Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Vermilion Energy Trust — Investor Presentation (February 2003)
39 slides from Vermilion Energy's investor presentation, Feb 20, 2003
Slide 1: Corporate Presentation February 2003
CORPORATE PRESENTATION FEBRUARY 2003 Lorenzo Donadeo President & CEO Updated February 20, 2003
Slide 2: Vermilion Energy Trust Overview
Vermilion Energy Trust OVERVIEW ! Vermilion Resources Ltd. Plan of Arrangement ! Approved January 22, 2003 ! Assets split into: ! Vermilion Energy Trust (TSX – VET.UN) ! Clear Energy Inc. (TSX - CEN) ! Began trading January 24, 2003
Slide 3: Value Realization for Shareholders: Reorganization Initiative
Value Realization for Shareholders REORGANIZATION INITIATIVE ! Rationale ! Better alignment of risk and reward ! Flexibility and liquidity for shareholders ! Higher trading multiples ! Preferential access to capital, lower cost of capital ! Challenge to maintain 20% growth above 25,000 boepd ! Taxab
Slide 4: Value Realization for Shareholders: Market Reaction
Value Realization for Shareholders REORGANIZATION INITIATIVE ! Strong market reaction: ! $7.65 per share (Oct 29, 2002 close) ! $12.85 per share (Jan 21, 2003 close) – up 68% ! Further price appreciation potential ! Alignment with peer group valuations ! Aventura Energy growth potential
Slide 5: Vermilion Energy Trust Statistics
Vermilion Energy Trust STATISTICS ! TSX listed: VET.UN ! Trading price (at Jan 31/03): $11.90 ! Units outstanding (including exchangeables): 57.5 mm ! Market capitalization: $684 mm ! First distribution: $0.17 per unit (Mar 14/03) ! Current debt: $210 mm ! Estimated taxability of distributions: 65-7
Slide 6: Why Invest in Vermilion Energy Trust?
Why Invest in Vermilion Energy Trust? ! Proven management team ! Quality assets ! Aventura upside ! No external management fees
Slide 7: Proven Management Team
Why Invest in Vermilion Energy Trust? PROVEN MANAGEMENT TEAM ! 2 of 3 founders of Vermilion Resources Ltd. ! Lorenzo Donadeo, President & CEO ! Claudio Ghersinich, Executive Vice President Business Development ! Acquisition, development and exploitation expertise ! Vermilion Resources Ltd. – a value
Slide 8: Proven Management Team: Ownership
Why Invest in Vermilion Energy Trust? PROVEN MANAGEMENT TEAM ! Management & Directors ownership – 13% ! Aligned with unitholders’ interests ! Think like owners ! Focused on per unit value creation
Slide 9: Quality Assets
Vermilion Energy Trust QUALITY ASSETS ! Stable, mature production of 24,200 boepd ! 90% operated ! New production behind pipe 1,500 boepd ! 150 well prospect inventory ! Quality farm-out inventory ! Long reserve life index – 10.5 years (15 years with Aventura) ! Low operating costs – $5.00/boe ! Hig
Slide 10: Canadian Assets
Vermilion Energy Trust CANADIAN ASSETS ! Production (boepd) (6:1) ALBERTA Drayton district: 9,050 Edmonton district: 8,750 Edmonton Utikuma District Total: 17,800 Peace ! Reserves (mmboe) River Arch Mastin Lake Drayton district: 30.7 Chip Lake Edmonton district: 20.3 Edmonton Drayton Total: 51.1 Dis
Slide 11: French Assets
Vermilion Energy Trust FRENCH ASSETS ! Current production (6:1) ! 6,400 boepd Paris ! Total net acreage Basin ! 710,000 undeveloped Paris FRANCE ! Total reserves ! 36.7 mmboe established Bordeaux Aquitaine Basin
Slide 12: French Assets: Operating Profile
Vermilion Energy Trust FRENCH ASSETS ! Operated in France for 6 years ! High cash flow generating assets ! Low decline, stable production ! Light sweet oil
Slide 13: France Netback Comparison
Vermilion Energy Trust F R A N C E N E T B A C K C O M P A R I S O N (9 Months Ended 2002) FRANCE* CANADA Price (CDN) $34.90 $27.71 Royalties (4.21) (6.85) Operating costs (6.34) (3.71) Operating netback $24.35 $17.15 * Brent based pricing Average pricing for first nine months 2002: Brent: $24.38 US
Slide 14: Production Mix
Vermilion Energy Trust PRODUCTION MIX Gas 43% NGL’s 9% Oil 48%
Slide 15: Aventura Investment
Aventura Investment ! Aventura Energy Inc. (TSX-V:AVR) ! Founded by Vermilion Resources in fall 1999 ! VET owns 72% of AVR common shares ! Junior E&P company ($175 mm market capitalization) ! AVR has 65% WI in the Trinidad Central Block and is the operator ! AVR has sufficient funding for its capita
Slide 16: Trinidad Location Map
Vermilion Energy Trust (Aventura) - Trinidad LOCATION MAP Venezuela Trinidad & Tobago Company lands 250 m Gas condensate fields Oil fields Tobago Pipelines 20 tcf Caribbean Sea TRINIDAD Cum Production: 3,200 mmbbls URR : 6,000 mmbbls PORT PORT of of Central Block SPAIN SPAIN Point Lisas 1 Pointe-a-P
Slide 17: Aventura Assets
Aventura Assets ! Current production ! 20 mmcf/d plus 500 boepd condensate ! 2,500 boepd net to AVR ! Current production potential ! 100 mmcf/d plus condensate ! Current reserves ! 60 mmboe P50 (net to AVR) ! 43 mmboe P50 (VET net at 72%)
Slide 18: Aventura Assets: 2003 Exploration Drilling Targets
Aventura Assets ! 2003 exploration drilling targets ! Saunders #1 – currently drilling - Carapal Ridge appraisal well - Test of sub-thrust play (76 mmboe potential) ! Baraka #1 new pool test - up to 150 mmboe potential (gas/condensate) ! Success in either have potential to double AVR value ! Complet
Slide 19: Aventura Rationale
Aventura Rationale ! Upside value not yet fully defined ! First half 2003 drilling will further define upside value ! Working on expanding gas markets ! Evaluate options to provide value to unitholders once value defined (12 to 18 months)
Slide 20: Aventura Alternatives: Acquire Remaining Equity
Aventura Rationale AVENTURA ALTERNATIVES ! Acquire remaining 28% of equity ! Ideal trust assets ! 15 year RLI ! Goal to expand market to 70 mmcf/d in 2005 ! Cdn$24 mm per year cash flow (AVR net)
Slide 21: Aventura Alternatives: Dispose or Distribute
Aventura Rationale AVENTURA ALTERNATIVES ! Dispose to a third party ! Value prior to 2003 drilling: ! Based on market capitalization - $135 mm ($2.34/unit) ! Based on acquisition cost - $110 mm ($1.95/unit) (Supported by GLJ valuation) ! Distribute AVR shares to unitholders ! Several other alternati
Slide 22: Management Strategy
Vermilion Energy Trust MANAGEMENT STRATEGY ! Sustain asset base ! Low risk drilling ! Accretive acquisitions ! Strategic farm-outs ! Maintain low operating costs ! Geographic diversification ! Commodity mix diversification
Slide 23: Distribution Objectives
Distribution Objectives ! Provide stable distributions ! Maintain a strong balance sheet ! Debt repayments of 5-15% annually ! Set aside cash for future reclamation costs ! $0.20 per barrel produced ! Prudently re-invest capital to maximize production and asset values ! Distribute 80 - 85% of cash f
Slide 24: Hedging Policy
Hedging Policy ! Hedge 30 to 60% of production ! Provide downside protection ! Provide stability of distributions ! Up to 2 years forward ! Current hedges ! 2003 ! 47% of oil production @ $24.74 per bbl WTI ! 41% of gas production @ $5.21 per mcf floor price ! 2004 ! 27% of oil production @ $24.16 p
Slide 25: Per Unit Cash Flow Sensitivity to Commodity Prices
Per Unit Cash Flow SENSITIVITY TO COMMODITY PRICES Gas Gas C$/mcf C$/mcf WTI WTI US$/bbl US$/bbl $4.25 $4.25 $5.25 $5.25 $6.25 $6.25 $32.50 $32.50 $2.40 $2.40 $2.57 $2.57 $2.74 $2.74 $30.00 $30.00 $2.33 $2.33 $2.50 $2.50 $2.67 $2.67 $27.50 $27.50 $2.26 $2.26 $2.43 $2.43 $2.60 $2.60 $25.00 $25.00 $2.
Slide 26: DRIP Plan
DRIP Plan ! Distribution Reinvestment Plan ! 5% bonus incentive of trust units ! Optional Trust Unit Purchase Plan ! Cash purchase ! 5% bonus incentive of trust units ! Maximum of $5,000 per month
Slide 27: Peer Group Comparison
Peer Group Comparison >$600 mm MARKET CAPITALIZATION Avg. Top Quartile VET.UN * RLI (years) 10.6 12.6 10.5-15(1) * Operating netback (per boe) 15.64 17.40 18.91(2) * Operating costs (per boe) boe) 6.62 5.50 5.00 * % Taxable 56 40 65-70 * Gas weighting (%) 49 58 43 * Premium to NAV (%) 33 46 20(3)-0(
Slide 28: Summary
Vermilion Energy Trust SUMMARY ! Premiere Trust ! Quality assets ! Proven management team – think like owners ! Stable distributions with strong value component ! Significant upside through Aventura equity ownership ! International advantage
Slide 29: Legal Disclaimer
Legal Disclaimer This presentation contains forward-looking financial and operational information including earnings, cash flow, unitholder distributions, debt levels, production and capital expenditure projections. These projections are based on the Trust’s expectations and are subject to a number
Slide 30: Corporate Presentation
CORPORATE PRESENTATION FEBRUARY 2003 Lorenzo Donadeo President & CEO
Slide 31: Reference Information: France
Reference Information France
Slide 32: Background on France
Background on France ! 3 producing basins ! Net importer of oil ! Refining capacity 1,946,923 bopd ! Supply 34,000 bopd, 400 mmcf/d ! Unutilized capacity at refineries ! Only 6 companies produce in country ! 2 multinationals ! 4 junior size ! Access to shipping channels
Slide 33: France Fiscal Comparison
France Fiscal Comparison FRANCE CANADA FED. Mining Royalty PROV. Crown Royalty - Onshore up to 1,000 - Sliding scale sensitive bopd and all offshore 0% to production and price - Sliding scale max. 12% - Non-deductible for taxes above 6,000 bopd - 4% on VRM fields (all deductible) Departmental/Munici
Slide 34: Reference Information: Trinidad
Reference Information Trinidad
Slide 35: Trinidad Legal / Hydrocarbon Background
Trinidad LEGAL / HYDROCARBON BACKGROUND ! Stable government and British based rule of law ! Tax-royalty fiscal regime (onshore) ! Royalty + production levy 13% ! (No deductions) ! Supplemental profits tax (sliding scale – oil) 0-21% ! (Deduct royalty, 50% of G&G, 40% devex) ! Petroleum profits tax +
Slide 36: Trinidad 2005 Indicative Netback Analysis
Trinidad “2005 Indicative” Netback Analysis Price (C$/boe, 6:1) 14.00 Royalties 1.65 Lifting costs 0.72 BTAX operating netback 11.63 Government taxes (UL/SPT/PPT) 4.51 ATAX cash flow netback 7.12 UL/SPT/PPT can further be reduced by annual G&A costs and new pools generated by 2003/2004 Capital Expen
Slide 37: Trinidad Natural Gas Markets 1990-2005
Trinidad NATURAL GAS MARKETS - 1990- 2005 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1990 1995 2000 2005E Domestic Sales LNG Sales Sources: Trinidad and Tobago Minister of Energy and Energy Industries; Atlantic LNG Company of Trinidad and Tobago; The National Gas Company of Trinidad and Tobago
Slide 38: Aventura Trinidad, Central Block Location Map
Vermilion Energy Trust – Aventura Trinidad, Central Block Company lands LOCATION MAP Gas condensate fields Oil fields Gas prospects Corosan Balata West Oil prospects 5 13 Field 390 3D seismic area 0 2D seismic Corosan NE Anticlines Corosan-1 Wilson Mandingo Corosan SW NE Baraka- Baraka-1 450 locatio
Slide 39: Central Block Prospect Inventory
Central Block Prospect Inventory FUTURE GROWTH ! 4 to 6 Herrera reservoir prospects and leads currently identified ! 2 shallow Forest / Wilson oil play areas identified (by- passed pay potential and proven undeveloped potential in well BP-404) ! Expanding E and P presence in Trinidad through Bid Rou
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