Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (May 2024)
42 slides from Vermilion Energy's investor presentation, May 2024
Slide 1: Vermilion Energy Investor Presentation
VERMILION ENERGY INTERNATIONALLY DIVERSIFIED FREE CASH FLOW FOCUSED INVESTOR PRESENTATION ESG LEADERSHIP MAY 2024
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (Apr. 30, 2024) $15.86 (TSX), US$11.53 (NYSE) Shares Outstanding (Apr. 30, 2024) 160.2 MM Average Daily Trading Volume (shares) 0.8 MM (TSX), 1.2 MM (NYSE) Quarterly dividend $0.12/share Capital Structure Market Capitalization $2.6 B Enterprise
Slide 3: Key Attributes
KEY ATTRIBUTES International energy company with 30 years operating in Europe and North America Diversified portfolio delivers outsized free cash flow, with top decile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique opport
Slide 4: Key Updates
KEY UPDATES Continued operational momentum • Q1 2024 production of 85,505 boe/d was above the upper end of our guidance range on strong operating performance • Achieved our $1 billion net debt target, reduced net debt to $0.9 billion and leverage to 0.7x, the lowest level in over a decade Investing
Slide 5: Germany Gas Exploration Program
GERMANY GAS EXPLORATION PROGRAM • Targets are on trend and analogous to Netherlands plays where we have drilled 29 gas wells with an average success rate over 70% • Successfully drilled the Osterheide well (100% WI) and discovered gas within the targeted zone, plan to test the well during Q2 2024 an
Slide 6: Croatia Gas Development
CROATIA GAS DEVELOPMENT • Successfully drilled two (1.2 net) of the four (2.4 net) exploration wells on the SA-7 block and completed drilling an additional one (0.6 net) well in April 2024 o All three wells drilled to date discovered hydrocarbons in multiple zones o Testing operations are planned fo
Slide 7: Montney Battery Progress
MONTNEY BATTERY PROGRESS • Construction on 16,000 boe/d battery is in the final stages, on schedule for start-up in late Q2 2024 o Battery increases our total Montney production capacity to approximately 20,000 boe/d, which we intend to fill over the coming years as we build out our BC Montney asset
Slide 8: Capital Allocation
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Slide 9: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Provide Resilient Increase Return of Maintain Strong Maintain Robust & Increasing Base Capital As Debt Balance Sheet Asset Base Dividend Decreases Rolling 10-year plan of NCIB approval to Net debt to trailing FFO Base dividend represents stable production while repurcha
Slide 10: Financial Leverage
FINANCIAL LEVERAGE NET DEBT METRICS* CURRENT CREDIT CAPACITY 4.0x $40 AS AT MARCH 31, 2024 NET DEBT PER FLOWING BARREL ($’000S) 3.5x $35 NET DEBT TO FFO RATIO 3.0x $30 $542MM 2.5x $25 2.0x $20 $400MM $1,600MM 1.5x $15 1.0x $10 0.5x $5 0.0x $0 Undrawn Capacity on Revolving Credit Facility Revolving C
Slide 11: Asset Portfolio High Grading
ASSET PORTFOLIO HIGH GRADING Q2 Acquired Leucrotta Exploration, adding strategic Montney 2022 assets and significantly enhancing the depth and quality of HIGHER FREE CASH FLOW PER BOE our drilling inventory Closed acquisition of Equinor’s 36.5% interest in the Corrib Q1 INCREASED EUROPEAN GAS EXPOSU
Slide 12: Strong Financial Position
STRONG FINANCIAL POSITION NET DEBT VS FFO* Focus on Debt Reduction Low Debt, Increased ROC & High Debt & Asset High-Grade Development of Key Projects $2,000 100 PRODUCTION (‘000 BOE/D) $1,500 75 $MM $1,000 50 $500 25 $0 0 2019 2020 2021 2022 2023 2024e 2025e WTI (US$/bbl) $57.03 $39.40 $67.92 $94.23
Slide 13: Free Cash Flow Allocation
FREE CASH FLOW ALLOCATION FREE CASH FLOW* $1,200 60% $1,000 50% FREE CASH FLOW ($MM) $800 40% EFCF PAYOUT % $600 30% $400 20% $200 10% $0 0% 2021 2022 2023 2024e Debt Reduction Net Acquisitions ARO/Leases Annual EFCF Payout %** Higher FCF and payout % allows us to return ~10% of market cap to shareh
Slide 14: International Advantage
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Slide 15: Advantages of International Diversification
ADVANTAGES OF INTERNATIONAL DIVERSIFICATION 2024e PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP DECILE NETBACKS OIL / EUROPEAN CONDENSATE / GAS NGL 22% (WTI) ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY 31% OIL (BRENT) NORTH 15% AMERICAN CONVENTIONAL ASSETS REDUCE CORP
Slide 16: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE HISTORICAL AND FORWARD PRICING OF NATURAL GAS NATURAL GAS $60 PRODUCTION %** 100% $50 2024 2025 TTF forward pricing is 5x AECO* ~40% of Vermilion’s natural gas production is % Hedged 50% 36% GAS PRICES (C$/MMBTU) $40 priced off premium European benchmarks Average Floor $
Slide 17: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS EUROPEAN SUPPLY/DEMAND BALANCE HISTORY** • Europe* consumes an average of ~40 Bcf/d, with a 30 70 Winter 2023 demand down ~10 Bcf/d Bcf/d swing between summer and winter due to 2nd warmest winter, government 60 policy, and extremely high prices • Russian supply ha
Slide 18: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES $140 $12 • Vermilion’s global crude oil portfolio sells at an $120 $10 average $5/bbl premium to the Canadian light oil VET PREMIUM TO MSW (C$/BBL) benchmark (MSW) $100 $8 • Approximately one-third of Vermilion’s crude oil $80 production is priced with r
Slide 19: Premium Operating Netbacks
PREMIUM OPERATING NETBACKS 2024e OPERATING NETBACK $50 100% 2024e OPERATING NETBACK ($/ BOE)* 2024e LIQUIDS WEIGHTING (%)* $40 80% $30 AVERAGE = $28.01 60% $20 40% $10 20% $0 0% Peer 1 Peer 2 VET Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 AVERAGE (EXCL V
Slide 20: International Operating Netbacks
INTERNATIONAL OPERATING NETBACKS 2024e OPERATING NETBACK $100 $80 $60 $/ BOE $40 PEER AVERAGE = $28.01 $20 $0 Australia France Ireland Croatia Netherlands Germany International assets generate strong netbacks on premium pricing * Source: Based on company 2024 estimates and 2024 full year average ref
Slide 21: Low Decline Assets
LOW DECLINE ASSETS BASE PRODUCTION DECLINE 50 At ~84,000 boe/d, our lower decline rate means VET doesn’t need to replace ~6k boe/d of production 40 AVERAGE = 30% DECLINE RATE (%) 30 20 10 0 Peer 1 VET Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Pee
Slide 22: Global Operational Expertise
GLOBAL OPERATIONAL EXPERTISE ALBERTA MONTNEY, CANADA OVER 900 HORIZONTAL 15 OFFSHORE WELLS WELLS DRILLED IN DRILLED IN AUSTRALIA NORTH AMERICA ONSHORE AND OFFSHORE; CONVENTIONAL AND WANDOO, AUSTRALIA UNCONVENTIONAL HARLINGEN, EXPERTISE NETHERLANDS NINE OPERATED OVER 80 WELLS GAS PLANTS DRILLED IN EU
Slide 23: Value Driven Acquisition Strategy
VALUE DRIVEN ACQUISITION STRATEGY Target underexploited consolidation opportunities and new development within existing core areas • Accretive while minimizing equity dilution to maximize per share value • Generates strong free cash flow in a mid-pricing environment to support a sustainable dividend
Slide 24: Asset Overview
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Slide 25: Europe
EUROPE NETHERLANDS • #2 onshore gas producer IRELAND • 800,000 net acres of undeveloped land • 56.5% operated interest in the Corrib Natural Gas Project • Q1 2024 production = 5,336 boe/d (97% gas) • Corrib represents 100% of Ireland’s domestic gas production GERMANY • Q1 2024 production = 10,057 bo
Slide 26: 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 21 producing wellbores and five dual lateral sidetracks tied into two platforms • New wells drilled every 2-3 years • Q1 2024 production = 4,
Slide 27: North America
NORTH AMERICA MONTNEY CANADA SOUTHEAST SASKATCHEWAN • Targeting liquids-rich gas in the • Q1 2024 production = 46,997 boe/d (46% liquids) • Targeting light oil in conventional Peace River Arch straddling the reservoirs AB and BC border • ~275,000 net acres of land with • ~80,000 net acres of Montney
Slide 28: Expanding Multi-Zone Development
EXPANDING MULTI-ZONE DEVELOPMENT DEEP BASIN MONTNEY PEACE RIVER ARCH POWDER RIVER BASIN Apply Deep Basin learnings to Develop and delineate highest Allocate capital to optimize Montney and PRB assets return zones in the stack asset free cashflow Multi-zone development provides inventory upside and m
Slide 29: Premium Montney Acreage
PREMIUM MONTNEY ACREAGE Oil Wet Gas Dry Gas A significant and contiguous premium acreage block in the oil window of the Montney Source: Land information sourced from XI Technologies Asset Book 29
Slide 30: BC Montney Results
BC MONTNEY RESULTS • First two wells on VET drilled BC Montney 16-28 AVERAGE DAILY WELL PRODUCTION pad (16-28) produced ~700 mboe combined, 1,600 including over 215 mbbls of liquids, in first >1,000 boe/d per well with 30+% 330 days on production 1,400 liquids (majority oil) over the first 330 days
Slide 31: Montney Development
MONTNEY DEVELOPMENT • Alberta infrastructure in place and pursuing an Alberta drill-to-fill strategy to optimize the development of the overall Montney asset 4-3 Battery • Primary focus now is building out BC infrastructure, including construction of 16,000 boe/d battery at 8-33, 8-33 Battery which
Slide 32: 2023 Reserves
2023 RESERVES RESERVE LIFE INDEX 18 16 14 RLI (YEARS) 12 10 8 6 4 2 - 2013 2014 2015 2016 2017 2018** 2019 2020 2021 2022 2023 PDP - RLI* 1P - RLI* 2P - RLI* PDP Average 1P Average 2P Average Proved Developed Proved Plus (1) BOE (mboe) Producing Proved Probable Probable North America 112,204 195,685
Slide 33: ESG & Sustainability
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Slide 34: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE EMISSIONS INTENSITY TREND Scope 1&2 tCO2e per BOE Vermilion’s Purpose: 0.035 To responsibly produce essential energy 0.030 while delivering long-term value to our 0.025 people, shareholders, customers, partners 0.020 and communities 0.015 2018 2019 2020 2021 2022 •
Slide 35: ESG Leadership
ESG LEADERSHIP Vermilion is committed to • Reducing the environmental impact of safe, responsible energy production • Caring for our people and communities, and Environment • Maintaining our strong corporate governance Emission Reduction Focus • On track to reducing Scope 1 emissions intensity by 15
Slide 36: Sustainability Projects
SUSTAINABILITY PROJECTS Advancing environmental sustainability in communities where we live and work PARENTIS SUSTAINABILITY PARTNERSHIP LA TESTE ECO-NEIGHBOURHOOD • Our geothermal energy tomato greenhouse • Our oil operations provide 1MW of geothermal project in Parentis, France provides 8 MW of en
Slide 37: Summary
SUMMARY International energy company with 30 years operating in Europe and North America Diversified portfolio delivers outsized free cash flow, with top decile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique opportunity f
Slide 38: Appendix
APPENDIX 38
Slide 39: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2024e 2025e 2024 FFO SENSITIVITY (C$MM)** FFO Impact (C$) Change Brent (US$/bbl) $86.69 $81.07 Hedged WTI (US$/bbl) $81.13 $75.94 WTI & Brent US$1/bbl $11MM LSB = WTI less (US$/bbl) $6.19 $4.82 MSW = WTI less (US$/bbl) $4.73 $3.65 LSB / WTI US$1/bbl $7MM
Slide 40: Commodity Hedge Position
COMMODITY HEDGE POSITION 2024 2025 PERCENTAGE OF PRODUCTION HEDGED (%)* PERCENTAGE OF PRODUCTION HEDGED (%)* 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Crude Oil European N.A. Corporate Crude Oil European N.A. Corporate Natural Gas Natural Gas Total Natur
Slide 41: Budget and Guidance
BUDGET AND GUIDANCE Category 2024 Guidance(1) 2024 Drilling Program Well Count Production (boe/d) 82,000 - 86,000 Germany 2 gross (1.6 net) E&D capital expenditures ($MM) $600 - 625 France 2 gross (2.0 net) Royalty rate (% of sales) 9 - 11% Croatia 4 gross (2.4 net) Operating ($/boe) $17.00 - 18.00
Slide 42: Advisory
ADVISORY This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an Disclosures, and the Sustainability Accounting Standards Board. Vermilion has used best efforts to align with the most offer to sell or the solicitation of an offer to bu