Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (June 2022)
49 slides from Vermilion Energy's investor presentation, June 2022
Slide 1: Vermilion Energy Investor Presentation
JUNE 2022 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES PRODUCTION 2022E PRO FORMA CORRIB & LXE ACQUISITIONS(3) ► Compelling value investment opportunity with robust free cash flow(1) OIL (BRENT) 15% o Trading at one of the highest FCF yields (~35%)(1,2), and largest discount to historical multiple EUROPEAN GAS compared to peer
Slide 3: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Internationally diversified asset portfolio enhances margins and free cash flow o Exposure to premium global commodity prices results in top decile netbacks and reduces cash flow volatility o European natural gas forward prices over $36/mmbtu and Brent ~US$5/bbl premium
Slide 4: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (June 1, 2022) $28.71 (TSX), $22.68 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (March 31, 2022) 162.4 million Average Daily Trading Volume (shares) 1.9 million (TSX), 2.3 million (NYSE) Quarterly dividend $0.06/share Director and Emp
Slide 5: ESG Leadership
ESG LEADERSHIP Environmental Vermilion is committed to reducing the environmental impact of traditional energy production, enriching and caring for the communities in which we live and work, and maintaining our strong corporate governance ► CDP Climate and Water scores of “B” in 2021 have us tied fo
Slide 6: Compelling Valuation
COMPELLING VALUATION 2023E FCF YIELD* 2023E EV/DACF* 40% 5.0x 4.5x Vermilion currently 35% trades at a 1.6x multiple 4.0x less than the peer group 30% average (48% lower) 3.5x AVERAGE = 3.3x 25% 3.0x 20% 2.5x AVERAGE = 17% 2.0x 15% 1.5x 10% 1.0x 5% 0.5x 0% 0.0x VET CPG ERF BTE SDE TVE WCP NVA PEY KE
Slide 7: Historical Valuation Discount
HISTORICAL VALUATION DISCOUNT CURRENT MULTIPLE DISCOUNT / PREMIUM TO 3-YEAR AVERAGE 1.5x 1.0x Vermilion historically traded at a 1.3x premium to the peer group 0.5x 0.0x FWD CONS EV/DACF ∆ TO HISTORICAL -0.5x -1.0x -1.5x -2.0x -2.5x MEG ARX AAV WCP YGR SGY POU KEL CPG ERF NVA TOU BTE VET PEY CR BIR
Slide 8: Positioned for Strong Returns
POSITIONED FOR STRONG RETURNS ► Primary drivers of Vermilion’s historical strong performance o Low debt levels o Diversified asset base that reduces volatility o Top decile netbacks & low declines from conventional / semi-conventional asset base that drive strong FCF o Strong exposure to premium pri
Slide 9: Pro Forma Financial Outlook
PRO FORMA FINANCIAL OUTLOOK Base Corrib & Pro Forma 2022E(1) Vermilion Leucrotta w/ Corrib & ► Our internationally diversified asset portfolio Acquisitions Leucrotta generates significant FFO and FCF FFO (unhedged) $2.2B $0.6B $2.8B ► Continue to anticipate reaching $1.2B debt FCF (unhedged) $1.8B $
Slide 10: Cumulative Free Cash Flow
CUMULATIVE FREE CASH FLOW CUMULATIVE FREE CASH FLOW (2022-2024) 5,000 4,000 3,000 2,000 $MM 1,000 - (1,000) (2,000) 2022E 2023E 2024E CUM FCF @ Strip Pricing* Net Debt @ Strip Pricing* Market Capitalization** VERMILION IS POSITIONED TO GENERATE SIGNIFICANT FREE CASH FLOW * Based on company estimates
Slide 11: Free Cash Flow Allocation Framework
FREE CASH FLOW ALLOCATION FRAMEWORK NET DEBT AND NET DEBT TO TRAILING FFO RATIO FREE CASH FLOW ALLOCATION FRAMEWORK 2,500 5.0x BALANCE SHEET STRENGTH & RETURN TO SHAREHOLDERS 2,000 4.0x ACQUISITIONS 1,500 3.0x FREE CASH 1,000 2.0x $MM FLOW 500 1.0x 0 0.0x -500 -1.0x ► BALANCE SHEET STRENGTHEN TO ► S
Slide 12: International Diversification
INTERNATIONAL DIVERSIFICATION 12
Slide 13: Three Core Operating Areas
THREE CORE OPERATING AREAS 2022E PRO FORMA CORRIB & LXE ACQUISITIONS(1) PRODUCTION E&D CAPEX INT INT 42% N.A. 38% 62% N.A. 58% FFO FCF INT N.A. N.A. INT 57% 39% 43% 61% VERMILION FOCUSED IN THREE CORE AREAS – NORTH AMERICA, EUROPE AND AUSTRALIA (1) Based on company estimates, pro forma Corrib Januar
Slide 14: Advantages of Internationally Diversified Portfolio
ADVANTAGES OF INTERNATIONALLY DIVERSIFIED PORTFOLIO ► Business drivers o Premium pricing drives top decile netbacks o Diversification helps manage risk and reduces market volatility o High quality conventional assets reduces corporate decline rates o Estimated corporate decline rate in the low 20% o
Slide 15: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES ► In aggregate, Vermilion’s global crude oil portfolio has $130 sold at an average $5/bbl premium to the Canadian light $120 oil benchmark (MSW) over the past 7 years $110 $100 ► Approximately 38% of Vermilion’s crude oil production is $90 priced with re
Slide 16: Premium European Natural Gas Pricing
PREMIUM EUROPEAN NATURAL GAS PRICING ► European natural gas forward price currently trading at GLOBAL NATURAL GAS PRICES ~C$36/mmbtu in 2022 and ~C$31/mmbtu in 2023 o Significant premium to North American benchmarks $45 2022 Full Year Realized Prices ~C$37/ ► This premium has significantly increased
Slide 17: European Gas Market Fundamentals
EUROPEAN GAS MARKET FUNDAMENTALS ► Europe consumes approximately 45-50 Bcf/d of natural gas, with demand increasing due to energy transition government policies * ► Power sector gas use is expected to grow during the transition o Germany is shutting down nuclear generation and has recently accelerat
Slide 18: Enhanced Operating Netback
ENHANCED OPERATING NETBACK 2022E OPERATING NETBACKS $100.00 100% $90.00 90% 2022E OPERATING NETBACK ($/BOE)* 2022E LIQUIDS WEIGHTING (%)* $80.00 80% $70.00 70% AVERAGE = $54.07 $60.00 60% $50.00 50% $40.00 40% $30.00 30% $20.00 20% $10.00 10% $0.00 0% VET** CPG BTE TVE WCP NVA ERF ARX POU KEL PEY BI
Slide 19: Acquisitions
ACQUISITIONS 19
Slide 20: 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 21: Inventory and Reserve Life Optimization
INVENTORY AND RESERVE LIFE OPTIMIZATION ► 2021 1P and 2P reserve life index increased to 9.7 16 years and 15.4 years, respectively 14 ► Leucrotta expected to significantly increase 1P and 2P 12 RLI as we achieve plateau production supported by multi-decade inventory 10 YEARS ► Leucrotta adds 20+ yea
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 ~$400MM(1) o Total consideration of ~$600MM (including contingent payment), with an effective date of Jan 1, 2022
Slide 23: Leucrotta Acquisition Overview
LEUCROTTA ACQUISITION OVERVIEW ► Vermilion to acquire Leucrotta Exploration Inc. for total cash consideration of $477 million ► Enhances North American depth and quality of inventory: o Multi-zone, inventory-rich Montney land base of 81,000 (77,000 net) acres; 20+ years of high value Tier 1 drilling
Slide 24: Acquisitions Fully Funded with 2022 FCF
ACQUISITIONS FULLY FUNDED WITH 2022 FCF Excess FCF Options: • Debt Repayment • Increase Base Dividend • Share Buyback ► 2022 budgeted FFO on Nov 2021 pricing was FREE CASH FLOW ALLOCATION • Special/Variable Excess FCFDividend Options: ~$1.2B 2,500 • Debt Repayment • Increase Base Dividend ► Corrib a
Slide 25: Enhanced Value on a Per Share Basis
ENHANCED VALUE ON A PER SHARE BASIS ACCRETIVE PRODUCTION GROWTH ► Announced in excess of $1.2 billion of strategic PRODUCTION PER SHARE (BOE/D PER MM SHARES) acquisitions in 2021 and 2022 100,000 600 ► Acquisitions were done without issuing equity and 95,000 580 560 diluting shareholders 90,000 540
Slide 26: Financial Discipline
FINANCIAL DISCIPLINE 26
Slide 27: 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 ► On-track to achieve ► Paid over $40/share of ► 2P RLI > 15 years ► Ireland Corrib gas $1.2B debt target by dividends 200
Slide 28: Value Creation 1994 - Current
VALUE CREATION 1994 - CURRENT MARKET CAPITALIZATION(3) TOTAL VALUE $4.7B CREATION OF $5.4B DIVIDENDS EQUITY PAID(2) ISSUED(1) $3.9B ($3.2B) VERMILION HAS GENERATED SIGNIFICANT SHAREHOLDER VALUE OVER THE PAST 27 YEARS (1) Equity issued for cash and acquisitions since 1994, including all shares issued
Slide 29: 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* ** FORECASTING TO ACHIEVE TARGETED LEVERAG
Slide 30: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY $2.5B ► No near-term maturities PRO FORMA AS AT APRIL 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 $
Slide 31: 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 32: Summary
SUMMARY ► Compelling investment with robust free cash flow, currently trading at the lowest valuations compared to our peers ► Financially disciplined with a focus on balance sheet strength and returning capital to shareholders o Reinstated a quarterly dividend in Q1 2022 o Forecasting to achieve ta
Slide 33: Asset Overview
ASSET OVERVIEW 33
Slide 34: Vermilion Production History
VERMILION PRODUCTION HISTORY 105,000 90,000 75,000 60,000 BOE/D 45,000 30,000 15,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E* E&D CAPEX 119% 103% 81% 81% 85% 94% 47% 53% 62% 58% 73% 38% 21% AS % OF FFO North America International Pro Forma Corrib & Leucrotta Acquisition L
Slide 35: Europe Assets
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 36: CEE Exploration Potential
CEE EXPLORATION POTENTIAL VERMILION HAS BUILT A HIGHLY PROSPECTIVE EXPLORATION PORTFOLIO ACROSS CEE ► Approximately 2.0 million net acres of undeveloped land in the Pannonian basin across three countries ► Focused on under-invested basins prospective for both oil and gas that can benefit from new te
Slide 37: 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 planned for Q2 2022 ► Contracted Wandoo cr
Slide 38: 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 39: Montney Evaluation Process
MONTNEY EVALUATION PROCESS ► Vermilion team has extensive experience in the Montney o VP Geosciences and multi-disciplined technical team with direct and proven experience in the Montney NEBC o Identified Peace River Arch as a Montney sweet-spot with less Core Leucrotta competition Acquisition ► Ver
Slide 40: Leucrotta Asset Details
LEUCROTTA 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 identifie
Slide 41: Mica Development Plans
MICA DEVELOPMENT PLANS ► Forecast to produce approximately 13,000 boe/d in 2023 4-30 BC AB 5-19 ► Infrastructure plan is in place to achieve a production base of 28,000 boe/d with the option to expand 8-4 A13-7 13-7 ► Longer-term development plan maintains optimal production level Proposed Water Hub
Slide 42: Appendix
APPENDIX 42
Slide 43: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2022E 2022 ANNUAL FFO SENSITIVITY (C$MM)** (Includes Impact of Corrib Acquisition) Brent (US$/bbl) $105.25 FFO Impact (C$) FFO Impact (C$) Change Hedged Unhedged WTI (US$/bbl) $100.38 LSB = WTI less (US$/bbl) $3.38 WTI & Brent US$1/bbl $10.6MM $16.2MM MS
Slide 44: 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 45: 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 46: 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 47: 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 48: 2022 Budget
2022 BUDGET E&D CAPITAL BUDGET GUIDANCE ► 2022 E&D capital budget of $500 million $600 $500 o North America - $290 million $400 $300 $MM o International - $210 million $200 $100 ► 2022 annual production guidance increased to 86,000 to $0 2020 2021 2022 Budget 88,000 boe/d (excluding Corrib Acquisiti
Slide 49: 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