Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Investor Presentation (June 2017)
101 slides from Vermilion Energy's investor presentation, June 2017
Slide 1: Internationally Diversified Sustainable Growth and Income
INTERNATIONALLY DIVERSIFIED SUSTAINABLE GROWTH AND INCOME JUNE 2017
Slide 2: Contents
CONTENTS Vermilion Overview............................................................................................................................ 3 Dividends…………............................................................................................................................ 14 Eleme
Slide 3: Vermilion Overview
VERMILION OVERVIEW 3
Slide 4: Vermilion's Key Attributes
VERMILION’S KEY ATTRIBUTES ► Global independent E&P with leading positions in high netback businesses in Europe, North America and Australia ► Self-funded growth-and-income model supported by high margins, low decline rates and strong capital efficiencies ► Defensive issue with multiple risk-reducin
Slide 5: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (May 29, 2017) $43.31 (TSX), $32.07 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding 120.7 million Average Daily Trading Volume (shares) 0.7 million Monthly Dividend $0.215/share Dividend Yield 6.0% Director and Employee Ownership (fully d
Slide 6: Vermilion History
VERMILION HISTORY Issued senior Launched as an Alberta-based oil & unsecured notes in Canadian gas exploration and production company Converted to High Yield market Issued senior IPO in April 1994 at $0.30 per share Vermilion Energy Trust unsecured notes in US Converted from an income Listed First H
Slide 7: Strategy
STRATEGY ► Self-funded growth-and-income ► Targeting yield contraction through per-share growth and risk reduction (low financial and operating leverage, consistent Capital Markets Model dividend history, and diversification) ► Cost reductions and inventory improvements allow us to execute our model
Slide 8: Production Growth and Capex
PRODUCTION GROWTH AND CAPEX ► Vermilion is self-funded for E&D CAPEX and cash dividends Y/Y Y/Y E&D Capital 2017 GUIDANCE – 69,000 TO 70,000 BOE/D Production Year Production PPS CAPEX Intensity (BOE/D) 80,000 Growth* Growth* ($MM) ($/BOE/D)** 70,000 2011 35,202 10% 6% 491 13,900 13% CAGR 60,000 2012
Slide 9: Consistent Production Growth Per Share
CONSISTENT PRODUCTION GROWTH PER SHARE DEBT-AND-DIVIDEND-ADJUSTED INDEXED PRODUCTION PER SHARE (BASE VALUE = 100)* COMPANY 250 (% OF PRODUCTION FROM N.A. GAS)** TOU (87%) PEY (92%) 200 PXT (0%) VET (22%) ARX (67%) BIR (84%) NVA (66%) 150 ERF (54%) WCP (22%) CPG (10%) MEG (0%) BNP (68%) 100 BNE (30%)
Slide 10: E&D Capital Budget
E&D CAPITAL BUDGET Capital Expenditures by Country 2014 Actuals 2015 Actuals 2016 Actuals 2017 Budget* ($MM) ($MM) ($MM) ($MM) Canada 336 202 62 128 France 148 92 69 67 Netherlands 62 47 24 32 Germany 3 5 4 15 Australia 44 62 60 30 USA 1 12 13 16 Ireland 94 67 9 1 Central and Eastern Europe - - 1 6
Slide 11: Fund Flows from Operations (FFO)
FUND FLOWS FROM OPERATIONS (FFO) FFO FFO Y/Y Year $1,000 ($MM) per Share Growth 2011 $474 $5.22 33% $800 2012 $558 $5.69 18% $600 2013 $668 $6.61 20% FFO $MM 2014 $805 $7.63 21% $400 2015 $516 $4.71 (36%) $200 2016 $511 $4.41 (1%) $0 2017E* $630 $5.25 23% 2017E 2018E 2003 2004 2005 2006 2007 2008 20
Slide 12: FFO Sensitivity
FFO SENSITIVITY 2017 Forecast FFO (C$MM) WTI (US$/BBL) 40 45 50 55 60 65 TTF (C$/MMBTU) 5.50 558 590 616 647 680 708 6.00 563 595 620 651 685 713 6.50 568 600 625 656 690 718 7.00 573 605 631 662 695 723 7.50 578 610 636 666 700 728 8.00 581 613 639 670 703 731 Brent to WTI differential ~$3.2MM for
Slide 13: Free Cash Flow Generation
FREE CASH FLOW GENERATION $500 80,000 8% Canadian US 6% $400 70,000 FFO LESS E&D CAPEX* ($MM) 2018E FCF YIELDS ($MM) PRODUCTION (BOE/D) 4% $300 60,000 2% $200 50,000 0% $100 40,000 -2% -4% $0 30,000 -6% -$100 20,000 VET FANG COG CVE SU PXD TOU DVN CNQ HSE CPG CXO ECA APA ARX AR IMO EOG VII 2011 2012
Slide 14: Dividends
DIVIDENDS 14
Slide 15: Monthly Dividends
RELIABLE AND GROWING DIVIDENDS CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q2 2017) = $32.88 $0.25 $0.215 MONTHLY DIVIDENDS $0.20 $0.20 $0.19 $0.17 $0.15 $0.10 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 VERMILION HAS BEEN PAYING A MONTHLY DIVIDEND SINCE 2003 15
Slide 16: Relative Dividend Yield
RELATIVE DIVIDEND YIELD 18% 16% 14% 12% DIVIDEND YIELD 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 VET Average Group average yield including companies not currently paying a dividend HIGHER YIELD THAN PEERS DESPITE RELIABLE AND GROWING DIVIDENDS * Source: National Bank, November 2016.
Slide 17: Sustainability Ratio
SUSTAINABILITY RATIO 200% 175% 162% 150% TOTAL EXPENDITURES / FFO* 140% 125% 121% 117% 121% 111% 109% 111% 100% 108% 75% 81% 89% 82% 74% 73% 70% 50% 59% 25% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E Cash Dividends Base E&D Capex (Excludes Corrib) New Ventur
Slide 18: WTI Break-Evens
WTI BREAK-EVENS $80 $70 $60 $50 AVERAGE $40 US$ WTI $30 $20 $10 $0 VET SPE PXX MEG BTE ATH ERF SU CPG KEL HSE CVE NVA TOG DEE ECA CNQ BNE CJ RRX NBZ RMP PWT WCP IMO POU SGY TET PGF VII Sustaining Capex Dividend (excl. DRIP) VERMILION HAS THE LOWEST SUSTAINING CAPEX BREAK-EVEN WTI PRICE AMONGST PEERS
Slide 19: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL 19
Slide 20: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL SELF-FUNDED GROWTH-AND-INCOME MODEL 1. High Margins 2. Low Base Production Decline Rates 3. Strong Capital Efficiencies Profitability on a per boe basis Required production replacement before growth Cost per boe/d to replace and grow production ► High margins provide in
Slide 21: Cost Reductions
COST REDUCTIONS OPERATIONAL EFFICIENCY CAPITAL EFFICIENCY 14.00 40.00 27% Reduction 12.00 35.00 84% Reduction 30.00 10.00 25.00 8.00 $ / BOE $ / BOE 20.00 6.00 15.00 29% Reduction 4.00 4% Reduction 10.00 2.00 5.00 0.00 0.00 OPEX Transportation G&A 2P F&D (Including FDC) 2012 2013 2014 2015 2016 2011
Slide 22: Netbacks
NETBACKS Q1 2017 Netbacks by Country Canada France Netherlands Germany Ireland Australia United States Total Company ($/BOE*) Sales $33.63 $67.85 $44.19 $47.30 $45.92 $77.11 $55.99 $46.94 Royalties (3.79) (6.06) (0.69) (3.60) - - (15.79) (2.91) Operating Cost (7.42) (12.94) (7.99) (12.96) (4.11) (22
Slide 23: Relative Netbacks
RELATIVE NETBACKS 2017E FIELD NETBACKS (EXCLUDING HEDGING) $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 ATH BTE PMT PPY BIR SPE PEY BXE VET RMP PXX ECA CPG SU HSE CVE NVA KEL TOU TOG ERF DEE AAV BNP RRX BNE CNQ NBZ ARX CR PWT CJ IMO WCP SGY POU TET PGF VII OIL MIXED GAS VET TOP DECILE NETBACK AMONGST BOTH
Slide 24: Full-Cycle Profitability
FULL-CYCLE PROFITABILITY 2016 FULL-CYCLE PROFIT US$/BOE (EXCLUDING HEDGING) $10 $5 $0 US$/BOE -$5 -$10 -$15 -$20 NFX BTE SPE OAS PE DVN SN APC APA PDCE SM COG CLR BIR PXD XEC AREX WLL VET PEY CPG CXO KEL RRC BBG CHK SWN ECA TOG CR EGN CJ RRX AAV NBL EOG TVE WCP SGY VII US CANADA VET *Macquarie Resea
Slide 25: Base Production Decline Rates
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET France 8% 10% 40% ONLY CORPORATE DECLINE NATURAL VET Netherlands** 0% 19% DECLINE CORPORATE 30% EFFECTIVE Germany 10% 12% DECLINE Ireland** 0% 13% 20% Australia** 0% 16% 10% Canada 20% 25% United S
Slide 26: Major Drilling Projects
MAJOR DRILLING PROJECTS Investment Well Cost IP365 EUR Prod. Efficiency ATAX Recycle ATAX Payout Net Well 2017E Net (C$M) (BOE/D) (MBOE) (IP365 $/BOED) ROR Ratio (Years) Inventory* Wells Planned European Gas Netherlands E&D $8.5 1,260 1,350 $6,800 >100% 6.0 x 1.1 66 1.0 Europe Germany Development $3
Slide 27: Reserves / Resources
RESERVES / RESOURCES 27
Slide 28: Reserves and Resource Base
RESERVES AND RESOURCE BASE RESERVES* 2016 RESOURCES* 350 350 300 300 16% CAGR 250 250 200 200 MMBOE 7% CAGR MMBOE 150 150 100 100 50 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Contingent Prospective Proved Reserves Probable Reserves Low Best Estimate High VERMILION’
Slide 29: Recycle Ratios
RECYCLE RATIOS Including FDC RECYCLE RATIO (F&D incl. FDC) 2016 F&D / FD&A Costs* ($/BOE) 6.0x F&D (E&D CAPEX) $5.57 5.0x FD&A (Total CAPEX, $6.62 including acquisitions) 4.0x F&D Operating Recycle Ratio 4.9x 3.0x 2.0x ► 13.1 year P+P reserve life index** 1.0x ► 11% year over year reserve growth ► R
Slide 30: Relative PDP Recycle Ratios
RELATIVE PDP RECYCLE RATIOS 3-YEAR PROVED DEVELOPED PRODUCING (PDP) FD&A RECYCLE RATIOS* 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET BIR RRX ERF PEY BNP RMP BXE DEE PPY YGR ARX PNE TVE NVA TET VII POU KEL TOP RECYCLE RATIOS AMONGST OUR PEER GROUP * AltaCorp Capital research, Oct 2016. Proved Developed Pr
Slide 31: Balance Sheet and Risk Management
BALANCE SHEET AND RISK MANAGMENT 31
Slide 32: Conservative Balance Sheet
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C$1.8 BILLION NET DEBT TO FFO RATIO* PRO-FORMA ESTIMATE AS AT MARCH 31, 2017 4.0 $0.5 B 3.0 $0.4 B 2.0 $0.9 B 1.0 REVOLVING CREDIT FACILITY 0.0 2017E 2018E 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bank Debt US$ Senior Notes Mood
Slide 33: Relative Leverage
RELATIVE LEVERAGE 2017E DEBT TO CASH FLOW 10.0x 9.0x 8.0x 7.0x 6.0x 5.0x US AVERAGE 4.0x 3.0x CANADIAN AVERAGE 2.0x 1.0x 0.0x FRU BTE KOS OAS CRZO BIR FANG SPE RSPP VET JONE MRD PE NVA PDCE EPE WTI BXE ECR KEL TOG ERF CR AAV RRX DNR BBG WPX BNP BNE SGY TET WCP PGF LPI US CANADA VET RELATIVELY LOW LE
Slide 34: Credit Metrics
CREDIT METRICS YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 Q1 2017 Credit Facility ($ millions) 950 1,200 1,750 2,000 2,000 1,400 Undrawn 1 481 425 727 812 618 521 Liquidity 2 583 815 848 853 681 522 Subordinated Debt ($ millions) 225 225 225 225 - 393 Consolidated EBITDA 3 ($ millions) 776 930 1,020 63
Slide 35: Risk Management
RISK MANAGEMENT ► Vermilion employs a systematic process to identify and manage risk across our business Financial Risk Market Risk Operational Risk Diversification of: Hedging program reduces risk associated with Integrated, corporate-wide safety programs ► Product risk Vermilion’s exposure to: red
Slide 36: Annual Commodity Hedge Position
ANNUAL COMMODITY HEDGE POSITION Full Year 2017 Full Year 2018 Full Year 2019 WTI Percent of Production Hedged 36% - - Average Floor / Ceiling / Swap ($/bbl) $70.62 / $79.23 / $70.79 -/-/- -/-/- Brent Percent of Production Hedged 28% 5% - Average Floor / Ceiling / Swap ($/bbl) $71.06 / $82.39 / $73.5
Slide 37: Quarterly Commodity Hedge Position
QUARTERLY COMMODITY HEDGE POSITION OIL HEDGES NATURAL GAS HEDGES Q1 2017 $70.27 European Gas North American Gas $67.61-$73.62 $73.45 $67.27-$79.95 Q1 2017 $7.71 $6.54-$8.03 Q1 2017 $3.09 $2.31-$3.01 $70.00- Q2 2017 $75.00 $70.56-$81.34 Q2 2017 $7.40 $6.49-$7.99 Q2 2017 $2.98 $2.31-$3.01 Q3 2017 $72.
Slide 38: International Diversification
INTERNATIONAL DIVERSIFICATION 38
Slide 39: Core Operating Areas
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 39
Slide 40: Organizational Model
ORGANIZATIONAL MODEL ► Vermilion uses a decentralized business unit structure to manage our diverse global portfolio ► Country-based business units are grouped into three regions: Vermilion Energy Inc. Europe, North America and Australia (Calgary Corporate HQ) ► Each business unit has integrated eng
Slide 41: Vermilion's International Advantage
VERMILION’S INTERNATIONAL ADVANTAGE ► Focused in three core areas (Europe, North America and Australia) with stable, well-developed fiscal and regulatory regimes ► Global asset portfolio provides commodity diversification and premium pricing ► Diversified product portfolio reduces price correlation,
Slide 42: Commodity Mix
COMMODITY MIX PRODUCTION (2017)* 2P RESERVES (YE 2016)** ESTIMATED FFO CONTRIBUTION (2017)* United Australia Australia France France Australia States 12% United 10% 17% 22% 6% 1% States United 2% Germany France States Germany 6% 23% 4% 8% Canada OIL (BRENT) OIL (BRENT) 31% 28% 30% OIL/ OIL (BRENT) O
Slide 43: Commodity Price Diversification
COMMODITY PRICE DIVERSIFICATION Commodity Exposures North American European WTI Brent PORTFOLIO MIX STANDARD DEVIATION* Natural Gas Natural Gas Crude Oil Crude Oil 100% Vermilion STANDARD DEVIATION 80% ANNUALIZED North American Peers 60% International Peers 40% 20% ► Diversified comm
Slide 44: Global Crude Oil Pricing Advantage
GLOBAL CRUDE OIL PRICING ADVANTAGE ► Approximately 65% of Vermilion’s crude oil CRUDE OIL** production is priced with reference to Dated Brent* BRENT $52 WTI $50 ► Reduces Vermilion’s exposure to the Differential ($5) transportation-related discount between Edmonton Differential ($15) Index and WTI
Slide 45: European Natural Gas Pricing
EUROPEAN NATURAL GAS PRICING 45
Slide 46: European Natural Gas Pricing - Summary
EUROPEAN NATURAL GAS PRICING - SUMMARY ► Futures markets continue to reflect a significant premium NATURAL GAS* for European natural gas versus AECO and Henry Hub $12 ► Realized forward prices are expected to be influenced $10 by imports of US Gulf Coast LNG into Europe, GAS PRICE (C$/MMBTU) LNG-BUI
Slide 47: European Natural Gas - Impact of US LNG
EUROPEAN NATURAL GAS – IMPACT OF US LNG ► US LNG liquefaction capacity expected to grow by 7.5 BCF/D (post-FID projects) LNG Costing to Europe from United States US$/mmbtu C$/mmbtu through 2020, potentially increasing US LNG shipments to Europe when pricing Source gas* 3.00 4.00 conditions are favor
Slide 48: European Natural Gas - Domestic Supply / Demand
EUROPEAN NATURAL GAS – DOMESTIC SUPPLY / DEMAND EUROPEAN SUPPLY European Supply & Demand (Bcf/d) 2012 2015 2017E 2020E European Domestic Production 26.5 22.5 21.5 20.0 ► European domestic production continues to decline Russia 9.9 13.8 14.5 14.8 ► Expect continued restrictions on Groningen productio
Slide 49: European Assets
EUROPEAN ASSETS 49
Slide 50: European Core Area
EUROPEAN CORE AREA NETHERLANDS GERMANY ► #2 onshore gas producer ► Establishing production operations and IRELAND ► Large and growing inventory of drilling opportunities substantial exploratory land position in ► Corrib field constitutes ~90% of ► 1P / 2P Reserves: 10.5 / 17.7 mmboe the North German
Slide 51: European Production
EUROPEAN PRODUCTION 35,000 30,000 25,000 20,000 BOE/D 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016 2017E E&D CAPEX AS % OF FFO** n/a 43% 51% 101% 45% 73% 111% 56% 23% 46% 26% 86% 84% 65% 43% 71% 93% 70% 31% 30% France Net
Slide 52: France
FRANCE ► Entered France in 1997 PARIS ► Assets characterized by large OOIP conventional fields with high PARIS BASIN working interest (OOIP in 5 largest fields >1.7 billion barrels of oil) ► Workover, infill drilling and secondary recovery opportunities FRANCE ► Strong free cash flow generator with
Slide 53: France Production
FRANCE PRODUCTION 14,000 12,000 10,000 8,000 BOE/D 6,000 4,000 2,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E E&D CAPEX AS % OF FFO* N/A 43% 51% 101% 45% 73% 111% 82% 30% 43% 30% 57% 41% 37% 21% 43% 63% 48% 46% 43% Crude Oil Gas LONG-TERM
Slide 54: France Operating Performance
FRANCE OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquired Reserves Initial acquisition (1997) 22.6 14,000 2006 Acquisition 15.0 2012 Acquisition #1 6.7 2012 Acquisition #2 6.3 2006 ACQUISITION 12,000 15.0 MMBOE (2P) Total Acquired Reserves 50.6 3,900 BOE/D Production to YE 2016 58.9
Slide 55: Champotran Development
CHAMPOTRAN DEVELOPMENT ► 18 wells drilled from 2013 to 2016 at 100% success rate CHAMPOTRAN PRODUCTION ► Reduced DCET costs by 23% since 2013 6,000 ► 36 net drilling locations identified in reserves and resources* 5,000 ► Successful waterflood program expansion in progress 4,000 ► 4 well program dri
Slide 56: Neocomian Development
NEOCOMIAN DEVELOPMENT NEOCOMIAN – GROWTH POTENTIAL – 4 WELLS PER YEAR ► Part of Paris Basin light oil assets (Neocomian field) acquired 2,500 VERMILION 4 WELLS PER YEAR DRILLING from ZaZa Energy France in December 2012 2,000 PRE-ACQUISITION WORKOVERS / PROGRAM OPTIMIZATIONS ► 45% production growth s
Slide 57: Cazaux Field Optimization
CAZAUX FIELD OPTIMIZATION ► Cazaux field acquired by Vermilion in 2006 ► One of France’s largest conventional fields (400MMbbl OOIP); CAZAUX PRODUCTION located in the Aquitaine Basin 2,500 ► 70% production growth since acquisition Pre-acquisition Vermilion Workovers / Optimizations ► Achieved solely
Slide 58: Netherlands
NETHERLANDS ► Entered Netherlands in 2004 HARLINGEN ► #2 onshore gas producer ► High impact natural gas drilling and development ► Strong gas price, favorable fiscal regime, and low OPEX enhance netbacks AMSTERDAM NETHERLANDS ► Seven consecutive years of organic production growth while generating FC
Slide 59: Netherlands Production
NETHERLANDS PRODUCTION NETHERLANDS - Expected per well risked economics (based on recent drilling) DCET Well Cost ($ million) $8.5 Expected IP30 Rate (boe/d) 1,690 10,000 Expected EUR per well (mboe) 1,350 After Tax ROR (%) >100% After Tax Payout (years) 1.1 After Tax NPV10 ($ million) $15.4 8,000 R
Slide 60: Netherlands Operating Performance
NETHERLANDS OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquired Reserves Initial acquisition (2004) 16.5 14,000 2013 Acquisition 2.3 2016 Acquisition (Drenthe WI) 0.6 12,000 INITIAL ACQUISITION Total Acquired Reserves 19.4 16.5 MMBOE (2P) 2013 ACQUISITION PRODUCTION (BOE/D) 5,900 BOE/
Slide 61: Netherlands Activity
NETHERLANDS ACTIVITY ► Vermilion has tripled its undeveloped land base since the beginning of 2012 ► We have drilled 12 high-rate extension and discovery gas wells since 2009, with an average success rate of 67% over this period ► 66 identified future net drilling locations in reserves and resources
Slide 62: Germany
GERMANY COUNTRY OVERVIEW ► Largest gas market in Europe, with a long history of oil and natural gas development ► Country-wide production is approximately 48 kbbl/d of oil and 0.75 Bcf/d of natural gas (170 kboe/d) GAS AND OIL PRODUCING ► Consistent fiscal framework and low political risk FIELDS PRO
Slide 63: German Land Position
GERMAN LAND POSITION Initial Non-Operated DUMMERSEE-UCHTE ACQUISITION (2014) Acquisition ► First entry into Germany, non-operated interest Farm-In Agreement ► 2016 production 2,400 boe/d Awarded Licenses ► Member of 4 party consortium operated by Exxon Engie Acquisition ► 50,000 net acres (85% undev
Slide 64: Germany Production
GERMANY PRODUCTION GERMANY – Burgmoor Z3 Sidetrack (Non-op gas assets, reflects 25% W.I.) DCET Well Cost ($ million) $3.8 IP30 Rate (boe/d) 350 5,000 EUR per well (mboe) 780 ENGIE ACQUISITION After Tax ROR (%) 34% (CLOSED DECEMBER After Tax Payout (years) 3.0 After Tax NPV10 ($ million) $4.6 19, 201
Slide 65: Ireland
IRELAND OVERVIEW ► Vermilion holds 18.5% non-operated interest in the Corrib gas field, offshore Ireland ► Corrib field constitutes ~95% of Ireland’s gas production ASSET CHARACTERISTICS ► Pricing indexed to National Balancing Point (NBP) (UK) ► No royalties, low OPEX and minimal ongoing CAPEX trans
Slide 66: Ireland Production
IRELAND PRODUCTION 12,000 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2015 2016 2017E E&D CAPEX AS % OF FFO* NM 9% 1% Gas EFFICIENT TRANSLATION OF REVENUE → FUND FLOWS FROM OPERATIONS → FREE CASH FLOW * 2017E: Company estimates as of May 29, 2017 with 4 months of actual prices and remainder of year at Ma
Slide 67: Corrib Performance
CORRIB PERFORMANCE 400 Production volumes reach ► Planned downtime, or constrained production, has full plant capacity occurred for plant maintenance, well testing, pressure 350 build-ups and partner marketing decisions First gas December 300 30, 2015 ► Planned and unplanned downtime decreased from
Slide 68: Central and Eastern Europe (CEE)
CENTRAL AND EASTERN EUROPE (CEE) EXTENSION OF EUROPEAN GROWTH STRATEGY ► Modest back-loaded capital commitments BRATISLAVA ► Prospective for both oil and gas ► Under-invested basin that can benefit from new technology CROATIA ► Awarded 4 exploration concessions covering nearly 2.35 million acres (10
Slide 69: North American Assets
NORTH AMERICAN ASSETS 69
Slide 70: Canada
CANADA ► Production and assets focused in West Pembina near Drayton Valley and Northgate in SE Saskatchewan ► In West Pembina, potential for three significant development projects sharing the same surface infrastructure ► Cardium light oil development - 90,000 net acres (1,800 m depth) ► Mannville l
Slide 71: Canada Production
CANADA PRODUCTION 30,000 25,000 20,000 BOE/D 15,000 10,000 5,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E E&D CAPEX AS % OF FFO* 21% 36% 67% 58% 31% 76% 247% 225% 165% 101% 86% 104% 42% 60% Crude Oil & NGL Gas 2017 CAPEX PROGRAM DELIVERS PRODUCTION GROWTH WITH FREE CA
Slide 72: West Pembina Cardium
WEST PEMBINA CARDIUM ► Dominant 90,000 net acre land position in West Pembina Cardium resource play ► Pembina is the largest conventional oil field in Western Canada ► Control key infrastructure: 15,000 bbl/d oil battery and two owned and operated gas plants VET OIL BATTERY ► Lifting costs ~$6 per b
Slide 73: Cardium Development
CARDIUM DEVELOPMENT NET CARDIUM PROSPECT INVENTORY* 12,000 AS AT MARCH 31, 2017 10,000 8,000 WELLS DRILLED 6,000 BOE/D 207 4,000 UNRISKED CONTINGENT REMAINING 2P 2,000 DEVELOPMENT LOCATIONS PENDING 70 0 252 2009 2010 2011 2012 2013 2014 2015 2016 2017E NET WELLS DRILLED 0 19 49 52 51 28 3 0 5 Crude
Slide 74: West Pembina and Ferrier Mannville
WEST PEMBINA AND FERRIER MANNVILLE NOTIKEWIN Industry Mannville Horizontals Key Oil Battery ► 340 net sections (220,000 acres) of Mannville rights, largely held Key Gas Plant by production Key Compressor VET Gas Pipeline ► 29 net West Pembina (Lower Mannville) wells drilled with an average productio
Slide 75: West Pembina (Lower Mannville) Condensate-Rich Gas
WEST PEMBINA (LOWER MANNVILLE) CONDENSATE-RICH GAS LOWER MANNVILLE 1,800 ELLERSLIE 1,600 1,400 1,200 1,000 BOE/D LOWER MANNVILLE ELLERSLIE – Expected per well economics 800 DCET Well Cost ($ million) $3.5 600 IP30 Rate (boe/d) 680 EUR per well (mboe) 760 400 After Tax ROR (%) >100% After Tax Payout
Slide 76: Ferrier (Upper Mannville) Liquids-Rich Gas
FERRIER (UPPER MANNVILLE) LIQUIDS-RICH GAS NOTIKEWIN FALHER 1,800 2,500 UPPER MANNVILLE 1,600 2,000 1,400 1,200 1,500 BOE/D UPPER MANNVILLE FERRIER– Expected per well economics 1,000 DCET Well Cost ($ million) $3.6 1,000 IP30 Rate (boe/d) 835 800 EUR per well (mboe) 930 600 500 After Tax ROR (%) 42%
Slide 77: Mannville Development
MANNVILLE DEVELOPMENT NET MANNVILLE PROSPECT INVENTORY* 16,000 AS AT MARCH 31, 2017 14,000 DRILLED TO DATE 12,000 50 10,000 BOE/D 8,000 6,000 BOOKED 2P NOTIKEWIN UNRISKED CONTINGENT 51 143 4,000 DEVELOPMENT PENDING 197 2,000 0 ELLERSLIE 2012 2013 2014 2015 2016 2017E 115 NET WELLS DRILLED 0 5 10 18
Slide 78: Southeast Saskatchewan
SOUTHEAST SASKATCHEWAN Legend Midale Fairway Entered area through acquisition of Elkhorn Resources Inc. in Vermilion Land ► VET Identified Locations April 2014, with further land added subsequent to acquisition Midale HZ Wells ► 2P reserves totaling 16.1 mmboe ► Land base covers ~65,100 net acres wi
Slide 79: Southeast Saskatchewan Development
SOUTHEAST SASKATCHEWAN DEVELOPMENT NET SE SASK PROSPECT INVENTORY* 4,000 AS AT MARCH 31, 2017 WELLS 3,000 DRILLED 27 BOE/D 2,000 REMAINING 2P UNRISKED LOCATIONS PROSPECTIVE 107 46 1,000 UNRISKED CONTINGENT 0 DEVELOPMENT 2014** 2015 2016 2017E PENDING 72 NET WELLS DRILLED 10 4 6 11 Crude Oil & NGLs G
Slide 80: United States - Wyoming Development
UNITED STATES - WYOMING DEVELOPMENT TURNER SAND WELL PERFORMANCE ► Entered U.S. in September 2014 400 350 300 ► Large, operated contiguous land position (81,500 net 250 acres at 100% working interest) in the Powder River BOPD 200 150 Basin with promising horizontal tight oil Turner Sand 100 developm
Slide 81: United States Production
UNITED STATES PRODUCTION 1,200 1,000 800 600 BOE/D 400 200 0 2014 2015 2016 2017E E&D CAPEX AS % OF OF ATAX NOI* 64% 535% 353% 133% Crude Oil & NGL Gas EARLY-STAGE LIGHT OIL GROWTH PROJECT * ATAX NOI is defined as FFO before G&A expense. Includes existing hedges and excludes interest. 2017E: Company
Slide 82: Australian Assets
AUSTRALIAN ASSETS 82
Slide 83: Australia
AUSTRALIA ► Entered Australia in 2005 ► Offshore oil field ~80 km N.W. of Australia (55 m water depth) ► Horizontal well development with 18 wellbores and five lateral sidetracks ► Wells 600m below sea bed with 1,500 - 3,700 m measured depths ► Contracted oil production receives a premium to Dated B
Slide 84: Australia Production
AUSTRALIA PRODUCTION AUSTRALIA - per well economics* based on performance of 2013-2016 drilling programs DCET Well Cost ($ million) $25.6 IP30 Rate (boe/d) 4,400 EUR per well (mboe) 1,000 12,000 After Tax ROR (%) 82% After Tax Payout (years) 1.3 After Tax NPV10 ($ million) $10.9 10,000 Recycle Ratio
Slide 85: Australia Operating Performance
AUSTRALIA OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquisition Date Reserves Reserves at initial acquisition (2005) 26.7 16,000 Total Acquisition Date Reserves 26.7 14,000 Production to YE 2016 30.5 Reserves at YE 2016 17.1 12,000 Total Produced / Closing Reserves 47.6 PRODUCTION (B
Slide 86: Australia Activity
AUSTRALIA ACTIVITY ► New wells are sidetracks from existing wellbores ► Oil is trapped above the existing wells, creating opportunity to sidetrack to a higher structural elevation to capture attic and flank oil ► 12 additional identified drilling opportunities* ► Field managed for stable production
Slide 87: Governance / Corporate Citizenship
GOVERNANCE / CORPORATE CITIZENSHIP 87
Slide 88: Governance
GOVERNANCE ► Vermilion’s external awards and recognition provide important benchmarks for our strong performance The Globe and Mail, Report on Business, Board Games ► In 2016, Vermilion ranked 3rd within the oil and gas sector, and among the top quartile of companies in the S&P/TSX composite index ►
Slide 89: Long-Term Compensation Approach
LONG-TERM COMPENSATION APPROACH ► Pay-for-performance is the foundation of Vermilion’s approach to compensation, both at the executive level and company-wide ► All employees participate in Vermilion’s equity-based Long-Term Incentive Plan (LTIP) and are shareholders in the company ► Executive compen
Slide 90: Health, Safety and Environment (HSE)
HEALTH, SAFETY AND ENVIRONMENT (HSE) PHILOSOPHY ► Safety, environmental protection, and regulatory compliance go hand-in-hand with VERMILION’S PRIORITIES maximizing profitability WE CONDUCT ALL ACTIVITIES TO: ► These priorities should never be in conflict; but if they prove to be, our personnel 1. P
Slide 91: Sustainability
SUSTAINABILITY ► Vermilion is recognized as a responsible oil and gas producer in our industry Carbon Disclosure Project (CDP) ► Vermilion was named to the CDP Climate ‘A’ List, one of 193 companies globally, and the only North American energy company to make the list ► Across all sectors, only thre
Slide 92: Strategic Community Investment
STRATEGIC COMMUNITY INVESTMENT ► Vermilion is committed to giving back to Canada France Netherlands Australia the communities in which we operate ► We assess the critical needs in each community, and determine where our financial resources and volunteer time can make a difference ► We focus our flag
Slide 93: Corporate Culture
CORPORATE CULTURE “GREAT PLACE TO WORK” INSTITUTE’S ANNUAL RANKING ► Great Place to Work Institute evaluates companies by analyzing results of a Trust Index© survey provided to employees and evaluating the workplace through a Culture Audit© ► Since 2010, Vermilion has been ranked among the Top 35 Be
Slide 94: Record of Value Creation
RECORD OF VALUE CREATION 94
Slide 95: Value Creation 1994 – 2017
VALUE CREATION 1994 – 2017 $8,000 $6,909 $5,937 $6,000 MILLIONS $4,000 TOTAL VALUE $2,723 MARKET CREATION CAPITALIZATION(2) $2,000 DIVIDENDS PAID(2) $0 EQUITY ISSUED(1) -$2,000 $(1,750) MORE THAN 20-YEAR RECORD OF STRONG VALUE CREATION (1) Equity issued for cash and acquisitions since 1994. (2) Divi
Slide 96: Return on Capital Employed
RETURN ON CAPITAL EMPLOYED 12 10 8 6 4 ROCE (%) 2 0 -2 -4 -6 -8 3 YEAR AVERAGE 5 YEAR AVERAGE 10 YEAR AVERAGE Vermilion Peer Average STRONG CAPITAL EFFICIENCY IN A CAPITAL INTENSIVE BUSINESS * Source: Canoils. ROCE = EBIT/(total assets - current liabilities). Peers: ARX, BTE, BNP, BNE, BIR, CPG, CR,
Slide 97: Relative Market Performance
RELATIVE MARKET PERFORMANCE Since Inception Indices 1 Year 3 Year 5 Year 10 Year 15 Year (23 Years) S&P TSX Oil & Gas E&P Index 52.5% -9.1% -6.7% -5.1% 4.4% 4.9% ENERGY INDICES S&P TSX Oil & Gas E&P Total Return Index 55.9% -6.2% -3.6% -1.8% 7.3% - S&P TSX High Income Energy Index 30.4% -8.2% -4.1%
Slide 98: Summary
SUMMARY ► Long-term, low-risk dividend growth model supported by ► High margins ► Diversified product mix ► Low base decline rate ► Diversified and well defined project slate ► Low financial leverage ► Focused on consistent growth in production, reserves, free cash flow and dividends per share ► Hig
Slide 99: Analyst Coverage
ANALYST COVERAGE FIRM ANALYST PHONE EMAIL AltaCorp Capital Patrick J. O’Rourke, CFA 403-539-8615 porourke@altacorpcapital.com Barclays Capital Grant Hofer, CFA 403-592-7460 grant.hofer@barclays.com BMO Nesbitt Burns Ray Kwan, P.Eng. 403-515-1501 ray.kwan@bmo.com Canaccord Genuity Corp. Dennis Fong 4
Slide 100: 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
Slide 101: Advisory on Reserves and Resource Disclosure
ADVISORY ON RESERVES AND RESOURCE DISCLOSURE Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 1, 2017 with an effective date of December 31, 2016) prepared by GLJ Petroleum Consultants Ltd. (“GLJ”), an indep