Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (March 2022)
42 slides from Vermilion Energy's investor presentation, March 2022
Slide 1: Vermilion Energy Investor Presentation
MARCH 2022 VERMILION ENERGY INVESTOR PRESENTATION INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED | ESG LEADERSHIP
Slide 2: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES PRODUCITON (2022E PRO FORMA CORRIB ACQUISITION)*** ► Compelling investment with growing free cash flow(1), accelerated deleveraging and OIL (BRENT) return of capital 16% EUROPEAN GAS o Trading at one of the highest FCF yields (>40%)(1,2) and one of the largest valuation di
Slide 3: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Financially disciplined with a focus on balance sheet strength and returning capital to shareholders o 2022E year end net debt(1) of ~$0.4B(2) with a net debt to trailing FFO ratio of ~0.2x(2,3) o Return of capital will be a staged approach that increases over time as fu
Slide 4: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (March 4, 2022) $25.03 (TSX), $19.70 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding (December 31, 2021) 162.3 million Average Daily Trading Volume (shares) 1.9 million (TSX), 2.3 million (NYSE) Quarterly dividend $0.06/share Director and
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: 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 7: Value Driven Acquisition Strategy
VALUE DRIVEN ACQUISTION 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 d
Slide 8: Inventory and Reserve Life Optimization
INVENTORY AND RESERVE LIFE OPTIMIZATION 16 ► 2021 1P and 2P reserve life index increased to 9.7 14 years and 15.4 years, respectively 12 ► Vermilion actively manages its inventory and 10 acquisition strategy to optimize reserve life and YEARS maximize long-term value 8 6 ► Our conventional and semi-
Slide 9: 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 ~$500MM(1) o Total consideration of ~$600MM (including contingent payment), with an effective date of Jan 1, 2022
Slide 10: Pro Forma Financial Outlook
PRO FORMA FINANCIAL OUTLOOK Base Corrib 2022E Vermilion(1) Acquisition(1) Pro Forma(2) ► Our internationally diversified asset portfolio generates significant FFO and FCF FFO (unhedged) $2.3B $0.9B $3.2B FCF (unhedged) $1.9B $0.9B $2.8B ► Pro forma FFO of $2.3 billion, or $3.2 billion on an unhedged
Slide 11: International Diversification
INTERNATIONAL DIVERSIFICATION 11
Slide 12: Three Core Operating Areas
THREE CORE OPERATING AREAS 2022E PRO FORMA CORRIB ACQUISITION* PRODUCTION E&D CAPEX INT N.A. 39% N.A. INT 61% 50% 50% FFO FCF N.A. N.A. 34% 31% INT INT 66% 69% VERMILION FOCUSED IN THREE CORE AREAS – NORTH AMERICA, EUROPE AND AUSTRALIA * Based on company estimates, the 2022 annualized impact of the
Slide 13: Advantages of Internationally Diversified Portfolio
ADVANTAGES OF INTERNATIONALLY DIVERSIFIED PORTFOLIO ► Business drivers o Premium pricing drives top decile netbacks o High quality conventional assets reduces corporate decline rates o Unique high IRR acquisition opportunities (e.g. Corrib) o Diversification helps manage risk, provides capital alloc
Slide 14: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES ► In aggregate, Vermilion’s global crude oil portfolio has $110 sold at an average $5/bbl premium to the Canadian light $100 oil benchmark (MSW) over the past 7 years $90 ► Approximately 38% of Vermilion’s crude oil production is $80 priced with referenc
Slide 15: Premium European Natural Gas Pricing
PREMIUM EUROPEAN NATURAL GAS PRICING ► European natural gas forward price currently trading at GLOBAL NATURAL GAS PRICES ~C$62/mmbtu in 2022 and ~C$34/mmbtu in 2023 ~C$65/ o Significant premium to North American benchmarks mmbtu $60 ► This premium has significantly increased recently due to: o Geopo
Slide 16: 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 17: Enhanced Operating Netback
ENHANCED OPERATING NETBACK 2022E OPERATING NETBACKS $120.00 100% 90% 2022E OPERATING NETBACK ($/BOE)* $100.00 2022E LIQUIDS WEIGHTING (%)* 80% 70% $80.00 60% $60.00 50% AVERAGE = $40.58 40% $40.00 30% 20% $20.00 10% $0.00 0% VET** CPG BTE TVE WCP ERF ARX POU NVA ATH KEL PEY BIR TOU AAV BASE PRO FORM
Slide 18: Focus on Free Cash Flow & Profitability
FOCUS ON FREE CASH FLOW & PROFITABILITY 18
Slide 19: Free Cash Flow
FREE CASH FLOW $14.00 $2,000 $12.00 $10.00 $1,500 $8.00 C$/SHARE $MM $1,000 $6.00 $4.00 $500 $2.00 $0 $0.00 2018 2019 2020 2021 2022E* E&D CAPEX FCF PRO FORMA CORRIB ACQ. CASH FLOW FROM OPERATING ACTIVITIES FCF/SHARE OUR HIGH MARGIN, LOW DECLINE ASSETS GENERATE SIGNIFICANT FREE CASH FLOW * Based on
Slide 20: Compelling Valuation
COMPELLING VALUATION 2022E FCF YIELD* 2023E FCF YIELD* 50% 40% 40% 30% 30% AVERAGE = 23% AVERAGE = 18% 20% 20% 10% 10% 0% 0% VET** BIR ERF WCP BTE PEY ARX NVA CPG TVE TOU AAV POU ATH KEL VET ERF BIR BTE PEY CPG ARX TOU WCP NVA AAV POU TVE ATH KEL 2022E PRO FORMA CORRIB ACQ. AVERAGE 2023E 2022E EV/DA
Slide 21: Free Cash Flow vs Market Capitalization
FREE CASH FLOW VS MARKET CAPITALIZATION FREE CASH FLOW VS MARKET CAPITALIZATION $60.00 60% $50.00 50% $40.00 40% FCF YIELD $/SHARE $30.00 30% $20.00 20% $10.00 10% $0.00 0% 2016 2017 2018 2019 2020 2021 2022E*** FCF/SHARE* SHARE PRICE** FCF YIELD OUR CURRENT SHARE PRICE DOES NOT REFLECT THE VALUE OF
Slide 22: Value Creation 1994 - Current
VALUE CREATION 1994 - CURRENT $6,000 $5,000 $4,000 $3,000 MARKET CAPITALIZATION(3) TOTAL VALUE $2,000 $3.9B CREATION OF $4.6B $MM $1,000 $0 DIVIDENDS ($1,000) EQUITY PAID(2) ISSUED(1) $3.9B ($2,000) ($3.2B) ($3,000) ($4,000) VERMILION HAS GENERATED SIGNIFICANT SHAREHOLDER VALUE OVER THE PAST 27 YEAR
Slide 23: Balance Sheet
BALANCE SHEET 23
Slide 24: Balance Sheet Composition
BALANCE SHEET COMPOSITION CURRENT CREDIT CAPACITY $2.5B ► No near-term maturities AS AT DECEMBER 31, 2021 o Covenant-based credit facility termed out to May 2024 $2,250 o US$ Senior Notes termed out to March 2025 $2,000 o March 2022 redemption price at 101.406% $1,750 $1,500 o March 2023 redemption
Slide 25: Debt Reduction and Future FCF Allocation
DEBT REDUCTION AND FUTURE FCF ALLOCATION ► Reinstated quarterly dividend of $0.06/share in Q1 NET DEBT AND NET DEBT TO TRAILING FFO RATIO 2022 2,500 5.0x o Represents <2% of 2022E FFO o Equates to <5% of FFO at mid-cycle pricing* 2,000 4.0x NET DEBT TO TRAILING FFO ► Majority of excess FCF allocated
Slide 26: 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 LEVERA
Slide 27: Commodity Hedge Position
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 Total Natur
Slide 28: Summary
SUMMARY ► Compelling investment with growing free cash flow, accelerated deleveraging and return of capital, currently trading at the lowest valuations compared to our peers ► Unique portfolio of internationally diversified assets that provide exposure to premium global commodity prices which result
Slide 29: Asset Overview
ASSET OVERVIEW 29
Slide 30: 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% 18% AS % OF FFO North America International Pro Forma Corrib Acq. LOW REINVESTMENT RAT
Slide 31: Europe
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 32: 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 33: 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 20 producing wellbores and five dual lateral sidetracks tied into two platforms ► Two well-program planned for Q2 2022 ► Contracted Wandoo cr
Slide 34: North America
NORTH AMERICA CANADA ► Targeting light oil and condensate-rich natural gas in West Central Alberta and light oil in SE Saskatchewan ► Approximately 400,000 net acres in West Pembina targeting the Mannville (2,400 – 2,700m depth) and Cardium (1,800m) formations with shared surface infrastructure ► Ap
Slide 35: Optimizing FCF in the Powder River Basin
OPTIMIZING FCF IN THE POWDER RIVER BASIN ► Contiguous land position of ~76,000 net acres in the Hilight area with multizone potential Vermilion Acreage o FCF positive with self-funded Turner development over the next 5+ years o Turner inventory of 62(1) locations (24 one-mile and 38 two-mile lateral
Slide 36: Appendix
APPENDIX 36
Slide 37: FFO Sensitivity
FFO SENSITIVITY COMMODITY PRICES* 2022E 2022 ANNUAL FFO SENSITIVITY (C$MM)** (Includes Impact of Corrib Acquisition) Brent (US$/bbl) $99.68 FFO Impact (C$) FFO Impact (C$) Change Hedged Unhedged WTI (US$/bbl) $93.06 LSB = WTI less (US$/bbl) $4.22 WTI & Brent US$1/bbl $10.6MM $16.2MM MSW = WTI less (
Slide 38: 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 39: 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 40: 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 41: 2022 Budget
2022 BUDGET E&D CAPITAL BUDGET GUIDANCE $500 ► 2022 E&D capital budget of $425 million $400 o North America - $215 million (3% decrease vs 2021) $300 $MM – Activity directed to Mannville condensate-rich natural gas $200 wells in Alberta and light-oil development in $100 Saskatchewan and Wyoming $0 2
Slide 42: 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
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