Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (October 2022)
46 slides from Vermilion Energy's investor presentation, October 2022
Slide 1: Vermilion Energy Investor Presentation
OCTOBER 2022 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (September 27, 2022) $27.89 (TSX), $20.32 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (June 30, 2022) 165.2 million Average Daily Trading Volume (shares) 2.0 million (TSX), 2.6 million (NYSE) Quarterly dividend $0.08/share Capital Str
Slide 3: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Value investment opportunity with robust free cash flow(1) o Trading at one of the highest FCF yields (>40%)(1,2) o 2022E pro forma FCF of ~$1.8B (~$11/share)(1,3) ► Return of capital framework provides for increasing returns as debt levels decrease o Anticipate returnin
Slide 4: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Internationally diversified portfolio provides top decile netbacks, strong free cash flow and reduces volatility o Exposure to premium global commodity prices (2023E Euro gas ~$75/mmbtu(1) and Brent oil ~US$5/bbl(1) premium to WTI) o Combination of top decile netbacks, l
Slide 5: Internationally Diversified Portfolio
INTERNATIONALLY DIVERSIFIED PORTFOLIO 2022E PRO FORMA CORRIB ACQUISITION(1) PRODUCTION E&D CAPEX INT INT 42% N.A. 38% N.A. 62% 58% FFO FCF N.A. N.A. 37% INT 30% INT 63% 70% MEANINGFUL EXPOSURE TO PREMIUM PRICED EUROPEAN GAS (1) Based on company estimates, pro forma Corrib January 1, 2022 and 2022 fu
Slide 6: 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 7: Return of Capital Framework
RETURN OF CAPITAL FRAMEWORK 7
Slide 8: Pillars of Shareholder Value
PILLARS OF SHAREHOLDER VALUE MAXIMIZING LONG-TERM SHAREHOLDER VALUE BALANCE SHEET SHAREHOLDER MAINTAIN A ROBUST & OPPORTUNISTIC STRENGTH RETURNS RESILIENT PORTFOLIO ACQUISITIONS ► Target $1.2B of debt by ► Paid over $40/share of ► 10-year plan delivers ► Ireland Corrib gas YE 2022 (0.5x net debt div
Slide 9: 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 10: Return of Capital Framework
RETURN OF CAPITAL FRAMEWORK ► Provide resilient and increasing Base Dividend o Quarterly dividend increased 33% to $0.08 ($0.32/year) in Q3 2022 o Provide ratable dividend increases up to an annual dividend representing 10% of mid-cycle(1) FFO ► Return increasing amount of FCF to shareholders as deb
Slide 11: Pro Forma Financial Outlook
PRO FORMA FINANCIAL OUTLOOK 2022E 2022E 2022E 2023E Base Corrib Pro Forma Analyst’s Vermilion Acquisition w/ Corrib(1) Consensus(3) FFO (hedged) $1.9B $0.45B $2.4B $2.6B FCF (hedged) $1.3B $0.45B $1.8B $2.0B FFO/Share $11.50 $14.51 $16.51 FCF/Share $8.18 $11.16 $12.82 Net Debt (year-end) $1.4B(2) $0
Slide 12: Significant Free Cash Flow
SIGNIFICANT FREE CASH FLOW CUMULATIVE FREE CASH FLOW (2022-2024) 6,000 5,000 Cumulative 4,000 Excess FCF ~$3.3B $MM 3,000 2,000 1,000 - 2022E 2023E 2024E Cumulative FCF* Cumulative Debt Reduction and Acquisitions Cumulative Dividend and Approved NCIB** Net Debt Market Capitalization*** PIVOTING FROM
Slide 13: Valuation Discount
VALUATION DISCOUNT 2023E DAFCF YIELD* 2023E EV/DACF* 50% 5.0x Implied EV/DACF assuming 4.5x C$20/mmbtu Euro gas price 45% Implied DAFCF yield assuming C$40/mmbtu Euro gas price 40% 4.0x Implied EV/DACF assuming C$40/mmbtu Euro gas price Implied DAFCF yield assuming 35% 3.5x C$20/mmbtu Euro gas price
Slide 14: International Advantage
INTERNATIONAL ADVANTAGE 14
Slide 15: Advantages of Internationally Diversified Portfolio
ADVANTAGES OF INTERNATIONALLY DIVERSIFIED PORTFOLIO 2022E PRO FORMA PRODUCTION (1) ► Business drivers o Premium pricing drives top decile netbacks OIL (BRENT) 15% o Diversification helps manage risk and reduces market volatility EUROPEAN GAS o High quality conventional assets reduces corporate decli
Slide 16: 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 17: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE VET PREMIUM TO AECO GAS PRICE $30 $90 VET PREMIUM TO AECO (C$/MMBTU*) Nov 22 TTF ~$79 2022E Realized Prices $80 $25 Vermilion = ~$24/mmbtu** GAS PRICES (C$/MMBTU) $70 AECO = ~$5/mmbtu $20 $60 $50 $15 $40 $10 $30 $20 $5 $10 $0 $0 2015 2016 2017 2018 2019 2020 2021 2022* 2
Slide 18: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS ► Europe consumes 45-50 Bcf/d of natural gas, with Russia TTF CAL 23 & CAL 24 PRICE INCREASE YTD* supplying ~40% in 2021 140 o EU goal to significantly reduce dependence on Russian gas 120 YTD 2022 Price Movement ► Natural gas recognized by the EU as a transition
Slide 19: Premium Cash Flow Netbacks
PREMIUM CASH FLOW NETBACKS 2023E CASH FLOW PER BOE $80 100% 90% $70 80% 2023E LIQUIDS WEIGHTING (%)* 2023E CASH FLOW PER BOE* $60 70% $50 60% $40 50% AVERAGE = $30.08 40% $30 30% $20 20% $10 10% $0 0% VET CPG HWX BTE MEG WCP POU TOU PIPE NVA PXT KEL SDE CJ AAV ERF BIR ARX PEY ATH IPCO 2023E AVERAGE
Slide 20: Acquisition Strategy
ACQUISITION STRATEGY 20
Slide 21: 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 22: 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 ~$450MM (1) o Total purchase price of ~$600MM (incl. contingent payment), with an effective date of Jan 1, 2022 o
Slide 23: Enhanced Value on a Per Share Basis
ENHANCED VALUE ON A PER SHARE BASIS ► Announced in excess of $1.2 billion of strategic ACCRETIVE PRODUCTION GROWTH acquisitions in 2021 and 2022 (PRB, Corrib & Leucrotta) PRODUCTION PER SHARE (BOE/D PER MM SHARES) 100,000 600 ► Acquisitions done without issuing equity and diluting 95,000 580 560 sha
Slide 24: Financial Discipline
FINANCIAL DISCIPLINE 24
Slide 25: 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 2021 2022E* NET DEBT TO FFO* NET DEBT TO EBITDA* ** ON TRACK TO ACHIEVE TARGETED LEVERAGE I
Slide 26: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY $2.5B ► No near-term maturities AS AT JUNE 30, 2022 o Covenant-based credit facility termed out to May 2026 $1,750 o US$400 million Senior Notes termed out to May 2030 $1,500 o May 2025 redemption price at 103.438% (declining thereafter $1,250 annual
Slide 27: 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 28: Value Creation 1994 - Current
VALUE CREATION 1994 - CURRENT MARKET TOTAL VALUE CAPITALIZATION(3) CREATION $4.6B $5.3B 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 29: Summary
SUMMARY ► Internationally diversified portfolio provides top decile netbacks, strong free cash flow and reduces volatility ► Pivoting from debt reduction to return of capital o Anticipate returning up to 50% - 75% of FCF in 2023 o 2023 analyst consensus FCF ~$2.0B ► Depth and quality of inventory to
Slide 30: Asset Overview
ASSET OVERVIEW 30
Slide 31: 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 32: CEE Exploration Potential
CEE EXPLORATION POTENTIAL ► Highly prospective exploration portfolio across CEE o ~2.0 million net acres of undeveloped land in the Pannonian basin across three countries o Focused on under-invested basins that can benefit from new technology ► Croatia o 975,000 net acres across two licenses prospec
Slide 33: 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 19 producing wellbores and five dual lateral sidetracks tied into two platforms ► Two well-program executed in Q2/Q3 2022 ► Contracted Wandoo
Slide 34: North America
NORTH AMERICA CANADA ► Targeting light oil and condensate-rich natural gas in West Central Alberta, light oil in SE Saskatchewan and shale gas in the Peace River Arch straddling the AB and BC borders ► ~400,000 net acres in West Pembina targeting the Mannville (2,400 – 2,700m depth) and Cardium (1,8
Slide 35: Montney Asset Details
MONTNEY ASSET DETAILS ► Primary asset is the Mica property in the Peace River Arch straddling the Alberta and British Columbia borders Upper Target – Tier 1 ► Comprised of 81,000 gross (77,000 net) contiguous acres of >15 years Inventory IRR > 100% Montney mineral rights ► Conservatively identified
Slide 36: Mica Development Plans
MICA DEVELOPMENT PLANS ► Infrastructure plan is in place to achieve a production base of 28,000 4-30 BC AB boe/d with the option to expand 5-19 ► Longer-term development plan maintains optimal production level 8-4 A13-7 over the next 20+ years with Tier 1 inventory Proposed Water Hub 13-7 ► Full dis
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 Performance
ESG PERFORMANCE 38
Slide 39: 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 40: 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 41: 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 42: 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 43: Appendix
APPENDIX 43
Slide 44: 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) $100.07 $77.07 $72.27 FFO Impact (C$) FFO Impact (C$) Change Hedged Unhedged WTI (US$/bbl) $92.93 $71.70 $66.63 LSB = WTI less (US$/bbl) $3.26 $4.96
Slide 45: 2022 Budget
2022 BUDGET ► 2022 E&D capital budget of $550 million 2022 Drilling Program Well Count o North America - $315 million Netherlands 2 gross (1.1) net o International - $235 million Germany 3 gross (3.0) net ► 2022 annual production guidance of 86,000 - 88,000 boe/d Hungary 3 gross (3.0) net (excluding
Slide 46: 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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