Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (February 2021)
45 slides from Vermilion Energy's investor presentation, February 2021
Slide 1: Vermilion Energy Investor Presentation
FEBRUARY 2021 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Unique portfolio of internationally diversified, highly efficient conventional oil and gas assets ideally suited to support a growth-and-income capital markets model o Paid out over $40 per share of dividends since 2003 ► Long history of strong profitability and free cas
Slide 3: Core Business Principles
CORE BUSINESS PRINCIPLES ► Maintain a strong balance sheet with low financial leverage o Targeting a Debt-to-Cash Flow ratio of less than 1.5x o Net debt reduction of $200+ million in 2021* ► Manage total payout ratio at less than 100% o 2021 payout ratio less than 65%* ► Consistently deliver result
Slide 4: ESG Leadership
ESG LEADERSHIP We are committed to Environmental, Social and Governance matters Environmental Social Governance We reduce environmental impacts of We are committed to the care of our We demonstrate strong corporate traditional energy production and develop people and those who work with us, and gove
Slide 5: ESG Performance
ESG PERFORMANCE Vermilion demonstrates strong corporate governance, with leadership that sets an example of the highest standards of ethics and integrity and a commitment to the responsible development of our diverse resource portfolio ► CDP Leadership Level rating of “A-” o Top 10% of oil and gas c
Slide 6: 2021 Budget
2021 BUDGET 6
Slide 7: 2021 Budget & Guidance Summary
2021 BUDGET & GUIDANCE SUMMARY ► Disciplined and balanced E&D capital budget of $300 million o Focused on maximizing returns and FCF* o Top priority is debt reduction and preserving financial liquidity ► Annual average production guidance of 83,000 to 85,000 boe/d o Represents 1% to 2% reduction fro
Slide 8: 2021 Capital Allocation
2021 CAPITAL ALLOCATION ► International capex increases 35% year-over- E&D CAPITAL BUDGET GUIDANCE year while North American capex decreases $400 37% year-over-year $350 $300 ► Majority of 1H 2021 drilling program allocated to condensate-rich natural gas wells in Alberta $250 and natural gas wells i
Slide 9: Transition to Level-Loaded Capex
TRANSITION TO LEVEL-LOADED CAPEX QUARTERLY E&D CAPEX & PRODUCTION $250 105,000 100,000 $200 95,000 Optional PRODUCTION (BOE/D) Capital 90,000 E&D CAPEX ($MM) $150 85,000 80,000 $100 75,000 70,000 $50 65,000 60,000 $0 55,000 Q1 2020 Q2 2020 Q3 2020 Q4 2020E* Q1 2021E Q2 2021E Q3 2021E Q4 2021E 2020 E
Slide 10: 2021 FFO & FCF Sensitivity
2021 FFO & FCF SENSITIVITY 2021 FFO SENSITIVITY (UNHEDGED)* $900 $800 $700 $600 $500 $MM FCF Wedge $400 $300 $200 $100 $0 US$40 US$45 US$50 US$55 US$60 US$65 WTI FULL-YEAR AVERAGE PRICE (US$/BBL) 2021 E&D Capital Budget FFO* * Fund Flows from Operations (FFO) is a non-standardized measure (see Advis
Slide 11: International Diversification
INTERNATIONAL DIVERSIFICATION 11
Slide 12: Core Operating Areas
CORE OPERATING AREAS 2021E PRODUCTION* INT 33% N.A. 67% N.A. INT FFO* 48% 52% VERMILION IS FOCUSED IN STABLE CORE AREAS * 2021 production and FFO based on January 13, 2021 strip and company estimates. 2021 strip at January 13, 2021: Brent (US$/bbl) $54.55; WTI US$51.82/bbl; LSB = WTI less US$5.00/bb
Slide 13: Global Commodity Diversification
GLOBAL COMMODITY DIVERSIFICATION PRODUCTION (2021E)* ESTIMATED FFO CONTRIBUTION (2021E)* OIL (BRENT) OIL (BRENT) 16% 25% EUROPEAN GAS 17% OIL / CONDENSATE / OIL / NGL CONDENSATE / EUROPEAN GAS (WTI) NGL NORTH AMERICAN 27% 38% (WTI) GAS 38% 29% NORTH AMERICAN GAS 10% EXPOSURE TO GLOBAL COMMODITY PRIC
Slide 14: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL BENCHMARKS ► Vermilion has significant leverage to oil prices Prompt VET Premium 2021E VET An increase of US$1/bbl generates approximately / (Discount) to WTI o Crude Oil Mix (US$/bbl)* $17MM of incremental FCF on an unhedged basis Brent 35% $4.75 ► Approximate
Slide 15: European Natural Gas Pricing
EUROPEAN NATURAL GAS PRICING ► Vermilion has significant leverage to improving European natural gas GLOBAL NATURAL GAS PRICES prices (+$1/mmbtu = +$28MM incremental FCF) $14 ► European natural gas forward prices are currently in the $8 to $12 $10/mmbtu range, representing a significant recovery from
Slide 16: Focus on Profitability
FOCUS ON PROFITABILITY 16
Slide 17: Return on Average Capital Employed
RETURN ON AVERAGE CAPITAL EMPLOYED RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE) 40% 35% 30% 25% ROACE (%)* 20% 15% 10% 5% 0% -5% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1 Year Average 5 Year VERMILION HAS DELIVER
Slide 18: Relative PDP Recycle Ratio
RELATIVE PDP RECYCLE RATIO 3-YEAR PROVED DEVELOPED PRODUCING (PDP) FD&A RECYCLE RATIOS* 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET YGR WCP BIR TOG CR ERF ARX NVA GXE CPG IPO BTE TOU PONY TVE VII KEL LXE HIGH NETBACKS AND STRONG CAPITAL EFFICIENCIES DRIVE INDUSTRY LEADING RECYCLE RATIOS AND PROFITABILITY * AT
Slide 19: Cost Reduction
COST REDUCTION OPERATING EFFICIENCY ORGANIC CAPITAL EFFICIENCY 14.00 35.00 8% Reduction 12.00 30.00 67% Reduction 10.00 25.00 8.00 20.00 $ / BOE 24% Reduction $ / BOE from 2014 Peak 6.00 15.00 52% Reduction 15% Reduction from 2014 Peak 10.00 4.00 from 2014 Peak 2.00 5.00 0.00 0.00 OPEX* Transportati
Slide 20: Free Cash Flow
FREE CASH FLOW FREE CASH FLOW GENERATION $1,000 $900 $800 $700 $600 $MM* $500 FCF = $400 FFO less $300 CAPEX $200 $100 $0 2016 2017 2018 2019 2020E* 2021E* FFO E&D CAPEX FFO FORECAST E&D CAPEX GUIDANCE FROM 2016 THROUGH 2020 WE REINVESTED ~60% OF FFO INTO E&D CAPEX AND GENERATED ~$1.4 BILLION OF FCF
Slide 21: Relative Valuation
RELATIVE VALUATION SHARE PRICE AS A PERCENTAGE OF BLOW-DOWN NET ASSET VALUE 150% SHARE PRICE / NAV PER SHARE (%)* 125% 100% 75% 50% 25% 0% VET MEG PXT PEY POU VII ARX TOU BIR CPG CNQ CVE WCP SU ERF IMO VERMILION TRADES AT A DISCOUNT TO NAV, PROVIDING AN ATTRACTIVE ENTRY POINT * Source: Peters estima
Slide 22: Summary
SUMMARY ► Unique portfolio of internationally diversified, highly efficient conventional oil and gas assets ideally suited to support a growth-and-income capital markets model o Paid out over $40 per share of dividends since 2003 ► Long history of strong profitability and free cash flow generation o
Slide 23: Balance Sheet
BALANCE SHEET 23
Slide 24: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY C$2.5 BILLION ► No near-term maturities AS AT SEPTEMBER 30, 2020 o Covenant-based credit facility termed out to May 2024 o US$ Senior Notes termed out to March 2025 $0.4 B ► Vermilion’s US$ Senior Notes have no financial covenants*** $0.4 B 4-Year Co
Slide 25: Financial Leverage
FINANCIAL LEVERAGE LEVERAGE RATIOS 4.0x 3.0x 2.0x VERMILION TARGETED LEVERAGE RANGE 1.0x 0.0x 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 NET DEBT TO FFO* NET DEBT TO EBITDA** LOW FINANCIAL LEVERAGE IS ONE OF OUR FIVE CORE BUSINESS PRINCIPLES * Reflec
Slide 26: Asset Overview
ASSET OVERVIEW 26
Slide 27: Vermilion Production
VERMILION PRODUCTION 105,000 90,000 75,000 60,000 BOE/D 45,000 30,000 15,000 0 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016 2017 2018 2019 2020E 2021E E&D CAPEX AS % OF FFO** 50% 36% 40% 38% 43% 32% 59% 115% 100% 77% 77% 80% 85% 43% 49% 57% 53% 63% 53% North America I
Slide 28: Europe
EUROPE NETHERLANDS GERMANY ► #2 onshore gas producer ► Established production operations and IRELAND ► Large and growing inventory of drilling opportunities substantial exploratory land position in ► 20% operated interest in the Corrib ► 1P / 2P Reserves: 11.1 / 21.0 mmboe* the North German Basin Na
Slide 29: CEE Exploration Potential
CEE EXPLORATION POTENTIAL VERMILION HAS BUILT A HIGHLY PROSPECTIVE EXPLORATION PORTFOLIO ACROSS CEE ► Approximately 3.5 million net acres of undeveloped land across three countries (Hungary, Croatia and Slovakia) ► Focused on under-invested basins prospective for both oil and gas that can benefit fr
Slide 30: 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 ► Ten additional drilling opportunities identified* with new
Slide 31: North America
NORTH AMERICA CANADA ► Targeting light oil and condensate-rich natural gas in West Central Alberta and light oil in SE Saskatchewan ► Over 400,000 net acres in West Pembina targeting the Mannville (2,400 – 2,700m depth) and Cardium (1,800m depth) formations with shared surface infrastructure ► Over
Slide 32: Robust Returns Amongst North American Projects
ATAX IRR (%) 20% 40% 60% 80% 0% 100% Ellerslie Frobisher/Alida Marten Hills Montney Montney Montney Eagle Ford Eagle Ford Condy Marcellus Viking Montney Cantuar Mannville Ellerslie Charlie Lake Montney Upper Mannville Frobisher / Alida SE SK Unfracked Dunvegan Montney Upper Mannville Montney Montney
Slide 33: Supplemental Information
SUPPLEMENTAL INFORMATION 33
Slide 34: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (January 29, 2021) $5.60 (TSX), $4.38 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (September 30, 2020) 158.3 million Average Daily Trading Volume (shares) 2.5 million (TSX), 1.8 million (NYSE) Monthly Dividend Currently Suspended Dire
Slide 35: FFO Sensitivity
FFO SENSITIVITY COMMODITY PRICES** ANNUAL 2021 UNHEDGED FFO SENSITIVITY (C$MM)* 2020E 2021E Change FFO Impact (C$) Brent (US$/bbl) $41.67 $54.55 WTI & Brent US$1/bbl $17.0MM WTI (US$/bbl) $39.70 $51.82 LSB = WTI less (US$/bbl) $5.27 $5.00 LSB / WTI Differential US$1/bbl $6.2MM MSW = WTI less (US$/bb
Slide 36: Commodity Hedge Position
COMMODITY HEDGE POSITION 2020 2021 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% WTI Brent European N.A. Corporate WTI Brent European N.A. Corporate Natural Gas Natural Gas Total Nat
Slide 37: European Natural Gas – Long Term Outlook
EUROPEAN NATURAL GAS – LONG TERM OUTLOOK Global Gas Trade to 2035: European Import Dependence Grows ► LNG and pipeline gas import growth is set to continue and will Net imports (bcf/d) As % share of demand require future European gas prices to remain globally competitive 2018 2025 2030 2035 2018 202
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 deploy energy and emissions efficiency improvement projects throughout our operations o In
Slide 39: Environmental Performance
ENVIRONMENTAL PERFORMANCE CDP (FORMERLY CARBON DISCLOSURE PROJECT) ► CDP is a not-for-profit that provides a global disclosure system for investors and companies to manage their environmental impacts, including Climate (results at right) ► Submitted to CDP Water for the first time in 2020, achieving
Slide 40: Social Performance
SOCIAL PERFORMANCE ► Committed to the care of our people and the enrichment of the communities where we live and work ► Give back through strategic community investment o In the past five years, Vermilion has invested more than $9.2 million and 11,100 hours of volunteer time in our communities ► Dem
Slide 41: Parentis Sustainability Partnership
PARENTIS SUSTAINABILITY PARTNERSHIP ► Vermilion received France’s Circular Economy Award for our project to supply geothermal heat from our oil operation to local greenhouses ► The award recognizes economically successful enterprises that operate within a “circular economy,” in which businesses and
Slide 42: La Teste Eco-Neighbourhood
LA TESTE ECO-NEIGHBOURHOOD ► Our operations in La Teste, France now support an eco-neighborhood heated the same way as the tomato greenhouses, using recycled geothermal energy from our oil operation ► 30-year partnership to provide 80% of the energy required for 550 homes ► Provides 1 MW of renewabl
Slide 43: Analyst Coverage
ANALYST COVERAGE FIRM ANALYST PHONE EMAIL ATB Capital Markets Patrick J. O’Rourke, CFA 403-539-8615 porourke@atb.com Bank of America Merrill Lynch Asit Sen, CFA 646-855-2602 asit.sen@baml.com BMO Nesbitt Burns Ray Kwan, P.Eng. 403-515-1501 ray.kwan@bmo.com Canaccord Genuity Anthony Petrucci 403-691-
Slide 44: 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 45: Advisory on Reserves and Resource Disclosure
ADVISORY ON RESERVES AND RESOURCE DISCLOSURE Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 10, 2020 with an effective date of December 31, 2019 relating to our year-end reserves) prepared by GLJ Petroleum
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