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Vermilion Energy Inc. Announces Results for the Three and Nine Months Ended September 30, 2019

October 31, 2019

CALGARY, Oct. 31, 2019 /CNW/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report operating and condensed financial results for the three and nine months ended September 30, 2019.

The unaudited financial statements and management discussion and analysis for the three and nine months ended September 30, 2019, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml, and on Vermilion's website at www.vermilionenergy.com.

Highlights

  • Q3 2019 production averaged 97,239 boe/d, a decrease of 6% from the prior quarter. The lower production level resulted from a number of plant turnarounds, unplanned downtime, and weather delays. Higher production in the US and France was more than offset by lower production in Canada, Netherlands, Ireland and Australia.

  • We have reduced our 2019 capital investment guidance by $10 million to $520 million. With nine months of results in place, we are revising our 2019 annual production guidance range to 100,000 to 101,000 boe/d to account for the unplanned downtime and lower capital investment. We expect to deliver annual production at the mid-point of this revised guidance range, reflecting strong year-over-year production per share growth of 5%.

  • Fund flows from operations ("FFO") for Q3 2019 was $216 million ($1.39/basic share(1)), a decrease of 3% from the previous quarter, primarily due to lower production volumes and weaker commodity prices. FFO for Q3 2019 decreased 17% from the same quarter last year as increased production was more than offset by weaker global commodity pricing.

  • In the United States, Q3 2019 production averaged 4,925 boe/d, an increase of 12% from the prior quarter, primarily driven by contributions from our 2019 drilling program, which continues to perform above our expectations. New well results were partially offset by a longer-than-expected turnaround at a third-party operated gas plant.

  • In Central and Eastern Europe, we drilled one (1.0 net) exploration well in Croatia during Q3 2019, which resulted in a second consecutive gas discovery. The well tested at a rate of 17.2 mmcf/d(2). We were also provisionally awarded the SA-07 license in Croatia, adding approximately 500,000 net acres to our portfolio, which will bring our total licensed acreage to approximately 2.4 million net acres in the country.

  • In France, Q3 2019 production averaged 10,347 boe/d, an increase of 6% from the prior quarter. Production volumes in the Paris Basin were no longer restricted after restart of the Grandpuits refinery in mid-August.

  • In Canada, Q3 2019 production averaged 58,504 boe/d, a decrease of 5% from the prior quarter. The decrease was primarily due to planned turnarounds and project delays caused by abnormally wet weather.

  • In the Netherlands, Q3 2019 production averaged 7,429 boe/d, a decrease of 17% from the prior quarter, primarily due to a planned turnaround and subsequent repairs required on a gas compression facility.

  • In Ireland, Q3 2019 production averaged 43 mmcf/d (7,202 boe/d), a decrease of 12% from the prior quarter. The decrease was primarily due to a planned plant turnaround and unplanned downtime at the Corrib natural gas processing facility. The downtime, which was unrelated to the plant turnaround, was remedied by early October.

  • In Australia, Q3 2019 production averaged 5,564 bbl/d, a decrease of 17% from the previous quarter primarily due to well management and unplanned vessel maintenance on the Wandoo platform.

  • Our Board of Directors has approved a 2020 Exploration and Development ("E&D") capital budget of $450 million, with associated production guidance of 100,000 to 103,000 boe/d. Our 2020 budget reflects continued emphasis on returning capital to investors, while still providing modest production growth. Within this budget, we also continue to advance strategic capital projects associated with early-stage exploration and development activities.

  • We have elected to phase out the Dividend Reinvestment Plan ("DRIP"), prorating the available DRIP shares by 25% each quarter starting in Q1 2020, until completely eliminated in Q4 2020.

  • Vermilion received top quartile rankings for 2019 for our industry sector in both the Sustainalytics ESG Rating and SAM (formerly known as RobecoSAM) annual Corporate Sustainability Assessment ("CSA"). These agencies analyze sustainability performance across economic, environmental, governance and social criteria, and the CSA is also the basis of the Dow Jones Sustainability Indices. Our 2019 Sustainability Report is available on our corporate website at: http://sustainability.vermilionenergy.com.

(1)

Non-GAAP Financial Measure.  Please see the "Non-GAAP Financial Measures" section of Management's Discussion and Analysis.



(2)

Berak-01 well (100% working interest) tested at a rate of 17.2 mmcf/d during a four-hour flow period with a stabilized flowing wellhead pressure of 908 psi on a 0.875 inch diameter choke.  A final shut in wellhead pressure of 1,186 psi was recorded following the flow test.  The flow test continued an additional 12 hours at reduced choke sizes to minimize flaring.  No formation water was produced during the test.  The well logged 21 feet of net gas pay with an average porosity of 32% from the Upper Miocene Pannonian sandstone occurring within a gross measured depth interval of 3,006-3,033 feet.  Test results are not necessarily indicative of long-term performance or ultimate recovery.

 













($M except as indicated)

Q3 2019


Q2 2019


Q3 2018



YTD 2019


YTD 2018

Financial











Petroleum and natural gas sales

391,935



428,043



508,411




1,301,061



1,221,178


Fund flows from operations

216,153



222,738



260,705




692,463



616,310


    Fund flows from operations ($/basic share) (1)

1.39



1.44



1.71




4.49



4.51


    Fund flows from operations ($/diluted share) (1)

1.39



1.42



1.69




4.45



4.46


Net earnings (loss)

(10,229)



2,004



(15,099)




31,322



(51,723)


    Net earnings (loss) ($/basic share)

(0.07)



0.01



(0.10)




0.2



(0.38)


Capital expenditures

127,879



92,607



146,185




422,539



354,634


Acquisitions

4,657



8,623



198,173




29,307



1,756,736


Asset retirement obligations settled

3,586



4,907



2,986




12,090



9,203


Cash dividends ($/share)

0.690



0.690



0.690




2.070



2.025


Dividends declared

107,176



106,884



105,192




319,609



282,801


    % of fund flows from operations

50

%


48

%


40

%



46

%


46

%

Net dividends (1)

98,316



98,111



100,872




294,872



238,865


    % of fund flows from operations

45

%


44

%


39

%



43

%


39

%

Payout (1)

229,781



195,625



250,043




729,501



602,702


    % of fund flows from operations

106

%


88

%


96

%



105

%


98

%

Net debt

2,001,870



1,950,509



2,034,086




2,001,870



2,034,086


Net debt to trailing twelve months fund flows from operations

2.19



2.03



2.55




2.19



2.55


Operational

Production











    Crude oil and condensate (bbls/d)

47,242



48,964



47,152




48,455



36,318


    NGLs (bbls/d)

7,772



8,107



6,839




7,925



5,878


    Natural gas (mmcf/d)

253.36



275.60



253.38




268.88



241.42


    Total (boe/d)

97,239



103,003



96,222




101,193



82,433


Average realized prices











    Crude oil and condensate ($/bbl)

73.45



79.46



85.84




75.38



84.98


    NGLs ($/bbl)

6.14



11.25



27.97




13.25



26.61


    Natural gas ($/mcf)

2.43



3.09



5.35




3.56



5.30


Production mix (% of production)











    % priced with reference to WTI

39

%


38

%


37

%



38

%


30

%

    % priced with reference to Dated Brent

19

%


18

%


18

%



18

%


21

%

    % priced with reference to AECO

26

%


26

%


26

%



26

%


26

%

    % priced with reference to TTF and NBP

16

%


18

%


19

%



18

%


23

%

Netbacks ($/boe)











    Operating netback (1)

28.22



29.62



34.85




29.80



33.26


    Fund flows from operations netback

23.73



24.15



29.69




24.89



27.59


    Operating expenses

11.55



11.04



11.13




11.85



10.94


    General and administration expenses

1.50



1.70



1.51




1.53



1.75


Average reference prices











    WTI (US $/bbl)

56.45



59.81



69.50




57.06



66.75


    Edmonton Sweet index (US $/bbl)

51.79



55.19



62.68




52.34



60.69


    Saskatchewan LSB index (US $/bbl)

52.01



55.54



63.35




52.81



60.61


    Dated Brent (US $/bbl)

61.94



68.82



75.27




64.65



72.13


    AECO ($/mcf)

1.06



1.03



1.19




1.64



1.48


    NBP ($/mcf)

4.50



5.44



10.95




6.08



10.12


    TTF ($/mcf)

4.40



5.75



10.92




6.08



10.00


Average foreign currency exchange rates











    CDN $/US $

1.32



1.34



1.31




1.33



1.29


    CDN $/Euro

1.47



1.50



1.52




1.49



1.54


Share information ('000s)

Shares outstanding - basic

155,505



155,032



152,497




155,505



152,497


Shares outstanding - diluted (1)

159,260



158,633



155,747




159,260



155,747


Weighted average shares outstanding - basic

155,254



154,795



152,432




154,326



136,585


Weighted average shares outstanding - diluted (1)

155,421



156,844



153,839




155,673



138,258


(1) 

The above table includes non-GAAP financial measures which may not be comparable to other companies.  Please see the "Non-GAAP Financial Measures" section of the accompanying Management's Discussion and Analysis.

 

Message to Shareholders

The third quarter of 2019 continued to be an exceptionally difficult period for energy investors, as the upstream oil and gas sector traded down to multi-year lows and significantly underperformed the broader equity market.  Vermilion was not spared.  Our stock price declined over 30% during the quarter, bringing our current dividend yield to approximately 14%.  While we are certainly disappointed with our share price performance, we would like to stress that Vermilion's dividend policy is not based on the market price of our shares. Our dividend policy is based on the fundamental economic sustainability and free cash flow generation of our business, which remains strong.

The capital markets environment for oil and gas companies has changed dramatically over recent years due to a multitude of factors, including poor investment returns from energy issuers, increased focus on ESG and SRI mandates, and a growing concern about the future of fossil fuels amongst both investors and the general public.  This has led to valuation multiple compression across the entire sector with many companies, including Vermilion, trading significantly below their historical valuation metrics.  Despite these changing capital market dynamics, the oil and gas sector is a vital contributor to the global economy and will be around for many decades to support the long-term energy transition.  During this transition, we believe there is significant value to be realized from responsible energy investment, and that Vermilion is optimally positioned to prosper in this industry and market environment.  Our belief in Vermilion is founded in the economic sustainability of our business model and our leadership in environmental sustainability in the upstream oil and gas sector.

Throughout our 25-year history, we have repeatedly made the necessary adjustments to adapt to the changing landscape around us.  Our business model has focused on sustainable growth and income, which we have successfully delivered to our shareholders over the years.  Vermilion has paid over $39 per share in distributions and dividends since 2003 and generated compounded growth in production per share of over 8% annually since 2012.  Our investment cycle time is short with minimal fixed commitments.  Consequently, we have flexibility to adjust our investment and growth levels to provide the combination of return of capital and growth which we think will maximize shareholder value in a changing capital market environment.  Based on the current market and commodity environment, we believe a strategy that is even more focused on free cash flow generation will create the most value for our shareholders.  As such, for 2020, while maintaining our dividend at current levels, we have elected to reduce our production growth rate and to introduce additional flexibility in how we return capital to investors.

This lower growth strategy was embedded i

Vermilion Energy Inc.
3500, 520 3rd Avenue SW
Calgary, Alberta T2P 0R3
Phone: 1-403-269-4884
Fax: 1-403-476-8100
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