CALGARY, April 25, 2019
/PRNewswire/ - Vermilion Energy Inc. ("Vermilion", "We",
"Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report
operating and condensed financial results for the three months
ended March 31, 2019.
The unaudited financial statements and management discussion and
analysis for the three months ended March 31, 2019, will
be available on the System for Electronic Document Analysis and
Retrieval ("SEDAR") at www.sedar.com, on EDGAR at
www.sec.gov/edgar.shtml, and on Vermilion's website at
www.vermilionenergy.com.
Highlights
- Q1 2019 production averaged 103,404 boe/d, representing a 2%
increase over the prior quarter, due to increases in Australia, Canada, the US, Germany and France.
- Fund flows from operations ("FFO") for Q1 2019 was $254 million ($1.66/basic share(1)), an increase of
14% from the previous quarter (14% on a per share basis) as a
result of higher production and realized commodity pricing,
partially offset by higher cash taxes. FFO for Q1 2019 increased
58% (27% on a per share basis) compared to the same quarter last
year due to higher production, which was partially offset by lower
commodity pricing and higher cash taxes.
- In Australia, production
averaged 5,862 bbl/d in Q1 2019, an increase of 40% from the
previous quarter primarily due to the contribution from the two
(2.0 net) well program completed at the end of January 2019.
- In Canada, production averaged
61,360 boe/d in Q1 2019, an increase of 1% from the prior quarter,
primarily driven by new well completions.
- In the United States, Q1 2019
production averaged 3,653 boe/d, an increase of 3% from the prior
quarter, primarily driven by a full quarter contribution from our
first Hilight well drilled in the prior quarter.
- In Germany, production in Q1
2019 averaged 3,763 boe/d, an increase of 1% from the prior
quarter. The increase is primarily due to better than expected
results from workovers performed on our operated oil assets. Late
in the quarter, we commenced drilling of the Burgmoor Z5 well (46%
working interest), marking the first operated drilling program by
Vermilion in Germany.
- In the Netherlands, Q1 2019
production averaged 8,677 boe/d, a 1% decrease from the prior
quarter. We continue to make progress on the permitting for our two
(1.0 net) 2019 planned wells. We received the drilling permit for
one well during the first quarter, and are currently awaiting
regulatory decisions on two additional wells, which should enable
us to execute our planned program for this year.
- In Ireland, production
averaged approximately 52 mmcf/d (8,619 boe/d) in Q1 2019, a
decrease of 1% from the prior quarter. In our first full quarter as
operator of the Corrib Project, we completed some minor projects
and activities previously identified to increase uptime and
optimize plant compression to increase gas throughput. We will
continue to evaluate other optimization opportunities throughout
2019 as we build more first-hand knowledge as operator.
(1)
|
Non-GAAP Financial
Measure. Please see the "Non-GAAP Financial Measures" section
of the accompanying Management's Discussion and
Analysis.
|
|
|
|
|
($M except as
indicated)
|
Q1
2019
|
|
Q4
2018
|
|
Q1
2018
|
Financial
|
|
|
|
Petroleum and natural
gas sales
|
481,083
|
|
456,939
|
|
318,269
|
Fund flows from
operations
|
253,572
|
|
222,342
|
|
160,415
|
Fund flows from operations ($/basic share) (1)
|
1.66
|
|
1.45
|
|
1.31
|
Fund flows from operations ($/diluted share) (1)
|
1.64
|
|
1.44
|
|
1.29
|
Net earnings
(loss)
|
39,547
|
|
323,373
|
|
24,740
|
Net earnings (loss) ($/basic share)
|
0.26
|
|
2.12
|
|
0.20
|
Capital
expenditures
|
202,053
|
|
163,580
|
|
128,465
|
Acquisitions
|
16,027
|
|
2,689
|
|
93,078
|
Asset retirement
obligations settled
|
3,597
|
|
6,562
|
|
3,591
|
Cash dividends
($/share)
|
0.690
|
|
0.690
|
|
0.645
|
Dividends
declared
|
105,549
|
|
105,310
|
|
79,005
|
%
of fund flows from operations
|
42%
|
|
47%
|
|
49%
|
Net dividends
(1)
|
98,445
|
|
100,195
|
|
59,364
|
%
of fund flows from operations
|
39%
|
|
45%
|
|
37%
|
Payout
(1)
|
304,095
|
|
270,337
|
|
191,420
|
%
of fund flows from operations
|
120%
|
|
122%
|
|
119%
|
Net debt
|
2,000,144
|
|
1,929,529
|
|
1,525,562
|
Ratio of net debt to
annualized fund flows from operations
|
1.97
|
|
2.17
|
|
2.38
|
Operational
|
Production
|
|
|
|
Crude oil and condensate (bbls/d)
|
49,181
|
|
47,678
|
|
27,008
|
NGLs (bbls/d)
|
7,897
|
|
7,815
|
|
5,126
|
Natural gas (mmcf/d)
|
277.96
|
|
276.77
|
|
228.20
|
Total (boe/d)
|
103,404
|
|
101,621
|
|
70,167
|
Average realized
prices
|
|
|
|
Crude oil and condensate ($/bbl)
|
73.45
|
|
66.19
|
|
80.03
|
NGLs ($/bbl)
|
22.49
|
|
25.69
|
|
25.37
|
Natural gas ($/mcf)
|
5.10
|
|
5.83
|
|
5.81
|
Production mix (% of
production)
|
|
|
|
%
priced with reference to WTI
|
37%
|
|
37%
|
|
21%
|
%
priced with reference to Dated Brent
|
18%
|
|
18%
|
|
24%
|
%
priced with reference to AECO
|
26%
|
|
26%
|
|
26%
|
%
priced with reference to TTF and NBP
|
19%
|
|
19%
|
|
29%
|
Netbacks
($/boe)
|
|
|
|
Operating netback (1)
|
31.50
|
|
27.58
|
|
31.27
|
Fund flows from operations netback
|
26.76
|
|
23.79
|
|
25.77
|
Operating expenses
|
12.92
|
|
12.04
|
|
10.90
|
General and administration expenses
|
1.38
|
|
1.37
|
|
1.88
|
Average reference
prices
|
|
|
|
WTI (US $/bbl)
|
54.90
|
|
58.81
|
|
62.87
|
Edmonton Sweet index (US $/bbl)
|
50.05
|
|
32.51
|
|
56.98
|
Saskatchewan LSB index (US $/bbl)
|
50.84
|
|
44.03
|
|
56.63
|
Dated Brent (US $/bbl)
|
63.20
|
|
67.76
|
|
66.76
|
AECO ($/mcf)
|
2.62
|
|
1.56
|
|
2.08
|
NBP ($/mcf)
|
8.33
|
|
11.03
|
|
9.96
|
TTF ($/mcf)
|
8.14
|
|
10.91
|
|
9.59
|
Average foreign
currency exchange rates
|
|
|
|
CDN $/US $
|
1.33
|
|
1.32
|
|
1.26
|
CDN $/Euro
|
1.51
|
|
1.51
|
|
1.55
|
Share information
('000s)
|
Shares outstanding -
basic
|
153,213
|
|
152,704
|
|
122,769
|
Shares outstanding -
diluted (1)
|
156,650
|
|
156,173
|
|
125,794
|
Weighted average
shares outstanding - basic
|
152,904
|
|
152,588
|
|
122,390
|
Weighted average
shares outstanding - diluted (1)
|
154,550
|
|
153,880
|
|
124,304
|
|
|
|
|
|
|
(1)
|
The above table
includes non-GAAP financial measures which may not be comparable to
other companies. Please see the "Non-GAAP Financial Measures"
section of Management's Discussion and Analysis.
|
Message to Shareholders
We delivered strong operational and financial results in Q1
2019. Production increased 2% quarter-over-quarter to 103,404 boe/d
and FFO increased 14% from the prior quarter to $254 million. While global benchmark commodity
prices were weaker in Q1 2019 compared to the prior quarter, we
benefited from a significant improvement in Canadian benchmark
prices and continued positive operational momentum across our asset
base. On a per share basis we generated $1.66(1) of FFO in Q1 2019 compared to
$1.31 in Q1 2018, representing a
year-over-year increase of 27% despite most commodity benchmark
prices being lower over this comparative period, reflecting
accretion from the acquisitions we completed in 2018 and our
ongoing organic development activities. Our Australian and
Canadian business units were responsible for most of the growth in
Q1 2019 as we brought two new offshore wells on production in
Australia and executed one of our
most active drilling programs to date in Canada. We achieved increased production
despite an unusually active cyclone season in Australia, which resulted in 11 days of
downtime at Wandoo and extremely cold weather conditions in our
producing areas in Canada and the
US.
We are committed to our capital markets strategy of sustainable
growth and income. With all business units contributing strong
development results to-date and most completion and tie-in
activities in North America
completed at break-up, we expect to deliver robust year-over-year
production per share growth in 2019 of 8% or more, while paying a
sustainable dividend which is currently yielding approximately
8%. We typically have a front-loaded capital program which
seeks to finish as much Canadian drilling and tie-in activity ahead
of break-up as possible, and this year was no exception, with
nearly 40% of our annual capital investment for Exploration and
Development ("E&D") activities executed in Q1 2019. As a
result, our total payout ratio exceeded 100% for the quarter.
However, based on the current commodity strip, our annual capital
program and dividend are more than fully funded with a forecasted
total payout ratio of approximately 90%. As we have previously
indicated, our intent is to allocate any excess cash generated
beyond the capital program and dividend towards debt reduction,
targeting a debt-to-FFO leverage ratio of 1.5 times or
lower. In Q2 2019, we negotiated an extension to our
$2.1 billion revolving credit
facility to extend the maturity to May
31, 2023. The closing of the amendment is expected to
take place before the end of April, 2019.
Q1 2019 Operations Review
Europe
In France, Q1 2019 production
averaged 11,470 boe/d, which was up slightly from the prior
quarter. Initial results from our 2019 workover program have
exceeded our expectations, with one recompletion in the Aquitaine
Basin yielding an initial 30-day rate of 600
bbls/d. Production contributions from the 2018 drilling
program in the Champotran field continue to outperform internal
estimates. Our 2019 Champotran drilling program commenced during
the first quarter, as we drilled and completed three (3.0 net)
wells. These wells are expected to be brought on production in late
April, while drilling of the final (1.0 net) well of the program is
ongoing.
In the Netherlands, Q1 2019
production averaged 8,677 boe/d, representing a 1% decrease from
the prior quarter. We continue to make progress on the permitting
for our two (1.0 net) 2019 planned wells. We received the drilling
permit for the Weststellingwerf well during the first quarter, and
are currently awaiting regulatory decisions on two additional
wells, which should enable us to execute our planned two-well
program for this year.
In Ireland, production averaged
approximately 52 mmcf/d (8,619 boe/d) in Q1 2019, a decrease of 1%
from the prior quarter. We completed some minor projects and
activities previously identified to increase uptime and optimize
plant compression to increase gas throughput. We will continue to
evaluate other optimization opportunities throughout 2019 as we
build more first-hand knowledge as operator.
In Germany, production in Q1
2019 averaged 3,763 boe/d, an increase of 1% from the prior
quarter. The increase is primarily due to better than expected
results from workovers performed on our operated oil
assets. Late in the quarter, we commenced drilling the
Burgmoor Z5 well (46% working interest), marking the first operated
drill by Vermilion in Germany. Drilling is expected to
conclude around mid-year, with well testing thereafter. We have
identified several other sizeable exploration prospects on our
German land base and intend to drill at least one new well per year
for the foreseeable future.
In Central and Eastern Europe
("CEE"), we had no production in the quarter. The Mh-Ny-07
well in Hungary watered out at its
current location, and we are evaluating the economics of
sidetracking the well to access remaining gas at a higher
structural location. We have received all necessary permits
for the 2019 Hungarian drilling program and are making steady
progress on permitting for our Croatia and Slovakia drilling programs. We plan a 10 (7.0
net) well 2019 drilling program for Central and Eastern Europe and remain very confident in
the growth outlook for this region.
North America
In Canada, production averaged
61,360 boe/d in Q1 2019, an increase of 1% from the prior quarter.
The production increase was driven by continued strong operating
performance across our Canadian assets including positive results
from our drilling programs in both Saskatchewan and Alberta. We drilled or
participated in 58 (54.9 net) wells in the first quarter of 2019,
including 45 (41.9 net) wells in Saskatchewan and 12 (12.0 net) Mannville wells in Alberta. In Saskatchewan, we tied in 40 wells from the Q1
program. Of the wells that have been on production for more
than 15 days, we achieved an average rate of 162 boe/d (71% oil) on
the Midale wells and 109 boe/d
(90% oil) on the open hole Frobisher wells. In Alberta, we tied in
11 wells from the Q1 program, including ten Mannville wells that have been on production
for more than 15 days achieving an average rate of 790 boe/d (40%
oil, condensate and NGLs). The results from our Q1 2019 drilling
program in both Saskatchewan and
Alberta continue to perform at or
above our expectations.
In the United States, Q1 2019
production averaged 3,653 boe/d, an increase of 3% from the prior
quarter. The increase was primarily due to a full quarter
contribution from our first Hilight well drilled in the prior
quarter, which continues to perform in line with our
expectations. We commenced our 2019 eight (7.6 net) well
drilling program in the Hilight Turner Sands by drilling three (3.0
net) horizontal wells during the quarter. We are in the
process of completing and testing these wells and plan to drill the
remaining five (4.6 net) Hilight wells in the second and third
quarters.
Australia
In Australia, production
averaged 5,862 bbl/d in Q1 2019, an increase of 40% from the
previous quarter primarily due to the contribution from the two
(2.0 net) well program completed at the end of January
2019. The wells began producing in early February 2019 and continue to perform in line
with our expectations. We produce these two wells intermittently at
restricted rates in order to maximize long-term value and to manage
to our annual production target of 6,000 bbl/d. Production in Q1
2019 was partially offset by weather related downtime, as two
cyclones resulted in the platform being shut down for 11 days
during the quarter.
Commodity Hedging
Vermilion hedges to manage commodity price exposures and
increase the stability of our cash flows, providing additional
certainty with regard to the execution of our dividend and capital
programs. In aggregate, as of April 23,
2019, we currently have 33% of our expected net-of-royalty
production hedged for Q2 2019. Over half of the Q2 2019 corporate
hedge position consists of two-way collars and three-way
structures, which allow participation in price increases, up to
contract ceilings.
We have currently hedged 69% of anticipated European natural gas
volumes for Q2 2019. We have also hedged 66% and 49% of our
anticipated full-year 2019 and 2020 European natural gas volumes,
respectively, at prices which are expected to provide for strong
project economics and free cash flows. At present 30% of our
Q2 2019, and 26% of our full year 2019 oil production is hedged.
For Q2 2019, 27% of our North American natural gas production is
priced away from AECO, due to diversification hedges to financially
sell at the SoCal Border and at Henry Hub for a portion of our
Alberta natural gas production,
and because 14% of our North American production is located in
Saskatchewan and Wyoming.
Sustainability
Sustainability is central to Vermilion's corporate strategy, as
illustrated by the constitution of our Sustainability
Committee by Vermilion's Board of Directors. We are pleased to note
continued external confirmation of our progress in this
realm. Our ISS Governance QualityScore increased from 3 to 2
(where a decile score of 1 indicates lowest governance risk), while
our Environment and Social QualityScores remain at 1 and 2
respectively. This reflects our ongoing dedication to strong
performance on ESG factors.
(signed "Anthony Marino")
Anthony Marino
President & Chief Executive Officer
April 25, 2019
(1)
|
Non-GAAP Financial
Measure. Please see the "Non-GAAP Financial Measures" section
of Management's Discussion and Analysis.
|
Guidance
On October 25, 2018, we released
our 2019 capital budget and related guidance. The 2019 total
budget and production guidance remain unchanged, although we have
deferred some activity to later in the year and reallocated capital
between business units, the breakdown of which can be found in our
corporate presentation located on our website.
The following table summarizes our guidance:
|
|
|
|
|
|
|
Date
|
|
Capital
Expenditures ($MM)
|
|
Production
(boe/d)
|
2019
Guidance
|
|
|
|
|
|
2019
Guidance
|
October 25,
2018
|
|
530
|
|
101,000 to
106,000
|
Annual General Meeting Webcast
As Vermilion's Annual General Shareholders Meeting is being held
today, April 25th, 2019 at
3:00 pm MDT in the Ballroom of the
Metropolitan Centre, 333 – 4th Avenue SW, Calgary, Alberta, there will not be a first
quarter conference call. In lieu of the conference call, a
presentation will be given by Anthony
Marino, President & Chief Executive Officer, after the
conclusion of formal business at approximately 3:15 pm MDT.
Shareholders who are not able to join the event in person may
access the meeting by webcast at
https://event.on24.com/wcc/r/1963826/3A2A3F4C79C314F3346A6F5C563BA36A. The
webcast link, along with the webcast slides, will be available on
Vermilion's website at
http://www.vermilionenergy.com/ir/eventspresentations.cfm under
Upcoming Events prior to the webcast.
About Vermilion
Vermilion is an international energy producer that seeks to
create value through the acquisition, exploration, development and
optimization of producing properties in North America, Europe and Australia. Our business model emphasizes
organic production growth augmented with value-adding acquisitions,
along with providing reliable and increasing dividends to
investors. Vermilion is targeting growth in production
primarily through the exploitation of light oil and liquids-rich
natural gas conventional resource plays in Canada and the
United States, the exploration and development of high
impact natural gas opportunities in the
Netherlands and Germany,
and through oil drilling and workover programs in France and Australia. Vermilion holds a 20% working
interest in the Corrib gas field in Ireland. Vermilion pays a monthly dividend of
Canadian $0.23 per share, which
provides a current yield of approximately 7.5%.
Vermilion's priorities are health and safety, the environment,
and profitability, in that order. Nothing is more important to
us than the safety of the public and those who work with us, and
the protection of our natural surroundings. We have been
recognized as a top decile performer amongst Canadian publicly
listed companies in governance practices, as a Climate Leadership
level (A-) performer by the CDP, and a Best Workplace in the Great
Place to Work® Institute's annual rankings in Canada, the
Netherlands and Germany. In
addition, Vermilion emphasizes strategic community investment in
each of our operating areas.
Employees and directors hold approximately 5% of our fully
diluted shares, are committed to consistently delivering superior
rewards for all stakeholders, and have delivered over 20 years of
market outperformance. Vermilion trades on the Toronto Stock
Exchange and the New York Stock Exchange under the symbol VET.
Disclaimer
Certain statements included or incorporated by reference in this
document may constitute forward looking statements or financial
outlooks under applicable securities legislation. Such forward
looking statements or information typically contain statements with
words such as "anticipate", "believe", "expect", "plan", "intend",
"estimate", "propose", or similar words suggesting future outcomes
or statements regarding an outlook. Forward looking statements or
information in this document may include, but are not limited to:
capital expenditures; business strategies and objectives;
operational and financial performance; estimated reserve quantities
and the discounted net present value of future net revenue from
such reserves; petroleum and natural gas sales; future production
levels (including the timing thereof) and rates of average annual
production growth; exploration and development plans; acquisition
and disposition plans and the timing thereof; operating and other
expenses, including the payment and amount of future dividends;
royalty and income tax rates; and the timing of regulatory
proceedings and approvals.
Such forward looking statements or information are based on a
number of assumptions, all or any of which may prove to be
incorrect. In addition to any other assumptions identified in this
document, assumptions have been made regarding, among other things:
the ability of Vermilion to obtain equipment, services and supplies
in a timely manner to carry out its activities in Canada and internationally; the ability of
Vermilion to market crude oil, natural gas liquids, and natural gas
successfully to current and new customers; the timing and costs of
pipeline and storage facility construction and expansion and the
ability to secure adequate product transportation; the timely
receipt of required regulatory approvals; the ability of Vermilion
to obtain financing on acceptable terms; foreign currency exchange
rates and interest rates; future crude oil, natural gas liquids,
and natural gas prices; and management's expectations relating to
the timing and results of exploration and development
activities.
Although Vermilion believes that the expectations reflected in
such forward looking statements or information are reasonable,
undue reliance should not be placed on forward looking statements
because Vermilion can give no assurance that such expectations will
prove to be correct. Financial outlooks are provided for the
purpose of understanding Vermilion's financial position and
business objectives, and the information may not be appropriate for
other purposes. Forward looking statements or information are
based on current expectations, estimates, and projections that
involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by
Vermilion and described in the forward looking statements or
information. These risks and uncertainties include, but are
not limited to: the ability of management to execute its business
plan; the risks of the oil and gas industry, both domestically and
internationally, such as operational risks in exploring for,
developing and producing crude oil, natural gas liquids, and
natural gas; risks and uncertainties involving geology of crude
oil, natural gas liquids, and natural gas deposits; risks inherent
in Vermilion's marketing operations, including credit risk; the
uncertainty of reserves estimates and reserves life and estimates
of resources and associated expenditures; the uncertainty of
estimates and projections relating to production and associated
expenditures; potential delays or changes in plans with respect to
exploration or development projects; Vermilion's ability to enter
into or renew leases on acceptable terms; fluctuations in crude
oil, natural gas liquids, and natural gas prices, foreign currency
exchange rates and interest rates; health, safety, and
environmental risks; uncertainties as to the availability and cost
of financing; the ability of Vermilion to add production and
reserves through exploration and development activities; the
possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; uncertainty in
amounts and timing of royalty payments; risks associated with
existing and potential future law suits and regulatory actions
against Vermilion; and other risks and uncertainties described
elsewhere in this document or in Vermilion's other filings with
Canadian securities regulatory authorities.
The forward looking statements or information contained in this
document are made as of the date hereof and Vermilion undertakes no
obligation to update publicly or revise any forward looking
statements or information, whether as a result of new information,
future events, or otherwise, unless required by applicable
securities laws.
This document contains metrics commonly used in the oil and gas
industry. These oil and gas metrics do not have any
standardized meaning or standard methods of calculation and
therefore may not be comparable to similar measures presented by
other companies where similar terminology is used and should
therefore not be used to make comparisons. 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.
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SOURCE Vermilion Energy Inc.