LinkedIn Contact UsContact Us
Menu

News

The information contained in news releases posted to this website was accurate at the time of posting, but may be superseded by subsequent news releases.

Sign up to automatically receive news releases from Vermilion. 

Vermilion Energy Inc. Announces First Quarter Results for the Three Months Ended March 31, 2012

May 4, 2012

CALGARY, May 4, 2012 /CNW/ - Vermilion Energy Inc. ("Vermilion" or the "Company") (TSX - VET) is pleased to report interim operating and unaudited financial results for the three months ended March 31, 2012.

HIGHLIGHTS

  • Recorded strong growth in average production volumes to 39,265 boe/d in the first quarter of 2012, a quarter over quarter and year over year increase of 7% and 15%, respectively as compared to fourth quarter 2011 volumes of 36,654 boe/d and first quarter 2011 volumes of 34,234 boe/d.  The growth in the first quarter of 2012 production was primarily attributable to the addition of incremental production volumes as a result of closing the previously announced acquisition of certain working interests in France in January 2012 and the continued strong performance of the Company's Cardium light oil program in Canada.

  • Generated fund flows from operations of $151.1 million ($1.56 per share) in the first quarter of 2012, as compared to $136.9 million ($1.46 per share) in the fourth quarter of 2011 and $101.8 million ($1.14 per share) in the first quarter of 2011.  Fund flows from operations for first quarter of 2012 were 10% higher quarter over quarter as a result of increased production volumes, offset to some extent by lower realized prices in Canada, France and the Netherlands.  The significant 48% year over year increase as compared to the first quarter of 2011 was attributable to both increased production volumes and higher realized pricing across all of Vermilion's operating regions.  Vermilion continues to benefit from the Company's significant exposure (44%) to Brent crude, which averaged US $118.49 per bbl, representing a premium of US $15.56/bbl over West Texas Intermediate and US $26.05/bbl over Edmonton sweet index pricing during the first quarter of 2012.  Pricing for the Company's high netback natural gas production in the Netherlands, representing approximately 15% of production, also remained strong at an average $10.18/mcf during the first quarter of 2012.

  • Increased capital budget for 2012 from $373 million to $450 million reflecting the strength and stability of Vermilion's fund flows from operations which are supported by its international operations and related commodity pricing.

  • Maintained a stable dividend of $0.19 per month.  Vermilion believes that this level of dividend is sustainable through to 'first gas' from its Corrib project, currently targeted for late 2014, following which Vermilion will consider a potential increase to the dividend.

  • Continued to grow production in the Company's Cardium light oil play in Western Canada as the Company continues with the long-term development of the assets.  Vermilion has increased Cardium related production from approximately 1,000 boe/d in 2010 to approximately 7,000 boe/d during the first quarter of 2012.  Vermilion participated in the drilling of 18.4 net and completion of 15.3 net Cardium wells during the first quarter of 2012.

  • Closed the acquisition of certain working interests in six producing fields located in the Paris and Aquitaine basins in France.  The assets are expected to average approximately 2,200 boe/d of production in 2012, weighted 86% to high quality Brent based crude, and add an estimated 6.7 million boe1 of proved plus probable reserves (96% crude oil).  Vermilion paid approximately $106 million cash at closing of the acquisition reflecting a cash cost of approximately $48,200 per flowing boe and $15.80 per boe of proved plus probable reserves as evaluated by GLJ and effective December 31, 2011.

  • Effective January 22, 2012, all open periods for appeal of the regulatory approvals related to construction of the onshore pipeline portion of Vermilion's Corrib offshore gas project in Ireland expired with no open appeals remaining outstanding.  The tunnelling site has been handed over to the tunnel contractor who will prepare the site and install the tunnel boring machine which is scheduled to commence tunnelling in the fourth quarter of 2012 with first gas at Corrib currently anticipated to occur in late 2014.

  • Acquired additional undeveloped lands in Canada with exposure to potential emerging shale oil and liquids-rich gas resource opportunities.  Including an additional 60 net sections that were acquired subsequent to the first quarter of 2012, Vermilion has invested a cumulative $76 million as part of its Canadian New Growth initiative to acquire a total of approximately 350 net sections.

  • Recognized for the third consecutive year by the Great Place to Work® Institute in both Canada and France.  Vermilion ranked as the 25th Best Workplace in Canada amongst 232 corporations that participated in the study while Vermilion's France office ranked as the 24th Best Workplace in France.

1  Estimated proved plus probable reserves attributable to the assets as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") in a report dated October 14, 2011 with an effective date of December 31, 2011.

Annual General Meeting Webcast

As Vermilion's Annual General Meeting is being held today, May 4, 2012 at 10:00 AM MST at the Metropolitan Centre, Calgary, Alberta, there will not be a first quarter conference call, however, a presentation will be given by Mr. Lorenzo Donadeo, President & CEO after the conclusion of the formal part of this meeting.  Please visit http://www.vermilionenergy.com/ir/eventspresentations.cfm and click on webcast under upcoming events to view the presentation which will commence at approximately 10:10 AM MST.

ABBREVIATIONS

bbl(s) barrel(s)
mbbls  thousand barrels
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  barrels of oil equivalent of natural gas and crude oil on the basis of one boe for six mcf of natural gas
mboe  thousand barrels of oil equivalent
mmboe  million barrels of oil equivalent
boe/d  barrels of oil equivalent per day
CBM  coalbed methane
NGLs  natural gas liquids
GJ/d  gigajoules per day
WTI  West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for crude oil of standard grade
AECO  the daily average Alberta natural gas price as traded on the Natural Gas Exchange
$M  thousand dollars
$MM  million dollars
PRRT  Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia
GAAP  Canadian Generally Accepted Accounting Principles or, alternatively, IFRS
IFRS  International Financial Reporting Standards or, alternatively, GAAP

DISCLAIMER

Certain statements included or incorporated by reference in this document may constitute forward looking statements under applicable securities legislation.  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:

  • capital expenditures;
  • business strategies and objectives;
  • reserve quantities and the discounted present value of future net cash flows from such reserves;
  • revenue;
  • future production levels and rates of average annual production growth;
  • exploration plans;
  • development plans;
  • acquisition and disposition plans and the timing thereof;
  • operating and other expenses;
  • royalty rates;
  • the timing of regulatory proceedings and approvals;
  • the timing of first commercial gas from the Corrib field; and
  • estimate of Vermilion's share of the expected gas rates 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 Vermilion to obtain equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally;
  • the ability of Vermilion to market oil 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 Vermilion to obtain financing on acceptable terms;
  • foreign currency exchange rates and interest rates;
  • future oil and natural gas prices; and
  • Management's expectations relating to the timing and results of development activities.

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.  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 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 and natural gas and market demand;
  • risks and uncertainties involving geology of oil and natural gas deposits;
  • risks inherent in Vermilion's marketing operations, including credit risk;
  • the uncertainty of reserves estimates and reserves life;
  • 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;
  • Vermilion's ability to enter into or renew leases;
  • fluctuations in oil 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 Vermilion to add production and reserves through development and exploration 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 Vermilion; and
  • other risks and uncertainties described elsewhere in this document or in Vermilion's other filings with Canadian securities regulatory authorities.

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.

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.

HIGHLIGHTS

($M except as indicated below) Three Months Ended
  March 31, Dec 31, March 31,
Financial 2012 2011 2011
Petroleum and natural gas sales 310,488 275,172 229,740
Fund flows from operations 1 151,122 136,883 101,785
  Fund flows from operations ($/basic share) 1.56 1.46 1.14
  Fund flows from operations ($/diluted share) 1.54 1.44 1.12
Net earnings (loss) 65,094 (30,243) 27,193
  Net earnings (loss) per share, basic ($/basic share) 0.67 (0.32) 0.30
Capital expenditures 94,360 152,251 118,414
Acquisitions, including acquired working capital deficiency 1 110,282 12,777 38,291
Asset retirement obligations settled 766  7,559 1,631
Cash dividends ($/share) 0.57 0.57 0.57
Dividends declared 55,124 53,871 50,942
  Less: Issuance of shares pursuant to the dividend reinvestment plan (17,558) (16,802) (12,976)
  Net dividends 1 37,566 37,069 37,966
  % of fund flows from operations, gross 36% 39% 50%
  % of fund flows from operations, net 25% 27% 37%
Total net dividends, capital expenditures and asset retirement obligations settled 1 132,692 196,879 158,011
  % of fund flows from operations 88% 144% 155%
  % of fund flows from operations (excluding the Corrib project) 80% 132% 142%
Net debt 1 530,031 428,961 441,318
Operational
Production      
  Crude oil (bbls/d) 24,492 22,096 20,521
  NGLs (bbls/d) 1,374 1,312 1,331
  Natural gas (mcf/d) 80,393 79,478 74,290
  Boe/d (6:1) 39,265 36,654 34,234
Production pricing      
  % priced with reference to WTI 23% 21% 15%
  % priced with reference to AECO 18% 20% 21%
  % priced with reference to Dated Brent 59% 59% 64%
Average selling price      
  Crude oil and NGLs ($/bbl) 113.99 105.49 96.80
  Natural gas ($/mcf) 5.77 6.57 5.89
Netbacks (6:1) ($/boe) 1      
  Operating netback 58.45 54.86 47.19
  Fund flows netback 42.30 40.60 33.05
  Operating expenses 13.31 12.01 12.28
Average reference prices      
  WTI (US $/bbl) 102.93 94.06 94.10
  Dated Brent (US $/bbl) 118.49 109.31 104.97
  AECO ($/mcf) 2.15 3.17 3.76
Average foreign exchange rates      
  CDN $/US $ 1.00 1.02 0.99
  CDN $/Euro 1.31 1.38 1.35
Share information ('000s)
Shares outstanding      
  Basic shares outstanding 96,838 96,430 89,856
  Diluted shares outstanding 1 99,557 98,778 91,837
Weighted average shares outstanding      
  Basic shares outstanding 96,644 93,616 89,224
  Diluted shares outstanding 98,191 95,082 90,514
         
1 The above table includes non-GAAP measures which may not be comparable to other companies.  Please see "Non-GAAP Measures" section of Management's Discussion and Analysis.

OPERATIONAL REVIEW AND OUTLOOK

Performance during the first quarter of 2012 reflected the continued strength of Vermilion's international operations and the advantages of its global commodity exposure.  Vermilion achieved record production volumes of 10,850 boe/d in France during the first quarter of 2012 following the January closing of its acquisition of certain working interests in the Paris and Aquitaine basins in France.  These volumes, combined with robust year over year production growth in both the Netherlands (17%) and Canada (29%), driven in Canada by steady growth in Cardium related production, resulted in strong 15% year over year growth in Vermilion's consolidated production volumes to 39,265 boe/d during the first quarter of 2012.

While Vermilion's Canadian peers were impacted significantly by the marked widening of Canadian crude differentials during the first quarter of 2012, Vermilion's netbacks remained solid as a result of the Company's significant exposure to Brent crude related pricing for its production in France, Australia and the Netherlands.  Whereas Canadian crudes indexed to Edmonton Sweet were priced at a US $10.49/bbl discount to average WTI pricing of US $102.93/bbl, Vermilion continued to see strong relative pricing for its Brent crude indexed production which averaged US $118.49/bbl during the quarter.  Canadian based Bakken UHC and WCS (Heavy) crudes also experienced significantly wider differentials to WTI during the quarter with average differentials of US $8.50/bbl and US $21.42/bbl, respectively.

Vermilion's global commodity exposure continues to benefit and differentiate the Company with approximately 44% of first quarter 2012 production volumes comprised of Brent crude and a further 15% comprised of Netherlands natural gas which averaged $10.18 per mcf during the first quarter of 2012 as a result of being priced off a basket of primarily Brent crude linked heating and fuel oil products.  Vermilion's strong leverage to global commodity markets, through its diversified international operations, places Vermilion in a strong competitive position relative to the Company's Canadian peers who are faced with significant exposure to weakening North American natural gas prices and a continued discount for Canadian based crude products relative to WTI, which is forecast to remain at a significant discount to Brent crude.  Vermilion's global commodity leverage enabled first quarter 2012 fund flows from operations to grow by 10% on a quarter over quarter basis and 48% on a year over year basis, notably outpacing the Company's strong production growth of 7% and 15%, respectively, over the comparable periods.

Concurrent with the release of first quarter 2012 operating and financial results, Vermilion is pleased to announce an increase to its 2012 planned capital expenditures to approximately $450 million, a 21% increase from its previous budget of $373 million announced in December 2011.  The additional capital will target Cardium drilling and completions, increasing Vermilion's planned drilling program to approximately 40 net Cardium wells in 2012; however, given the majority of this incremental activity will likely take place late in the year, it is not expected to materially impact anticipated 2012 consolidated production volumes which are forecast to average between 37,000 boe/d and 38,000 boe/d in 2012. The increased capital expectations also reflect the consolidation of an additional 4.3 net sections of undeveloped Cardium lands in the West Pembina region and the further acquisition of approximately 60 net sections of undeveloped lands with exposure to an emerging liquids rich resource play subsequent to the end of the first quarter of 2012.  To date, Vermilion has invested a total of $76 million to acquire approximately 350 net sections of undeveloped lands in Canada with exposure to potential emerging shale oil and liquids rich resource opportunities.

Vermilion's Canadian development activities will continue to focus primarily on the full scale development of the Cardium light oil play.  Vermilion's well performance to date has remained relatively consistent and continues to outpace that of most peers in the West Pembina region of the Cardium play, lending support to management's belief that drilling activity in this region will provide for reasonably consistent and repeatable results over the life of the program.  Vermilion has made significant strides in reducing average per well costs to between $3.5 and $3.7 million per well.  Transportation costs also continue to decrease as Vermilion ties in and processes greater volumes through the Company's newly constructed oil processing facility.  At the end of the first quarter of 2012, Vermilion had drilled or participated in approximately 86.4 net wells, 71.2 of which were on production at the end of the first quarter.   With an identified inventory at the beginning of 2012 of approximately 300 net additional economic prospects in the West Pembina region, Vermilion has a drilling inventory that is expected to last at least five to six years at an expected drilling rate of 40 to 60 wells per year.  That inventory could grow as Vermilion continues to mature the play and seeks to consolidate existing land positions within its core West Pembina operating region. A further 120 prospects have been identified on Vermilion's legacy acreage; however, they are viewed as having marginal economics in the current environment but may be drilled in future years if technological improvements, costs or commodity prices change sufficiently to improve the economics of these prospects.

Vermilion continues to benefit from strong volumes from three Australian wells at Wandoo brought on production in the fall of 2010.  Vermilion has identified additional infill drilling opportunities at Wandoo that should enable the Company to maintain production levels between 6,000 and 8,000 boe/d for the foreseeable future, dependent on the timing of future drilling programs.  Vermilion is currently planning to initiate a two to three well drilling program in late 2012 with related production additions anticipated in early 2013.  Wandoo continues to be a strong cash flow generator for the Company attracting pricing at a meaningful premium to the Dated Brent index for crude oil with no transportation costs as a result of production being inventoried and sold directly at the platform.

During the first quarter of 2012, Vermilion announced that it had closed the previously announced acquisition of certain working interests in six producing fields located in the Paris and Aquitaine basins in France. The assets are expected to average approximately 2,200 boe per day of production in 2012, weighted 86% to high quality Brent based crude, and add an estimated 6.7 million boe1 of proved plus probable reserves (96% crude oil).  Vermilion paid approximately $106 million cash at closing of the acquisition reflecting a cash cost of approximately $48,200 per flowing boe and $15.80 per boe of proved plus probable reserves as evaluated by GLJ and effective December 31, 2011.  The acquired assets consist of interests in the Itteville (79%), Vert Le Grand (90%), Vert Le Petit (100%), La Croix Blanche (100%) and Dommartin-Lettrée (56%) fields in the Paris Basin and the Vic Bilh (73%) field in the Aquitaine Basin.  Vermilion previously held the remaining non-operated working interests in each of the Itteville, Vert Le Grand and Vic Bilh fields and now holds a 100% operated working interest in each of the acquired fields with the exception of the Dommartin-Lettrée field in the Paris Basin, in which the Company now holds a 56% non-operated interest.  The acquisition was a natural addition to Vermilion's existing France asset base and is well aligned with the Company's strategic objective to maintain and consolidate its core operating areas and own and operate 100% of its assets. The acquired assets further strengthen Vermilion's position as the leading oil producer in France, and with a significant weighting toward high quality oil, are expected to provide robust netbacks in the current commodity price environment. Vermilion is in the preliminary stages of evaluating these new properties and believes it has identified numerous areas where it can reduce the current cost structure of these assets and increase production over time through optimized production operations, water flood management and exploitation of infill development opportunities.

Vermilion continued permitting related work efforts in the Netherlands during the first quarter of 2012 in preparation for the planned 2012 drilling campaign comprised of two new development wells that are expected to spud during the third quarter of 2012.  Production volumes from the 2009 De Hoeve-1 well are currently expected to be brought on production by mid-year 2012 while production volumes from the 2011 drilling campaign are currently anticipated in late 2012 or early 2013.  Vermilion plans to maintain a rolling inventory of projects such that each year will involve a combination of new wells and the tie-in of prior successes.

In Ireland, the Corrib partners have received all key approvals enabling preparation and construction of the tunnelling site for the on-shore pipeline.  On January 22, 2012, the period for appeals of the regulatory permits expired with no appeals remaining outstanding effectively bringing the regulatory approval phase of the project to a close.  The Corrib partners have turned over the site to the tunnelling contractor to finalize construction in preparation to begin tunnelling activities in the fourth quarter of 2012.

Vermilion remains positioned to deliver strong operational and financial performance over the next several years as the Company anticipates growing production by approximately 35% to 50,000 boe/d in 2015 through the continued development of its significant portfolio of organic growth opportunities.  Combined with an anticipated 50% growth in fund flows from operations over that same period, Vermilion remains confident of its ability to maintain a stable dividend for investors with the potential for dividend growth once Vermilion's Corrib gas project comes on-stream in late 2014.  Near term development will continue to focus on high netback oil and European gas opportunities, including light oil production growth from the Cardium play in Western Canada and continued development of high-netback natural gas prospects in the Netherlands.  In addition, with the regulatory process now complete, Vermilion and its partners are positioned to complete construction of the on-shore pipeline, the final remaining phase of development for the Company's Corrib natural gas project in Ireland.  With five wells currently drilled, tested and ready for production and construction of related pipelines and facilities largely complete, the Corrib project is anticipated to deliver approximately 55 mmcf per day (9,000 boe/d) of net production to Vermilion when it comes on stream in late 2014 providing strong production and cash flow growth for the Company in 2015.  Beyond 2015, growth is anticipated to come from the development of new and emerging resource plays in Canada and Western Europe.  Beginning in late 2010, the Company launched its New Growth Initiative forming two teams of senior technical professionals focused on the identification and capture of positions in Canada and Europe providing exposure to new and emerging unconventional shale oil and natural gas development opportunities with potential to deliver meaningful production and reserves growth over the next five to ten years and beyond.  Relatively stable production in Australia, France and Ireland is expected to deliver free cash flow to enable the funding of these new growth opportunities.

The Company's conservative fiscal management and limited use of equity to finance its growth objectives should ensure that future growth is realized on a per share basis for investors.  The management and directors of Vermilion continue to control approximately 8% of the outstanding shares and remain committed to delivering superior rewards to all stakeholders.  Further, the Company continues to be recognized for excellence in its business practices.  In the first quarter of 2012, Vermilion was recognized for the third consecutive year by the Great Place to Work® Institute in both Canada and France.  Vermilion ranked as the 25th Best Workplace in Canada among more than 230 companies that participated in the study while Vermilion's France office ranked as the 24th Best Workplace in France.

1  Estimated proved plus probable reserves attributable to the assets as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") in a report dated October 14, 2011 with an effective date of December 31, 2011.

MANAGEMENT'S DISCUSSION AND ANALYSIS 

The following is Management's Discussion and Analysis ("MD&A"), dated May 3, 2012, of Vermilion Energy Inc.'s ("Vermilion" or the "Company") operating and financial results as at and for the three months ended March 31, 2012 compared with the corresponding period in the prior year.

This discussion should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2012 and the audited consolidated financial statements for the year ended December 31, 2011 and 2010, together with accompanying notes.  Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR at www.sedar.com or on Vermilion's website at www.vermilionenergy.com.

The unaudited condensed consolidated interim financial statements for the three months ended March 31, 2012 and comparative information have been prepared in Canadian dollars, except where another currency has been indicated, and in accordance with IAS 34, "Interim financial reporting", as issued by the International Accounting Standards Board.

NON-GAAP MEASURES

This report includes non-GAAP measures as further described herein.  These measures do not have standardized meanings prescribed by GAAP and therefore may not be comparable with the calculations of similar measures for other entities.

"Fund flows from operations" represents cash flows from operating activities before changes in non-cash operating working capital and asset retirement obligations settled.  Management considers fund flows from operations and per share calculations of fund flows from operations (see discussion relating to per share calculations below) to be key measures as they demonstrate Vermilion's ability to generate the cash necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments.  Management believes that by excluding the temporary impact of changes in non-cash operating working capital, fund flows from operations provides a useful measure of Vermilion's ability to generate cash that is not subject to short-term movements in non-cash operating working capital.  The most directly comparable GAAP measure is cash flows from operating activities.

Fund flows from operations (excluding the Corrib project) is the above amount, excluding transportation expense related to the Corrib project.  Transportation expense related to the Corrib project are due under a ship or pay agreement and, as there is a ceiling on the total payments due in relation to the associated pipeline, these expenses essentially represent a prepayment for future pipeline transportation services.

Cash flows from operating activities as presented in Vermilion's consolidated statements of cash flows are reconciled to fund flows from operations below:

    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011 2011   Q4/11 Q1/11
Cash flows from operating activities 124,887 158,639 126,617      
Changes in non-cash operating working capital 25,469 (29,315) (26,463)      
Asset retirement obligations settled 766 7,559 1,631      
Fund flows from operations 151,122 136,883 101,785   10% 48%
               
    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011  2011   Q4/11 Q1/11
Fund flows from operations 151,122 136,883 101,785      
Transportation expense related to the Corrib project 2,001 2,101 2,198      
Fund flows from operations (excluding the Corrib project) 153,123 138,984 103,983   10% 47%

"Acquisitions, including acquired working capital deficiency" is the sum of "Property acquisitions" as presented on Vermilion's consolidated statements of cash flows, plus any working capital deficiencies acquired as a result of those acquisitions.  Management considers acquired working capital deficiencies to be an important element of a property acquisition.

Property acquisitions as presented in Vermilion's consolidated statements of cash flows is reconciled to acquisitions, including acquired working capital deficiency below:

    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011  2011   Q4/11 Q1/11
Property acquisitions 106,184 12,777 38,291       
Working capital deficiencies acquired from acquisitions 4,098 - -      
Acquisitions, including acquired working capital deficiency 110,282 12,777 38,291   763% 188%

"Net debt" is the sum of long-term debt and working capital as presented in Vermilion's consolidated balance sheets.  Net debt is used by management to analyze the financial position and leverage of Vermilion.  The most directly comparable GAAP measure is long-term debt.

Long-term debt as presented in Vermilion's consolidated balance sheets is reconciled to net debt below:

  As At
  March 31, Dec 31,
($M) 2012 2011
Long-term debt 373,798 373,436
Current liabilities 493,465 491,184
Current assets (337,232) (435,659)
Net debt 530,031 428,961

"Cash dividends per share" represents cash dividends declared per share by Vermilion during the relevant periods.

"Net dividends" is calculated as dividends declared for a given period, less proceeds received by Vermilion pursuant to the dividend reinvestment plan.  Dividends both before and after the dividend reinvestment plan are reviewed by management and are also assessed as a percentage of fund flows from operations to analyze how much of the cash that is generated by Vermilion is being used to fund dividends.  Dividends declared is the most directly comparable GAAP measure to net dividends.  Dividends declared as presented in Vermilion's consolidated statement of changes in shareholders' equity is reconciled to net dividends as follows:

    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011 2011   Q4/11 Q1/11
Dividends declared 55,124 53,871 50,942      
Issuance of shares pursuant to the dividend reinvestment plan (17,558) (16,802) (12,976)      
Net dividends 37,566 37,069 37,966   1% (1%)

"Total net dividends, capital expenditures and asset retirement obligations settled" is calculated as net dividends as determined above, plus the following amounts for the relevant periods from Vermilion's consolidated statements of cash flows:  "Drilling and development", "Exploration and evaluation", and "Asset retirement obligations settled."

Total net dividends, capital expenditures and asset retirement obligations settled (excluding the Corrib project) is the above amount excluding drilling and development and asset retirement obligations settled relating to the Corrib project.

These measures are reviewed by management and are assessed as a percentage of fund flows from operations to analyze the amount of cash that is generated by Vermilion that is available to repay debt and fund potential acquisitions.  These non-GAAP measures are comprised of the following GAAP measures:

    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011 2011   Q4/11 Q1/11
Dividends declared 55,124 53,871 50,942   2% 8%
Issuance of shares pursuant to the dividend reinvestment plan (17,558) (16,802) (12,976)   4% 35%
Drilling and development 87,896 129,478 116,833   (32%) (25%)
Exploration and evaluation 6,464 22,773 1,581   (72%) 309%
Asset retirement obligations settled 766 7,559 1,631   (90%) (53%)
Total net dividends, capital expenditures and asset retirement obligations settled 132,692 196,879 158,011   (33%) (16%)
               
    Three Months Ended   % change
    March 31, Dec 31, March 31,   Q1/12 vs. Q1/12 vs.
($M) 2012 2011 2011   Q4/11 Q1/11
Total net dividends, capital expenditures and asset retirement obligations settled 132,692 196,879 158,011   (33%) (16%)
Capital expenditures and asset retirement obligations settled related            
  to the Corrib project (9,482) (13,869) (9,983)   (32%) (5%)
Total net dividends, capital expenditures and asset retirement obligations            
  settled (excluding the Corrib project) 123,210 183,010 148,028   (33%) (17%)

"Netbacks" are per unit of production measures used in operational and capital allocation decisions.

"Diluted shares outstanding" is the sum of shares outstanding at the period end plus outstanding awards under Vermilion's equity based compensation plan, based on current performance factor and forfeiture estimates.

Shares outstanding is reconciled to diluted shares outstanding below:

  As At
  March 31, Dec 31, March 31,
('000s of shares) 2012 2011 2011
Shares outstanding 96,838 96,430 89,856
Potential shares issuable pursuant to equity based compensation plan 2,719 2,348 1,981
Diluted shares outstanding 99,557 98,778 91,837

OPERATIONAL ACTIVITIES  

Canada

In Canada, Vermilion participated in the drilling of 27 wells (19.2 net) during the first quarter of 2012. These wells included 17 (15.8 net) operated Cardium horizontal wells and 7 (2.3 net) non-operated Cardium wells. At the end of the first quarter of 2012, 64 operated (56.6 net) Cardium wells were on production and 45 (14.6 net) non-operated wells were on production. While drilling and completions activity has remained robust during the first quarter of 2012, Vermilion currently plans for a moderate slowdown in activity and production additions during the second quarter of 2012 as a result of some completions and tie-ins being deferred until the summer months when spring break-up is complete.

France

In France, Vermilion continued with an active workover and recompletion program in addition to assuming operatorship of production associated with the recently acquired working interests in the Paris and Aquitaine basins.  Vermilion continues to work toward full integration of the acquired a

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