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…
CAPITAL MARKETS SUMMARY Market Summary Trading Price (August 23, 2017) 39.60 (TSX), 31.56 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding 121.4 million Average Daily Trading Volume (shares) 0.7 million Monthly Dividend…
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…
STRATEGY Self-funded growth-and-income Targeting free cash flow and dividend yield compression through per-share growth and risk reduction (low financial and Capital Markets Model operating leverage, consistent dividend history, and…
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 (87%) PEY (92%) 200 PXT (0%) VET (22%) ARX (67%) BIR (84%)…
E&D CAPITAL BUDGET Capital Expenditures by Country 2014 Actuals 2015 Actuals 2016 Actuals 2017 Budget* (MM) (MM) (MM) (MM) Canada 336 202 62 143 France 148 92 69 70 Netherlands 62 47 24 33 Germany 3 5 4 12 Australia 44 62 60 30…
FUND FLOWS FROM OPERATIONS / FREE CASH FLOW FFO FCF 1,000 500 80,000 800 400 70,000 FFO LESS E&D CAPEX* (MM) PRODUCTION (BOE/D) 300 60,000 600 FFO (MM) 200 50,000 400 100 40,000 200 0 30,000 0 -100 20,000…
RELATIVE DIVIDEND YIELD 18% 16% 14% 12% DIVIDEND YIELD 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 VET Average Group average yield including companies not currently paying a dividend…
WTI BREAK-EVENS 80 70 60 50 AVERAGE 40 US WTI 30 20 10 0 VET SPE PXX MEG BTE ATH ERF SU CPG KEL HSE CVE NVA TOG DEE ECA CNQ BNE CJ RRX NBZ RMP…
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 1H 2017 Netbacks by Country Canada France Netherlands Germany Ireland Australia United States Total Company (/BOE*) Sales 32.85 64.75 41.94 44.61 41.92 73.68 52.15 45.19 Royalties (3.57) (6.08) (0.65) (3.39) - - (14.71)…
RELATIVE NETBACKS 2017E FIELD NETBACKS (EXCLUDING HEDGING) 45 40 35 30 25 20 15 10 5 0 ATH BTE PMT PPY BIR SPE PEY BXE VET RMP PXX ECA CPG SU HSE CVE NVA KEL…
FULL-CYCLE PROFITABILITY 2016 FULL-CYCLE PROFIT US/BOE (EXCLUDING HEDGING) 10 5 0 US / BOE -5 -10 -15 -20 NFX BTE SPE OAS PE DVN SN APC COG CLR BIR PXD XEC AREX PDCE**…
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET France 8% 10% 40% ONLY CORPORATE DECLINE NATURAL VET Netherlands** 0% 19% DECLINE CORPORATE 30% EFFECTIVE Germany 10%…
DRILLING PROJECTS Well IP365 EUR Prod. Efficiency ATAX Recycle ATAX Payout Net Well 2017E Net Investment Cost (BOE/D) (MBOE) (IP365 /BOED) ROR Ratio (Years) Inventory* Wells Planned (CM) European Gas Netherlands E&D 8.5 1,260 1,350…
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* 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET ARX PONY JOY BNP BIR BNE PEY RRX PNE TVE BXE TOG WCP YGR NVA CPG LXE TET TOP RECYCLE RATIOS…
BALANCE SHEET / RISK MANAGMENT 31
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C1.8 BILLION NET DEBT TO FFO RATIO* AS AT JUNE 30, 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 2006 2007 2008…
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 BTE KOS OAS FRU EPE BXE CRZO VET BIR SPE JONE ECR…
CREDIT METRICS YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 Q2 2017 Credit Facility ( millions) 950 1,200 1,750 2,000 2,000 1,400 Undrawn 1 481 425 727 812 618 516 Liquidity 2 583 815 848 853 681 532 Subordinated Debt ( millions) 225 225…
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 42% - - Average Floor / Ceiling / Swap (/bbl) 66.06 / 76.93 / 70.79 -/-/- -/-/- Brent Percent of Production Hedged 38%…
QUARTERLY COMMODITY HEDGE POSITION OIL HEDGES NATURAL GAS HEDGES Q1 2017 70.27 67.61-73.62 73.45 67.27- European Gas North American Gas 79.95 Q1 2017 7.71 6.54-8.03 Q1 2017 3.09 2.31-3.01 70.00- 69.82- Q2 2017 75.00 79.45 Q2…
INTERNATIONAL DIVERSIFICATION 38
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 39
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…
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…
COMMODITY MIX PRODUCTION (2017)* 2P RESERVES (YE 2016)** ESTIMATED FFO CONTRIBUTION (2017)* United Australia Australia France France Australia States 12% United 9% 16% 22% 6% 1% States United 1% 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 51 WTI 49 Differential (7) Reduces Vermilions exposure to the Differential (17)…
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 continues to decline European Domestic Production 26.5 22.5 21.5 20.0 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 PARIS BASIN Assets characterized by large OOIP conventional fields with high working interest (OOIP in 5 largest fields 1.7 billion barrels of oil) FRANCE Workover, infill drilling and…
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 48 kbbl/d of oil and 0.75 Bcf/d of natural gas (170k boe/d) GAS AND OIL…
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 currently holds an 18.5% non-operated interest in the Corrib gas field, offshore Ireland On July 12, 2017 Vermilion and Canada Pension Plan Investment Board (CPPIB) announced a strategic partnership At…
VERMILION / CPPIB STRATEGIC PARTNERSHIP On July 12, 2017 Vermilion and Canada Pension Plan Investment Board (CPPIB) announced a strategic partnership CPPIB will acquire Shell Overseas Holdings Ltd. 45% interest in Corrib for 830…
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% 2% 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 70
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 VET…
CARDIUM DEVELOPMENT NET CARDIUM PROSPECT INVENTORY* 12,000 AS AT JUNE 30, 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 Key Compressor by production VET Gas Pipeline 29 net West…
WEST PEMBINA (LOWER MANNVILLE) CONDENSATE-RICH GAS LOWER MANNVILLE 2,000 ELLERSLIE 1,800 1,600 1,400 1,200 BOE/D 1,000 LOWER MANNVILLE ELLERSLIE Expected per well economics 800 DCET Well Cost ( million) 3.4 Peak IP30…
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 JUNE 30, 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 Vermilion Land Entered area through acquisition of Elkhorn Resources Inc. in VET Identified Locations April 2014, with further land added subsequent to acquisition Midale HZ Wells 2P…
SOUTHEAST SASKATCHEWAN DEVELOPMENT NET SE SASK PROSPECT INVENTORY* 4,000 AS AT JUNE 30, 2017 WELLS 3,000 DRILLED 28 BOE/D 2,000 REMAINING 2P UNRISKED LOCATIONS PROSPECTIVE 106 46 1,000 UNRISKED CONTINGENT 0…
UNITED STATES - WYOMING DEVELOPMENT TURNER SAND WELL PERFORMANCE Entered U.S. in September 2014 450 400 Unit Obligation well drilled with limited well control due to unit stipulation. 350 This step out test requirement has now…
UNITED STATES PRODUCTION 1,000 900 800 700 600 500 BOE/D 400 300 200 100 0 2014 2015 2016 2017E E&D CAPEX AS % OF OF ATAX NOI* 64% 535% 353% 168% Crude Oil & NGL Gas EARLY-STAGE LIGHT OIL GROWTH PROJECT * ATAX…
AUSTRALIAN ASSETS 83
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 88
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 95
VALUE CREATION 1994 2017 8,000 6,000 5,868 4,807 4,000 MILLIONS TOTAL VALUE 2,857 MARKET CREATION CAPITALIZATION(2) 2,000 DIVIDENDS PAID(2) 0 EQUITY ISSUED(1) -2,000 (1,796) 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% S&P TSX Oil & Gas E&P Total Return Index 55.9% -6.2% -3.6% -1.8% 7.3%…
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.…
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…
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