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CALGARY, Nov. 9, 2015 /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, 2015.
|(1)||Additional GAAP Financial Measure. Please see the "Additional and Non-GAAP Financial Measures" section of Management's Discussion and Analysis.|
Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Monday, November 9, 2015 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 49495111. The replay will be available until midnight mountain time on November 16, 2015.
You may also listen to the audio webcast by going to http://event.on24.com/r.htm?e=1056685&s=1&k=8F525422649C891C089BC59110D715CC or visit Vermilion's website at www.vermilionenergy.com/ir/eventspresentations.cfm.
|Three Months Ended||Nine Months Ended|
|($M except as indicated)||Sep 30,||Jun 30,||Sep 30,||Sep 30,||Sep 30,|
|Petroleum and natural gas sales||245,051||264,331||344,688||705,267||1,113,555|
|Fund flows from operations (1)||129,435||129,496||197,898||379,726||619,337|
|Fund flows from operations ($/basic share)||1.17||1.18||1.85||3.48||5.90|
|Fund flows from operations ($/diluted share)||1.16||1.17||1.83||3.44||5.81|
|Net earnings (loss)||(83,310)||6,813||53,903||(75,222)||210,684|
|Net earnings (loss) ($/basic share)||(0.76)||0.06||0.50||(0.69)||2.01|
|Asset retirement obligations settled||2,123||1,218||4,677||6,448||9,709|
|Cash dividends ($/share)||0.645||0.645||0.645||1.935||1.935|
|% of fund flows from operations||55%||55%||35%||56%||33%|
|Net dividends (1)||26,654||28,675||48,480||103,341||145,163|
|% of fund flows from operations||21%||22%||24%||27%||23%|
|% of fund flows from operations||94%||93%||123%||123%||109%|
|% of fund flows from operations (excluding the Corrib project)||77%||76%||107%||107%||97%|
|Net debt (1)||1,363,043||1,377,902||1,243,438||1,363,043||1,243,438|
|Ratio of net debt to annualized fund flows from operations (1)||2.6||2.7||1.6||2.7||1.5|
|Crude oil (bbls/d)||28,164||28,916||29,147||28,420||28,890|
|Natural gas (mmcf/d)||140.97||114.29||110.52||123.51||109.33|
|Average realized prices|
|Crude oil and NGLs ($/bbl)||56.57||68.90||102.49||61.48||108.02|
|Natural gas ($/mcf)||5.36||4.86||5.74||5.18||6.60|
|Production mix (% of production)|
|% priced with reference to WTI||24%||27%||28%||26%||27%|
|% priced with reference to AECO||22%||21%||18%||21%||18%|
|% priced with reference to TTF||20%||16%||18%||18%||18%|
|% priced with reference to Dated Brent||34%||36%||36%||35%||37%|
|Netbacks ($/boe) (1)|
|Fund flows from operations netback||24.58||26.76||44.08||26.64||46.02|
|Average reference prices|
|WTI (US $/bbl)||46.43||57.94||97.17||51.00||99.61|
|Edmonton Sweet index (US $/bbl)||43.01||55.08||89.24||46.64||92.17|
|Dated Brent (US $/bbl)||50.26||61.92||101.85||55.39||106.57|
|Average foreign currency exchange rates|
|CDN $/US $||1.31||1.23||1.09||1.26||1.09|
|Share information ('000s)|
|Shares outstanding - basic||110,818||109,806||106,921||110,818||106,921|
|Shares outstanding - diluted (1)||113,643||112,626||109,749||113,643||109,749|
|Weighted average shares outstanding - basic||110,293||109,319||106,768||109,052||104,891|
|Weighted average shares outstanding - diluted||111,193||110,746||108,290||110,433||106,582|
|(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.|
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 crude 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 crude 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|
|HH||Henry Hub, a reference price paid for natural gas in US dollars at Erath, Louisiana|
|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|
|NGTL||NOVA Gas Transmission Ltd., a wholly owned subsidiary of TransCanada is the owner of a gas transmission system known as the NGTL system. The NGTL system is a 23,500 km pipeline that gathers natural gas for both use in Alberta, and to deliver it to provincial border points for export to North American markets.|
|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|
MESSAGE TO SHAREHOLDERS
Crude oil prices once again came under significant pressure during the third quarter of 2015 with WTI reaching its lowest level since the financial crisis of 2008-2009. This continued price volatility, coupled with an emerging consensus that we are in a "lower for longer" price environment, provides an opportunity to share our perspective on Vermilion's strengths in today's challenging conditions.
Since inception, we have remained highly disciplined in our approach to financial management. We have historically targeted our cash outflows (net cash dividends, capital expenditures plus abandonment and reclamation costs) at levels equal to, or less than, our cash inflows (fund flows from operations.) In addition, we have targeted moderate leverage ratios, enabling us to manage through lower commodity price environments and take advantage of compelling business opportunities. This conservative approach allowed us to enter the current commodity price downturn in a position of relative financial strength as compared to many of our peers and to avoid large equity issues during this part of the commodity cycle.
Sustainability has always been paramount in our dividend policy. We have raised the dividend three times since it was initiated in 2003. We have never reduced our dividend, and we do not foresee the need to do so in the future.
We have proactively managed our credit capacity to ensure sufficient liquidity to meet the expected requirements of our business, irrespective of the financial environment. Vermilion has a 4-year revolving credit facility totalling $2.0 billion and more than $700 million of borrowing capacity available at the end of the quarter. We are, and expect to continue to remain, in compliance with all applicable debt covenants. We currently intend to use our revolving credit facility to retire $225 million in senior unsecured notes that mature in February 2016 as we continue to evaluate options for long-term refinancing.
Vermilion's management approach allows us to quickly adapt to changes in the external environment. Following the unexpected commodity downturn in 2014, we acted decisively to reduce our 2015 capital program by 30% from 2014 levels. We are once again taking action to preserve our financial flexibility and maintain a sustainable business model by targeting a preliminary capital expenditure level for 2016 of approximately $350MM, a nearly 50% reduction from 2014 expenditures levels. In the latter part of 2014, we introduced the third installment of our Profitability Enhancement Program ("PEP") to identify opportunities to reduce costs to support the long-term profitability of our Company. Prior installments of PEP achieved strong results in both the 1998 industry downturn and the financial crisis of 2008-2009. We expect that our third installment of PEP will result in cost savings related to capital spending, operating expense and G&A expenditures estimated at between $70 and $80 million for full-year 2015.
Vermilion's international diversification has played a significant role in our success, and is a key advantage differentiating us from our peer group. Over the past number of years, we have benefitted from the premium that our Brent-priced oil production has received as compared to WTI-based oil production in North America. More recently, our growing exposure to European natural gas has supported our ability to continue to deliver strong financial results in the current commodity price environment. As European natural gas prices remain at levels approximately three times those in North America, a significant part of our strategic focus has been on maximizing our exposure to this advantageously-priced commodity. In addition, our growing exposure to European natural gas also helps to reduce the volatility of our composite revenue stream. This, in turn, reduces the volatility of our internally-generated cash flow which funds our capital program and cash dividends.
Another key benefit of Vermilion's geographic diversity is that it provides the Company with a large inventory of potential capital investment opportunities. This allows us to select and fund projects that will generate the highest return in a given economic environment. This advantage is even more important in a low commodity price environment in which available capital funding is highly restricted.
Vermilion has a large resource base in its three operating regions which present a number of diverse, high-return, organic investment opportunities. We believe that this resource base leaves us well-positioned for long-term, value-adding, organic growth. In addition, our strong asset and operating positions result in significant advantages over our competitors in a number of jurisdictions, particularly in onshore Europe. This "franchise" has historically led to enhanced returns on acquisition opportunities as compared to what can typically be achieved in North America alone. We believe Vermilion remains positioned to deliver both continued organic growth and the potential for opportunistic, high return acquisitions, while maintaining sustainable and growing dividends to our shareholders.
Third Quarter Review
Record quarterly production of 56,280 boe/d for Q3 2015 exceeded prior quarter production of 51,831 boe/d by 9%. This quarter-over-quarter increase was primarily attributable to higher production in the Netherlands due to recent drilling success, with additional contributions from the Canadian Mannville drilling program and increased Australian oil production. Canadian third-party facility restrictions impacted average production by approximately 900 boe/d during Q3.
In July, we placed two Netherlands wells (Slootdorp-06/07 - 92.8% working interest) on production for an extended production test. The two wells, drilled in the prior quarter, contributed approximately 24 mmcf/d (4,000 boe/d) to the quarter's average production rate. We also executed various debottlenecking activities, both during and after the quarter, to enhance deliverability from these wells. The Diever-02 exploration well (45% working interest), drilled in 2014, came on production in early November for an extended production test at a gross rate of 28.5 mmcf/d (4,750 boe/d). Because of current pipeline constraints in the multi-well system that Diever-02 produces into, Vermilion's net incremental production increase from this well is limited to approximately 6 mmcf/d (1,000 boe/d), net to Vermilion.
In France, production from the four (4.0 net) well Champotran drilling program executed in Q1 2015 continues to exceed expectations. After converting one of the wells to a waterflood injector, total oil production from the remaining three producing wells was approximately 820 bbls/d at the end of the quarter. Results from other activities directed at our Champotran field have also been highly positive. Our Champotran waterflood program has continued to provide strong results, delivering highly capital efficient production growth. We recorded an increase of approximately 300 bbls/d over the cour