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CALGARY, Aug. 1, 2013 /CNW/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report interim operating and unaudited financial results for the three and six months ended June 30, 2013.
Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Thursday, August 1, 2013 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 78595598. The replay will be available until midnight eastern time on August 8, 2013.
You may also listen to the audio webcast by clicking http://event.on24.com/r.htm?e=626589&s=1&k=1A994A34B44915C6630ABBE2027B8AD9 or visit Vermilion's website at www.vermilionenergy.com/ir/eventspresentations.cfm.
|bbls/d||barrels per day|
|mcf||thousand cubic feet|
|mmcf||million cubic feet|
|bcf||billion cubic feet|
|mcf/d||thousand cubic feet per day|
|mmcf/d||million cubic feet per day|
|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)|
|mboe||thousand barrel of oil equivalent|
|mmboe||million barrel of oil equivalent|
|boe/d||barrel of oil equivalent per day|
|NGLs||natural gas liquids|
|WTI||West Texas Intermediate, the reference price paid for crude oil of standard grade in U.S. dollars at Cushing, Oklahoma|
|AECO||the daily average benchmark price for natural gas at the AECO 'C' hub in southeast Alberta|
|TTF||the price for natural gas in the Netherlands, quoted in MWh of natural gas per hour per day, at the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services|
|PRRT||Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia|
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:
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. Financial outlooks are provided for the purpose of understanding Vermilion's financial strength 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 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.
In accordance with National Instruments 51-101, 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.
|Three Months Ended||Six Months Ended|
|($M except as indicated)||June 30,||March 31,||June 30,||June 30,||June 30,|
|Petroleum and natural gas sales||311,966||309,576||246,544||621,542||557,032|
|Fund flows from operations 1||174,592||163,629||127,775||338,221||278,897|
|Fund flows from operations ($/basic share)||1.73||1.65||1.30||3.38||2.87|
|Fund flows from operations ($/diluted share)||1.71||1.61||1.28||3.33||2.82|
|Net earnings per share ($/basic share)||1.05||0.53||0.39||1.58||1.06|
|Asset retirement obligations settled||2,370||1,388||2,581||3,758||3,347|
|Cash dividends ($/share)||0.60||0.60||0.57||1.20||1.14|
|Net dividends 1||42,146||44,080||37,181||86,226||74,747|
|% of fund flows from operations, gross||35%||36%||44%||36%||40%|
|% of fund flows from operations, net||24%||27%||29%||25%||27%|
|Total net dividends, capital expenditures and asset retirement obligations||122,634||225,937||134,650||348,571||267,342|
|% of fund flows from operations||70%||138%||105%||103%||96%|
|% of fund flows from operations (excluding the Corrib project)||55%||127%||93%||90%||86%|
|Net debt 1||674,368||744,762||524,610||674,368||524,610|
|Crude oil (bbls/d)||26,638||23,583||24,658||25,119||24,576|
|Natural gas (mmcf/d)||86.40||82.16||78.63||84.29||79.51|
|Average realized prices|
|Crude oil and NGLs ($/bbl)||98.95||103.98||100.07||101.42||103.17|
|Natural gas ($/mcf)||7.22||6.77||5.79||7.00||5.78|
|Production mix (% of production)|
|% priced with reference to WTI||25%||24%||23%||24%||23%|
|% priced with reference to AECO||17%||18%||18%||18%||18%|
|% priced with reference to European gas||17%||18%||16%||17%||16%|
|% priced with reference to Dated Brent||41%||40%||43%||41%||43%|
|Netbacks ($/boe) 1|
|Fund flows netback||44.90||43.89||39.40||44.40||39.85|
|Average reference prices|
|WTI (US $/bbl)||94.22||94.37||93.49||94.30||98.21|
|Edmonton Sweet index (US $/bbl)||90.56||87.42||83.29||88.99||87.86|
|Dated Brent (US $/bbl)||102.44||112.55||108.19||107.50||113.34|
|Netherlands gas price ($/GJ)||10.14||10.40||9.45||10.23||9.50|
|Share information ('000s)|
|Shares outstanding - basic||101,418||99,462||98,330||101,418||98,330|
|Shares outstanding - diluted 1||103,735||102,380||101,249||103,735||101,249|
|Weighted average shares outstanding - basic||100,964||99,301||97,937||100,137||97,291|
|Weighted average shares outstanding - diluted||102,223||101,349||99,923||101,578||99,000|
The above table includes non-GAAP measures which may not be comparable
to other companies. Please see the "Non-GAAP
Measures" section of Management's Discussion and Analysis.
OPERATIONAL REVIEW AND OUTLOOK
Vermilion's strong performance during the second quarter illustrates our consistent operational execution and the advantages of our global diversification strategy. Thus far in 2013, we have achieved growth across all four of our operating regions resulting in record consolidated three and six-month production volumes of 42,813 and 40,772 boe/d, respectively.
Our diversified product mix continues to afford a significant competitive advantage. In the second quarter, 66% of production volumes were Brent and WTI-based crude oil and liquids and 17% was high-netback European gas. Our Brent-based crude (41% of production) continues to receive a premium to the Dated Brent index, resulting in an average realized price of $105.25 per barrel for the second quarter. In addition, our Netherlands natural gas production received an average price of $10.82 per mcf, a premium of $7.29 per mcf compared to an average second quarter price of $3.53 per mcf for AECO natural gas in Canada. Our consistent production growth and increasing exposure to liquids and European gas enabled fund flows from operations to grow 7% quarter-over-quarter and 37% year-over-year.
The majority of our Canadian development activities continued to be focused on the development of our Cardium light oil play. Well performance continues to outpace that of our peers in the area, demonstrating the quality of our land position in the West Pembina region. Since entering the play in 2009, we have drilled 202 gross wells (141 net) in the Cardium and increased production to over 9,500 boe/d. We continue to optimize completion technology and well designs, and remain one of few companies in our producing area to employ long reach wells (greater than one mile in length). After demonstrating production improvement and a significant reduction in per-section costs by drilling long-reach 1.5-mile horizontal wells, we are now planning on drilling a higher percentage of 1.5-mile wells and several 2.0-mile pilot wells over the remainder of 2013. The optimization of frac design and fluids, multi-well pads and drilling longer horizontal wells has enabled us to reduce well costs from more than $5 million per section at the outset of development in 2009 to approximately $3 million per section in the second quarter of 2013. Furthermore, in pursuit of ongoing well cost reduction and enhanced environmental stewardship, we are testing several alternative processes for the recycling of frac flowback water. We also initiated a water injection pilot to test applicability of water-flooding to this reservoir. We anticipate our Cardium drilling inventory will last five to six years at a drilling rate of 40 to 60 wells per year. Our per unit operating costs remain less than $6 per boe for our operated production, resulting in strong operating netbacks of approximately $65 per boe during the second quarter.
In addition to the Cardium, we have also identified a significant inventory of Mannville condensate-rich natural gas targets in the Drayton Valley area. During 2013, our plans are to drill a total of six gross (3.2 net) Mannville wells targeting the Ellerslie formation. During the second quarter, we drilled and completed our third Ellerslie well and brought on production from our second well, which was drilled and completed during the first quarter. In its fourth month of production, the first well is producing at a rate of approximately 3.5 mmcf/d of sales gas with 496 barrels per day condensate and natural gas liquids (79% condensate). In its third month of production, the second well is producing at approximately 4.5 mmcf/d of sales gas with 322 barrels per day of natural gas liquids (70% condensate). The third well was brought on production in July and has averaged approximately 1.3 mmcf/d of sales gas with 466 barrels per day of associated natural gas liquids (77% condensate) at an average flowing tubing pressure of 1,125 pounds per square inch during the first two weeks of production.
We continue to expand our position in the Duvernay liquids-rich natural gas resource play with an additional 36.6 net sections acquired in the second quarter and nine net sections acquired subsequent to quarter end. In total, we have amassed 318 net sections in the Edson and Drayton Valley areas spanning the breadth of the liquids-rich natural gas fairway, at a cost of approximately $76 million ($375 per acre). To date, we have drilled three vertical stratigraphic test wells and plan to drill our first horizontal well late in 2013, with completion to occur in 2014. Our Duvernay rights generally underlie our Cardium and Mannville liquids-rich gas positions, allowing for potential infrastructure, operational and timing advantages should full field development of the Duvernay be pursued. Combined, our Cardium, Mannville and Duvernay positions provide us with exploration and development opportunities in our core Canadian operating region that have the potential to deliver strong production and reserve growth into the latter half of the decade.
Our Australian activities during the first half of 2013 were focused on completion of the drilling program at Wandoo. We drilled two sidetracks off existing wells, including the longest horizontal section yet drilled at Wandoo to-date of 3,400 metres. The 2013 drilling program has been our most successful effort yet in Australia. Both sidetracks were brought on production at restricted rates in April, demonstrating productive capacities in excess of 6,000 bbls/d and 3,000 bbls/d, respectively. To meet current marketing agreements and provide long-term certainty to our customers, our current plan is to maintain production levels within our prior guidance of between 6,000 bbls/d and 8,000 bbls/d. We anticipate maintaining these production levels in Australia for the foreseeable future with drilling programs approximately every two years. Wandoo oil garners a premium to the Dated Brent index and incurs no transportation cost as production is sold directly from the platform, leading to very high netbacks.
During the second quarter, we concluded an initial four-well infill drilling program in the Champotran field in France. The program was subsequently expanded to five wells to drill a two-kilometer step-out well to the south of the existing field. All five of the wells were successful, with the four infill wells completed in June and the extension well completed in July. All five wells currently have per-well production rates in excess of 300 bbls/d at low water cuts. In aggregate, current production from the wells is approximately 1,800 bbls/d at a 4% water cut. Additional activities in France included workovers, recompletions and facilities upgrades in both the Paris and Aquitaine Basins. In 2012, we completed two acquisitions that were natural additions to our asset base in France and further secured our position as the leading oil producer in the country. We continue to integrate these assets and to identify further opportunities to increase production through seismic data acquisition, workovers, optimized water-flood management and development drilling. Our French business is now an organic growth asset, featuring low base decline rates, high netbacks from Brent-indexed production, strong cash flow generation and high capital efficiencies on development projects. We are increasing our France-based technical staffing to identify and execute additional investment opportunities in these large, complex, conventional light oil fields in both the Paris and Aquitaine Basins.
We continued permitting and drilling preparations in the Netherlands for a three-well drilling campaign in the second half of 2013. Our Garijp debottlenecking project was completed in the first quarter of 2013, enabling incremental production from two wells previously drilled at Vinkega. Surface facilities for the multi-zone Langezwaag-1 well (42% working interest) were completed and commissioned mid-way through the second quarter. Langezwaag-1 is currently producing from the Vlieland zone at an average rate of 3.0 mmcf/d, net to Vermilion. We intend to increase activity in the Netherlands each year to maintain a rolling inventory of projects so that each year's capital program will involve a combination of drilling new wells and the tie-in of previous successes. In March, we were awarded an exploration license for the Akkrum concess