Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (May 2023)
40 slides from Vermilion Energy's investor presentation, May 2023
Slide 1: Vermilion Energy Investor Presentation
MAY 2023 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (May 1, 2023) $16.90 (TSX), $12.50 (NYSE) Shares Outstanding (March 31, 2023) 162.3 MM Average Daily Trading Volume (shares) 1.7 MM (TSX), 2.3 MM (NYSE) Quarterly dividend $0.10/share Capital Structure Market Capitalization $2.7 B Enterprise Val
Slide 3: What Differentiates Vermilion
WHAT DIFFERENTIATES VERMILION ► Internationally diversified portfolio delivers outsized free cash flow and reduces volatility o Exposure to premium global commodities, top decile netbacks, low base decline and enhanced flexibility for capital allocation ► Global operations with 29 years operating in
Slide 4: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE Vermilion’s Purpose drives ESG focus: To responsibly produce essential energy while delivering long-term value to our people, shareholders, customers, partners and communities EMISSIONS INTENSITY Scope 1&2 tCO2e per BOE Environment • Reduced our emissions intensity
Slide 5: Financial Discipline and Capital Allocation
FINANCIAL DISCIPLINE AND CAPITAL ALLOCATION 5
Slide 6: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES PROVIDE RESILIENT INCREASE RETURN MAINTAIN STRONG MAINTAIN ROBUST AND INCREASING OF CAPITAL AS DEBT BALANCE SHEET ASSET BASE BASE DIVIDEND DECREASES Target net debt to trailing Rolling 10-year plan of Ratable increases up to NCIB approval to FFO ratio of 1.0x or less st
Slide 7: Net Debt vs. FFO
NET DEBT VS. FFO NET DEBT VS FFO (2018 – 2024E) $2,000 $1,500 $MM $1,000 $500 $0 2018 2019 2020 2021 2022 2023E 2024E** WTI (US$/bbl) $64.77 $57.03 $39.40 $67.92 $94.23 $77.20 $73.01 AECO ($/GJ) $ 1.50 $ 1.76 $ 2.23 $ 3.62 $ 5.27 $ 2.80 $ 3.25 TTF ($/mmbtu) $10.23 $ 5.90 $ 4.18 $19.86 $48.37 $20.61
Slide 8: Net Debt vs. Return of Capital
NET DEBT VS. RETURN OF CAPITAL NET DEBT VS. RETURN OF CAPITAL (2021 - 2024E*) $2,000 60% $1,750 50% $1,500 40% $1,250 % of FCF 25% to 30% $MM $1,000 30% $750 20% $500 10% $250 $0 0% 2021 2022 2023E 2024E** Net Debt Return of Capital AS DEBT CONTINUES TO DECREASE, MORE CASH WILL BE AVAILABLE FOR RETU
Slide 9: Financial Leverage
FINANCIAL LEVERAGE NET DEBT TO FFO* CURRENT CREDIT CAPACITY AS AT MARCH 31, 2023 4.5x 4.0x 3.5x $541MM 3.0x 2.5x 2.0x $406MM $1,600MM 1.5x 1.0x 0.5x 0.0x Undrawn Capacity on Revolving Credit Facility Revolving Credit Facility Balance ($0) Senior Unsecured Notes 2025 Maturity Senior Unsecured Notes 2
Slide 10: International Advantage
INTERNATIONAL ADVANTAGE 10
Slide 11: Advantages of International Diversification
ADVANTAGES OF INTERNATIONAL DIVERSIFICATION 2023E PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP DECILE NETBACKS EUROPEAN OIL / GAS CONDENSATE / 19% NGL ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY (WTI) OIL (BRENT) 34% 14% NORTH AMERICAN CONVENTIONAL ASSETS REDUCE CORP
Slide 12: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES ► Vermilion’s global crude oil portfolio sells at an average $140 $12 $5/bbl premium to the Canadian light oil benchmark $120 $10 (MSW) VET PREMIUM TO MSW (C$/BBL) $100 $8 ► Approximately one-third of Vermilion’s crude oil $80 production is priced with r
Slide 13: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE HISTORICAL AND FORWARD PRICING OF NATURAL GAS NATURAL GAS $60 PRODUCTION %** 100% $50 TTF forward pricing is 7x AECO* ~40% of Vermilion’s natural gas production GAS PRICES (C$/MMBTU) $40 is priced off premium European benchmarks 75% $30 50% $20 $10 25% $0 2015 2016 2017
Slide 14: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS Bcf/d EUROPEAN GAS BY SOURCE** 80 ► Europe* consumes 45-50 Bcf/d, with Russia supplying ~40% historically o Russian pipeline imports have been reduced by 85% from ~16 Bcf/d in 2021 60 to ~2 Bcf/d in 2H22 and are not expected to return in the foreseeable future 40
Slide 15: Premium Operating Netbacks
PREMIUM OPERATING NETBACKS 2024E OPERATING NETBACK $100 100% 2024E OPERATING NETBACK ($/ BOE)* $90 $80 75% 2024E LIQUIDS WEIGHTING (%)* $70 $60 $50 50% $40 AVERAGE = $29.67 $30 25% $20 $10 $0 0% 2024E AVERAGE (EXCL VET) LIQUIDS WEIGHTING VERMILION’S INTERNATIONALLY DIVERSIFIED ASSETS GENERATE TOP DE
Slide 16: Valuation Discount
VALUATION DISCOUNT 2024E FCF YIELD* 30% 25% 20% 15% AVERAGE = 12% 10% 5% 0% VET CPG BTE PEY BIR ATH TVE AAV WCP NVA POU PXT ERF CJ TOU HWX ARX KEL 2024E AVERAGE (EXCL VET) VERMILION HAS A TOP DECILE FCF YIELD * Source: RBC Capital Markets estimates as of May 1, 2023, based on 2024 futures pricing as
Slide 17: Operational Excellence
OPERATIONAL EXCELLENCE 17
Slide 18: Global Operational Expertise
GLOBAL OPERATIONAL EXPERTISE ALBERTA MONTNEY, CANADA OVER 900 HORIZONTAL 15 OFFSHORE WELLS WELLS DRILLED IN DRILLED IN AUSTRALIA NORTH AMERICA ONSHORE AND OFFSHORE; CONVENTIONAL AND WANDOO, AUSTRALIA UNCONVENTIONAL HARLINGEN, NETHERLANDS EXPERTISE NINE OPERATED OVER 80 WELLS GAS PLANTS DRILLED IN EU
Slide 19: Operational Excellence
OPERATIONAL EXCELLENCE REAL-TIME DATA DRIVES IMPROVED RESULTS Continuous • Benchmark performance to identify opportunities • Apply best practices across global operations Improvement • Engage external experts Sharing ideas and learnings across multi- Technical • Peer reviews focused on technical exc
Slide 20: Deep Basin Multi-Zone Asset Development
DEEP BASIN MULTI-ZONE ASSET DEVELOPMENT WEST CENTRAL ALBERTA 30,000 25,000 20,000 Production growth from liquids-rich gas zones offset BOE/D 15,000 Cardium declines 10,000 5,000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 OIL LIQUIDS-RICH GAS MULTI-ZONE DEVELOPMENT PROVIDES OPERATIONAL
Slide 21: Future Multi-Zone Asset Potential
FUTURE MULTI-ZONE ASSET POTENTIAL POWDER RIVER BASIN MONTNEY PEACE RIVER ARCH Apply learnings to Powder River and Montney assets Develop and delineate highest return zones in the stack Allocate capital to optimize asset free cashflow CREATING VALUE THROUGH THE APPLICATION OF MULTI-ZONE DEVELOPMENT A
Slide 22: 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 23: Asset Portfolio High Grading
ASSET PORTFOLIO HIGH GRADING Q3 2021 – Acquired a private oil and gas company in ► Wyoming, expanding our multi-zone drilling inventory in HIGHER FREE CASH FLOW PER BOE the Powder River Basin INCREASED EUROPEAN GAS EXPOSURE ► Q2 2022 – Acquired Leucrotta Exploration, adding strategic Montney ass
Slide 24: Summary
SUMMARY ► Internationally diversified portfolio delivers outsized free cash flow and reduces volatility o Exposure to premium global commodities, top decile netbacks, low base decline and enhanced flexibility for capital allocation ► Global operations with 29 years operating in Europe and North Amer
Slide 25: Asset Overview
ASSET OVERVIEW 25
Slide 26: Europe
EUROPE NETHERLANDS ► #2 onshore gas producer IRELAND ► 0.8 million net acres of undeveloped land ► 56.5% operated interest in the Corrib Natural Gas Project ► Q1 2023 production = 4,910 boe/d (99% gas) ► Corrib represents 100% of Ireland’s domestic gas production GERMANY ► Q1 2023 pro forma producti
Slide 27: CEE Exploration Potential
CEE EXPLORATION POTENTIAL ► CROATIA o 975,000 net acres across two licenses prospective for natural gas and light oil o Drilled two gas wells on SA-10; tested at 15 mmcf/d and 17 mmcf/d* o Gas plant scheduled for start-up in early 2024 ► HUNGARY o 615,000 net acres with three licenses prospective fo
Slide 28: 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 21 producing wellbores and five dual lateral sidetracks tied into two platforms ► Two well-program executed in Q2/Q3 2022 ► Platform currentl
Slide 29: North America
NORTH AMERICA CANADA MONTNEY ► Q1 2023 production = 54,991 boe/d (51% liquids) SOUTHEAST SASKATCHEWAN ► Targeting liquids-rich gas in the Peace ► Targeting light oil in conventional River Arch straddling the AB and BC reservoirs border ► ~275,000(1) net acres of land with ► ~80,000 net acres of Mont
Slide 30: Montney Infrastructure Update
MONTNEY INFRASTRUCTURE UPDATE ► Alberta infrastructure in place and pursuing an Alberta drill-to-fill strategy to optimize the development of the overall Montney asset ► Primary focus now is building out BC infrastructure, 4-3 Battery including construction of 16,000 boe/d battery at 8-33 8-33 Batte
Slide 31: Montney Well Optimization
MONTNEY WELL OPTIMIZATION boe/d MONTNEY WELL PRODUCTION(1) 1,400 ► Improved well productivity driven by 1,250 1,200 longer laterals, optimized well placement and plug and perforations completions 1,000 900 800 o AB 06-05 IP30(1) +40% vs. prior AB pad 610 600 440 o BC 16-28 IP30(1) +40% vs. offset BC
Slide 32: 2022 Reserves
2022 RESERVES RESERVE LIFE INDEX 18 16 ► 2P reserves increased 9% to 523 mmboe 14 12 ► Replaced 234% of production on a 2P basis at a 10 YEARS FD&A cost of $19.22/boe, including changes in FDC 8 6 ► High netback production resulted in strong 2P FD&A 4 Operating Recycle Ratio of 4.4 times 2 - 2013 20
Slide 33: ESG and Sustainability
ESG AND SUSTAINABILITY 33
Slide 34: ESG Leadership
ESG LEADERSHIP Vermilion is committed to reducing the environmental impact of traditional energy production, enriching and Environmental caring for the communities in which we live and work, and maintaining our strong corporate governance ► On track to reducing Scope 1 emissions intensity from our o
Slide 35: Sustainability Projects
SUSTAINABILITY PROJECTS ► Vermilion is committed to advancing environmental sustainability and economic inclusivity through partnerships in the communities where we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD ► Our geothermal energy tomato greenhouse project in ► Our
Slide 36: Appendix
APPENDIX 36
Slide 37: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2022 2023E 2024E 2023 FFO SENSITIVITY (C$MM)** FFO Impact (C$) Brent (US$/bbl) $101.19 $81.67 $77.44 Change Hedged WTI (US$/bbl) $94.23 $77.20 $73.01 LSB = WTI less (US$/bbl) $3.38 $5.52 $5.07 WTI & Brent US$1/bbl $11MM MSW = WTI less (US$/bbl) $1.82 $3.
Slide 38: Commodity Hedge Position
COMMODITY HEDGE POSITION 2023 2024 100% 100% PERCENTAGE OF PRODUCTION HEDGED (%)* PERCENTAGE OF PRODUCTION HEDGED (%)* 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Crude Oil European N.A. Corporate Crude Oil European N.A. Corporate Natural Gas Natural Gas Total Natur
Slide 39: 2023 Budget and Guidance
2023 BUDGET AND GUIDANCE Category Guidance(1) 2023 Drilling Program Well Count Production (boe/d) 82,000 - 86,000 Netherlands 2 gross (1.0 net) E&D Capital Expenditures ($MM) $570 Germany 3 gross (2.3 net) Croatia 3 gross (3.0 net) Royalty rate, including windfall royalties (% of sales)(2) 12 - 14%
Slide 40: 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