Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (October 2024)
44 slides from Vermilion Energy's investor presentation, October 2024
Slide 1: Vermilion Energy Investor Presentation October 2024
VERMILION ENERGY INTERNATIONALLY DIVERSIFIED FREE CASH FLOW FOCUSED INVESTOR PRESENTATION ESG LEADERSHIP OCTOBER 2024
Slide 2: Vermilion at a Glance
VERMILION AT A GLANCE Market Summary VET Trading Price (Sept. 30, 2024) $13.20 (TSX), US$9.77 (NYSE) Shares Outstanding (Sept. 30, 2024) 155.3 MM Average Daily Trading Volume (shares) 0.8 MM (TSX), 1.2 MM (NYSE) Quarterly Dividend $0.12/share Capital Structure Market Capitalization $2.1 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 quartile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique oppo
Slide 4: Key Updates
KEY UPDATES Germany Gas Exploration Program • Osterheide well (100% WI) tested at a restricted rate of 17 mmcf/d(1) with 4,625 psi wellhead pressure, on track to bring on production first half of 2025, expect well to produce at a restricted rate • Commenced drilling Wisselshorst well (30% WI) in Aug
Slide 5: Germany Gas Exploration Program
GERMANY GAS EXPLORATION PROGRAM • Successfully completed the Osterheide well (100% WI), flow tested at a restricted rate of 17 mmcf/d(1) with a wellhead pressure of 4,625 psi o Flow rate was constrained by limitations on the testing equipment o Expect on-stream in H1/25 at restricted rate, receiving
Slide 6: Croatia Gas Development
CROATIA GAS DEVELOPMENT • Completed testing operations on the third well of our four-well program on the SA-7 block o Well tested at 5.6 mmcf/d(1), building on results of 300 bbls/d and 4.5 mmcf/d(2) for first two wells tested in Q2 2024 o Plan to test the fourth and final well of this program in Q4
Slide 7: BC Montney Development
BC MONTNEY DEVELOPMENT • Brought on production five (5.0 net) wells on the 9-21 BC pad, wells produced at average IP60(1) rate of over 1,050 boe/d (46% liquids)(2) o Total DCET costs were approximately $9.6 million per well as we continue to make progress towards our normalized targeted cost range o
Slide 8: Capital Allocation
CAPITAL ALLOCATION 8 8
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 $40 AS AT JUNE 30, 2024 NET DEBT PER BOE PRODUCTION ($’000S) 3.5x $35 3.0x $30 NET DEBT TO FFO RATIO $547MM 2.5x $25 2.0x $20 $1,350MM $379MM 1.5x $15 1.0x $10 $250MM 0.5x $5 0.0x $0 Undrawn Capacity on Revolving Credit Facility Accor
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 Q1 Closed acquisition of Equinor’s 36.5% interest in the Corrib INCREASED EUROPEAN GAS EXPOSU
Slide 12: Strong Financial Position
STRONG FINANCIAL POSITION NET DEBT VS FFO* Focus on Debt Reduction Low Debt, Increased ROC & & Asset High-Grade Development of Key Projects $2,000 100 PRODUCTION (‘000 BOE/D) $MM $1,500 95 $1,000 90 $500 85 $0 80 2020 2021 2022 2023 2024e 2025e Net Debt to Trailing FFO* 4.0x 1.8x 0.8x 0.9x 0.8x 0.8x
Slide 13: Compounding Shareholder Returns
COMPOUNDING SHAREHOLDER RETURNS CUMULATIVE SHAREHOLDER RETURNS CUMULATIVE NCIB ACTIVITY $12.00 16 EFCF Payout Target ~50% 14 $10.00 CUMULATIVE RETURN ($/SHARE)* Vermilion returned over SHARES REPURCHASED (MM)** $40/share to shareholders from 12 2003 to 2020 via base dividend $8.00 EFCF Payout 33% 10
Slide 14: Impactful Return of Capital
IMPACTFUL RETURN OF CAPITAL ANNUAL DIVIDEND PER SHARE VS. SHARE COUNT $0.80 165 SHARES OUTSTANDING (MM) DIVIDENDS PER SHARE $0.60 160 6% of FFO $0.40 155 $0.20 150 $0.00 145 2021 2022 2023 2024 YTD* Annualized Dividend per Share Share Count Decreasing share count contributes to ratable dividend incr
Slide 15: International Advantage
wm INTERNATIONAL : ADVANTAGE 15
Slide 16: Advantages of International Diversification
ADVANTAGES OF INTERNATIONAL DIVERSIFICATION 2024e PRODUCTION (1) EXPOSURE TO PREMIUM COMMODITY PRICES DRIVES TOP QUARTILE NETBACKS OIL / EUROPEAN CONDENSATE / GAS NGL 22% (WTI) ASSET DIVERSIFICATION REDUCES RISK AND CASHFLOW VOLATILITY 31% OIL (BRENT) NORTH 15% AMERICAN CONVENTIONAL ASSETS REDUCE CO
Slide 17: European Gas Price Advantage
EUROPEAN GAS PRICE ADVANTAGE HISTORICAL AND FORWARD PRICING OF NATURAL GAS NATURAL GAS $60 PRODUCTION %** 100% $50 Euro Gas 2024 2025 TTF forward pricing is 6x AECO* ~40% of Vermilion’s natural gas production is % Hedged 46% 44% GAS PRICES (C$/MMBTU) $40 priced off premium European benchmarks Averag
Slide 18: Structural Drivers for European Gas
STRUCTURAL DRIVERS FOR EUROPEAN GAS EUROPEAN SUPPLY/DEMAND BALANCE HISTORY** 80 • Europe* consumes an average of ~40 Bcf/d, with a 30 Bcf/d Winter 2023 demand down ~10 Bcf/d due to 2nd warmest winter, government swing between summer and winter 60 policy, and extremely high prices 40 • Russian supply
Slide 19: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE OIL PRICES $140 $14 • Vermilion’s global crude oil portfolio sells at an $120 $12 average $4/bbl premium to the Canadian light oil VET PREMIUM TO MSW (C$/BBL) benchmark (MSW) $100 $10 • Approximately one-third of Vermilion’s crude oil $80 $8 production is priced wi
Slide 20: Premium Operating Netbacks
PREMIUM OPERATING NETBACKS 2024e OPERATING NETBACK $50 100% 2024e OPERATING NETBACK ($/ BOE)* 2024e LIQUIDS WEIGHTING (%)* $40 80% $30 AVERAGE = $27.71 60% $20 40% $10 20% $0 0% Peer 1 Peer 2 Peer 3 VET 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 21: International Operating Netbacks
INTERNATIONAL OPERATING NETBACKS 2024e OPERATING NETBACK 2020 PRODUCTION $80 INTL 32% $60 NORTH AMERICA 68% $/ BOE $40 2024e PRODUCTION (1) PEER AVERAGE = $27.71 $20 INTL 37% NORTH AMERICA 63% $0 Australia Croatia Ireland Netherlands France Germany International assets generate strong netbacks on pr
Slide 22: Low Decline Assets
LOW DECLINE ASSETS BASE PRODUCTION DECLINE 50 At ~84,500 boe/d, our lower decline rate means VET doesn’t need to replace ~6,000 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
Slide 23: 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 24: 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 25: Asset Overview
Nass ASSET OVERVIEW 25 a
Slide 26: 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 • Q2 2024 production = 4,524 boe/d (99% gas) • Corrib represents 100% of Ireland’s domestic gas production GERMANY • Q2 2024 production = 9,616 boe
Slide 27: 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 • Q2 2024 production = 3,
Slide 28: North America
NORTH AMERICA MONTNEY CANADA SOUTHEAST SASKATCHEWAN • Targeting liquids-rich gas in the • Q2 2024 production = 48,943 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 29: 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 30: 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 30
Slide 31: BC Montney Well Results
BC MONTNEY WELL RESULTS BC MONTNEY AVERAGE IP60 PRODUCTION 1,400 Wells are shorter lateral 1,200 length, initially constrained • Brought on production five (5.0 net) wells on 9-21 1,000 by infrastructure, and include several child wells BC pad in Q3 2024, average IP60(1) rate of over 800 boe/d 1,050
Slide 32: Montney Development
MONTNEY DEVELOPMENT • Alberta infrastructure in place and pursuing an Alberta drill-to-fill strategy to optimize the development of the 4-3 Battery overall Montney asset 8-33 Battery • Focus is building out BC infrastructure, construction of 16,000 boe/d battery completed in Q2 2024 o Battery and wa
Slide 33: 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 34: History of International Development
HISTORY OF INTERNATIONAL DEVELOPMENT ACQUIRED 2P RESERVES VS. POST-ACQUISITION PRODUCTION AND 2P RESERVES 350,000 300,000 250,000 MBOE 200,000 150,000 100,000 50,000 - 1 2 ACQUIRED RESERVES RESERVE ADDITIONS PRODUCTION 2023 RESERVES** (1997-2023)* (1997-2023) (1997-2023) France Entered in 1997, acqu
Slide 35: ESG & Sustainability
ESG & SUSTAINABILITY 35
Slide 36: Environment, Social and Governance
ENVIRONMENT, SOCIAL AND GOVERNANCE EMISSIONS INTENSITY TREND Vermilion’s Purpose: 0.030 Scope 1&2 tCO2e per BOE To responsibly produce essential energy 0.025 while delivering long-term value to our people, shareholders, customers, partners 0.020 and communities 0.015 2019 2020 2021 2022 2023 • Reduc
Slide 37: Strong ESG Focus
STRONG ESG FOCUS 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
Slide 38: Sustainability Projects
SUSTAINABILITY PROJECTS Advancing environmental projects 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 energy t
Slide 39: Summary
SUMMARY International energy company with 30 years operating in Europe and North America Diversified portfolio delivers outsized free cash flow, with top quartile netbacks, low declines, and enhanced capital allocation optionality Strong FCF(1) underpinned by robust asset base and unique opportunity
Slide 40: Appendix
APPENDIX 40
Slide 41: Pricing and FFO Sensitivity
PRICING AND FFO SENSITIVITY COMMODITY PRICES* 2024e 2025e 2024 FFO SENSITIVITY (C$MM)** FFO Impact (C$) Change Brent (US$/bbl) $80.84 $71.78 Hedged WTI (US$/bbl) $75.55 $67.37 WTI & Brent US$1/bbl $5MM LSB = WTI less (US$/bbl) $ 6.31 $ 5.75 MSW = WTI less (US$/bbl) $ 4.75 $ 3.74 LSB / WTI US$1/bbl $
Slide 42: 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 43: Budget and Guidance
BUDGET AND GUIDANCE Category 2024 Guidance(1) 2024 Drilling Program Well Count Production (boe/d) 83,000 - 86,000 Germany 3 gross (2.3 net) E&D capital expenditures ($MM) $600 - 625 Croatia 4 gross (2.4 net) Royalty rate (% of sales) 9 - 11% International Total 7 gross (4.7 net) Operating ($/boe) $1
Slide 44: 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
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