Vermilion Energy Inc. · TSX:VET

Vermilion Energy — Vermilion Energy Trust — Shareholder Meeting (May 2006)

32 slides from Vermilion Energy's shareholder meeting presentation, May 5, 2006

  1. Slide 1: Annual and Special Meeting May 5, 2006

    Annual and Special Meeting May 5, 2006

  2. 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

  3. Slide 3: Statistics

    Statistics Listed on Toronto Stock Exchange VET.UN Trading price (May 1, 2006) $33.60 Monthly distribution (Since February 2003) $0.17 Current yield 6.1% Units outstanding (Including 4.5mm exchangeable shares) 70.0 mm Market capitalization $2.3 bn Average trading volume (Units/day, 2006 YTD) 190,000

  4. Slide 4: Performance Highlights

    Performance Highlights Since Inception Q1 06 2005 2004 Production (boe/d) 26,241 25,166 22,990 Cash flow ($mm) $82.7 $277.2 $169.8 Distributions ($mm) $27.1 $126.2 $122.6 Distributions as % of CF 39% 46% 72% Total Return 299% 11.2% 58% 44.5% Reserves Proven + Probable (P50) (mmboe) 110.85 93.01 Unit

  5. Slide 5: Strategy

    Strategy ƒ Expand asset base through strategic acquisitions, farm- ins, asset optimization and exploitation activities ƒ Focus growth in three regions: Canada, Western Europe & Australia ƒ Control costs by operating its properties - be recognized as a premier operator on and offshore ƒ Expose unitho

  6. Slide 6: Balanced Approach

    Balanced Approach Australia 2006E Production Western 15% Europe 27,500 – 28,500 boe/d 47% Oil 53% Canada 38% NGL’s 3% Oil Based Gas 18% Gas 26%

  7. Slide 7: Quality Assets

    Quality Assets ƒ New acquisitions target under- capitalized properties, rich with low risk opportunities ƒ Strong inventory of investment prospects within each country ƒ Reserves Life Index at Dec 31, 2005 of 11.4 years (proved + probable) ƒ Ability to increase production and reserves from the curre

  8. Slide 8: Sound Financial Position

    Sound Financial Position ƒ Conservative financial management ƒ March 31, 2006 net debt of C$225 million on borrowing base of C$410 mm ƒ Target debt to cash flow ratio of 1.0 times or lower ƒ 0.6 x at March 31, 2006 ƒ 1.1 x upon closing of France acquisition ƒ Debt repayment plan over the balance of

  9. Slide 9: 2005 Review

    2005 Review ƒ Replaced 297% of production ƒ Increased reserves per debt-adjusted unit by 9.5% ƒ Delivered top quartile FD&A costs ƒ Increased the reserve life index to 11.4 years ƒ Acquired Australian production for $95 mm ƒ 4,800 boe/d of production, 16.0 mmboe reserves (P50) ƒ $19,800 per flowing

  10. Slide 10: 2005 Review

    2005 Review ƒ Acquired Glacier Energy for $94 mm ƒ Provides controlling interest in over 100,000 acres of CBM lands in the heart of the Horseshoe Canyon play ƒ Completed both acquisitions (Australia & Glacier) without additional equity ƒ Invested $103 mm in Development Capital ƒ Drilled 55 CBM/shall

  11. Slide 11: 2006 Q1 Highlights

    2006 Q1 Highlights ƒ Announced agreement to acquire an 89.9% interest in Esso Rep for $185 mm ƒ Invested $40 mm in development capital ƒ Drilled 3 new La Torche wells in France ƒ Drilled 32 additional Horseshoe Canyon wells in Alberta ƒ Continued optimization program in the Netherlands ƒ Survived ac

  12. Slide 12: 2006 Expanded Capital Program - $140 mm

    2006 Expanded Capital Program - $140 mm Canada $76 mm Drayton Valley Infills, recompletions Coalbed Methane (60 wells - $33 mm) France $39 mm Paris Basin Dev. drilling (4 wells) Workovers and optimization Aquitaine Basin Production maintenance & workovers Reservoir evaluation potential drill Netherl

  13. Slide 13: France – Proposed Esso Rep Acquisition

    France – Proposed Esso Rep Acquisition ƒ Target June 2006 Closing ƒ Acquire 89.9% of shares of Paris Basin Esso Rep PARIS ƒ Price $185 mm Aquitaine ƒ 3,950 boe/d at acquisition date Maritime BORDEAUX ƒ 15.5 mmboe P50 reserves Aquitaine Basin ƒ P50 RLI = 10.8 years

  14. Slide 14: Proposed Acquisition – Esso Rep Asset Detail

    Proposed Acquisition – Esso Rep Asset Detail ƒ Complementary assets in core Paris areas Paris Basin Assets MALNOUE CHAUNOY CHAMPOTRAN ƒ 10 Fields (3 Paris Basin, 7 Aquitaine VULAINE Basin) VERT-LE-GRAND ST JUST EN BRIE ITTEVILLE BREMONDERIE DONNEMARIE ƒ 2006E production of 3,500 bopd (calendar year,

  15. Slide 15: Large Field Reserves (mmboe)

    Large Field Reserves (mmboe) 600 500 400 300 200 100 0 Utikuma Wandoo Parentis Chaunoy Cazaux Cum Prod Booked Unbooked remaining OIP

  16. Slide 16: Vermilion Large Fields – OOIP 1,474 mmboe

    Vermilion Large Fields – OOIP 1,474 mmboe 30.8% Cum Production Booked Reserves Unbooked OIP 65.5% 3.7%

  17. Slide 17: Vermilion Netbacks – 2005A (C$/boe)

    Vermilion Netbacks – 2005A (C$/boe) Canada France Netherlands Australia Revenue $59.95 $64.00 $41.29 $65.03 Royalties (12.29) (5.46) (0.00) (21.07) OP Cost (7.37) (6.89) (9.63) (9.09) Transportation Expense (0.58) (3.22) (0.00) (0.04) Operating Netback* $39.71 $48.43 $31.66 $34.83 G&A (1.48) (1.69)

  18. Slide 18: Creating Option Value

    CREATING OPTION VALUE

  19. Slide 19: Creating Low-Risk Option Value

    Creating Low-Risk Option Value ƒ Optimize value of assets through creation of joint venture and partnership entities ƒ Provide exposure to high impact opportunities while minimizing risk capital ƒ Verenex Energy Inc. ƒ Aquitaine Maritime prospect

  20. Slide 20: Verenex Energy Inc.

    Verenex Energy Inc. ƒ Trades on Toronto Stock Exchange – VNX ƒ Strong independent management team and board of directors ƒ Vermilion owns approximately 49% (15.2 million shares) ƒ Total cash invested = $15mm ƒ $65 million of option value ($0.90 per VET unit) ƒ Libya 2006 – US$48mm work program (50%

  21. Slide 21: Verenex - Area 47, Libya

    Verenex - Area 47, Libya ƒ 2.7 billion BOE discovered in 54 fields in Ghadames Basin ƒ 1.4 mm acre block ƒ 3 drill ready prospects offsetting discoveries ƒ Area 47 ringed with oil discoveries ƒ Spud anticipated late in Q3 2006 Data Source: IHS Energy (2005) and Beicip Franlab Report (2004)

  22. Slide 22: Aquitaine Maritime

    Aquitaine Maritime 3D Seismic Leads Paris Basin PARIS Aquitaine Maritime BORDEAUX Aquitaine Aquitaine Basin ƒ World-scale exploration leads identified through 2D Basin and 3D seismic completed in 2005 ƒ Offshore extension of geologic trend that includes Parentis Field ƒ Interpreting seismic with bas

  23. Slide 23: Performance

    PERFORMANCE

  24. Slide 24: Peer Group Production (2006E)

    Peer Group Production (2006E) Vermilion measures itself against the top 20 conventional energy trusts 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 PW T ERF CNE AET HTE PGF BNP PTF PW I BTE PVE VET TET PMT PEY SHN NAE CPG PGX AVN Source: CIBC

  25. Slide 25: Reclamation Funding

    Reclamation Funding $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 VET Reclamation Fund ($mm) PV of Asset Retirement Obligation ($mm)

  26. Slide 26: Netback vs Peer Group (2006E)

    Netback vs Peer Group (2006E) Despite tax leakage from foreign operations, Vermilion’s after-tax netbacks are in the top quartile of the peer group $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 VET Source: CIBC

  27. Slide 27: Reserve Life Index – VET vs. Peers

    Reserve Life Index – VET vs. Peers Vermilion’s RLI (P50) has increased to 11.4 years 20 18 16 14 12 10 8 6 4 2 0 VET Source: CIBC

  28. Slide 28: Change In Reserves Per Debt Adjusted Unit (2003-2005)

    Change In Reserves Per Debt Adjusted Unit (2003-2005) VET’s Reserves per Debt Adjusted Unit have increased by 22.7% since conversion to a trust 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 VET Source: Company Reports

  29. Slide 29: Sustainability

    Sustainability 200% 20.0% 175% 17.5% 150% 15.0% 125% 12.5% 100% 10.0% 75% 7.5% 50% 5.0% 25% 2.5% 0% 0.0% VET est Distribution as % of CF Dev. Capex as % of CF Yield

  30. Slide 30: Valuation vs Peer Group (2006E EV/DACF)

    Valuation vs Peer Group (2006E EV/DACF) Vermilion trades below the average of its peer group based on debt-adjusted cash flow measures, without attributing any value to the ‘option value streams’ 10 9 8 Average 7 6 5 4 3 2 1 0 VET Source: CIBC

  31. Slide 31: Building Sustainability

    Building Sustainability ƒ Conservative financial structure ƒ Strong operational expertise ƒ Value added international oil and gas focus ƒ Diverse growth prospects ƒ Option value designed to improve the long term sustainability of the Trust

  32. Slide 32: oY ERMILI AN

    oY ERMILI AN ENERGY TR See Sr stronger than jever [=

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