CALGARY,
June 28, 2016 /PRNewswire/
- Vermilion Energy Inc. ("Vermilion", the "Company", "We" or
"Our") (TSX, NYSE: VET) has entered into a definitive purchase and
sale agreement whereby Vermilion, through its wholly owned
subsidiary, will acquire interests in several production and
exploration assets in Germany (the
"Acquisition") from Engie E&P Deutschland GmbH, for total
consideration of €33 million ($47.9
million). The Acquisition has an effective date of
January 1, 2016 and is anticipated to
close in late Q4 2016, subject to customary closing adjustments.
Vermilion will fund the Acquisition through existing credit
facilities.
The Acquisition includes operated and
non-operated interests in five oil and three gas producing fields,
along with an operated interest in one exploration license (the
"Assets"). The Assets are located within the prolific North German
Basin in northwest Germany and are
forecasted to produce approximately 2,000 boe/d in 2016 (50% oil).
Proved plus probable reserves are estimated at 9.2 million
boe(1) (74% proved developed producing(1))
based on an independent evaluation by GLJ Petroleum Consultants
Ltd. with an effective date of December 31,
2015. The transaction metrics are estimated at approximately
$24,000 per boe per day, $5.86 per boe of proved plus probable
reserves(1) including future development capital
(generating a 2P recycle ratio of 3.5 times based on projected 2016
netbacks), and 3.1 times estimated 2016 operating cash
flow(2) using the current forward commodity strip. The
Acquisition is expected to be accretive for all pertinent per share
metrics including production, fund flows from
operations(2), reserves and net asset value.
Vermilion will assume operatorship of six of the
eight producing fields, with the other fields operated by
ExxonMobil Production Deutschland ("EMPG") and Deutsche Erdoel AG
("DEA"). The Acquisition also includes a 50% operated interest in a
190 km oil pipeline network and a 66.7% operated interest in the
Bedekaspel exploration license located in the Permian Rotliegend
gas fairway, adding to Vermilion's existing 16.7%
interest.
The Acquisition adds a low decline (approximately
10%) production base to our portfolio, and provides us with our
first operated producing properties in Germany, further strengthening our presence in
the country. The Assets are expected to be complementary with our
existing European portfolio, offering similar subsurface
characteristics and development opportunities. We have identified a
number of low-risk optimization and workover opportunities on the
acquired assets, from which we expect to maintain a
flat-to-moderately growing production profile while generating free
cash flow(2) to further support our
growth-and-income capital markets model. In addition, we have
identified development and exploration drilling opportunities that
are not included in our current reserves estimate.
Vermilion entered Germany in early 2014 through the acquisition
of a 25% non-operating interest in a four-partner consortium. In
July 2015, we executed a significant
exploratory farm-in agreement that provides us with
participating interest in over 850,000 net acres of undeveloped
land, as well as access to key technical data in the North German
Basin. This Acquisition substantially advances our objective of
developing a material business unit in Germany, a country with a long history of oil
and natural gas development, a consistent fiscal framework and low
political risk.
About Vermilion
Vermilion is an international energy producer
that seeks to create value through the acquisition, exploration,
development and optimization of producing properties in
North America, Europe and Australia. Our business model targets annual
organic production growth, along with providing reliable and
increasing dividends to investors. Vermilion is targeting growth in
production primarily through the exploitation of light oil and
liquids-rich natural gas conventional resource plays in
Canada and the United States, the exploration and
development of high impact natural gas opportunities in
the Netherlands and Germany, and through oil drilling and workover
programs in France and
Australia. Vermilion also holds an
18.5% working interest in the Corrib gas field in Ireland. Vermilion pays a monthly dividend of
Canadian $0.215 per share, which
provides a current yield of approximately 6%. Management and
directors of Vermilion hold approximately 6% of the outstanding
shares, are committed to consistently delivering superior rewards
for all stakeholders, and have delivered a 20-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 ("mcf") 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) Estimated proved plus probable and
proved developed producing reserves attributable to the Assets as
evaluated by GLJ Petroleum Consultants Ltd. in a report dated
June 27, 2016 with an effective date
of December 31, 2015.
(2) Non-standardized and non-GAAP financial
measures: This news release includes references to certain
financial measures which do not have standardized meanings
prescribed by International Financial Reporting Standards ("IFRS").
Fund flows from operations is a non-standardized financial measure
that is calculated as cash flows from operating activities before
changes in non-cash operating working capital and asset retirement
obligations settled. We analyze fund flows from operations both on
a consolidated basis and on a business unit basis in order to
assess the contribution of each business unit and our ability to
generate cash necessary to pay dividends, repay debt, fund asset
retirement obligations and make capital investments. Free cash flow
and operating cash flow are non-GAAP financial measures. Free cash
flow is calculated as fund flows from operations less capital
expenditures. Operating cash flow is calculated as fund flows from
operations before general and administration expense, interest and
income taxes. We consider free cash flow and operating cash flow to
be key measures as they are 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. For additional
information on non-standardized and non-GAAP financial measures,
please refer to the Management's Discussion and Analysis contained
in Vermilion's 2015 Annual Report for the year ended December 31, 2015 available on SEDAR or at the
Company's website (www.vermilionenergy.com).
DISCLAIMER
Certain statements included or incorporated by
reference in this press release may constitute forward-looking
statements under applicable securities legislation. 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 anticipated closing date of the Acquisition;
- the sources of existing production and future development
drilling opportunities;
- the annual decline rate of the Assets;
- the number and classification of future development drilling
opportunities;
- the pricing received for production, and resulting operating
and after-tax cash flow netbacks for the Assets;
- the estimate of annualized 2016 production;
- the anticipated acquisition metrics;
- the expectation that the Assets will generate free cash flow
positive;
- the expectation that fiscal and regulatory policies in
Germany remain supportive of
continued investment;
- development plans and strategic objectives.
Statements relating to reserves are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated, and can
be profitably produced in the future. 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:
- satisfaction of all conditions to the proposed Acquisition and
receipt of all necessary approvals.
- the ability of Vermilion to obtain equipment, services and
supplies in a timely manner to carry out planned development
activities;
- the ability of Vermilion to integrate the Assets in the
Company's current operations
- the ability of Vermilion to market oil and natural gas
successfully to current and new customers;
- the timely receipt of required regulatory approvals;
- currency, exchange and interest rates;
- future oil and natural gas prices; and
- Management's expectations relating to the timing and results of
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. 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 (including the Acquisition), 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.