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CALGARY, March 4, 2013 /CNW/ - Vermilion Energy Inc. ("Vermilion" or the "Company") (TSX - VET) is pleased to report interim operating and unaudited financial results for the three months and year ended December 31, 2012.
Reserves and resources information in this news release is a summary only and is subject to the information set forth in Vermilion's news release dated March 4, 2013 entitled "Vermilion Energy Inc. Announces 2012 Year-end Summary Reserves and Resource Information".
Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Monday, March 4, 2013 at 9:00 AM MST (11:00 AM EST). To participate, you may call toll free 1-877-407-9205 (North America) or 1-201-689-8054 (International). The conference call will also be available on replay by calling 1-877-660-6853 (North America) or 1-201-612-7415 (International) using conference ID number 407099. The replay will be available until midnight eastern time on March 11, 2013.
You may also listen to the audio webcast by clicking www.investorcalendar.com/IC/CEPage.asp?ID=170376 or visit Vermilion's website at www.vermilionenergy.com/ir/eventspresentations.cfm.
|bbls/d||barrels per day|
|mcf||thousand cubic feet|
|mmcf||million cubic feet|
|bcf||billion cubic feet|
|mcf/d||thousand cubic feet per day|
|mmcf/d||million cubic feet per day|
|boe||barrel of oil equivalent, including: crude oil, natural gas liquids and natural gas on the basis of one boe for six mcf of natural gas|
|mboe||thousand barrel of oil equivalent|
|mmboe||million barrel of oil equivalent|
|boe/d||barrel of oil equivalent per day|
|NGLs||natural gas liquids|
|WTI||West Texas Intermediate, the reference price paid for crude oil of standard grade in U.S. dollars at Cushing, Oklahoma|
|AECO||the daily average benchmark price for natural gas at the AECO 'C' hub in southeast Alberta|
|PRRT||Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia|
Certain statements included or incorporated by reference in this document 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 document may include, but are not limited to:
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:
Although Vermilion 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 Vermilion can give no assurance that such expectations will prove to be correct. Financial outlooks are provided for the purpose of understanding Vermilion'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 Vermilion and described in the forward looking statements or information. These risks and uncertainties include but are not limited to:
The forward looking statements or information contained in this document are made as of the date hereof and Vermilion 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.
In accordance with National Instruments 51-101, natural gas volumes have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Financial data contained within this document are reported in Canadian dollars, unless otherwise stated.
|Three Months Ended||Year Ended|
|($M except as indicated)||Dec 31,||Sept 30,||Dec 31,||Dec 31,||Dec 31,|
|Petroleum and natural gas sales||241,233||284,838||275,172||1,083,103||1,031,570|
|Fund flows from operations 1||141,737||137,094||136,883||557,728||474,336|
|Fund flows from operations ($/basic share)||1.43||1.39||1.46||5.69||5.22|
|Fund flows from operations ($/diluted share)||1.41||1.37||1.44||5.62||5.14|
|Net earnings per share ($/basic share)||0.58||0.31||(0.32)||1.94||1.57|
|Asset retirement obligations settled||8,424||1,968||7,559||13,739||23,071|
|Cash dividends ($/share)||0.57||0.57||0.57||2.28||2.28|
|Net dividends 1||37,967||38,945||37,069||151,659||148,765|
|% of fund flows from operations, gross||40%||41%||39%||40%||44%|
|% of fund flows from operations, net||27%||28%||27%||27%||31%|
|Total net dividends, capital expenditures and asset retirement obligations||203,426||147,168||196,879||617,936||662,616|
|% of fund flows from operations||144%||107%||144%||111%||140%|
|% of fund flows from operations (excluding the Corrib project)||129%||93%||131%||99%||123%|
|Net debt 1||677,231||549,491||428,961||677,231||428,961|
|Return on shareholders' equity||14%||12%|
|Crude oil (bbls/d)||23,699||23,047||22,096||23,971||20,979|
|Natural gas (mcf/d)||68,344||73,524||79,478||75,200||77,207|
|Average realized prices|
|Crude oil and NGLs ($/bbl)||96.74||100.70||105.49||101.07||104.58|
|Natural gas ($/mcf)||7.15||6.12||6.57||6.17||6.35|
|Production mix (% of production)|
|% priced with reference to WTI||25%||23%||21%||24%||17%|
|% priced with reference to AECO||14%||16%||20%||16%||21%|
|% priced with reference to European gas||17%||17%||16%||17%||16%|
|% priced with reference to Dated Brent||44%||44%||43%||43%||46%|
|Netbacks ($/boe) 1|
|Fund flows netback||46.07||38.66||40.60||40.96||36.93|
|Average reference prices|
|WTI (US $/bbl)||88.18||92.22||94.06||94.20||95.12|
|Dated Brent (US $/bbl)||110.02||109.61||109.31||111.58||111.27|
|Average foreign currency exchange rates|
|CDN $/US $||0.99||0.99||1.02||1.00||0.99|
|Share information ('000s)|
|Weighted average shares outstanding|
The above table includes non-GAAP measures which may not be comparable
to other companies. Please see the "Non-GAAP
Measures" section of Management's Discussion and Analysis.
2012 IN REVIEW AND 2013 OUTLOOK
The strength of Vermilion's global commodity exposure and continued robust operations were highlighted in 2012. The Company's operating and fund flows netbacks, both before and after tax, continued to improve in 2012, while many of Vermilion's Canadian peers struggled with low Canadian gas prices and wide differentials for Canadian crude products relative to West Texas Intermediate (WTI), which itself remains at a significant discount to Brent-based crude. The Company complimented this positive price exposure with steady execution across its operating regions. Year-over-year total production increased 7%, driven by the acquisition of Brent-based oil in France and a 14% increase in Canadian production despite the intentional shut-in of significant dry natural gas production volumes during the second half of the year.
The pricing differentials witnessed in 2011 continued throughout 2012 with Brent-based crude averaging a US$17.38 /bbl premium to WTI. This afforded Vermilion a significant competitive advantage with approximately 43% of 2012 production volumes comprised of Brent-based crude production and a further 17% comprised of high-netback European gas. Vermilion's European gas received an average price of $9.70 /mcf in 2012 as compared to a realized average price of $2.52 /mcf for natural gas indexed to AECO in Canada. The Company's global commodity profile and increasing exposure to crude oil and liquids enabled it to achieve year-over-year growth in fund flows from operations of nearly 18%, outpacing production growth of 7%. In the near term, growth in fund flows from operations is expected to continue to outpace production growth as the Company continues to benefit from its global exposure and increasing leverage to high netback oil and European gas production.
Development capital spending was $452.5 million in 2012 compared to $490.8 million in 2011. 2012 spending was in-line with the most recent guidance (November 14, 2012) of $450 million. During 2012, Vermilion completed two acquisitions in France for total consideration of $181.1 million as well as payment of the final installment for the Corrib acquisition of $134.3 million (US$135 million).
Vermilion focused its 2012 Canadian activities on continued development of the Cardium light oil play. Average Cardium related production of over 7,600 boe/d was double 2011 production of 3,800 boe/d. Vermilion's per well production rates have remained consistently above its peers in the West Pembina region reflecting the high quality of the reservoir underlying the Company's land base. At the current drilling rate of 40 to 60 wells per year, production is anticipated to reach a peak of 12,000 to 14,000 boe/d in the next two to three years. In any resource play, cost containment is key. Completion of the Company's 15,000 bbl/d oil battery in 2011 has enabled Vermilion to achieve top quartile operating costs of less than $6 /bbl on operated production and provides the necessary infrastructure for full scale development of the Cardium light oil play. Furthermore, the Company's continued implementation of improved completion technology and well design, including the implementation of water-based fracture technologies, multi-well pad drilling, and extended horizontal sections, has resulted in a meaningful reduction in well costs from more than $5 million per section at the start of development to approximately $3 million per section in the fourth quarter of 2012. As development progresses, the Company anticipates the drilling of additional long-reach horizontal wells which should continue to drive well costs lower on a per section basis. At the end of 2012, Vermilion had drilled 119 net physical (132 net section equivalent) Cardium wells and carried a drillable inventory of 261 net section equivalent Cardium wells resulting in a five-to-six year inventory of drillable locations at the current pace of development. The Company has also identified a further 120 prospective locations which are currently classified as contingent due to their marginal economics in the current pricing environment, but could be drilled in the future with improvements in technology, costs or commodity prices. For 2013, development activities in Canada will focus primarily on continued development of the Cardium with plans for an approximate 50 (42 net) well Cardium program in addition to a 6 (2.3 net) well Mannville liquids-rich gas program.
During the year, the Company announced a significant position in the emerging Duvernay liquids-rich natural gas resource play. To date, Vermilion has amassed 270 net sections in two large contiguous land blocks spanning the full breadth of the liquids-rich natural gas fairway. Leveraging its early entry strategy, the Company has been able to build this position at a cost of approximately $425 /acre. During 2012, the Company completed two vertical appraisal wells, and has completed a third vertical appraisal well subsequent to year-end. Vermilion's Duvernay rights underlie the Company's existing Cardium development project, providing the potential to leverage existing Company infrastructure to create timing, operational and infrastructure cost advantages. In addition to its Cardium and Duvernay rights in the region, the Company also has a large inventory of more conventional, Mannville based liquids-rich natural gas development opportunities including the Ellerslie, Notikewin and Fahler zones. With the addition of the Duvernay, Vermilion now has exposure to three distinct development opportunities in this core operating region that have the potential to deliver growth for the Company into the second half of the decade.
Vermilion continues to benefit from strong Brent-based pricing on its Australia production, enhancing the Wandoo field's contribution as a strong cash flow generator for the Company. A drilling program originally planned for late 2012 was deferred due to delayed receipt of the offshore drilling rig. Subsequent to year-end Vermilion has received a drilling rig and commenced drilling of its two-well program at Wandoo. The two wells will be sidetracks that utilize existing well bores and are expected to come on-stream shortly following their completion in the second quarter of 2013. However, with the cyclone season typically occurring from December through March, there is the potential for the Company to experience some weather related delays. Vermilion believes it can sustain production at Wandoo of approximately 6,000 and 8,000 bbls/d for the foreseeable future with subsequent drill programs expected to occur approximately every two years.
In France, the Company completed two separate acquisitions in addition to its annual workover and recompletions programs. In January 2012, the Company acquired certain working interests in six producing fields located in the Paris and Aquitaine basins for a cash cost of approximately $106 million. With incremental production of more than 2,000 boe/d and an estimated 6.7(1) million boe of proved plus probable reserves (96% crude oil), the acquisition reflected the advantage of Vermilion's international exposure adding Brent crude production and reserves at attractive acquisition metrics of approximately $48,000 per boe/d and $15.80 /boe of proved plus probable reserves(1). In December 2012, Vermilion completed a further acquisition of approximately 850 boe/d of 100% working interest Brent crude oil production in the Paris Basin, with proved plus probable developed producing reserves(2) of approximately 6.3 million boe at December 31, 2012. Vermilion paid approximately $75 million for the acquisition, resulting in acquisition metrics of approximately $88,000 per boe/d and $12.00 /boe of proved plus probable developed producing reserves(2). Both acquisitions were complimentary to the Company's existing France assets and further strengthened Vermilion's position as the leading oil producer in France. For 2013, Vermilion will continue to focus on its annual workover and recompletion programs in addition to a four-well infill drilling program in the Champotran field. The Company will also work toward fully integrating its 2012 acquisitions and identifying further optimization and cost reduction opportunities.
In the Netherlands, Vermilion completed the tie-in of the De Hoeve-1 exploration well (previously drilled in 2009) during the second quarter of 2012, followed by the drilling of two new gas wells in the second (Vinkega-2) and third (Eernwoude-2) quarters of 2012. The Eernwoude-2 well was subsequently brought on production late in the fourth quarter of 2012. Also during the fourth quarter, the Company received the necessary partner approvals and initiated a project to debottleneck the Garijp gas gathering system, planned for completion during the second quarter of 2013 that is expected to enable production from the Vinkega-2 well to be brought on-stream. Pipeline construction for the Company's Langezwaag-1 well (drilled in the fourth quarter of 2011) was completed late in 2012, and the well is currently expected to come on production following completion of surface facilities in the second quarter of 2013. In December of 2012, Vermilion was awarded an exploration license for the Opmeer concession, comprising more than 56,000 acres and located directly west of the Company's existing Slootdorp concession. For 2013, Vermilion is planning a two-to-three-well drilling program in the Netherlands.
In Ireland, the Corrib tunnel boring machine has been installed and tunneling activities related to completion of the nine kilometre onshore pipeline project commenced on December 16, 2012. Tunneling, construction and installation activities, commissioning and start-up are anticipated to take approximately two years to complete. With five wells currently drilled, tested and ready for production, and construction of related pipelines and facilities largely complete, the project is anticipated to produce first gas in late 2014 or early 2015, and to reach peak production levels of approximately 55 mmcf/d (9,000 boe/d) net to Vermilion in mid-2015.
Vermilion currently expects average production volumes between 39,000 and 40,500 boe/d for 2013, with the mid-point of that range representing approximately 5% production growth over 2012. Looking forward, Vermilion remains positioned to deliver on its production goal of 50,000 boe/d in 2015. Over the next several years, the Company anticipates growth to be driven by continued development of the Cardium light oil play in Western Canada, high-netback natural gas drilling opportunities in the Netherlands, and the onset of production at Corrib. France and Australia production is anticipated to remain relatively stable over that same time period while generating significant free cash flow given the strong weighting toward Brent-based crude oil production. The Company's medium-term and longer-term growth is anticipated to come from focused development of emerging resource plays in Canada and the greater European region.
As a means to positioning Vermilion for participation in medium to longer-term resource-based growth opportunities, the Company launched its New Growth Initiative in early 2010 to identify and secure low-cost, early-entry positions in emerging resource opportunities in Canada and the grea