Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (February 2022)
41 slides from Vermilion Energy's investor presentation, February 2022
Slide 1: Vermilion Energy Investor Presentation
FEBRUARY 2022 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES PRODUCITON (2022E PRO FORMA CORRIB ACQUISITION)*** ► Compelling investment with growing free cash flow, accelerated deleveraging and OIL (BRENT) return of capital 16% EUROPEAN GAS o Trading at one of the highest FCF yields (>40%)* and one of the largest valuation discounts
Slide 3: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Financially disciplined with a focus on balance sheet strength and returning capital to shareholders o 2022E year end net debt of ~$0.9B* with a net debt to trailing FFO ratio of ~0.5x* o Return of capital will be a staged approach that increases over time as further deb
Slide 4: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (January 31, 2022) $19.78 (TSX), $15.57 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (September 30, 2021) 162.0 million Average Daily Trading Volume (shares) 1.9 million (TSX), 2.3 million (NYSE) Plan to reinstate a $0.06 quarterly div
Slide 5: 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 Climate and Water scores of “B” in 2021 have us tied fo
Slide 6: Building a Sustainable Future
BUILDING A SUSTAINABLE FUTURE VERMILION RECOGNIZED BY BMO AS AN INDUSTRY LEADER IN ESG ► Vermilion continues to rank in the top quartile in emissions intensity ► Relative to its peers, Vermilion ranks well on total fresh water use per barrel of oil ► Vermilion has strong ESG governance with a focuse
Slide 7: Value Driven Acquisition Strategy
VALUE DRIVEN ACQUISTION 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 d
Slide 8: Inventory and Reserve Life Optimization
INVENTORY AND RESERVE LIFE OPTIMIZATION 16 ► Vermilion actively manages its inventory and 14 acquisition strategy to optimize reserve life and maximize shareholder value 12 10 Our conventional and semi-conventional asset YEARS ► 8 base requires low capital reinvestment due to low 6 decline rate and
Slide 9: Corrib Consolidation Acquisition (Nov 2021)
CORRIB CONSOLIDATION ACQUISITION (NOV / 2021) ► 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 FFO of ~$365MM* and FCF** of ~$361MM* o Total consideration of $556 million with an effective date is Januar
Slide 10: Pro Forma Corrib Acquisition
PRO FORMA CORRIB ACQUISITION Base Corrib 2022E Vermilion* Acquisition* Pro Forma** FFO $1.5B $0.4B $1.9B FCF $1.1B $0.4B $1.5B FFO/Share $9.22 $2.58 $11.80 FCF/Share $6.64 $2.55 $9.19 Net Debt*** (year-end) $0.7B $0.2B $0.9B Net Debt to Trailing FFO 0.5x 0.5x EV/DACF 2.5x 2.1x CORRIB ACQUISITION 38%
Slide 11: Exposure to European Gas Enhances Netbacks
EXPOSURE TO EUROPEAN GAS ENHANCES NETBACKS PRODUCTION FFO OIL (BRENT) OIL (BRENT) 18% EUROPEAN 22% GAS 15% EUROPEAN GAS 2022E VET BASE* OIL / CONDENSATE / OIL / CONDENSATE / 27% NGL NORTH NGL (WTI) AMERICAN (WTI) GAS NORTH 39% 40% AMERICAN 28% GAS 11% OIL (BRENT) OIL (BRENT) 16% 17% EUROPEAN GAS 22%
Slide 12: Optimizing FCF in the Powder River Basin
OPTIMIZING FCF IN THE POWDER RIVER BASIN ► Contiguous land position of ~76,000 net acres in the Hilight area with multizone potential o Operating netback of ~$50/boe* at current commodity prices, with plan to further Vermilion Acreage reduce unit cost o FCF positive with self-funded Turner developme
Slide 13: International Diversification
INTERNATIONAL DIVERSIFICATION 13
Slide 14: Three Core Operating Areas
THREE CORE OPERATING AREAS 2022E PRO FORMA CORRIB ACQUISITION* PRODUCTION E&D CAPEX INT N.A. 39% N.A. INT 61% 50% 50% FFO FCF N.A. INT N.A. 38% INT 40% 60% 62% VERMILION FOCUSED IN THREE CORE AREAS – NORTH AMERICA, EUROPE AND AUSTRALIA * Based on company estimates, the 2022 annualized impact of the
Slide 15: Advantages of Internationally Diversified Portfolio
ADVANTAGES OF INTERNATIONALLY DIVERSIFIED PORTFOLIO ► Business drivers o Premium pricing drives top decile netbacks o High quality conventional assets reduces corporate decline rates o Unique high IRR acquisition opportunities (e.g. Corrib) o Diversification helps manage risk, provides capital alloc
Slide 16: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES ► In aggregate, Vermilion’s global crude oil portfolio has $110 sold at an average $5.00/bbl premium to the Canadian $100 light oil benchmark (MSW) over the past 7 years $90 ► Approximately 38% of Vermilion’s crude oil production is $80 priced with refer
Slide 17: Premium European Natural Gas Pricing
PREMIUM EUROPEAN NATURAL GAS PRICING ► European natural gas forward prices currently GLOBAL NATURAL GAS PRICES >C$34/ trading at ~C$34.00/mmbtu for 2022 and mmbtu ~C$23.00/mmbtu for 2023, supported by: $35 o Low domestic storage levels coupled with forecasted $30 cold weather could drive even higher
Slide 18: European Gas Market Fundamentals
EUROPEAN GAS MARKET FUNDAMENTALS ► Declining European domestic production results in higher EMISSION ALLOWANCES (EUA CARBON CREDITS) dependence on imports €/ton 100 PRICE HISTORY* o Groningen field will cease production in October 2022 80 o Mature North Sea production is in decline 60 ► Power sector
Slide 19: Enhanced Operating Netback
ENHANCED OPERATING NETBACK 2022E OPERATING NETBACKS $80.00 100% $70.00 90% 2022E OPERATING NETBACK ($/BOE)* 2022E LIQUIDS WEIGHTING (%)* 80% $60.00 70% $50.00 60% AVERAGE = $40.18 $40.00 50% $30.00 40% 30% $20.00 20% $10.00 10% $0.00 0% VET** CPG BTE WCP TVE POU ARX ERF NVA PEY KEL ATH BIR TOU AAV B
Slide 20: Focus on Free Cash Flow & Profitability
FOCUS ON FREE CASH FLOW & PROFITABILITY 20
Slide 21: Fund Flows from Operations
FUND FLOWS FROM OPERATIONS $2,000 $10.00 $1,800 $9.00 $1,600 $8.00 ANNUAL FFO ($MM) $1,400 $7.00 $1,200 $6.00 C$/SHARE $1,000 $5.00 $800 $4.00 $600 $3.00 $400 $2.00 $200 $1.00 $0 $0.00 2018 2019 2020 2021E* 2022E** E&D CAPEX FCF PRO FORMA CORRIB ACQ. FCF/Share OUR HIGH MARGIN, LOW DECLINE ASSETS GEN
Slide 22: Free Cash Flow Yield
FREE CASH FLOW YIELD 2022E FCF YIELD* 2023E FCF YIELD* 60% 60% 50% 50% 40% 40% AVERAGE = 27% 30% 30% AVERAGE = 22% 20% 20% 10% 10% 0% 0% 2022E PRO FORMA CORRIB ACQ. AVERAGE 2023E AVERAGE VERMILION’S FCF YIELD ARE THE HIGHEST AMONGST OUR PEERS *Source: Peters & Co. estimates as of January 31, 2022, u
Slide 23: Discounted EV/DACF Multiple
DISCOUNTED EV/DACF MULTIPLE 2022E EV/DACF (UNHEDGED)* 6.0x 5.0x 4.0x AVERAGE = 3.3 x 3.0x 2.0x 1.0x 0.0x VET CPG ERF PEY BTE NVA BIR AAV ARX WCP TOU POU MEG SU CVE CNQ 2022E EV/DACF PRO FORMA CORRIB ACQ. (HEDGED) Average VERMILION TRADES AT THE LOWEST EV/DACF MULTIPLE RELATIVE TO ITS PEERS *Source:
Slide 24: Balance Sheet
BALANCE SHEET 24
Slide 25: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY $2.5B ► No near-term maturities AS AT SEPTEMBER 30, 2021 o Covenant-based credit facility termed out to May 2024 $2,250 o US$ Senior Notes termed out to March 2025 $2,000 o March 2022 redemption price at 101.406% $1,750 $1,500 o March 2023 redemption
Slide 26: Debt Reduction and Future FCF Allocation
DEBT REDUCTION AND FUTURE FCF ALLOCATION ► Plan to reinstate $0.06 quarterly dividend in NET DEBT AND NET DEBT TO TRAILING FFO RATIO Q1 2022 2,500 5.0x o Represents <3% of 2022E FFO o Equates to ~5% of FFO at mid-cycle pricing* 2,000 4.0x NET DEBT TO TRAILING FFO ► Majority of excess FCF allocated t
Slide 27: 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* 2022E** NET DEBT TO FFO** NET DEBT TO EBITDA*** FORECASTING TO ACHIEVE TARGETED LEVE
Slide 28: Commodity Hedge Position
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 Total Natur
Slide 29: Summary
SUMMARY ► Compelling investment with growing free cash flow, accelerated deleveraging and return of capital, currently trading at the lowest valuation compared to our peers ► Unique portfolio of internationally diversified assets that provide exposure to premium global commodity prices which results
Slide 30: Asset Overview
ASSET OVERVIEW 30
Slide 31: Vermilion Production History
VERMILION PRODUCTION HISTORY 105,000 90,000 75,000 60,000 BOE/D 45,000 30,000 15,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E* 2022E** E&D CAPEX 119% 103% 81% 81% 85% 94% 47% 53% 62% 58% 73% 38% 21% AS % OF FFO North America International Pro Forma Corrib Acq. LOW REINVESTMENT
Slide 32: 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 ► 56.5% operated inte
Slide 33: CEE Exploration Potential
CEE EXPLORATION POTENTIAL VERMILION HAS BUILT A HIGHLY PROSPECTIVE EXPLORATION PORTFOLIO ACROSS CEE ► Approximately 2.0 million net acres of undeveloped land in the Pannonian basin across three countries ► Focused on under-invested basins prospective for both oil and gas that can benefit from new te
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 20 producing wellbores and five dual lateral sidetracks tied into two platforms ► Two well-program planned for Q2 2022 ► Contracted Wandoo cr
Slide 35: 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 36: Appendix
APPENDIX 36
Slide 37: FFO Sensitivity
FFO SENSITIVITY COMMODITY PRICES* 2021E 2022E 2022 ANNUAL FFO SENSITIVITY (C$MM)** (Includes Impact of Corrib Acquisition) Brent (US$/bbl) $70.73 $84.99 FFO Impact (C$) FFO Impact (C$) Change Hedged Unhedged WTI (US$/bbl) $67.92 $81.89 LSB = WTI less (US$/bbl) $4.00 $4.95 WTI & Brent US$1/bbl $16.0M
Slide 38: 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 near-term and long-term emission reduction targets o We deploy energy and emissions ef
Slide 39: Emission Reduction Targets
EMISSION REDUCTION TARGETS ► In April 2021, Vermilion introduced near-term and long-term emission reduction targets o Aspirational target of net zero emissions in our operations, including Scope 1 and Scope 2 emissions, by 2050 o Reducing Scope 1 emissions intensity from our operations by 15 to 20%
Slide 40: Sustainability Projects
SUSTAINABILITY PROJECTS ► Vermilion is committed to advancing environmental sustainability, economic inclusivity and creating partnerships within the communities in which we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD ► Our recycled geothermal energy tomato greenhous
Slide 41: 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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