Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Vermilion Energy Trust — Investor Presentation (October 2008)
46 slides from Vermilion Energy's investor presentation, October 2008
Slide 1: Investor Presentation October 2008
Investor Presentation October 2008
Slide 2: Legal Disclaimer
Legal Disclaimer This document contains forward-looking financial and operational information including earnings, cash flow, unitholder distributions, debt levels, production, reserves, resources and capital expenditure projections. These projections are based on the Trust’s expectations and are sub
Slide 3: Background
Background • Calgary based global oil and gas production company • Conservative, value driven strategy • Technical expertise in full cycle production and exploration activities • Expand asset base through asset optimization, drilling activities and strategic acquisitions • Focus growth in three regi
Slide 4: Performance Highlights
Performance Highlights • Five year compound average return of 30.4% • Five consecutive years of positive returns • Four consecutive years of top-quartile returns • #1 total return performance for Canadian conventional energy trusts 2005 - 2007 • Positioned for continued strong performance • Good def
Slide 5: Relative Performance
Relative Performance $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Vermilion Energy Trust S&P/TSX Energy Trust Index S&P/TSX Composite Index S&P 500 Composite Index S&P 500 Energy Index
Slide 6: Market Profile
Market Profile VET.UN – Toronto Stock Exchange (Oct 15, 2008) $26.00 Monthly distribution $0.19 Current yield 8.8% Units outstanding 76.8 mm Market capitalization C$2.0 billion Management ownership 9% Net debt (June 30, 2008) $285 mm Debt to cash flow (Q2 annualized) 0.4 x Reserve life index (Dec 31
Slide 7: value creation
value creation
Slide 8: Maximizing Tail-End Reserves
Maximizing Tail-End Reserves 20,000 Original France Acquisition (mmboe): 18,000 Acquired Jan 1997 22.6 Cum prod 1997-2007 22.5 16,000 Remaining Dec 31, 2007 32.5 14,000 12,000 boe/d 10,000 8,000 6,000 4,000 2,000 0 1996 1996PF 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Vermilion Rep SAS
Slide 9: 3-YR Recycle Ratio
3-YR Recycle Ratio 3.0 For every $1.00 invested over the past three years Vermilion has generated over $2.25 in funds from 2.5 operations 2.3 2.0 Average = 1.8 1.5 1.0 0.5 0.0 BTE PEY VET PGX CPG BNP AET PMT NAE ERF PVE TET PGF AVN PWT HTE Based on P50 reserves additions without changes in FDC
Slide 10: 3-YR Reserves Per Unit Growth Rate
3-YR Reserves Per Unit Growth Rate Annual Average from 2004 to 2007 15% 9.3% 10% 4.6% 5% 0.7% 0% -0.9% -5% US Independents VET Cdn Large Cap Cdn Trust Peers
Slide 11: 3-YR Production Per Unit Growth Rate
3-YR Production Per Unit Growth Rate Annual Average from 2004 to 2007 10% 7.2% 7.0% 5% 0% -5% -7.1% -7.3% -10% VET US Independents Cdn Large Cap Cdn Trust Peers
Slide 12: 3-YR Production Per Unit Growth & Yield
3-YR Production Per Unit Growth & Yield Annual Average from 2004 to 2007 15% 14.0% 10% 7.6% 4.6% 5% 0% -5% -6.1% -10% VET US Independents Cdn Large Cap Cdn Trust Peers
Slide 13: 3-YR Yield vs. Total Return
3-YR Yield vs. Total Return Performance from 2004 to 2007 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% VET BTE CPG AET BNP HTE PGF NAE DAY PWT PVE ERF PGX PEY PMT TET AVN Average Yield 3-YR Return
Slide 14: Key Attributes of Vermilion
Key Attributes of Vermilion • Sustainable Low Risk Returns • ‘Free’ Option Value • High Quality Asset Base
Slide 15: sustainable low risk returns
sustainable low risk returns
Slide 16: Business Plan
Business Plan • Hybrid growth / income model • Convert to corporation between 2011 to 2013 • Sheltered from trust tax for 3 to 5 years beyond 2011 • Target single digit (5 - 7%) reserve and production growth on a per unit basis • Maintain current dividend
Slide 17: Conservative Financial Management
Conservative Financial Management • Cash flow allocation – Distributions (25 - 35% of cash flow) – Development capital (35 - 50% of cash flow) • Surplus cash flow – Acquisitions – Debt reduction – Return to unitholders • Sustainable distribution increases • Share buyback
Slide 18: Sustainable Business Model
Sustainable Business Model (2009 Estimates - Based on US$80 WTI and C$6.50 AECO) 175% Cash Payout Average 73%: VET = 48% 150% Average = 134% 125% 100% 75% 50% 25% 0% VET NAE PGF TET BNP PMT PWT PGX CPG DAY BTE ERF PVE AET PEY AVN HTE Distribution as % of CF Dev. Capex as % of CF Average Source: CIBC
Slide 19: Financial Strength
Financial Strength Current total debt divided by 2009E cash flow (based on US$80 WTI and C$6.50 AECO) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Average = 1.8 1.5 1.0 0.5 0.0 VET ERF NAE AET CPG BTE BNP DAY PWT TET PVE PGX PGF PEY AVN PMT HTE Source: CIBC
Slide 20: option value
option value
Slide 21: Verenex Energy Inc.
Verenex Energy Inc. • Founded by Vermilion in 2004 • Vermilion owns approximately 42.4% – 18.8 million shares (Trades on TSX – VNX) • Focused in Libya – 50% interest in 1.5 million acre permit • Strategic review process launched in Sept 2008 – Significant net proceeds expected for VET
Slide 22: Verenex in Libya - Activity Inventory
Verenex in Libya - Activity Inventory • 14 wells drilled & cased to date – 2 active rigs • 8 announced oil discoveries to date • Independently (DM) estimated 1.6 billion boe of contingent and prospective resources • Combined production tests from 10 wells of 97,000 boe/d • Proposed initial productio
Slide 23: Potential Verenex Value
Potential Verenex Value • Third party valuations, VNX per share $10 to $20 • Vermilion value range, $mm $190 to $370 • Vermilion per share value $2.50 to $4.80 • Vermilion accretion value 10% to 18%
Slide 24: Balance Sheet Option - Acquisition
Balance Sheet Option - Acquisition • Financial capacity to acquire $500 mm to $600 mm of properties without issuing equity in a $70 oil price environment • Possible incremental production of 7,000 to 10,000 boe/d • Maintain debt to cash flow at 1.5 - 1.7 times • Potential accretion to Vermilion unit
Slide 25: Total Potential Return
Total Potential Return Current yield 9% Verenex option potential 10 – 18% Balance sheet option potential 20 – 30% Total potential return 9 - 57%
Slide 26: quality assets
quality assets
Slide 27: Asset Highlights
Asset Highlights • High quality high netback properties • Low decline, long reserve life index (>10 yrs) • Drilling inventory of 5 years • Operate 90% of production • Focused, high average working interest (82%)
Slide 28: Performance Highlights
Performance Highlights 6MO 2008 2007 2006 2005 Production (boe/d) 33,407 31,325 27,401 25,166 Fund flows from operations ($/unit) $4.07 $5.28 $4.86 $4.07 Distributions ($/unit) $1.14 $2.06 $2.04 $2.04 Distributions as % of fund flows 25% 35% 38% 46% Total payout ratio as % of funds 42% 73% 77% 90% T
Slide 29: Diversified Leverage to Oil Prices
Diversified Leverage to Oil Prices Geographic Split Western Australia Europe 21% 43% 2008 Guidance: 32,000 - 33,000 boe/d Canada 36% 75% of revenue stream is priced relative to oil Commodity Split Oil 58% NGL’s 4% Netherlands gas ($CDN) 2008 $12.25 / mcf Oil Based 2009 $14.00 / mcf Gas 14% Canadian
Slide 30: Peer Netbacks - 2008E
Peer Netbacks - 2008E After tax cash netback before and net of hedging (based on US$110 WTI and C$8.50 AECO) $70 $60 $48.05 net of hedge $50 $40 Average = $37.16 net $30 $20 CPG VET PWT AET HTE NAE ERF PGF BNP PEY DAY BTE PVE AVN TET PGX PMT Source: CIBC
Slide 31: Top Oil Pool Opportunities
Top 5 Oil Pool Opportunities Targeted incremental WF + EOR = 105 mmboe2 Current total VET reserves = 127 mmboe Unbooked EOR – 5% Potential 2 Unbooked WF – 2% Potential 2 Total Unbooked 1 Resource Potential (899 mmboe) Cumulative 1 Production (545.1 mmboe) 1 GLJ Petroleum Consultants Ltd., France Min
Slide 32: Robust Organic Opportunities
Robust Organic Opportunities Canada 40 - 50 Drayton Valley tight gas locations Over 350 Horseshoe Canyon CBM locations 10 - 15 Utikuma oil well prospects France Over 90 drilling locations and 50 workover opportunities identified in the Paris and Aquitaine Basins Targeting 6 - 10 new drills in 2009
Slide 33: Robust Organic Opportunities
Robust Organic Opportunities Netherlands Over 30 prospects in 3 major play areas averaging 20 - 30 BCF1 of net unrisked resource potential Targeting 4 - 5 new drills in 2009 1 internal estimates Wandoo B Platform Australia 6 to 12 future infill opportunities available 1,000+ boe/d targets 2 wells pl
Slide 34: Australia – Attic Oil
Australia – Attic Oil • As the water enters the pool, both the oil-water and gas-oil contacts move up • Oil will be trapped above the existing wells, creating an opportunity to drill above the existing wells to capture this “attic” oil • 2 wells planned for 2008 – potential 1,000 boe/d each
Slide 35: Vermilion Energy Trust - Summary
Vermilion Energy Trust - Summary • Good defensive position in an uncertain market • Proven, high performing value creation model • Sustainable low risk returns - currently 8.8% yield • ‘Free’ option values provide potential capital appreciation ranging from 10% to 48% • High quality assets • Financi
Slide 36: Background Information
Background Information VERMILION a ——————E_ a EE EE
Slide 37: Canada
Canada Operate in 3 core producing areas with over 800 wells Operate 4 major oil batteries with fluid handling capacity approaching 100,000 b/d Operate several gas treatment centres providing combined capacity of >100 mmcf/d Developing unconventional resource plays Coalbed Methane (CBM) and tight ga
Slide 38: Drayton Valley
Drayton Valley Control over 160,000 net acres of land, approximately 50% undeveloped Stacked zone potential Most areas completed at one well per section or less 2nd half 7-well drilling program in progress Continuous workover and Map area is 80 km x 80 km Grids are 10 square km recompletion program
Slide 39: France
France Largest and most active oil producer in France Operate 350 wells from 19 fields in 2 basins and process over 200,000 b/d of fluid Paris Basin Marine operations at Parentis Field include 28 production and injection platforms Aquitaine Basin Significant EOR potential in 3 major oil pools
Slide 40: Australian Assets
Australian Assets • Wandoo Field - acquired initial 60% interest in March 2005 and balance in June 2007: 15 producing wells and two offshore oil production platforms • Approved as offshore operator in November 2005 • Wandoo Field developed in 1992 with horizontal well technology • Fluid processing c
Slide 41: Australian Opportunities
Australian Opportunities Wandoo B Platform Wandoo B Platform Proposed locations Two attic oil wells scheduled for 2008 6 to 12 future infill opportunities available Reviewing potential for immobilized flank oil recovery 500m x 500m as witnessed at Stag Field
Slide 42: Netherlands Assets
Netherlands Assets • Second largest onshore gas operations in the Netherlands • Operate more than 50 wells on seven production licenses that have produced approximately 1.4 tcf to date • Operate three gas treatment centres with combined capacity of more than 150 mmcf/d • Operate the only offshore pl
Slide 43: Netherlands - Significant Targets
Netherlands - Significant Targets The purchase of production LEEUWARDEN in the Netherlands came with adjacent lands and ZUIDWAL abundant, close in, lower Leeuwarden/Oosterend risk exploration prospects Gorredijk/Steenwijk GORREDIJK These lands are Slootdorp held by production with no forced expiries
Slide 44: Production History
Production History Average Annual Production 35,000 Converted to Trust in 2003 Spun-off Exploreco with 30,000 1,600 boe/d of production 25,000 20,000 BOE/D 15,000 10,000 5,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E France Canada Netherlands Australia
Slide 45: Trading History
Trading History $50.00 Note: Since February 2003, Vermilion $45.00 has also distributed $11.57 per unit to unitholders $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 Conversion to energy trust Jan 24, 2003 $5.00 $0.00 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Apr-06 Apr-08
Slide 46: Company Comparatives
Company Comparatives Large Cap Companies Canadian Energy Trusts – Advantage Canada – ARC – Canadian Natural Res. – Baytex – EnCana – Bonavista – Nexen – Crescent Point – Talisman – Daylight – Enerplus US Independents – Harvest – Apache – NAL – Anadarko – Paramount – Chesapeake – Pengrowth – Devon –
Vermilion Energy Trust — Investor Presentation (October 2008) on 6ix