CALGARY, Nov. 7, 2013 /CNW/ - Vermilion Energy Inc.
("Vermilion", "We" or "Our") (TSX: VET) (NYSE: VET) is pleased to
announce that our Board of Directors has approved a 7.5% increase
in the monthly cash dividend to $0.215
CDN per share from the current level of $0.20 CDN per share. The increase is
expected to become effective for the January
2014 dividend payable on February 17,
2014(1). This marks the third increase to our
monthly dividend (previously our distribution during our income
trust era), and our second annual increase.
With the continued strength of our operations
and our expansive opportunity base (including our recently
completed and proposed acquisitions in the Netherlands and Germany, respectively), we are confident we
can achieve our future growth objectives and continue to provide
reliable and increasing dividends to investors. We believe
our balance sheet remains well positioned to execute our
capital-efficient growth-and-income model and fund Corrib
development through to first gas production, while remaining within
an acceptable net debt-to-fund flows from operations(2)
ratio. Corrib is expected to provide a significant increase
to our free cash flow(2) upon first gas production.
Production and Capital Guidance
As discussed in our third quarter 2013 financial
and operating results released earlier today, we now expect to
achieve average 2013 production volumes at the upper end of our
guidance range of 40,500 to 41,000 boe/d, including a minor amount
of production associated with our Netherlands acquisition completed on
October 10, 2013. We also
announced an increase in our anticipated 2013 development capital
to $530 million, primarily
attributable to the impact of a weaker Canadian dollar as compared
to foreign exchange rates at the time of our original guidance, a
delay in the timing of rig arrival for our Australian drill program
(originally anticipated to occur in late 2012) which shifted
expenditures into 2013, and minor additions to our capital work
scope during 2013 (such as the addition of the successful
Champotran southern extension well in France).
For 2014, our Board of Directors has approved a
development capital program of approximately $555 million, including expenditures associated
with our recently completed acquisition in the Netherlands and anticipated expenditures
related to our proposed acquisition in Germany. Key development expenditures in
2014 include increased drilling activity in France and the
Netherlands, drilling and completion of two horizontal
Duvernay appraisal wells in
Canada, and the continued
development of our significant Cardium and Mannville liquids-rich gas opportunities in
Canada.
The 2014 capital program is anticipated to
generate organic production growth of 4% to 6% in 2014.
Combined with our recent acquisition in the Netherlands and the proposed acquisition
in Germany (assuming a
January 31, 2014 close), we currently
anticipate 2014 average daily production of between 45,000 and
46,000 boe/d, representing annual production growth of
approximately 10% to 12% as compared to 2013. As discussed in
our third quarter 2013 financial and operating results, our recent
Netherlands acquisition is
anticipated to deliver average daily production volumes of
approximately 400 boe/d in 2014. In the case of our planned
German acquisition, while we are targeting closing on or before
December 31, 2013, we recognize that
up to a one-month delay in closing may potentially be required to
complete all acquisition steps and to secure necessary
approvals. Based on an estimated average production rate of
3,000 boe/d in 2013, and the inclusion of eleven months of
production for 2014, we are guiding to a contribution of
approximately 2,300 boe/d from the German assets in 2014.
Capital Expenditures
Country |
2013
Estimate
($mm) |
|
2014
Budget
($mm) |
Canada |
$ |
|
|
235 |
|
$ |
240 |
France |
|
|
|
95 |
|
|
120 |
Netherlands |
|
|
|
32 |
|
|
50 |
Australia |
|
|
|
78 |
|
|
40 |
|
$ |
|
|
440 |
|
$ |
450 |
Ireland |
|
|
|
90 |
|
|
90 |
Base Development Capital |
$ |
|
|
530 |
|
$ |
540 |
Netherlands acquisition* |
|
|
|
- |
|
|
5 |
Germany acquisition (proposed)** |
|
|
|
- |
|
|
10 |
Total Development Capital |
$ |
|
|
530 |
|
$ |
555 |
|
|
|
|
|
|
|
|
Acquisition of assets in Netherlands* |
|
|
|
27 |
|
|
- |
Acquisition of assets in Germany (estimated cash
cost at close, excluding final adjustments)** |
|
|
|
- |
|
|
170 |
Other |
|
|
|
3 |
|
|
- |
Total Capital Expenditures |
$ |
|
|
560 |
|
$ |
725 |
*October 10, 2013 acquisition of Northern Petroleum Nederland
B.V. (see October 1, 2013 news release available on Company website
at www.vermilionenergy.com or at the Company's
profile on SEDAR at www.sedar.com). |
**November 2013 proposed acquisition of 25% contractual
participation interest in consortium of exploration and production
companies with interests in Germany from GDF Suez E&P
Deutschland GmbH. The acquisition is expected to close prior to
January 31, 2014. (see Nov 6, 2013 news release available on
Company website at www.vermilionenergy.com or at the
Company's profile on SEDAR at www.sedar.com). |
|
Total Development Capital by Category
Category |
2013
Estimate
($mm) |
|
2014
Budget
($mm) |
Drilling, completion, workovers and
recompletions |
$ |
290 |
|
$ |
260 |
Production equipment, facilities, new well
equipment and tie-in (including Ireland) |
|
225 |
|
|
260 |
Seismic, studies, land and other |
|
15 |
|
|
35 |
Total Development Capital |
$ |
530 |
|
$ |
555 |
|
|
|
|
|
|
In Canada,
budgeted 2014 development capital of $240
million includes expenditures for drilling or participating
in an estimated 36 (30.3 net) Cardium wells and eight (5.7 net)
Mannville wells. Anticipated
Cardium and Mannville expenditures
represent approximately 80% of planned Canadian development
expenditures. Additional development expenditures include
drilling and completion of two horizontal Duvernay appraisal wells, as well as drilling
and appraisal activities targeting other Canadian new venture
opportunities.
France is
expected to be a meaningful contributor to oil production and fund
flows from operations growth over the next few years.
Accordingly, development activities will expand significantly in
2014 in our France Business Unit. For 2014, allocated
development capital of $120 million
will include expenditures for a nine-well drilling program with new
wells planned for our Champotran, Cazaux, Parentis and Tamaris
fields. Further development expenditures in 2014 will include
an estimated 18-well workover program.
Our Netherlands Business Unit will also see a
significant increase in activity in 2014. Planned activities
include a four-to-six well drilling program depending on the
arrival date of the drilling rig contracted for our 2013 drilling
program. The drilling program will include our first new well
on the lands acquired in October
2013. The remainder of our planned $55 million 2014 capital program is budgeted for
well workovers and facilities maintenance and upgrades.
Both the France
and Netherlands development
programs are designed to achieve organic growth in each business
unit while continuing to generate significant free cash flow.
In 2013 we drilled two highly successful
sidetracks off existing wells in Australia. We do not expect to drill
again until 2015. As a result, we are planning for a
$40 million capital program in 2014,
which is a significant reduction from our 2013 program.
Planned activities include preparation and permitting activities in
advance of our planned 2015 drilling program as well as ongoing
facilities maintenance, enhancement and refurbishment.
Tunnelling operations restarted at Corrib in
Ireland on November 3, 2013 after a suspension following a
worksite fatality. We are planning for a $90 million capital program in 2014, the same
amount estimated for our 2013 capital program. First gas
production is now expected at approximately mid-2015.
Provided our acquisition in Germany is concluded as anticipated, we
anticipate capital expenditures of approximately $10 million, including participation in one
development well, in 2014.
About Vermilion
Vermilion is an oil-leveraged producer that
adheres to a value creation strategy through the execution of full
cycle exploration and production programs focused on the
acquisition, exploration, development and optimization of producing
properties in Western Canada,
Europe and Australia. Our business model targets annual
organic production growth of approximately 5% along with providing
reliable and increasing dividends to investors. Vermilion is
targeting growth in production primarily through the exploitation
of conventional resource plays in Western
Canada, including Cardium light oil and liquids rich natural
gas, the exploration and development of high impact natural gas
opportunities in the Netherlands
and through drilling and workover programs in France and Australia. Vermilion also holds an 18.5%
working interest in the Corrib gas field in Ireland. In addition, Vermilion pays a monthly
dividend of Canadian $0.20 per share,
which provides a current yield in excess of 4%. Management
and directors of Vermilion hold approximately 8% of the outstanding
shares and are dedicated to consistently delivering superior
rewards for all stakeholders, featuring an 18-year history of
market outperformance. Vermilion trades on the Toronto Stock
Exchange and the New York Stock Exchange under the symbol VET.
Natural gas volumes have been converted on the basis of six
thousand cubic feet of natural gas to one barrel equivalent of
oil. 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.
(1) |
In accordance with applicable corporate law requirements
(including solvency tests), formal declaration and payment of the
January 2014 dividend remains subject to final Board of Director
approval prior to its declaration on January 15, 2014. |
|
|
(2) |
Fund flows from operations, net debt, free cash flow and
netbacks are non-GAAP (as defined herein) measures that 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. "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. "Free cash flow" represents fund flows from operations in
excess of capital expenditures. Management considers free
cash flow to be a key measure as it is used to determine the
funding available for investing and financing activities, including
payment of dividends, repayment of long-term debt, reallocation to
existing business units, and deployment into new ventures.
"Netbacks" are per boe and per mcf measures used in operational and
capital allocation decisions. For relevant operating netback
related disclosures please refer to the reconciliation contained on
page 29 of management's discussion and analysis contained in
Vermilion's Third Quarter 2013 Financial Report for the three and
nine months ended September 30, 2013 available on SEDAR
(www.sedar.com or at the company's website
www.vermilionenergy.com). |
|
|
DISCLAIMER
Certain statements included or incorporated by
reference in this press release 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
press release may include, but are not limited to:
- the effective date of the 7.5% increase in our monthly cash
dividend;
- our ability to achieve future growth objectives and continuing
to provide reliable and growing dividends to investors;
- our balance sheet strength;
- the anticipated impact on projected free cash flow upon Corrib
first gas production;
- anticipated 2013 average annual production volumes and the
amount of 2013 development capital;
- anticipated 2014 development capital program amount, including
the location, type and impact of expenditures;
- anticipated closing of the proposed acquisition in Germany
- anticipated 2014 average daily production, including
anticipated organic and overall annual production growth
rates;
- anticipated 2014 average daily production volumes from
the Netherlands acquisition and
the proposed Germany acquisition;
and
- anticipated impact of France
activities on oil production and funds flow growth over the next
few years, and France and
Netherlands on organic growth in
each region and free cash flow.
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.
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 and natural gas and market
demand;
- risks and uncertainties involving geology of oil 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, costs and expenses;
- potential delays or changes in plans with respect to proposed
acquisitions, exploration or development projects or capital
expenditures;
- Vermilion's ability to enter into or renew leases;
- fluctuations in oil 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
development and exploration activities;
- general economic and business conditions;
- 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.
SOURCE Vermilion Energy Inc.