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CALGARY, Nov. 10, 2014 /CNW/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report operating and unaudited financial results for the three and nine months ended September 30, 2014.
|(1)||Additional GAAP Financial Measure. Please see the "Additional and Non-GAAP Financial Measures" section of Management's Discussion and Analysis.|
|(2)||Estimated proved plus probable reserves and contingent resources attributable to the assets as evaluated by GLJ Petroleum Consultants Ltd. in a report dated October 28, 2014, with an effective date of July 1, 2014, using the GLJ (2014-07) price forecast.|
|(3)||Test results are not necessarily indicative of long-term production performance or of ultimate recovery.|
Vermilion Energy Inc. Third Quarter 2014 Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Monday, November 10, 2014 at 9:00 AM MST (11:00 AM EST). To participate, you may call 1-888-231-8191 (Canada and US Toll Free) or 1-647-427-7450 (International and Toronto Area). The conference call will also be available on replay by calling 1-855-859-2056 using conference ID number 6117964. The replay will be available until midnight eastern time on November 17, 2014.
You may also listen to the audio webcast at http://event.on24.com/r.htm?e=852632&s=1&k=79DE9E8E7910A2E76368C9BFBF328E76 or visit Vermilion's website at www.vermilionenergy.com/ir/eventspresentations.cfm.
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: capital expenditures; business strategies and objectives; operational and financial performance; 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 and amount of future dividends; royalty and income tax rates; the timing of regulatory proceedings and approvals; and the timing of first commercial natural gas 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 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 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 Vermilion 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 exploration and 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. Financial outlooks are provided for the purpose of understanding Vermilion's financial position 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 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 Vermilion'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 and associated expenditures; potential delays or changes in plans with respect to exploration or development projects; Vermilion'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 Vermilion to add production and reserves through exploration and development activities; 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.
All oil and natural gas reserve information contained in this document has been prepared and presented in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The actual oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document. The estimated future net revenue from the production of oil and natural gas reserves does not represent the fair market value of these reserves.
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.
|AECO||the daily average benchmark price for natural gas at the AECO 'C' hub in southeast Alberta|
|bbls/d||barrels per day|
|bcf||billion cubic feet|
|boe||barrel of oil equivalent, including: crude oil, natural gas liquids and natural gas (converted on the basis of one boe for|
|six mcf of natural gas)|
|boe/d||barrel of oil equivalent per day|
|mboe||thousand barrel of oil equivalent|
|mcf||thousand cubic feet|
|mcf/d||thousand cubic feet per day|
|mmboe||million barrel of oil equivalent|
|mmcf||million cubic feet|
|mmcf/d||million cubic feet per day|
|NGLs||natural gas liquids|
|PRRT||Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia|
|TTF||the day-ahead price for natural gas in the Netherlands, quoted in MWh of natural gas, at the Title Transfer Facility|
|Virtual Trading Point operated by Dutch TSO Gas Transport Services|
|WTI||West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma|
|Three Months Ended||Nine Months Ended|
|($M except as indicated)||Sep 30,||Jun 30,||Sep 30,||Sep 30,||Sep 30,|
|Petroleum and natural gas sales||344,688||387,684||327,185||1,113,555||948,727|
|Fund flows from operations (1)||197,898||216,076||165,645||619,337||503,866|
|Fund flows from operations ($/basic share)||1.85||2.05||1.63||5.90||5.01|
|Fund flows from operations ($/diluted share)||1.83||2.01||1.61||5.81||4.94|
|Net earnings ($/basic share)||0.50||0.51||0.67||2.01||2.25|
|Asset retirement obligations settled||4,677||2,381||2,738||9,709||6,496|
|Cash dividends ($/share)||0.645||0.645||0.600||1.935||1.800|
|% of fund flows from operations||35%||32%||37%||33%||36%|
|Net dividends (1)||48,480||49,561||41,649||145,163||127,875|
|% of fund flows from operations||24%||23%||25%||23%||25%|
|% of fund flows from operations||123%||87%||109%||109%||105%|
|% of fund flows from operations (excluding the Corrib project)||107%||73%||87%||97%||89%|
|Net debt (1)||1,243,438||1,168,998||700,286||1,243,438||700,286|
|Ratio of net debt to annualized fund flows from operations (1)||1.6||1.4||1.1||1.5||1.0|
|Crude oil (bbls/d)||29,147||30,184||26,664||28,890||25,640|
|Natural gas (mmcf/d)||110.52||114.08||77.41||109.33||81.97|
|Average realized prices|
|Crude oil and NGLs ($/bbl)||102.49||109.89||108.87||108.02||103.95|
|Natural gas ($/mcf)||5.74||6.19||6.00||6.60||6.68|
|Production mix (% of production)|
|% priced with reference to WTI||28%||30%||24%||27%||24%|
|% priced with reference to AECO||18%||18%||17%||18%||17%|
|% priced with reference to TTF||18%||18%||14%||18%||16%|
|% priced with reference to Dated Brent||36%||34%||45%||37%||43%|
|Netbacks ($/boe) (1)|
|Fund flows from operations netback||44.08||46.24||43.60||46.02||44.13|
|Average reference prices|
|WTI (US $/bbl)||97.17||102.99||105.82||99.61||98.14|
|Edmonton Sweet index (US $/bbl)||89.24||96.85||101.10||92.17||93.03|
|Dated Brent (US $/bbl)||101.85||109.63||110.37||106.57||108.45|
|Average foreign currency exchange rates|
|CDN $/US $||1.09||1.09||1.04||1.09||1.02|
|Share information ('000s)|
|Shares outstanding - basic||106,921||106,620||101,787||106,921||101,787|
|Shares outstanding - diluted (1)||109,749||109,371||104,195||109,749||104,195|
|Weighted average shares outstanding - basic||106,768||105,577||101,613||104,891||100,634|
|Weighted average shares outstanding - diluted (1)||108,290||107,330||102,763||106,582||102,083|
|(1)||The above table includes additional GAAP and non-GAAP financial measures which may not be comparable to other companies. Please see the "ADDITIONAL AND NON-GAAP FINANCIAL MEASURES" section of Management's Discussion and Analysis.|
MESSAGE TO SHAREHOLDERS
In 2014, we celebrated Vermilion's 20th anniversary as a publicly traded company. It has been a demanding, but also a tremendously rewarding 20 years. During this time, we have witnessed significant change and encountered many challenges to the industry, and we are particularly proud of our demonstrated ability to effectively navigate those challenges to the benefit of our shareholders. Today's environment is no different. The recent volatility in the capital markets, and more particularly in the energy sector (due to a rapid fall in commodity prices and near term price expectations), creates yet another opportunity for us to demonstrate the sustainability of our business model and the advantages of our diversified portfolio. Vermilion's relative performance during this period has once again demonstrated the stable and defensive nature of our business, our strong positioning within the industry, and our shareholders' continued confidence in our ability to prosper. Our balance sheet remains strong and we believe our longer-term focus, combined with our conservative approach and patience, will allow us to create further opportunity for our shareholders in the current environment.
Reflecting on Vermilion's record, we are pleased that our previous efforts have resulted in a compound average total return including dividends, as of September 30, 2014, of 36.4% per annum since inception. We are also proud of the consistency of those returns. Over the last one, three, five, ten and 15 calendar-year periods, we have reliably delivered double-digit compound average total returns of 24.6%, 14.5%, 24.0%, 18.6% and 25.5%, respectively.
In spite of current commodity price weakness, we continue to believe that Vermilion is better situated for continued growth than at any other time in our history. With the consistent performance of our operations and our expansive and growing opportunity base, we remain confident that we are positioned to deliver continued strong operational and financial performance in the future, while also providing a reliable and growing dividend stream to our shareholders.
We are confident that the assets in our current portfolio contain significant opportunity for growth for years to come. In the current environment, we also find ourselves positioned to enhance growth in shareholder value and further diversify our opportunity base through acquisition activity in both North American and international markets.
In February 2014 we announced our entry into Germany. Germany has a long history of oil and gas development activity, low political risk and strong marketing fundamentals. The acquisition provides us with entry into this sizable market, in the form of free cash flow(1) generating, low-decline assets with near-term development inventory in addition to longer-term, low-permeability gas prospectivity. We believe that our conventional and unconventional expertise, coupled with new access to proprietary technical data, will position us for future development and expansion opportunities in both Germany and the greater European region.
In late April 2014 we announced the completion of our acquisition of Elkhorn Resources Inc., a private southeast Saskatchewan producer. The acquired assets consist of high netback, light oil production in the Northgate region of southeast Saskatchewan and include approximately 57,000 net acres of land (approximately 80% undeveloped), seven oil batteries, and preferential access to 50% or greater capacity at a solution gas facility that is currently under construction.
In addition, we recently completed an $11.1 million transaction which marks our first acquisition in the United States, representing a low-cost entry position in the prolific Powder River Basin of northeastern Wyoming. The transaction provides a promising tight oil development project, and we have put in place the human resources necessary to support future organic growth and acquisitions in the region. Through the transaction, we acquired approximately 68,000 acres of land (98% undeveloped) with current working interest production of approximately 200 bbls/d (100% oil), proved plus probable reserves estimated at 2.2(2) million boe (82% oil) and contingent resource of 10.0(2) million boe (82% oil). Transaction metrics, with no deduction for land value, equate to approximately $56,000 per boe/d and $20.98 per boe, including future development costs of approximately $35.3 million. The land base includes 53,000 net acres at a 70% operated working interest in a promising tight oil project in the Turner Sand at a depth of approximately 1,500 metres. The most recently completed well on this land block (70% working interest) is currently producing approximately 220 bbls/d of oil in its fourth month of production, from an approximately 1,100 metre hydraulically-fractured horizontal lateral.
Looking ahead we see continued opportunity for expansion. In North America, we are faced with an active asset market and we continue to see technology unlocking new opportunities for development. With Vermilion's access to relatively low cost capital, our conservative balance sheet, and significant near-term free cash flow growth on the horizon (including from Corrib, which is expected to commence production in mid-2015), we are well positioned to compete and transact should suitable opportunities arise. While international asset markets remain substantially less liquid than in North America, we similarly find ourselves well-positioned for assets that do become available in our selective regions of interest.
The third quarter of 2014 marks another quarter of consistent operational execution for our Company. We continue to achieve strong results from our successful Mannville condensate-rich gas and Cardium light-oil development programs in Canada. Our strong Cardium results reflect continued improvements in completions design and better-than-forecasted production v