Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Merger or Acquisition (November 2021)
21 slides from Vermilion Energy's merger presentation, Nov 29, 2021
Slide 1: Vermilion Energy Corrib Acquisition & 2022 Budget Conference Call
NOVEMBER 29, 2021 VERMILION ENERGY CORRIB ACQUISITION & 2022 BUDGET CONFERENCE CALL INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: 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
Slide 3: Corrib Acquisition Overview
CORRIB ACQUISITION OVERVIEW ► Vermilion to acquire Equinor Energy Ireland Limited which owns a 36.5% interest in Corrib o ~23 mmboe of 2P reserves and ~7,700 boe/d of 2022 forecast production o 2022E FFO of ~$365 million* and FCF** of ~$361 million* o Effective date is January 1, 2022, and is antici
Slide 4: Corrib Acquisition Key Attributes
CORRIB ACQUISITION KEY ATTRIBUTES ► Consolidates ownership in an operated asset with high margin, low decline and low emissions at an attractive price o Increases Vermilion’s operated ownership in Corrib to 56.5% o Corrib has an estimated operating netback of ~$130/boe* and an annual decline rate of
Slide 5: Corrib Acquisition Key Attributes
CORRIB ACQUISITION KEY ATTRIBUTES ► Increases exposure to premium priced European natural gas o ~22% of production and ~42% of FFO, based on 2022 full-year pro forma estimate* ► Enhances and rebalances international weighting of portfolio o ~39% of production and ~60% of FFO, based on 2022 full-year
Slide 6: Exposure to European Gas Enhances Netbacks
EXPOSURE TO EUROPEAN GAS ENHANCES NETBACKS PRODUCTION FFO OIL (BRENT) OIL (BRENT) 18% EUROPEAN 23% GAS 15% EUROPEAN 2022E VET BASE* OIL / CONDENSATE / OIL / GAS 24% NORTH CONDENSATE / NGL NGL (WTI) AMERICAN GAS (WTI) NORTH 39% 41% AMERICAN 28% GAS 12% OIL (BRENT) OIL (BRENT) 16% 17% EUROPEAN GAS OIL
Slide 7: Enhanced Operating Netback
ENHANCED OPERATING NETBACK 2022E OPERATING NETBACKS $60.00 100% 90% 2022E OPERATING NETBACK ($/BOE)* $50.00 2022E LIQUIDS WEIGHTING (%)* 80% 70% $40.00 AVERAGE = $32.24 60% $30.00 50% 40% $20.00 30% 20% $10.00 10% $0.00 0% VET** CPG BTE WCP TVE ARX ERF POU NVA ATH KEL BIR PEY AAV TOU BASE FY Pro For
Slide 8: Premium European Natural Gas Pricing
PREMIUM EUROPEAN NATURAL GAS PRICING ► European natural gas forward prices currently trading GLOBAL NATURAL GAS PRICES >C$38/ at ~C$23.00/mmbtu for 2022 and ~C$15.00/mmbtu mmbtu for 2023, supported by: $25 o Declining European domestic production $20 o Increasing European carbon pricing C$/MMBTU* o
Slide 9: Strong Market Fundamentals for European Gas
STRONG MARKET FUNDAMENTALS FOR EUROPEAN GAS ► Declining European domestic production results in higher €/ton EMISSION ALLOWANCES (EUA CARBON CREDITS) dependence on imports 80.00 PRICE HISTORY o Groningen field will cease production in October 2022 70.00 60.00 o Mature North Sea production is in decl
Slide 10: Rebalancing International Portfolio
REBALANCING INTERNATIONAL PORTFOLIO PRODUCTION FFO FCF INT 2022E VET 33% N.A. INT N.A. INT BASE* 47% 45% N.A. 53% 55% 67% INT N.A. N.A. 2022 FULL YEAR 39% 37% 40% INT PRO FORMA** N.A. INT 61% 60% 63% * Based on company estimates and commodity strip prices at November 26, 2021, excluding the Corrib A
Slide 11: Pro Forma FFO Accretion of 33%
PRO FORMA FFO ACCRETION OF 33% FFO FORECAST* FFO PER SHARE FORECAST* $1,600 $10.00 $9.00 $1,400 $8.00 33% $1,200 $7.00 $1,000 $6.00 $/SHARE $MM $800 $5.00 $4.00 $600 $3.00 $400 $2.00 $200 $1.00 $0 $- 2021E 2022E 2021E 2022E VET Base FY Pro Forma VET Base FY Pro Forma * Based on company estimates, th
Slide 12: Pro Forma FCF Accretion of 53%
PRO FORMA FCF ACCRETION OF 53% FCF FORECAST* FCF PER SHARE FORECAST* $1,200 $7.00 $6.00 $1,000 $5.00 53% $800 $4.00 $/SHARE $MM $600 $3.00 $400 $2.00 $200 $1.00 $0 $- 2021E 2022E 2021E 2022E VET Base FY Pro Forma VET Base FY Pro Forma * Based on company estimates, the 2022 annualized impact of the C
Slide 13: Enhanced Free Cash Flow Yield
ENHANCED FREE CASH FLOW YIELD 2022E FCF YIELD* 60% 50% 40% 30% AVERAGE = 23% 20% 10% 0% VET** CPG ARX ERF NVA MEG PEY BTE WCP BIR CVE TOU AAV POU CNQ SU IMO 2022E FY Pro Forma Average *Source: Peters & Co. estimates as of November 22, 2021, using Peters & Co. 2022 base price deck: WTI US$71.90/bbl;
Slide 14: Enhanced Debt Adjusted Free Cash Flow Yield
ENHANCED DEBT ADJUSTED FREE CASH FLOW YIELD 2022E DAFCF YIELD* 30% AVERAGE = 20% 20% 10% 0% VET** ERF NVA ARX CPG MEG WCP BTE PEY BIR TOU POU AAV CVE CNQ SU IMO 2022E Full-Year Pro Forma Average *Source: Peters & Co. estimates as of November 22, 2021, using Peters & Co. 2022 base price deck: WTI US$
Slide 15: Corrib Has Low Emission Intensity
CORRIB HAS LOW EMISSION INTENSITY SCOPE 1 AND 2 EMISSIONS 70.0 60.0 50.0 kg CO2e/boe 40.0 28.6 30.0 25.0 20.0 10.0 4.2 0.0 Oil Weighted Peers Gas Weighted Peers Average * Scope 1 and 2 emissions before sequestration projects as reported in company disclosures. 15
Slide 16: 2022 Budget and Guidance
2022 BUDGET AND GUIDANCE E&D CAPITAL BUDGET GUIDANCE ► 2022 E&D capital budget of $425 million $500 o North America - $215 million (3% decrease vs 2021) $400 $300 International - $210 million (36% increase vs 2021) $MM o $200 – Increase primarily related to Australia 2-well offshore drilling program
Slide 17: Return of Capital Strategy
RETURN OF CAPITAL STRATEGY ► Plan to reinstate a $0.06 per share quarterly dividend commencing in Q1 2022 o Equates to an annual cash outlay of approximately $40 million o Less than 3% of 2022 full-year pro forma FFO* and approximately 5% based on mid-cycle commodity prices** o Dividend sustainable
Slide 18: Acquisition Accelerates Deleveraging
ACQUISITION ACCELERATES DELEVERAGING NET DEBT AND NET DEBT TO TRAILING FFO RATIO $1,800 2.0x $1,600 1.8x 1.6x $1,400 1.4x $MM $1,200 1.2x $1,000 1.0x -11% $800 0.8x $600 0.6x 2021E 2022E NET DEBT NET DEBT / FFO NET DEBT / FFO (FY Pro Forma) * Based on company estimates, the 2022 annualized impact of
Slide 19: Commodity Hedge Position
COMMODITY HEDGE POSITION 2022 2023 60% 60% PERCENTAGE OF PRODUCTION HEDGED (%)** PERCENTAGE OF PRODUCTION HEDGED (%)** 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 Natural Gas*** Natural Gas Total W
Slide 20: Summary
SUMMARY ► Corrib Acquisition is deleveraging and highly accretive on an FFO and FCF per share basis and enhances our ability to return additional capital to shareholders o Acquisition is self-funded with a quick 2-year payout and high 41% IRR o Eliminates the need for dilutive equity issuance and ma
Slide 21: Summary
SUMMARY ► Our plan to reinstate a $0.06 per share quarterly dividend provides a sustainable base dividend for shareholders while allowing for further debt reduction and capacity for future dividend increases o Return of capital framework will be a staged approach that will increase over time as debt
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