CALGARY,
Aug. 1, 2013 /PRNewswire/ - Vermilion
Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX,
NYSE: VET) is pleased to report interim operating and unaudited
financial results for the three and six months ended June 30, 2013.
HIGHLIGHTS
- We recorded the strongest operating quarter in our history in
the second quarter of 2013. Thus far, our capital program has
achieved better than anticipated results, generating production
growth in all four of our business units. The Company
previously increased production guidance following the first
quarter of 2013. However, in view of our operational performance,
we are further increasing our production guidance for 2013 to
between 40,500 and 41,000 boe/d, up from previous guidance of
39,500 to 40,500 boe/d and original guidance of 39,000 to 40,500
boe/d.
- Achieved record average production of 42,813 boe/d during the
second quarter of 2013, compared to 38,707 boe/d in the first
quarter of 2013 and 39,168 boe/d in the second quarter of 2012.
Quarter-over-quarter growth resulted primarily from strong
production additions from our Cardium and Mannville drilling in Canada and high productivity from our two-well
sidetrack program in Australia.
- Increased quarter-over-quarter production by 13% to over 9,500
boe/d during the second quarter of 2013 from our Cardium light oil
play in Western Canada.
- Continued our Mannville
liquids-rich gas horizontal development program by drilling our
third Ellerslie well and bringing
on production from the second well which was drilled and completed
during the first quarter. In their third and fourth months of
production, the first two wells are averaging approximately 4.0
mmcf/d of sales gas and over 400 bbls/d of natural gas liquids (75%
condensate) per well.
- Completed a two-well sidetrack drilling program in Australia. The wells were brought on
production at restricted rates and have demonstrated productive
capacity in excess of 6,000 bbls/d and 3,000 bbls/d,
respectively. These wells are currently being produced
intermittently to match production to marketing arrangements and to
maintain our long-term Wandoo field production rate at between
6,000 and 8,000 bbls/d.
- Concluded a five-well drilling program in the Champotran field
in France in the second
quarter. Four of the wells were infill wells and the fifth
well was an approximately two-kilometer step-out well to test
southern extension of the field. All five of the wells were
successful, with the four infill wells completed in June and the
extension well completed in July. All five wells currently
have per-well production rates in excess of 300 bbls/d at low water
cuts. In aggregate, current production from the wells is
approximately 1,800 bbls/d at a 4% water cut.
- Generated fund flows from operations of $174.6 million ($1.73 per share) in the second quarter of 2013,
as compared to $163.6 million
($1.65 per share) in the first
quarter of 2013 and $127.8 million
($1.30 per share) in the second
quarter of 2012. Fund flows from operations for the second
quarter of 2013 increased 7% on a quarter-over-quarter basis and
37% on a year-over-year basis.
- We continue to benefit from strong pricing driven by our
significant exposure to Brent-based crude oil, WTI-based crude oil
and European gas. Vermilion's
Brent-based crude production, representing 41% of total production,
averaged $105.25 per bbl in the
quarter. WTI crude, representing 25% of our production,
averaged $94.22 per bbl. Vermilion's natural gas production in
the Netherlands, representing
approximately 15% of production, received an average price of
$10.82 per mcf during the second
quarter of 2013, a premium of $7.29
per mcf as compared to AECO.
- Increased our significant position in the Duvernay liquids-rich natural gas resource
play with the acquisition of an additional 46 sections since the
first quarter, bringing our total land position to 318 net
sections. This land position, which spans the breadth of the
liquids-rich natural gas fairway in two largely-contiguous blocks,
was assembled for approximately $76 million
dollars ($375 per acre). We
currently anticipate drilling our first horizontal Duvernay well prior to year-end 2013, with
completion planned for early 2014.
- In Ireland, tunneling, onshore
pipelining, offshore umbilical-laying, and offshore seismic
acquisition activities for our Corrib project continued during the
second quarter. Based on our deterministic schedule for
remaining construction and commissioning activities, first gas
production is anticipated to occur between the end of 2014 and
early 2015.
- In June 2013, Vermilion's syndicate of lenders agreed to
increase the Company's 3-year revolving borrowing base from
$950 million to $1.2 billion. At the end of the second quarter,
Vermilion had available capacity
under the borrowing base of $591
million and a net debt to annualized second quarter fund
flows from operations ratio of 0.97 times.
Conference Call and Audio Webcast Details
Vermilion will
discuss these results in a conference call to be held on
Thursday, August 1, 2013 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 78595598. The replay will be available
until midnight eastern time on
August 8, 2013.
You may also listen to the audio webcast by
clicking
http://event.on24.com/r.htm?e=626589&s=1&k=1A994A34B44915C6630ABBE2027B8AD9
or visit Vermilion's website at
www.vermilionenergy.com/ir/eventspresentations.cfm.
ABBREVIATIONS
bbl(s) |
|
barrel(s) |
mbbls |
|
thousand barrels |
bbls/d |
|
barrels per day |
mcf |
|
thousand cubic feet |
mmcf |
|
million cubic feet |
bcf |
|
billion cubic feet |
mcf/d |
|
thousand cubic feet per day |
mmcf/d |
|
million cubic feet per day |
GJ |
|
gigajoules |
MWh |
|
megawatt hour |
boe |
|
barrel of oil equivalent, including: crude oil, natural gas
liquids and natural gas (converted on the basis of one boe for
six mcf of natural gas) |
mboe |
|
thousand barrel of oil equivalent |
mmboe |
|
million barrel of oil equivalent |
boe/d |
|
barrel of oil equivalent per day |
NGLs |
|
natural gas liquids |
WTI |
|
West Texas Intermediate, the reference price paid for crude oil
of standard grade in U.S. dollars at Cushing, Oklahoma |
AECO |
|
the daily average benchmark price for natural gas at the AECO
'C' hub in southeast Alberta |
TTF |
|
the price for natural gas in the Netherlands, quoted in MWh of
natural gas per hour per day, at the Title Transfer Facility
Virtual Trading Point operated by Dutch TSO Gas Transport
Services |
$M |
|
thousand dollars |
$MM |
|
million dollars |
PRRT |
|
Petroleum Resource Rent Tax, a profit based tax levied on
petroleum projects in Australia |
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;
- reserve quantities and the discounted present value of future
net cash flows 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 of future
dividends;
- royalty and income tax rates;
- the timing of regulatory proceedings and approvals; and
- the timing of first commercial natural gas; and the estimate of
Vermilion's share of the expected
natural gas production from the Corrib field.
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 strength 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;
- 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.
In accordance with National Instruments 51-101,
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.
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
($M except as indicated) |
|
|
June
30, |
|
|
March
31, |
|
|
June
30, |
|
|
June
30, |
|
|
June
30, |
Financial |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Petroleum and natural gas sales |
|
|
311,966 |
|
|
309,576 |
|
|
246,544 |
|
|
621,542 |
|
|
557,032 |
Fund flows from operations
1 |
|
|
174,592 |
|
|
163,629 |
|
|
127,775 |
|
|
338,221 |
|
|
278,897 |
|
Fund flows from operations
($/basic share) |
|
|
1.73 |
|
|
1.65 |
|
|
1.30 |
|
|
3.38 |
|
|
2.87 |
|
Fund flows from operations
($/diluted share) |
|
|
1.71 |
|
|
1.61 |
|
|
1.28 |
|
|
3.33 |
|
|
2.82 |
Net earnings |
|
|
106,198 |
|
|
52,137 |
|
|
37,816 |
|
|
158,335 |
|
|
102,910 |
|
Net earnings per share ($/basic
share) |
|
|
1.05 |
|
|
0.53 |
|
|
0.39 |
|
|
1.58 |
|
|
1.06 |
Capital expenditures |
|
|
78,118 |
|
|
180,469 |
|
|
94,888 |
|
|
258,587 |
|
|
189,248 |
Acquisitions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
106,184 |
Asset retirement obligations
settled |
|
|
2,370 |
|
|
1,388 |
|
|
2,581 |
|
|
3,758 |
|
|
3,347 |
Cash dividends ($/share) |
|
|
0.60 |
|
|
0.60 |
|
|
0.57 |
|
|
1.20 |
|
|
1.14 |
Dividends declared |
|
|
60,776 |
|
|
59,612 |
|
|
55,962 |
|
|
120,388 |
|
|
111,086 |
Net dividends 1 |
|
|
42,146 |
|
|
44,080 |
|
|
37,181 |
|
|
86,226 |
|
|
74,747 |
|
% of fund flows from operations,
gross |
|
|
35% |
|
|
36% |
|
|
44% |
|
|
36% |
|
|
40% |
|
% of fund flows from operations,
net |
|
|
24% |
|
|
27% |
|
|
29% |
|
|
25% |
|
|
27% |
Total net dividends,
capital expenditures and asset retirement obligations |
|
|
122,634 |
|
|
225,937 |
|
|
134,650 |
|
|
348,571 |
|
|
267,342 |
|
% of fund flows from
operations |
|
|
70% |
|
|
138% |
|
|
105% |
|
|
103% |
|
|
96% |
|
% of fund flows from operations
(excluding the Corrib project) |
|
|
55% |
|
|
127% |
|
|
93% |
|
|
90% |
|
|
86% |
Net debt 1 |
|
|
674,368 |
|
|
744,762 |
|
|
524,610 |
|
|
674,368 |
|
|
524,610 |
Operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d) |
|
|
26,638 |
|
|
23,583 |
|
|
24,658 |
|
|
25,119 |
|
|
24,576 |
|
NGLs (bbls/d) |
|
|
1,775 |
|
|
1,431 |
|
|
1,405 |
|
|
1,604 |
|
|
1,389 |
|
Natural gas (mmcf/d) |
|
|
86.40 |
|
|
82.16 |
|
|
78.63 |
|
|
84.29 |
|
|
79.51 |
|
Total (boe/d) |
|
|
42,813 |
|
|
38,707 |
|
|
39,168 |
|
|
40,772 |
|
|
39,217 |
Average realized prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and NGLs ($/bbl) |
|
|
98.95 |
|
|
103.98 |
|
|
100.07 |
|
|
101.42 |
|
|
103.17 |
|
Natural gas ($/mcf) |
|
|
7.22 |
|
|
6.77 |
|
|
5.79 |
|
|
7.00 |
|
|
5.78 |
Production mix (% of production) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% priced with reference to
WTI |
|
|
25% |
|
|
24% |
|
|
23% |
|
|
24% |
|
|
23% |
|
% priced with reference to
AECO |
|
|
17% |
|
|
18% |
|
|
18% |
|
|
18% |
|
|
18% |
|
% priced with reference to
European gas |
|
|
17% |
|
|
18% |
|
|
16% |
|
|
17% |
|
|
16% |
|
% priced with reference to Dated
Brent |
|
|
41% |
|
|
40% |
|
|
43% |
|
|
41% |
|
|
43% |
Netbacks ($/boe) 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating netback |
|
|
59.30 |
|
|
59.18 |
|
|
53.88 |
|
|
59.24 |
|
|
54.79 |
|
Fund flows netback |
|
|
44.90 |
|
|
43.89 |
|
|
39.40 |
|
|
44.40 |
|
|
39.85 |
|
Operating expenses |
|
|
12.36 |
|
|
14.10 |
|
|
12.41 |
|
|
13.21 |
|
|
12.54 |
Average reference prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl) |
|
|
94.22 |
|
|
94.37 |
|
|
93.49 |
|
|
94.30 |
|
|
98.21 |
|
Edmonton Sweet index (US
$/bbl) |
|
|
90.56 |
|
|
87.42 |
|
|
83.29 |
|
|
88.99 |
|
|
87.86 |
|
Dated Brent (US $/bbl) |
|
|
102.44 |
|
|
112.55 |
|
|
108.19 |
|
|
107.50 |
|
|
113.34 |
|
AECO ($/GJ) |
|
|
3.35 |
|
|
3.03 |
|
|
1.80 |
|
|
3.19 |
|
|
1.92 |
|
Netherlands gas price ($/GJ) |
|
|
10.14 |
|
|
10.40 |
|
|
9.45 |
|
|
10.23 |
|
|
9.50 |
Share information
('000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding - basic |
|
|
101,418 |
|
|
99,462 |
|
|
98,330 |
|
|
101,418 |
|
|
98,330 |
Shares outstanding - diluted
1 |
|
|
103,735 |
|
|
102,380 |
|
|
101,249 |
|
|
103,735 |
|
|
101,249 |
Weighted average shares outstanding -
basic |
|
|
100,964 |
|
|
99,301 |
|
|
97,937 |
|
|
100,137 |
|
|
97,291 |
Weighted average shares outstanding -
diluted |
|
|
102,223 |
|
|
101,349 |
|
|
99,923 |
|
|
101,578 |
|
|
99,000 |
1 |
The above table includes non-GAAP measures
which may not be comparable to other companies. Please see
the "Non-GAAP
Measures" section of Management's Discussion and Analysis. |
OPERATIONAL REVIEW AND OUTLOOK
Vermilion's
strong performance during the second quarter illustrates our
consistent operational execution and the advantages of our global
diversification strategy. Thus far in 2013, we have achieved growth
across all four of our operating regions resulting in record
consolidated three and six-month production volumes of 42,813 and
40,772 boe/d, respectively.
Our diversified product mix continues to afford
a significant competitive advantage. In the second quarter, 66% of
production volumes were Brent and WTI-based crude oil and liquids
and 17% was high-netback European gas. Our Brent-based crude (41%
of production) continues to receive a premium to the Dated Brent
index, resulting in an average realized price of $105.25 per barrel for the second quarter. In
addition, our Netherlands natural
gas production received an average price of $10.82 per mcf, a premium of $7.29 per mcf compared to an average second
quarter price of $3.53 per mcf for
AECO natural gas in Canada. Our
consistent production growth and increasing exposure to liquids and
European gas enabled fund flows from operations to grow 7%
quarter-over-quarter and 37% year-over-year.
The majority of our Canadian development
activities continued to be focused on the development of our
Cardium light oil play. Well performance continues to outpace that
of our peers in the area, demonstrating the quality of our land
position in the West Pembina region. Since entering the play in
2009, we have drilled 202 gross wells (141 net) in the Cardium and
increased production to over 9,500 boe/d. We continue to optimize
completion technology and well designs, and remain one of few
companies in our producing area to employ long reach wells (greater
than one mile in length). After demonstrating production
improvement and a significant reduction in per-section costs by
drilling long-reach 1.5-mile horizontal wells, we are now planning
on drilling a higher percentage of 1.5-mile wells and several
2.0-mile pilot wells over the remainder of 2013. The optimization
of frac design and fluids, multi-well pads and drilling longer
horizontal wells has enabled us to reduce well costs from more than
$5 million per section at the outset
of development in 2009 to approximately $3
million per section in the second quarter of 2013.
Furthermore, in pursuit of ongoing well cost reduction and enhanced
environmental stewardship, we are testing several alternative
processes for the recycling of frac flowback water. We also
initiated a water injection pilot to test applicability of
water-flooding to this reservoir. We anticipate our Cardium
drilling inventory will last five to six years at a drilling rate
of 40 to 60 wells per year. Our per unit operating costs remain
less than $6 per boe for our operated
production, resulting in strong operating netbacks of approximately
$65 per boe during the second
quarter.
In addition to the Cardium, we have also
identified a significant inventory of Mannville condensate-rich natural gas targets
in the Drayton Valley area. During
2013, our plans are to drill a total of six gross (3.2 net)
Mannville wells targeting the
Ellerslie formation. During the
second quarter, we drilled and completed our third Ellerslie well and brought on production from
our second well, which was drilled and completed during the first
quarter. In its fourth month of production, the first well is
producing at a rate of approximately 3.5 mmcf/d of sales gas with
496 barrels per day condensate and natural gas liquids (79%
condensate). In its third month of production, the second
well is producing at approximately 4.5 mmcf/d of sales gas with 322
barrels per day of natural gas liquids (70% condensate). The
third well was brought on production in July and has averaged
approximately 1.3 mmcf/d of sales gas with 466 barrels per day of
associated natural gas liquids (77% condensate) at an average
flowing tubing pressure of 1,125 pounds per square inch during the
first two weeks of production.
We continue to expand our position in the
Duvernay liquids-rich natural gas
resource play with an additional 36.6 net sections acquired in the
second quarter and nine net sections acquired subsequent to quarter
end. In total, we have amassed 318 net sections in the Edson and Drayton
Valley areas spanning the breadth of the liquids-rich
natural gas fairway, at a cost of approximately $76 million ($375
per acre). To date, we have drilled three vertical
stratigraphic test wells and plan to drill our first horizontal
well late in 2013, with completion to occur in 2014. Our
Duvernay rights generally underlie
our Cardium and Mannville
liquids-rich gas positions, allowing for potential infrastructure,
operational and timing advantages should full field development of
the Duvernay be pursued.
Combined, our Cardium, Mannville
and Duvernay positions provide us
with exploration and development opportunities in our core Canadian
operating region that have the potential to deliver strong
production and reserve growth into the latter half of the
decade.
Our Australian activities during the first half
of 2013 were focused on completion of the drilling program at
Wandoo. We drilled two sidetracks off existing wells, including the
longest horizontal section yet drilled at Wandoo to-date of 3,400
metres. The 2013 drilling program has been our most successful
effort yet in Australia.
Both sidetracks were brought on production at restricted rates in
April, demonstrating productive capacities in excess of 6,000
bbls/d and 3,000 bbls/d, respectively. To meet current
marketing agreements and provide long-term certainty to our
customers, our current plan is to maintain production levels within
our prior guidance of between 6,000 bbls/d and 8,000 bbls/d. We
anticipate maintaining these production levels in Australia for the foreseeable future with
drilling programs approximately every two years. Wandoo oil garners
a premium to the Dated Brent index and incurs no transportation
cost as production is sold directly from the platform, leading to
very high netbacks.
During the second quarter, we concluded an
initial four-well infill drilling program in the Champotran field
in France. The program was
subsequently expanded to five wells to drill a two-kilometer
step-out well to the south of the existing field. All five of
the wells were successful, with the four infill wells completed in
June and the extension well completed in July. All five wells
currently have per-well production rates in excess of 300 bbls/d at
low water cuts. In aggregate, current production from the
wells is approximately 1,800 bbls/d at a 4% water cut.
Additional activities in France
included workovers, recompletions and facilities upgrades in both
the Paris and Aquitaine Basins. In
2012, we completed two acquisitions that were natural additions to
our asset base in France and
further secured our position as the leading oil producer in the
country. We continue to integrate these assets and to identify
further opportunities to increase production through seismic data
acquisition, workovers, optimized water-flood management and
development drilling. Our French business is now an organic growth
asset, featuring low base decline rates, high netbacks from
Brent-indexed production, strong cash flow generation and high
capital efficiencies on development projects. We are increasing our
France-based technical staffing to
identify and execute additional investment opportunities in these
large, complex, conventional light oil fields in both the
Paris and Aquitaine Basins.
We continued permitting and drilling
preparations in the Netherlands
for a three-well drilling campaign in the second half of 2013. Our
Garijp debottlenecking project was completed in the first quarter
of 2013, enabling incremental production from two wells previously
drilled at Vinkega. Surface facilities for the multi-zone
Langezwaag-1 well (42% working interest) were completed and
commissioned mid-way through the second quarter. Langezwaag-1
is currently producing from the Vlieland zone at an average rate of
3.0 mmcf/d, net to Vermilion. We intend to increase
activity in the Netherlands each
year to maintain a rolling inventory of projects so that each
year's capital program will involve a combination of drilling new
wells and the tie-in of previous successes. In March, we were
awarded an exploration license for the Akkrum concession, located
directly between our existing Gorredijk and Leeuwarden concessions.
Covering more than 54,000 acres, the Akkrum concession adds to our
significant land position and future potential prospects in
the Netherlands. Over the last
year, we have more than doubled our undeveloped acreage position in
the Netherlands to more than
435,000 net acres. Like our French Business Unit, we now
consider our Netherlands Business Unit to be an organic growth
business, and we are increasing our technical staffing in
the Netherlands to turn our
substantial inventory of prospect leads into drillable
projects.
In Ireland,
tunneling activities related to the completion of the nine
kilometer onshore pipeline for Corrib commenced in December,
2012. Various other onshore and offshore activities have
progressed as well over the first half of 2012, including umbilical
lays to the offshore wells, onshore pipelining in segments that are
not within the tunnel, construction of the tunnel boring machine
reception site and gas plant pre-commissioning. Tunneling,
construction, commissioning and start-up activities are anticipated
to take approximately 18 months to complete, with first gas
anticipated between the end of 2014 and early 2015. Peak production
is expected to be reached in mid-2015, with peak production levels
of approximately 55 mmcf/d (9,000 boe/d), net to Vermilion.
With respect to current well and facility
deliverability, we are not currently producing at full capacity in
our Australia and Netherlands business units. Our
conservative approach to utilizing available well deliverability is
supported by several considerations. In general, we seek to
maximize capital efficiency, which means that in some cases, we do
not install facility capacity and well equipment to maximize
initial production rates. In other cases, there are technical
or commercial drivers, such as reservoir management or long-term
product marketing considerations, that lead us to hold production
levels below available deliverability. Moreover, our capital
markets model is based on low-risk, ratable organic growth along
with income to our shareholders. We believe that our
conservative approach to production management reduces the risk of
execution of our growth and income model in future time
periods.
Our objective remains to produce ratable annual
growth at the consolidated company level of approximately 5% to 7%
per year, before consideration of Corrib's future impact.
With Corrib's anticipated contribution to our production and
cash flow streams, we continue to target overall growth of
approximately 30% to 50,000 boe/d from 2012 to 2015, and fund flows
from operations growth of approximately 40% over the same period.
Near term growth and cash flow are expected to be driven by
continued Cardium and Mannville
development in Canada, oil
development activities in France,
and high-netback natural gas drilling in the Netherlands. A significant increment
of production growth and free cash flow growth is expected from
Corrib between the end of 2014 and early 2015, with full production
achieved during 2015. Our Australian Business Unit is
expected to provide steady production as well as significant free
cash flow.
We increased our monthly dividend by 5.3% in the
first quarter of 2013, from $0.19 to
$0.20 per share. The increase became
effective for the January 2013
dividend paid February 15, 2013. With
the increasing certainty for Corrib development timing and the
anticipated strength of future cash flows from all of our worldwide
businesses, we are committed and believe we are well positioned to
provide a reliable and growing dividend stream to investors.
On March 12, 2013,
Vermilion shares began trading on
the New York Stock Exchange under the ticker symbol "VET". As
an international oil and gas producer, we believe the secondary
listing will assist in broadening our investor base and increase
trading liquidity.
Vermilion's
conservative fiscal management and capital discipline leaves us
well positioned to execute our growth-and-income model and provide
growth to investors on a per share basis. The management and
directors of Vermilion continue to
hold approximately 8% of the outstanding shares and remain
committed to delivering superior rewards to all stakeholders.
Continuing to be acknowledged for excellence in our business
practices, Vermilion was
recognized for the fourth consecutive year by the Great Place to
Work® Institute in both Canada and
France. Vermilion ranked as the 22nd Best Workplace in
Canada among more than 315
companies. Our French unit ranked as the 27th Best Workplace in the
country.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is Management's Discussion and
Analysis ("MD&A"), dated July 31,
2013, of Vermilion Energy Inc.'s ("Vermilion" or the
"Company") operating and financial results as at and for the three
and six months ended June 30, 2013 as
compared with the corresponding periods in the prior year.
This discussion should be read in conjunction
with the unaudited condensed consolidated interim financial
statements for the three and six months ended June 30, 2013 and the audited consolidated
financial statements for the year ended December 31, 2012 and 2011, together with
accompanying notes. Additional information relating to
Vermilion, including its Annual
Information Form, is available on SEDAR at www.sedar.com or on
Vermilion's website at
www.vermilionenergy.com.
The unaudited condensed consolidated interim
financial statements for the three and six months ended
June 30, 2013 and comparative
information have been prepared in Canadian dollars, except where
another currency has been indicated, and in accordance with IAS 34,
"Interim financial reporting", as issued by the International
Accounting Standards Board.
NON-GAAP MEASURES
This report includes non-GAAP measures as
further described herein. These non-GAAP measures do not have
standardized meanings prescribed by International Financial
Reporting Standards ("IFRS" or, alternatively, "GAAP") and
therefore may not be comparable with the calculations of similar
measures for other entities.
"Fund flows from operations" represents
cash flows from operating activities before changes in non-cash
operating working capital and asset retirement obligations
settled. Management considers fund flows from operations and
fund flows from operations per share to be key measures as they
demonstrate Vermilion's ability to
generate the cash necessary to pay dividends, repay debt, fund
asset retirement obligations and make capital investments.
Management believes that by excluding the temporary impact of
changes in non-cash operating working capital, fund flows from
operations provides a useful measure of Vermilion's ability to generate cash that is
not subject to short-term movements in non-cash operating working
capital.
"Fund flows from operations (excluding the
Corrib project)" represents fund flows from operations
excluding expenses related to the Corrib project. Management
believes that by excluding expenses related to the Corrib project,
fund flows from operations (excluding the Corrib project) provides
a useful measure of Vermilion's
ability to generate cash from its current producing assets.
The most directly comparable GAAP measure to
fund flows from operations and fund flows from operations
(excluding the Corrib project) is cash flows from operating
activities.
Cash flows from operating activities as
presented in Vermilion's
consolidated statements of cash flows are reconciled to fund flows
from operations and fund flows from operations (excluding the
Corrib project) as follows:
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Cash flows from operating activities |
|
|
|
179,074 |
|
|
190,712 |
|
|
123,485 |
|
|
369,786 |
|
|
248,372 |
Changes in non-cash operating working capital |
|
|
|
(6,852) |
|
|
(28,471) |
|
|
1,709 |
|
|
(35,323) |
|
|
27,178 |
Asset retirement obligations settled |
|
|
|
2,370 |
|
|
1,388 |
|
|
2,581 |
|
|
3,758 |
|
|
3,347 |
Fund flows from operations |
|
|
|
174,592 |
|
|
163,629 |
|
|
127,775 |
|
|
338,221 |
|
|
278,897 |
Expenses related to the Corrib project |
|
|
|
2,036 |
|
|
1,855 |
|
|
2,344 |
|
|
3,891 |
|
|
4,708 |
Fund flows from operations
(excluding the Corrib project) |
|
|
|
176,628 |
|
|
165,484 |
|
|
130,119 |
|
|
342,112 |
|
|
283,605 |
"Cash dividends per share" represents
cash dividends declared per share by Vermilion.
"Net dividends" are dividends declared
less proceeds received by Vermilion for the issuance of shares pursuant
to the dividend reinvestment plan, both as presented in
Vermilion's consolidated
statements of changes in shareholders' equity. Dividends both
before and after the dividend reinvestment plan are reviewed by
management and are assessed as a percentage of fund flows from
operations to analyze the amount of cash that is generated by
Vermilion which is being used to
fund dividends. Dividends declared is the most directly
comparable GAAP measure to net dividends.
"Total net dividends, capital expenditures
and asset retirement obligations settled" are net dividends
plus the following amounts from Vermilion's consolidated statements of cash
flows: drilling and development, exploration and evaluation,
dispositions and asset retirement obligations settled.
"Total net dividends, capital expenditures
and asset retirement obligations settled (excluding the Corrib
project)" are total net dividends, capital expenditures and
asset retirement obligations settled excluding drilling and
development and asset retirement obligations settled relating to
the Corrib project.
Total net dividends, capital expenditures and
asset retirement obligations settled and total net dividends,
capital expenditures and asset retirement obligations settled
(excluding the Corrib project) are reviewed by management and are
assessed as a percentage of fund flows from operations and fund
flows from operations (excluding the Corrib project) to analyze the
amount of cash that is generated by Vermilion that is available to repay debt and
fund potential future acquisitions and capital expenditures.
Dividends declared, total net dividends, capital
expenditures and asset retirement obligations settled and total net
dividends, capital expenditures and asset retirement obligations
settled (excluding the Corrib project) are reconciled to their most
directly comparable GAAP measures as follows:
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Dividends declared |
|
|
|
60,776 |
|
|
59,612 |
|
|
55,962 |
|
|
120,388 |
|
|
111,086 |
Issuance of shares pursuant to the dividend
reinvestment plan |
|
|
|
(18,630) |
|
|
(15,532) |
|
|
(18,781) |
|
|
(34,162) |
|
|
(36,339) |
Net dividends |
|
|
|
42,146 |
|
|
44,080 |
|
|
37,181 |
|
|
86,226 |
|
|
74,747 |
Drilling and development |
|
|
|
75,005 |
|
|
179,520 |
|
|
77,956 |
|
|
254,525 |
|
|
165,852 |
Dispositions |
|
|
|
- |
|
|
(8,627) |
|
|
- |
|
|
(8,627) |
|
|
- |
Exploration and evaluation |
|
|
|
3,113 |
|
|
9,576 |
|
|
16,932 |
|
|
12,689 |
|
|
23,396 |
Asset retirement obligations settled |
|
|
|
2,370 |
|
|
1,388 |
|
|
2,581 |
|
|
3,758 |
|
|
3,347 |
Total net dividends, capital
expenditures and asset retirement obligations settled |
|
|
|
122,634 |
|
|
225,937 |
|
|
134,650 |
|
|
348,571 |
|
|
267,342 |
Capital expenditures and asset retirement
obligations settled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related to the Corrib project |
|
|
|
(24,878) |
|
|
(16,520) |
|
|
(13,928) |
|
|
(41,398) |
|
|
(23,410) |
Total net dividends, capital
expenditures and asset retirement obligations settled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding the Corrib project) |
|
|
|
97,756 |
|
|
209,417 |
|
|
120,722 |
|
|
307,173 |
|
|
243,932 |
"Net debt" is the sum of long-term debt
and working capital as presented in Vermilion's consolidated balance sheets.
Net debt is used by management to analyze the financial position
and leverage of Vermilion.
The most directly comparable GAAP measure is long-term debt.
Long-term debt as presented in Vermilion's consolidated balance sheets is
reconciled to net debt as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
At |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Dec 31, |
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780,470 |
|
|
642,022 |
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,912 |
|
|
355,711 |
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(432,014) |
|
|
(320,502) |
Net debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
674,368 |
|
|
677,231 |
"Netbacks" are per boe and per mcf
measures used in the analysis of operational activities and are
used by management as a basis for decisions on capital
allocation.
"Diluted shares outstanding" is the sum
of shares outstanding at the period-end plus outstanding awards
under Vermilion's equity based
compensation plan, based on current estimates of future performance
factors and forfeitures. The most directly comparable GAAP measure
is shares outstanding.
Shares outstanding is reconciled to diluted
shares outstanding as follows:
|
|
|
|
As
At |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
('000s of shares) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
Shares outstanding |
|
|
|
101,418 |
|
|
99,462 |
|
|
98,330 |
Potential shares issuable pursuant
to the equity based compensation plan |
|
|
|
2,317 |
|
|
2,918 |
|
|
2,919 |
Diluted shares outstanding |
|
|
|
103,735 |
|
|
102,380 |
|
|
101,249 |
OPERATIONAL ACTIVITIES
Canada
Vermilion
drilled three (1.9 net) wells during the second quarter of 2013. In
the Cardium, Vermilion drilled one
(1.0 net) horizontal well and brought twelve gross operated and two
non-operated wells on production during the quarter. In the
Mannville, Vermilion drilled two (0.9 net) wells and
brought one well on production. Drilling and completion activities
were lower than in the first quarter of 2013 as a result of some
activities being deferred until the summer months following spring
break-up.
France
Vermilion
completed its five-well Champotran drilling program during the
second quarter of 2013. The Company also completed a number of
workovers in both the Paris and
Aquitaine Basins. Late in the quarter, Vermilion commenced 3D seismic and subsurface
studies in the Vic Bilh region that will continue into the latter
half of the year.
Netherlands
Operating activities in the second quarter
focused on facility maintenance and site construction. Vinkega-2
surface facilities were commissioned for first gas in late June,
and Langezwaag-1 surface facilities were commissioned for first gas
in mid-May. Vermilion is
currently planning and preparing for a three well drilling program
in the Netherlands during the
second half of 2013.
Australia
Australian activity in the second quarter
focused on completion of a two-well drilling program and
demobilization of the rig. Other activities included minor
facility maintenance and repairs.
PRODUCTION
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil & NGLs
(bbls/d) |
|
|
|
10,610 |
|
|
9,301 |
|
|
9,078 |
|
14% |
|
|
17% |
|
|
9,959 |
|
|
8,977 |
|
11% |
|
Natural gas (mmcf/d) |
|
|
|
43.69 |
|
|
41.04 |
|
|
41.32 |
|
6% |
|
|
6% |
|
|
42.37 |
|
|
41.58 |
|
2% |
|
Total (boe/d) |
|
|
|
17,892 |
|
|
16,140 |
|
|
15,965 |
|
11% |
|
|
12% |
|
|
17,021 |
|
|
15,906 |
|
7% |
|
% of consolidated |
|
|
|
42% |
|
|
41% |
|
|
40% |
|
|
|
|
|
|
|
41% |
|
|
41% |
|
|
France |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d) |
|
|
|
10,390 |
|
|
10,330 |
|
|
9,931 |
|
1% |
|
|
5% |
|
|
10,360 |
|
|
10,101 |
|
3% |
|
Natural gas (mmcf/d) |
|
|
|
4.19 |
|
|
4.21 |
|
|
3.57 |
|
- |
|
|
17% |
|
|
4.20 |
|
|
3.53 |
|
19% |
|
Total (boe/d) |
|
|
|
11,088 |
|
|
11,032 |
|
|
10,526 |
|
1% |
|
|
5% |
|
|
11,060 |
|
|
10,689 |
|
3% |
|
% of consolidated |
|
|
|
26% |
|
|
29% |
|
|
27% |
|
|
|
|
|
|
|
27% |
|
|
27% |
|
|
Netherlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs (bbls/d) |
|
|
|
50 |
|
|
96 |
|
|
84 |
|
(48%) |
|
|
(40%) |
|
|
73 |
|
|
78 |
|
(6%) |
|
Natural gas (mmcf/d) |
|
|
|
38.52 |
|
|
36.91 |
|
|
33.74 |
|
4% |
|
|
14% |
|
|
37.72 |
|
|
34.41 |
|
10% |
|
Total (boe/d) |
|
|
|
6,470 |
|
|
6,248 |
|
|
5,707 |
|
4% |
|
|
13% |
|
|
6,360 |
|
|
5,813 |
|
9% |
|
% of consolidated |
|
|
|
15% |
|
|
16% |
|
|
15% |
|
|
|
|
|
|
|
16% |
|
|
15% |
|
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d) |
|
|
|
7,363 |
|
|
5,287 |
|
|
6,970 |
|
39% |
|
|
6% |
|
|
6,331 |
|
|
6,809 |
|
(7%) |
|
% of consolidated |
|
|
|
17% |
|
|
14% |
|
|
18% |
|
|
|
|
|
|
|
16% |
|
|
17% |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil & NGLs
(bbls/d) |
|
|
|
28,413 |
|
|
25,014 |
|
|
26,063 |
|
14% |
|
|
9% |
|
|
26,723 |
|
|
25,965 |
|
3% |
|
% of consolidated |
|
|
|
66% |
|
|
65% |
|
|
67% |
|
|
|
|
|
|
|
66% |
|
|
66% |
|
|
|
Natural gas (mmcf/d) |
|
|
|
86.40 |
|
|
82.16 |
|
|
78.63 |
|
5% |
|
|
10% |
|
|
84.29 |
|
|
79.51 |
|
6% |
|
% of consolidated |
|
|
|
34% |
|
|
35% |
|
|
33% |
|
|
|
|
|
|
|
34% |
|
|
34% |
|
|
|
Total (boe/d) |
|
|
|
42,813 |
|
|
38,707 |
|
|
39,168 |
|
11% |
|
|
9% |
|
|
40,772 |
|
|
39,217 |
|
4% |
Average total production in Canada of 17,892 boe/d during the second
quarter of 2013 represented an increase of 11% compared to 16,140
boe/d in the first quarter of 2013, and 12% as compared to 15,965
boe/d in the second quarter of the prior year. The increased
volumes are largely attributable to continued development in the
Cardium. Mannville development
also contributed with two wells on production during the second
quarter. Vermilion's
exposure to oil and liquids represented approximately 59% of
Canadian production in the second quarter of 2013 compared to 57%
in the second quarter of 2012.
Production in France averaged 11,088 boe/d in the second
quarter of 2013, essentially flat with production of 11,032 boe/d
in the first quarter of 2013. On a year-over-year basis, production
has grown by 5%. This increase is largely attributable to
incremental production volumes associated with Vermilion's acquisition completed in
December 2012 and continued workover
and recompletion activities largely offsetting natural declines.
Production from the five-well drilling program started to be
brought on late in the second quarter. In France, Vermilion remains predominantly weighted to
Brent crude at approximately 94% of production.
Average production volumes of 6,470 boe/d in
the Netherlands during the second
quarter of 2013 represented an increase of 4% quarter-over-quarter
and 13% year-over-year. Production growth was largely attributable
to Vermilion completing
debottlenecking activities at Garijp, facilitating increased
throughput of production from Vinkega-1.
Australia
production averaged 7,363 boe/d during the second quarter of 2013,
an increase of 39% compared to 5,287 boe/d in the prior quarter,
and 6% compared to 6,970 boe/d in the second quarter of 2012.
Production volumes in the second quarter of 2013 reflect the
strength of the base production at Wandoo with growth attributable
to incremental production from the new wells which were brought on
production at restricted rates in April.
FINANCIAL REVIEW
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six Months Ended |
|
%
change |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Net earnings |
|
|
|
106,198 |
|
|
52,137 |
|
|
37,816 |
|
104% |
|
|
181% |
|
|
158,335 |
|
|
102,910 |
|
54% |
Fund flows from operations |
|
|
|
174,592 |
|
|
163,629 |
|
|
127,775 |
|
7% |
|
|
37% |
|
|
338,221 |
|
|
278,897 |
|
21% |
Cash flow from operating activities |
|
|
|
179,074 |
|
|
190,712 |
|
|
123,485 |
|
(6%) |
|
|
45% |
|
|
369,786 |
|
|
248,372 |
|
49% |
Net debt |
|
|
|
674,368 |
|
|
744,762 |
|
|
524,610 |
|
(9%) |
|
|
29% |
|
|
674,368 |
|
|
524,610 |
|
29% |
Long-term debt |
|
|
|
780,470 |
|
|
712,763 |
|
|
452,267 |
|
9% |
|
|
73% |
|
|
780,470 |
|
|
452,267 |
|
73% |
Ratio of net debt to annualized
fund flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from operations |
|
|
|
1.0 |
|
|
1.1 |
|
|
1.0 |
|
(9%) |
|
|
- |
|
|
1.0 |
|
|
0.9 |
|
11% |
Total net dividends, capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and asset retirement
obligations settled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of fund flows from operations |
|
|
|
70% |
|
|
138% |
|
|
105% |
|
|
|
|
|
|
|
103% |
|
|
96% |
|
|
% of fund flows from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding the
Corrib project) |
|
|
|
55% |
|
|
127% |
|
|
93% |
|
|
|
|
|
|
|
90% |
|
|
86% |
|
|
Net earnings for the three and six months ended
June 30, 2013 increased as compared
to first quarter of 2013 and the same periods in 2012 due to the
increases in operating income resulting from production growth
coupled with unrealized foreign exchange gains recorded in the
current periods. The unrealized foreign exchange gain of
$25.5 million recorded in 2013
primarily resulted from the impact of the appreciation of the Euro
against the Canadian dollar and the resultant impact on
Vermilion's financial
balances.
Fund flows from operations for the second
quarter of 2013 was 7% higher ($11.0
million) than the first quarter. This increase was
driven by record production, including growth across all of
Vermilion's operating
regions. Fund flows from operations for the three and six
months ended June 30, 2013 was 37%
and 21% higher, respectively, than the same periods in 2012.
The significant increases were largely the result of year-over-year
production growth, coupled with the absence of the large build in
inventory that occurred in 2012. On a year-to-date basis,
inventory decreased by 238,000 bbls in 2013 versus an increase of
137,000 bbls in 2012. While the Dated Brent reference price
declined by 5% from the 2012 periods, the impact of these declines
were entirely offset by increased realized prices for Vermilion's production in Canada and the
Netherlands.
Cash flow from operating activities for the
second quarter of 2013 decreased as compared to the first quarter
of the same year despite the increased net earnings due to the
impact of unfavorable timing differences pertaining to working
capital. Cash flow from operating activities for the three
and six months ended June 30, 2013
increased as compared to the same periods in 2012 due to the
aforementioned increase in net earnings coupled with favorable
timing differences pertaining to working capital.
Long-term debt as at June
30, 2013 increased to $780.5
million from $642.0 million as
at December 31, 2012 as a result of
increased borrowings on the revolving credit facility to fund
current year development capital expenditures. As fund flows
from operations exceeded dividends paid, Vermilion ended the second quarter with net
debt of $674.4 million, a reduction
from $744.8 million as at
March 31, 2013 and $677.2 million as at December 31, 2012.
The ratio of total net dividends, capital
expenditures and asset retirement obligations settled (excluding
capital expenditures and asset retirement obligations settled on
the Corrib project) expressed as a percentage of fund flows from
operations for the second quarter of 2013 decreased compared to
both the first quarter of 2013 and the second quarter of
2012. This decrease was primarily the result of the
aforementioned increase in fund flows from operations coupled with
reduced capital expenditures in the second quarter of 2013.
The decreases in capital expenditures were due to the absence of
expenditures relating to the Australia drilling campaign, which primarily
took place in the first quarter of 2013, and higher expenditures
during the second quarter of 2012 relating to Duvernay land acquisitions in Canada.
COMMODITY PRICES
|
|
|
|
Three
Months Ended |
|
% change |
|
|
Six
Months Ended |
|
%
change |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Average reference prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl) |
|
|
|
94.22 |
|
|
94.37 |
|
|
93.49 |
|
- |
|
|
1% |
|
|
94.30 |
|
|
98.21 |
|
(4%) |
Edmonton Sweet index (US $/bbl) |
|
|
|
90.56 |
|
|
87.42 |
|
|
83.29 |
|
4% |
|
|
9% |
|
|
88.99 |
|
|
87.86 |
|
1% |
Dated Brent (US $/bbl) |
|
|
|
102.44 |
|
|
112.55 |
|
|
108.19 |
|
(9%) |
|
|
(5%) |
|
|
107.50 |
|
|
113.34 |
|
(5%) |
AECO ($/GJ) |
|
|
|
3.35 |
|
|
3.03 |
|
|
1.80 |
|
11% |
|
|
86% |
|
|
3.19 |
|
|
1.92 |
|
66% |
Netherlands gas price ($/GJ) |
|
|
|
10.14 |
|
|
10.40 |
|
|
9.45 |
|
(3%) |
|
|
7% |
|
|
10.23 |
|
|
9.50 |
|
8% |
Netherlands gas price (€/GJ) |
|
|
|
7.57 |
|
|
7.81 |
|
|
7.27 |
|
(3%) |
|
|
4% |
|
|
7.69 |
|
|
7.31 |
|
5% |
Average realized prices ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
|
62.00 |
|
|
57.61 |
|
|
51.58 |
|
8% |
|
|
20% |
|
|
59.93 |
|
|
53.70 |
|
12% |
France |
|
|
|
98.04 |
|
|
107.17 |
|
|
104.15 |
|
(9%) |
|
|
(6%) |
|
|
102.84 |
|
|
106.56 |
|
(3%) |
Netherlands |
|
|
|
65.08 |
|
|
61.21 |
|
|
57.88 |
|
6% |
|
|
12% |
|
|
63.19 |
|
|
58.49 |
|
8% |
Australia |
|
|
|
111.54 |
|
|
120.76 |
|
|
129.94 |
|
(8%) |
|
|
(14%) |
|
|
115.89 |
|
|
119.16 |
|
(3%) |
Consolidated |
|
|
|
80.21 |
|
|
83.04 |
|
|
76.04 |
|
(3%) |
|
|
5% |
|
|
81.60 |
|
|
79.57 |
|
3% |
Production mix (% of production) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% priced with reference to WTI |
|
|
|
25% |
|
|
24% |
|
|
23% |
|
|
|
|
|
|
|
24% |
|
|
23% |
|
|
% priced with reference to AECO |
|
|
|
17% |
|
|
18% |
|
|
18% |
|
|
|
|
|
|
|
18% |
|
|
18% |
|
|
% priced with reference to
European gas |
|
|
|
17% |
|
|
18% |
|
|
16% |
|
|
|
|
|
|
|
17% |
|
|
16% |
|
|
% priced with reference to Dated Brent |
|
|
|
41% |
|
|
40% |
|
|
43% |
|
|
|
|
|
|
|
41% |
|
|
43% |
|
|
Reference prices
During the second quarter of 2013, North
American crude oil prices remained relatively consistent with the
preceding quarter while Dated Brent crude oil prices decreased 9%
quarter-over-quarter. Western Canadian supply issues and
increased rail capacity resulted in a narrowing differential for
both WTI and the Edmonton Sweet index versus Dated Brent
($8.22 and $11.88 per bbl, respectively, for the second
quarter of 2013 as compared to $18.18
and $25.13 per bbl, respectively, for
the first quarter of 2013).
The AECO reference price for the second quarter
of 2013 increased 11% as compared to the first quarter of 2013 and
is significantly higher when compared to the same period in 2012 as
a result of relatively flat North American production coupled with
downward trending storage levels.
Realized pricing
The realized price of Vermilion's crude oil in Canada is directly linked to WTI but is
subject to market conditions in Western
Canada. These market conditions can result in
fluctuations in the pricing differential, as reflected by the
Edmonton Sweet index price. The realized price of
Vermilion's NGLs in Canada is based on product specific
differentials pertaining to trading hubs in the U.S. The
realized price of Vermilion's
natural gas in Canada is based on
the AECO spot price in Alberta.
Vermilion's
crude oil in France and
Australia is priced with reference
to Dated Brent.
As of January 1,
2013, the price of Vermilion's natural gas in the Netherlands is now based on the TTF
day-ahead index, as determined on the Title Transfer Facility
Virtual Trading Point operated by Dutch TSO Gas Transport Services,
plus various fees. GasTerra, a state owned entity, continues
to purchase all natural gas produced by Vermilion in the
Netherlands. Prior to 2013, the natural gas price
received by Vermilion in
the Netherlands was calculated
using a trailing average of Dated Brent and the natural gas prices
from European trading hubs.
Average realized prices in Vermilion's jurisdictions will differ from
their corresponding average reference prices due to a number of
factors, including the timing of the sale of production,
differences in the quality of production and point of
settlement. In Canada,
average realized prices are also impacted by the production mix of
crude oil, NGLs and natural gas.
CAPITAL EXPENDITURES AND ACQUISITIONS
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
By classification |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Drilling and development |
|
|
|
75,005 |
|
|
179,520 |
|
|
77,956 |
|
|
254,525 |
|
|
165,852 |
Dispositions |
|
|
|
- |
|
|
(8,627) |
|
|
- |
|
|
(8,627) |
|
|
- |
Exploration and evaluation |
|
|
|
3,113 |
|
|
9,576 |
|
|
16,932 |
|
|
12,689 |
|
|
23,396 |
Capital expenditures |
|
|
|
78,118 |
|
|
180,469 |
|
|
94,888 |
|
|
258,587 |
|
|
189,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquisition |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
106,184 |
Acquisitions |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
106,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
By category |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Land |
|
|
|
2,307 |
|
|
3,129 |
|
|
31,713 |
|
|
5,436 |
|
|
38,380 |
Seismic |
|
|
|
5,569 |
|
|
3,813 |
|
|
1,327 |
|
|
9,382 |
|
|
2,126 |
Drilling and completion |
|
|
|
20,235 |
|
|
126,185 |
|
|
28,309 |
|
|
146,420 |
|
|
83,167 |
Production equipment and facilities |
|
|
|
40,819 |
|
|
49,942 |
|
|
26,718 |
|
|
90,761 |
|
|
51,473 |
Recompletions |
|
|
|
4,510 |
|
|
4,131 |
|
|
1,403 |
|
|
8,641 |
|
|
4,048 |
Other |
|
|
|
4,678 |
|
|
1,896 |
|
|
5,418 |
|
|
6,574 |
|
|
10,054 |
Dispositions |
|
|
|
- |
|
|
(8,627) |
|
|
- |
|
|
(8,627) |
|
|
- |
Capital expenditures |
|
|
|
78,118 |
|
|
180,469 |
|
|
94,888 |
|
|
258,587 |
|
|
189,248 |
Acquisitions |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
106,184 |
Total capital expenditures and
acquisitions |
|
|
|
78,118 |
|
|
180,469 |
|
|
94,888 |
|
|
258,587 |
|
|
295,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
By country |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Canada |
|
|
|
17,578 |
|
|
86,636 |
|
|
55,456 |
|
|
104,214 |
|
|
127,438 |
France |
|
|
|
23,223 |
|
|
21,592 |
|
|
10,281 |
|
|
44,815 |
|
|
122,123 |
Netherlands |
|
|
|
4,157 |
|
|
372 |
|
|
5,379 |
|
|
4,529 |
|
|
7,949 |
Australia |
|
|
|
8,282 |
|
|
55,349 |
|
|
9,867 |
|
|
63,631 |
|
|
14,411 |
Ireland |
|
|
|
24,878 |
|
|
16,520 |
|
|
13,905 |
|
|
41,398 |
|
|
23,511 |
Capital expenditures:
Capital expenditures for the second quarter of
2013 were significantly lower than both the first quarter of 2013
and the second quarter of 2012. The decrease from the
first quarter of 2013 was the result of reduced drilling activity
in both Canada and Australia. The decrease from the second
quarter of 2012 was the result of reduced land purchases in
Canada for the Duvernay play, partially offset by increased
drilling activity in France and
tunnelling activity in Ireland.
Capital expenditures for the six months ended
June 30, 2013 was higher than the
same period in 2012 as a result of increased drilling activity in
France and Australia and tunnelling activity in
Ireland. These increases
were partially offset by reduced land purchases in Canada for the Duvernay play.
PETROLEUM AND NATURAL GAS SALES
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
%
change |
By product |
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe and per
mcf) |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Crude oil & NGLs |
|
|
255,183 |
|
|
259,498 |
|
|
205,126 |
|
(2%) |
|
|
24% |
|
|
514,681 |
|
|
473,417 |
|
9% |
Per boe |
|
|
98.95 |
|
|
103.98 |
|
|
100.07 |
|
(5%) |
|
|
(1%) |
|
|
101.42 |
|
|
103.17 |
|
(2%) |
Natural gas |
|
|
56,783 |
|
|
50,078 |
|
|
41,418 |
|
13% |
|
|
37% |
|
|
106,861 |
|
|
83,615 |
|
28% |
Per mcf |
|
|
7.22 |
|
|
6.77 |
|
|
5.79 |
|
7% |
|
|
25% |
|
|
7.00 |
|
|
5.78 |
|
21% |
Petroleum and natural gas sales |
|
|
311,966 |
|
|
309,576 |
|
|
246,544 |
|
1% |
|
|
27% |
|
|
621,542 |
|
|
557,032 |
|
12% |
Per boe |
|
|
80.21 |
|
|
83.04 |
|
|
76.04 |
|
(3%) |
|
|
5% |
|
|
81.60 |
|
|
79.57 |
|
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
By country |
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
100,950 |
|
|
83,688 |
|
|
74,932 |
|
21% |
|
|
35% |
|
|
184,638 |
|
|
155,458 |
|
19% |
Per boe |
|
|
62.00 |
|
|
57.61 |
|
|
51.58 |
|
8% |
|
|
20% |
|
|
59.93 |
|
|
53.70 |
|
12% |
France |
|
|
100,418 |
|
|
121,566 |
|
|
94,828 |
|
(17%) |
|
|
6% |
|
|
221,984 |
|
|
198,339 |
|
12% |
Per boe |
|
|
98.04 |
|
|
107.17 |
|
|
104.15 |
|
(9%) |
|
|
(6%) |
|
|
102.84 |
|
|
106.56 |
|
(3%) |
Netherlands |
|
|
38,316 |
|
|
34,421 |
|
|
30,062 |
|
11% |
|
|
27% |
|
|
72,737 |
|
|
61,882 |
|
18% |
Per boe |
|
|
65.08 |
|
|
61.21 |
|
|
57.88 |
|
6% |
|
|
12% |
|
|
63.19 |
|
|
58.49 |
|
8% |
Australia |
|
|
72,282 |
|
|
69,901 |
|
|
46,722 |
|
3% |
|
|
55% |
|
|
142,183 |
|
|
141,353 |
|
1% |
Per boe |
|
|
111.54 |
|
|
120.76 |
|
|
129.94 |
|
(8%) |
|
|
(14%) |
|
|
115.89 |
|
|
119.16 |
|
(3%) |
Vermilion's
consolidated petroleum and natural gas sales for the second quarter
of 2013 was relatively consistent with the first quarter of 2013 as
the decrease in Dated Brent prices was offset by increased natural
gas production and higher AECO pricing. Petroleum and natural
gas sales for the second quarter of 2013 was higher than the same
period in 2012 as a result of increased sales volumes and favorable
North American commodity prices.
Vermilion's
consolidated petroleum and natural gas sales for the six months
ended June 30, 2013 was higher than
the same period in 2012. This increase was the result of
increased sales volumes in all of Vermilion's jurisdictions, partially offset by
lower Dated Brent pricing year-over-year.
CRUDE OIL INVENTORY
Vermilion
carries an inventory of crude oil in France and Australia, which is a result of timing
differences between production and sales.
The following table summarizes the changes in
Vermilion's crude oil inventory
positions:
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
(mbbls) |
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
France |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening crude oil inventory |
|
|
|
|
|
218 |
|
|
354 |
|
|
223 |
|
|
354 |
|
|
187 |
Adjustments |
|
|
|
|
|
- |
|
|
5 |
|
|
- |
|
|
5 |
|
|
- |
Crude oil production |
|
|
|
|
|
945 |
|
|
930 |
|
|
904 |
|
|
1,875 |
|
|
1,838 |
Crude oil sales |
|
|
|
|
|
(961) |
|
|
(1,071) |
|
|
(856) |
|
|
(2,032) |
|
|
(1,754) |
Closing crude oil inventory |
|
|
|
|
|
202 |
|
|
218 |
|
|
271 |
|
|
202 |
|
|
271 |
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening crude oil
inventory |
|
|
|
|
|
165 |
|
|
268 |
|
|
- |
|
|
268 |
|
|
222 |
Crude oil production |
|
|
|
|
|
670 |
|
|
476 |
|
|
634 |
|
|
1,146 |
|
|
1,239 |
Crude oil sales |
|
|
|
|
|
(648) |
|
|
(579) |
|
|
(359) |
|
|
(1,227) |
|
|
(1,186) |
Closing crude oil inventory |
|
|
|
|
|
187 |
|
|
165 |
|
|
275 |
|
|
187 |
|
|
275 |
Inventory held on the balance sheet as at
June 30, 2013 was comprised of the
following components:
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
France |
|
|
|
Australia |
|
|
|
Total |
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,667 |
|
|
|
3,956 |
|
|
|
7,623 |
Royalties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217 |
|
|
|
- |
|
|
|
1,217 |
Depletion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,217 |
|
|
|
3,617 |
|
|
|
7,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,101 |
|
|
|
7,573 |
|
|
|
16,674 |
DERIVATIVE INSTRUMENTS
The following tables summarize Vermilion's outstanding risk management
positions as at June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management - Oil |
|
|
|
|
|
|
|
|
|
|
bbls/d |
|
|
|
Strike Price(s) US
$/bbl |
Swap - WTI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
93.04 |
July 2013 - September 2013 |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
95.47 |
July 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
94.98 |
Collar - WTI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2013 - September 2013 |
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
92.00 - 98.85 |
Collar - Dated Brent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
3,500 |
|
|
|
96.14 - 107.34 |
July 2013 - September 2013 |
|
|
|
|
|
|
|
|
|
|
1,750 |
|
|
|
97.86 - 107.68 |
July 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
97.50 - 109.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management - European
natural gas |
|
|
|
|
|
|
|
|
|
|
GJ/d |
|
|
|
Strike Price(s) €/GJ |
Swap - TTF 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2013 - September 2013 |
|
|
|
|
|
|
|
|
|
|
1,800 |
|
|
|
7.12 |
May 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
3,600 |
|
|
|
7.41 |
June 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
14,400 |
|
|
|
7.44 |
October 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
1,800 |
|
|
|
7.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management - Canadian natural gas |
|
|
|
|
|
|
|
|
|
|
GJ/d |
|
|
|
Strike Price(s) $/GJ |
Swap - AECO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
3.65 |
Collar - AECO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2013 - September 2013 |
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
2.90 - 3.47 |
April 2013 - October 2013 |
|
|
|
|
|
|
|
|
|
|
3,500 |
|
|
|
3.05 - 3.66 |
April 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
2.93 - 3.52 |
October 2013 - December 2013 |
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
2.85 - 3.56 |
Collar - AECO (Physical) 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2012 - March 2014 |
|
|
|
|
|
|
|
|
|
|
5,500 |
|
|
|
2.60 - 3.78 |
June 2012 - March 2014 |
|
|
|
|
|
|
|
|
|
|
3,000 |
|
|
|
2.30 - 3.75 |
1
|
TTF derivatives are priced based on the TTF
"day-ahead" bid and offer quotations, which
are quoted in MWh of natural gas per hour per day. MWh of
natural gas per hour per day
measures are converted at a ratio of 1 MWh to 3.6 GJ. |
|
|
2
|
Physical AECO collars have a funded cost of
$0.10/GJ. |
From time to time Vermilion
enters into new risk management positions. Up to date
information regarding outstanding risk management positions is
available on Vermilion's website
at www.vermilionenergy.com/ir/hedging.cfm.
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
%
change |
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Realized (gain) loss on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
derivative
instruments |
|
|
|
|
|
(1,770) |
|
|
2,787 |
|
|
3,591 |
|
(164%) |
|
|
(149%) |
|
|
1,017 |
|
|
9,309 |
|
(89%) |
Per boe |
|
|
|
|
|
(0.46) |
|
|
0.75 |
|
|
1.11 |
|
(161%) |
|
|
(141%) |
|
|
0.13 |
|
|
1.33 |
|
(90%) |
The realized gain on derivative instruments for
the second quarter of 2013 is comprised primarily of amounts
received on Vermilion's WTI
extendable swaps (which matured on June 30,
2013) and Dated Brent costless collars (as the reference
price was below the floor price on select instruments for the
entirety of the second quarter). The realized gain for the
second quarter of 2013 compares to a realized loss in both the
first quarter of 2013, which primarily resulted from Dated Brent
reference prices exceeding the ceiling price on the costless
collars, and the second quarter of 2012, where the loss related
both to premiums and amounts paid for settlement.
The realized loss for the six months ended
June 30, 2013 is lower than the
realized loss for the same period in 2012 due to the aforementioned
realized gain recorded in the second quarter of 2013 and the
absence of premiums paid on funded derivatives.
ROYALTIES
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
%
change |
By product |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe and per
mcf) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Crude oil & NGLs |
|
|
|
15,353 |
|
|
14,810 |
|
|
13,242 |
|
4% |
|
|
16% |
|
|
30,163 |
|
|
27,483 |
|
10% |
Per boe |
|
|
|
5.95 |
|
|
5.93 |
|
|
6.46 |
|
- |
|
|
(8%) |
|
|
5.94 |
|
|
5.99 |
|
(1%) |
Natural gas |
|
|
|
447 |
|
|
980 |
|
|
89 |
|
(54%) |
|
|
402% |
|
|
1,427 |
|
|
300 |
|
376% |
Per mcf |
|
|
|
0.06 |
|
|
0.13 |
|
|
0.01 |
|
(54%) |
|
|
500% |
|
|
0.09 |
|
|
0.02 |
|
350% |
Royalties |
|
|
|
15,800 |
|
|
15,790 |
|
|
13,331 |
|
- |
|
|
19% |
|
|
31,590 |
|
|
27,783 |
|
14% |
Per boe |
|
|
|
4.06 |
|
|
4.24 |
|
|
4.11 |
|
(4%) |
|
|
(1%) |
|
|
4.15 |
|
|
3.97 |
|
5% |
% of petroleum and natural gas sales |
|
|
|
5.1% |
|
|
5.1% |
|
|
5.4% |
|
|
|
|
|
|
|
5.1% |
|
|
5.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
By country |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
|
9,707 |
|
|
8,989 |
|
|
8,216 |
|
8% |
|
|
18% |
|
|
18,696 |
|
|
17,185 |
|
9% |
Per boe |
|
|
|
5.96 |
|
|
6.19 |
|
|
5.66 |
|
(4%) |
|
|
5% |
|
|
6.07 |
|
|
5.94 |
|
2% |
% of petroleum and natural gas
sales |
|
|
|
9.6% |
|
|
10.7% |
|
|
11.0% |
|
|
|
|
|
|
|
10.1% |
|
|
11.1% |
|
|
France |
|
|
|
6,093 |
|
|
6,801 |
|
|
5,115 |
|
(10%) |
|
|
19% |
|
|
12,894 |
|
|
10,598 |
|
22% |
Per boe |
|
|
|
5.95 |
|
|
6.00 |
|
|
5.62 |
|
(1%) |
|
|
6% |
|
|
5.97 |
|
|
5.69 |
|
5% |
% of petroleum and natural gas
sales |
|
|
|
6.1% |
|
|
5.6% |
|
|
5.4% |
|
|
|
|
|
|
|
5.8% |
|
|
5.3% |
|
|
Canadian royalties, as a percentage of sales,
decreased to 9.6% for the three months ended June 30, 2013 from 10.7% for the prior quarter
and 11.0% for the comparative period of the prior year. For
the six months ended June 30, 2013,
royalties, as a percentage of sales, decreased to 10.1% from 11.1%
for the six months ended June 30,
2012. These decreases are largely associated with the
timing of placing additional Cardium wells on production that
benefit from a royalty incentive on initial production volumes.
In France, the
primary portion of the royalties levied is based on units of
production and that component, therefore, is not subject to changes
in commodity prices. As average Brent-crude oil prices were
slightly weaker for the three and six month periods ended
June 30, 2013 versus the comparative
periods presented, royalties, as a percentage of sales, were higher
in the current periods.
Production in the
Netherlands and Australia
is not subject to royalties.
OPERATING EXPENSE
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
%
change |
By product |
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe and per
mcf) |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Crude oil & NGLs |
|
|
35,682 |
|
|
41,855 |
|
|
28,645 |
|
(15%) |
|
|
25% |
|
|
77,537 |
|
|
65,511 |
|
18% |
Per boe |
|
|
13.84 |
|
|
16.77 |
|
|
13.97 |
|
(17%) |
|
|
(1%) |
|
|
15.28 |
|
|
14.28 |
|
7% |
Natural gas |
|
|
12,400 |
|
|
10,720 |
|
|
11,580 |
|
16% |
|
|
7% |
|
|
23,120 |
|
|
22,267 |
|
4% |
Per mcf |
|
|
1.58 |
|
|
1.45 |
|
|
1.62 |
|
9% |
|
|
(2%) |
|
|
1.52 |
|
|
1.54 |
|
(1%) |
Operating |
|
|
48,082 |
|
|
52,575 |
|
|
40,225 |
|
(9%) |
|
|
20% |
|
|
100,657 |
|
|
87,778 |
|
15% |
Per boe |
|
|
12.36 |
|
|
14.10 |
|
|
12.41 |
|
(12%) |
|
|
- |
|
|
13.21 |
|
|
12.54 |
|
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
By country |
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
15,975 |
|
|
13,841 |
|
|
13,217 |
|
15% |
|
|
21% |
|
|
29,816 |
|
|
27,484 |
|
8% |
Per boe |
|
|
9.81 |
|
|
9.53 |
|
|
9.10 |
|
3% |
|
|
8% |
|
|
9.68 |
|
|
9.49 |
|
2% |
France |
|
|
16,935 |
|
|
19,939 |
|
|
13,755 |
|
(15%) |
|
|
23% |
|
|
36,874 |
|
|
28,857 |
|
28% |
Per boe |
|
|
16.53 |
|
|
17.58 |
|
|
15.11 |
|
(6%) |
|
|
9% |
|
|
17.08 |
|
|
15.50 |
|
10% |
Netherlands |
|
|
5,260 |
|
|
3,969 |
|
|
5,457 |
|
33% |
|
|
(4%) |
|
|
9,229 |
|
|
9,566 |
|
(4%) |
Per boe |
|
|
8.93 |
|
|
7.06 |
|
|
10.51 |
|
26% |
|
|
(15%) |
|
|
8.02 |
|
|
9.04 |
|
(11%) |
Australia |
|
|
9,912 |
|
|
14,826 |
|
|
7,796 |
|
(33%) |
|
|
27% |
|
|
24,738 |
|
|
21,871 |
|
13% |
Per boe |
|
|
15.30 |
|
|
25.61 |
|
|
21.68 |
|
(40%) |
|
|
(29%) |
|
|
20.16 |
|
|
18.44 |
|
9% |
In Canada,
second quarter operating expense of $16.0
million was higher than the $13.8
million for the first quarter of 2013 and the $13.2 million for the second quarter of
2012. The quarter-over-quarter increase was due to higher
fuel and electricity costs, additional expense associated with rig
mats as well as additional major project activity. The
increase in operating expense for the three and six months ended
June 30, 2013 as compared to the same
periods of the prior year is related to higher fuel and electricity
costs, higher property tax expense and the timing of major project
work. Despite additional volumes, operating costs per boe for
the three months and six months ended June
30, 2013 increased as compared to the comparative periods
presented, due to the higher level of expense.
In France,
second quarter operating expense of $16.9
million was lower than the expense of $19.9 million for the first quarter of 2013 due
to the large inventory draw that occurred in the prior
quarter. When inventoried product is sold, the related costs
are expensed in the period of sale. Operating expense
for the three and six months ended June 30,
2013 was higher than the expense for the comparative periods
of the prior year due to inventory draws in the current periods as
opposed to inventory builds for the comparative periods, additional
operating expense associated with a December
2012 acquisition in France
as well as the timing of repair and optimization activities.
Operating expense per boe has decreased quarter-over-quarter due to
the timing of downhole work. Operating expense per boe for
the three and six months ended June 30,
2013 increased from the comparative periods in the prior
year despite higher volumes as a result of additional downhole work
and higher salary costs.
In the
Netherlands, operating expense for the three months ended
June 30, 2013 increased to
$5.3 million from $4.0 million in the prior quarter due to the
timing of project work. This resulted in a
quarter-over-quarter increase in operating expense per boe.
For the three and six months ended June 30,
2013, operating expense remained relatively consistent with
the same periods of the prior year; however, higher volumes
resulted in lower operating expense per boe for the current
periods.
In Australia,
second quarter operating expense decreased to $9.9 million from the previous quarter's expense
of $14.8 million due to the prior
quarter's crude oil inventory draw. A decrease in crude
oil inventory results in the related production costs being
expensed when the product is sold. Operating expense for the
three and six months ended June 30,
2013 increased from the comparative periods in the prior
year due to inventory builds in those prior periods which resulted
in production costs being temporarily carried on the balance sheet
until sale. Higher production for the current quarter
resulted in a decrease in operating expense per boe versus both the
prior quarter as well as the second quarter of 2012.
TRANSPORTATION EXPENSE
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six Months Ended |
|
%
change |
By country |
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
|
|
2,611 |
|
|
2,269 |
|
|
2,350 |
|
15% |
|
|
11% |
|
|
4,880 |
|
|
4,394 |
|
11% |
Per boe |
|
|
|
|
1.60 |
|
|
1.56 |
|
|
1.62 |
|
3% |
|
|
(1%) |
|
|
1.58 |
|
|
1.52 |
|
4% |
France |
|
|
|
|
2,416 |
|
|
2,754 |
|
|
1,894 |
|
(12%) |
|
|
28% |
|
|
5,170 |
|
|
4,542 |
|
14% |
Per boe |
|
|
|
|
2.36 |
|
|
2.43 |
|
|
2.08 |
|
(3%) |
|
|
13% |
|
|
2.39 |
|
|
2.44 |
|
(2%) |
Ireland |
|
|
|
|
1,626 |
|
|
1,618 |
|
|
1,974 |
|
- |
|
|
(18%) |
|
|
3,244 |
|
|
3,975 |
|
(18%) |
Transportation |
|
|
|
|
6,653 |
|
|
6,641 |
|
|
6,218 |
|
- |
|
|
7% |
|
|
13,294 |
|
|
12,911 |
|
3% |
Per boe |
|
|
|
|
1.71 |
|
|
1.78 |
|
|
1.92 |
|
(4%) |
|
|
(11%) |
|
|
1.75 |
|
|
1.84 |
|
(5%) |
Consolidated transportation expense for the
second quarter of 2013 was relatively unchanged as compared to the
first quarter of 2013 as the impact of higher sales volumes in
Canada was offset by the impact of
a reduced number of shipments in France.
Consolidated transportation expense for the
three and six months ended June 30,
2013 was higher than the same periods in 2012. This
increase resulted from higher sales volumes in Canada and France, partially offset by lower payments
under the ship or pay agreement related to the Corrib project.
GENERAL AND ADMINISTRATION EXPENSE
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
General and administration |
|
|
|
|
11,313 |
|
|
12,610 |
|
|
12,068 |
|
(10%) |
|
|
(6%) |
|
|
23,923 |
|
|
22,216 |
|
8% |
Per boe |
|
|
|
|
2.91 |
|
|
3.38 |
|
|
3.72 |
|
(14%) |
|
|
(22%) |
|
|
3.14 |
|
|
3.17 |
|
(1%) |
General and administration expense for the
second quarter of 2013 decreased slightly from the prior quarter
due to the timing of corporate expenditures. The decrease in
expense for the current quarter, as compared to the second quarter
of the prior year, is associated with higher third party overhead
recoveries. For the six months ended June 30, 2013, general and administration expense
increased as a result of increased staffing levels required to
support Vermilion's operational
activities coupled with expenditure timing.
EQUITY BASED COMPENSATION EXPENSE
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six Months Ended |
|
%
change |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Equity based compensation |
|
|
|
|
10,724 |
|
|
16,136 |
|
|
9,861 |
|
(34%) |
|
|
9% |
|
|
26,860 |
|
|
19,916 |
|
35% |
Per boe |
|
|
|
|
2.76 |
|
|
4.33 |
|
|
3.04 |
|
(36%) |
|
|
(9%) |
|
|
3.53 |
|
|
2.84 |
|
24% |
Equity based compensation expense relates to
non-cash compensation expense attributable to long-term incentives
granted to directors, officers and employees under the Vermilion
Incentive Plan (VIP). The expense is recognized over the vesting
period based on the grant date fair value of awards, adjusted for
the ultimate number of awards that actually vest as determined by
the Company's achievement of performance conditions.
Equity based compensation expense for the second
quarter of 2013 was lower than the preceeding quarter due to an
overall decrease in outstanding awards. The expense for the
three and six months ended June 30,
2013 was higher than the expense for the same period in 2012
as the 2013 expense reflects the revision of future performance
condition assumptions starting in the fourth quarter of 2012.
INTEREST EXPENSE
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Interest expense |
|
|
|
|
9,336 |
|
|
8,689 |
|
|
6,600 |
|
7% |
|
|
41% |
|
|
18,025 |
|
|
12,701 |
|
42% |
Per boe |
|
|
|
|
2.40 |
|
|
2.33 |
|
|
2.04 |
|
3% |
|
|
18% |
|
|
2.37 |
|
|
1.81 |
|
31% |
Interest expense for the three and six months
ended June 30, 2013 increased versus
the comparable periods due to increased borrowings under
Vermilion's revolving credit
facility.
DEPLETION AND DEPRECIATION, ACCRETION, IMPAIRMENTS AND GAIN
ON ACQUISITION
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Depletion and depreciation |
|
|
|
|
78,418 |
|
|
81,448 |
|
|
76,512 |
|
(4%) |
|
|
2% |
|
|
159,866 |
|
|
152,360 |
|
5% |
Per boe |
|
|
|
|
20.16 |
|
|
21.85 |
|
|
23.60 |
|
(8%) |
|
|
(15%) |
|
|
20.99 |
|
|
21.76 |
|
(4%) |
Accretion |
|
|
|
|
6,000 |
|
|
5,824 |
|
|
5,792 |
|
3% |
|
|
4% |
|
|
11,824 |
|
|
11,030 |
|
7% |
Per boe |
|
|
|
|
1.54 |
|
|
1.56 |
|
|
1.79 |
|
(1%) |
|
|
(14%) |
|
|
1.55 |
|
|
1.58 |
|
(2%) |
Impairments |
|
|
|
|
- |
|
|
- |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
|
65,800 |
|
(100%) |
Per boe |
|
|
|
|
- |
|
|
- |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
|
9.40 |
|
(100%) |
Gain on acquisition |
|
|
|
|
- |
|
|
- |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
|
(45,309) |
|
(100%) |
Per boe |
|
|
|
|
- |
|
|
- |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
|
(6.47) |
|
(100%) |
Depletion and depreciation expense for the
second quarter of 2013 was relatively consistent with both the
first quarter of 2013 and the second quarter of 2012.
Depletion and depreciation expense for the six months ended
June 30, 2013 was 5% higher than the
same period in 2012 primarily due to the result of increased
production year-over-year.
Accretion expense for the second quarter of 2013
was relatively consistent with both the first quarter of 2013 and
the second quarter of 2012. Accretion expense was higher for
the six months ended June 30, 2013 as
compared to the same period in 2012 as a result of accretion
expense on asset retirement obligations recorded for the
acquisition in France in the
fourth quarter of 2012.
The impairment losses for the six months ended
June 30, 2012 pertained to impairment
losses recorded on Vermilion's
conventional deep gas and shallow coal bed methane natural gas
plays. These impairment charges were the result of
significant declines in the forward pricing assumptions for natural
gas in Canada.
The gain on acquisition for the six months ended
June 30, 2012 relates to Vermilion's acquisition of certain working
interests in the Paris and
Aquitaine basins in France.
The gain arose as a result of the increase in the fair value of the
acquired petroleum and natural gas reserves from the time when the
acquisition was negotiated to the acquisition date. The
increase resulted from a change in the underlying commodity price
forecasts used to determine the fair value of the acquired
reserves.
TAXES
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
By classification |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Current taxes before PRRT |
|
|
|
36,719 |
|
|
35,557 |
|
|
29,225 |
|
3% |
|
|
26% |
|
|
72,276 |
|
|
61,589 |
|
17% |
Per boe |
|
|
|
9.44 |
|
|
9.54 |
|
|
9.01 |
|
(1%) |
|
|
5% |
|
|
9.49 |
|
|
8.80 |
|
8% |
PRRT |
|
|
|
12,590 |
|
|
11,153 |
|
|
8,460 |
|
13% |
|
|
49% |
|
|
23,743 |
|
|
35,729 |
|
(34%) |
Per boe |
|
|
|
3.24 |
|
|
2.99 |
|
|
2.61 |
|
8% |
|
|
24% |
|
|
3.12 |
|
|
5.10 |
|
(39%) |
Current taxes |
|
|
|
49,309 |
|
|
46,710 |
|
|
37,685 |
|
6% |
|
|
31% |
|
|
96,019 |
|
|
97,318 |
|
(1%) |
Per boe |
|
|
|
12.68 |
|
|
12.53 |
|
|
11.62 |
|
1% |
|
|
9% |
|
|
12.61 |
|
|
13.90 |
|
(9%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
|
|
Six
Months Ended |
|
% change |
By country |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
Q2/13 vs. |
|
|
Q2/13 vs. |
|
|
June 30, |
|
|
June 30, |
|
2013 vs. |
($M except per boe) |
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
Q1/13 |
|
|
Q2/12 |
|
|
2013 |
|
|
2012 |
|
2012 |
Canada |
|
|
|
328 |
|
|
251 |
|
|
845 |
|
31% |
|
|
(61%) |
|
|
579 |
|
|
1,287 |
|
(55%) |
Per boe |
|
|
|
0.20 |
|
|
0.17 |
|
|
0.58 |
|
18% |
|
|
(66%) |
|
|
0.19 |
|
|
0.44 |
|
(57%) |
France |
|
|
|
16,124 |
|
|
18,659 |
|
|
15,725 |
|
(14%) |
|
|
3% |
|
|
34,783 |
|
|
28,620 |
|
22% |
Per boe |
|
|
|
15.74 |
|
|
16.45 |
|
|
17.27 |
|
(4%) |
|
|
(9%) |
|
|
16.11 |
|
|
15.38 |
|
5% |
Netherlands |
|
|
|
9,621 |
|
|
9,434 |
|
|
5,875 |
|
2% |
|
|
64% |
|
|
19,055 |
|
|
14,932 |
|
28% |
Per boe |
|
|
|
16.34 |
|
|
16.78 |
|
|
11.31 |
|
(3%) |
|
|
44% |
|
|
16.55 |
|
|
14.11 |
|
17% |
Australia |
|
|
|
23,236 |
|
|
18,366 |
|
|
15,240 |
|
27% |
|
|
52% |
|
|
41,602 |
|
|
52,479 |
|
(21%) |
Per boe |
|
|
|
35.86 |
|
|
31.73 |
|
|
42.38 |
|
13% |
|
|
(15%) |
|
|
33.91 |
|
|
44.24 |
|
(23%) |
Vermilion pays
current taxes in France,
the Netherlands and Australia. Corporate income taxes in
France and the Netherlands apply to taxable income after
eligible deductions. In France, taxable income is taxed at a rate of
approximately 34.4%, plus an additional profit tax of 1.7% levied
until 2014 if annual gross revenues exceed 250 million Euros. In the Netherlands, taxable income is taxed at a
rate of approximately 46%. As a function of the impact of
Vermilion's Canadian tax pools,
the Company does not presently pay current taxes in Canada. The Canadian segment includes holding
companies that pay current taxes in foreign jurisdictions.
In Australia,
current taxes include both corporate income taxes and PRRT.
Corporate income taxes are applied at a rate of approximately 30%
on taxable income after eligible deductions, which include
PRRT. PRRT is a profit based tax applied at a rate of 40% on
sales less eligible expenditures, including operating expenses and
capital expenditures.
Current taxes for the second quarter of 2013 was
higher than the first quarter of 2013 and the same period in 2012
due to higher petroleum and natural gas sales. Current taxes
for the six months ended June 30,
2013 was slightly lower than the same period in 2012 despite
higher petroleum and natural gas sales due to higher capital
expenditures in Australia during
the current year, which resulted in decreased PRRT.
OTHER EXPENSE (INCOME)
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M except per boe) |
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Other expense (income) |
|
|
|
|
|
|
|
|
|
|
|
271 |
|
|
(67) |
|
|
585 |
|
|
204 |
|
|
8,568 |
Per boe |
|
|
|
|
|
|
|
|
|
|
|
0.07 |
|
|
(0.02) |
|
|
0.18 |
|
|
0.03 |
|
|
1.22 |
Other expense for the six months ended
June 30, 2012 was comprised primarily
of $8.5 million relating to transfer
taxes paid to regulatory authorities in France pursuant to the first quarter of 2012
acquisition of certain working interests in six producing fields
located in the Paris and Aquitaine
basins.
FOREIGN EXCHANGE
|
|
|
|
|
|
Three Months Ended |
|
|
Six
Months Ended |
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
($M except per boe) |
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Unrealized foreign exchange (gain)
loss |
|
|
|
|
|
(28,025) |
|
|
2,519 |
|
|
16,730 |
|
|
(25,506) |
|
|
11,483 |
Per boe |
|
|
|
|
|
(7.21) |
|
|
0.68 |
|
|
5.16 |
|
|
(3.35) |
|
|
1.64 |
Realized foreign exchange (gain) loss |
|
|
|
|
|
(1,272) |
|
|
617 |
|
|
(755) |
|
|
(655) |
|
|
65 |
Per boe |
|
|
|
|
|
(0.33) |
|
|
0.17 |
|
|
(0.23) |
|
|
(0.09) |
|
|
0.01 |
Foreign exchange (gain) loss |
|
|
|
|
|
(29,297) |
|
|
3,136 |
|
|
15,975 |
|
|
(26,161) |
|
|
11,548 |
Per boe |
|
|
|
|
|
(7.54) |
|
|
0.85 |
|
|
4.93 |
|
|
(3.44) |
|
|
1.65 |
As a result of Vermilion's international operations,
Vermilion conducts business in
currencies other than the Canadian dollar and has monetary assets
and liabilities (including cash, receivables, payables, derivative
assets and liabilities, and intercompany loans) denominated in such
currencies. Vermilion's
exposure to foreign currencies includes the U.S. Dollar, the Euro
and the Australian Dollar.
Foreign exchange gains and losses are comprised
of both unrealized and realized amounts. Unrealized foreign
exchange gains and losses are the result of translating monetary
assets and liabilities held in non-functional currencies to the
respective functional currencies of Vermilion and its subsidiaries. Realized
gains and losses are the result of foreign exchange fluctuations
and the timing of payments on transactions conducted in
non-functional currencies and as such are subject to
fluctuations.
For the three and six months ended June 30, 2013, the unrealized foreign exchange
gain primarily resulted from the impact of the appreciation of the
Euro against the Canadian dollar and the resultant impact on
Vermilion's financial
balances.
SUMMARY OF RESULTS
|
|
|
|
|
|
Three
Months Ended |
|
|
|
|
|
|
Jun 30, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Sept 30, |
|
|
Jun 30, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Sept 30, |
($M except per share) |
|
|
|
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
2012 |
|
|
2012 |
|
|
2012 |
|
|
2011 |
|
|
2011 |
Petroleum and natural gas
sales |
|
|
|
|
|
311,966 |
|
|
309,576 |
|
|
241,233 |
|
|
284,838 |
|
|
246,544 |
|
|
310,488 |
|
|
275,172 |
|
|
248,361 |
Net earnings (loss) |
|
|
|
|
|
106,198 |
|
|
52,137 |
|
|
56,914 |
|
|
30,798 |
|
|
37,816 |
|
|
65,094 |
|
|
(30,243) |
|
|
64,442 |
Net earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
1.05 |
|
|
0.53 |
|
|
0.58 |
|
|
0.31 |
|
|
0.39 |
|
|
0.67 |
|
|
(0.32) |
|
|
0.71 |
Diluted |
|
|
|
|
|
1.04 |
|
|
0.51 |
|
|
0.57 |
|
|
0.31 |
|
|
0.38 |
|
|
0.66 |
|
|
(0.32) |
|
|
0.70 |
The fluctuations in Vermilion's petroleum and natural gas sales
and net earnings (loss) from quarter-to-quarter are primarily
caused by variations in sales volumes, crude oil and natural gas
prices and the impact of royalties and tax legislation in the
jurisdictions in which Vermilion
operates. In addition, changes in foreign exchange rates may
result in unrealized gains and losses on Vermilion's financial balances held in foreign
currencies while changes in petroleum and natural gas prices may
impact gains and losses on derivative instruments and may result in
impairment charges or the reversal of impairment charges incurred
in previous periods.
LIQUIDITY AND CAPITAL RESOURCES
Vermilion's net debt as at
June 30, 2013 was $674.4 million compared to $677.2 million as at December 31, 2012.
Long-term debt was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Annualized Interest Rate |
|
|
As At |
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
Dec 31, |
|
|
June 30, |
|
|
|
|
Dec 31, |
($M) |
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
|
|
2012 |
Revolving credit facility |
|
|
|
|
|
|
|
|
|
|
3.3% |
|
|
3.3% |
|
|
557,788 |
|
|
|
|
419,784 |
Senior unsecured notes |
|
|
|
|
|
|
|
|
|
|
6.5% |
|
|
6.5% |
|
|
222,682 |
|
|
|
|
222,238 |
Long-term debt |
|
|
|
|
|
|
|
|
|
|
4.3% |
|
|
4.7% |
|
|
780,470 |
|
|
|
|
642,022 |
Revolving Credit Facility
At June 30, 2013,
Vermilion had in place a bank
revolving credit facility totalling $1.2
billion, of which approximately $557.8 million was drawn. The facility,
which matures on May 31, 2016, is
fully revolving up to the date of maturity.
The facility is extendable from time to time,
but not more than once per year, for a period not longer than three
years, at the option of the lenders and upon notice from
Vermilion. If no extension
is granted by the lenders, the amounts owing pursuant to the
facility are repayable on the maturity date. This facility
bears interest at a rate applicable to demand loans plus applicable
margins.
The amount available to Vermilion under this facility is reduced by
outstanding letters of credit associated with Vermilion's operations totalling $51.3 million as at June
30, 2013 (December 31, 2012 -
$49.2 million).
The facility is secured by various fixed and
floating charges against the subsidiaries of Vermilion. Under the terms of the
facility, Vermilion must maintain
a ratio of total bank borrowings (defined as consolidated total
debt), to consolidated net earnings before interest, income taxes,
depreciation, accretion and other certain non-cash items (defined
as consolidated EBITDA) of not greater than 4.0. In addition,
Vermilion must maintain a ratio of
consolidated total senior debt (defined as consolidated total debt
excluding unsecured and subordinated debt) to consolidated EBITDA
of not greater than 3.0.
As at June 30,
2013, Vermilion was in
compliance with its financial covenants.
Senior Unsecured Notes
On February 10,
2011, Vermilion issued
$225.0 million of senior unsecured
notes at par. The notes bear interest at a rate of 6.5% per
annum and will mature on February 10,
2016. As direct senior unsecured obligations of
Vermilion, the notes rank pari
passu with all other present and future unsecured and
unsubordinated indebtedness of the Company.
Vermilion may,
at its option, prior to February 10,
2014, redeem up to 35% of the notes with net proceeds of
equity offerings by the Company at a redemption price equal to
106.5% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest, if any, to the applicable redemption
date. Subsequently, Vermilion may, on or after February 10, 2014, redeem all or part of the
notes at fixed redemption prices, plus, in each case, accrued and
unpaid interest, if any, to the applicable redemption date.
The notes were initially recognized at fair value net of
transaction costs and are subsequently measured at amortized cost
using an effective interest rate of 7.1%.
ASSET RETIREMENT OBLIGATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As At |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
Dec 31, |
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
Asset retirement obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358,868 |
|
|
|
371,063 |
The decrease in asset retirement obligations was
primarily the result of an overall increase in the discount rates
applied to the obligations.
DIVIDENDS
|
|
|
|
|
|
Three Months
Ended |
|
|
|
Six Months
Ended |
|
|
|
Year Ended |
|
|
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
Dec 31, |
($M) |
|
|
|
|
|
2013 |
|
|
|
2013 |
|
|
|
2012 |
Cash flows from operating activities |
|
|
|
|
|
179,074 |
|
|
|
369,786 |
|
|
|
496,580 |
Net earnings |
|
|
|
|
|
106,198 |
|
|
|
158,335 |
|
|
|
190,622 |
Dividends declared |
|
|
|
|
|
60,776 |
|
|
|
120,388 |
|
|
|
223,717 |
Excess of cash flows from
operating activities over dividends declared |
|
|
|
|
|
118,298 |
|
|
|
249,398 |
|
|
|
272,863 |
Excess (shortfall) of net earnings over dividends
declared |
|
|
|
|
|
45,422 |
|
|
|
37,947 |
|
|
|
(33,095) |
During the six months ended June 30, 2013, Vermilion maintained monthly dividends at
$0.20 per share and declared
dividends totalling $120.4
million.
Excess cash flows from operating activities over
dividends declared are used to fund capital expenditures, asset
retirement obligations and debt repayments.
Following Vermilion's conversion to a trust in
January 2003, the distribution
remained at $0.17 per unit per month
until it was increased to $0.19 per
unit per month in December
2007. Effective September 1,
2010, Vermilion converted
to a dividend paying corporation and dividends remained at
$0.19 per share per month until
increased to $0.20 per share per
month in January 2013. The
January 2013 increase was announced
on November 14, 2012 and resulted in
an increase in the monthly cash dividends by 5.3% to $0.20 per share per month beginning with the
January 2013 dividend (paid on
February 15, 2013).
Vermilion's
policy with respect to dividends is to be conservative and maintain
a low ratio of dividends to fund flows from operations.
During low price commodity cycles, Vermilion will initially maintain dividends
and allow the ratio to rise. Should low commodity price
cycles remain for an extended period of time, Vermilion will evaluate the necessity of
changing the level of dividends, taking into consideration capital
development requirements, debt levels and acquisition
opportunities.
Over the next two years, Vermilion anticipates that Corrib, Cardium and
other exploration and development activities will require a
significant capital investment by Vermilion. Although Vermilion currently expects to be able to
maintain its current dividend, Vermilion's fund flows from operations may not
be sufficient during this period to fund cash dividends, capital
expenditures and asset retirement obligations. Vermilion will evaluate its ability to finance
any shortfalls with debt, issuances of equity or by reducing some
or all categories of expenditures to ensure that total expenditures
do not exceed available funds.
SHAREHOLDERS' EQUITY
During the six months ended June 30, 2013, Vermilion issued 2.3 million shares pursuant
to the dividend reinvestment plan and Vermilion's equity based compensation
programs. Shareholders' capital increased by $99.0 million as a result of the issuance of
those shares.
As at June 30,
2013, there were 101.4 million shares outstanding. As
at July 31, 2013, there were 101.6
million shares outstanding.
CORRIB PROJECT
Vermilion holds
an 18.5% non-operating interest in the offshore Corrib gas field
located off the northwest coast of Ireland. Production from Corrib is
expected to increase Vermilion's
volumes by approximately 55 mmcf/d (9,000 boe/d) once the field
reaches peak production. Vermilion acquired its 18.5% working interest
in the project on July 30,
2009. The project comprises five offshore wells, both
offshore and onshore pipeline segments as well as a natural gas
processing facility. At the time of the acquisition most of
the key components of the project, with the exception of the
onshore pipeline, were either complete or in the latter stages of
development. Vermilion's
interest was acquired for cash consideration of $136.8 million with subsequent capital
expenditures to June 30, 2013 of
$344.0 million, primarily related to
completion of the natural gas processing facility, sub-surface well
work, and permitting, preparations and construction of the onshore
pipeline. Furthermore, pursuant to the terms of the
acquisition agreement, Vermilion
made an additional payment to the vendor of $134.3 million (US$135
million) at the end of 2012. In 2011, approvals and
permissions were granted for the onshore gas pipeline and tunneling
activities commenced in December of 2012. Vermilion expects to continue significant
capital investment on this project over the next two years and
currently expects to achieve initial gas production from this field
between the end of 2014 and early 2015, and to reach peak
production levels in mid-2015.
RISK MANAGEMENT
Vermilion is
exposed to various market and operational risks. For a
detailed discussion of these risks, please see Vermilion's Annual Report for the year ended
December 31, 2012.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in
accordance with IFRS requires management to make estimates,
judgments and assumptions that affect reported assets, liabilities,
revenues and expenses, gains and losses, and disclosures of any
possible contingencies. These estimates and assumptions are
developed based on the best available information which management
believed to be reasonable at the time such estimates and
assumptions were made. As such, these assumptions are
uncertain at the time estimates are made and could change,
resulting in a material impact on Vermilion's consolidated financial
statements. Estimates are reviewed by management on an
ongoing basis, and as a result, certain of these estimates may
change from period to period due to the availability of new
information. Additionally, as a result of the unique circumstances
of each jurisdiction that Vermilion operates in, the critical accounting
estimates may affect one or more jurisdictions.
The following outlines what management believes
to be the most critical accounting policies involving the use of
estimates and assumptions:
i. |
|
|
|
Depletion and depreciation charges
are based on estimates of total proven and probable reserves that
Vermilion expects to recover in the future. |
ii. |
|
|
|
Asset retirement obligations are
based on past experience and current economic factors which
management believes are reasonable. |
iii. |
|
|
|
Impairment tests are performed at the
cash generating unit (CGU) level, which is determined based on
management's judgment. The calculation of the recoverable
amount of a CGU is based on market factors as well as estimates of
PNG reserves and future costs required to develop reserves. |
iv. |
|
|
|
Deferred tax amounts recognized in
the consolidated financial statements are based on management's
assessment of the tax positions at the end of each reporting
period. |
OFF BALANCE SHEET ARRANGEMENTS
Vermilion has
certain lease agreements that are entered into in the normal course
of operations, all of which are operating leases and accordingly no
asset or liability value has been assigned to the consolidated
balance sheet as at June 30,
2013.
Vermilion has
not entered into any guarantee or off balance sheet arrangements
that would materially impact Vermilion's financial position or results of
operations.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in Vermilion's internal control over financial
reporting that occurred during the period covered by this MD&A
that has materially affected, or is reasonably likely to materially
affect, its internal control over financial reporting.
RECENTLY ADOPTED ACCOUNTING
PRONOUNCEMENTS
As of January 1,
2013, Vermilion adopted the
following pronouncements as issued by the IASB. The adoption
of these standards did not have a material impact on Vermilion's consolidated financial
statements.
IFRS 10 "Consolidated Financial
Statements"
IFRS 10 replaced Standing Interpretations Committee 12,
"Consolidation - Special Purpose Entities" and the consolidation
requirements of IAS 27 "Consolidated and Separate Financial
Statements". The new standard replaces the existing risk and
rewards based approaches and establishes control as the determining
factor when determining whether an interest in another entity
should be included in the consolidated financial
statements.
IFRS 11 "Joint Arrangements"
IFRS 11 replaced IAS 31 "Interests in Joint Ventures". The
new standard focuses on the rights and obligations of an
arrangement, rather than its legal form. The standard
redefines joint operations and joint ventures and requires joint
operations to be proportionately consolidated and joint ventures to
be equity accounted.
IFRS 12 "Disclosure of Interests in Other
Entities"
IFRS 12 provides comprehensive disclosure requirements on interests
in other entities, including joint arrangements, associates, and
special purpose entities. The new disclosures are intended to
assist financial statement users in evaluating the nature, risks
and financial effects of an entity's interest in subsidiaries and
joint arrangements.
IFRS 13 "Fair Value Measurement"
IFRS 13 provides a common definition of fair value within
IFRS. The new standard provides measurement and disclosure
guidance and applies when another IFRS requires or permits an item
to be measured at fair value, with limited exceptions.
IAS 34 "Interim Financial Reporting"
Amendments to IAS 34 require specific disclosure on the fair value
of financial instruments for interim reporting.
ACCOUNTING PRONOUNCEMENTS NOT YET
ADOPTED
The adoption of the following pronouncements is
not expected to have a material impact on Vermilion's consolidated financial
statements:
IFRS 9 "Financial Instruments"
As of January 1, 2015, Vermilion will be required to adopt IFRS 9, as
part of the first phase of the IASB's project to replace IAS 39,
"Financial Instruments: Recognition and Measurement". The new
standard replaces the current multiple classification and
measurement models for financial assets and liabilities with a
single model that has only two classification categories: amortized
cost and fair value.
NETBACKS
The following table includes segmented financial statement
information on a per unit basis. Natural gas sales volumes
have been converted on a basis of six thousand cubic feet of
natural gas to one barrel of oil equivalent.
|
|
|
Three Months Ended June 30,
2013 |
|
Six Months Ended June 30,
2013 |
|
|
Three Months
Ended June 30,
2012 |
|
Six Months
Ended June 30,
2012 |
|
|
|
Oil &
NGLs |
|
Natural
Gas |
|
|
Total |
|
Oil &
NGLs |
|
Natural
Gas |
|
|
Total |
|
|
Total |
|
Total |
|
|
|
$/bbl |
|
$/mcf |
|
|
$/boe |
|
$/bbl |
|
$/mcf |
|
|
$/boe |
|
|
$/boe |
|
$/boe |
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
88.74 |
|
3.84 |
|
|
62.00 |
|
87.12 |
|
3.60 |
|
|
59.93 |
|
|
51.58 |
|
53.70 |
Realized hedging gain (loss) |
|
|
0.35 |
|
0.01 |
|
|
0.22 |
|
0.32 |
|
- |
|
|
0.19 |
|
|
(0.29) |
|
(0.37) |
Royalties |
|
|
(9.70) |
|
(0.09) |
|
|
(5.96) |
|
(9.70) |
|
(0.16) |
|
|
(6.07) |
|
|
(5.66) |
|
(5.94) |
Transportation |
|
|
(2.02) |
|
(0.17) |
|
|
(1.60) |
|
(2.01) |
|
(0.16) |
|
|
(1.58) |
|
|
(1.62) |
|
(1.52) |
Operating |
|
|
(9.76) |
|
(1.65) |
|
|
(9.81) |
|
(9.51) |
|
(1.65) |
|
|
(9.68) |
|
|
(9.10) |
|
(9.49) |
Operating netback |
|
|
67.61 |
|
1.94 |
|
|
44.85 |
|
66.22 |
|
1.63 |
|
|
42.79 |
|
|
34.91 |
|
36.38 |
France |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
100.79 |
|
9.41 |
|
|
98.04 |
|
105.40 |
|
10.28 |
|
|
102.84 |
|
|
104.15 |
|
106.56 |
Realized hedging gain (loss) |
|
|
1.47 |
|
- |
|
|
1.38 |
|
(0.30) |
|
- |
|
|
(0.28) |
|
|
(3.30) |
|
(4.25) |
Royalties |
|
|
(6.23) |
|
(0.28) |
|
|
(5.95) |
|
(6.24) |
|
(0.29) |
|
|
(5.97) |
|
|
(5.62) |
|
(5.69) |
Transportation |
|
|
(2.51) |
|
- |
|
|
(2.36) |
|
(2.54) |
|
- |
|
|
(2.39) |
|
|
(2.08) |
|
(2.44) |
Operating |
|
|
(17.01) |
|
(1.55) |
|
|
(16.53) |
|
(17.54) |
|
(1.62) |
|
|
(17.08) |
|
|
(15.11) |
|
(15.50) |
Operating netback |
|
|
76.51 |
|
7.58 |
|
|
74.58 |
|
78.78 |
|
8.37 |
|
|
77.12 |
|
|
78.04 |
|
78.68 |
Netherlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
84.11 |
|
10.82 |
|
|
65.08 |
|
96.46 |
|
10.47 |
|
|
63.19 |
|
|
57.88 |
|
58.49 |
Operating |
|
|
- |
|
(1.50) |
|
|
(8.93) |
|
- |
|
(1.35) |
|
|
(8.02) |
|
|
(10.51) |
|
(9.04) |
Operating netback |
|
|
84.11 |
|
9.32 |
|
|
56.15 |
|
96.46 |
|
9.12 |
|
|
55.17 |
|
|
47.37 |
|
49.45 |
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
111.54 |
|
- |
|
|
111.54 |
|
115.89 |
|
- |
|
|
115.89 |
|
|
129.94 |
|
119.16 |
Realized hedging loss |
|
|
- |
|
- |
|
|
- |
|
(0.82) |
|
- |
|
|
(0.82) |
|
|
(0.47) |
|
(0.28) |
Operating |
|
|
(15.30) |
|
- |
|
|
(15.30) |
|
(20.16) |
|
- |
|
|
(20.16) |
|
|
(21.68) |
|
(18.44) |
PRRT 1 |
|
|
(19.43) |
|
- |
|
|
(19.43) |
|
(19.35) |
|
- |
|
|
(19.35) |
|
|
(23.53) |
|
(30.12) |
Operating netback |
|
|
76.81 |
|
- |
|
|
76.81 |
|
75.56 |
|
- |
|
|
75.56 |
|
|
84.26 |
|
70.32 |
Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
98.95 |
|
7.22 |
|
|
80.21 |
|
101.42 |
|
7.00 |
|
|
81.60 |
|
|
76.04 |
|
79.57 |
Realized hedging gain (loss) |
|
|
0.68 |
|
- |
|
|
0.46 |
|
(0.21) |
|
- |
|
|
(0.13) |
|
|
(1.11) |
|
(1.33) |
Royalties |
|
|
(5.95) |
|
(0.06) |
|
|
(4.06) |
|
(5.94) |
|
(0.09) |
|
|
(4.15) |
|
|
(4.11) |
|
(3.97) |
Transportation |
|
|
(1.69) |
|
(0.29) |
|
|
(1.71) |
|
(1.73) |
|
(0.30) |
|
|
(1.75) |
|
|
(1.92) |
|
(1.84) |
Operating |
|
|
(13.84) |
|
(1.58) |
|
|
(12.36) |
|
(15.28) |
|
(1.52) |
|
|
(13.21) |
|
|
(12.41) |
|
(12.54) |
PRRT 1 |
|
|
(4.88) |
|
- |
|
|
(3.24) |
|
(4.68) |
|
- |
|
|
(3.12) |
|
|
(2.61) |
|
(5.10) |
Operating netback |
|
|
73.27 |
|
5.29 |
|
|
59.30 |
|
73.58 |
|
5.09 |
|
|
59.24 |
|
|
53.88 |
|
54.79 |
General and administration |
|
|
|
|
|
|
|
(2.91) |
|
|
|
|
|
|
(3.14) |
|
|
(3.72) |
|
(3.17) |
Interest expense |
|
|
|
|
|
|
|
(2.40) |
|
|
|
|
|
|
(2.37) |
|
|
(2.04) |
|
(1.81) |
Realized foreign exchange
gain (loss) |
|
|
|
|
|
|
|
0.33 |
|
|
|
|
|
|
0.09 |
|
|
0.23 |
|
(0.01) |
Other income (expense) |
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
0.07 |
|
|
0.06 |
|
(1.15) |
Current income taxes 1 |
|
|
|
|
|
|
|
(9.44) |
|
|
|
|
|
|
(9.49) |
|
|
(9.01) |
|
(8.80) |
Fund flows netback |
|
|
|
|
|
|
|
44.90 |
|
|
|
|
|
|
44.40 |
|
|
39.40 |
|
39.85 |
Accretion |
|
|
|
|
|
|
|
(1.54) |
|
|
|
|
|
|
(1.55) |
|
|
(1.79) |
|
(1.58) |
Depletion and depreciation |
|
|
|
|
|
|
|
(20.16) |
|
|
|
|
|
|
(20.99) |
|
|
(23.60) |
|
(21.76) |
Impairments |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
- |
|
(9.40) |
Gain on acquisition |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
- |
|
6.47 |
Deferred taxes |
|
|
|
|
|
|
|
(2.46) |
|
|
|
|
|
|
(1.79) |
|
|
(0.09) |
|
4.02 |
Unrealized other expense |
|
|
|
|
|
|
|
(0.09) |
|
|
|
|
|
|
(0.10) |
|
|
(0.24) |
|
(0.07) |
Unrealized foreign exchange
gain (loss) |
|
|
|
|
|
|
|
7.21 |
|
|
|
|
|
|
3.35 |
|
|
(5.16) |
|
(1.64) |
Unrealized gain on derivative
instruments |
|
|
|
|
|
|
|
2.22 |
|
|
|
|
|
|
0.99 |
|
|
6.17 |
|
1.67 |
Equity based compensation |
|
|
|
|
|
|
|
(2.76) |
|
|
|
|
|
|
(3.53) |
|
|
(3.04) |
|
(2.84) |
Earnings netback |
|
|
|
|
|
|
|
27.32 |
|
|
|
|
|
|
20.78 |
|
|
11.65 |
|
14.72 |
1 |
Vermilion considers Australian PRRT to be an
operating item and accordingly has included PRRT in the calculation
of operating netbacks. Current
income taxes presented above excludes PRRT. |
|
|
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
Note |
|
|
|
2013 |
|
|
|
2012 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
235,598 |
|
|
|
102,125 |
Accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
160,425 |
|
|
|
180,064 |
Crude oil inventory |
|
|
|
|
|
|
|
|
|
|
|
|
16,674 |
|
|
|
25,719 |
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
2,149 |
|
|
|
2,086 |
Prepaid expenses |
|
|
|
|
|
|
|
|
|
|
|
|
17,168 |
|
|
|
10,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
432,014 |
|
|
|
320,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
192,124 |
|
|
|
193,354 |
Exploration and evaluation assets |
|
|
|
|
|
|
|
|
4 |
|
|
|
128,571 |
|
|
|
117,161 |
Capital assets |
|
|
|
|
|
|
|
|
3 |
|
|
|
2,546,298 |
|
|
|
2,445,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,299,007 |
|
|
|
3,076,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
232,249 |
|
|
|
300,682 |
Dividends payable |
|
|
|
|
|
|
|
|
7 |
|
|
|
20,284 |
|
|
|
18,836 |
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
1,009 |
|
|
|
8,484 |
Income taxes payable |
|
|
|
|
|
|
|
|
|
|
|
|
72,370 |
|
|
|
27,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
325,912 |
|
|
|
355,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
6 |
|
|
|
780,470 |
|
|
|
642,022 |
Asset retirement obligations |
|
|
|
|
|
|
|
|
5 |
|
|
|
358,868 |
|
|
|
371,063 |
Deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
298,519 |
|
|
|
288,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,763,769 |
|
|
|
1,657,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' capital |
|
|
|
|
|
|
|
|
7 |
|
|
|
1,580,314 |
|
|
|
1,481,345 |
Contributed surplus |
|
|
|
|
|
|
|
|
|
|
|
|
41,442 |
|
|
|
69,581 |
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
(14,786) |
|
|
|
(32,409) |
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
(71,732) |
|
|
|
(99,871) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,535,238 |
|
|
|
1,418,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,299,007 |
|
|
|
3,076,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF NET EARNINGS AND
COMPREHENSIVE INCOME
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE
AMOUNTS, UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and natural gas sales |
|
|
|
|
|
|
|
311,966 |
|
|
246,544 |
|
|
621,542 |
|
|
557,032 |
Royalties |
|
|
|
|
|
|
|
(15,800) |
|
|
(13,331) |
|
|
(31,590) |
|
|
(27,783) |
Petroleum and natural gas revenue |
|
|
|
|
|
|
|
296,166 |
|
|
233,213 |
|
|
589,952 |
|
|
529,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
48,082 |
|
|
40,225 |
|
|
100,657 |
|
|
87,778 |
Transportation |
|
|
|
|
|
|
|
6,653 |
|
|
6,218 |
|
|
13,294 |
|
|
12,911 |
Equity based compensation |
|
|
|
8 |
|
|
|
10,724 |
|
|
9,861 |
|
|
26,860 |
|
|
19,916 |
Gain on derivative instruments |
|
|
|
|
|
|
|
(10,421) |
|
|
(16,424) |
|
|
(6,521) |
|
|
(2,367) |
Interest expense |
|
|
|
|
|
|
|
9,336 |
|
|
6,600 |
|
|
18,025 |
|
|
12,701 |
General and administration |
|
|
|
|
|
|
|
11,313 |
|
|
12,068 |
|
|
23,923 |
|
|
22,216 |
Foreign exchange (gain) loss |
|
|
|
|
|
|
|
(29,297) |
|
|
15,975 |
|
|
(26,161) |
|
|
11,548 |
Other expense |
|
|
|
|
|
|
|
271 |
|
|
585 |
|
|
204 |
|
|
8,568 |
Accretion |
|
|
|
5 |
|
|
|
6,000 |
|
|
5,792 |
|
|
11,824 |
|
|
11,030 |
Depletion and depreciation |
|
|
|
3, 4 |
|
|
|
78,418 |
|
|
76,512 |
|
|
159,866 |
|
|
152,360 |
Impairments |
|
|
|
3 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
65,800 |
Gain on acquisition |
|
|
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
(45,309) |
|
|
|
|
|
|
|
|
131,079 |
|
|
157,412 |
|
|
321,971 |
|
|
357,152 |
EARNINGS BEFORE INCOME TAXES |
|
|
|
|
|
|
|
165,087 |
|
|
75,801 |
|
|
267,981 |
|
|
172,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
|
9,580 |
|
|
300 |
|
|
13,627 |
|
|
(28,131) |
Current |
|
|
|
|
|
|
|
49,309 |
|
|
37,685 |
|
|
96,019 |
|
|
97,318 |
|
|
|
|
|
|
|
|
58,889 |
|
|
37,985 |
|
|
109,646 |
|
|
69,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS |
|
|
|
|
|
|
|
106,198 |
|
|
37,816 |
|
|
158,335 |
|
|
102,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
|
|
|
|
|
18,955 |
|
|
(16,411) |
|
|
17,623 |
|
|
(9,030) |
COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
125,153 |
|
|
21,405 |
|
|
175,958 |
|
|
93,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
1.05 |
|
|
0.39 |
|
|
1.58 |
|
|
1.06 |
Diluted |
|
|
|
|
|
|
|
1.04 |
|
|
0.38 |
|
|
1.56 |
|
|
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING ('000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
100,964 |
|
|
97,937 |
|
|
100,137 |
|
|
97,291 |
Diluted |
|
|
|
|
|
|
|
102,223 |
|
|
99,923 |
|
|
101,578 |
|
|
99,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
OPERATING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
106,198 |
|
|
37,816 |
|
|
158,335 |
|
|
102,910 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion |
|
|
|
5 |
|
|
|
6,000 |
|
|
5,792 |
|
|
11,824 |
|
|
11,030 |
Depletion and
depreciation |
|
|
|
3, 4 |
|
|
|
78,418 |
|
|
76,512 |
|
|
159,866 |
|
|
152,360 |
Impairments |
|
|
|
3 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
65,800 |
Gain on
acquisition |
|
|
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
(45,309) |
Unrealized gain on
derivative instruments |
|
|
|
|
|
|
|
(8,651) |
|
|
(20,015) |
|
|
(7,538) |
|
|
(11,676) |
Equity based
compensation |
|
|
|
8 |
|
|
|
10,724 |
|
|
9,861 |
|
|
26,860 |
|
|
19,916 |
Unrealized foreign
exchange (gain) loss |
|
|
|
|
|
|
|
(28,025) |
|
|
16,730 |
|
|
(25,506) |
|
|
11,483 |
Unrealized other
expense |
|
|
|
|
|
|
|
348 |
|
|
779 |
|
|
753 |
|
|
514 |
Deferred taxes |
|
|
|
|
|
|
|
9,580 |
|
|
300 |
|
|
13,627 |
|
|
(28,131) |
Asset retirement obligations settled |
|
|
|
5 |
|
|
|
(2,370) |
|
|
(2,581) |
|
|
(3,758) |
|
|
(3,347) |
Changes in non-cash operating working capital |
|
|
|
|
|
|
|
6,852 |
|
|
(1,709) |
|
|
35,323 |
|
|
(27,178) |
Cash flows from operating activities |
|
|
|
|
|
|
|
179,074 |
|
|
123,485 |
|
|
369,786 |
|
|
248,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling and development |
|
|
|
3 |
|
|
|
(75,005) |
|
|
(77,956) |
|
|
(254,525) |
|
|
(165,852) |
Exploration and evaluation |
|
|
|
4 |
|
|
|
(3,113) |
|
|
(16,932) |
|
|
(12,689) |
|
|
(23,396) |
Property acquisitions |
|
|
|
3 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
(106,184) |
Dispositions |
|
|
|
3 |
|
|
|
- |
|
|
- |
|
|
8,627 |
|
|
- |
Changes in non-cash investing working capital |
|
|
|
|
|
|
|
(75,613) |
|
|
(23,030) |
|
|
(37,403) |
|
|
(29,784) |
Cash flows used in investing activities |
|
|
|
|
|
|
|
(153,731) |
|
|
(117,918) |
|
|
(295,990) |
|
|
(325,216) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in long-term debt |
|
|
|
|
|
|
|
70,000 |
|
|
76,774 |
|
|
139,429 |
|
|
76,774 |
Issuance of shares pursuant to the dividend
reinvestment plan |
|
|
|
|
|
|
|
- |
|
|
18,781 |
|
|
- |
|
|
36,339 |
Cash dividends |
|
|
|
|
|
|
|
(41,754) |
|
|
(55,678) |
|
|
(84,778) |
|
|
(110,725) |
Cash flows from financing activities |
|
|
|
|
|
|
|
28,246 |
|
|
39,877 |
|
|
54,651 |
|
|
2,388 |
Foreign exchange gain (loss) on cash held in
foreign currencies |
|
|
|
|
|
|
|
5,496 |
|
|
(2,608) |
|
|
5,026 |
|
|
(2,578) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
|
|
|
59,085 |
|
|
42,836 |
|
|
133,473 |
|
|
(77,034) |
Cash and cash equivalents, beginning of
period |
|
|
|
|
|
|
|
176,513 |
|
|
114,637 |
|
|
102,125 |
|
|
234,507 |
Cash and cash equivalents, end of period |
|
|
|
|
|
|
|
235,598 |
|
|
157,473 |
|
|
235,598 |
|
|
157,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary information for
operating activities - cash payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
|
|
|
|
8,417 |
|
|
4,419 |
|
|
20,509 |
|
|
13,926 |
Income taxes paid |
|
|
|
|
|
|
|
18,669 |
|
|
84,012 |
|
|
51,304 |
|
|
103,711 |
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Shareholders' |
|
|
Contributed |
|
|
Comprehensive |
|
|
|
|
|
|
Shareholders' |
|
|
|
|
Note |
|
|
Capital |
|
|
Surplus |
|
|
|
Loss |
|
|
Deficit |
|
|
Equity |
Balances as at January 1, 2012 |
|
|
|
|
|
|
|
1,368,145 |
|
|
|
56,468 |
|
|
|
(33,387) |
|
|
|
(59,625) |
|
|
|
1,331,601 |
Net earnings |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
102,910 |
|
|
|
102,910 |
Currency translation adjustments |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(9,030) |
|
|
|
- |
|
|
|
(9,030) |
Equity based compensation expense |
|
|
|
|
|
|
|
- |
|
|
|
19,280 |
|
|
|
- |
|
|
|
- |
|
|
|
19,280 |
Dividends declared |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(111,086) |
|
|
|
(111,086) |
Issuance of shares pursuant to the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan |
|
|
|
7 |
|
|
|
36,339 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,339 |
Vesting of equity based awards |
|
|
|
7, 8 |
|
|
|
33,356 |
|
|
|
(33,356) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
Share-settled dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on vested equity based awards |
|
|
|
7, 8 |
|
|
|
7,116 |
|
|
|
- |
|
|
|
- |
|
|
|
(7,116) |
|
|
|
- |
Shares issued pursuant to the
bonus plan |
|
|
|
7 |
|
|
|
636 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
636 |
Balances as at June 30, 2012 |
|
|
|
|
|
|
|
1,445,592 |
|
|
|
42,392 |
|
|
|
(42,417) |
|
|
|
(74,917) |
|
|
|
1,370,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Shareholders' |
|
|
Contributed |
|
|
Comprehensive |
|
|
|
|
|
Shareholders' |
|
|
|
|
Note |
|
|
Capital |
|
|
Surplus |
|
|
|
Loss |
|
|
Deficit |
|
|
Equity |
Balances as at January 1, 2013 |
|
|
|
|
|
|
|
1,481,345 |
|
|
|
69,581 |
|
|
|
(32,409) |
|
|
|
(99,871) |
|
|
|
1,418,646 |
Net earnings |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
158,335 |
|
|
|
158,335 |
Currency translation adjustments |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
17,623 |
|
|
|
- |
|
|
|
17,623 |
Equity based compensation expense |
|
|
|
|
|
|
|
- |
|
|
|
26,231 |
|
|
|
- |
|
|
|
- |
|
|
|
26,231 |
Dividends declared |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(120,388) |
|
|
|
(120,388) |
Issuance of shares pursuant to the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan |
|
|
|
7 |
|
|
|
34,162 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
34,162 |
Vesting of equity based awards |
|
|
|
7, 8 |
|
|
|
54,370 |
|
|
|
(54,370) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
Share-settled dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on vested equity based awards |
|
|
|
7, 8 |
|
|
|
9,808 |
|
|
|
- |
|
|
|
- |
|
|
|
(9,808) |
|
|
|
- |
Shares issued pursuant to the
bonus plan |
|
|
|
7 |
|
|
|
629 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
629 |
Balances as at June 30, 2013 |
|
|
|
|
|
|
|
1,580,314 |
|
|
|
41,442 |
|
|
|
(14,786) |
|
|
|
(71,732) |
|
|
|
1,535,238 |
DESCRIPTION OF EQUITY RESERVES
Shareholders' capital
Represents the recognized amount for common shares when issued, net
of equity issuance costs and deferred taxes.
Contributed surplus
Represents the recognized value of employee awards which are
settled in shares. Once vested, the value of the awards is
transferred to shareholders' capital.
Accumulated other comprehensive
loss
Represents the cumulative income and expenses which are not
recorded immediately in net earnings and are accumulated until an
event triggers recognition in net earnings. The current balance
consists of currency translation adjustments resulting from
translating financial statements of subsidiaries with a foreign
functional currency to Canadian dollars at period-end rates.
Retained earnings (deficit)
Represents the cumulative net earnings less distributed earnings of
Vermilion Energy Inc.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2013 AND 2012
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE
AND PER SHARE AMOUNTS, UNAUDITED)
1. BASIS OF PRESENTATION
Vermilion Energy Inc. (the "Company" or
"Vermilion") is a corporation governed by the laws of the Province
of Alberta and is actively engaged
in the business of crude oil and natural gas exploration,
development, acquisition and production.
These condensed consolidated interim financial
statements are in compliance with IAS 34, "Interim financial
reporting" and have been prepared using the same accounting
policies and methods of computation as Vermilion's consolidated financial statements
for the year ended December 31, 2012,
except as discussed in Note 2.
These condensed consolidated interim financial
statements should be read in conjunction with Vermilion's consolidated financial statements
for the year ended December 31, 2012,
which are contained within Vermilion's Annual Report for the year ended
December 31, 2012 and are available
on SEDAR at www.sedar.com or on Vermilion's website at
www.vermilionenergy.com.
These condensed consolidated interim financial
statements were approved and authorized for issuance by the Board
of Directors of Vermilion on
July 31, 2013.
2. RECENTLY ADOPTED ACCOUNTING
PRONOUNCEMENTS
On January 1,
2013, Vermilion adopted the
following pronouncements as issued by the IASB. The adoption
of these standards did not have a material impact on Vermilion's consolidated financial
statements.
IFRS 10 "Consolidated Financial
Statements"
IFRS 10 replaced Standing Interpretations Committee 12,
"Consolidation - Special Purpose Entities" and the consolidation
requirements of IAS 27 "Consolidated and Separate Financial
Statements". The new standard replaces the existing risk and
rewards based approaches and establishes control as the determining
factor when determining whether an interest in another entity
should be included in the consolidated financial
statements.
IFRS 11 "Joint Arrangements"
IFRS 11 replaced IAS 31 "Interests in Joint Ventures". The
new standard focuses on the rights and obligations of an
arrangement, rather than its legal form. The standard
redefines joint operations and joint ventures and requires joint
operations to be proportionately consolidated and joint ventures to
be equity accounted.
IFRS 12 "Disclosure of Interests in Other
Entities"
IFRS 12 provides comprehensive disclosure requirements on interests
in other entities, including joint arrangements, associates, and
special purpose entities. The new disclosures are intended to
assist financial statement users in evaluating the nature, risks
and financial effects of an entity's interest in subsidiaries and
joint arrangements.
IFRS 13 "Fair Value Measurement"
IFRS 13 provides a common definition of fair value within
IFRS. The new standard provides measurement and disclosure
guidance and applies when another IFRS requires or permits an item
to be measured at fair value, with limited exceptions.
IAS 34 "Interim Financial Reporting"
Amendments to IAS 34 require specific disclosure on the fair value
of financial instruments for interim reporting. These
disclosures are included in Note 11.
3. CAPITAL ASSETS
The following table reconciles the change in Vermilion's capital assets:
|
|
|
|
Petroleum and |
|
|
Furniture and |
|
|
Total |
($M) |
|
|
|
Natural Gas
Assets |
|
|
Office
Equipment |
|
|
Capital Assets |
Balance at January 1, 2012 |
|
|
|
|
2,016,611 |
|
|
|
15,071 |
|
|
2,031,682 |
Additions |
|
|
|
|
407,973 |
|
|
|
5,248 |
|
|
413,221 |
Transfers from exploration and evaluation
assets |
|
|
|
|
10,528 |
|
|
|
- |
|
|
10,528 |
Property acquisitions |
|
|
|
|
206,260 |
|
|
|
- |
|
|
206,260 |
Corporate acquisitions |
|
|
|
|
136,297 |
|
|
|
- |
|
|
136,297 |
Borrowing costs capitalized |
|
|
|
|
9,994 |
|
|
|
- |
|
|
9,994 |
Changes in estimate for asset retirement
obligations |
|
|
|
|
1,334 |
|
|
|
- |
|
|
1,334 |
Depletion and depreciation |
|
|
|
|
(289,194) |
|
|
|
(5,165) |
|
|
(294,359) |
Impairments |
|
|
|
|
(65,800) |
|
|
|
- |
|
|
(65,800) |
Effect of movements in foreign exchange rates |
|
|
|
|
(3,882) |
|
|
|
(35) |
|
|
(3,917) |
Balance at December 31, 2012 |
|
|
|
|
2,430,121 |
|
|
|
15,119 |
|
|
2,445,240 |
Additions |
|
|
|
|
252,454 |
|
|
|
2,071 |
|
|
254,525 |
Dispositions |
|
|
|
|
(8,627) |
|
|
|
- |
|
|
(8,627) |
Changes in estimate for asset retirement
obligations |
|
|
|
|
(25,774) |
|
|
|
- |
|
|
(25,774) |
Depletion and depreciation |
|
|
|
|
(152,433) |
|
|
|
(3,363) |
|
|
(155,796) |
Effect of movements in foreign exchange rates |
|
|
|
|
36,628 |
|
|
|
102 |
|
|
36,730 |
Balance at June 30, 2013 |
|
|
|
|
2,532,369 |
|
|
|
13,929 |
|
|
2,546,298 |
4. EXPLORATION AND EVALUATION ASSETS
The following table reconciles the change in Vermilion's exploration and evaluation
assets:
($M) |
|
|
|
|
|
|
|
|
|
|
Exploration and Evaluation
Assets |
Balance at January 1, 2012 |
|
|
|
|
|
|
|
|
|
|
92,301 |
Additions |
|
|
|
|
|
|
|
|
|
|
39,317 |
Transfers to petroleum and natural gas assets |
|
|
|
|
|
|
|
|
|
|
(10,528) |
Depreciation |
|
|
|
|
|
|
|
|
|
|
(3,485) |
Effect of movements in foreign
exchange rates |
|
|
|
|
|
|
|
|
|
|
(444) |
Balance at December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
117,161 |
Additions |
|
|
|
|
|
|
|
|
|
|
12,689 |
Depreciation |
|
|
|
|
|
|
|
|
|
|
(1,810) |
Effect of movements in foreign exchange rates |
|
|
|
|
|
|
|
|
|
|
531 |
Balance at June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
128,571 |
5. ASSET RETIREMENT OBLIGATIONS
The following table reconciles the change in
Vermilion's asset retirement
obligations:
($M) |
|
|
|
|
|
|
|
|
|
|
Asset Retirement
Obligations |
Balance at January 1, 2012 |
|
|
|
|
|
|
|
|
|
|
310,531 |
Additional obligations recognized |
|
|
|
|
|
|
|
|
|
|
55,228 |
Changes in estimates for existing obligations |
|
|
|
|
|
|
|
|
|
|
(26,560) |
Obligations settled |
|
|
|
|
|
|
|
|
|
|
(13,739) |
Accretion |
|
|
|
|
|
|
|
|
|
|
23,040 |
Changes in discount rates |
|
|
|
|
|
|
|
|
|
|
22,807 |
Effect of movements in foreign
exchange rates |
|
|
|
|
|
|
|
|
|
|
(244) |
Balance at December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
371,063 |
Additional obligations recognized |
|
|
|
|
|
|
|
|
|
|
1,420 |
Obligations settled |
|
|
|
|
|
|
|
|
|
|
(3,758) |
Accretion |
|
|
|
|
|
|
|
|
|
|
11,824 |
Changes in discount rates |
|
|
|
|
|
|
|
|
|
|
(27,194) |
Effect of movements in foreign exchange rates |
|
|
|
|
|
|
|
|
|
|
5,513 |
Balance at June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
358,868 |
6. LONG-TERM DEBT
The following table summarizes Vermilion's outstanding long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As At |
($M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013 |
|
|
|
Dec 31, 2012 |
Revolving credit facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
557,788 |
|
|
|
419,784 |
Senior unsecured notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,682 |
|
|
|
222,238 |
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780,470 |
|
|
|
642,022 |
Revolving Credit Facility
At June 30, 2013,
Vermilion had in place a bank
revolving credit facility totalling $1.2
billion, of which approximately $557.8 million was drawn. The facility,
which matures on May 31, 2016, is
fully revolving up to the date of maturity.
The facility is extendable from time to time,
but not more than once per year, for a period not longer than three
years, at the option of the lenders and upon notice from
Vermilion. If no extension
is granted by the lenders, the amounts owing pursuant to the
facility are repayable on the maturity date. This facility
bears interest at a rate applicable to demand loans plus applicable
margins.
The amount available to Vermilion under this facility is reduced by
outstanding letters of credit associated with Vermilion's operations totalling $51.3 million as at June
30, 2013 (December 31, 2012 -
$49.2 million).
The facility is secured by various fixed and
floating charges against the subsidiaries of Vermilion. Under the terms of the
facility, Vermilion must maintain
a ratio of total bank borrowings (defined as consolidated total
debt), to consolidated net earnings before interest, income taxes,
depreciation, accretion and other certain non-cash items (defined
as consolidated EBITDA) of not greater than 4.0. In addition,
Vermilion must maintain a ratio of
consolidated total senior debt (defined as consolidated total debt
excluding unsecured and subordinated debt) to consolidated EBITDA
of not greater than 3.0.
As at June 30,
2013, Vermilion was in
compliance with its financial covenants.
Senior Unsecured Notes
On February 10,
2011, Vermilion issued
$225.0 million of senior unsecured
notes at par. The notes bear interest at a rate of 6.5% per
annum and will mature on February 10,
2016. As direct senior unsecured obligations of
Vermilion, the notes rank pari
passu with all other present and future unsecured and
unsubordinated indebtedness of the Company.
Vermilion may,
at its option, prior to February 10,
2014, redeem up to 35% of the notes with net proceeds of
equity offerings by the Company at a redemption price equal to
106.5% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest, if any, to the applicable redemption
date. Subsequently, Vermilion may, on or after February 10, 2014, redeem all or part of the
notes at fixed redemption prices, plus, in each case, accrued and
unpaid interest, if any, to the applicable redemption date.
The notes were initially recognized at fair value net of
transaction costs and are subsequently measured at amortized cost
using an effective interest rate of 7.1%.
7. SHAREHOLDERS' CAPITAL
The following tables reconcile the change in
Vermilion's shareholders'
capital:
Shareholders' Capital |
|
|
|
|
|
|
|
|
Number of Shares
('000s) |
|
|
|
Amount ($M) |
Balance as at January 1, 2012 |
|
|
|
|
|
|
|
|
96,430 |
|
|
|
1,368,145 |
Issuance of shares pursuant to the dividend
reinvestment plan |
|
|
|
|
|
|
|
|
1,631 |
|
|
|
72,058 |
Vesting of equity based awards |
|
|
|
|
|
|
|
|
904 |
|
|
|
33,355 |
Share-settled dividends on vested equity based
awards |
|
|
|
|
|
|
|
|
157 |
|
|
|
7,151 |
Shares issued pursuant to the bonus plan |
|
|
|
|
|
|
|
|
13 |
|
|
|
636 |
Balance as at December 31, 2012 |
|
|
|
|
|
|
|
|
99,135 |
|
|
|
1,481,345 |
Issuance of shares pursuant to the
dividend reinvestment plan |
|
|
|
|
|
|
|
|
697 |
|
|
|
34,162 |
Vesting of equity based awards |
|
|
|
|
|
|
|
|
1,372 |
|
|
|
54,370 |
Share-settled dividends on vested equity based
awards |
|
|
|
|
|
|
|
|
202 |
|
|
|
9,808 |
Shares issued pursuant to the bonus plan |
|
|
|
|
|
|
|
|
12 |
|
|
|
629 |
Balance as at June 30, 2013 |
|
|
|
|
|
|
|
|
101,418 |
|
|
|
1,580,314 |
Dividends declared to shareholders for the six
months ended June 30, 2013 were
$120.4 million.
Subsequent to the end of the period and prior to
the condensed consolidated interim financial statements being
authorized for issue on July 31,
2013, Vermilion declared
dividends totalling $20.3 million or
$0.20 per share.
8. EQUITY BASED COMPENSATION
The following table summarizes the number of
awards outstanding under the Vermilion Incentive Plan ("VIP"):
Number of Awards
('000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
Opening balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,690 |
|
|
|
1,750 |
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712 |
|
|
|
681 |
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(749) |
|
|
|
(596) |
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73) |
|
|
|
(145) |
Closing balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,580 |
|
|
|
1,690 |
The fair value of a VIP award is determined on
the grant date at the closing price of Vermilion's common shares on the Toronto Stock
Exchange, adjusted by the estimated performance factor that will
ultimately be achieved. Dividends, which notionally accrue to
the awards during the vesting period, are not included in the
determination of grant date fair values.
9. SEGMENTED INFORMATION
The following segment information has been
prepared by segregating the results into the geographic areas in
which Vermilion operates.
The following amounts include transactions between segments, which
are recorded at fair value at the date of recognition.
|
|
|
|
Three
Months Ended June 30, 2013 |
($M) |
|
|
|
Canada |
|
|
|
France |
|
|
Netherlands |
|
|
Australia |
|
|
Ireland |
|
|
Total |
Drilling and development |
|
|
|
14,465 |
|
|
|
23,223 |
|
|
4,157 |
|
|
8,282 |
|
|
24,878 |
|
|
75,005 |
Exploration and evaluation |
|
|
|
3,113 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external customers |
|
|
|
100,950 |
|
|
|
100,418 |
|
|
38,316 |
|
|
72,282 |
|
|
- |
|
|
311,966 |
Royalties |
|
|
|
(9,707) |
|
|
|
(6,093) |
|
|
- |
|
|
- |
|
|
- |
|
|
(15,800) |
Revenue from external customers |
|
|
|
91,243 |
|
|
|
94,325 |
|
|
38,316 |
|
|
72,282 |
|
|
- |
|
|
296,166 |
Realized gain (loss) on derivative
instruments |
|
|
|
360 |
|
|
|
1,411 |
|
|
(1) |
|
|
- |
|
|
- |
|
|
1,770 |
Transportation expense |
|
|
|
(2,611) |
|
|
|
(2,416) |
|
|
- |
|
|
- |
|
|
(1,626) |
|
|
(6,653) |
Operating expense |
|
|
|
(15,975) |
|
|
|
(16,935) |
|
|
(5,260) |
|
|
(9,912) |
|
|
- |
|
|
(48,082) |
Operating income (loss) |
|
|
|
73,017 |
|
|
|
76,385 |
|
|
33,055 |
|
|
62,370 |
|
|
(1,626) |
|
|
243,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
|
|
|
328 |
|
|
|
16,124 |
|
|
9,621 |
|
|
10,646 |
|
|
- |
|
|
36,719 |
PRRT |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
12,590 |
|
|
- |
|
|
12,590 |
Current income taxes |
|
|
|
328 |
|
|
|
16,124 |
|
|
9,621 |
|
|
23,236 |
|
|
- |
|
|
49,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2012 |
($M) |
|
|
|
Canada |
|
|
|
France |
|
|
Netherlands |
|
|
Australia |
|
|
Ireland |
|
|
Total |
Drilling and development |
|
|
|
38,476 |
|
|
|
10,281 |
|
|
5,427 |
|
|
9,867 |
|
|
13,905 |
|
|
77,956 |
Exploration and evaluation |
|
|
|
16,980 |
|
|
|
- |
|
|
(48) |
|
|
- |
|
|
- |
|
|
16,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external customers |
|
|
|
74,932 |
|
|
|
94,828 |
|
|
30,062 |
|
|
46,722 |
|
|
- |
|
|
246,544 |
Royalties |
|
|
|
(8,216) |
|
|
|
(5,115) |
|
|
- |
|
|
- |
|
|
- |
|
|
(13,331) |
Revenue from external customers |
|
|
|
66,716 |
|
|
|
89,713 |
|
|
30,062 |
|
|
46,722 |
|
|
- |
|
|
233,213 |
Realized loss on derivative instruments |
|
|
|
(423) |
|
|
|
(3,000) |
|
|
- |
|
|
(168) |
|
|
- |
|
|
(3,591) |
Transportation expense |
|
|
|
(2,350) |
|
|
|
(1,894) |
|
|
- |
|
|
- |
|
|
(1,974) |
|
|
(6,218) |
Operating expense |
|
|
|
(13,217) |
|
|
|
(13,755) |
|
|
(5,457) |
|
|
(7,796) |
|
|
- |
|
|
(40,225) |
Operating income (loss) |
|
|
|
50,726 |
|
|
|
71,064 |
|
|
24,605 |
|
|
38,758 |
|
|
(1,974) |
|
|
183,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
|
|
|
845 |
|
|
|
15,725 |
|
|
5,875 |
|
|
6,780 |
|
|
- |
|
|
29,225 |
PRRT |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
8,460 |
|
|
- |
|
|
8,460 |
Current income taxes |
|
|
|
845 |
|
|
|
15,725 |
|
|
5,875 |
|
|
15,240 |
|
|
- |
|
|
37,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2013 |
($M) |
|
|
|
Canada |
|
|
|
France |
|
|
Netherlands |
|
|
Australia |
|
|
Ireland |
|
|
Total |
Total assets |
|
|
|
1,325,667 |
|
|
|
873,242 |
|
|
142,317 |
|
|
311,415 |
|
|
646,366 |
|
|
3,299,007 |
Drilling and development |
|
|
|
98,525 |
|
|
|
44,815 |
|
|
6,156 |
|
|
63,631 |
|
|
41,398 |
|
|
254,525 |
Exploration and evaluation |
|
|
|
12,689 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
12,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external customers |
|
|
|
184,638 |
|
|
|
221,984 |
|
|
72,737 |
|
|
142,183 |
|
|
- |
|
|
621,542 |
Royalties |
|
|
|
(18,696) |
|
|
|
(12,894) |
|
|
- |
|
|
- |
|
|
- |
|
|
(31,590) |
Revenue from external customers |
|
|
|
165,942 |
|
|
|
209,090 |
|
|
72,737 |
|
|
142,183 |
|
|
- |
|
|
589,952 |
Realized gain (loss) on derivative
instruments |
|
|
|
597 |
|
|
|
(608) |
|
|
(1) |
|
|
(1,005) |
|
|
- |
|
|
(1,017) |
Transportation expense |
|
|
|
(4,880) |
|
|
|
(5,170) |
|
|
- |
|
|
- |
|
|
(3,244) |
|
|
(13,294) |
Operating expense |
|
|
|
(29,816) |
|
|
|
(36,874) |
|
|
(9,229) |
|
|
(24,738) |
|
|
- |
|
|
(100,657) |
Operating income (loss) |
|
|
|
131,843 |
|
|
|
166,438 |
|
|
63,507 |
|
|
116,440 |
|
|
(3,244) |
|
|
474,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
|
|
|
579 |
|
|
|
34,783 |
|
|
19,055 |
|
|
17,859 |
|
|
- |
|
|
72,276 |
PRRT |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
23,743 |
|
|
- |
|
|
23,743 |
Current income taxes |
|
|
|
579 |
|
|
|
34,783 |
|
|
19,055 |
|
|
41,602 |
|
|
- |
|
|
96,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2012 |
($M) |
|
|
|
Canada |
|
|
|
France |
|
|
Netherlands |
|
|
Australia |
|
|
Ireland |
|
|
Total |
Total assets |
|
|
|
1,170,481 |
|
|
|
701,189 |
|
|
142,612 |
|
|
285,474 |
|
|
516,377 |
|
|
2,816,133 |
Drilling and development |
|
|
|
104,022 |
|
|
|
16,008 |
|
|
7,900 |
|
|
14,411 |
|
|
23,511 |
|
|
165,852 |
Exploration and evaluation |
|
|
|
23,347 |
|
|
|
- |
|
|
49 |
|
|
- |
|
|
- |
|
|
23,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external customers |
|
|
|
155,458 |
|
|
|
198,339 |
|
|
61,882 |
|
|
141,353 |
|
|
- |
|
|
557,032 |
Royalties |
|
|
|
(17,185) |
|
|
|
(10,598) |
|
|
- |
|
|
- |
|
|
- |
|
|
(27,783) |
Revenue from external customers |
|
|
|
138,273 |
|
|
|
187,741 |
|
|
61,882 |
|
|
141,353 |
|
|
- |
|
|
529,249 |
Realized loss on derivative instruments |
|
|
|
(1,061) |
|
|
|
(7,914) |
|
|
- |
|
|
(334) |
|
|
- |
|
|
(9,309) |
Transportation expense |
|
|
|
(4,394) |
|
|
|
(4,542) |
|
|
- |
|
|
- |
|
|
(3,975) |
|
|
(12,911) |
Operating expense |
|
|
|
(27,484) |
|
|
|
(28,857) |
|
|
(9,566) |
|
|
(21,871) |
|
|
- |
|
|
(87,778) |
Operating income (loss) |
|
|
|
105,334 |
|
|
|
146,428 |
|
|
52,316 |
|
|
119,148 |
|
|
(3,975) |
|
|
419,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
|
|
|
1,287 |
|
|
|
28,620 |
|
|
14,932 |
|
|
16,750 |
|
|
- |
|
|
61,589 |
PRRT |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
35,729 |
|
|
- |
|
|
35,729 |
Current income taxes |
|
|
|
1,287 |
|
|
|
28,620 |
|
|
14,932 |
|
|
52,479 |
|
|
- |
|
|
97,318 |
Reconciliation of operating income to net earnings
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
($M) |
|
|
|
|
|
June 30, 2013 |
|
|
June 30, 2012 |
|
|
June 30, 2013 |
|
|
June 30, 2012 |
Operating income |
|
|
|
|
|
243,201 |
|
|
183,179 |
|
|
474,984 |
|
|
419,251 |
Equity based compensation |
|
|
|
|
|
(10,724) |
|
|
(9,861) |
|
|
(26,860) |
|
|
(19,916) |
Unrealized gain on derivative
instruments |
|
|
|
|
|
8,651 |
|
|
20,015 |
|
|
7,538 |
|
|
11,676 |
Interest expense |
|
|
|
|
|
(9,336) |
|
|
(6,600) |
|
|
(18,025) |
|
|
(12,701) |
General and administration |
|
|
|
|
|
(11,313) |
|
|
(12,068) |
|
|
(23,923) |
|
|
(22,216) |
Foreign exchange gain (loss) |
|
|
|
|
|
29,297 |
|
|
(15,975) |
|
|
26,161 |
|
|
(11,548) |
Other expense |
|
|
|
|
|
(271) |
|
|
(585) |
|
|
(204) |
|
|
(8,568) |
Accretion |
|
|
|
|
|
(6,000) |
|
|
(5,792) |
|
|
(11,824) |
|
|
(11,030) |
Depletion and depreciation |
|
|
|
|
|
(78,418) |
|
|
(76,512) |
|
|
(159,866) |
|
|
(152,360) |
Impairments |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
(65,800) |
Gain on acquisition |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
45,309 |
Earnings before income taxes |
|
|
|
|
|
165,087 |
|
|
75,801 |
|
|
267,981 |
|
|
172,097 |
Income taxes |
|
|
|
|
|
(58,889) |
|
|
(37,985) |
|
|
(109,646) |
|
|
(69,187) |
Net earnings |
|
|
|
|
|
106,198 |
|
|
37,816 |
|
|
158,335 |
|
|
102,910 |
10. CAPITAL DISCLOSURES
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
($M except as indicated) |
|
|
|
June 30, 2013 |
|
|
June 30, 2012 |
|
|
June 30, 2013 |
|
|
June 30, 2012 |
Long-term debt |
|
|
|
780,470 |
|
|
452,267 |
|
|
780,470 |
|
|
452,267 |
Current liabilities |
|
|
|
325,912 |
|
|
397,483 |
|
|
325,912 |
|
|
397,483 |
Current assets |
|
|
|
(432,014) |
|
|
(325,140) |
|
|
(432,014) |
|
|
(325,140) |
Net debt [1] |
|
|
|
674,368 |
|
|
524,610 |
|
|
674,368 |
|
|
524,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
179,074 |
|
|
123,485 |
|
|
369,786 |
|
|
248,372 |
Changes in non-cash operating working capital |
|
|
|
(6,852) |
|
|
1,709 |
|
|
(35,323) |
|
|
27,178 |
Asset retirement obligations settled |
|
|
|
2,370 |
|
|
2,581 |
|
|
3,758 |
|
|
3,347 |
Fund flows from operations |
|
|
|
174,592 |
|
|
127,775 |
|
|
338,221 |
|
|
278,897 |
Annualized fund flows from operations [2] |
|
|
|
698,368 |
|
|
511,100 |
|
|
676,442 |
|
|
557,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net debt to annualized fund flows from
operations ([1] ÷ [2]) |
|
|
|
1.0 |
|
|
1.0 |
|
|
1.0 |
|
|
0.9 |
The ratio of net debt to annualized fund flows
from operations for the three and six months ended June 30, 2013 was relatively consistent with same
periods in 2012 as fund flows from operations increased
proportionately with net debt. The increase in net debt was
the result of the second of two acquisitions that occurred in
France during 2012 and capital
expenditures pertaining to the Ireland assets, which are currently under
development.
Vermilion is
subject to certain externally imposed capital requirements under
its revolving credit facility. During the periods covered by
these consolidated financial statements, Vermilion continued to comply with these
requirements.
11. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
The following table summarizes information relating to
Vermilion's financial instruments
as at June 30, 2013 and December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2013 |
|
|
As at December 31, 2012 |
|
|
|
Class of
financial
instrument |
|
|
Consolidated
balance
sheet caption |
|
|
Accounting
designation |
|
|
Related caption
on Statement of Net
Earnings |
|
|
Carrying
value ($M) |
|
Fair
value
($M) |
|
|
Carrying
value ($M) |
|
Fair
value
($M) |
|
|
Fair value
measurement
hierarchy |
Cash |
|
|
Cash and cash equivalents |
|
|
HFT |
|
|
Gains and losses on foreign exchange
are included in foreign exchange (gain) loss |
|
|
235,598 |
|
235,598 |
|
|
102,125 |
|
102,125 |
|
|
Level 1 |
Receivables |
|
|
Accounts receivable |
|
|
LAR |
|
|
Gains and losses on foreign exchange
are included in foreign exchange (gain) loss and impairments are
recognized as general and administration expense |
|
|
160,425 |
|
160,425 |
|
|
180,064 |
|
180,064 |
|
|
Not applicable |
Derivative assets |
|
|
Derivative instruments |
|
|
HFT |
|
|
Gain on derivative instruments |
|
|
2,149 |
|
2,149 |
|
|
2,086 |
|
2,086 |
|
|
Level 2 |
Derivative liabilities |
|
|
Derivative instruments |
|
|
HFT |
|
|
Gain on derivative instruments |
|
|
(1,009) |
|
(1,009) |
|
|
(8,484) |
|
(8,484) |
|
|
Level 2 |
Payables |
|
|
Accounts payable and accrued
liabilities |
|
|
OTH |
|
|
Gains and losses on foreign exchange
are included in foreign exchange (gain) loss |
|
|
(252,533) |
|
(252,533) |
|
|
(319,518) |
|
(319,518) |
|
|
Not applicable |
|
|
|
|
|
|
Dividends payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
Long-term debt |
|
|
OTH |
|
|
Interest expense |
|
|
(780,470) |
|
(787,288) |
|
|
(642,022) |
|
(656,315) |
|
|
Not applicable |
The accounting designations used in the above
table refer to the following:
HFT - Classified as "Held for trading" in
accordance with International Accounting Standard 39 "Financial
Instruments: Recognition and Measurement". These financial
assets and liabilities are carried at fair value on the
consolidated balance sheets with associated gains and losses
reflected in net earnings.
LAR - "Loans and receivables" are initially
recognized at fair value and are subsequently measured at amortized
cost. Impairments and foreign exchange gains and losses are
recognized in net earnings.
OTH - "Other financial liabilities" are
initially recognized at fair value net of transaction costs
directly attributable to the issuance of the instrument and
subsequently are measured at amortized cost. Interest is
recognized in net earnings using the effective interest
method. Foreign exchange gains and losses are recognized in
net earnings.
Level 1 - Fair value measurement is determined
by reference to unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 - Fair value measurement is determined
based on inputs other than unadjusted quoted prices that are
observable, either directly or indirectly.
Level 3 - Fair value measurement is based on
inputs for the asset or liability that are not based on observable
market data.
Determination of Fair Values
The level in the fair value hierarchy into which
the fair value measurements are categorized is determined on the
basis of the lowest level input that is significant to the fair
value measurement. Transfers between levels on the fair value
hierarchy are deemed to have occurred at the end of the reporting
period.
Fair values for derivative assets and derivative
liabilities are determined using pricing models incorporating
future prices that are based on assumptions which are supported by
prices from observable market transactions and are adjusted for
credit risk.
The carrying value of receivables approximate
their fair value due to their short maturities.
The carrying value of long-term debt outstanding
on the revolving credit facility approximates its fair value due to
the use of short-term borrowing instruments at market rates of
interest.
The fair value of the senior unsecured notes
changes in response to changes in the market rates of interest
payable on similar instruments and was determined with reference to
prevailing market rates for such instruments.
Nature and Extent of Risks Arising from Financial
Instruments
Market risk:
Vermilion's financial instruments
are exposed to currency risk related to changes in foreign currency
denominated financial instruments and commodity price risk related
to outstanding derivative positions. The following table
summarizes what the impact on comprehensive income before tax would
be for the six months ended June 30,
2013 given changes in the relevant risk variables that
Vermilion considers were
reasonably possible at the balance sheet date. The impact on
comprehensive income before tax associated with changes in these
risk variables for assets and liabilities that are not considered
financial instruments are excluded from this analysis. This
analysis does not attempt to reflect any interdependencies between
the relevant risk variables.
|
|
|
|
|
|
June 30, 2013 |
|
|
|
|
Before tax effect on
comprehensive income |
Risk ($M) |
|
|
|
Description of change in risk
variable |
|
Increase (decrease) |
Currency risk - Euro to Canadian |
|
|
|
Increase in strength of the
Canadian dollar against the |
|
(4,128) |
|
|
|
|
Euro by 5% over the relevant closing
rates on June 30, 2013 |
|
|
|
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
4,128 |
|
|
|
|
Euro by 5% over the relevant closing
rates on June 30, 2013 |
|
|
Currency risk - US $ to Canadian |
|
|
|
Increase in strength of the
Canadian dollar against the |
|
(4,953) |
|
|
|
|
US$ by 5% over the relevant closing
rates on June 30, 2013 |
|
|
|
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
4,953 |
|
|
|
|
US$ by 5% over the relevant closing
rates on June 30, 2013 |
|
|
Currency risk - AUD $ to Canadian |
|
|
|
Increase in strength of the
Canadian dollar against the |
|
(261) |
|
|
|
|
AUD$ by 5% over the relevant closing
rates on June 30, 2013 |
|
|
|
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
261 |
|
|
|
|
AUD$ by 5% over the relevant closing
rates on June 30, 2013 |
|
|
Commodity price risk |
|
|
|
Increase in relevant oil
reference price within option pricing models used to |
|
(6,067) |
|
|
|
|
determine the fair value of financial
derivative positions by US$5.00/bbl at June 30, 2013 |
|
|
|
|
|
|
Decrease in relevant oil
reference price within option pricing models used to |
|
5,923 |
|
|
|
|
determine the fair value of financial
derivative positions by US$5.00/bbl at June 30, 2013 |
|
|
Interest rate risk |
|
|
|
Increase in average Canadian
prime interest rate |
|
(2,250) |
|
|
|
|
by 100 basis points during the six
months ended June 30, 2013 |
|
|
|
|
|
|
Decrease in average Canadian
prime interest rate |
|
2,250 |
|
|
|
|
by 100 basis points during the six
months ended June 30, 2013 |
|
|
|
|
|
|
|
SOURCE Vermilion Energy Inc.