Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (January 2024)
40 slides from Vermilion Energy's investor presentation, January 2024
Slide 1: Vermilion Energy Investor Presentation
VERMILION ENERGY INTERNATIONALLY DIVERSIFIED FREE CASH FLOW FOCUSED INVESTOR PRESENTATION ESG LEADERSHIP JANUARY 2024
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (Jan. 11, 2024) $15.81 (TSX), US$11.80 (NYSE) Shares Outstanding (Dec. 31, 2023) 162.3 MM Average Daily Trading Volume (shares) 1.0 MM (TSX), 1.3 MM (NYSE) Quarterly dividend $0.12/share Capital Structure Market Capitalization $2.6 B Enterprise
Slide 3: Key Attributes
KEY ATTRIBUTES International energy company with 29 years operating in Europe and North America Diversified portfolio delivers outsized free cash flow, with top decile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique opport
Slide 4: Key Updates 2024 Budget
KEY UPDATES 2024 BUDGET Strong financial outlook FREE CASH FLOW GROWTH(1) $1,000 • 2024 FFO(1) and FCF(1) forecasted to be approx. $1.3B and $700MM, respectively, based on forward commodity prices • 2024e FCF represents a ~40% increase vs. 2023 forecast $750 Increasing return of capital $MM $500 ~40
Slide 5: Capital Allocation
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: Financial Leverage
FINANCIAL LEVERAGE NET DEBT TO FFO* CURRENT CREDIT CAPACITY AS AT SEPTEMBER 30, 2023 4.5x 4.0x 3.5x $541MM 3.0x 2.5x 2.0x $406MM $1,567MM 1.5x 1.0x 0.5x $33MM 0.0x Undrawn Capacity on Revolving Credit Facility Revolving Credit Facility Balance Senior Unsecured Notes 2025 Maturity Senior Unsecured No
Slide 8: Asset Portfolio High Grading
ASSET PORTFOLIO HIGH GRADING Acquired a private oil and gas company in Wyoming, Q3 expanding our multi-zone , extended reach drilling 2021 HIGHER FREE CASH FLOW PER BOE inventory in the Powder River Basin Acquired Leucrotta Exploration, adding strategic Q2 INCREASED EUROPEAN GAS EXPOSURE Montney ass
Slide 9: Strong Financial Position
STRONG FINANCIAL POSITION NET DEBT VS FFO* Focus on Debt Reduction Increased ROC & High Debt & Asset High-Grade Strong Balance Sheet $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 $77.58 $7
Slide 10: Free Cash Flow Allocation
FREE CASH FLOW ALLOCATION FREE CASH FLOW* $1,250 $1,000 $750 $MM $500 $250 $0 FCF Use of FCF Use of FCF Use of FCF Use of FCF FCF FCF FCF 2021 2022 2023e 2024e ARO/Leases Return of Capital Debt Reduction Net Acquisitions Increasing amount of free cash flow allocated to return of capital * 2021-2022
Slide 11: International Advantage
wm INTERNATIONAL : ADVANTAGE 11
Slide 12: Advantages of International Diversification
ADVANTAGES OF INTERNATIONAL DIVERSIFICATION 2024e PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP DECILE NETBACKS OIL / EUROPEAN CONDENSATE / GAS NGL 22% (WTI) ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY 30% OIL (BRENT) 16% NORTH AMERICAN CONVENTIONAL ASSETS REDUCE CORP
Slide 13: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE HISTORICAL AND FORWARD PRICING OF NATURAL GAS NATURAL GAS $60 PRODUCTION %** 100% $50 Q1/24 2024 2025 TTF forward pricing is 6x AECO* ~40% of Vermilion’s natural gas production is % Hedged 46% 39% 21% GAS PRICES (C$/MMBTU) $40 priced off premium European benchmarks Avera
Slide 14: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS EUROPEAN SUPPLY/DEMAND BALANCE HISTORY** • Europe* consumes an average of 45-50 Bcf/d, with a 30- 70 Winter 2023 demand down ~10 Bcf/d 40 Bcf/d swing between summer and winter due to 2nd warmest winter, government 60 policy, and extremely high prices • Russian sup
Slide 15: 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 16: Premium Operating Netbacks
PREMIUM OPERATING NETBACKS 2024e OPERATING NETBACK $50 100% 2024e OPERATING NETBACK ($/ BOE)* 2024e LIQUIDS WEIGHTING (%)* $40 80% $30 60% AVERAGE = $25.40 $20 40% $10 20% $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 AVERAGE
Slide 17: International Operating Netbacks
INTERNATIONAL OPERATING NETBACKS 2024e OPERATING NETBACK $100 $80 $60 $/ BOE $40 PEER AVERAGE = $25.40 $20 $0 Ireland Croatia Australia Netherlands France Germany International assets generate strong netbacks on premium pricing * Source: Based on company 2024 estimates and 2024 full year average ref
Slide 18: Low Decline Assets
LOW DECLINE ASSETS BASE PRODUCTION DECLINE 50 At ~84,000 boe/d, our lower decline rate means VET doesn’t need to replace ~6k boe/d of production 40 AVERAGE = 30% DECLINE RATE (%) 30 20 10 0 Peer 1 Peer 2 VET Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Pee
Slide 19: 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 20: 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 21: Asset Overview
ASSET OVERVIEW Bey soe
Slide 22: Europe
EUROPE NETHERLANDS • #2 onshore gas producer IRELAND • 800,000 net acres of undeveloped land • 56.5% operated interest in the Corrib Natural Gas Project • Q3 2023 production = 4,091 boe/d (99% gas) • Corrib represents 100% of Ireland’s domestic gas production GERMANY • Q3 2023 production = 7,993 boe
Slide 23: 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 • Capital required to maintain production is Non-operated Oil lower due to conventional asset base o Decline rate of ~12% for European operations • Stron
Slide 24: 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 25: North America
NORTH AMERICA MONTNEY CANADA SOUTHEAST SASKATCHEWAN • Targeting liquids-rich gas in the • Q3 2023 production = 50,007 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 26: Expanding Multi-Zone Development
EXPANDING MULTI-ZONE DEVELOPMENT DEEP BASIN MONTNEY PEACE RIVER ARCH Apply Deep Basin learnings to Montney assets Develop and delineate highest return zones in the stack Allocate capital to optimize asset free cashflow Multi-zone development provides inventory upside and maximizes return on investme
Slide 27: Multi-Zone Development
MULTI-ZONE DEVELOPMENT PRODUCTION BY PLAY 40 35 30 25 BOE/D (‘000s) 20 15 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CARDIUM (OIL-WEIGHTED) DEEP BASIN LIQUIDS-RICH GAS ZONES MONTNEY LIQUIDS-RICH GAS Creating value through the application of multi-zone developme
Slide 28: 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, including construction of 16,000 boe/d battery at 8-33 4-3 Battery o Completed site pre
Slide 29: BC Montney Results
BC MONTNEY RESULTS • Production rates from first VET drilled BC 16-28 AVERAGE DAILY WELL PRODUCTION Montney pad (16-28) continues to show 1,600 strong production rates after 180 days 1,400 o Validates Tier 1 BC inventory and presents opportunity for down spacing 1,200 1,000 • 2024 Montney developmen
Slide 30: 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 $19.22/boe, including changes in 10 FDC 8 6 • High netback production resulted in strong 2P 4 FD&A Operating Recycle Ratio of 4.4 times 2 - •
Slide 31: ESG & Sustainability
ESG & SUSTAINABILITY 31
Slide 32: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE EMISSIONS INTENSITY TREND Scope 1&2 tCO2e per BOE Vermilion’s Purpose: 0.035 To responsibly produce essential energy 0.030 while delivering long-term value to our 0.025 people, shareholders, customers, partners 0.020 and communities 0.015 2018 2019 2020 2021 2022 E
Slide 33: ESG Leadership
ESG LEADERSHIP Vermilion is committed to • Reducing the environmental impact of safe, responsible energy production • Caring for our people and communities, and Environment • Maintaining our strong corporate governance Emission Reduction Focus • On track to reducing Scope 1 emissions intensity by 15
Slide 34: Sustainability Projects
SUSTAINABILITY PROJECTS Advancing environmental sustainability in communities where we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD • Our geothermal energy tomato greenhouse • Our oil operations provide 1MW of geothermal project in Parentis, France provides 8 MW of en
Slide 35: Summary
SUMMARY International energy company with 29 years operating in Europe and North America Diversified portfolio delivers outsized free cash flow, with top decile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique opportunity f
Slide 36: Appendix
APPENDIX 36
Slide 37: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2023e 2024e 2024 FFO SENSITIVITY (C$MM)** FFO Impact (C$) Change Brent (US$/bbl) $82.55 $75.24 Hedged WTI (US$/bbl) $77.58 $71.29 WTI & Brent US$1/bbl $11MM LSB = WTI less (US$/bbl) $5.04 $6.00 MSW = WTI less (US$/bbl) $3.27 $4.73 LSB / WTI US$1/bbl $7MM
Slide 38: Commodity Hedge Position
COMMODITY HEDGE POSITION 2023 2024 PERCENTAGE OF PRODUCTION HEDGED (%)* PERCENTAGE OF PRODUCTION HEDGED (%)* 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Crude Oil European N.A. Corporate Crude Oil European N.A. Corporate Natural Gas Natural Gas Total Natur
Slide 39: Budget and Guidance
BUDGET AND GUIDANCE Category 2024 Guidance(1) 2024 Drilling Program Well Count Production (boe/d) 82,000 - 86,000 Germany 2 gross (1.6 net) E&D capital expenditures ($MM) $600 - 625 France 2 gross (2.0 net) Royalty rate (% of sales) 7 - 9% Croatia 4 gross (4.0 net) Operating ($/boe) $17.00 - 18.00 I
Slide 40: 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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