CALGARY, AB, March 6, 2024 /CNW/ – Vermilion Energy Inc. (“Vermilion”, “We”, “Our”, “Us” or the “Company”) (TSX:VET) (NYSE:VET) is pleased to report operating and condensed financial results for the year ended December 31, 2023.
The audited financial statements, management discussion and analysis and annual information form for the year ended December 31, 2023 will be available on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”) at www.sedarplus.ca, on EDGAR at www.sec.gov/edgar.shtml, and on Vermilion’s website at www.vermilionenergy.com.
Highlights
Q4 2023 Results
Q4 2023 fund flows from operations (“FFO”)(1) was $372 million ($2.27/basic share)(2) and exploration and development (“E&D”) capital expenditures(3) were $143 million, resulting in free cash flow (“FCF”)(4) of $229 million ($1.40/basic share)(5).
Net debt(6) decreased by $164 million in Q4 2023 to $1.1 billion, the lowest level in a decade and a 50% reduction from the peak in 2020. In addition, Vermilion returned $45 million to shareholders comprised of $16 million of dividends and $29 million of share buybacks.
Production during the fourth quarter of 2023 averaged 87,597 boe/d(8), comprised of 54,216 boe/d(8) from our North American assets and 33,381 boe/d(8) from our International assets.
Q4 2023 production benefited from a full quarter of production from Australia and Ireland following maintenance downtime in the prior quarter, as well as increased production in the Netherlands due to new production from our 2023 drilling program.
Year End 2023 Results
2023 FFO(1) was $1,143 million ($6.98/basic share)(2) and E&D capital expenditures(3) were $590 million, resulting in FCF(4) of $552 million ($3.37/basic share)(5).
Net debt(6) decreased by $266 million in 2023 to $1.1 billion, representing a trailing net debt-to-FFO ratio(7) of under 1.0 times. In addition, Vermilion returned $160 million to shareholders, comprised of $65 million in dividends and $95 million of share buybacks.
Reported a 2023 net loss of $238 million ($1.45/basic share) driven by non-cash impairment charges and dispositions, partially offset by strong price realization and acquisition activity. Excluding non-cash impairments, net earnings were $536 million ($3.27/basic share).
Production during 2023 averaged 83,994 boe/d(8), which was at the mid-point of our 2023 guidance range. Strong performance across many of our business units served to offset wildfire-related downtime in Canada and maintenance downtime in Australia.
Year-end 2023 proved developed producing (“PDP”) reserves were 173 mmboe(9) and total proved plus probable (“2P”) reserves were 430 mmboe(9), reflecting a reserve life index of 5.6 years and 14.0 years, respectively.
The after-tax net present value of PDP reserves, discounted at 10%, is $3.2 billion(9) and the after-tax net present value of 2P reserves, discounted at 10%, is $5.7 billion(9), or $28.72 per basic share(9) after deducting year-end net debt.
Outlook
In conjunction with our Q4 2023 release, we announced a quarterly cash dividend of $0.12 per share, payable on April 15, 2024 to shareholders of record on March 28, 2024. This quarterly cash dividend represents a 20% increase over the prior quarterly dividend.
Given our strong financial position and continued operational momentum, we are increasing our capital return target to 50% of excess FCF and will manage to this target on a full-year basis versus our previous effective date of April 1, 2024. Year-to-date, we have repurchased and retired 1.4 million shares and plan to increase the pace of share buybacks starting immediately.
Construction of the 16,000 boe/d Mica Montney battery is progressing as planned and remains on schedule for a mid-year start-up. With the additional capacity provided by this battery, we are able to move forward with the growth phase of our Mica Montney asset, and have drilled six wells on our 16-28 BC pad that will be completed and ready for tie-in during Q2 2024.
We continued to advance our deep gas exploration and development plans in Germany, with drilling operations nearly complete on the first well of our program. We expect to reach total depth in the coming weeks and will then move the rig to the next location, where the second well of our program will be drilled during Q2 2024.
In Croatia, we drilled the first exploration well on the SA-7 block in Q1 2024 and reached total measured depth of 2,371 metres, where we discovered hydrocarbons in multiple zones. We plan to evaluate and test these zones during the second quarter while commencing drilling on the second of four wells planned on the SA-7 block this year. Construction of the gas plant on the SA-10 block is progressing as planned and remains on schedule for a mid-year start-up.
($M except as indicated)
Q4 2023
Q3 2023
Q4 2022
2023
2022
Financial
Petroleum and natural gas sales
522,969
475,532
842,693
2,022,555
3,476,394
Cash flows from operating activities
343,831
118,436
495,195
1,024,528
1,814,220
Fund flows from operations (1)
372,117
270,218
284,220
1,142,611
1,634,865
Fund flows from operations ($/basic share) (2)
2.27
1.65
1.74
6.98
10.00
Fund flows from operations ($/diluted share) (2)
2.27
1.62
1.70
6.98
9.71
Net (loss) earnings
(803,136)
57,309
395,408
(237,587)
1,313,062
Net (loss) earnings ($/basic share)
(4.91)
0.35
2.42
(1.45)
8.03
Cash flows used in investing activities
132,932
170,404
168,053
576,435
1,059,292
Capital expenditures (3)
142,887
125,639
169,305
590,191
551,817
Acquisitions (10)
25,724
5,238
4,558
273,018
539,713
Dispositions
14,855
—
—
197,007
—
Asset retirement obligations settled
28,937
13,582
16,508
56,966
37,514
Repurchase of shares
28,736
11,645
—
94,838
71,659
Cash dividends ($/share)
0.10
0.10
0.08
0.40
0.28
Dividends declared
16,227
16,367
13,058
65,248
45,769
% of fund flows from operations (11)
4 %
6 %
5 %
6 %
3 %
Payout (12)
188,051
155,588
198,871
712,405
635,100
% of fund flows from operations (12)
51 %
58 %
70 %
62 %
39 %
Free cash flow (4)
229,230
144,575
114,915
552,420
1,083,048
Long-term debt
914,015
966,505
1,081,351
914,015
1,081,351
Net debt (6)
1,078,567
1,242,522
1,344,586
1,078,567
1,344,586
Net debt to four quarter trailing fund flows from operations (7)
0.9
1.2
0.8
0.9
0.8
Operational
Production (8)
Crude oil and condensate (bbls/d)
32,866
31,417
38,915
31,727
37,530
NGLs (bbls/d)
7,412
7,344
7,497
7,296
7,961
Natural gas (mmcf/d)
283.91
263.80
234.23
269.83
238.18
Total (boe/d)
87,597
82,727
85,450
83,994
85,187
Average realized prices
Crude oil and condensate ($/bbl)
107.91
106.94
115.02
102.43
123.89
NGLs ($/bbl)
33.38
27.77
39.93
31.54
45.95
Natural gas ($/mcf)
8.48
6.32
17.43
8.17
18.99
Production mix (% of production)
% priced with reference to WTI
29 %
34 %
38 %
33 %
38 %
% priced with reference to Dated Brent
17 %
13 %
18 %
13 %
16 %
% priced with reference to AECO
31 %
34 %
30 %
33 %
30 %
% priced with reference to TTF and NBP
23 %
19 %
14 %
21 %
16 %
Netbacks ($/boe)
Operating netback (13)
57.48
49.30
70.00
49.22
70.15
Fund flows from operations ($/boe) (14)
48.83
35.76
35.08
37.90
52.65
Operating expenses
15.35
16.26
16.81
17.03
15.75
General and administration expenses
2.60
2.77
1.65
2.68
1.86
Average reference prices
WTI (US $/bbl)
78.32
82.26
82.65
77.63
94.23
Dated Brent (US $/bbl)
84.05
86.76
88.71
82.62
101.19
AECO ($/mcf)
2.30
2.61
4.64
2.64
5.25
TTF ($/mcf)
17.45
14.11
38.36
17.40
48.35
Share information (‘000s)
Shares outstanding – basic
162,271
163,666
163,227
162,271
163,227
Shares outstanding – diluted (15)
166,456
167,904
168,616
166,456
168,616
Weighted average shares outstanding – basic
163,335
163,946
163,105
163,719
163,489
Weighted average shares outstanding – diluted (15)
163,335
166,392
167,397
163,719
168,426
(1)
Fund flows from operations (FFO) is a total of segments measure comparable to net (loss) earnings that is comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized gain (loss) on derivatives, realized foreign exchange gain (loss), and realized other income (expense). The measure is used to assess the contribution of each business unit to Vermilion’s ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations, and make capital investments. FFO does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(2)
Fund flows from operations per share (basic and diluted) are supplementary financial measures and are not standardized financial measures under IFRS, and therefore may not be comparable to similar measures disclosed by other issuers. They are calculated using FFO (a total of segments measure) and basic/diluted shares outstanding. The measure is used to assess the contribution per share of each business unit. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(3)
Capital expenditures is a non-GAAP financial measure that is the sum of drilling and development costs and exploration and evaluation costs from the Consolidated Statements of Cash Flows. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(4)
Free cash flow (FCF) and excess free cash flow (EFCF) are non-GAAP financial measures comparable to cash flows from operating activities. FCF is comprised of FFO less drilling and development and exploration and evaluation expenditures and EFCF is FCF less payments on lease obligations and asset retirement obligations settled. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(5)
Free cash flow per basic share is a non-GAAP supplementary financial measure and is not a standardized financial measure under IFRS and may not be comparable to similar measures disclosed by other issuers. It is calculated using FCF and basic shares outstanding.
(6)
Net debt is a capital management measure comparable to long-term debt and is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities). More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(7)
Net debt to trailing FFO is a supplementary financial measure and is not a standardized financial measure under IFRS. It may not be comparable to similar measures disclosed by other issuers and …
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