Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (July 2021)
34 slides from Vermilion Energy's investor presentation, July 2021
Slide 1: Vermilion Energy Investor Presentation
JULY 2021 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Unique portfolio of internationally diversified assets o Exposure to global commodity price benchmarks reduces cash flow volatility o Will support the return to a dividend capital markets model (over $40/share of dividends from 2003 to early 2020) ► Long history of stron
Slide 3: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (June 28, 2021) $10.65 (TSX), $8.63 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (March 31, 2021) 159.3 million Average Daily Trading Volume (shares) 2.1 million (TSX), 1.9 million (NYSE) Monthly Dividend Currently Suspended Director a
Slide 4: ESG Leadership
ESG LEADERSHIP Environmental Vermilion is committed to reducing the environmental impact of traditional energy production, enriching and caring for the communities in which we live and work, and maintaining our strong corporate governance ► CDP Leadership Level rating of “A-” – since 2017; A in 2016
Slide 5: International Diversification
INTERNATIONAL DIVERSIFICATION 5
Slide 6: Core Operating Areas
CORE OPERATING AREAS 2021E PRODUCTION* E&D CAPEX* INT 33% INT N.A. N.A. 45% 67% 55% FFO* FCF* INT INT N.A. N.A. 47% 47% 53% 53% VERMILION IS FOCUSED IN STABLE CORE AREAS * 2021 production and FFO based on June 21, 2021 strip and company estimates. 2021 strip at June21, 2021: Brent (US$/bbl) $68.20;
Slide 7: Global Commodity Diversification
GLOBAL COMMODITY DIVERSIFICATION PRODUCTION (2021E)* ESTIMATED FFO CONTRIBUTION (2021E)* OIL (BRENT) OIL (BRENT) 16% 25% EUROPEAN GAS 17% OIL / OIL / CONDENSATE / CONDENSATE / EUROPEAN GAS NGL NGL NORTH AMERICAN 22% (WTI) (WTI) GAS 43% 38% 29% NORTH AMERICAN GAS 10% EXPOSURE TO GLOBAL COMMODITY PRIC
Slide 8: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL BENCHMARKS ► Vermilion has significant leverage to oil prices 2021E VET Premium / 2021E VET An increase of US$1/bbl generates approximately (Discount) to WTI o Crude Oil Mix (US$/bbl)* $17MM of incremental FCF on an unhedged basis Brent** 35% $5.00 ► Approximat
Slide 9: European Natural Gas Pricing
EUROPEAN NATURAL GAS PRICING ► Vermilion has significant leverage to European natural gas GLOBAL NATURAL GAS PRICES prices (+$1/mmbtu = +$28MM incremental FCF) $14 ► European natural gas forward prices are currently trading in $12 the $7 to $12/mmbtu range $10 Strengthening European carbon pricing i
Slide 10: Focus on Free Cash Flow & Profitability
FOCUS ON FREE CASH FLOW & PROFITABILITY 10
Slide 11: Free Cash Flow Generation
FREE CASH FLOW FREE CASH FLOW GENERATION $1,000 $2,000 $900 $1,800 $800 $1,600 CUMULATIVE FCF ($MM)** $700 $1,400 $600 $1,200 $MM* $500 $1,000 $400 $800 $300 $600 $200 $400 $100 $200 $0 $0 2016 2017 2018 2019 2020 2021E* E&D CAPEX FCF E&D CAPEX GUIDANCE FCF FORECAST CUMULATIVE FCF FROM 2016 THROUGH
Slide 12: Free Cash Flow Yield
FREE CASH FLOW YIELD 2021E FCF YIELD 30% 25% 2021E FCF YIELD (%)* AVERAGE = 18% 20% 15% 10% 5% 0% VET BTE CPG ERF MEG CVE ARX CNQ BIR SU WCP IMO TOU PEY POU NVA VERMILION TRADES AT ONE OF THE HIGHEST FCF YIELDS AMONGST CANADIAN PEERS * Source: RBC estimates as of June 24, 2021, using RBC 2021 base p
Slide 13: Operating Netbacks
OPERATING NETBACKS 2021E OPERATING NETBACKS $40.00 100% 90% 2021E OPERATING NETBACK ($/BOE)* $35.00 2021E LIQUIDS WEIGHTING (%)* 80% $30.00 70% $25.00 60% $20.00 50% $15.00 40% 30% $10.00 20% $5.00 10% $0.00 0% CPG BTE VET WCP ATH ERF ARX POU NVA PEY KEL BIR TOU AAV OPERATING NETBACK LIQUIDS WEIGHTI
Slide 14: FFO Sensitivity
FFO SENSITIVITY ANNUAL 2021 UNHEDGED FFO SENSITIVITY (C$MM)* COMMODITY PRICES** 2021E Change FFO Impact (C$) Brent (US$/bbl) $68.20 WTI (US$/bbl) $65.75 WTI & Brent US$1/bbl $17.0MM LSB = WTI less (US$/bbl) $4.65 MSW = WTI less (US$/bbl) $4.32 LSB / WTI Differential US$1/bbl $6.2MM TTF ($/mmbtu) $10
Slide 15: Balance Sheet
BALANCE SHEET 15
Slide 16: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY $2.5B ► No near-term maturities AS AT MARCH 31, 2021 $2,250 o Covenant-based credit facility termed out to May 2024 $2,000 o US$ Senior Notes termed out to March 2025 $1,750 $1,500 ► Vermilion’s US$ Senior Notes have no financial covenants $1,250 and
Slide 17: Financial Leverage
FINANCIAL LEVERAGE LEVERAGE RATIOS 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x VERMILION TARGETED LEVERAGE RANGE 1.5x 1.0x 0.5x 0.0x 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E* NET DEBT TO FFO** NET DEBT TO EBITDA*** FOCUSED ON REDUCING LEVERAGE TO OUR TARGETED
Slide 18: 2021 Leverage Sensitivity
2021 LEVERAGE SENSITIVITY 2021E DEBT-TO-CASH FLOW AT VARIOUS FORWARD OIL PRICES $800 4.0x $700 3.5x 2021E FREE CASH FLOW* ($MM) $600 3.0x 2021E YEAR-END D/FFO* (x) $500 2.5x $400 2.0x $300 1.5x $200 1.0x $100 0.5x $0 0.0x US$50/BBL US$60/BBL US$70/BBL US$80/BBL SIGNIFICANT TORQUE TO A CONTINUING OIL
Slide 19: Commodity Hedge Position
COMMODITY HEDGE POSITION 2021 2022 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% WTI Brent European N.A. Corporate WTI Brent European N.A. Corporate Natural Gas Natural Gas Total Nat
Slide 20: Summary
SUMMARY ► Unique and defensive portfolio of internationally diversified assets with exposure to global commodity price benchmarks ► Long history of strong profitability and free cash flow generation with a focus on return on capital ► Significant leverage to recovering global commodity prices which
Slide 21: Asset Overview
ASSET OVERVIEW 21
Slide 22: Vermilion Production
VERMILION PRODUCTION 105,000 90,000 75,000 60,000 BOE/D 45,000 30,000 15,000 0 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016 2017 2018 2019 2020 2021E E&D CAPEX 53% 37% 41% 40% 46% 33% 61% 119% 103% 81% 81% 85% 94% 47% 53% 62% 58% 73% 39% AS % OF FFO** North America In
Slide 23: Europe
EUROPE NETHERLANDS GERMANY IRELAND ► #2 onshore gas producer ► Established production operations ► 20% operated interest in the Corrib ► Large and growing inventory of drilling opportunities and substantial exploratory land Natural Gas Project position in the North German Basin ► Corrib field consti
Slide 24: CEE Exploration Potential
CEE EXPLORATION POTENTIAL VERMILION HAS BUILT A HIGHLY PROSPECTIVE EXPLORATION PORTFOLIO ACROSS CEE ► Approximately 3.0 million net acres of undeveloped land across three countries (Hungary, Croatia and Slovakia) ► Focused on under-invested basins prospective for both oil and gas that can benefit fr
Slide 25: 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 20 producing wellbores and five dual lateral sidetracks tied into two platforms ► Two well-program planned for 1H 2022 ► Contracted Wandoo cr
Slide 26: North America
NORTH AMERICA CANADA ► Targeting light oil and condensate-rich natural gas in West Central Alberta and light oil in SE Saskatchewan ► Approximately 400,000 net acres in West Pembina targeting the Mannville (2,400 – 2,700m depth) and Cardium (1,800m) formations with shared surface infrastructure ► Ap
Slide 27: ESG Performance
ESG PERFORMANCE 27
Slide 28: Environmental Sustainability
ENVIRONMENTAL SUSTAINABILITY ► We are playing a meaningful role in the energy transition by reducing the environmental impact of our traditional energy production and developing renewable energy projects o We have set two new emissions targets o We deploy energy and emissions efficiency improvement
Slide 29: Emission Reduction Targets
EMISSION REDUCTION TARGETS ► We are progressing the development of our comprehensive, long-term ESG strategy, based on the leadership position we have established in sustainability for more than a decade ► This progress is reflected in our announcement of two new emission-related targets o Targeting
Slide 30: Emission Reduction Targets
EMISSION REDUCTION TARGETS ► Our new targets are supported by our track record o Achieving flaring reduction targets set after acquisitions in southeast Saskatchewan in 2014 and 2018 o Innovative use of geothermal energy from produced water at 2 projects in France ► 2020 emissions data expected in Q
Slide 31: Social Performance
SOCIAL PERFORMANCE ► Give back through strategic community investment o Since 2015, Vermilion has invested more than $9.8 million and 11,700 hours of volunteer time in our communities ► Demonstrate excellent results in annual employee survey provided by the Great Place to Work Institute to evaluate
Slide 32: Parentis Sustainability Partnership
PARENTIS SUSTAINABILITY PARTNERSHIP ► Vermilion received France’s Circular Economy Award, recognizing economically successful enterprises that operate within a “circular economy,” in which businesses and processes conserve, reuse and recycle resources, for our project to supply geothermal heat from
Slide 33: La Teste Eco-Neighbourhood
LA TESTE ECO-NEIGHBOURHOOD ► Our operations in La Teste, France now support an eco-neighborhood heated the same way as the tomato greenhouses, using recycled geothermal energy from our oil operation ► 30-year partnership to provide 80% of the energy required for 550 homes ► Provides 1 MW of renewabl
Slide 34: 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