CALGARY, Oct. 30, 2017 /PRNewswire/ - Vermilion Energy
Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE:
VET) is pleased to report operating and unaudited financial results
for the three and nine months ended September 30,
2017.
The unaudited financial statements and management discussion and
analysis for the three and nine months ended September
30, 2017, will be available on the System for Electronic Document
Analysis and Retrieval ("SEDAR") at www.sedar.com, on EDGAR at
www.sec.gov/edgar.shtml, and on Vermilion's website at
www.vermilionenergy.com.
HIGHLIGHTS
- Average production of 67,403 boe/d during Q3 2017 was up
slightly compared to the prior quarter. Production increases
in Canada, Netherlands and the US were largely offset by
unplanned downtime at the Corrib project in Ireland.
- Fund flows from operations ("FFO") for Q3 2017 was $131 million ($1.08/basic share(1)), a decrease of
11% from the previous quarter. This decrease was primarily
due to lower sales in Ireland and
Australia, and lower realized
commodity prices.
- In Canada, we drilled 15 (12.8
net) wells and placed 12 (10.4 net) wells on production during the
quarter, resulting in quarterly production growth of 10% for the
Canadian business unit. Predictable growth across our three
core areas in Canada contributed
to record quarterly production of approximately 31,500 boe/d, which
represents year-over-year growth of 29% relative to Q3 2016, while
still generating free cash flow from the Canadian unit.
- We completed our two (1.0 net) well drilling campaign in
the Netherlands during the quarter
with the drilling of Eesveen-02 (60% working interest) and
Nieuwehorne-02 (42% working interest). The Eesveen-02 well
tested at a rate in excess of 18 mmcf/d(2) net and is
expected to be brought on production in mid-2018. The
Nieuwehorne-02 well encountered 10 metres of gas pay and is
currently being prepared for a flow test. In addition, we
received ministry authorization to increase production on one of
our pools, which came into effect in early September and
contributed to a 10% increase in Netherlands production from the previous
quarter.
- In the US, production continued to grow following our three
(3.0 net) well program in the first half of the year.
Production exceeded 1,000 boe/d in Q3 2017, representing a 16%
increase compared to the previous quarter.
- In Ireland, production from
Corrib averaged 49 mmcf/d (8,173 boe/d) in Q3 2017, a 23% reduction
from Q2 2017 due to extended downtime following a plant
turnaround. Turnaround tasks were completed successfully, but
after restarting the plant, unodorized gas was detected in the
distribution network resulting in an extended period of
downtime. Production at Corrib resumed on October 11th after 21 days of downtime
in Q3 and just over 10 days of downtime in Q4. The annualized
impact from this downtime, net to Vermilion, is estimated at
approximately 900 boe/d.
- As a result of the Corrib downtime, we are reducing our 2017
average production guidance to 68,000 to 69,000 boe/d, compared to
our previous guidance of 69,000 to 70,000 boe/d.
- Our Board of Directors have formally approved an Exploration
and Development ("E&D") capital budget of $315 million for 2018, with associated production
guidance of 74,500 to 76,500 boe/d. The midpoint of our 2018
production guidance is unchanged compared to our previous target,
while the projected total E&D capital spend for 2017 and 2018
combined is lower than our previous targets. The 2018
production target results in compound annual growth of 9% for the
two-year period from 2017-2018 with a forecasted
payout(1) ratio below 100% in both years, based on
current strip pricing.
- Vermilion received a top quartile ranking for 2017 for our
industry sector in RobecoSAM's annual Corporate Sustainability
Assessment ("CSA"). The CSA analyzes sustainability
performance across economic, environmental, governance and social
criteria, and is the basis of the Dow Jones Sustainability
Indices.
(1)
|
Non-GAAP Financial
Measure. Please see the "Non-GAAP Financial Measures" section of
Management's Discussion and Analysis.
|
(2)
|
Eesveen-02 Zechstein
2 carbonate flow test was performed over a two hour period at a
wellhead pressure of 1,290 psi with flow rates of 8.3 mmcf/d net
and the Eesveen-02 Rotliegend sandstone flow test was performed
over a 10 day period at a wellhead pressure of 2,360 psi with flow
rates of 10 mmcf/d net resulting in combined production in excess
of 18 mmcf/d net to Vermilion. These test results are not
necessarily indicative of long-term performance of ultimate
recovery.
|
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
($M except as
indicated)
|
Sep
30,
|
Jun
30,
|
Sep
30,
|
|
Sep
30,
|
Sep
30,
|
Financial
|
2017
|
2017
|
2016
|
|
2017
|
2016
|
Petroleum and natural
gas sales
|
248,505
|
271,391
|
232,660
|
|
781,497
|
622,900
|
Fund flows from
operations
|
130,755
|
147,123
|
140,974
|
|
421,312
|
361,209
|
|
Fund flows from
operations ($/basic share) (1)
|
1.08
|
1.22
|
1.21
|
|
3.51
|
3.14
|
|
Fund flows from
operations ($/diluted share) (1)
|
1.07
|
1.20
|
1.19
|
|
3.45
|
3.11
|
Net (loss)
earnings
|
(39,191)
|
48,264
|
(14,475)
|
|
53,613
|
(156,019)
|
|
Net (loss) earnings
($/basic share)
|
(0.32)
|
0.40
|
(0.12)
|
|
0.45
|
(1.36)
|
Capital
expenditures
|
91,382
|
58,875
|
41,039
|
|
246,146
|
175,526
|
Acquisitions
|
20,976
|
993
|
10,391
|
|
24,589
|
19,811
|
Asset retirement
obligations settled
|
1,749
|
2,120
|
2,066
|
|
6,118
|
6,290
|
Cash dividends
($/share)
|
0.645
|
0.645
|
0.645
|
|
1.935
|
1.935
|
Dividends
declared
|
78,293
|
77,858
|
75,465
|
|
232,744
|
222,974
|
|
% of fund flows from
operations
|
60%
|
53%
|
54%
|
|
55%
|
62%
|
Net dividends
(1)
|
54,364
|
48,617
|
24,553
|
|
144,068
|
73,556
|
|
% of fund flows from
operations
|
42%
|
33%
|
17%
|
|
34%
|
20%
|
Payout
(1)
|
147,495
|
109,612
|
67,658
|
|
396,332
|
255,372
|
|
% of fund flows from
operations
|
113%
|
75%
|
48%
|
|
94%
|
71%
|
Net debt
|
1,370,995
|
1,314,766
|
1,343,923
|
|
1,370,995
|
1,343,923
|
Ratio of net debt to
annualized fund flows from operations
|
2.6
|
2.2
|
2.4
|
|
2.4
|
2.8
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Operational
|
Production
|
|
|
|
|
|
|
|
Crude oil and
condensate (bbls/d)
|
27,687
|
28,525
|
27,842
|
|
27,684
|
28,483
|
|
NGLs
(bbls/d)
|
4,947
|
3,821
|
2,478
|
|
3,828
|
2,621
|
|
Natural gas
(mmcf/d)
|
208.63
|
209.36
|
199.66
|
|
209.35
|
199.90
|
|
Total
(boe/d)
|
67,403
|
67,240
|
63,596
|
|
66,404
|
64,421
|
Average realized
prices
|
|
|
|
|
|
|
|
Crude oil and
condensate ($/bbl)
|
61.47
|
64.35
|
56.60
|
|
64.58
|
52.57
|
|
NGLs
($/bbl)
|
23.96
|
20.98
|
12.40
|
|
23.01
|
9.67
|
|
Natural gas
($/mcf)
|
4.01
|
4.75
|
3.98
|
|
4.79
|
3.76
|
Production mix (% of
production)
|
|
|
|
|
|
|
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% priced with
reference to WTI
|
22%
|
20%
|
19%
|
|
20%
|
20%
|
|
% priced with
reference to AECO
|
26%
|
24%
|
20%
|
|
24%
|
22%
|
|
% priced with
reference to TTF and
NBP
|
26%
|
28%
|
32%
|
|
29%
|
29%
|
|
% priced with
reference to Dated Brent
|
26%
|
28%
|
29%
|
|
27%
|
29%
|
Netbacks
($/boe)
|
|
|
|
|
|
|
|
Operating netback
(1)
|
26.06
|
28.72
|
27.88
|
|
28.69
|
25.75
|
|
Fund flows from
operations netback
|
20.87
|
23.66
|
23.25
|
|
23.34
|
20.46
|
|
Operating
expenses
|
9.87
|
10.14
|
9.05
|
|
9.80
|
9.21
|
Average reference
prices
|
|
|
|
|
|
|
|
WTI (US
$/bbl)
|
48.20
|
48.28
|
44.94
|
|
49.47
|
41.33
|
|
Edmonton Sweet index
(US $/bbl)
|
45.32
|
46.03
|
42.06
|
|
46.57
|
38.11
|
|
Dated Brent (US
$/bbl)
|
52.08
|
49.83
|
45.85
|
|
51.90
|
41.77
|
|
AECO
($/mmbtu)
|
1.45
|
2.78
|
2.32
|
|
2.31
|
1.85
|
|
NBP
($/mmbtu)
|
6.78
|
6.52
|
5.29
|
|
7.10
|
5.69
|
|
TTF
($/mmbtu)
|
6.93
|
6.74
|
5.43
|
|
7.12
|
5.58
|
Average foreign
currency exchange rates
|
|
|
|
|
|
|
|
CDN $/US $
|
1.25
|
1.34
|
1.31
|
|
1.31
|
1.32
|
|
CDN $/Euro
|
1.47
|
1.48
|
1.46
|
|
1.45
|
1.48
|
Share information
('000s)
|
Shares outstanding -
basic
|
121,585
|
120,947
|
117,386
|
|
121,585
|
117,386
|
Shares outstanding -
diluted (1)
|
124,453
|
123,794
|
120,183
|
|
124,453
|
120,183
|
Weighted average
shares outstanding - basic
|
121,280
|
120,514
|
116,814
|
|
120,152
|
114,975
|
Weighted average
shares outstanding - diluted (1)
|
122,485
|
122,660
|
118,177
|
|
121,963
|
116,221
|
(1
)
|
The above table
includes non-GAAP financial measures which may not be comparable to
other companies. Please see the "NON-GAAP FINANCIAL MEASURES"
section of Management's Discussion and
Analysis.
|
MESSAGE TO SHAREHOLDERS
We have now set our 2018 budget and have reaffirmed our
long-term targets of delivering 5 to 7% production per share growth
at a payout ratio of less than 100% under the prevailing commodity
strip. Our 2018 budget projects production of 74,500 to
76,500 boe/d on capital investment of $315
million. Production growth for 2018 is projected to be
10% on an absolute basis and 7% on a per share basis.
Achieving our guidance targets is very important to us.
Early in 2017, we encountered unexpected permitting difficulties in
the Netherlands, and accordingly
constructed and implemented a revised investment and production
plan that called on other jurisdictions to make up this difference.
While the revised plan was successful in generating expected
production volumes in our operated business units, we encountered
an additional problem in our non-operated Irish unit towards the
end of Q3. Downtime at Corrib, following a plant turnaround
in September, reduced production by approximately 2,400 boe/d in
Q3, and will cost us approximately 900 boe/d on an annualized basis
in 2017. This foregone production is impossible to make up by
the end of 2017. As a result, we have reduced our 2017
production guidance from a range of 69,000 to 70,000 boe/d to a
range of 68,000 to 69,000 boe/d. Nonetheless, we still expect
to achieve 2017 year-over-year production growth of approximately
8% in absolute terms, and approximately 3% on a per-share
basis. Incorporating our 2018 production guidance implies a
compound annual growth rate of approximately 9% for the two-year
period from 2017-2018 with a forecasted payout(1) ratio
below 100% in both years, based on current strip pricing.
In early September, the French government announced further
details on its proposed Climate Plan, and enabling legislation is
currently being debated in the French Parliament. The plan
contains a number of elements broadly affecting the French economy,
including reductions in nuclear power generation and future
restrictions on internal combustion engines and hydrocarbon-based
fuels for cars. Two previously-announced elements affect the
French oil production industry. First, the proposed
legislation prohibits the issuance of new exploration concessions
in France, although existing
exploration concessions may be converted to production concessions
in the event of hydrocarbon discoveries. Vermilion is largely
unaffected by this change. Our French investment activities
are overwhelmingly concentrated in development projects on existing
fields in existing production concessions. In a limited set
of existing exploration concessions, we do intend to conduct
seismic and drilling operations, and in these cases, the proposed
legislation allows conversion to production concessions if
exploration is successful. Second, the proposed legislation
puts a limit on renewals of existing production concessions at
2040, with certain exceptions which may allow for a longer
production term. Again, if the time limit on production
concession renewals is enacted, we expect an immaterial effect on
Vermilion's production and reserve profile. With respect to
the advisability of the proposed changes to French oil production
policy, we first point out that Vermilion was designated as a
Climate "A" List company by CDP (formerly the Carbon Disclosure
Project) in 2016, one of only five energy companies in the world to
receive such a designation. In addition, we have several
sustainability projects ongoing in France that reduce carbon emissions while
simultaneously promoting new industries and economic inclusivity,
and intend to implement more sustainability projects over
time. Finally, domestic oil production in France has a lower carbon footprint than
imported oil. While Vermilion supports and is a part of the
long-term energy transition, we believe that the transition is best
realized by turning to best-in-class companies such as Vermilion to
produce the oil and gas that will still be consumed in the French
and world economies.
While operating in Europe has
always been more challenging as compared to North America, we have demonstrated throughout
our history that the superior return we achieve from our European
assets is well worth the additional effort. We have a long
track record of profitably increasing our oil and gas production in
Europe and we have the appropriate
personnel and business practices in place to continue to succeed in
this exacting but high return jurisdiction. We believe that
the operating and business development franchise that we have
established in Europe would be
difficult to replicate, and therefore provides us with a
significant competitive advantage, which we believe will continue
to drive strong growth and high returns for Vermilion and our
shareholders in the future. Our European franchise and skill
set may in fact become more valuable over time as other companies
may elect to exit this demanding region, potentially creating a
greater pace of business development opportunity. In the
nearer term, we look very much forward to resuming growth in
the Netherlands, beginning
drilling activities in Central and Eastern Europe ("CEE"), and assuming
operatorship of our Corrib project in Ireland.
Q3 2017 Review
Vermilion's Q3 2017 production of 67,403 boe/d was up slightly
compared to the prior quarter. Higher production in
Canada and the US was achieved
through successful drilling programs in the first nine months of
the year, while Netherlands
production benefited from receipt of permits and reduced turnaround
work. Downtime at Corrib significantly offset production
growth in other jurisdictions, reducing expected Q3 production by
approximately 2,400 boe/d.
Fund flows from operations ("FFO") for Q3 2017 was $131 million ($1.08/basic share(1)) as compared to
$147 million ($1.22/basic share(1)) in Q2
2017. FFO decreased 11% quarter-over-quarter primarily due to
unplanned downtime in Ireland,
lower Australian sales and a decline in realized commodity
prices. Despite this decrease in FFO, our
payout(1) ratio for the first nine months of 2017 was
94%.
Europe
We had an active quarter in the
Netherlands, which included the completion of our two (1.0
net) well drilling campaign. The Eesveen-02 well (60% working
interest) encountered 24 metres of net pay in two separate
intervals targeting the Zechstein-2 carbonate and the Rotliegend
sandstone. The second well, Nieuwehorne-02 (42% working
interest), also targeted two separate intervals, the Zechstein-2
carbonate and the Vlieland sandstone, encountering 10 metres of net
pay. The two zones in the Eesveen-02 well were flow tested at
a combined rate in excess of 18 mmcf/d(2) net and the
well is expected to be brought on production in mid-2018. The
Nieuwehorne-02 well is currently being prepared for a flow
test. During the quarter, the Ministry of Economic Affairs
published its approval for a production rate increase on one of our
pools, which became effective in early September. As a
result, production in the
Netherlands is currently back up to more than 8,000 boe/d
and should continue to grow through the balance of the year.
We also received additional permits for our 3D seismic survey in
the Akkrum and South Friesland III exploration licenses, and have
increased the size of the program from 220 square kilometres to 315
square kilometres, with completion of the program expected prior to
the end of the year.
In Ireland, production from
Corrib averaged 49 mmcf/d (8,173 boe/d) in Q3 2017, a 23% reduction
from Q2 2017 due to an extended downtime period following a plant
turnaround. Although turnaround tasks were completed
successfully, unodorized gas was detected in the distribution
network following restart. This resulted in an extended
period of downtime to remove the unodorized gas and to implement
process changes to ensure that odorant would be continuously
injected and monitored in future plant operation. Production
at Corrib resumed on October
11th after 21 days of downtime in Q3 and just
over 10 days of downtime in Q4. The annualized impact from
this downtime, net to Vermilion, is estimated at approximately 900
boe/d.
In Germany, we continue to
execute workover and artificial lift optimization operations on the
assets acquired from Engie E&P Deutschland GmbH in December
2016. For the second consecutive quarter, production from the
acquired assets represented a 10% increase from pre-acquisition
levels and contributed to a slight increase in overall business
unit production from the previous quarter despite no new drilling
activity. Compared to Q3 2016, production has increased by
82% through our acquisition and organic growth activities, and has
contributed to a much stronger free cash flow profile for the
German Business Unit. Based on current strip pricing, we are
forecasting the German business to deliver free cash
flow(1) of approximately 65% in 2017.
North America
In Canada, we continued
successful execution of our 2017 capital program. During Q3
2017, we drilled or participated in 10 (8.0 net) Mannville wells, two (2.0 net) Cardium wells
and three (2.8 net) Midale wells
and brought on production seven (5.6 net) Mannville wells, two (2.0 net) Cardium wells
and three (2.8 net) Midale
wells. All three projects continue to deliver predicable
results, driving a 29% increase in year-over-year quarterly
production to approximately 31,500 boe/d for the Canadian Business
Unit. There was significant third-party maintenance by TCPL
in west-central Alberta in the
third quarter, with planned and unplanned disruptions restricting
available gas capacity on multiple systems. Despite these
restrictions, our Canadian Business Unit was able to deliver its
growth targets. In addition, during the quarter we executed
on $20 million of tuck-in
acquisitions, mainly focused on enhancing our Mannville land base in the Drayton Valley and Ferrier areas.
In the United States,
production grew 16% quarter-over-quarter as a result of the three
(3.0 net) Turner Sand wells drilled in the first quarter, setting
the stage for an increased drilling program in 2018. Our
25,500 acre Rex Federal Unit in the northern region of the Turner
Sand project was approved by the Bureau of Land Management ("BLM")
in early October, and we received a paying well determination from
the BLM for the 24,400 acre Three Horn Federal Unit. This
determination eliminates a 180 day continuous drilling obligation
and holds the leases within the Three Horn Unit for a minimum of
five years, with many of the federal leases within the unit having
even longer tenure. These federal units cover the majority of
our Turner Sand project, giving us an even lower expiry profile and
greater control over the pace and focus of development
activities.
Sustainability
Vermilion received a top quartile ranking for 2017 for our
industry sector in RobecoSAM's annual Corporate Sustainability
Assessment ("CSA"). The CSA analyzes sustainability
performance across economic, environmental, governance and social
criteria, and is the basis of the Dow Jones Sustainability
Indices. The RobecoSAM assessment follows earlier recognition
of Vermilion's Sustainability performance, including placement on
the CDP Climate "A" List as a global leader in environmental
stewardship, top oil and gas company performance in Corporate
Knights Future 40 Responsible Corporate Leaders in Canada ranking, and receipt of the French
government's Circular Economy Award for Industrial and Regional
Ecology for our geothermal energy partnership in Parentis. We
believe the integration of sustainability principles into our
business is the right thing to do, increases shareholder returns,
enhances our business development opportunities and reduces
long-term risks to our business model.
2018 Budget
Our Board of Directors have formally approved an E&D capital
budget of $315 million for 2018, with
associated production guidance of 74,500 to 76,500 boe/d. The
midpoint of our 2018 production guidance is unchanged compared to
our previous target, while the projected total E&D capital
spend for 2017 and 2018 combined is lower than our previous
targets. The 2018 production target results in compound
annual growth of 9% for the 2017-2018 two-year period, with a
forecasted payout(1) ratio below 100% in both years,
based on current strip pricing.
This budget funds development of a number of high-return
projects, including investment in all three core areas of
Canada, continued development in
both the Neocomian and Champotran fields in France, a return to production growth in
the Netherlands where we continue
to benefit from favorably-priced European natural gas, continued
development of our Turner Sands play
in the United States, and
inaugural drilling in our CEE business unit in the South Battonya
license in Hungary.
Our 2018 E&D budget represents the fourth consecutive year
of significantly lower capital expenditures and our third
consecutive year where E&D capital will be less than 50% of
2014 levels, even though 2018 production rates are expected to be
50% higher than in 2014. Absolute production growth of 10%
for 2018 is estimated to translate to per share growth of 7%, based
on the midpoint of our production guidance range. Our
geographic and commodity diversification allow for a high return
capital program even in tempered commodity price environments, and
provide the flexibility to respond to changes in individual
commodity markets as prices recover.
At current strip prices, Vermilion expects to fully fund 2018
E&D capital expenditures and cash dividends from fund flows
from operations. This would represent the third consecutive
year of delivering per share production growth at a payout ratio of
less than 100%.
Europe
Our 2018 E&D budget for France of $73
million is relatively consistent with 2017 investment.
Following our successful inaugural 2017 drilling campaign in the
Neocomian field, we plan to drill an additional four (4.0 net)
wells in the Neocomian fields in the Paris Basin in 2018, with the potential to
initiate the drilling program in late 2017. In addition, we
expect to drill three (3.0 net) Champotran wells, which includes
one (1.0 net) sidetrack step-out well, and continue our ongoing
program of workovers and optimizations.
In the Netherlands, our 2018
E&D budget of $35 million
represents a 6% increase from 2017. We expect to drill three
(1.5 net) exploration wells after completing our successful 2017
two-well (1.0 net) exploration program. We also expect to
execute the second phase of our seismic acquisition program.
In Germany, our 2018 E&D
capital budget of $14 million
represents a 40% increase from our 2017 program. We will
continue to invest in optimization projects and other well work on
the oil and gas assets acquired at the end of 2016. We expect
to commence pre-drilling operations on the operated Burgmoor Z5
development well in 2018, with plans to drill in 2019. We
will also continue to advance our permitting, studies and other
activities associated with the farm-in agreement we signed in
mid-2015.
Our 2018 Central and Eastern
Europe capital program of $11
million builds on $8 million
of planned 2017 investment. In 2018, we plan to drill our
first well (1.0 net) in the South Battonya license in
Hungary. We were issued licenses in Ebes and South Battonya
in 2014 and 2015 covering 334,000 acres, and we focused our 2017
activities on interpreting 3D seismic in the South Battonya
license. In 2018, in addition to drilling in Hungary, we expect to continue pre-drilling
investment in our Slovakian and Croatian prospects.
Ireland will continue to be a
strong free cash flow contributor in 2018, with a low level of
capital investment expected in 2018. We expect to become
operator of the Corrib gas field in mid-2018, subject to partner
and regulatory approvals and completion of our acquisition, with
Canada Pension Plan Investment Board, of Shell E&P Ireland
Limited.
North America
We plan to invest approximately $136
million in E&D activities in Canada in 2018, representing a decrease of 5%
from the $143 million forecasted for
2017. Because permitting approvals are generally routine and
producing infrastructure is generally accessible in western
Canada, our Canadian business unit
has the ability to ramp capital activity levels up or down in
response to corporate needs and capital availability. Our
2017 capital investment program of $143
million represented a 32% increase from initial budget
levels as capital activity was increased throughout 2017 to take
advantage of this ability to ramp up in a short period of time.
Our Canadian investment program continues to be significantly
oil-weighted with all three of our core plays in Canada generating robust economics in the
prevailing commodity price environment. In 2018, we expect to
drill or participate in 17 (13.8 net) Mannville wells, five (4.2 net) Cardium oil
wells in west central Alberta and
16 (15.5 net) Midale light oil
wells in southeast Saskatchewan.
In the United States, we expect
to drill and complete five (5.0 net) wells targeting the light oil
Turner Sand in the Powder River Basin of Wyoming.
Australia
Our 2018 E&D budget of $22
million for Australia will
focus on facility maintenance and pre-spending for the 2019 drill
campaign.
E&D Capital Investment by Country
|
|
|
|
|
|
Country
|
2018
Budget*
($MM)
|
2017
Estimate
($MM)
|
2018 vs.
2017
%
Change
|
2018
Net
Wells
|
2017
Net
Wells
|
Canada
|
136
|
143
|
(5%)
|
33.5
|
34.7
|
France
|
73
|
71
|
3%
|
7.0
|
5.0
|
Netherlands
|
35
|
33
|
6%
|
1.5
|
1.0
|
Germany
|
14
|
10
|
40%
|
-
|
-
|
Ireland
|
1
|
1
|
-
|
-
|
-
|
Australia
|
22
|
30
|
(27%)
|
-
|
-
|
USA
|
23
|
19
|
21%
|
5.0
|
3.0
|
Central and Eastern
Europe
|
11
|
8
|
38%
|
1.0
|
-
|
Total E&D
Capital Expenditures
|
315
|
315
|
-
|
48.0
|
43.7
|
E&D Capital Investment by Category
|
|
|
|
Category
|
2018
Budget*
($MM)
|
2017
Estimate
($MM)
|
2018 vs.
2017
%
Change
|
Drilling, completion,
new well equipment and tie-in, workovers and
recompletions
|
210
|
195
|
8%
|
Production equipment
and facilities
|
60
|
70
|
(14%)
|
Seismic, studies,
land and other
|
45
|
50
|
(10%)
|
Total E&D
Capital Expenditures
|
315
|
315
|
-
|
* 2018 Budget
reflects foreign exchange assumptions of USD/CAD 1.25, CAD/EUR 1.49
and CAD/AUD 0.97.
|
Our revised production plan by business unit can be found in our
November 2017 investor presentation
on our website.
Commodity Hedging
Vermilion hedges to manage commodity price exposures and
increase the stability of cash flows, providing additional
certainty with regards to the execution of our dividend and capital
programs. We currently have 37% of our expected
net-of-royalty production hedged for 2018, including 45% of
anticipated European natural gas volumes and 38% of anticipated
North American gas volumes. At present, we maintain greater
torque to oil prices, with 29% of our oil production hedged.
We will continue to hedge the 2018 and 2019 periods as suitable
opportunities arise.
Organizational Update
Mr. Jenson Tan, currently
Director of Business Development, has been promoted to the position
of Vice President of Business Development. Mr. Tan joined
Vermilion in 2010 and has over 15 years of technical and management
experience in international oil and gas. Business development
has been a particular strength of Vermilion, and Mr. Tan has played
a key role in a number of our important transactions in
France, Netherlands, Germany, Canada, Central and Eastern Europe and, most recently, in
Ireland. Mr. Tan has a Bachelor of Science degree in
Petroleum Engineering from the University of
Texas.
(signed "Anthony Marino")
Anthony Marino
President & Chief Executive Officer
October 26, 2017
(1)
|
Non-GAAP Financial
Measure. Please see the "Non-GAAP Financial Measures" section of
Management's Discussion and Analysis.
|
(2)
|
Eesveen-02 Zechstein
2 carbonate flow test was performed over a two hour period at a
wellhead pressure of 1,290 psi with flow rates of 8.3 mmcf/d net
and the Eesveen-02 Rotliegend sandstone flow test was performed
over a 10 day period at a wellhead pressure of 2,360 psi with flow
rates of 10 mmcf/d net resulting in combined production in excess
of 18 mmcf/d net to Vermilion. These test results are not
necessarily indicative of long-term performance of ultimate
recovery.
|
GUIDANCE
On October 31, 2016, we released
our 2017 capital expenditure guidance of $295 million and associated production guidance
of between 69,000-70,000 boe/d. On July 26, 2017 we announced an increase in our
capital expenditure guidance from $295
million to $315 million
following the acceleration of 2018 activities in our Canadian
business unit. We also adjusted our 2017 annual production
guidance on October 30, 2017 to
68,000-69,000 boe/d to reflect an extended downtime period
following a plant turnaround at our Corrib asset in Ireland.
We released our 2018 capital budget and related guidance
concurrent with the release of our Q3 2017 results.
The following table summarizes our guidance:
|
|
Date
|
Capital
Expenditures ($MM)
|
Production
(boe/d)
|
2017
Guidance
|
|
|
|
2017
Guidance
|
October 31,
2016
|
295
|
69,000 to
70,000
|
2017
Guidance
|
July 26,
2017
|
315
|
69,000 to
70,000
|
2017
Guidance
|
October 30,
2017
|
315
|
68,000 to
69,000
|
2018
Guidance
|
|
|
|
2018
Guidance
|
October 30,
2017
|
315
|
74,500 to
76,500
|
CONFERENCE CALL AND AUDIO WEBCAST DETAILS
Vermilion
will discuss these results in a conference call to be held on
Monday October 30, 2017 at
9:00 AM MST (11:00 AM EST). To participate, you may call
1-888-231-8191 (Canada and US Toll
Free) or 1-647-427-7450 (International and Toronto Area). The conference call will
also be available on replay by calling 1-855-859-2056 using
conference ID number 83587949 . The replay will be available
until midnight mountain time on
November 13, 2017.
You may also listen to the audio webcast by clicking
http://event.on24.com/r.htm?e=1504689&s=1&k=ED9536745788B34E97020409EBE1B0A2
or visit Vermilion's website at
http://www.vermilionenergy.com/invest-with-us/events--presentations.cfm
About Vermilion
Vermilion is an international energy producer that seeks to
create value through the acquisition, exploration, development and
optimization of producing properties in North America, Europe and Australia. Our business model emphasizes
organic production growth augmented with value-adding acquisitions,
along with providing reliable and increasing dividends to
investors. Vermilion is targeting growth in production
primarily through the exploitation of light oil and liquids-rich
natural gas conventional resource plays in Canada and the
United States, the exploration and development of high
impact natural gas opportunities in the
Netherlands and Germany,
and through oil drilling and workover programs in France and Australia. Vermilion currently holds an
18.5% working interest in the Corrib gas field in Ireland. Vermilion pays a monthly
dividend of Canadian $0.215 per
share, which provides a current yield of approximately
6.0%.
Vermilion's priorities are health and safety, the environment,
and profitability, in that order. Nothing is more important
to us than the safety of the public and those who work with us, and
the protection of our natural surroundings. We have been
recognized as a top decile performer amongst Canadian publicly
listed companies in governance practices, as a Climate "A" List
performer by the CDP, and a Best Workplace in the Great Place to
Work® Institute's annual rankings in Canada, France and the Netherlands. In addition,
Vermilion emphasizes strategic community investment in each of our
operating areas.
Employees and directors hold approximately 6.5% of our fully
diluted shares, are committed to consistently delivering superior
rewards for all stakeholders, and have delivered over 20 years of
market outperformance. Vermilion trades on the Toronto Stock
Exchange and the New York Stock Exchange under the symbol VET.
DISCLAIMER
Certain statements included or incorporated by reference in this
document may constitute forward looking statements or financial
outlooks under applicable securities legislation. Such
forward looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "propose", or similar words
suggesting future outcomes or statements regarding an
outlook. Forward looking statements or information in this
document may include, but are not limited to: capital expenditures;
business strategies and objectives; operational and financial
performance; estimated reserve quantities and the discounted net
present value of future net revenue from such reserves; petroleum
and natural gas sales; future production levels (including the
timing thereof) and rates of average annual production growth;
exploration and development plans; acquisition and disposition
plans and the timing thereof; operating and other expenses,
including the payment and amount of future dividends; royalty and
income tax rates; and the timing of regulatory proceedings and
approvals.
Such forward looking statements or information are based on a
number of assumptions, all or any of which may prove to be
incorrect. In addition to any other assumptions identified in
this document, assumptions have been made regarding, among other
things: the ability of Vermilion to obtain equipment, services and
supplies in a timely manner to carry out its activities in
Canada and internationally; the
ability of Vermilion to market crude oil, natural gas liquids, and
natural gas successfully to current and new customers; the timing
and costs of pipeline and storage facility construction and
expansion and the ability to secure adequate product
transportation; the timely receipt of required regulatory
approvals; the ability of Vermilion to obtain financing on
acceptable terms; foreign currency exchange rates and interest
rates; future crude oil, natural gas liquids, and natural gas
prices; and management's expectations relating to the timing and
results of exploration and development activities.
Although Vermilion believes that the expectations reflected in
such forward looking statements or information are reasonable,
undue reliance should not be placed on forward looking statements
because Vermilion can give no assurance that such expectations will
prove to be correct. Financial outlooks are provided for the
purpose of understanding Vermilion's financial position and
business objectives, and the information may not be appropriate for
other purposes. Forward looking statements or information are
based on current expectations, estimates, and projections that
involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by
Vermilion and described in the forward looking statements or
information. These risks and uncertainties include, but are
not limited to: the ability of management to execute its business
plan; the risks of the oil and gas industry, both domestically and
internationally, such as operational risks in exploring for,
developing and producing crude oil, natural gas liquids, and
natural gas; risks and uncertainties involving geology of crude
oil, natural gas liquids, and natural gas deposits; risks inherent
in Vermilion's marketing operations, including credit risk; the
uncertainty of reserves estimates and reserves life and estimates
of resources and associated expenditures; the uncertainty of
estimates and projections relating to production and associated
expenditures; potential delays or changes in plans with respect to
exploration or development projects; Vermilion's ability to enter
into or renew leases on acceptable terms; fluctuations in crude
oil, natural gas liquids, and natural gas prices, foreign currency
exchange rates and interest rates; health, safety, and
environmental risks; uncertainties as to the availability and cost
of financing; the ability of Vermilion to add production and
reserves through exploration and development activities; the
possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; uncertainty in
amounts and timing of royalty payments; risks associated with
existing and potential future law suits and regulatory actions
against Vermilion; and other risks and uncertainties described
elsewhere in this document or in Vermilion's other filings with
Canadian securities regulatory authorities.
The forward looking statements or information contained in this
document are made as of the date hereof and Vermilion undertakes no
obligation to update publicly or revise any forward looking
statements or information, whether as a result of new information,
future events, or otherwise, unless required by applicable
securities laws.
Natural gas volumes have been converted on the basis of six
thousand cubic feet of natural gas to one barrel of oil
equivalent. Barrels of oil equivalent (boe) may be
misleading, particularly if used in isolation. A boe
conversion ratio of six thousand cubic feet to one barrel of oil is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead.
Financial data contained within this document are reported in
Canadian dollars, unless otherwise stated
SOURCE Vermilion Energy Inc.