Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (October 2023)
43 slides from Vermilion Energy's investor presentation, October 2023
Slide 1: Vermilion Energy Investor Presentation October 2023
VERMILION ENERGY INTERNATIONALLY DIVERSIFIED FREE CASH FLOW FOCUSED INVESTOR PRESENTATION ESG LEADERSHIP OCTOBER 2023
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (September 28, 2023) $19.89 (TSX), $14.74 (NYSE) Shares Outstanding (June 30, 2023) 164.3 MM Average Daily Trading Volume (shares) 1.2 MM (TSX), 1.6 MM (NYSE) Quarterly dividend $0.10/share Capital Structure Market Capitalization $3.3 B Enterpri
Slide 3: What Differentiates Vermilion
WHAT DIFFERENTIATES VERMILION Internationally diversified portfolio delivers outsized free cash flow and reduces volatility Exposure to premium global commodities, top decile netbacks, low base decline and enhanced flexibility for capital allocation Global operations with 29 years operating in Europ
Slide 4: September Operations Update
SEPTEMBER OPERATIONS UPDATE • Successfully completed all inspection and repair work on the Wandoo facility in Australia o The facility is currently on production and is expected to produce ~4,000 bbl/d of oil in Q4 2023 o Under current strip pricing we are forecasting over $100 million of FCF(1) fro
Slide 5: Financial Discipline and Capital Allocation
FINANCIAL DISCIPLINE AND CAPITAL ALLOCATION 5 5
Slide 6: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Provide Resilient Increase Return of Maintain Strong Maintain Robust & Increasing Base Capital As Debt Balance Sheet Asset Base Dividend Decreases Target net debt to trailing Rolling 10-year plan of Ratable increases up to NCIB approval to FFO ratio of 1.0x or less at s
Slide 7: Improving Financial Metrics
IMPROVING FINANCIAL METRICS NET DEBT VS FFO* $2,000 100 Production (‘000 boe/d) $1,500 75 $MM $1,000 50 $500 25 $0 0 2018 2019 2020 2021 2022 2023E 2024E** WTI (US$/bbl) $64.77 $57.03 $39.40 $67.92 $94.23 $77.04 $76.08 AECO ($/GJ) $ 1.50 $ 1.76 $ 2.23 $ 3.62 $ 5.27 $ 2.86 $ 3.08 TTF ($/mmbtu) $10.23
Slide 8: Increasing Return of Capital
INCREASING RETURN OF CAPITAL NET DEBT VS. RETURN OF CAPITAL* $2,000 60% $1,750 50% $1,500 40% $1,250 % of FCF 25% to 30% $MM $1,000 30% $750 20% $500 10% $250 $0 0% 2021 2022 2023E 2024E** Net Debt Return of Capital As debt continues to decrease, more cash will be available for return to shareholder
Slide 9: Free Cash Flow Allocation
FREE CASH FLOW ALLOCATION FREE CASH FLOW* $1,200 Forecasting Significant $1,000 FCF in 2024 $800 $600 $MM $400 $200 $0 FCF Use of FCF FCF Use of FCF FCF Use of FCF FCF 2021 2022 2023E 2024E** FCF ARO/Leases/Other*** Net Acquisitions Net Debt Reduction Return of Capital Increasing amount of free cash
Slide 10: Financial Leverage
FINANCIAL LEVERAGE NET DEBT TO FFO* CURRENT CREDIT CAPACITY AS AT JUNE 30, 2023 4.5x 4.0x 3.5x $530MM 3.0x 2.5x $397MM 2.0x $1,600MM 1.5x 1.0x 0.5x 0.0x Undrawn Capacity on Revolving Credit Facility Revolving Credit Facility Balance ($0) Senior Unsecured Notes 2025 Maturity Senior Unsecured Notes 20
Slide 11: International Advantage
wm INTERNATIONAL : ADVANTAGE 11
Slide 12: Advantages of Diversification
ADVANTAGES OF DIVERSIFICATION 2023E PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP DECILE NETBACKS EUROPEAN OIL / GAS CONDENSATE / 20% NGL ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY (WTI) OIL (BRENT) 34% 13% NORTH AMERICAN CONVENTIONAL ASSETS REDUCE CORPORATE DECLINE
Slide 13: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES $140 $12 • Vermilion’s global crude oil portfolio sells at an $120 $10 average $5/bbl premium to the Canadian light oil VET PREMIUM TO MSW (C$/BBL) benchmark (MSW) $100 $8 • Approximately one-third of Vermilion’s crude oil $80 production is priced with r
Slide 14: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE HISTORICAL AND FORWARD PRICING OF NATURAL GAS NATURAL GAS $60 PRODUCTION %** 100% $50 2H/23 2024 2025 TTF forward pricing is 7x AECO* ~40% of Vermilion’s natural gas production is % Hedged 51% 34% 18% GAS PRICES (C$/MMBTU) $40 priced off premium European benchmarks Avera
Slide 15: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS Bcf/d EUROPEAN GAS BY SOURCE** • Europe* consumes 45-50 Bcf/d, with Russia supplying ~40% historically 60 50 o Russian pipeline imports have been reduced by 85% from ~16 Bcf/d 40 in 2021 to ~2 Bcf/d in 2H22 30 20 • Europe domestic supply declining with demand expe
Slide 16: Premium Operating Netbacks
PREMIUM OPERATING NETBACKS 2024E OPERATING NETBACK $60 100% 2024E OPERATING NETBACK ($/ BOE)* 2024E LIQUIDS WEIGHTING (%)* $50 80% $40 AVERAGE = $33.39 60% $30 40% $20 20% $10 $0 0% VET Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Peer 15 Pee
Slide 17: Resilient Business
RESILIENT BUSINESS 2024E PAYOUT RATIO* Vermilion’s leading payout ratio, low base decline, diverse commodity mix, and reduced leverage make for a more resilient business across the commodity cycle 100% 80% 60% 40% 20% 0% VET Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer
Slide 18: Resilient Valuation
RESILIENT VALUATION • Net debt per boe/d decreased by over 40% DECREASING NET DEBT*** since 2014 which de-risks equity valuation $30,000 4.5 • 2024 EV/DACF multiple* of 2.9x compared to $25,000 4.0 pro-forma YE 2022 PDP RLI** of ~6 years 3.5 $20,000 3.0 • Reduced asset retirement obligations through
Slide 19: Operational Excellence
OPERATIONAL EXCELLENCE 19
Slide 20: Global Operational Expertise
GLOBAL OPERATIONAL EXPERTISE ALBERTA MONTNEY, CANADA OVER 900 HORIZONTAL 15 OFFSHORE WELLS WELLS DRILLED IN DRILLED IN AUSTRALIA NORTH AMERICA ONSHORE AND OFFSHORE; CONVENTIONAL AND WANDOO, AUSTRALIA UNCONVENTIONAL HARLINGEN, EXPERTISE NETHERLANDS NINE OPERATED OVER 80 WELLS GAS PLANTS DRILLED IN EU
Slide 21: Operational Excellence
OPERATIONAL EXCELLENCE Sharing ideas and learnings across multi-jurisdictions drives continuous • Benchmark performance to identify opportunities improvement Continuous • Apply best practices across global operations • Engage external experts Improvement • Peer reviews focused on technical excellenc
Slide 22: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE EMISSIONS INTENSITY TREND Scope 1&2 tCO2e per BOE Vermilion’s Purpose: 0.035 To responsibly produce essential energy 0.030 while delivering long-term value to our 0.025 people, shareholders, customers, partners 0.020 and communities 0.015 2018* 2019 2020 2021 2022
Slide 23: Deep Basin Multi-Zone Development
DEEP BASIN MULTI-ZONE DEVELOPMENT WEST CENTRAL ALBERTA 30,000 25,000 20,000 Production growth from liquids-rich gas zones BOE/D 15,000 offset Cardium declines 10,000 5,000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 OIL LIQUIDS-RICH GAS Multi-zone development provides inventory upside a
Slide 24: Future Multi-Zone Asset Potential
FUTURE MULTI-ZONE ASSET POTENTIAL POWDER RIVER BASIN MONTNEY PEACE RIVER ARCH Apply learnings to Powder River and Montney assets Develop and delineate highest return zones in the stack Allocate capital to optimize asset free cashflow Creating value through the application of multi-zone development a
Slide 25: Montney Development
MONTNEY DEVELOPMENT • Alberta infrastructure in place and pursuing an Alberta drill-to-fill strategy to optimize the development of the overall Montney asset • Primary focus now is building out BC infrastructure, 4-3 Battery including construction of 16,000 boe/d battery at 8-33 8-33 Battery o Recei
Slide 26: BC Montney Results
BC MONTNEY RESULTS • Production rates from first VET drilled BC boe/d 16-28 AVERAGE DAILY WELL PRODUCTION(1) Montney pad (16-28) continues to hold flat 1,600 after 120 days 1,400 o Validates Tier 1 BC inventory and presents opportunity for down spacing 1,200 1,000 • 2024 Montney development exclusiv
Slide 27: Value Driven Acquisition Strategy
VALUE DRIVEN ACQUISITION STRATEGY Target underexploited consolidation opportunities and new development within existing core areas • Accretive while minimizing equity dilution to maximize per share value • Generates strong free cash flow in a mid-pricing environment to support a sustainable dividend
Slide 28: Asset Portfolio High Grading
ASSET PORTFOLIO HIGH GRADING Q3 Acquired a private oil and gas company in Wyoming, HIGHER FREE CASH FLOW PER BOE 2021 expanding our multi-zone , extended reach drilling inventory in the Powder River Basin INCREASED EUROPEAN GAS EXPOSURE Q2 Acquired Leucrotta Exploration, adding strategic 2022 Montne
Slide 29: Summary
SUMMARY Internationally diversified portfolio delivers outsized free cash flow and reduces volatility Exposure to premium global commodities, top decile netbacks, low base decline and enhanced flexibility for capital allocation Global operations with 29 years operating in Europe and North America Op
Slide 30: Asset Overview
ASSET OVERVIEW 30.8
Slide 31: Europe
EUROPE NETHERLANDS • #2 onshore gas producer IRELAND • 0.8 million net acres of undeveloped land • 56.5% operated interest in the Corrib Natural Gas Project • Q2 2023 production = 4,607 boe/d (99% gas) • Corrib represents 100% of Ireland’s domestic gas production GERMANY • Q2 2023 production = 11,25
Slide 32: Europe Highlights
EUROPE HIGHLIGHTS Operated Exploration Non-op Exploration • Producing assets with PDP RLI* of 5.5 years Operated Gas Non-operated Gas Operated Oil • Minimal drilling activity required to maintain Non-operated Oil production due to conventional asset base with low decline rate • Strong economics asso
Slide 33: Australia
AUSTRALIA • 100% operated interest in Wandoo, an offshore oil field approximately 80 km N.W. of Australia (55m water depth) • Horizontal well development with 21 producing wellbores and five dual lateral sidetracks tied into two platforms • New wells drilled every 2-3 years • Expected to produce app
Slide 34: North America
NORTH AMERICA MONTNEY CANADA SOUTHEAST SASKATCHEWAN • Targeting liquids-rich gas in the • Q2 2023 production = 48,464 boe/d (45% liquids) • Targeting light oil in conventional Peace River Arch straddling the reservoirs AB and BC border • ~275,000(1) net acres of land with • ~80,000 net acres of Mont
Slide 35: 2022 Reserves
2022 RESERVES RESERVE LIFE INDEX 18 • 2P reserves increased 9% to 523 mmboe 16 14 • Replaced 234% of production on a 2P basis at a 12 RLI (Years) FD&A cost of $19.22/boe, including changes in 10 FDC 8 6 • High netback production resulted in strong 2P 4 FD&A Operating Recycle Ratio of 4.4 times 2 - •
Slide 36: ESG & Sustainability
ESG & SUSTAINABILITY 36
Slide 37: ESG Leadership
ESG LEADERSHIP Vermilion is committed to • Reducing the environmental impact of safe, responsible energy production • Caring for our people and communities, and • Maintaining our strong corporate governance Environmental Emission Reduction Focus • On track to reducing Scope 1 emissions intensity by
Slide 38: Sustainability Projects
SUSTAINABILITY PROJECTS Advancing environmental sustainability in communities where we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD • Our geothermal energy tomato greenhouse • Our oil operations provide 1MW of geothermal project in Parentis, France provides 8 MW of en
Slide 39: Appendix
APPENDIX 39
Slide 40: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2022 2023E 2024E 2023 FFO SENSITIVITY (C$MM)** FFO Impact (C$) Brent (US$/bbl) $101.19 $81.67 $80.52 Change Hedged WTI (US$/bbl) $94.23 $77.04 $76.08 LSB = WTI less (US$/bbl) $3.38 $4.24 $4.82 WTI & Brent US$1/bbl $11MM MSW = WTI less (US$/bbl) $1.82 $2.
Slide 41: Commodity Hedge Position
COMMODITY HEDGE POSITION 2023 2024 PERCENTAGE OF PRODUCTION HEDGED (%)* PERCENTAGE OF PRODUCTION HEDGED (%)* 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Crude Oil European N.A. Corporate Crude Oil European N.A. Corporate Natural Gas Natural Gas Total Natur
Slide 42: 2023 Budget and Guidance
2023 BUDGET AND GUIDANCE Category Guidance(1) 2023 Drilling Program Well Count Production (boe/d) 82,000 - 86,000 Netherlands 2 gross (1.0 net) Q3 2023 production (boe/d) 80,000 - 83,000 Germany 3 gross (2.3 net) Q4 2023 production (boe/d) 86,000 - 89,000 Croatia 3 gross (3.0 net) E&D capital expend
Slide 43: Advisory
ADVISORY This presentation is for information purposes only and is not intended to, and should not be construed to including net debt, free cash flow and fund flows from operations as well as non-GAAP measures including constitute, an offer to sell or the solicitation of an offer to buy, securities
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