VERMILIONS KEY ATTRIBUTES Global independent E&P with leading positions in high netback businesses in Europe, North America and Australia Self-funded growth-and-income model supported by high margins, low decline rates and strong…
VERMILION HISTORY Issued senior Launched as an Alberta-based oil & unsecured notes in Canadian gas exploration and production company Converted to High Yield market Issued senior IPO in April 1994 at 0.30 per share Vermilion…
CAPITAL MARKETS SUMMARY Market Summary Trading Price (April 24, 2017) 48.12 (TSX), 35.61 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding 120.5 million Average Daily Trading Volume (shares) 0.6 million Monthly Dividend…
STRATEGY Self-funded growth-and-income Targeting yield contraction through per-share growth and risk reduction (low financial and operating leverage, consistent Capital Markets Model dividend history, and diversification) Cost…
PRODUCTION GROWTH AND CAPEX Vermilion is self-funded for E&D CAPEX and cash dividends Y/Y Y/Y E&D Capital 2017 GUIDANCE 69,000 TO 70,000 BOE/D Production Year Production PPS CAPEX Intensity (BOE/D) 80,000 Growth* Growth* (MM)…
CONSISTENT PRODUCTION GROWTH PER SHARE DEBT-AND-DIVIDEND-ADJUSTED INDEXED PRODUCTION PER SHARE (BASE VALUE = 100)* COMPANY 250 (% OF PRODUCTION FROM N.A. GAS)** TOU (88%) PEY (93%) 200 PXT (0%) VET (24%) ARX (66%) BIR (89%)…
E&D CAPITAL BUDGET Capital Expenditures by Country 2014 Actuals 2015 Actuals 2016 Actuals 2017 Budget* (MM) (MM) (MM) (MM) Canada 336 202 62 128 France 148 92 69 67 Netherlands 62 47 24 32 Germany 3 5 4 15 Australia 44 62 60 30…
FUND FLOWS FROM OPERATIONS (FFO) FFO FFO Y/Y Year 1,000 (MM) per Share Growth 2011 474 5.22 33% 800 2012 558 5.69 18% 600 2013 668 6.61 20% FFO MM 2014 805 7.63 21% 400 2015 516 4.71 (36%) 200 2016 511 4.41 (1%) 0…
RELATIVE DIVIDEND YIELD 18% 16% 14% 12% DIVIDEND YIELD 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 VET Average Group average yield including companies not currently paying a dividend HIGHER…
RELATIVE SUSTAINABILITY 200% 175% 150% 2-YEAR CAPEX / CF (2017-2018) 125% 100% 75% 50% 25% 0% PEY PPY BIR PMT ECA BXE TOU PXT VET NVA DEE KEL TOG ERF CPG PNE ARX RRX…
ELEMENTS OF SUSTAINABLE MODEL 19
ELEMENTS OF SUSTAINABLE MODEL SELF-FUNDED GROWTH-AND-INCOME MODEL 1. High Margins 2. Low Base Production Decline Rates 3. Strong Capital Efficiencies Profitability on a per boe basis Required production replacement before growth…
NETBACKS Q1 2017 Netbacks by Country Canada France Netherlands Germany Ireland Australia United States Total Company (/BOE*) Sales 33.63 67.85 44.19 47.30 45.92 77.11 55.99 46.94 Royalties (3.79) (6.06) (0.69) (3.60) - - (15.79)…
RELATIVE NETBACKS 2016 OPERATING NETBACK EXCL. HEDGING* 2016 AFTER-TAX CASH NETBACK EXCL. HEDGING* 25 20 20 15 /BOE /BOE 15 10 10 5 5 0 0 -5 MEG BTE PEY BIR VET PXT NVA CPG TOG TOU ERF…
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET ONLY CORPORATE France 11% 11% 40% DECLINE NATURAL DECLINE VET Netherlands** 0% 19% CORPORATE EFFECTIVE 30% DECLINE…
MAJOR DRILLING PROJECTS Investment Well Cost IP365 EUR Prod. Efficiency ATAX Recycle ATAX Payout Net Well 2017E Net (CM) (BOE/D) (MBOE) (IP365 /BOED) ROR Ratio (Years) Inventory* Wells Planned European Gas Netherlands E&D 8.5 1,260…
RECYCLE RATIOS Including FDC RECYCLE RATIO (F&D incl. FDC) 2016 F&D / FD&A Costs* (/BOE) 6.0x F&D (E&D CAPEX) 5.57 5.0x FD&A (Total CAPEX, 6.62 including acquisitions) 4.0x F&D Operating Recycle Ratio 4.9x 3.0x 2.0x 13.1…
RELATIVE PDP RECYCLE RATIOS 3-YEAR PROVED DEVELOPED PRODUCING (PDP) FD&A RECYCLE RATIOS* 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET BIR RRX ERF PEY BNP RMP BXE DEE PPY YGR ARX PNE TVE NVA TET VII POU KEL TOP RECYCLE…
BALANCE SHEET 30
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C1.8 BILLION NET DEBT TO FFO RATIO* PRO-FORMA ESTIMATE AS AT MARCH 31, 2017 4.0 0.5 B 3.0 0.4 B 2.0 0.9 B 1.0 REVOLVING CREDIT FACILITY 0.0 2017E 2018E 2003 2004 2005…
RELATIVE LEVERAGE 2017E DEBT TO CASH FLOW 10.0x 9.0x 8.0x 7.0x 6.0x 5.0x US AVERAGE 4.0x 3.0x CANADIAN AVERAGE 2.0x 1.0x 0.0x FRU BTE KOS OAS CRZO BIR FANG SPE RSPP VET JONE…
CREDIT METRICS YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 Q1 2017 Credit Facility ( millions) 950 1,200 1,750 2,000 2,000 1,400 Undrawn 1 481 425 727 812 618 521 Liquidity 2 583 815 848 853 681 522 Subordinated Debt ( millions) 225 225…
RISK MANAGEMENT 34
RISK MANAGEMENT Vermilion employs a systematic process to identify and manage risk across our business Financial Risk Market Risk Operational Risk Diversification of: Hedging program reduces risk associated with Integrated,…
ANNUAL COMMODITY HEDGE POSITION Full Year 2017 Full Year 2018 Full Year 2019 WTI Percent of Production Hedged 36% - - Average Floor / Ceiling / Swap (/bbl) 71.21 / 79.91 / 71.94 -/-/- -/-/- Brent Percent of Production Hedged 28%…
QUARTERLY COMMODITY HEDGE POSITION OIL HEDGES NATURAL GAS HEDGES Q1 2017 71.53 European Gas North American Gas 68.34-74.43 74.76 68.47-81.38 74.89 Q1 2017 7.97 6.77-8.32 Q1 2017 3.10 2.31-3.01 70.00- Q2 2017 75.00 70.76-82.38…
INTERNATIONAL DIVERSIFICATION 38
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 39
VERMILIONS INTERNATIONAL ADVANTAGE Focused in three core areas (Europe, North America and Australia) with stable, well-developed fiscal and regulatory regimes Global asset portfolio provides commodity diversification and premium…
ORGANIZATIONAL MODEL Vermilion uses a decentralized business unit structure to manage our diverse global portfolio Country-based business units are grouped into three regions: Vermilion Energy Inc. Europe, North America and…
COMMODITY MIX PRODUCTION (2017)* 2P RESERVES (YE 2016)** ESTIMATED FFO CONTRIBUTION (2017)* United Australia Australia France France Australia States 12% United 10% 17% 22% 6% 1% States United 2% Germany France States Germany…
COMMODITY PRICE DIVERSIFICATION Commodity Exposures North American European WTI Brent PORTFOLIO MIX STANDARD DEVIATION* Natural Gas Natural Gas Crude Oil Crude Oil 100% Vermilion STANDARD DEVIATION 80% ANNUALIZED North…
GLOBAL CRUDE OIL PRICING ADVANTAGE Approximately 65% of Vermilions crude oil CRUDE OIL** production is priced with reference to Dated Brent* BRENT 52 WTI 50 Reduces Vermilions exposure to the Differential (3)…
EUROPEAN NATURAL GAS PRICING 45
EUROPEAN NATURAL GAS PRICING - SUMMARY Futures markets continue to reflect a significant premium NATURAL GAS* for European natural gas versus AECO and Henry Hub 12 Realized forward prices are expected to be influenced 10 by…
EUROPEAN NATURAL GAS IMPACT OF US LNG US LNG liquefaction capacity expected to grow by 7.5 BCF/D (post-FID projects) LNG Costing to Europe from United States US/mmbtu C/mmbtu through 2020, potentially increasing US LNG shipments to…
EUROPEAN NATURAL GAS DOMESTIC SUPPLY / DEMAND EUROPEAN SUPPLY European Supply & Demand (Bcf/d) 2012 2015 2017E 2020E European Domestic Production 26.5 22.5 21.5 20.0 European domestic production continues to decline Russia 9.9 13.8…
EUROPEAN ASSETS 49
EUROPEAN CORE AREA NETHERLANDS GERMANY 2 onshore gas producer Establishing production operations and IRELAND Large and growing inventory of drilling opportunities substantial exploratory land position in Corrib field constitutes 95%…
EUROPEAN PRODUCTION 35,000 30,000 25,000 20,000 BOE/D 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016 2017E E&D CAPEX AS % OF FFO** n/a…
FRANCE Entered France in 1997 PARIS Assets characterized by large OOIP conventional fields with high PARIS BASIN working interest (OOIP in 5 largest fields 1.7 billion barrels of oil) Workover, infill drilling and secondary…
CHAMPOTRAN DEVELOPMENT 18 wells drilled from 2013 to 2016 at 100% success rate CHAMPOTRAN PRODUCTION Reduced DCET costs by 23% since 2013 6,000 36 net drilling locations identified in reserves and resources* 5,000 Successful…
NEOCOMIAN DEVELOPMENT NEOCOMIAN GROWTH POTENTIAL 4 WELLS PER YEAR Part of Paris Basin light oil assets (Neocomian field) acquired 2,500 VERMILION 4 WELLS PER YEAR DRILLING from ZaZa Energy France in December 2012 2,000…
CAZAUX FIELD OPTIMIZATION Cazaux field acquired by Vermilion in 2006 One of Frances largest conventional fields (400MMbbl OOIP); CAZAUX PRODUCTION located in the Aquitaine Basin 2,500 70% production growth since acquisition…
NETHERLANDS Entered Netherlands in 2004 HARLINGEN 2 onshore gas producer High impact natural gas drilling and development Strong gas price, favorable fiscal regime, and low OPEX enhance netbacks AMSTERDAM NETHERLANDS Seven…
NETHERLANDS PRODUCTION NETHERLANDS - Expected per well risked economics (based on recent drilling) DCET Well Cost ( million) 8.5 Expected IP30 Rate (boe/d) 1,690 10,000 Expected EUR per well (mboe) 1,350 After Tax ROR (%) 100%…
NETHERLANDS ACTIVITY Vermilion has tripled its undeveloped land base since the beginning of 2012 We have drilled 12 high-rate extension and discovery gas wells since 2009, with an average success rate of 67% over this period 66…
GERMANY COUNTRY OVERVIEW Largest gas market in Europe, with a long history of oil and natural gas development Country-wide production is approximately 44 kbbl/d of oil and 0.7 Bcf/d of natural gas (160 kboe/d) GAS AND OIL PRODUCING…
GERMAN LAND POSITION Initial Non-Operated DUMMERSEE-UCHTE ACQUISITION (2014) Acquisition First entry into Germany, non-operated interest Farm-In Agreement 2016 production 2,400 boe/d Awarded Licenses Member of 4 party consortium…
GERMANY PRODUCTION GERMANY Burgmoor Z3 Sidetrack (Non-op gas assets, reflects 25% W.I.) DCET Well Cost ( million) 3.8 IP30 Rate (boe/d) 350 5,000 EUR per well (mboe) 780 ENGIE ACQUISITION After Tax ROR (%) 34% (CLOSED DECEMBER…
IRELAND OVERVIEW Vermilion holds 18.5% non-operated interest in the Corrib gas field, offshore Ireland Corrib field constitutes 95% of Irelands gas production ASSET CHARACTERISTICS Pricing indexed to National Balancing Point (NBP)…
IRELAND PRODUCTION 12,000 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2015 2016 2017E E&D CAPEX AS % OF FFO* NM 9% 1% Gas EFFICIENT TRANSLATION OF REVENUE FUND FLOWS FROM OPERATIONS FREE CASH FLOW * 2017E: Company…
CORRIB PERFORMANCE 400 Production volumes reach Planned downtime, or constrained production, has full plant capacity occurred for plant maintenance, well testing, pressure 350 build-ups and partner marketing decisions First gas…
CENTRAL AND EASTERN EUROPE (CEE) EXTENSION OF EUROPEAN GROWTH STRATEGY Modest back-loaded capital commitments BRATISLAVA Prospective for both oil and gas Under-invested basin that can benefit from new technology CROATIA Awarded 4…
NORTH AMERICAN ASSETS 69
CANADA Production and assets focused in West Pembina near Drayton Valley and Northgate in SE Saskatchewan In West Pembina, potential for three significant development projects sharing the same surface infrastructure Cardium light…
WEST PEMBINA CARDIUM Dominant 90,000 net acre land position in West Pembina Cardium resource play Pembina is the largest conventional oil field in Western Canada Control key infrastructure: 15,000 bbl/d oil battery and two owned and…
CARDIUM DEVELOPMENT NET CARDIUM PROSPECT INVENTORY* 12,000 AS AT MARCH 31, 2017 10,000 8,000 WELLS DRILLED 6,000 BOE/D 207 4,000 UNRISKED CONTINGENT REMAINING 2P 2,000 DEVELOPMENT LOCATIONS PENDING 70 0 252 2009 2010…
WEST PEMBINA AND FERRIER MANNVILLE NOTIKEWIN Industry Mannville Horizontals Key Oil Battery 340 net sections (220,000 acres) of Mannville rights, largely held Key Gas Plant by production Key Compressor VET Gas Pipeline 29 net West…
WEST PEMBINA (LOWER MANNVILLE) CONDENSATE-RICH GAS LOWER MANNVILLE 1,800 ELLERSLIE 1,600 1,400 1,200 1,000 BOE/D LOWER MANNVILLE ELLERSLIE Expected per well economics 800 DCET Well Cost ( million) 3.5 600 IP30 Rate…
FERRIER (UPPER MANNVILLE) LIQUIDS-RICH GAS NOTIKEWIN FALHER 1,800 2,500 UPPER MANNVILLE 1,600 2,000 1,400 1,200 1,500 BOE/D UPPER MANNVILLE FERRIER Expected per well economics 1,000 DCET Well Cost ( million) 3.6…
MANNVILLE DEVELOPMENT NET MANNVILLE PROSPECT INVENTORY* 16,000 AS AT MARCH 31, 2017 14,000 DRILLED TO DATE 12,000 50 10,000 BOE/D 8,000 6,000 BOOKED 2P NOTIKEWIN UNRISKED CONTINGENT 51 143 4,000 DEVELOPMENT PENDING…
SOUTHEAST SASKATCHEWAN Legend Midale Fairway Entered area through acquisition of Elkhorn Resources Inc. in Vermilion Land VET Identified Locations April 2014, with further land added subsequent to acquisition Midale HZ Wells…
SOUTHEAST SASKATCHEWAN DEVELOPMENT NET SE SASK PROSPECT INVENTORY* 4,000 AS AT MARCH 31, 2017 WELLS 3,000 DRILLED 27 BOE/D 2,000 REMAINING 2P UNRISKED LOCATIONS PROSPECTIVE 107 46 1,000 UNRISKED CONTINGENT 0…
UNITED STATES - WYOMING DEVELOPMENT TURNER SAND WELL PERFORMANCE Entered U.S. in September 2014 400 350 300 Large, operated contiguous land position (81,500 net 250 acres at 100% working interest) in the Powder River BOPD…
UNITED STATES PRODUCTION 1,200 1,000 800 600 BOE/D 400 200 0 2014 2015 2016 2017E E&D CAPEX AS % OF OF ATAX NOI* 64% 535% 353% 140% Crude Oil & NGL Gas EARLY-STAGE LIGHT OIL GROWTH PROJECT * ATAX NOI is defined…
AUSTRALIAN ASSETS 82
AUSTRALIA Entered Australia in 2005 Offshore oil field 80 km N.W. of Australia (55 m water depth) Horizontal well development with 18 wellbores and five lateral sidetracks Wells 600m below sea bed with 1,500 - 3,700 m measured…
AUSTRALIA PRODUCTION AUSTRALIA - per well economics* based on performance of 2013-2016 drilling programs DCET Well Cost ( million) 25.6 IP30 Rate (boe/d) 4,400 EUR per well (mboe) 1,000 12,000 After Tax ROR (%) 82% After Tax Payout…
AUSTRALIA OPERATING PERFORMANCE VALUE CREATION (2P RESERVES)* MMBOE Acquisition Date Reserves Reserves at initial acquisition (2005) 26.7 16,000 Total Acquisition Date Reserves 26.7 14,000 Production to YE 2016 30.5 Reserves at YE…
AUSTRALIA ACTIVITY New wells are sidetracks from existing wellbores Oil is trapped above the existing wells, creating opportunity to sidetrack to a higher structural elevation to capture attic and flank oil 12 additional identified…
GOVERNANCE / CORPORATE CITIZENSHIP 87
GOVERNANCE Vermilions external awards and recognition provide important benchmarks for our strong performance The Globe and Mail, Report on Business, Board Games In 2016, Vermilion ranked 3rd within the oil and gas sector, and among…
LONG-TERM COMPENSATION APPROACH Pay-for-performance is the foundation of Vermilions approach to compensation, both at the executive level and company-wide All employees participate in Vermilions equity-based Long-Term Incentive Plan…
HEALTH, SAFETY AND ENVIRONMENT (HSE) PHILOSOPHY Safety, environmental protection, and regulatory compliance go hand-in-hand with VERMILIONS PRIORITIES maximizing profitability WE CONDUCT ALL ACTIVITIES TO: These priorities should…
SUSTAINABILITY Vermilion is recognized as a responsible oil and gas producer in our industry Carbon Disclosure Project (CDP) Vermilion was named to the CDP Climate A List, one of 193 companies globally, and the only North American…
STRATEGIC COMMUNITY INVESTMENT Vermilion is committed to giving back to Canada France Netherlands Australia the communities in which we operate We assess the critical needs in each community, and determine where our financial…
CORPORATE CULTURE GREAT PLACE TO WORK INSTITUTES ANNUAL RANKING Great Place to Work Institute evaluates companies by analyzing results of a Trust Index survey provided to employees and evaluating the workplace through a Culture…
RECORD OF VALUE CREATION 94
VALUE CREATION 1994 2017 8,000 6,909 5,937 6,000 MILLIONS 4,000 TOTAL VALUE 2,723 MARKET CREATION CAPITALIZATION(2) 2,000 DIVIDENDS PAID(2) 0 EQUITY ISSUED(1) -2,000 (1,750) MORE THAN 20-YEAR RECORD OF STRONG…
RETURN ON CAPITAL EMPLOYED 12 10 8 6 4 ROCE (%) 2 0 -2 -4 -6 -8 3 YEAR AVERAGE 5 YEAR AVERAGE 10 YEAR AVERAGE Vermilion Peer Average STRONG CAPITAL EFFICIENCY IN A CAPITAL INTENSIVE BUSINESS * Source: Canoils. ROCE…
RELATIVE MARKET PERFORMANCE Since Inception Indices 1 Year 3 Year 5 Year 10 Year 15 Year (23 Years) S&P TSX Oil & Gas E&P Index 52.5% -9.1% -6.7% -5.1% 4.4% 4.9% ENERGY INDICES S&P TSX Oil & Gas E&P Total Return Index 55.9%…
SUMMARY Long-term, low-risk dividend growth model supported by High margins Diversified product mix Low base decline rate Diversified and well defined project slate Low financial leverage Focused on consistent growth in…
ANALYST COVERAGE FIRM ANALYST PHONE EMAIL AltaCorp Capital Patrick J. ORourke, CFA 403-539-8615 porourkealtacorpcapital.com Barclays Capital Grant Hofer, CFA 403-592-7460 grant.hoferbarclays.com BMO Nesbitt Burns Ray Kwan, P.Eng.…
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