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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
(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