Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Vermilion Energy Trust — Investor Presentation (June 2003)
47 slides from Vermilion Energy's investor presentation, June 2003
Slide 1: Corporate Presentation June 2003
CORPORATE PRESENTATION JUNE 2003
Slide 2: 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 3: Vermilion Energy Trust Overview
Vermilion Energy Trust OVERVIEW ! Vermilion Resources Ltd. Plan of Arrangement ! Approved January 22, 2003 ! Vermilion Energy Trust (TSX – VET.UN) ! Clear Energy Inc. (TSX - CEN) ! VET.UN began trading January 24, 2003 ! Traded 39.7 mm units to May 31 ! Traded 6.4 mm units in May (290,000 units/day)
Slide 4: Statistics
Vermilion Energy Trust STATISTICS ! TSX listed: VET.UN ! Trading price (May 30/03) $12.70 ! Units outstanding (including exchangeables): exchangeables): 57.5 mm ! Market capitalization $730 ! Net debt March 31, 2003 $194 mm ! Monthly distribution ( First - March 14/03) $0.17 per unit ! Current yield
Slide 5: 2003 Outlook
2003 Outlook ! Average Production: 23,600 BOEPD Cash Flow $148 mm CAPEX $55 mm Distribution $0.17 per unit/month ! Estimated taxability of distributions 65 – 75% ! Pricing Assumptions Q1 Q2-Q4 2003E WTI, US$ per bbl $33.86 $23.00 $25.85 AECO, C$ per mcf $ 8.33 $ 6.30 $ 6.80 ! FX Assumptions $0.662 $
Slide 6: Why Invest in Vermilion Energy Trust?
Why Invest in Vermilion Energy Trust? ! Proven management team ! Management & directors ownership – 12% ! Quality assets ! Light oil and natural gas ! No external management fees ! Aligned with unitholders’ interests ! Aventura upside ! Commitment to realize value by mid-2004
Slide 7: Proven Management Team
Proven Management Team ! 2 of 3 founders of Vermilion Resources Ltd. ! Lorenzo Donadeo, President & CEO ! Claudio Ghersinich, Executive Vice President Business Development ! Strong supporting team ! Curtis Hicks, VP Finance & CFO ! Raj Patel, VP Marketing ! Doug Reynolds, VP Land ! Martin Robert, VP
Slide 8: Quality Assets
Quality Assets ! Stable, mature production of 23,500 + boepd ! 75 – 80% operated ! Substantial well prospect inventory ! Quality farm-out inventory ! Significant workover and secondary recovery potential ! Long reserve life index – 10.3 years (14 years with Aventura) ! Low operating costs – $5.25/bo
Slide 9: Canadian Assets
Vermilion Energy Trust CANADIAN ASSETS ! Production (2003E) ALBERTA Gas (mmcf/d): 59.0 Oil & NGL’s (b/d): 7,400 Slave Lake Total: (boe/d – 6:1) 17,200 Peace ! Reserves (mmboe) River Arch Athabasca Proven: 43.3 Drayton Valley Probable: 18.2 Edmonton Established: 52.5 Central AB ! Total net acreage So
Slide 10: Canadian Assets Key Properties
Canadian Assets KEY PROPERTIES Current Production (May 2003 Estimate) Oil & NGL Gas Total BOPD MMCFD BOED(1) Athabasca 0 6.0 995 Central Alberta 169 11.2 2,028 Drayton Valley 2,925 28.4 7,658 Peace River Arch 284 11.1 2,136 Slave Lake 3,335 1.3 3,554 Southern Foothills 162 4.1 843 6,875 62.1 17,214
Slide 11: Canadian Assets Opportunity Base
Canadian Assets OPPORTUNITY BASE ! Athabasca Shallow gas development drilling ! Central Alberta Shallow gas development drilling ! Drayton Valley Waterflood optimization, development drilling and downspacing ! Slave Lake Infill drilling, waterflood optimization in progress
Slide 12: France Assets
Vermilion Energy Trust FRANCE ASSETS ! Operated in France for 6 years ! Light sweet oil ! Low decline, stable production ! Reserve life index > 15 years ! High cash flow generating assets
Slide 13: France Assets
France Assets ! Production (2003E) ! 6,400 boepd (6:1) Paris ! Reserves (mmboe) Basin Paris Proven: 29.1 Probable: 14.0 FRANCE Established: 36.1 ! Total net acreage Bordeaux Aquitaine Basin ! 710,000 undeveloped
Slide 14: France Assets - Parentis, Aquitaine Basin
France Assets Paris Basin Paris Parentis - Aquitaine Basin FRANCE Bordeaux Aquitaine Basin
Slide 15: France Assets - Malnoue, Paris Basin
France Assets Paris Basin Paris FRANCE Malnoue - Paris Basin Bordeaux Aquitaine Basin
Slide 16: France Assets Production History
France Assets PRODUCTION HISTORY BOE/D 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Aquitaine Basin Paris Basin Total France
Slide 17: France/Canada Oil Netback Comparison
France/Canada Oil Netback Comparison 2002 Oil Netbacks FRANCE* CANADA Price (CDN $/bbl) $35.16 $36.31 Hedge (0.31) (1.08) Royalties (4.42) (8.49) Operating costs (6.10) (5.26) Operating netback $24.33 $21.48 * Brent based pricing Average pricing for 2002: Brent: $24.98 US/BBL WTI: $25.83 US/BBL
Slide 18: Aventura Upside
Vermilion Energy Trust AVENTURA UPSIDE ! Aventura Energy Inc. is a Junior E&P company founded by Vermilion Resources in fall 1999 ! TSX Listed AVR ! Trading Price (May 30/03) $3.90 ! Shares outstanding 44.6 mm ! Market Capitalization $174 mm ! VET owns 72% of AVR common shares ! AVR has 65% WI in th
Slide 19: Aventura Energy Inc. Trinidad Location Map
Aventura Energy Inc. TRINIDAD LOCATION MAP Company lands Venezuela Trinidad & Tobago Gas condensate fields Oil fields Tobago Pipelines 20 tcf Angostura TRINIDAD PORT PORT of of Central oil/gas discovery Caribbean SPAIN SPAIN Block Sea Point Lisas Pointe-a-Pierre Eastern Point Fortin Offshore Field 1
Slide 20: Aventura Energy Inc. Trinidad Location Map
Aventura Energy Inc. TRINIDAD LOCATION MAP Company lands Venezuela Trinidad & Tobago Gas condensate fields Oil fields Tobago Pipelines 20 tcf Point Lisas Industrial Park Angostura TRINIDAD PORT PORT of of Central oil/gas discovery Caribbean SPAIN SPAIN Block Sea Point Lisas Pointe-a-Pierre Eastern P
Slide 21: Aventura Energy Inc. Trinidad Location Map
Aventura Energy Inc. TRINIDAD LOCATION MAP Company lands Venezuela Trinidad & Tobago Gas condensate fields Oil fields Tobago Pipelines 20 tcf Pointe-a-Pierre Refinery - (160,000 BOPD Complex) Angostura TRINIDAD PORT PORT of of Central oil/gas discovery Caribbean SPAIN SPAIN Block Sea Point Lisas Poi
Slide 22: Aventura Energy Inc. Trinidad Location Map
Aventura Energy Inc. TRINIDAD LOCATION MAP Company lands Venezuela Trinidad & Tobago Gas condensate fields Oil fields Tobago Pipelines 20 tcf Point Fortin LNGAngostura Facilities TRINIDAD PORT PORT of of Central oil/gas discovery Caribbean SPAIN SPAIN Block Sea Point Lisas Pointe-a-Pierre Eastern Po
Slide 23: Aventura – Central Block
Aventura – Central Block CENTRAL BLOCK LOCATION MAP - TRINIDAD Company lands Gas condensate fields Oil fields Gas prospects Oil prospects 3D seismic area Corosan Balata West 5 13 2D seismic 390 Field 0 Anticlines Saunders- Saunders-1 Corosan NE Proposed 3D seismic Corosan-1 Wilson Mandingo Corosan S
Slide 24: Aventura – Central Block
Aventura – Central Block CENTRAL BLOCK LOCATION MAP - TRINIDAD Company lands Gas condensate fields Oil fields Gas prospects Oil prospects 3D seismic area Corosan Balata West 5 13 2D seismic 390 Field 0 Anticlines Saunders- Saunders-1 Corosan NE Proposed 3D seismic Corosan-1 Wilson Mandingo Corosan S
Slide 25: Aventura Assets
Aventura Assets ! Current production ! Gross - 20 mmcf/d plus 500 bpd 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 26: Aventura – 2003 Program
Aventura – 2003 Program ! Exploration drilling targets ! Saunders #1 – commencing completion operations to test Herrera formation ! Baraka #1 new pool test - up to 150 mmboe potential (gas/condensate) – currently drilling ! 3-D Seismic extension to cover entire land base ! Negotiate natural gas cont
Slide 27: Aventura – 2003 Exploration Program
Aventura – 2003 Exploration Program CENTRAL BLOCK LOCATION MAP - TRINIDAD Company lands Gas condensate fields Oil fields Gas prospects Oil prospects 3D seismic area Corosan Balata West 5 13 2D seismic 390 Field 0 Anticlines Saunders- Saunders-1 Corosan NE Proposed 3D seismic Corosan-1 Wilson Manding
Slide 28: Aventura Rationale
Vermilion Energy Trust AVENTURA RATIONALE ! 2003 activities will better define Aventura value ! First half 2003 drilling may expand reserve base ! Establishing gas contracts will clarify revenue potential ! Renew short-term contract to 2005 ! Establish high-volume contract for 2005 and beyond ! Eval
Slide 29: Value Realization Alternatives: Acquire Remaining Equity
Aventura Rationale VALUE REALIZATION ALTERNATIVES ! Acquire remaining 28% of equity ! Ideal trust assets ! 15 year RLI ! Goal to expand market to 70-80 mmcf/d in 2005 ! Cdn $35-$40 mm per year cash flow (AVR net)
Slide 30: Value Realization Alternatives: Dispose or Distribute
Aventura Rationale VALUE REALIZATION ALTERNATIVES ! Dispose to a third party ! Value prior to 2003 drilling: ! Based on market capitalization - $125 mm ($2.20/unit) ! Based on acquisition cost - $110 mm ($1.95/unit) (Supported by GLJ valuation) ! Distribute AVR shares to unitholders ! Several other
Slide 31: 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 32: Distribution Objectives
Distribution Objectives ! Provide stable distributions ! Distribute 80 – 85% of cash flow assuming normalized commodity pricing ! Maintain a strong balance sheet ! Set aside cash for future reclamation costs ! $0.20 per barrel produced ! Prudently re-invest capital to maximize production and asset v
Slide 33: Production and Geographic Mix (2003 E)
Production and Geographic Mix (2003 E) Gas 42% Trust Production NGL’s 8% Oil 50% Trinidad 7% France 25% Consolidated Production Canada 68% BOE Production (6:1)
Slide 34: Hedging Policy
Hedging Policy ! Hedge 30 to 60% of production – up to 2 years ! Provide downside protection ! Provide stability of distributions ! Current hedges ! 2003 ! 46% of oil production @ $24.74 per bbl WTI 2/3 of hedged oil is fixed at Cdn $0.63 • ! 43% of gas production - $5.21 per mcf floor price - $5.93
Slide 35: Per Unit Cash Flow Sensitivity to Commodity Prices
Per Unit Cash Flow SENSITIVITY TO COMMODITY PRICES Gas Gas C$/mcf C$/mcf WTI WTI US$/bbl US$/bbl $5.80 $5.80 $6.80 $6.80 $7.80 $7.80 $29.85 $29.85 $2.52 $2.52 $2.67 $2.67 $2.83 $2.83 $27.85 $27.85 $2.46 $2.46 $2.61 $2.61 $2.77 $2.77 $25.85 $25.85 $2.40 $2.40 $2.55 $2.55 $2.71 $2.71 $23.85 $23.85 $2.
Slide 36: 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 37: Peer Group Comparison
Peer Group Comparison >$500 mm MARKET CAPITALIZATION Avg. Top Quartile VET.UN * RLI (years) 10.4 12.8 10.3-14.2(1) * Operating netback (per boe) $16.09 $18.10 $19.59(2) * Operating costs (per boe) $7.17 $5.68 $4.60(2) * % Taxable (2003E) 60 50 65-75 * Gas weighting (%) 54 72 42 * Premium to NAV (%)
Slide 38: Summary
Summary ! Premiere Trust ! Quality assets ! Proven management team ! Stable distributions ! International advantage ! Significant upside through Aventura equity ownership
Slide 39: Corporate Presentation
CORPORATE PRESENTATION JUNE 2003
Slide 40: Reference Information: France
Reference Information France
Slide 41: 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 42: 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 43: Reference Information: Trinidad
Reference Information Trinidad
Slide 44: 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 45: Trinidad 2003 Netback Analysis
Trinidad 2003 Netback Analysis Price (Cdn $/boe, 6:1) $12.79 Royalties 1.33 Lifting costs 2.31 BTAX operating netback 9.15 G&A 1.83 Government taxes (UL/SPT/PPT) 0.14 ATAX cash flow netback $ 7.18 UL/SPT/PPT can further be reduced by annual G&A costs and new pools generated by 2003/2004 Capital Expe
Slide 46: Trinidad Natural Gas Markets 1990-2005
Trinidad NATURAL GAS MARKETS - 1990- 2005 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1990 1992 1994 1996 1998 2000 2002 2004E 2006E On-Shore Markets LNG Markets Sources: Trinidad and Tobago Minister of Energy and Energy Industries; Atlantic LNG Company of Trinidad and Tobago; The National Gas C
Slide 47: 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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