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Vermilion Energy Inc. Announces 2012 Year-End Summary Reserves and Resource Information

March 4, 2013

CALGARY, March 4, 2013 /CNW/ - Vermilion Energy Inc. ("Vermilion", the "Company", "We" or "Our") (VET - TSX) is pleased to announce summary 2012 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 has been 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, please review the Company's Annual Information Form for the year ended December 31, 2012, to be filed on SEDAR at www.sedar.com on or before March 31, 2013.

HIGHLIGHTS

  • Total proved ("1P") reserves increased 9.1% to 105.3 million boe, while total proved plus probable ("2P") reserves increased 12.7% to 164.9 million boe.

  • Replaced 235% of 2012 total production, adding 32.5 million boe of 2P reserves with 19.2 million boe (59%) of 2P reserves additions coming from exploration and development ("E&D") activities and 13.2 million boe (41%) of 2P reserves additions through acquisitions.

  • Replaced 139% of 2012 total production through E&D activities. Excluding development related expenditures at Corrib, Vermilion reinvested only 71% of fund flows from operations to achieve an average cost of $20.48 /boe for E&D related 2P reserves additions and a recycle ratio of 2.7 times.  Including Corrib related development expenditures, Vermilion reinvested 81% of fund flows from operations to achieve an average cost of $23.53 /boe for E&D related 2P reserves additions and a recycle ratio of 2.4 times.

  • Replaced 245% of 2012 total crude oil production, adding 21.5 million boe of 2P crude oil reserves comprised of 16.5 million boe (77%) of 2P Brent-based crude oil reserves and 5.0 million boe (23%) of 2P Canadian based light oil reserves.  Vermilion added 12.9 million boe (60%) of 2P Brent-based crude oil reserves at an average cost of approximately $14 /boe through completion of two separate acquisitions in France during 2012.

  • GLJ estimated contingent resources of 83.9 million boe (low estimate) to 231.8 million boe (high estimate), with a best estimate of 160.9 million boe, and prospective resources of 9.6 million boe (low estimate) to 541.0 million boe (high estimate), with a best estimate of 249.4 million boe (See "Contingent and Prospective Resources" in this news release).

  • Achieved finding and development ("F&D") costs (excluding future development costs ("FDC")) for 2P reserves of $23.53 /boe, and finding, development and acquisition ("FD&A") costs (excluding FDC) for 2P reserves of $19.52 /boe.  This compares to average F&D and FD&A costs (excluding FDC) for 2P reserves on a three-year basis of $26.34 /boe and $24.64 /boe, respectively, and on a five-year basis of $26.67 /boe and $23.30 /boe, respectively. All in FD&A costs (including FDC) in 2012 for 2P reserves were $23.36 /boe resulting in a recycle ratio of 2.4 times.

  • 2012 year-end 2P reserves were comprised of 39% Brent-based light crude, 19.5% Canadian-based light crude, 20% European natural gas, 18% Canadian natural gas and 3.5% natural gas liquids.

  • Reserve life index increased to 12.5 years for 2P reserves and 8.0 years for 1P reserves based on year-end 2012 reserves and annualized fourth quarter 2012 production.

  • At year-end 2012, Vermilion had booked 267.1 net Cardium wells as compared to 207.7 net Cardium wells at the end of 2011.  Average booked 2P reserves per well remain relatively consistent at approximately 155.8 mboe/well.

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 annual information form 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 this annual information form 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 14, 2013 with an effective date of December 31, 2012 (the "GLJ Report").  The GLJ Report 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, 2012 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 Report 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 Report.  There is no assurance that the future price and cost assumptions used in the GLJ Report will prove accurate and variances could be material.

Reserves for Australia, Canada, France, Ireland and the Netherlands 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 (8)

      Light and Medium Crude Oil   Crude Oil   Natural Gas
Canada
  Natural Gas
France
  Natural Gas
Netherlands
  Natural Gas
Liquids
  Inflation
Rate
  Exchange
Rate
Year     WTI
Cushing
Oklahoma
($US/bbl)
  Edmonton
Par Price
40o API
($Cdn/bbl)
  Cromer
Medium
29.3o API
($Cdn/bbl)
  Brent Blend
FOB
North Sea
($US/bbl)
  AECO
Gas Price
($Cdn/MMBtu)
  National
Balancing
Point
(UK)
  Gas Price
($Cdn/Mcf)
  FOB
Field Gate
($Cdn/bbl)
  Percent
Per Year
  ($US/$Cdn)
2012     94.10   86.86   81.56   111.60   2.45   9.37   9.70   65.42   1.6   1.001
Forecast                                          
2013     90.00   85.00   79.90   105.00   3.38   9.13   9.68   65.38   2.0   1.000
2014     92.50   91.50   84.18   102.50   3.83   9.32   9.88   71.37   2.0   1.000
2015     95.00   94.00   86.48   102.50   4.28   9.76   10.35   75.51   2.0   1.000
2016     97.50   96.50   88.78   102.50   4.72   10.25   10.86   77.52   2.0   1.000
2017     97.50   96.50   88.78   100.00   4.95   10.00   10.60   77.52   2.0   1.000
Thereafter     2.0%   2.0%   2.0%   2.0%   2.0%   2.0%   2.0%   2.0%   2.0%   1.000
                                           

All forecast prices in Table 1 above provided by GLJ. For 2012, the price of Vermilion's natural gas in the Netherlands was based on pricing established by GasTerra, a state owned entity which purchases all natural gas produced by Vermilion in the Netherlands.  For 2012, the natural gas price in the Netherlands was calculated using a trailing average of Dated Brent and the natural gas prices from European trading hubs.  France natural gas production was benchmarked to National Balancing Point (UK).  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, 2012, the average realized sales prices before hedging were $117.03 per bbl (Australia) and $107.67 per bbl (France) for Brent-based crude oil, $82.84 per bbl for Canadian-based crude oil and NGLs, $9.81 per Mcf for European natural gas and $2.52 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, 2012:

Table 2: Capital Costs Incurred

        Acquisition Costs      
(M$)       Proved
Properties
    Unproved
Properties
    Exploration
Costs (1)
  Development
Costs
    Total
Costs
Australia       -     -     -   49,389     49,389
Canada       69     -     39,045   236,634     275,748
France       169,597     -     -   47,382     216,979
Ireland       -     -     -   58,764     58,764
Netherlands       -     -     272   21,052     21,324
Total       169,666     -     39,317   413,221     622,204
                               

Note:
(1) Includes costs of acquiring undeveloped lands.

The following table sets forth the reserve life index based on total proved and proved plus probable reserve and fourth quarter 2012 production of 36,265 boe/d.

Table 3: Reserve Life Index

Commodity           Production     Reserve Life Index (years)  
            Fourth Quarter
2012
      Total
Proved
    Proved Plus
Probable
 
Oil and natural gas liquids (bbl/d)           24,875       7.1     11.2  
Natural gas (mcf/d)           68,344       9.8     15.2  
Oil Equivalent (boe/d)           36,265       8.0     12.5  
                             

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 (8)

      Light and Medium Oil   Heavy Oil   Natural Gas   Natural Gas Liquids   BOE
      Gross (1)   Net (1)   Gross (1)   Net (1)   Gross (1)   Net (1)   Gross (1)   Net (1)   Gross   Net
      (Mbbl)   (Mbbl)   (Mbbl)   (Mbbl)   (MMcf)   (MMcf)   (Mbbl)   (Mbbl)   (Mboe)   (Mboe)
Proved Developed Producing (2) (5)                                          
Australia     10,327   10,327   -   -   -   -   -   -   10,327   10,327
Canada     9,521   7,890   17   16   66,035   59,340   2,360   1,564   22,905   19,361
France     30,898   28,962   -   -   1,377   1,336   -   -   31,127   29,184
Ireland     -   -   -   -   -   -   -   -   -   -
Netherlands     -   -   -   -   20,778   20,778   33   33   3,496   3,496
Total Proved Developed Producing     50,746   47,179   17   16   88,190   81,453   2,393   1,597   67,855   62,368
Proved Developed Non-Producing (2) (6)                                          
Australia     -   -   -   -   -   -   -   -   -   -
Canada     549   478   -   -   7,032   6,424   154   114   1,875   1,662
France     602   576   -   -   -   -   -   -   602   576
Ireland     -   -   -   -   -   -   -   -   -   -
Netherlands     -   -   -   -   15,828   15,828   29   29   2,667   2,667
Total Proved Developed Non-Producing     1,151   1,054   -   -   22,860   22,253   184   143   5,145   4,906
Proved Undeveloped (2) (7)                                          
Australia     -   -   -   -   -   -   -   -   -   -
Canada     8,045   7,172   -   -   40,947   38,215   1,051   866   15,920   14,407
France     1,017   984   -   -   -   -   -   -   1,017   984
Ireland     -   -   -   -   91,954   91,954   -   -   15,326   15,326
Netherlands     -   -   -   -   -   -   -   -   -   -
Total Proved Undeveloped     9,062   8,157   -   -   132,901   130,170   1,051   866   32,263   30,717
Proved (2)                                          
Australia     10,327   10,327   -   -               -   -   -   -   10,327   10,327
Canada     18,115   15,540   17   16   114,014   103,980   3,565   2,544   40,700   35,430
France     32,516   30,522   -   -   1,377   1,336   -   -   32,746   30,744
Ireland     -   -   -   -   91,954   91,954   -   -   15,326   15,326
Netherlands     -   -   -   -   36,606   36,606   62   62   6,163   6,163
Total Proved     60,959   56,389   17   16   243,951   233,875   3,627   2,606   105,262   97,991
Probable (3)                                          
Australia     6,815   6,815   -   -   -   -   -   -   6,816   6,816
Canada     14,099   11,888   3   3   65,654   60,267   2,026   1,522   27,070   23,457
France     14,263   13,392   -   -   23   23   -   -   14,266   13,396
Ireland     -   -   -   -   35,078   35,078   -   -   5,846   5,846
Netherlands     -   -   -   -   33,277   33,277   60   60   5,607   5,607
Total Probable     35,177   32,095   3   3   134,033   128,646   2,086   1,582   59,605   55,121
Proved Plus Probable (2) (3)                                          
Australia     17,143   17,143   -   -   -   -   -   -   17,143   17,143
Canada     32,214   27,428   20   19   179,668   164,247   5,591   4,066   67,770   58,887
France     46,779   43,914   -   -   1,401   1,358   -   -   47,012   44,140
Ireland     -   -   -   -   127,033   127,033   -   -   21,172   21,172
Netherlands     -   -   -   -   69,883   69,883   123   123   11,770   11,770
Total Proved Plus Probable     96,136   88,484   20   19   377,984   362,521   5,713   4,188   164,867   153,111
                                           

Table 5: Net Present Values of Future Net Revenue - Based on Forecast Prices and Costs (8)

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Vermilion Energy Inc.
3500, 520 3rd Avenue SW
Calgary, Alberta T2P 0R3
Phone: 1-403-269-4884
Fax: 1-403-476-8100
Investor Relations
Whistleblower
Community Investment
Emergency Contacts
      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) (5)                                          
Australia     494,122   448,134   409,522   376,948   349,281   243,707   220,036   200,192   183,496   169,361
Canada     720,151   571,011   473,635   405,829   356,227   720,151   571,011   473,635   405,829   356,227
France     1,840,380   1,360,328   1,096,420   929,750   814,095   1,346,767   1,007,535   815,310   691,887   605,409
Ireland     -   -   -   -   -   -   -