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CALGARY, March 5, 2012 /CNW/ - Vermilion Energy Inc. ("Vermilion" or the "Company") (TSX - VET) is pleased to report interim operating and unaudited financial results for the year ended December 31, 2011.
|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.|
Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Monday, March 5, 2012 at 9:00 AM MST (11:00 AM EST). To participate, you may call toll free 1-877-407-9205 (North America) or 1-201-689-8054 (International). The conference call will also be available on replay by calling 1-877-660-6853 (North America) or 1-201-612-7415 (International) using account number 286 and conference ID number 384826. The replay will be available until midnight eastern time on March 12, 2012.
You may also listen to the audio webcast by clicking http://www.investorcalendar.com/IC/CEPage.asp?ID=166857 or visit Vermilion's website at http://www.vermilionenergy.com/ir/eventspresentations.cfm.
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:
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:
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 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.
|($M except as indicated below)||Three Months Ended||Year Ended|
|Dec 31,||Sept 30,||Dec 31,||Dec 31,||Dec 31,|
|Petroleum and natural gas sales||275,172||248,361||216,426||1,031,570||727,805|
|Fund flows from operations 1||136,883||116,369||98,162||474,336||357,529|
|Fund flows from operations ($/adjusted basic share)||1.46||1.29||1.11||5.22||4.05|
|Fund flows from operations ($/adjusted diluted share)||1.44||1.27||1.09||5.14||3.99|
|Net earnings (loss)||(30,243)||64,442||(21,809)||142,821||44,395|
|Net earnings (loss) per share, basic ($/basic share)||(0.32)||0.71||(0.25)||1.57||0.53|
|Asset retirement obligations settled||7,559||4,269||5,110||23,071||6,861|
|Cash dividends ($/share)||0.57||0.57||0.57||2.28||2.28|
|Less: Issuance of shares pursuant to the dividend reinvestment plan||(16,802)||(15,219)||(13,467)||(59,081)||(40,824)|
|Net dividends 1||37,069||36,393||37,197||148,765||148,920|
|% of fund flows from operations, gross||39%||44%||52%||44%||53%|
|% of fund flows from operations, net||27%||31%||38%||31%||42%|
|Total net dividends, capital expenditures and asset retirement obligations settled1||196,879||175,443||147,742||662,616||587,151|
|% of fund flows from operations||144%||151%||151%||140%||164%|
|% of fund flows from operations (excluding the Corrib project)||134%||132%||136%||125%||142%|
|Net debt 1||428,961||303,295|
|Return on shareholders' equity (%)||12%||5%|
|Crude oil (bbls/d)||22,096||20,464||21,573||20,979||18,479|
|Natural gas (mcf/d)||79,478||77,056||73,899||77,207||73,144|
|Average selling price|
|Crude oil and NGLs ($/bbl)||105.49||100.71||83.88||104.58||79.54|
|Natural gas ($/mcf)||6.57||6.50||5.74||6.35||5.58|
|Netbacks (6:1) ($/boe) 1|
|Fund flows netback||40.60||36.46||30.23||36.93||30.48|
|Average reference prices|
|WTI (US $/bbl)||94.06||89.76||85.17||95.12||79.53|
|Dated Brent (US $/bbl)||109.31||113.46||86.48||111.27||79.47|
|Average foreign exchange rates|
|CDN $/US $||1.02||0.98||1.01||0.99||1.03|
|Shares outstanding ('000s)|
|Basic shares outstanding||96,430||88,998|
|Diluted shares outstanding 1||98,778||91,144|
|Weighted average shares outstanding ('000s)|
|Adjusted basic shares outstanding 1||93,616||90,492||88,832||90,878||88,213|
|Adjusted diluted shares outstanding 1||95,082||91,710||90,273||92,272||89,555|
|Share trading ($/share)|
|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 in this news release.|
2011 IN REVIEW AND 2012 OUTLOOK
2011 highlighted the strength of Vermilion's international operations and the advantages of its global commodity exposure. While many of Vermilion's Canadian peers struggled with difficult operating conditions during the second quarter of 2011, Vermilion's operations and production growth continued largely unabated due to the strength of its international operations in Australia, France and the Netherlands. Robust year over year production growth in Australia (11%) and the Netherlands (17%) combined with steady growth in Cardium related production volumes in Canada during the second half of the year resulted in strong 10% year over year growth in Vermilion's consolidated production volumes in 2011.
The advantages of Vermilion's global commodity exposure has never been more apparent than in 2011, a year where Dated Brent crude averaged US$111.27 per bbl, a US$16.15 per bbl premium to West Texas Intermediate which averaged US$95.12 per bbl in 2011. This afforded Vermilion a significant advantage with approximately 46% of 2011 production volumes comprised of Dated Brent crude and a further 16% comprised of Netherlands natural gas which averaged $9.59 per mcf during 2011 as a result of being priced off a basket of primarily Dated 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 its peers who are faced with significant exposure to weakening North American natural gas prices and a recent widening of the discount for Canadian based crude products relative to West Texas Intermediate, which remains at a significant discount to Dated Brent. Vermilion's global commodity leverage enabled fund flows from operations to grow by nearly 33% in 2011, notably outpacing the Company's strong year over year production growth of 10%.
Vermilion continues to be recognized for excellence in its business practices. In 2011, Vermilion was recognized for the second consecutive year as one of the top 25 Best Workplaces in Canada as compiled by the Great Place to Work® Institute and was similarly recognized for the second consecutive year as one of the top 15 Best Workplaces in France. Vermilion was also recognized as one of Canada's top oil and gas companies in terms of corporate governance in the Globe and Mail's annual Board Games survey.
Operational Year in Review
Development capital spending was $490.8 million in 2011 compared to $432.2 million in 2010. These investments included approximately $61.0 million for land acquisition in Canada, directed towards the purchase of 154 net sections of undeveloped land with exposure to potential emerging shale oil and liquids-rich gas resource opportunities. A further $62.0 million was directed towards the Corrib gas project in Ireland.
Vermilion's development activities focused primarily on the initiation of full scale development of the Cardium light oil play. In August of 2011, the Company commissioned a 15,000 bbl/d oil processing facility to handle anticipated volumes arising from ongoing development of the play. Completion of the facility allowed Vermilion to accelerate development activities during the second half of the year enabling the Company to significantly grow production volumes and exit with more than 6,000 boe/d of Cardium related production. 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 supporting management's belief that drilling activity in this region will provide for reasonably consistent and highly repeatable results over the life of the program. While development of this play is still in the early stages, Vermilion has made significant strides in reducing average per well costs from more than $4.7 million at the start of 2011 to between $3.5 and $3.7 million per well toward the end of the year. Transportation costs also continue to decrease as Vermilion ties in and processes greater volumes through the Company's newly constructed oil processing facility. Vermilion's Cardium reserves also reinforced the continued success of the program with average per well reserves increasing from 146 mboe per well to 163 mboe per well. At the end of 2011, Vermilion had drilled approximately 68 net wells, 57 of which were on production at year end. With an inventory of approximately 300 additional economic prospects currently identified 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 50 wells per year beginning in 2013. A further 120 prospects have been identified, however they are viewed as having marginal economics in the current environment but could be drilled in future years if technological improvements, costs or commodity prices change sufficiently to improve the economics of these prospects.
Vermilion continued to benefit from strong volumes from three wells brought on production in the fall of 2010. The new wells were all lateral extensions to existing wellbores and were brought on at a combined restricted rate of 2,000 to 3,000 boe/d to minimize water coning and to maximize ultimate recovery from the reservoir. 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. Wandoo continues to be a strong cash flow generator for the Company attracting pricing at a slight premium to Dated Brent crude with no transportation costs as a result of production being inventoried and sold directly at the platform.
Vermilion maintained a steady workover and completion program during 2011. Subsequent to year end, Vermilion announced that it had acquired 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 Dated Brent based crude, and add an estimated 6.71 million boe of proved plus probable reserves (96% crude oil). Taking into consideration an effective date of January 1, 2011 and customary closing adjustments, Vermilion paid approximately $107 million cash at closing of the acquisition reflecting a cash cost of approximately $48,600 per flowing boe and $16.00 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 drilled four gas wells in the second half of 2011 and continued permitting related work efforts in preparation for the 2012 drilling campaign. In addition, Vermilion finalized unitization negotiations relating to production from the Rotliegend zone of the Vinkega-1 discovery well enabling the Company to tie-in additional production volumes in mid-December of 2011. Production volumes from the 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 expected to be tied in late 2012 or early 2013.
The Corrib partners received all key approvals enabling construction of the tunnelling site for the on-shore pipeline to begin in late summer 2011. 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 currently expect construction of the onshore pipeline to take approximately two years and first gas to occur in late 2014 following commissioning of the field, the pipelines and all related facilities.
Vermilion remains positioned to deliver strong operational and financial performance over the next several years as the Company anticipates growing production to 50,000 boe/d in 2015 through the continued development of its significant portfolio of organic growth opportunities. 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.
Vermilion currently expects average production volumes for 2012 of between 37,000 boe/d and 38,000 boe/d representing approximately six to eight percent growth over 2011, while fund flows from operations growth is anticipated to significantly outpace production growth in the near term as the Company focuses on high netback oil and European gas drilling opportunities and continues to benefit from premium pricing available as a result of the Company's exposure to global commodity markets.
Dated Brent crude, which represents approximately 46% of Vermilion's production, continues to trade at a significant premium to West Texas Intermediate with the recent forward strip indicating a spot premium of more than US$15.00 per bbl and an average premium in excess of US$11.00 per bbl for calendar 2012. Pricing for Vermilion's 2012 natural gas production in the Netherland's, representing approximately 16% of consolidated production, remains strong and is currently anticipated to meet or exceed 2011 pricing levels of $9.59 per mcf. Combined with Vermilion's Cardium related production volumes, the Company's anticipated 2012 consolidated production volumes are expected to be approximately 83% levered to crude oil pricing, predominantly Dated Brent.
Vermilion's Canadian development program will focus on the ongoing development of the Cardium light oil resource play. The Company's 2012 capital program currently contemplates the drilling of approximately 20 net new Cardium wells and completion of an additional 11 net drilled wells. The transition to water-based frac fluids during 2011 has significantly reduced overall well costs and Vermilion is currently targeting drilling, completion, equipping and tie-in related costs to average between $3.5 million and $3.7 million per well in 2012. The Company is currently evaluating the potential for additional Cardium related capital expenditures in 2012 of between $50 million and $75 million. The additional capital would target incremental drilling of between 10 and 20 additional wells in 2012, however given the majority of this incremental activity would take place late in the year, it is not expected to materially impact anticipated 2012 production volumes.
In France, Vermilion will continue with its annual workover and recompletion programs in addition to work activities related to its newly acquired assets in both the Paris and Aquitaine basins. 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.
In the Netherlands, Vermilion expects to begin producing from the 2009 De Hoeve-1 well by mid-year 2012 and is planning to drill two new development opportunities towards the latter half of the year. The Company will also begin preparation and permitting work for the 2013 drilling campaign. 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 Australia, Vermilion is currently planning to drill three wells in the fall of 2012 keeping with its planned objective to maintain average production levels at between 6,000 boe/d and 8,000 boe/d by drilling two to three wells every other year.
The Board of Directors of Vermilion wishes to advise stakeholders that Bob Mac Dougall, Executive Vice President and Chief Operating Officer is leaving the organization. An international search for Mr. Mac Dougall's replacement has been initiated and the Board is pleased to announce that Bob will remain with the Company until August 31, 2012 to ensure business continuity and an orderly transition. The Board and management at Vermilion would like to thank Bob for his hard work and strong contributions to Vermilion's success over the last eight years during which time Bob was instrumental in assembling Vermilion's top rated international operations team.
Vermilion continues to target production growth of approximately 35% to 50,000 boe/d in 2015 which, when combined with anticipated fund flows from operations growth, should ensure a sustainable dividend for investors and the potential for dividend growth once Vermilion's Corrib gas project comes on-stream in late 2014. 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.
|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.|
FOR ADDITIONAL INFORMATION ABOUT VERMILION, INCLUDING FURTHER INFORMATION REGARDING VERMILION'S RESERVES, PLEASE REVIEW THE COMPANY'S DECEMBER 31, 2011 ANNUAL INFORMATION FORM THAT WILL BE FILED ON SEDAR AT WWW.SEDAR.COM ON OR BEFORE MARCH 31, 2012.
GLJ Petroleum Consultants Ltd. ("GLJ"), independent petroleum engineering consultants in Calgary (qualified reserve evaluators), has prepared the 2011 year-end reserves evaluation report for Vermilion dated February 3, 2012, with an effective date of December 31, 2011, in accordance with National Instrument 51-1011 and the Canadian Oil and Gas Evaluation Handbook (COGEH).
Vermilion added total proved plus probable reserves of 16.8 mmboe, approximately 1.3 times production in 2011. Adjusting for production of 12.8 mmboe, Vermilion's proved reserves (P90) remained relatively flat at 96.5 mmboe at December 31, 2011. Total proved plus probable reserves (P50) increased by approximately 2.7% to 146.2 mmboe. Based on fourth quarter production rates, Vermilion's effective reserve life index at January 1, 2012 is approximately 7.2 years for proved reserves and 10.9 years for P50 reserves. Vermilion booked 100.7 additional net Cardium wells in addition to an upward revision to reserves for previously booked Cardium wells to bring average bookings across Vermilion's 207.7 net booked Cardium wells to approximately 162.9 mboe per well. Continued strong well performance to date resulted in increased reserve bookings per well in the Cardium resource play while continuing to remain relatively conservative given the lack of long term production history. Vermilion believes that the potential remains for further positive revisions in the booked recoverable resource potential of the Cardium play as additional production history is observed.
Estimates of reserves have been made assuming that development of each property, in respect of which estimates have been made, will occur without regard to the availability of funding required for that development.
The summary reserves table and reserves reconciliation table are included below. The reserves shown are Vermilion's working interest share before deducting royalties.
Company Working Interest Reserves Summary Table as at December 31, 2011
|Future Net Revenue
(Escalated Prices - Before Tax)
PDF available at: http://www.vermilionenergy.com/files/historical-press-releases/2012/2012-03-05 - Announces Year End 2011 Operating and Financial Results.pdf
Vermilion Energy Inc.
3500, 520 3rd Avenue SW
Calgary, Alberta T2P 0R3