area
EUROPEAN CORE AREA NETHERLANDS GERMANY ► #2 onshore gas producer ► Establishing production operations and IRELAND ► Large and growing inventory of drilling opportunities substantial exploratory land position in ► Corrib field constitutes ~95% of ► 1P / 2P Reserves: 11.8 / 22.2 mmboe the North German
Slide 50: European Production
EUROPEAN PRODUCTION 35,000 30,000 25,000 20,000 BOE/D 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016 2017 2018 2019E E&D CAPEX AS % OF FFO** n/a 43% 51% 101% 45% 73% 111% 56% 23% 46% 26% 86% 84% 65% 43% 71% 93% 70% 31% 33%
Slide 51: France
FRANCE ► Entered France in 1997 PARIS PARIS BASIN ► Assets characterized by large OOIP conventional fields with high working interest (OOIP in 5 largest fields >1.7 billion barrels of oil) FRANCE ► Brent indexed production base with low base decline rate BORDEAUX ► Workover, infill drilling and seco
Slide 52: France Production
FRANCE PRODUCTION 14,000 12,000 10,000 8,000 BOE/D 6,000 4,000 2,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E E&D CAPEX AS % OF FFO* N/A 43% 51% 101% 45% 73% 111% 82% 30% 43% 30% 57% 41% 37% 21% 43% 63% 48% 46% 49% 47% 40% Crude
Slide 53: France Operating Performance
FRANCE OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquired Reserves Initial acquisition (1997) 22.6 14,000 2006 Acquisition 15.0 2012 Acquisition #1 6.7 2006 ACQUISITION 2012 Acquisition #2 6.3 15.0 MMBOE (2P) 12,000 3,900 BOE/D Total Acquired Reserves 50.6 PRODUCTION (BOE/D) Producti
Slide 54: Parentis Sustainability Partnership
PARENTIS SUSTAINABILITY PARTNERSHIP ► Vermilion was the recipient of France’s Circular Economy Award for our project to supply geothermal heat from our oil operation to local greenhouses ► The award recognizes economically successful enterprises that operate within a “circular economy,” in which bus
Slide 55: La Teste Eco-Habitats
LA TESTE ECO-HABITATS ► Our operations near La Teste, France now support an eco-neighborhood of 450 homes that are heated the same way as the tomato greenhouses, using recycled geothermal energy from our oil operation ► 30-year partnership to provide 70% of the energy required for 450 homes ► Preven
Slide 56: Netherlands
NETHERLANDS ► Entered Netherlands in 2004 HARLINGEN ► #2 onshore gas producer ► Strong gas price, favorable fiscal regime, and low OPEX enhance netbacks ► High impact natural gas drilling and development AMSTERDAM NETHERLANDS ► Doubled production since 2009 while generating FCF** ► Undeveloped land
Slide 57: Netherlands Production
NETHERLANDS PRODUCTION NETHERLANDS - Expected per well risked economics (based on recent drilling) DCET Well Cost ($ million) $9.2 Expected IP30 Rate (boe/d)** 1,690 Expected EUR per well (mboe) ** 1,350 10,000 After Tax ROR (%) >100% After Tax Payout (years) 1.1 After Tax NPV10 ($ million) $15.4 Re
Slide 58: Netherlands Operating Performance
NETHERLANDS OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquired Reserves Initial acquisition (2004) 16.5 2013 Acquisition 2.3 14,000 2016 Acquisition (Drenthe WI) 0.6 2013 ACQUISITION Total Acquired Reserves 19.4 2.3 MMBOE (2P) INITIAL ACQUISITION 12,000 600 BOE/D 16.5 MMBOE (2P) PROD
Slide 59: Netherlands Activity
NETHERLANDS ACTIVITY ► Vermilion has tripled its undeveloped land base since the beginning of 2012 ► We have drilled 14 high-rate extension and discovery gas wells since 2009, with an average success rate of approximately 70% over this period ► 92 identified future net drilling locations in reserves
Slide 60: Netherlands 3D Seismic
NETHERLANDS 3D SEISMIC Legacy 2D Line Q4 2017 SEISMIC ACQUISITION ► 310 km2 of new 3D seismic acquired in late 2017 in two concessions near Vermilion’s core operating area in the Netherlands ► This new survey has been merged with older data to complete a continuous 3D seismic set over 2,400 km2 ► To
Slide 61: Role of Domestic Gas in the Netherlands
ROLE OF DOMESTIC GAS IN THE NETHERLANDS ► Production induced seismicity in the Groningen field, including 3.6/3.4 magnitude earthquakes NETHERLANDS SUPPLY AND DEMAND* in 2012/2018, has raised public concern regarding overall gas extraction in the Netherlands 3,000 ► Groningen (largest gas field in E
Slide 62: Investing in Our Netherlands Communities
INVESTING IN OUR NETHERLANDS COMMUNITIES MUNICIPALITY LINKAGE PROGRAM ► Vermilion launched the Municipality Linkage Program (MLP) in 2016 in the Netherlands, to support targeted and transparent connections between our capital investments and the municipalities where they take place ► MLP projects to
Slide 63: Germany
GERMANY COUNTRY OVERVIEW ► Largest gas market in Europe, with a long history of oil and natural gas development ► Country-wide production is approximately 48 kbbl/d of oil and 0.75 Bcf/d of natural gas (170k boe/d) ► Consistent fiscal framework and low political risk NORTH GERMAN BASIN PROGRESSION O
Slide 64: German Exploration Opportunities
GERMAN EXPLORATION OPPORTUNITIES WE HOLD 26% OF NET LICENSED ACREAGE IN THE NORTH GERMAN BASIN Initial Non-Operated ► Integrated geoscience/engineering/permitting effort began in 2016 Acquisition ► Our emphasis is on permeable (conventional) gas plays with 100 prospects identified Farm-In Agreement
Slide 65: Germany Production
GERMANY PRODUCTION GERMANY – Burgmoor Z3 Sidetrack (Non-op gas assets, reflects 25% W.I.) ENGIE ACQUISITION DCET Well Cost ($ million) $4.0 (CLOSED DECEMBER IP30 Rate (boe/d)** 350 5,000 EUR per well (mboe)** 780 19, 2016) ADDED ~2,000 After Tax ROR (%) 36% BOE/D (50% OIL) After Tax Payout (years) 3
Slide 66: Germany Operating Performance
GERMANY OPERATING PERFORMANCE GERMANY OPERATED OIL ASSETS ► Operated oil fields acquired by Vermilion at 1,200 the end of 2016 ENGIE ACQUISITION (CLOSED ► Vermilion has grown production by ~30% 1,000 DECEMBER 19, 2016) 680 BOE/D OPERATED OIL since the acquisition closed PRODUCTION (BOE/D) ► Producti
Slide 67: Ireland
IRELAND OVERVIEW ► Vermilion holds a 20% operated interest in the Corrib gas field, offshore Ireland ► On July 12, 2017 Vermilion and Canada Pension Plan Investment Board (“CPPIB”) announced a strategic partnership, whereby CPPIB will acquire Shell’s 45% interest in the project (closed in Q4 2018) ►
Slide 68: Ireland Production
IRELAND PRODUCTION 12,000 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2015 2016 2017 2018 2019E E&D CAPEX AS % OF FFO* NM 9% 1% 1% 1% Gas EFFICIENT TRANSLATION OF REVENUE → FUND FLOWS FROM OPERATIONS → FREE CASH FLOW * 2019 FFO estimate based on 1 month of actuals, remainder of year at strip. 2019 strip
Slide 69: Ireland Future Development Opportunities
IRELAND FUTURE DEVELOPMENT OPPORTUNITIES ► Future development opportunities include: ► Reperforation of bypassed pay in existing well bores (mean estimate of 7 bcf of recoverable gas with P10 upside to 12 bcf) ► Side-track of existing well for infill (mean estimate of 31 bcf of recoverable gas with
Slide 70: Central and Eastern Europe (CEE)
CENTRAL AND EASTERN EUROPE (CEE) EXTENSION OF EUROPEAN GROWTH STRATEGY ► Modest back-loaded capital commitments ► Prospective for both oil and gas ► Under-invested basin that can benefit from new technology HUNGARY ► Awarded South Battonya and Ebes concessions in 2014/2015 covering over 334,000 acre
Slide 71: CEE Five Year Project Inventory
CEE FIVE YEAR PROJECT INVENTORY Project Name Timing Background A portfolio shallow gas prospects can be quickly and inexpensively drilled and Hungary Shallow Gas Play 2019-2021 hooked up. Modern 3D seismic allows a high success rate in high porosity/permeability Upper Miocene sandstone reservoirs. A
Slide 72: North American Assets
NORTH AMERICAN ASSETS 72
Slide 73: North American Project Ranking
NORTH AMERICAN PROJECT RANKING Mannville Ellerslie Condy PROJECT RANKING BY ATAX IRR 100% (2019E - 17 Net Wells) WY Turner Sand Unfracked Frobisher / Alida (2019E - 8 Net Wells) (2019E - 64 Net Wells) 80% SE Sask Bakken SE Sask Frac’d Midale Upper Mannville (2019E - 2 Net Wells) (2019E - 32 Net Well
Slide 74: Canada
CANADA ► Production and assets are focused in West Central Alberta and SE Saskatchewan ► In West Pembina, potential for three significant development projects sharing surface infrastructure with a land position of approximately 400,000 net acres across the Mannville (2,400 – 2,700m depth), Cardium (
Slide 75: Canada Production
CANADA PRODUCTION 70,000 60,000 50,000 40,000 BOE/D 30,000 20,000 10,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E E&D CAPEX AS % OF FFO* 21% 36% 67% 58% 31% 76% 247% 225% 165% 101% 86% 104% 42% 78% 72% 58% Crude Oil & NGL Gas 2018 CAPEX PROGRAM DELIVERS PROD
Slide 76: Mannville
ALBERTA NOTIKEWIN Industry Mannville Horizontals Key Oil Battery ► 375 net sections (240,000 acres) of Mannville rights, Key Gas Plant Key Compressor largely held by production VET Gas Pipeline ► 54 net West Pembina (Lower Mannville / Ellerslie) wells drilled with an average production rate per well
Slide 77: Lower Mannville (Ellerslie) / Upper Mannville
LOWER MANNVILLE (ELLERSLIE) / UPPER MANNVILLE (NOTIKEWIN / FALHER) LOWER MANNVILLE WELL PERFORMANCE* UPPER MANNVILLE WELL PERFORMANCE* 2,000 3,000 Lower Mannville (Ellerslie) 2,500 1,600 Type Curve 2,000 1,200 BOE/D BOE/D 1,500 800 1,000 400 500 0 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11
Slide 78: Southeast Saskatchewan
SOUTHEAST SASKATCHEWAN ► Entered SE Saskatchewan through the acquisition of Elkhorn Resources Inc. in 2014, with further land added subsequent to acquisition ► Acquired Spartan Energy May 2018, adding over 400,000 net acres to our SE SK land base ► 2P reserves totaling 145.3 mmboe* MISSISSIPPIAN ► L
Slide 79: SE Saskatchewan Land Position
SE SASKATCHEWAN LAND POSITION ► Entered SE Saskatchewan through the acquisition of Elkhorn Resources Inc. in 2014, with further land added subsequent to acquisition ► Acquired Spartan Energy May 2018, adding over 400,000 net acres to our SE SK land base ► Land base covers over 550,000 net acres with
Slide 80: Frac Midale / Open Hole Frobisher
FRAC MIDALE / OPEN HOLE FROBISHER FRAC MIDALE WELL PERFORMANCE OPEN HOLE FROBISHER WELL PERFORMANCE 500 400 400 300 Frac Midale Type Curve 300 Open Hole Frobisher Type Curve BBL/D BBL/D 200 200 100 100 0 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 MONTHS ON PRODUCTION MONTHS ON PRODUCTIO
Slide 81: United States – Wyoming Development
UNITED STATES – WYOMING DEVELOPMENT PRB STRAT COLUMN ► Entered U.S. in 2014 Lance Fm Fox Hills Fm ► Early stage light oil growth project in the Powder River Lewis Shale Teckla SS Mesaverde Basin of northeastern Wyoming Fm Teapot SS ► Large, operated contiguous land position (148,700 net Parkman SS U
Slide 82: United States Production
UNITED STATES PRODUCTION 6,000 5,000 4,000 BOE/D 3,000 2,000 1,000 0 2014 2015 2016 2017 2018 2019E E&D CAPEX AS % OF ATAX NOI* 64% 535% 353% 204% 186% 93% Crude Oil & NGL Gas POWDER RIVER BASIN PROVIDES ANOTHER SOURCE OF LONG-TERM GROWTH FOR VERMILION * 2019 FFO estimate based on 1 month of actuals
Slide 83: Hilight Asset
HILIGHT ASSET HILIGHT TURNER HZ WELL PERFORMANCE 2,000 OIL PRODUCTION ► Assets are operated and controlled by Vermilion, with 1,500 ~93% of land Held by Production at ~96% average (BBLS/D) Turner Hz (9 wells) 510 MBOE Type Curve Working Interest 1,000 ► Identified 92* future drilling locations 500 0
Slide 84: East Finn Asset
EAST FINN ASSET EAST FINN TURNER SAND WELL PERFORMANCE 500 OIL PRODUCTION (BBLS/D) ► Vermilion holds a large operated acreage position east of 400 the Finn Shurley field Turner Hz 275 MBO Type Curve 300 ► Limited development has occurred since mid-1980’s 200 ► Low risk field extension project using
Slide 85: Australian Assets
AUSTRALIAN ASSETS 85
Slide 86: Australia
AUSTRALIA ► Entered Australia in 2005 ► Offshore oil field ~80 km N.W. of Australia (55 m water depth) ► Horizontal well development with 20 wellbores and five lateral sidetracks ► Wells 600m below sea bed with 1,500 - 3,700 m measured depths ► Contracted oil sales receives a premium to Dated Brent
Slide 87: Australia Production
AUSTRALIA PRODUCTION AUSTRALIA - per well economics* based on performance of 2013-2016 drilling programs DCET Well Cost ($ million) $25.6 IP30 Rate (boe/d) 4,400 EUR per well (mboe) 1,000 12,000 After Tax ROR (%) >100% After Tax Payout (years) 0.4 After Tax NPV10 ($ million) $18.4 10,000 Recycle Rat
Slide 88: Australia Operating Performance
AUSTRALIA OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquisition Date Reserves Reserves at initial acquisition (2005) 26.7 16,000 Total Acquisition Date Reserves 26.7 14,000 Production to YE 2018 34.3 Reserves at YE 2018 14.5 12,000 Total Produced / Closing Reserves 48.8 PRODUCTION (B
Slide 89: Australia Activity
AUSTRALIA ACTIVITY ► Oil is trapped above and between the existing wells, creating opportunity to drill to a higher structural elevation and between existing wells to capture attic, flank and undrained oil ► 10 additional identified drilling opportunities* ► Field managed for stable production of ap
Slide 90: Corporate Citizenship
Vermilion Enersy Family Centre CORPORATE CITIZENSHIP 90
Slide 91: Governance
GOVERNANCE ► Vermilion’s external awards and recognition provide important benchmarks for our strong performance The Globe and Mail, Report on Business, Board Games ► In 2018, Vermilion ranked 2nd within the oil and gas sector, and among the top quartile of companies in the S&P/TSX composite index ►
Slide 92: Employee and Director Ownership
EMPLOYEE AND DIRECTOR OWNERSHIP ► Pay-for-performance is the foundation of our approach to compensation, both at the executive and employee level ► All directors and employees participate in Vermilion’s equity-based Long-Term Incentive Plan (LTIP) and are shareholders of the company, holding approxi
Slide 93: Health, Safety and Environment (HSE)
HEALTH, SAFETY AND ENVIRONMENT (HSE) PHILOSOPHY ► Safety, environmental protection, and regulatory compliance go hand-in-hand with VERMILION’S PRIORITIES maximizing profitability WE CONDUCT ALL ACTIVITIES TO: ► These priorities should never be in conflict; but if they prove to be, our personnel 1. P
Slide 94: CDP (Carbon Disclosure Project)
CDP (CARBON DISCLOSURE PROJECT) ► CDP (formerly Carbon Disclosure Project) is an international environmental organization that collects information about carbon emissions and energy use ► Vermilion was named to the CDP Climate Leadership level (A-) in 2018 for CO2e EMISSIONS INTENSITY PER BOE the se
Slide 95: Strategic Community Investment
STRATEGIC COMMUNITY INVESTMENT ► Vermilion is committed to giving back Canada France Netherlands Australia Ireland to the communities in which we operate ► We assess the critical needs in each community, and determine where our financial resources and volunteer time can make a difference ► We focus
Slide 96: Corporate Culture
CORPORATE CULTURE “GREAT PLACE TO WORK” INSTITUTE’S ANNUAL RANKING ► Great Place to Work Institute evaluates companies by analyzing results of a confidential Trust Index© survey provided to employees and evaluating the workplace through a Culture Audit© ► Since 2010, Vermilion has been ranked among
Slide 97: Record of Value Creation
RECORD OF VALUE CREATION 97
Slide 98: Value Creation 1994 – 2019
VALUE CREATION 1994 – 2019 $8,000 TOTAL VALUE $6,000 $5,161 CREATION OF $5,438 $4,000 MARKET MILLIONS CAPITALIZATION(2) $2,000 $3,381 $0 EQUITY DIVIDENDS ($2,000) ISSUED(1) PAID(2) ($3,104) ($4,000) MORE THAN 20-YEAR RECORD OF STRONG VALUE CREATION (1) Equity issued for cash and acquisitions since 1
Slide 99: Return on Capital Employed vs Total Return
RETURN ON CAPITAL EMPLOYED 10 YEAR TOTAL RETURN VERSUS 10 YEAR AVERAGE ROCE 150% VET FRU 100% TOTAL RETURN (%) PEY CNQ 50% POU ARX SU 0% BIR ERF CPG IMO SPE NVA AAV -50% ECA CR BTE OBE PGF -100% -15% -10% -5% 0% 5% 10% 15% 20% AVERAGE ROCE (%) TRANSLATING STRONG CAPITAL EFFICIENCIES INTO LEADING SHA
Slide 100: ESG and Shareholder Returns
ESG AND SHAREHOLDER RETURNS ► Sustainability performance is integral to our business and is positively correlated to our strong shareholder returns 5-Yr Total Return vs. Sustainalytics Rank 5-Yr Total Return vs CDP Score 5-Yr Total Return vs RobecoSAM Percentile Rank 40 40 40 ERF ERF VET VET VET 20
Slide 101: Relative Market Performance
RELATIVE MARKET PERFORMANCE CUMULATIVE TOTAL RETURN SINCE BEGINNING OF GROWTH-AND-INCOME ERA 1,600% 1,400% 1,200% 1,000% 800% 600% 400% 200% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 VET S&P/TSX Exploration and Production Total Return Index MSCI World In
Slide 102: Analyst Coverage
ANALYST COVERAGE FIRM ANALYST PHONE EMAIL AltaCorp Capital Patrick J. O’Rourke, CFA 403-539-8615 porourke@altacorpcapital.com Bank of America Merrill Lynch Asit Sen, CFA 646-855-2602 asit.sen@baml.com BMO Nesbitt Burns Ray Kwan, P.Eng. 403-515-1501 ray.kwan@bmo.com Canaccord Genuity Corp. Dennis Fon
Slide 103: Advisory
ADVISORY This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an offer to sell or the solicitation of an offer to buy, securities of Vermilion. This presentation and its contents should not be construed, under any circumstances, as inv
Slide 104: Advisory on Reserves and Resource Disclosure
ADVISORY ON RESERVES AND RESOURCE DISCLOSURE Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 7, 2019 with an effective date of December 31, 2018 relating to our year-end reserves) prepared by GLJ Petroleum
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