Vermilion Energy Inc. · TSX:VET

Vermilion Energy — Vermilion Energy Trust — Investor Presentation (March 2006)

39 slides from Vermilion Energy's investor presentation, March 2006

1. Slide 1: Investor Presentation March 2006

   Investor Presentation March 2006

2. Slide 2: Legal Disclaimer

   Legal Disclaimer This presentation contains forward-looking financial and operational information including earnings, cash flow, unitholder distributions, debt levels, production and capital expenditure projections. These projections are based on the Trust’s expectations and are subject to a number

3. Slide 3: Corporate Profile

   Corporate Profile ƒ Calgary based global oil and gas production company ƒ Co-founded in 1994 by current President & CEO ƒ Over 250 employees worldwide ƒ Publicly owned and traded on the Toronto $32.00 Stock Exchange with market capitalization $28.00 exceeding Cdn$2.0 billion $24.00 $20.00 ƒ Technica

4. Slide 4: Statistics

   Statistics ƒ Listed on Toronto Stock Exchange VET.UN ƒ Trading price (March 10, 2006) $31.70 ƒ Monthly distribution (Since February 2003) $0.17 ƒ Current yield 6.4% ƒ Units outstanding (Including 4.6mm exchangeable shares) 68.9 mm ƒ Market capitalization $2.1 bn ƒ Average trading volume (Units/day,

5. Slide 5: Strategy

   Strategy ƒ Expand asset base through strategic acquisitions, farm-ins, asset optimization and exploitation activities ƒ Focus growth in three regions: Canada, Western Europe & Australia ƒ Control costs by operating its properties. Be recognized as a premier operator on and offshore ƒ Expose unithold

6. Slide 6: Quality Assets

   Quality Assets ƒ New acquisitions target undercapitalized properties, rich with low risk opportunities ƒ Strong inventory of investment prospects within each country ƒ Reserves Life Index at Dec 31, 2005 of 11.4 years (proved + probable) ƒ Ability to increase production and reserves from the current

7. Slide 7: Sound Financial Position

   Sound Financial Position ƒ Conservative financial management ƒ 2005 year-end net debt of C$245 million on borrowing base of C$410 mm ƒ Target debt to cash flow ratio of 1.0 times or lower ƒ 0.7x at year end 2005 ƒ 1.1x upon closing of France acquisition ƒ Debt repayment plan over the balance of 2006

8. Slide 8: Energy Trust Acquisitions 2004-2005

   Energy Trust Acquisitions 2004-2005 Production value ($/boed) $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2004 2005 RBC, Canaccord

9. Slide 9: 2006 Proposed Capital Program - $120 mm

   2006 Proposed Capital Program - $120 mm ƒ Canada $67 mm Drayton Valley Infills, recompletions Coalbed Methane (40 wells - $33 mm) ƒ France $30 mm Paris Basin Dev. drilling (4-5 wells) Aquitaine Basin Production maintenance Reservoir evaluation potential drill ƒ Netherlands Production optimization $1

10. Slide 10: Operations

    OPERATIONS

11. Slide 11: Canadian Assets

    Canadian Assets ALBERTA Slave Lake Athabasca ƒ Operate in four core producing areas with Drayton EDMONTON over 750 wells Valley ƒ Operate four major oil batteries with fluid handling capacity approaching 100,000 b/d Central AB ƒ Operate several gas treatment centres CALGARY providing combined capaci

12. Slide 12: Canadian Focus

    Canadian Focus ƒ Infill drilling for tight gas on dominant land position (12 wells in 2006) ƒ Optimize large facility infrastructure targeting 3rd party fee revenue ƒ Optimize waterflood recovery from large Utikuma Field ƒ Large inventory of recompletion opportunities ƒ Develop CBM resource play (40

13. Slide 13: Canadian Focus

    Canadian Focus ALBERTA Slave Lake Athabasca Drayton EDMONTON Coalbed Methane Valley ƒ Canada’s emerging resource play Central AB ƒ Successfully drilled over 110 wells since July 2005 CALGARY ƒ Current target is Horseshoe Canyon CBM ƒ Future potential for Mannville CBM on VET lands

14. Slide 14: CBM Activity - Morningside

    CBM Activity - Morningside ƒ Current areas of focus include Morningside and Mikwan ƒ Increased focus on areas with processing and pipeline capacity Proposed pipeline ƒ Control 100,000 acres with over 400 infill locations identified ƒ 2006 program includes 40 wells, facilities and pipeline expansion

15. Slide 15: French Assets

    French Assets Paris Paris Basin Basin PARIS ƒ Largest and most active oil producer in France Aquitaine Aquitaine ƒ Operate 150 wells from 9 fields in 2 basins Maritime Maritime and process over 125,000 b/d of fluid BORDEAUX Aquitaine Aquitaine Basin ƒ Marine operations at Parentis Field include Basi

16. Slide 16: French Focus

    French Focus ƒ Step out delineation of La Torche Field, 4-5 wells planned for 2006 ƒ Optimize waterflood recovery from large Parentis Field ƒ Workover program targeting by-passed production and reserves ƒ Initiate secondary recovery of La Torche Field ƒ Evaluate tertiary recovery for Parentis Field

17. Slide 17: La Torche Drilling Locations - 2006

    La Torche Drilling Locations - 2006 3 -2579.4 ƒ 4-5 wells in 2006 LBT1/1G ƒ Reviewing 2-D 3 -2449.5 2 seismic CER102 -25 22D -2431.4 acquired in 5 -2411.0 2005 La Torche 4D 6D -2406.8 ƒ Expansion and La Torche 5D 10D -2401.2 9D -2426.0 19D -2388.5 infill 8D -2393.8 CHN1 -2411.0 La Torche 7D -2388.7

18. Slide 18: Proposed Acquisition – Esso Rep

    Proposed Acquisition – Esso Rep ƒ Complementary assets in core areas ƒ 10 Fields (3 Paris Basin, 7 Aquitaine Basin) ƒ 2006E production of 3,500 bopd (calendar year, net) ƒ Creates significant operating synergies ƒ Opportunities include re-starts, recompletions and development drilling Paris COURBEY

19. Slide 19: Acquisition Metrics – Esso Rep (89.886%)

    Acquisition Metrics1 – Esso Rep (89.886%) ƒ Price – C$185mm ƒ Production, net to VET (3,925 boe/d) ƒ Reserves ƒ Proved, net to VET 11.2 mm boe ƒ Proved + Prob 15.5 mm boe ƒ RLI ƒ Proved 7.8 years ƒ Proved + Prob 10.8 years ƒ Cost ƒ production $47,000 per boe/d ƒ $/boe proved $16.50 per boe ƒ $/boe p

20. Slide 20: Maximizing Tail-End Reserves

    Maximizing Tail-End Reserves 8,000 7,000 VET realized production 6,000 5,000 boe/d 4,000 Projected production at 3,000 time of acquisition Acquired 22.6 mm boe 2,000 Added 31.3 mm boe Produced 19.4 mm boe 1,000 Current 34.5 mm boe 0 1990 1992 1994 1996 1998 2000 2002 2004 2006

21. Slide 21: Netherlands Assets

    Netherlands Assets Harlingen Amsterdam ƒ Second largest onshore gas operations in the Netherlands NETHERLANDS ƒ Operate more than 50 wells on seven production licenses that have produced approximately 1.4 tcf to date ƒ Operate three gas treatment centres with combined capacity of more than 250 mmcf/

22. Slide 22: Netherlands Focus

    Netherlands Focus ƒ Infill drilling opportunities, 2-3 tight gas infills scheduled for 2006 ƒ Step-out exploration opportunities ƒ Installation of velocity strings to increase recoveries and stabilize production ƒ Consolidation of surface facilities to increase process efficiency, reduce costs and i

23. Slide 23: Australian Assets

    Australian Assets AUSTRALIA ƒ Wandoo Field acquired in March 2005: 15 producing wells ƒ Approved as offshore operator in November ‘05 ƒ Wandoo Field developed in 1992 with horizontal well technology ƒ Fluid processing capacity of >100,000 bpd ƒ No well interventions since original development

24. Slide 24: Australian Focus

    Australian Focus ƒ Well workovers planned for 2006 targeting reduction in water production and recovery of bypassed pay ƒ Opportunities to reposition horizontal well placements to increase recoveries. ƒ Completed reservoir simulation confirming incremental recovery potential ƒ Phase 1 of facility de

25. Slide 25: Vermilion Netbacks – 2005A (C$/boe)

    Vermilion Netbacks – 2005A (C$/boe) Canada France Netherlands Australia Revenue $59.95 $64.00 $41.29 $65.03 Royalties (12.29) (5.46) (0.00) (21.07) OP Cost (7.37) (6.89) (9.63) (9.09) Transportation Expense (0.58) (3.22) (0.00) (0.04) Operating Netback* $39.71 $48.43 $31.66 $34.83 G&A (1.48) (1.69)

26. Slide 26: Creating Option Value

    CREATING OPTION VALUE

27. Slide 27: Creating Low-Risk Option Value

    Creating Low-Risk Option Value ƒ Optimize value of assets through creation of joint venture and partnership entities ƒ Provide exposure to high impact opportunities while minimizing risk capital ƒ Verenex Energy Inc ƒ Aquitaine Maritime prospect

28. Slide 28: Verenex Energy Inc.

    Verenex Energy Inc. ƒ Trades on TSX Exchange – VNX ƒ Strong independent management team and board of directors ƒ Vermilion owns approximately 49% (15.2 million shares) ƒ Total cash invested = $15mm ƒ $55 million of option value ($0.80 per VET unit) ƒ Libya 2006 – US$48mm work program (50% VNX) ƒ 4 e

29. Slide 29: Verenex - Area 47, Libya

    Verenex - Area 47, Libya ƒ 2.7 billion BOE discovered in 54 fields in Ghadames Basin1 ƒ 1.4 mm acre block ƒ 3 drill ready prospects offsetting discoveries ƒ Area 47 ringed with oil discoveries ƒ Gas & condensate pipelines traverse Area 47 and 3 oil lines 30 km east Data Source: IHS Energy (2005) and

30. Slide 30: Aquitaine Maritime

    Aquitaine Maritime 3D Seismic Leads Paris Paris Basin Basin PARIS Aquitaine Aquitaine Maritime Maritime BORDEAUX ƒ World-scale exploration leads identified Aquitaine Aquitaine Basin through 2-D and 3-D seismic completed in Basin 2005 ƒ Offshore extension of geologic trend that includes Parentis Fiel

31. Slide 31: Performance

    PERFORMANCE

32. Slide 32: Peer Group Production (2006E)

    Peer Group Production (2006E) 100,000 Vermilion measures itself against the 90,000 top 20 conventional energy trusts 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 ET VN E F T T N F I T PG E TE P TE E Y X F T PW PT PW VE TE ER PG PM A N N PG PV PE SH A H B N A C B C Source: CIBC

33. Slide 33: Reserve Life Index – VET vs. Peers

    Reserve Life Index – VET vs. Peers 20.0 Vermilion’s RLI (P50) has 18.0 increased to 11.4 yrs 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Source: CIBC

34. Slide 34: Netback vs Peer Group (2006E)

    Netback vs Peer Group (2006E) $40.00 Despite tax leakage from foreign operations, $35.00 Vermilion’s after-tax netbacks are in the top quartile of the peer group $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: CIBC

35. Slide 35: P50 Reserves / Debt Adjusted Unit (Normalized)

    P50 Reserves/ Debt Adjusted Unit (Normalized) 160% 150% VET’s Reserves per Debt Adjusted Unit have increased by 140% 22.7% since conversion to a trust 130% VET.UN 120% 110% 100% 90% 80% 70% 60% 2002 2003 2004 2005 Source: Vermilion

36. Slide 36: Valuation vs Peer Group (2006E EV/DACF)

    Valuation vs Peer Group (2006E EV/DACF) 8.5 Vermilion trades below the average of its peer group based on debt-adjusted 8.0 cash flow measures, without attributing any value to the ‘option value streams’ 7.5 7.0 6.5 6.0 5.5 5.0 Source: CIBC

37. Slide 37: VET vs S&P/TSX Capped Energy Trust Index

    VET vs S&P/TSX Capped Energy Trust Index 400 375 Vermilion has consistently 350 outperformed the Energy 325 Trust Index, Returning top quartile performance over 300 the past three years with a 275 compounded annual rate of return of 46.4% 250 VET.un 225 200 175 Energy Trust Index 150 (Total Return)

38. Slide 38: Building Sustainability

    Building Sustainability ƒ Strong operational and financial track record ƒ Breadth and depth of technical expertise ƒ Value added international oil and gas focus ƒ Diverse growth prospects ƒ Equity participation designed to improve the long term sustainability of the Trust

39. Slide 39: oY ERMILI AN

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