Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (January 2012)
41 slides from Vermilion Energy's investor presentation, January 2012
Slide 1: Vermilion Energy Inc. - Steady Growth, Stable Dividends
Vermilion Energy Inc. Steady Growth Stable Dividends January 2012 A World of Energy 1
Slide 2: Legal Disclaimer
Legal Disclaimer This document contains forward-looking financial and operational information including information relating to targeted total returns, earnings, cash flow, dividends, debt levels, production (including timing of first production and amount of deferred payment for Corrib Field), dril
Slide 3: Market Profile
Market Profile Stock Exchange Symbol (TSX:VET) (January 3, 2012) $46.69 Monthly dividend $0.19 Current yield 4.8% Market capitalization (96.4 MM shares outstanding) C$4.5 billion Management ownership and control position 8% Net debt* (December 31, 2011) (represents approximately 0.6x consensus 2011E
Slide 4: Why Invest In Vermilion?
Why Invest In Vermilion? Steady Growth - Visible production growth of approximately 35% to 50,000 boe/d in 2015 - Estimated cash flow growth of approximately 50% by 2015* Stable, reliable dividends - Dividend has never been reduced since initiation in 2003 (increased in 2007) - Anticipated cash flow
Slide 5: Steady Growth - Production
Steady Growth - Production 2012 Guidance: 37,000 to 38,000 boe/d 50 Projected Production Growth (mboe/d) ~10% liquids growth in 2012 (6-8% overall production growth) 2011 Estimated Exit Rate: ~ 37,000 boe/d Anticipate 35% production 30 growth to ~ 50,000 boe/d in 2015 2010 2011 2012 2013 2014 2015 g
Slide 6: Visible Growth Prospects
Visible Growth Prospects Robust prospect Over 300 net undrilled Cardium locations inventory to drive growth through Over 110 net undrilled liquids-rich tight gas locations 2015 and beyond Over 20 net undrilled Netherlands gas prospects Ongoing Corrib development (9,000 boe/d net) Over 15 drilling op
Slide 7: Stable, Reliable Dividends
Stable, Reliable Dividends Maintain One of only two high-yield peers that has never reduced dividend since inception 9 years ago stable dividend Anticipated 50% cash flow increase by 2015 will provide policy capacity for stable and reliable dividend growth Dec 2007 to current - $0.19 $0.17 $0.19 200
Slide 8: Global Price Exposure
Global Price Exposure 2012 Production (E)* France and Australia production priced against Brent crude North US$8.70*/bbl premium over WTI in 2012 American Gas 17.5% Brent Netherlands gas priced primarily off a basket of crude oil products Crude 2011(E)**: C$9.50/mcf; 2012(E)**: C$9.65 /mcf 44% 83% l
Slide 9: Diversified Global Operations
Diversified Global Operations CANADA (Alberta) 12,987 boe/d IRELAND (Corrib)* (45% Oil) (Royalty Free Natural Gas) Focus: Focus: Cardium oil / liquids-rich gas Achieving “First Gas” 2014 NETHERLANDS 5,589 boe/d (Royalty Free Natural Gas priced to Oil) Focus: FRANCE High impact natural gas exploratio
Slide 10: Top Quartile Cash Netbacks
Top Quartile Cash Netbacks NETBACKS BY COUNTRY TOTAL (Q3-2011) $CDN/boe 1 Canada France Netherlands Australia Company Revenue $51.81 $108.40 $58.11 $102.98 $77.85 Royalties (6.99) (6.88) - - (4.23) Operating cost (11.28) (19.15) (7.76) (15.70) (13.57) PRRT - - - (24.86) (5.73) Transportation (1.37)
Slide 11: Premium Netback
Premium Netback $60.00 After Tax Cash Flow Netback (Peer Group) $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 CPG PBN VET TET BTE NAE PWT ARX ERF PEY PGF BNP PRQ PMT Source: CIBC World Markets
Slide 12: Balance Sheet Strength
Balance Sheet Strength Debt levels may exceed Company target levels of 1.0x or less until Corrib ‘first gas’ but will remain well at or below current industry debt levels Historic Debt to Fund Flows Levels 2003 2004 2005 2006 2007 2008 2009 2010 2011E* Fund flows from operations 144.8 169.8 277.2 34
Slide 13: Financial Flexibility
Financial Flexibility Balance sheet $800 MM revolving credit facility (syndicated 3-yr term will support to 2014) anticipated capital required $225 MM 5-year (6.5%) notes due 2016; 3 year non-call to fund growth initiatives and Year end 2011 debt estimated at 0.6x debt to consensus maintain dividend
Slide 14: Value Creation 1994 through 2011
Value Creation 1994 through 2011 Total Value Creation = $4,889 $5,000 $4,000 $4,500 $3,000 millions $2,000 $1,000 $1,325 $0 $936 ($1,000) Equity issued for cash Dividends Current market since 1994 2003 - 2011 capitalization Source: Company Reports 14
Slide 15: Relative Performance
Relative Performance Total Return Performance by Period 60% 40% 20% 0% Vermilion Energy -20% S&P TSX Composite Index S&P 500 Composite Index -40% S&P 500 Energy Index MSCI World (Devevloped Country) Index -60% 2005 2006 2007 2008 2009 2010 2011 15
Slide 16: 2020 Vision - New Growth
2020 Vision - New Growth Focused Seeking to build a portfolio of organic resource plays to New Growth supplement growth post 2015 Initiative Two focused teams of technical professionals spanning various disciplines Canada team focused on identification and capture of medium-term resource opportuniti
Slide 17: Attractive Valuation
Attractive Valuation Enterprise Value / Debt Adjusted Cash Flow (Peer Group) 16 >60% Oil Weighting 14 12 10 Average = 9.33 8 6 4 2 0 PRQ PEY BTE CPG BNP VET ARX PMT PGF ERF PWT NAE Source: TD Securities
Slide 18: Prospects Overview
M4 Prospects Overview “—"
Slide 19: 2012 Development Budget
2012 Development Budget Country Key 2012 Capital Activities 2011E ($mm) 2012B ($mm) 20 (net) Cardium wells, facilities & equipment, other $194 $128 Canada drilling, land maintenance and non-operations capital (2011 land and facilities) $134 Active workover/recompletions, facilities construction Fran
Slide 20: Strategy Focus - Canada
Strategy Focus - Canada Develop Cardium oil field Develop existing inventory of liquids rich gas prospects Establish new positions in unconventional resources plays Q3 2011 Production – 12,987 boe/d (45% / 55% - oil / gas) 20
Slide 21: West Pembina Cardium Overview
West Pembina Cardium Overview Cardium Productive Trend Dominant position in the higher quality reservoir Cardium Zero Edge Have grown production from zero to more than 6,000 boe/d in less than two years C A C Over 300 net undrilled locations identified C C A Planning to drill 20 (net) wells in 2012
Slide 22: Cardium Results - West Pembina
Cardium Results - West Pembina Vermilion Operated Production Rates vs. Peer Production Rates 300 45 Vermilion Well Count VET Average Daily Prod 40 250 Industry Average Daily Prod* 35 * West Pembina peer group: BNE; Baccalieu; NVA; PBN; PWT; VRO 200 30 25 BOEPD WELLS 150 20 100 15 10 50 5 0 0 1 2 3 4
Slide 23: Cardium Well Costs
Cardium Well Costs 2010/11 Operated well costs (DCET) 2012 Target Avg. 2012 ($MM) Cardium Program Well Cost ($MM) $7 Drill $1.5 - $1.7 Complete (Water Frac) $1.3 - $1.5 $6 Equip & Tie-in $0.55 Total Well Costs (DCET) $3.5 - $3.7(1) Infrastructure & Pipeline $0.25 $5 Land cost $0.28 Target full-cycle
Slide 24: Cardium Economics
Cardium Economics Current Cardium Economics as a % of Oil Price Cardium play provides strong economics in current $80 to $100 WTI crude oil environment (estimated ROR of 50%) 2.5x - 3.0x recycle ratio Operating netbacks equal to (half cycle) approximately 75% - 80% of current Operating Netback oil p
Slide 25: Liquids-Rich Gas Overview West Pembina & Ferrier
Liquids-Rich Gas Overview West Pembina & Ferrier Conventional Notikewin Underexploited stacked Ellerslie Resource Mannville Sands Notikewin Resource Additional emerging gas plays Average 45 – 60 bbls / mmcf Multi-zone, liquids-rich gas Liquids content varies by play type and region 120 identified lo
Slide 26: Strategic Focus - Netherlands
Strategic Focus - Netherlands Expand inventory and identify opportunities for future resource play development Furtherance of applications and permitting for future drilling and production activities Over 30 additional gross prospects identified Q3 2011 Production – 5,589 boe/d (100% gas - priced to
Slide 27: Netherlands Activity
Netherlands Activity Production from Vlieland zone of Vinkega-1 discovery brought on late Middelburen 2 May 2011 Completed acquisition of Rotliegend Legend rights for Vinkega-1 and brought on Vermilion Concessions incremental production in Dec 2011 Producing Gas Fields Drilling Prospects 2009 – 2010
Slide 28: Strategic Focus - Australia
Strategic Focus - Australia Wandoo Field - 100% owned and operated 21 producing wells, 2 offshore oil production platforms with fluid processing capacity of 160,000+ bpd Maintain production through ongoing development drilling, workovers and water shutoffs Extend economic limit of facilities and ult
Slide 29: Wandoo Activity 2010 - 2012
Wandoo Activity 2010 - 2012 2008 Wells Highly successful drilling programs in 2008 2010 Wells and 2010 with ROR’s estimated at 66% after tax New wells used deviated sidetracks off existing well bores Complete preparations and planning for two to three well drilling program in 2012 15 drilling opport
Slide 30: Strategic Focus - France
Strategic Focus - France Maintain stable production through workover and recompletion program Optimize performance of large waterfloods Optimize operation of assets acquired (Jan 2012) in Paris and Aquitaine Basins Evaluate and position for potential future resource play development Paris Basin (LIA
Slide 31: France Asset Acquisition
France Asset Acquisition PARIS BASIN Acquired Closing W.I. W.I.* Vert-le-Petit 100% 100% La Croix Blanche 100% 100% Vert-le-Grande 90.05% 100% Ittevilee 78.7% 100% Dommartin-Lettree 57% 57% (Non-Operated) AQUITAINE BASIN Vic-Bilh 73% 100% * Anticipated working interests following closing of transact
Slide 32: France Asset Acquisition
France Asset Acquisition ACQUISITION SUMMARY 2012E Average 2,200 boe per day Production 86% Brent crude oil (increases Brent weighting) 2011E Reserves * 6.7 million boe proved + probable (79% proved) 96% Brent crude (increases Brent weighting) Purchase Price C$115 million ~$52,000 per boe/d ~$17.21
Slide 33: Asset Overview - Ireland
Asset Overview - Ireland Corrib Partnership Interests 45.5% Shell (Operator) 36.0% Statoil 18.5% Vermilion (acquired 2009) Corrib will provide up to 65% of Ireland’s domestic gas needs at start-up Key permits now received 33
Slide 34: Corrib
Corrib Corrib Wells drilled and tested Status Subsea manifold installed Offshore pipeline installed Gas processing plant completed 170 km sales pipeline completed Onshore tie-in pipeline in progress 34
Slide 35: Corrib
Corrib Preparation of tunneling site for on- Tunnel Boring Machine "Fionnuala" shore pipeline underway following April 2011 receipt of final approvals Construction of on-shore pipeline expected to begin in mid 2012 and take at least two years to complete Final payment of US$135mm due December 2012 A
Slide 36: Why Invest In Vermilion?
Why Invest In Vermilion? Visible Growth to ~50,000 boe/d Stable, Reliable Dividends Premium Commodity Exposure Balance Sheet to Fund Growth Long Term Strategy and New Growth Opportunities Attractive Valuation 36
Slide 37: Vermilion Energy Inc.
Vermilion Energy Inc. Steady Growth Stable Dividends www.vermilionenergy.com 37
Slide 38: Appendix
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Slide 39: Historical Financial Summary
Historical Financial Summary Financial Summary ($MM CDN except per unit amounts) 2003 2004 2005 2006 2007 2008 2009 2010 Revenue 314.1 354.5 529.9 618.1 707.3 1,001.9 639.8 727.8 Royalties (74.7) (63.6) (88) (92.2) (97.5) (130.8) (97.6) (83.5) Expenses (211.3) (243.9) (245.7) (337.6) (403.3) (532.0)
Slide 40: Consolidated Netbacks
Consolidated Netbacks Operating Netbacks, $/boe (Gas converted at 6:1) 2003 2004 2005 2006 2007 2008 2009 2010 Price $39.90 $43.21 $57.94 $61.80 $61.86 $83.61 $55.83 $65.38 Realized hedging gain (loss) (2.38) (3.73) (4.46) (0.02) (0.25) (0.89) 0.47 0.50 Royalties (net) (8.92) (7.54) (9.54) (9.22) (8
Slide 41: Total Payout / Total Expenditures to EBITDA
Total Payout Net Dividends + Interest + Taxes CAPEX (incl. Aband./Reclam .) Corrib CAPEX 180% Corrib Development Phase Vermilion’s long term strategy targets free cash flow in 2015 162% 160% following Corrib development phase 140% Total Expenditures /EBITDA 120% 119% 116% 115% 100% 87% 80% 80% 76% 6
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