Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (November 2022)
44 slides from Vermilion Energy's investor presentation, November 2022
Slide 1: Vermilion Energy Investor Presentation
NOVEMBER 2022 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (November 8, 2022) $33.03(TSX), $24.59 (NYSE) Shares Outstanding (September 30, 2022) 162.9 MM Average Daily Trading Volume (shares) 1.9 MM (TSX), 2.6 MM (NYSE) Quarterly dividend $0.08/share Capital Structure Market Capitalization $5.4 B Enterp
Slide 3: What Differentiates Vermilion
WHAT DIFFERENTIATES VERMILION ► Internationally diversified portfolio delivers outsized free cash flow and reduces volatility o Exposure to premium global commodities, top decline netbacks, low base decline and enhanced flexibility for capital allocation ► Global operations with 28 years operating i
Slide 4: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE Vermilion’s Purpose drives ESG focus: To responsibly produce essential energy while delivering long-term value to our people, shareholders, customers, partners and communities EMISSIONS INTENSITY Scope 1&2 tCO2e per BOE Environment • Reduced our emissions intensity
Slide 5: Return of Capital Framework
RETURN OF CAPITAL FRAMEWORK 5
Slide 6: Executing Our Strategic Plan
EXECUTING OUR STRATEGIC PLAN DEBT REDUCTION TO STRENGTHEN BALANCE SHEET INCREASE INTERNATIONAL WEIGHTING AND EUROPEAN GAS EXPOSURE REINSTATE RESILIENT BASE DIVIDEND PROVIDE RATABLE INCREASES TO BASE DIVIDEND ENHANCE NORTH AMERICA INVENTORY WITH HIGH QUALITY LONG-LIFE ASSET ACHIEVE NEAR-TER
Slide 7: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES PROVIDE RESILIENT INCREASE RETURN MAINTAIN STRONG MAINTAIN ROBUST AND INCREASING OF CAPITAL AS DEBT BALANCE SHEET ASSET BASE 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 st
Slide 8: Pro Forma Financial Outlook
PRO FORMA FINANCIAL OUTLOOK 2022E 2022E 2022E 2022E Base Corrib Windfall Pro Forma Vermilion Acquisition Tax(1) w/ Corrib and WFT(1) FFO (hedged) $1.9B $0.4B $(0.3B) $2.0B FCF (hedged) $1.4B $0.4B $(0.3B) $1.5B FFO/Share $11.62 $12.53 FCF/Share $8.28 $9.17 FCF Yield ~25% ~30% Net Debt (year-end) $1.
Slide 9: Valuation Discount
VALUATION DISCOUNT 2023E DAFCF YIELD* 40% Implied DAFCF yield assuming ~$400MM windfall tax** 35% 30% 25% AVERAGE = 18% 20% 15% 10% 5% 0% VET PXT PEY SDE IPCO PIPE OBE POU KEL ARX ERF AAV TOU CPG WCP NVA BIR BTE MEG TVE ATH HWX CJ 2023E AVERAGE (EXCL VET) 2023E (incl. Windfall Tax)** VERMILION HAS T
Slide 10: International Advantage
INTERNATIONAL ADVANTAGE 10
Slide 11: Advantages of International Diversification
ADVANTAGES OF INTERNATIONAL DIVERSIFICATION 2022E PRO FORMA PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP DECILE NETBACKS OIL / EUROPEAN CONDENSATE / GAS NGL 24% ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY (WTI) 34% OIL (BRENT) NORTH 15% AMERICAN GAS CONVENTIONAL ASSE
Slide 12: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES ► In aggregate, Vermilion’s global crude oil portfolio has $14 $140 sold at an average $5/bbl premium to the Canadian light $12 $120 oil benchmark (MSW) over the past 7 years VET PREMIUM TO MSW (C$/BBL) $10 $100 ► Approximately one-third of Vermilion’s c
Slide 13: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE VET PREMIUM TO AECO GAS PRICE $30 $60 VET PREMIUM TO AECO (C$/MMBTU*) 2022E Realized Prices $25 $50 Vermilion = ~$22/mmbtu** GAS PRICES (C$/MMBTU) AECO = ~$5/mmbtu $20 $40 $15 $30 $10 $20 $5 $10 $0 $0 2015 2016 2017 2018 2019 2020 2021 2022E* 2023 VET Realized Premium to
Slide 14: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS ► Europe consumes 45-50 Bcf/d of natural gas, with Russia supplying 2022 Y/Y Change in LNG Imports ~40% in 2021 8.0 o EU goal to significantly reduce dependence on Russian gas 6.0 ► Natural gas demand is expected to increase 4.0 o EU recognizes natural gas as a tr
Slide 15: Premium Cash Flow Netbacks
PREMIUM CASH FLOW NETBACKS 2023E CASH FLOW PER BOE $80 100% 90% $70 2023E LIQUIDS WEIGHTING (%)* 80% 2023E CASH FLOW PER BOE* $60 70% $50 60% $40 50% AVERAGE = $32.76 40% $30 30% $20 20% $10 10% $0 0% 2023E AVERAGE (EXCL VET) LIQUIDS WEIGHTING VERMILION’S INTERNATIONALLY DIVERSIFIED ASSETS GENERATE
Slide 16: Operational Excellence
OPERATIONAL EXCELLENCE 16
Slide 17: 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, NETHERLANDS EXPERTISE NINE OPERATED >80 WELLS DRILLED IN GAS PLANTS EUROPE
Slide 18: Offshore Drilling Capability
OFFSHORE DRILLING CAPABILITY Wandoo Background ► Offshore oil field ~80 km N.W. of Australia (55 m water depth) ► Horizontal wells development with 21 wellbores and five lateral sidetracks ► Wells 600m below seabed with 1,500 – 4,300m measured depths ► Wandoo crude oil sells at ~US$14/bbl premium to
Slide 19: Operational Excellence
OPERATIONAL EXCELLENCE REAL-TIME DATA DRIVES IMPROVED RESULTS Continuous • Benchmark performance to identify opportunities • Apply best practices across global operations Improvement • Engage external experts Sharing ideas and learnings across multi- Technical • Peer reviews focused on technical exc
Slide 20: Deep Basin Multi-Zone Asset Development
DEEP BASIN MULTI-ZONE ASSET DEVELOPMENT WEST CENTRAL ALBERTA 30,000 25,000 20,000 Production growth from liquids-rich gas zones offset BOE/D 15,000 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 OPERATIONAL
Slide 21: 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 22: Acquisition Strategy
ACQUISITION STRATEGY 22
Slide 23: Value Driven Acquisition Strategy
VALUE DRIVEN ACQUISITION STRATEGY ► Target underexploited consolidation opportunities and new development within existing core areas o Accretive while minimizing equity dilution to maximize per share value o Generates strong free cash flow in a mid-cycle pricing environment to support a sustainable
Slide 24: Corrib Consolidation Acquisition
CORRIB CONSOLIDATION ACQUISITION ► Acquisition of an incremental 36.5% interest, increases our operated ownership to 56.5% o ~7,700 boe/d of 2022E production expected to generate FCF of ~$0.4B (1) o Total purchase price of US$459MM (incl. contingent payment), with an effective date of Jan 1, 2022 o
Slide 25: Financial Discipline
FINANCIAL DISCIPLINE 25
Slide 26: Financial Leverage
FINANCIAL LEVERAGE NET DEBT TO FFO 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x SIGNIFICANT PROGRESS ON DEBT REDUCTION; LEVERAGE CURRENTLY AT LOWEST LEVEL IN 10 YEARS * Reflects period-end net debt to four quarter trailing fund flows from operations, for further information refer to the "Non-GA
Slide 27: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY CURRENT REPAYMENT TIMELINE AS AT SEPTEMBER 30, 2022 AS AT SEPTEMBER 30, 2022 $1,000 $548MM $750 $1,135MM $MM $500 $411MM $250 $465MM $0 2022 2023 2024 2025 2026 2027 2028 2029 2030 Undrawn Capacity on Revolving Credit Facility Revolving Credit Facili
Slide 28: Pro Forma Commodity Hedge Position
PRO FORMA COMMODITY HEDGE POSITION 2022 2023 100% 100% PERCENTAGE OF PRODUCTION HEDGED (%)* PERCENTAGE OF PRODUCTION HEDGED (%)* 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 T
Slide 29: Value Creation 1994 - Current
VALUE CREATION 1994 - CURRENT MARKET TOTAL VALUE CAPITALIZATION(3) CREATION $5.4B $6.1B DIVIDENDS EQUITY PAID(2) ISSUED(1) $3.9B ($3.2B) VERMILION BUSINESS MODEL DELIVERS SIGNIFICANT LONG-TERM SHAREHOLDER VALUE (1) Equity issued for cash and acquisitions since 1994, including all shares issued under
Slide 30: Summary
SUMMARY ► Internationally diversified portfolio delivers outsized free cash flow and reduces volatility o Exposure to premium global commodities, top decline netbacks, low base decline and enhanced flexibility for capital allocation ► Global operations with 28 years operating in Europe and North Ame
Slide 31: Asset Overview
ASSET OVERVIEW 31
Slide 32: Europe
EUROPE NETHERLANDS ► #2 onshore gas producer IRELAND ► 1.5 million acres of undeveloped land ► 20% operated interest in the Corrib Natural Gas Project ► Q3 2022 production = 4,933 boe/d (98% gas) ► 56.5% operated interest upon closing of partner acquisition, expected Q1 2023 GERMANY ► Q3 2022 pro fo
Slide 33: CEE Exploration Potential
CEE EXPLORATION POTENTIAL ► Croatia o 975,000 net acres across two licenses prospective for natural gas and light oil o Drilled two gas wells on SA-10; tested at 15 mmcf/d and 17 mmcf/d* o Gas plant scheduled for commissioning in 2023 ► Hungary o 950,000 net acres with four licenses prospective for
Slide 34: 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 ► Two well-program executed in Q2/Q3 2022 ► Q3 2022 productio
Slide 35: North America
NORTH AMERICA CANADA MONTNEY ► Q3 2022 production = 52,080 boe/d (54% liquids) SOUTHEAST SASKATCHEWAN ► Targeting liquids-rich gas in the Peace ► Targeting light oil in conventional River Arch straddling the AB and BC reservoirs border ► ~500,000 net acres of land with ► ~77,000 net acres of Montney
Slide 36: Mica Development Plans
MICA DEVELOPMENT PLANS ► Infrastructure plan is in place to achieve a production base of 28,000 boe/d with the option to expand ► Longer-term development plan maintains optimal production level over the next 20+ years with Tier 1 inventory ► Full discretion over pace of development, we will determin
Slide 37: Inventory and Reserve Life Optimization
INVENTORY AND RESERVE LIFE OPTIMIZATION 16 ► 2021 1P and 2P reserve life index increased to 9.7 years and 15.4 years, respectively (excludes Corrib 14 and Leucrotta acquisitions) 12 ► Leucrotta expected to significantly increase 1P and 2P 10 RLI, adds 20+ years of low-risk, self-funding, high- deliv
Slide 38: ESG and Sustainability
ESG AND SUSTAINABILITY 38
Slide 39: ESG Leadership
ESG LEADERSHIP Vermilion is committed to reducing the environmental impact of traditional energy production, enriching and Environmental caring for the communities in which we live and work, and maintaining our strong corporate governance ► On track to reducing Scope 1 emissions intensity from our o
Slide 40: Sustainability Projects
SUSTAINABILITY PROJECTS ► Vermilion is committed to advancing environmental sustainability and economic inclusivity through partnerships in the communities where we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD ► Our geothermal energy tomato greenhouse project in ► Our
Slide 41: Appendix
APPENDIX 41
Slide 42: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2022E 2023E 2024E ANNUAL FFO SENSITIVITY (C$MM)** (Includes Impact of Corrib Acquisition) Brent (US$/bbl) $102.61 $86.70 $79.90 FFO Impact (C$) FFO Impact (C$) Change Hedged Unhedged WTI (US$/bbl) $95.39 $80.57 $74.22 LSB = WTI less (US$/bbl) $3.12 $4.74
Slide 43: 2022 Budget
2022 BUDGET ► 2022 E&D capital budget of $550MM 2022 Drilling Program Well Count Netherlands 1 gross (0.5) net ► 2022 production guidance of 86,000 - 88,000 boe/d Germany 3 gross (3.0) net (excluding Corrib Acquisition volumes) Hungary 3 gross (3.0) net o Expect production to be at the lower end of
Slide 44: 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
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