Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Shareholder Meeting (May 2016)
36 slides from Vermilion Energy's shareholder meeting presentation, May 6, 2016
Slide 1: Vermilion Energy Inc. Annual General Meeting May 6, 2016
VERMILION ENERGY INC. ANNUAL GENERAL MEETING MAY 6, 2016
Slide 2: 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 3: Advisory (Continued) - Reserves & Resource Definitions
ADVISORY (Continued) Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 8, 2016 with an effective date of December 31, 2015) prepared by GLJ Petroleum Consultants Ltd. (“GLJ”), an independent qualified reserve
Slide 4: Presentation Outline
PRESENTATION OUTLINE ► Our objectives during industry downturn ► Why our model works ► Business unit performance ► What sets us apart 4
Slide 5: Our Objectives During Industry Downturn
OUR OBJECTIVES DURING INDUSTRY DOWNTURN ► Maintain balance sheet strength ► Protect dividend ► Continue growth 5
Slide 6: Cost Reduction
COST REDUCTION 20.00 18.00 48% Reduction 16.00 14.00 17% Reduction 12.00 $ / BOE 10.00 8.00 6.00 4.00 30% Reduction 26% Reduction 2.00 61% Reduction 0.00 2P F&D (incl. FDC) Opex Transportation G&A ARO 2014 2015 2016E VERMILION’S ONGOING FOCUS ON EFFICIENCY HAS RESULTED IN SIGNIFICANT PER UNIT COST R
Slide 7: E&D Capital Budget
E&D CAPITAL BUDGET 2014 Actuals 2015 Actuals 2016 Budget* 2016 vs 2015 2016 vs 2014 Capital Expenditures by Country ($MM) ($MM) ($MM) % Change % Change Canada 336 202 54 (73%) (84%) France 148 92 59 (36%) (60%) Netherlands 62 47 23 (51%) (63%) Germany 3 5 8 60% 167% Australia 44 62 66 6% 50% USA 1 1
Slide 8: Total Expenditures / FFO - Sustainability Ratio
SUSTAINABILITY RATIO 86% AVERAGE PRE-CORRIB CORRIB DEVELOPMENT PHASE CORRIB CASH FLOW 175% 162% 150% 140% TOTAL EXPENDITURES / FFO* 121% 125% 121% 117% 108% 111% 109% 111% 100% 81% 78% 74% 73% 75% 59% 50% 25% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Net Dividend Base
Slide 9: Conservative Balance Sheet
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY $2.0 BILLION NET DEBT TO FFO RATIO* 5.0 PEER AVERAGE 2016 = 4.9x PEER AVERAGE 2017 = 4.1x 4.0 VET 2016 = 3.2x 520 3.0 1,480 2.0 VET 2017 = 2.1x 1.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E2017E REVOLVING CREDIT FACILITY Sou
Slide 10: Monthly Dividends
RELIABLE AND GROWING DIVIDENDS CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q1 2016) = $29.66 $0.25 $0.215 MONTHLY DIVIDENDS $0.20 $0.20 $0.19 $0.17 $0.15 $0.10 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 VERMILION HAS NEVER CUT ITS DIVIDEND 10
Slide 11: Production Growth and Capex
PRODUCTION GROWTH AND CAPEX 2016 GUIDANCE – 62,500 TO 63,500 BOE/D 70,000 Y/Y E&D Capital 60,000 Production Y/Y PPS Capex Intensity 15% CAGR Year (boe/d) Growth Growth ($MM) ($/boe/d)* 50,000 2011 35,202 10% 6% 491 13,900 40,000 BOE/D 2012 37,803 7% 0% 453 12,000 6% CAGR 2013 41,005 8% 5% 543 13,200
Slide 12: Reserves Growth
RESERVES GROWTH 2015 F&D / FD&A Costs* Including FDC ($/boe) 275 F&D (E&D CAPEX) $8.98 250 FD&A (Total CAPEX, including acquisitions) $10.03 225 FD&A Operating Recycle Ratio 3.2x 200 10% CAGR ► 11.7 year P+P reserve life index** 175 MMBOE ► 6% year over year reserve growth 150 40 125 35 100 30 75 25
Slide 13: Why Our Model Works
WHY OUR MODEL WORKS ► International diversification ► Elements of a sustainable growth and income model ► Free cash flow with growth 13
Slide 14: Core Operating Areas
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 14
Slide 15: European Core Area
EUROPEAN CORE AREA DEVELOPING LEADING-TO-DOMINANT BUSINESSES IN EACH JURISDICTION IRELAND FRANCE #1 oil producer, with ¾ share of domestic industry NETHERLANDS #2 onshore gas producer NETHERLANDS GERMANY Entry into the significant German E&P Industry GERMANY IRELAND Corrib field will constitute 95%
Slide 16: 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 2016E France Netherlands Germany Ireland BUILDING OUR EUROPEAN FRANCHISE FOR TWO DECADES 16
Slide 17: Global Commodity Mix
GLOBAL COMMODITY MIX PRODUCTION (2016)* 2P RESERVES (YE 2015)** ESTIMATED FFO CONTRIBUTION (2016)* France Australia Australia France Australia 24% United 16% United 11% 19% United 7% States States 1% Germany States Canada 0% France 4% 3% OIL (BRENT) Germany 19% 27% OIL (BRENT) 30% 3% 30% OIL (BRENT)
Slide 18: Global Pricing Advantage
GLOBAL PRICING ADVANTAGE CRUDE OIL* NATURAL GAS** VET BRENT US$46 Differential ($5) $12 2016 Euro Gas 2016 Euro Gas Swap C$9.40 Collar Ceiling $10 C$9.31 GAS PRICE ($/MMBTU) Differential ($19) VET BRENT 2016 Euro Gas PRODUCTION Collar Floor EDMONTON $8 C$7.98 INDEX European gas price approximately $
Slide 19: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL ► Vermilion's global asset base delivers the three key elements necessary to support a sustainable, long-term dividend growth model: ► High margins (represented as $/boe) ► Low base production decline rates ► Strong capital efficiencies (represented as $/boe/d) ► All ma
Slide 20: Relative Netbacks
RELATIVE NETBACKS 2015 OPERATING NETBACK EXCL. HEDGING* 2015 AFTER TAX CASH NETBACK EXCL. HEDGING* $35 $30 $30 $25 $25 $20 $/BOE $/BOE $20 $15 $15 $10 $10 $5 $5 $0 $0 BIR POU NVA GTE CPG SGY PGF TOU ERF WCP BTE PEY VET BNE PXT TOG PSK ARX MEG PWT BNP CR VII CPG SGY BIR TOU NVA ERF PGF POU WCP BTE VE
Slide 21: Base Production Decline Rates
BASE PRODUCTION DECLINE RATES Effective Natural 50% Country Decline Rate* Decline Rate* France 11% 11% 40% VET VET CANADA CORPORATE Netherlands** 0% 22% ONLY DECLINE NATURAL DECLINE 30% VET Germany 11% 11% CORPORATE EFFECTIVE DECLINE Ireland 3% 3% 20% Australia** 0% 20% 10% Canada 28% 28% United Sta
Slide 22: Capital Efficiency
CAPITAL EFFICIENCY Prod. Efficiency Investment Well Cost (C$M) IP365 (boe/d) ATAX ROR % Recycle Ratio Payout (Years) (IP365 $/boed) European Gas Netherlands E&D $12.0 1,260 75% 3.3 x 1.9 $9,500 EUROPE Brent Crude Champotran Development (France) $4.3 210 71% 2.1 x 2.3 $20,500 Neocomian Development (F
Slide 23: Business Unit Performance
BUSINESS UNIT PERFORMANCE
Slide 24: France
FRANCE 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 2016E E&D CAPEX AS A % OF FFO* n/a 43% 51% 101% 45% 73% 111% 82% 30% 43% 30% 57% 41% 37% 21% 43% 63% 48% 41% Crude Oil Gas LONG-TERM OIL PRODUCTION GR
Slide 25: Netherlands
NETHERLANDS 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E E&D CAPEX AS A % OF FFO* 24% 7% 55% 16% 54% 19% 32% 28% 35% 71% 52% 43% Gas NGL GROWING GAS PRODUCTION WITH FREE CASH FLOW GENERATION * 2016E: Company estimates as of May 2, 2016 with four
Slide 26: Germany
GERMANY 4,000 3,000 BOE/D 2,000 1,000 0 2014 2015 2016E E&D CAPEX AS A % OF FFO* 16% 28% 57% Gas STABLE PRODUCTION WITH FREE CASH FLOW AND MAJOR EXPLORATORY FARM-IN * 2016E: Company estimates as of May 2, 2016 with four months of actual prices and remainder of year at May 2, 2016 strip: TTF $5.60/mm
Slide 27: Ireland
IRELAND 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2015 2016E E&D CAPEX AS A % OF FFO* NM 9% Gas EXCEPTIONAL TRANSLATION OF REVENUE FUND FLOWS FROM OPERATIONS FREE CASH FLOW * 2016E: Company estimates as of May 2, 2016 with four months of actual prices and remainder of year at May 2, 2016 strip: NBP
Slide 28: Central and Eastern Europe (CEE)
CENTRAL AND EASTERN EUROPE (CEE) EXTENSION OF EUROPEAN GROWTH STRATEGY BUDAPEST EBES ► Modest back-loaded capital commitments ► Prospective for both oil and gas HUNGARY SOUTH BATTONYA HUNGARY ► Awarded Ebes and South Battonya concessions covering more than ZAGREB DR-04 320,000 acres (100% working in
Slide 29: Canada
CANADA 30,000 25,000 20,000 BOE/D 15,000 10,000 5,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E E&D CAPEX AS A % OF FFO * 21% 36% 67% 58% 31% 76% 247% 225% 165% 101% 86% 104% 60% Crude Oil & NGL Gas 2016 CAPEX PROGRAM PROVIDES FCF + STABLE PRODUCTION * 2016E: Company estima
Slide 30: United States
UNITED STATES 600 500 400 BOE/D 300 200 100 0 2014 2015 2016E E&D CAPEX AS A % OF ATAX NOI* 64% 535% 192% Crude Oil & NGL Gas ACCRETIVE, LOW-COST ACQUISITION WITH SIGNIFICANT GROWTH POTENTIAL * ATAX NOI is defined as FFO before G&A expense. 2016E: Company estimates as of May 2, 2016 with four months
Slide 31: Australia
AUSTRALIA 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E E&D CAPEX AS A % OF FFO* 19% 15% 43% 7% 48% 16% 40% 51% 34% 75% 83% Crude Oil MANAGING FOR MODERATE PRODUCTION GROWTH WHILE GENERATING POSITIVE FREE CASH FLOW * 2016E: Company estimates as of May
Slide 32: What Sets Us Apart
WHAT SETS US APART ► Governance / Sustainability ► Corporate Culture ► Value Creation 32
Slide 33: Governance / Sustainability
GOVERNANCE / SUSTAINABILITY GLOBE & MAIL BOARD GAMES GOVERNANCE REPORT CARBON DISCLOSURE PROJECT (CDP) EXPLORERS & PRODUCERS ASSOCIATION OF CANADA ► In 2015, Vermilion was ranked 2nd within the energy sector and ► Named to the 2015 Canada Climate Disclosure ► Named Top Canadian-Based International 2
Slide 34: Corporate Culture
CORPORATE CULTURE “GREAT PLACE TO WORK” INSTITUTE’S ANNUAL RANKING ► Since 2010 Vermilion has been ranked among the Top 25 Best Workplaces in Canada and France ► Demonstrates strong corporate culture, creating a high-performance organization ► Reflects highly engaged and motivated staff ► Aids in at
Slide 35: Value Creation 1994 – 2016
VALUE CREATION 1994 – 2016 $5,783 $6,000 $4,916 TOTAL VALUE CREATION $4,000 MARKET CAPITALIZATION(2) MILLIONS $2,445 $2,000 DIVIDENDS PAID(2) $0 EQUITY ISSUED(1) -$2,000 $(1,577) MORE THAN 20-YEAR RECORD OF STRONG VALUE CREATION (1) Equity issued for cash and acquisitions since 1994. (2) Dividends p
Slide 36: Vermilion Energy Inc. Annual General Meeting May 6, 2016
VERMILION ENERGY INC. ANNUAL GENERAL MEETING MAY 6, 2016