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Vermilion Energy Inc. Announces 2014 Year-End Summary Reserves and Resource Information

February 27, 2015

CALGARY, Feb. 27, 2015 /CNW/ - Vermilion Energy Inc. ("Vermilion", the "Company", "We" or "Our") (TSX, NYSE: VET) is pleased to announce summary 2014 year-end reserves and resource information.  The estimates of reserves and resources and other oil and gas information contained in this news release has been estimated by GLJ Petroleum Consultants Ltd. ("GLJ") and prepared in accordance with National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH"). For additional information about Vermilion, including Vermilion's statement of reserves data and other information in Form 51-101F1, report on reserves data by independent qualified reserves evaluator or auditor in Form 51-101F2 and report of management and directors on oil and gas disclosure in Form 51-101F3, please review the Company's Annual Information Form for the year ended December 31, 2014, to be filed on March 6, 2015 and available on SEDAR at www.sedar.com and on the SEC's EDGAR system at www.sec.gov.

HIGHLIGHTS

  • Total proved ("1P") reserves increased 17% to 151.5 mmboe(1), while total proved plus probable ("2P") reserves increased 24% to 246.9 mmboe(1). This represents year-over-year 1P and 2P per share reserves growth of 12% and 18%, respectively.

  • Finding and Development ("F&D") and Finding, Development and Acquisition ("FD&A") costs, including Future Development Capital ("FDC") for 2014 on a 2P basis were $17.37/boe and $22.38/boe, resulting in Recycle Ratios of 3.2 and 2.5, respectively.  Similarly, our three-year F&D and FD&A, including FDC, on a 2P basis were $19.26/boe and $20.83/boe, respectively.

  • In 2014, we added 66.5 mmboe of 2P reserves with 37.7 mmboe (57%) of additions coming from exploration and development ("E&D") activities and 28.8 mmboe (43%) of additions through acquisitions.  This represents production replacement at the 2P level of 208% through E&D related activities and 367% including acquisitions.  At a 1P level, we replaced 125% and 225% of 2014 production, respectively.

  • Our independent GLJ 2014 Resource Assessment(1) indicates low, best, and high estimates for contingent resources of 103.1(1) mmboe, 293.4(1) mmboe, and 408.0(1) mmboe, an increase of 39%, 26% and 16%, respectively, compared to our GLJ 2013 Resource Assessment(2).  Prospective resources were assessed at low, best and high estimates of 308.3(1) mmboe, 601.6(1) mmboe, and 900.3(1) mmboe, an increase of 419%, 21%, and 10%, respectively versus our GLJ 2013 Resource Assessment.  Importantly, the GLJ 2014 Resource Assessment reflects a significant increase in even the most conservative "Low Estimate" for both contingent and prospective resources in Canada, as well as incremental increases across our European asset base.

  • At year-end 2014, 2P reserves were comprised of 30% Brent-based light crude, 18% Canadian-based light crude, 10% natural gas liquids, 20% European natural gas and 22% Canadian natural gas.

  • Reserve life index for 2P reserves increased to 13.6 years for year-end 2014 reserves based on annualized Q4 2014 production, compared to 13.3 years at year-end 2013. Year-end 2014 reserve life index for 1P reserves was 8.4 years, as compared to 8.6 years at year-end 2013.

  • Following on our successful 2013 program, our 2014 drilling activity resulted in an additional 22 (16.8 net) undeveloped wells booked at the 2P level in the Mannville liquids-rich gas play in Alberta, with average reserves of approximately 790 mboe/well.

  • The successful drilling of Deblinghausen Z7 well in Germany added 1.3 mmboe of 2P reserves for Vermilion's 25% working interest.

  • Our Diever-2 discovery in the Netherlands added 1.3 mmboe of 2P reserves for Vermilion's 33.1% working interest (projected average interest over well life).

(1)      Vermilion retained GLJ to conduct an independent resource evaluation to assess contingent and prospective resources across all of the Company's key operating regions with an effective date of December 31, 2014 (the "GLJ 2014 Resource Assessment")
(2)      Vermilion retained GLJ to conduct an independent resource evaluation to assess contingent and prospective resources across all of the Company's key operating regions with an effective date of December 31, 2013 (the "GLJ 2013 Resource Assessment")
   

DISCLAIMER

Certain statements included or incorporated by reference in this news release 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 news release may include, but are not limited to:

  • capital expenditures;
  • business strategies and objectives;
  • estimated reserve quantities and the discounted present value of future net cash flows from such reserves;
  • petroleum and natural gas sales;
  • future production levels (including the timing thereof) and rates of average annual production growth, estimated contingent resources and prospective resources;
  • exploration and development plans;
  • acquisition and disposition plans and the timing thereof;
  • operating and other expenses, including the payment of future dividends;
  • royalty and income tax rates;
  • the timing of regulatory proceedings and approvals;
  • the timing of first commercial gas from the Corrib field; and
  • the estimate of Vermilion's share of the expected natural gas production from the Corrib field.

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 the Company to obtain equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally;
  • the ability of the Company 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 the Company 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 development activities.

Although the Company 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 the Company can give no assurance that such expectations will prove to be correct.  Financial outlooks are provided for the purpose of understanding the Company's financial strength 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 the Company 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 the Company'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, costs and expenses;
  • potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
  • the Company'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 the Company to add production and reserves through exploration and development 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 the Company; and
  • other risks and uncertainties described elsewhere in the annual information form of the Company for the year ended December 31, 2014 or in the Company's other filings with Canadian securities authorities.

The forward-looking statements or information contained in this news release are made as of the date hereof and the Company 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.

RESERVES, FUTURE NET REVENUE AND OTHER OIL AND GAS INFORMATION

The following is a summary of the oil and natural gas reserves and the value of future net revenue of Vermilion as evaluated by GLJ, independent petroleum engineering consultants in Calgary in a report dated February 6, 2015 with an effective date of December 31, 2014 (the "GLJ 2014 Reserves Evaluation").  The GLJ 2014 Reserves Evaluation was prepared in accordance with National Instrument 51-101 and COGEH.

Reserves and other oil and gas information in this news release is effective December 31, 2014 unless otherwise stated.

All evaluations of future net production revenue set forth in the tables below are stated after overriding and lessor royalties, Crown royalties, freehold royalties, mineral taxes, direct lifting costs, normal allocated overhead and future capital investments, including abandonment and reclamation obligations.  Future net production revenues estimated by the GLJ 2014 Reserves Evaluation do not represent the fair market value of the reserves.  Other assumptions relating to the costs, prices for future production and other matters are included in the GLJ 2014 Reserve Evaluation.  There is no assurance that the future price and cost assumptions used in the GLJ 2014 Reserves Evaluation will prove accurate and variances could be material.

Reserves for Australia, Canada, France, Germany, Ireland, the Netherlands and the United States are established using deterministic methodology.  Total proved reserves are established at the 90 percent probability (P90) level.  There is a 90 percent probability that the actual reserves recovered will be equal to or greater than the P90 reserves.  Total proved plus probable reserves are established at the 50 percent probability (P50) level.  There is a 50 percent probability that the actual reserves recovered will be equal to or greater than the P50 reserves.

Estimates of reserves have been made assuming that development of each property, in respect of which estimates have been made, will occur without regard to the availability of funding required for that development.

With respect to finding and development costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.

Pricing used in the forecast price estimates is set forth in the table below and referenced in the notes to subsequent tables.

Table 1: Forecast Prices used in Estimates (1)

                     
          Natural Gas Natural Gas Natural Gas Inflation Exchange Exchange
  Light and Medium Crude Oil Crude Oil Canada Europe Liquids Rate Rate Rate
  WTI Edmonton Cromer Brent Blend   National Balancing        
  Cushing Par Price Medium FOB AECO Point FOB      
  Oklahoma 40˚ API 29.3˚ API North Sea Gas Price (UK) Field Gate Percent    
Year ($US/bbl) ($Cdn/bbl) ($Cdn/bbl) ($US/bbl) ($Cdn/MMBtu) ($US/MMBtu) ($Cdn/bbl) Per Year ($US/$Cdn) (EUR/$Cdn)
2014 93.06 94.77 89.86 99.89 4.52 8.26 72.59 2.0 0.905 1.467
Forecast                    
2015 62.50 64.71 61.47 67.50 3.31 7.50 38.13 2.0 0.850 1.450
2016 75.00 80.00 76.00 82.50 3.77 8.25 47.68 2.0 0.875 1.450
2017 80.00 85.71 81.43 87.50 4.02 8.75 52.15 2.0 0.875 1.450
2018 85.00 91.43 86.86 90.00 4.27 9.00 55.62 2.0 0.875 1.450
2019 90.00 97.14 92.29 95.00 4.53 9.50 59.10 2.0 0.875 1.450
Thereafter 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 0.875 1.450
 
Note:
(1)  The pricing assumptions used in the GLJ Report  with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating
and capital costs are set forth above. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable
evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
   

All forecast prices in the table above are provided by GLJ.  For 2014, the price of Vermilion's natural gas in the Netherlands was based on the TTF day-ahead index, as determined on the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services, plus various fees. GasTerra, a state owned entity purchases all natural gas produced by Vermilion in the Netherlands.  The price of Vermilion's natural gas in Germany is based on the TTF month-ahead index, as determined on the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services, plus various fees.  The benchmark price for Australia and France crude oil was Dated Brent. The benchmark price for Canadian crude oil was Edmonton Par and Canadian natural gas was priced against AECO.  For the year ended December 31, 2014, the average realized sales prices before hedging were $113.80 per bbl (Australia), $8.70 per Mcf (Netherlands), $7.67 per Mcf (Germany), $105.43 per bbl (France) for Brent-based crude oil, $74.08 per bbl (United States) for WTI, $88.98 per bbl for Canadian-based crude oil and NGLs and $4.53 per Mcf for Canadian natural gas.

The following table summarizes the capital expenditures made by Vermilion on oil and natural gas properties for the year ended December 31, 2014:

Table 2: Capital Costs Incurred

    Acquisition Costs            
    Proved   Unproved   Exploration   Development   Total
(M$)   Properties   Properties   Costs   Costs   Costs
Australia   -     -     -     44,283   44,283
Canada   249,485   168,334   45,157   291,046   754,022
France   -     -     11,833   136,019   147,852
Germany   156,806   16,065   -     2,747   175,618
Ireland   -     -     -     94,439   94,439
Netherlands   -     -     12,045   49,695   61,740
United States   11,175   -     -     460   11,635
Total   417,466   184,399   69,035   618,689   1,289,589

The following table sets forth the reserve life index based on total proved and proved plus probable reserve and fourth quarter 2014 production of 49,571 boe/d.

Table 3: Reserve Life Index

Commodity Production   Reserve Life Index (years)
  Fourth Quarter 2014   Total Proved   Proved Plus Probable
Oil and natural gas liquids (bbl/d) 31,668   7.8   12.4
Natural gas (mmcf/d) 107.42   9.5   15.9
Oil Equivalent (boe/d) 49,571   8.4   13.6

The following tables provide reserves data and a breakdown of future net revenue by component and production group using forecast prices and costs.  For Canada, the tables following include Alberta gas cost allowance.

The following tables may not total due to rounding.

Table 4: Oil and Gas Reserves - Based on Forecast Prices and Costs (1)

  Light and Medium Crude Oil Heavy Oil Natural Gas Natural Gas Liquids BOE BOE
  Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross Net
  (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboe) (Mboe)
Proved Developed Producing (3) (5) (6)                    
Australia 10,434 10,434 -   -   -   -   -   -   10,434 10,434
Canada 16,174 13,206 10 9 94,264 85,967 5,150 3,804 37,046 31,347
France 31,650 29,431 -   -   9,875 9,430 -   -   33,297 31,003
Germany -   -   -   -   29,432 25,245 -   -   4,905 4,208
Ireland -   -   -   -   -   -   -   -   -   -  
Netherlands -   -   -   -   14,123 13,450 28 25 2,382 2,267
United States 165 137 -   -   61 51 2 2 177 148
Total Proved Developed Producing 58,423 53,208 10 9 147,755 134,143 5,180 3,831 88,241 79,407
Proved Developed Non-Producing (3) (5) (7)                    
Australia -   -   -   -   -   -   -   -   -   -  
Canada 1,227 1,099 -   -   12,561 11,248 476 322 3,797 3,296
France 977 874 -   -   -   -   -   -   977 874
Germany -   -   -   -   10,324 8,806 -   -   1,721 1,468
Ireland -   -   -   -   -   -   -   -   -   -  
Netherlands -   -   -   -   17,863 17,863 16 16 2,993 2,993
United States -   -   -   -   -   -   -   -   -   -  
Total Proved Developed Non-Producing 2,204 1,973 -   -   40,748 37,917 492 338 9,488 8,631
Proved Undeveloped (3) (8)                    
Australia 2,100 2,100 -   -   -   -   -   -   2,100 2,100
Canada 10,077 8,789 -   -   70,589 64,886 7,924 6,542 29,766 26,145
France 2,975 2,780 -   -   -   -   -   -   2,975 2,780
Germany -   -   -   -   502 (39) -   -   84 (7)
Ireland -   -   -   -   105,931 105,931 -   -   17,655 17,655
Netherlands -   -   -   -   5,169 2,584 10 5 872 436
United States 284 234 -   -   182 150 8 6 322 265
Total Proved Undeveloped 15,436 13,903 -   -   182,373 173,512 7,942 6,553 53,774 49,374
Proved (3)                    
Australia 12,534 12,534 -   -   -   -   -   -   12,534 12,534
Canada 27,478 23,094 10 9 177,414 162,101 13,550 10,668 70,609 60,788
France 35,602 33,085 -   -   9,875 9,430 -   -   37,249 34,657
Germany -   -   -   -   40,258 34,012 -   -   6,710 5,669
Ireland -   -   -   -   105,931 105,931 -   -   17,655 17,655
Netherlands -   -   -   -   37,155 33,897 54 46 6,246 5,696
United States 449 371 -   -   243 201 10 8 500 413
Total Proved 76,063 69,084 10 9 370,876 345,572 13,614 10,722 151,502 137,412
Probable (4)                    
Australia 5,449 5,449 -   -   -   -   -   -   5,449 5,449
Canada 14,797 12,175 2 2 141,032 126,232 11,331 8,689 49,635 41,905
France 20,288 18,848 -   -   2,582 2,465 -   -   20,719 19,259
Germany -   -   -   -   21,301 17,816 -   -   3,550 2,969
Ireland -   -   -   -   38,707 38,707 -   -   6,451 6,451
Netherlands -   -   -   -   47,076 41,987 103 85 7,949 7,083
United States 1,338 1,104 -   -   1,402 1,159 58 48 1,630 1,345
Total Probable 41,872 37,576 2 2 252,100 228,366 11,492 8,822 95,383 84,461
Proved Plus Probable (3) (4)                    
Australia 17,983 17,983 -   -   -   -   -   -   17,983 17,983
Canada 42,275 35,269 12 11 318,446 288,333 24,881 19,357 120,244 102,693
France 55,890 51,933 -   -   12,457 11,895 -   -   57,967 53,916
Germany -   -   -   -   61,559 51,828 -   -   10,260 8,638
Ireland -   -   -   -   144,638 144,638 -   -   24,106 24,106
Netherlands -   -   -   -   84,231 75,884 157 131 14,195 12,779
United States 1,787 1,475 -   -   1,645 1,360 68 56 2,129 1,758
Total Proved Plus Probable 117,935 106,660 12 11 622,976 573,938 25,106 19,544 246,884 221,873
 
Notes:
(1)  The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital
costs are set forth above.  See "Forecast Prices used in Estimates".  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved
plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2) "Gross Reserves" are Vermilion's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of Vermilion.
"Net Reserves" are Vermilion's working interest (operating or non-operating) share after deduction of royalty obligations, plus Vermilion's royalty interests in reserves.
(3) "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable.  It is likely that the actual remaining quantities recovered
will exceed the estimated proved reserves.
(4)  "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves.  It is equally likely that the actual remaining quantities
recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(5)  "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would
involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(6)  "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may
be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(7)  "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date
of resumption of production is unknown.
(8)  "Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost
of drilling a well) is required to render them capable of production.  They must fully meet the requirements of the reserves classification (proved, probable, possible) to which
they are assigned.
   

Table 5: Net Present Values of Future Net Revenue - Based on Forecast Prices and Costs (1)

  Before Deducting Future Income Taxes Discounted At   After Deducting Future Income Taxes Discounted At
(M$) 0% 5% 10% 15% 20%   0% 5% 10% 15% 20%
Proved Developed Producing (2) (4) (5)                      
Australia 291,164 263,104 239,218 218,979 201,803   280,825 242,543 213,082 189,932 171,394
Canada 1,262,154 972,328 790,894 668,312 580,565   1,262,155 972,328 790,895 668,312 580,565
France 2,054,566 1,447,105 1,120,222 918,238 781,399   1,655,535 1,184,551 921,918 755,890 641,911
Germany 104,703 88,743 76,967 68,031 61,063   104,703 88,743 76,967 68,031 61,063
Ireland -   -   -   -   -     -   -   -   -   -  
Netherlands 44,934 46,660 46,565 45,756 44,670   44,726 46,457 46,366 45,563 44,480
United States 8,235 6,662 5,619 4,885 4,343   8,235 6,662 5,619 4,885 4,343
Total Proved Developed Producing 3,765,756 2,824,602 2,279,485 1,924,201 1,673,843   3,356,179 2,541,284 2,054,847 1,732,613 1,503,756
Proved Developed Non-Producing (2) (4) (6)                      
Australia -   -   -   -   -     -   -   -   -   -  
Canada 101,096 72,953 56,758 46,332 39,099   54,946 50,000 44,899 39,996 35,611
France 57,393 38,340 27,990 21,760 17,681   37,650 24,928 18,020 13,868 11,154
Germany 46,636 32,713 23,976 18,295 14,442   46,636 32,713 23,976 18,295 14,442
Ireland -   -   -   -   -     -   -   -   -   -  
Netherlands 61,915 45,630 34,900 27,543 22,322   60,340 44,093 33,399 26,075 20,884
United States -   -   -   -   -     -   -   -   -   -  
Total Proved Developed Non-Producing 267,040 189,636 143,624 113,930 93,544   199,572 151,734 120,294 98,234 82,091
Proved Undeveloped (2) (7)                      
Australia 71,575 47,975 31,079 18,724 9,524   25,361 12,037 2,650 (4,084) (8,989)
Canada 681,560 465,275 327,825
Vermilion Energy Inc.
3500, 520 3rd Avenue SW
Calgary, Alberta T2P 0R3
Phone: 1-403-269-4884
Fax: 1-403-476-8100
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