INTERNATIONALLY DIVERSIFIED SUSTAINABLE GROWTH AND INCOME MAY 2018
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 (April 25, 2018) 45.53 (TSX), 35.47 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding 122.8 million Average Daily Trading Volume (shares) 0.7 million Monthly Dividend *…
CORE OPERATING AREAS 2018E PRE-SPARTAN 2018E POST-SPARTAN ACQUISITION ACQUISITION (ANNUALIZED) PRODUCTION* PRODUCTION* NORTH AMERICA EUR EUR N.A. 35% N.A. 47% 46% 60% AUS AUS 5% 7% FFO* FFO* EUROPE N.A. EUR EUR 34% 41%…
VERMILION HISTORY Issued senior Acquired producing Launched as an Alberta-based oil & fields from Engie E&P unsecured notes in Canadian gas exploration and production company Converted to Deutschland GmbH High Yield market Issued…
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 ANNUAL PRODUCTION VS E&D CAPITAL EXPENDITURES RUN-RATE WITH SPARTAN 100 800 17% CAGR 700 80 600 MBOE / D 500 MM 60 400 40 6% CAGR 300 200 20 100 0 0 2003 2004 2005 2006…
PRODUCTION GROWTH PER SHARE DEBT-AND-DIVIDEND-ADJUSTED INDEXED PRODUCTION PER SHARE (BASE VALUE = 100)* COMPANY 250 (% OF PRODUCTION FROM N.A. GAS)** PXT (0%) TOU (84%) 200 VET (PRE-SPE) (24%) PEY (91%) BIR (79%) NVA (60%)…
E&D CAPITAL BUDGET Capital Expenditures by Country 2014 Actuals 2015 Actuals 2016 Actuals 2017 Actuals 2018 Budget* (MM) (MM) (MM) (MM) (MM) Canada 336 202 62 149 251 France 148 92 69 73 73 Netherlands 62 47 24 31 35 Germany 3 5 4…
FFO / FCF FFO FCF (CORPORATE ERA) 1,200 600 100,000 RUN-RATE WITH RUN-RATE WITH SPARTAN SPARTAN 1,000 500 FFO LESS E&D CAPEX* (MM) 80,000 PRODUCTION (BOE/D) 400 800 FFO (MM) 300 60,000 600 200 40,000 400…
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 2018 Netbacks by Country Total Spartan Canada France Netherlands Germany Ireland Australia United States (/BOE*) Company Energy**** Sales 32.19 81.70 53.31 56.86 58.79 86.94 72.94 51.13 60.49 Royalties (3.41) (10.60)…
RELATIVE NETBACKS 2018E FIELD NETBACKS (EXCLUDING HEDGING) 45 40 35 30 25 20 15 10 5 0 NVA CONA ECA VET PSK HSE DEE CVE SPE PXX IBR BXE CPG FRU SU ATH MEG ERF…
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET France 8% 10% 40% ONLY CORPORATE DECLINE NATURAL DECLINE VET Netherlands** 0% 19% CORPORATE 30% EFFECTIVE Germany 10%…
DRILLING PROJECTS DCET Economics at US55 WTI Investment Well Cost IP365 EUR Prod. Efficiency Net Well 2018E Net (BOE/D) (MBOE) (IP365 /BOED) ATAX Recycle ATAX Payout Inventory* Wells Planned (CM) ROR Ratio (Years) European Gas…
RECYCLE RATIOS Including FDC RECYCLE RATIO (F&D incl. FDC) 2017 F&D / FD&A Costs* (/BOE) 6.0x 2015-2017 F&D (E&D CAPEX) 10.57 3 Yr Avg 3.3x 5.0x 2012-2014 FD&A (Total CAPEX, 11.24 3 Yr Avg 2.7x including acquisitions) 4.0x…
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 BNE ARX BIR AAV PEY TOU SRX YGR CR WCP NVA RRX CPG VII BTE PONY SPE TVE KEL GXE ERF LXE TOP…
BALANCE SHEET / RISK MANAGEMENT 27
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C1.8 BILLION NET DEBT-TO-FFO RATIO* AS AT MARCH 31, 2018 4.0 0.4 B 3.0 0.4 B 2.0 1.0 B 1.0 Q4 2018E ANNUALIZED REVOLVING CREDIT FACILITY 0.0 US Senior Notes 2003 2004 2005…
RELATIVE LEVERAGE 2018E DEBT TO CASH FLOW 6.0x 5.0x 4.0x 3.0x CANADIAN AVERAGE US AVERAGE 2.0x 1.0x 0.0x MEG** ECR OAS ATH PXX BTE CQE PPR DEE KOS NVA FRU SPE CPE PE…
CREDIT METRICS YE 2013 YE 2014 YE 2015 YE 2016 YE 2017 Q1 2018 Credit Facility ( millions) 1,200 1,750 2,000 2,000 1,400 1,400 Undrawn 1 425 727 812 618 493 410 Liquidity 2 815 848 853 681 540 429 Subordinated Debt ( millions) 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 2018 Full Year 2019 Full Year 2020 WTI Percent of Production Hedged 10% 2% - Average Floor / Ceiling / Swap (/bbl) 65.80 / 73.57 / 69.73 - / - / 80.20 -/-/- Brent Percent of Production…
QUARTERLY COMMODITY HEDGE POSITION OIL HEDGES NATURAL GAS HEDGES (/bbl) (/mmbtu) Q1 2018 69.83 62.32-70.23 77.03 74.12 65.66- European Gas North American Gas Q1 2018 7.64 7.21-8.47 Q1 2018 2.65 2.67-3.06 69.17- 66.45- Q2 2018…
INTERNATIONAL DIVERSIFICATION 34
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 (2018E)* 2P RESERVES (YE 2017)** ESTIMATED FFO CONTRIBUTION (2018E)* France United Australia Australia 13% France States Germany Australia 8% 6% 22% 2% France United 4% 5% 16% States United States…
COMMODITY PRICE DIVERSIFICATION PORTFOLIO MIX STANDARD DEVIATION* 60% ANNUALIZED STANDARD 50% DEVIATION (%) 40% 30% 20% 10% 0% VET VET + TVE ERF OBE KEL BNE NVA ARX BNP WCP BTE TOU BIR CPG SPE RRX PEY SPE**…
GLOBAL CRUDE OIL PRICING ADVANTAGE Approximately 60% of Vermilions crude oil CRUDE OIL** production is priced with reference to Dated Brent* BRENT 77 Reduces Vermilions exposure to the WTI 71 transportation-related discount between…
EUROPEAN NATURAL GAS PRICING 40
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 influenced by a number of 10 LNG-BUILD…
EUROPEAN NATURAL GAS IMPACT OF US LNG US LNG liquefaction capacity expected to grow by 7.5 BCF/D (post-FID projects) through 2020, LNG Costing to Europe from United States US/mmbtu C/mmbtu 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 44
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%…
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 26% since 2013 3,500 38 net drilling locations identified in reserves and resources* 3,000 2P reserves have…
NEOCOMIAN DEVELOPMENT NEOCOMIAN GROWTH POTENTIAL 4 WELLS PER YEAR Part of Paris Basin light oil assets (Neocomian field) acquired 2,500 from ZaZa Energy France in December 2012 PRE-ACQUISITION VERMILION WORKOVERS / OPTIMIZATIONS /…
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 63% production growth since acquisition…
PARENTIS SUSTAINABILITY PARTNERSHIP Vermilion was the recipient of Frances Circular Economy Award for our project to supply geothermal heat from our oil operation to local greenhouses The award recognizes economically successful…
LA TESTE ECO-HABITATS Our operations near La Teste, France now support an eco-neighborhood of 450 homes that are heated the same way as the tomato greenhouses, using recycled geothermal energy from our oil operation 30-year…
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) 9.2 Expected IP30 Rate (boe/d) 1,690 12,000 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 14 high-rate extension and discovery gas wells since 2009, with an average success rate of approximately 70% over this…
INVESTING IN OUR NETHERLANDS COMMUNITIES MUNICIPALITY LINKAGE PROGRAM Vermilion launched the Municipality Linkage Program (MLP) in 2016 in the Netherlands, to support targeted and transparent connections between our capital…
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) Consistent fiscal…
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) 4.0 IP30 Rate (boe/d) 350 5,000 EUR per well (mboe) 780 ENGIE ACQUISITION After Tax ROR (%) 36% (CLOSED DECEMBER…
GERMANY OPERATING PERFORMANCE Operated oil fields acquired by Vermilion GERMANY OPERATED OIL ASSETS at the end of 2016 1,200 Vermilion has grown production by 30% ENGIE ACQUISITION (CLOSED since the acquisition closed 1,000 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…
IRELAND PRODUCTION 12,000 10,000 8,000 6,000 BOE/D 4,000 2,000 0 2015 2016 2017 2018E E&D CAPEX AS % OF FFO* NM 9% 1% 1% Gas EFFICIENT TRANSLATION OF REVENUE FUND FLOWS FROM OPERATIONS FREE CASH FLOW * 2018…
CENTRAL AND EASTERN EUROPE (CEE) EXTENSION OF EUROPEAN GROWTH STRATEGY Modest back-loaded capital commitments Prospective for both oil and gas Under-invested basin that can benefit from new technology HUNGARY Awarded South…
NORTH AMERICAN ASSETS 67
NORTH AMERICA CANADA Production and assets are focused in West Central Alberta and SE Saskatchewan In West Pembina, potential for three significant development projects sharing surface infrastructure Mannville liquids-rich gas:…
NORTH AMERICAN PRODUCTION 50,000 40,000 30,000 BOE/D 20,000 10,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E* E&D CAPEX AS % OF FFO* 21% 36% 67% 58% 31% 76% 247% 225% 165% 101%…
WEST PEMBINA AND FERRIER MANNVILLE NOTIKEWIN Industry Mannville Horizontals Key Oil Battery 330 net sections (211,800 acres) of Mannville rights, largely held by Key Gas Plant Key Compressor production VET Gas Pipeline 39 net West…
WEST PEMBINA (LOWER MANNVILLE ELLERSLIE) 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…
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) 3.7…
MANNVILLE DEVELOPMENT NET MANNVILLE PROSPECT INVENTORY* 20,000 AS AT MARCH 31, 2018 18,000 DRILLED TO DATE 16,000 71 14,000 12,000 BOE/D 10,000 8,000 UNRISKED BOOKED 2P NOTIKEWIN 6,000 CONTINGENT 65 142 4,000…
WEST PEMBINA CARDIUM Dominant 100,000+ 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…
SOUTHEAST SASKATCHEWAN Entered area through acquisition of Elkhorn Resources Inc. in April 2014, with further land added subsequent to acquisition 2P reserves totaling 23.9 mmboe Land base covers 93,200 net acres with over 90%…
ACQUISITION OF SPARTAN ENERGY CORP. TRANSACTION METRICS Purchase Price (MM) 1.40 billion 2P Reserves (92% oil and NGLs) 113.5 mmboe * EV/FFO Multiple (annualized) 4.7 x 2P Reserves Acquisition Cost 12.33 per boe FFO per Share…
EXPANSION OF SE SASKATCHEWAN POSITION SPARTAN ACQUISITION Approximately 480,000 net acres (750 net sections) 457,000 net acres, 714 net sections in Sask 20,000 net acres, 17 net sections in AB 3,000 net acres, 4 net sections in…
SOUTHEAST SASKATCHEWAN DEVELOPMENT NET SE SASK PROSPECT INVENTORY* 18,000 AS AT MARCH 31, 2018 (PRE-SPARTAN) 16,000 14,000 WELLS DRILLED 12,000 38 BOE/D 10,000 8,000 UNRISKED PROSPECTIVE REMAINING 2P 6,000 46…
UNITED STATES WYOMING DEVELOPMENT TURNER SAND WELL PERFORMANCE 450 Entered U.S. in September 2014 400 350 Large, operated contiguous land position (83,500 net acres at 300 100% working interest) in the Powder River Basin with…
ATAX IRR 20% 60% 80% 0% 40% 100% Woodenhouse ** Ellerslie ** Frobisher/Alida Montney Eagle Ford Woodford Marcellus Eagle Ford Ellerslie Mannville Woodford Alida Lloydminster Frobisher/ Eagle Ford Wasatch…
AUSTRALIAN ASSETS 81
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 30,000 Total Acquisition Date Reserves 26.7 Production to YE 2017 32.7 25,000 Reserves at…
AUSTRALIA ACTIVITY Oil is trapped above and between the existing wells, creating opportunity to drill to a higher structural elevation and between existing wells to capture attic, flank and undrained oil 12 additional identified…
GOVERNANCE / CORPORATE CITIZENSHIP 86
GOVERNANCE Vermilions external awards and recognition provide important benchmarks for our strong performance The Globe and Mail, Report on Business, Board Games In 2017, Vermilion ranked 4th 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 Carbon Disclosure Project (CDP) Vermilion was named to the CDP (formerly Carbon Disclosure Project) Climate Leadership level (A-) in 2017. Vermilion is the only Canadian energy company and one of only two North…
CDP (CARBON DISCLOSURE PROJECT) CDP (formerly Carbon Disclosure Project) is an international environmental organization that collects information about carbon emissions and energy use Vermilion was named to the CDP Climate…
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…
GLOBAL RESPONDER PROGRAM The Netherlands Rescue and Help on Water In 2017, Vermilion established our Global Emergency Responder Program to support critical equipment and training needs for emergency medevac and similar services in…
CORPORATE CULTURE GREAT PLACE TO WORK INSTITUTES ANNUAL RANKING Great Place to Work Institute evaluates companies by analyzing results of a confidential Trust Index survey provided to employees and evaluating the workplace through a…
RECORD OF VALUE CREATION 95
VALUE CREATION 1994 2018 8,000 5,590 6,808 6,000 4,000 MARKET CAPITALIZATION(2) MILLIONS TOTAL VALUE CREATION 2,000 3,037 0 DIVIDENDS EQUITY PAID(2) ISSUED(1) (2,000) (1,819) MORE THAN 20-YEAR RECORD OF…
RETURN ON CAPITAL EMPLOYED 10 YEAR TOTAL RETURN VERSUS 10 YEAR AVERAGE ROCE 25% 20% IMO 15% FRU AVERAGE ROCE (%) PEY VET 10% SU ARX BTE CNQ 5% BIR CPG ECA AAV 0% ERF PGF NVA -5% CR OBE SPE -10% POU -15%…
ESG AND SHAREHOLDER RETURNS Sustainability performance is integral to our business and is positively correlated to our strong shareholder returns 5-Year Total Return vs. CDP Score 5-Year Total Return vs. RobecoSAM Score 5-Year Total…
RELATIVE MARKET PERFORMANCE CUMULATIVE TOTAL RETURN SINCE BEGINNING OF GROWTH AND INCOME ERA 1,600% 1,400% 1,200% 1,000% 800% 600% 400% 200% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016…
ANALYST COVERAGE FIRM ANALYST PHONE EMAIL AltaCorp Capital Patrick J. ORourke, CFA 403-539-8615 porourkealtacorpcapital.com BMO Nesbitt Burns Ray Kwan, P.Eng. 403-515-1501 ray.kwanbmo.com Canaccord Genuity Corp. Dennis Fong 403-508-3884…
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