Vermilion Energy Inc. Announces Results for the Three and Six Months Ended June 30, 2024
Vermilion Energy reported a Q2 2024 production average of 84,974 boe/d, a 2% YoY increase, driven largely by assets in Australia and Mica Montney. North American assets contributed 54,987 boe/d, while international assets added 29,987 boe/d. Fund flows from operations reached $237 million, with free cash flow at $126 million. The company returned $66 million to shareholders via dividends and buybacks.
Net debt decreased by $38 million to $907 million, the lowest in over a decade. Vermilion increased its annual production guidance to 83,000-86,000 boe/d while maintaining a capital budget of $600-$625 million. Q2 saw significant operational milestones including the completion of the Mica Montney battery and the SA-10 gas plant in Croatia. The quarterly dividend was announced at $0.12 per share, payable on October 15, 2024.
Vermilion Energy ha riportato una media di produzione nel secondo trimestre del 2024 di 84.974 boe/giorno, con un aumento del 2% rispetto all'anno precedente, principalmente grazie agli attivi in Australia e Mica Montney. Gli attivi nordamericani hanno contribuito con 54.987 boe/giorno, mentre gli attivi internazionali hanno aggiunto 29.987 boe/giorno. I flussi di cassa dalle operazioni hanno raggiunto i 237 milioni di dollari, con un flusso di cassa libero di 126 milioni. La società ha restituito 66 milioni di dollari agli azionisti tramite dividendi e riacquisti.
Il debito netto è diminuito di 38 milioni di dollari, arrivando a 907 milioni, il livello più basso in oltre un decennio. Vermilion ha aumentato la sua guida sulla produzione annuale a 83.000-86.000 boe/giorno mantenendo un budget per il capitale di 600-625 milioni di dollari. Nel secondo trimestre sono stati raggiunti traguardi operativi significativi, tra cui il completamento della batteria Mica Montney e della centrale a gas SA-10 in Croazia. Il dividendo trimestrale è stato annunciato a 0,12 dollari per azione, pagabile il 15 ottobre 2024.
Vermilion Energy reportó un promedio de producción de 84,974 boe/d en el segundo trimestre de 2024, un aumento del 2% interanual, impulsado principalmente por activos en Australia y Mica Montney. Los activos norteamericanos contribuyeron con 54,987 boe/d, mientras que los activos internacionales sumaron 29,987 boe/d. Los flujos de fondos de las operaciones alcanzaron los 237 millones de dólares, con un flujo de caja libre de 126 millones. La compañía devolvió 66 millones de dólares a los accionistas a través de dividendos y recompras.
La deuda neta se redujo en 38 millones de dólares, llegando a 907 millones, el nivel más bajo en más de una década. Vermilion incrementó su guía de producción anual a 83,000-86,000 boe/d mientras mantenía un presupuesto de capital de 600-625 millones de dólares. El segundo trimestre vio hitos operativos significativos, incluyendo la finalización de la batería Mica Montney y la planta de gas SA-10 en Croacia. Se anunció un dividendo trimestral de 0.12 dólares por acción, pagadero el 15 de octubre de 2024.
버밀리온 에너지는 2024년 2분기 평균 생산량이 하루 84,974 boe로, 전년 대비 2% 증가했다고 보고했습니다. 이는 주로 호주와 미카 몬티니 자산에 의해 이루어진 결과입니다. 북미 자산은 하루 54,987 boe에 기여했으며, 해외 자산은 29,987 boe를 추가했습니다. 운영에서의 자금 흐름은 2억 3천7백만 달러에 도달했으며, 자유 현금 흐름은 1억 2천6백만 달러였습니다. 회사는 배당금과 자사주 매입을 통해 주주에게 6천6백만 달러를 환원했습니다.
순 부채는 3천8백만 달러 감소하여 9억 7백만 달러로, 10년 이상 만에 가장 낮은 수치입니다. 버밀리온은 연간 생산 지침을 하루 83,000-86,000 boe로 상향 조정했으며, 자본 예산을 6억-6억 2천5백만 달러로 유지했습니다. 2분기에는 미카 몬티니 배터리와 크로아티아의 SA-10 가스 플랜트 완료를 포함한 중요한 운영 이정표가 있었습니다. 분기 배당금은 주당 0.12달러로 발표되었으며, 2024년 10월 15일에 지급될 예정입니다.
Vermilion Energy a annoncé une production moyenne de 84 974 boe/jour au deuxième trimestre 2024, soit une augmentation de 2 % par rapport à l'année précédente, principalement due aux actifs en Australie et à Mica Montney. Les actifs nord-américains ont contribué à hauteur de 54 987 boe/jour, tandis que les actifs internationaux ont ajouté 29 987 boe/jour. Les flux de fonds provenant des opérations ont atteint 237 millions de dollars, avec un flux de trésorerie libre de 126 millions. La société a restitué 66 millions de dollars aux actionnaires via des dividendes et des rachats d'actions.
La dette nette a diminué de 38 millions de dollars pour atteindre 907 millions de dollars, le niveau le plus bas depuis plus d'une décennie. Vermilion a augmenté son guidance de production annuelle à 83 000-86 000 boe/jour tout en maintenant un budget d'investissement de 600 à 625 millions de dollars. Le deuxième trimestre a vu d'importantes étapes opérationnelles, dont l'achèvement de la batterie Mica Montney et de l'usine de gaz SA-10 en Croatie. Le dividende trimestriel a été annoncé à 0,12 dollar par action, payable le 15 octobre 2024.
Vermilion Energy meldete im zweiten Quartal 2024 eine Produktionsdurchschnitt von 84.974 boe/Tag, was einem Anstieg von 2% im Vergleich zum Vorjahr entspricht. Dies wurde hauptsächlich durch Vermögenswerte in Australien und Mica Montney vorangetrieben. Nordamerikanische Vermögenswerte trugen mit 54.987 boe/Tag bei, während internationale Vermögenswerte 29.987 boe/Tag hinzufügten. Die Mittelzuflüsse aus dem Betrieb erreichten 237 Millionen Dollar, während der freie Cashflow 126 Millionen Dollar betrug. Das Unternehmen gab 66 Millionen Dollar über Dividenden und Aktienrückkäufe an die Aktionäre zurück.
Die Nettoverschuldung verringerte sich um 38 Millionen Dollar auf 907 Millionen Dollar, was den niedrigsten Stand seit über einem Jahrzehnt darstellt. Vermilion hat seine Jahresproduktionsprognose auf 83.000-86.000 boe/Tag angehoben und das Investitionsbudget von 600-625 Millionen Dollar beibehalten. Im 2. Quartal wurden bedeutende betriebliche Meilensteine erreicht, darunter der Abschluss der Mica Montney-Batterie und des SA-10-Gaskraftwerks in Kroatien. Die vierteljährliche Dividende wurde mit 0,12 Dollar pro Aktie bekannt gegeben, zahlbar am 15. Oktober 2024.
- Production increased by 2% YoY to 84,974 boe/d
- Free cash flow of $126 million
- Returned $66 million to shareholders
- Net debt decreased by $38 million to $907 million
- Increased annual production guidance to 83,000-86,000 boe/d
- Completed Mica Montney battery and SA-10 gas plant
- Fund flows from operations decreased to $237 million from $431 million in Q1 2024
- Net earnings reported a loss of $82 million
Insights
Vermilion Energy's Q2 2024 results demonstrate solid operational performance and financial discipline. Some key highlights:
- Production averaged 84,974 boe/d, up 2% year-over-year and 6% on a per share basis.
- Fund flows from operations were
$237 million ($1.48 /basic share), generating free cash flow of$126 million . - Net debt decreased by
$38 million to$907 million , representing a low 0.7x net debt to trailing FFO ratio. - The company returned
$66 million to shareholders through dividends and share buybacks, representing 62% of excess free cash flow.
Vermilion has increased its 2024 production guidance to 83,000-86,000 boe/d while maintaining its capital budget of
Overall, Vermilion's disciplined capital allocation, debt reduction progress and exposure to premium-priced European gas provide a solid foundation for sustainable shareholder returns. The company's exploration success in Croatia and Germany also offers potential for future organic growth.
Vermilion Energy's Q2 results highlight several positive operational developments that strengthen its position in key markets:
- The completion of the Mica Montney battery in British Columbia is a significant milestone, enabling production to nearly double to 14,000 boe/d by 2025, with potential for further expansion to 28,000 boe/d.
- In Croatia, the commissioning of the SA-10 gas plant ahead of schedule enhances Vermilion's European gas portfolio, which now accounts for about 40% of its total gas production.
- Exploration success in Croatia, with a 100% success rate on a four-well campaign, validates the company's geological assessments and sets the stage for future growth.
- Progress on deep gas exploration in Germany, with testing planned for Q3 2024 and drilling of a second well to commence soon, could unlock significant long-term potential.
These developments demonstrate Vermilion's ability to execute on its strategy of balanced global production growth. The company's focus on European natural gas is particularly noteworthy, given the strong pricing environment (
The operational efficiencies achieved in the Montney, including reduced completion times and water usage, are also encouraging signs of continuous improvement in a key growth area. These factors, combined with Vermilion's disciplined financial management, position the company well for sustainable growth and value creation.
The unaudited interim financial statements and management discussion and analysis for the three and six months ended June 30, 2024 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
- Production during Q2 2024 averaged 84,974 boe/d(8) (
53% natural gas and47% crude oil and liquids), comprised of 54,987 boe/d(8) from our North American assets and 29,987 boe/d(8) from our International assets. Production for the quarter was at the upper end of our Q2 2024 guidance range and represents an increase of2% year-over-year, and6% year-over-year on a per share basis, primarily due toAustralia , as well as the start-up of the 8-33 BC battery on our Mica Montney asset, which facilitated higher production from our recent 16-28 BCMontney wells. - Given the strong operational performance year-to-date, and anticipation of new production growth during the second half of the year in Mica and
Croatia offsetting planned downtime, we are increasing our annual production guidance to 83,000 to 86,000 boe/d (from 82,000 to 86,000 boe/d previously), while maintaining our capital budget guidance of to$600 .$625 million - Q2 2024 fund flows from operations ("FFO")(1) was
($237 million /basic share)(2) and exploration and development ("E&D") capital expenditures(3) were$1.48 , resulting in free cash flow ("FCF")(4) of$111 million ($126 million /basic share)(5). The decrease in FFO from the prior quarter (Q1 2024 -$0.79 ) was primarily driven by lower realized commodity hedge gains.$431 million - Vermilion returned
to shareholders during Q2 2024, comprised of$66 million of dividends and$19 million of share buybacks, representing$47 million 62% of excess FCF ("EFCF")(4). We repurchased and cancelled 2.8 million shares during Q2 2024 and plan to maintain a robust pace of share buybacks in the months ahead as we manage towards an annual return of capital target of50% of EFCF. We have repurchased and cancelled 6.1 million shares year-to-date, and have reduced our outstanding common shares to 157.3 million at July 31, 2024. - Net debt(6) decreased by
in Q2 2024 to$38 million , representing a net debt to trailing FFO ratio(7) of 0.7 times and the lowest debt level in over a decade.$907 million - In conjunction with our Q2 2024 release, we announced a quarterly cash dividend of
per share, payable on October 15, 2024 to shareholders of record on September 27, 2024.$0.12 - In
Germany , we are currently equipping our first deep gas exploration well with production tubing in advance of a planned well test later this quarter. We continue to prepare for tie-in operations for this well, with an anticipated on-stream date of early 2025. We plan to commence drilling on the second exploration well (0.6 net) in the coming weeks. - On the SA-10 block in
Croatia , we completed construction of the gas plant and tied in the first of the two standing wells in late Q2 2024. The second well was tied in early Q3 2024 and production is ramping up, increasing our exposure to strong European natural gas prices. - On the SA-7 block in
Croatia , we drilled one (0.6 net) exploration well and completed two (1.2 net) wells from the prior quarter. The first well tested over 300 bbls/d(15) of light oil, while the second well tested at 4.5 mmcf/d(15) of natural gas. Subsequent to the quarter we completed drilling on the final well (0.6 net) of this four well program, and discovered hydrocarbons across multiple zones, representing a100% success rate on this four-well exploration drilling campaign. - In
Canada , construction of the 16,000 boe/d BCMontney battery was completed during the quarter, with wells from our 16-28 pad tied-in prior to start-up. The completion of this battery was an important milestone in our BCMontney development and provides a runway for future production growth on ourMontney asset. We anticipate the wells from our recently completed 9-21 BC pad to be on line by late Q3 2024. These wells were completed in significantly less time than previous wells and used approximately30% less water, resulting in approximately15% completion cost savings as we continue to drive efficiencies in our Mica Montney operations. - We released the annual update to our sustainability reporting in July 2024. Our 2023 Scope 1 emission intensity is in line with our target to reduce our 2019 baseline by
15% to20% by 2025. The full report is available at https://www.vermilionenergy.com/sustainability.
($M except as indicated) | Q2 2024 | Q1 2024 | Q2 2023 | YTD 2024 | YTD 2023 |
Financial | |||||
Petroleum and natural gas sales | 478,925 | 508,035 | 471,356 | 986,960 | 1,024,054 |
Cash flows from operating activities | 266,322 | 354,295 | 173,632 | 620,617 | 562,261 |
Fund flows from operations (1) | 236,703 | 431,358 | 247,109 | 668,061 | 500,276 |
Fund flows from operations ($/basic share) (2) | 1.48 | 2.68 | 1.51 | 4.16 | 3.05 |
Fund flows from operations ($/diluted share) (2) | 1.47 | 2.64 | 1.48 | 4.11 | 2.99 |
Net earnings (loss) | (82,425) | 2,305 | 127,908 | (80,120) | 508,240 |
Net earnings (loss) ($/basic share) | (0.52) | 0.01 | 0.78 | (0.50) | 3.10 |
Cash flows used in investing activities | 153,025 | 181,343 | 164,404 | 334,368 | 273,099 |
Capital expenditures (3) | 110,610 | 190,442 | 166,845 | 301,052 | 321,665 |
Acquisitions (9) | 5,450 | 9,752 | (9,716) | 15,202 | 242,056 |
Dispositions | — | — | — | — | 182,152 |
Asset retirement obligations settled | 11,745 | 4,975 | 11,893 | 16,720 | 14,447 |
Repurchase of shares | 46,555 | 36,409 | 24,316 | 82,964 | 54,457 |
Cash dividends ($/share) | 0.12 | 0.12 | 0.10 | 0.24 | 0.10 |
Dividends declared | 18,981 | 19,183 | 16,430 | 38,164 | 16,430 |
% of fund flows from operations (10) | 8 % | 4 % | 7 % | 6 % | 3 % |
Payout (12) | 141,336 | 214,600 | 195,168 | 355,936 | 195,168 |
% of fund flows from operations (11) | 60 % | 50 % | 79 % | 53 % | 39 % |
Free cash flow (4) | 126,093 | 240,916 | 80,264 | 367,009 | 178,611 |
Long-term debt | 915,364 | 933,506 | 913,785 | 915,364 | 913,785 |
Net debt (6) | 906,715 | 944,496 | 1,321,100 | 906,715 | 1,321,100 |
Net debt to four quarter trailing fund flows from operations (7) | 0.7 | 0.7 | 1.0 | 0.7 | 1.0 |
Operational | |||||
Production (8) | |||||
Crude oil and condensate (bbls/d) | 32,879 | 32,695 | 29,342 | 32,787 | 31,305 |
NGLs (bbls/d) | 7,196 | 7,046 | 6,538 | 7,121 | 7,213 |
Natural gas (mmcf/d) | 269.39 | 274.59 | 283.63 | 271.99 | 265.72 |
Total (boe/d) | 84,974 | 85,505 | 83,152 | 85,240 | 82,805 |
Average realized prices | |||||
Crude oil and condensate ($/bbl) | 108.93 | 104.26 | 96.64 | 106.49 | 97.66 |
NGLs ($/bbl) | 31.61 | 34.16 | 28.11 | 32.87 | 32.53 |
Natural gas ($/mcf) | 5.69 | 6.10 | 7.37 | 5.90 | 8.94 |
Production mix (% of production) | |||||
% priced with reference to WTI | 32 % | 32 % | 32 % | 32 % | 35 % |
% priced with reference to Dated Brent | 15 % | 15 % | 12 % | 15 % | 11 % |
% priced with reference to AECO | 33 % | 32 % | 33 % | 33 % | 34 % |
% priced with reference to TTF and NBP | 20 % | 21 % | 23 % | 21 % | 20 % |
Netbacks ($/boe) | |||||
Operating netback (12) | 40.32 | 62.07 | 43.66 | 51.44 | 44.98 |
Fund flows from operations ($/boe) (13) | 30.87 | 53.86 | 32.35 | 42.61 | 33.43 |
Average reference prices | |||||
WTI (US $/bbl) | 80.57 | 76.96 | 73.80 | 78.76 | 74.97 |
Dated Brent (US $/bbl) | 84.94 | 83.24 | 78.39 | 84.09 | 79.83 |
AECO ($/mcf) | 1.18 | 2.50 | 2.45 | 1.84 | 2.84 |
TTF ($/mcf) | 13.62 | 11.77 | 15.04 | 12.69 | 19.03 |
Share information ('000s) | |||||
Shares outstanding - basic | 158,174 | 159,859 | 164,294 | 158,174 | 164,294 |
Shares outstanding - diluted (14) | 161,672 | 164,044 | 168,530 | 161,672 | 168,530 |
Weighted average shares outstanding - basic | 159,525 | 161,221 | 164,997 | 160,373 | 164,997 |
Weighted average shares outstanding - diluted (14) | 161,069 | 163,648 | 167,364 | 162,022 | 167,364 |
(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, equity based compensation settled in cash, 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 four quarter trailing fund flows from operations 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 is calculated using net debt (capital management measure) and FFO (total of segment measure). The measure is used to assess the ability to repay debt. Information in this document is included by reference; refer to the "Non-GAAP and Other Specified Financial Measures" section of this document. |
(8) | Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. |
(9) | Acquisitions is a non-GAAP financial measure that is calculated as the sum of acquisitions and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net acquired working capital. 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. |
(10) | Dividends % of FFO is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers, calculated as dividends divided by FFO. The ratio is used by management as a metric to assess the cash distributed to shareholders. Reconciliation to primary financial statement measures can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. |
(11) | Payout and payout % of FFO are a non-GAAP financial measure and a non-GAAP ratio, respectively, that are not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers. Payout is comparable to dividends declared and is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled, while the ratio is calculated as payout divided by FFO. 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. |
(12) | Operating netback is a non-GAAP financial measure comparable to net earnings and is comprised of sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses. 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. |
(13) | Fund flows from operations per boe is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers, calculated as FFO by boe production. Fund flows from operations per boe is used by management to assess the profitability of our business units and Vermilion as a whole. 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. |
(14) | Diluted shares outstanding represent the sum of shares outstanding at the period end plus outstanding awards under the Long-term Incentive Plan ("LTIP"), based on current estimates of future performance factors and forfeiture rates. |
(15) | Zbjegovaca-1 Istok well ( |
Meduric-1 Istok well ( |
Message to Shareholders
During the second quarter we achieved key operational milestones with the completion and startup of the Mica Montney battery in
We are also pleased to report test results from the first two wells on the SA-7 exploration block in
Production during the second quarter averaged 84,974 boe/d which was at the upper end of our quarterly production guidance range and represents an increase of
As a result of consistently strong operational performance across our asset base, production for the first half of the year averaged 85,240 boe/d, trending towards the upper end of our budgeted annual guidance range of 82,000 to 86,000 boe/d. With the startup of our new Mica Montney battery and
Q2 2024 Operations Review
Production from our North American operations averaged 54,987 boe/d(1) in Q2 2024, an increase of
At Mica, we drilled one (1.0 net) and brought on production six (6.0 net) BC
Construction of the 16,000 boe/d 8-33 BC
International
Production from our International operations averaged 29,987 boe/d(1) in Q2 2024, a decrease of
In
In
Outlook and Guidance Update
Full-year production guidance has been increased to 83,000 to 86,000 boe/d (from 82,000 to 86,000 boe/d previously), reflecting our strong operational performance year-to-date. Our Q3 2024 capital program includes completing and bringing on production the five (5.0 net) wells from the 9-21 pad in the BC
Commodity Hedging
Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, as of July 31, 2024, we have
https://www.vermilionenergy.com/invest-with-us/hedging.
(Signed "Dion Hatcher")
Dion Hatcher
President & Chief Executive Officer
July 31, 2024
(1) | Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. |
(2) | Zbjegovaca-1 Istok well ( |
Meduric-1 Istok well ( |
Non-GAAP and Other Specified Financial Measures
This report and other materials released by Vermilion includes financial measures that are not standardized, specified, defined, or determined under IFRS and are therefore considered non-GAAP or other specified financial measures and may not be comparable to similar measures presented by other issuers. These financial measures include:
Total of Segments Measures
Fund flows from operations (FFO): Most directly comparable to net (loss) earnings, FFO is comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, equity based compensation settled in cash, 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.
Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | |||||
$M | $/boe | $M | $/boe | $M | $/boe | $M | $/boe | |
Sales | 478,925 | 62.46 | 471,356 | 61.74 | 986,960 | 62.97 | 1,024,054 | 68.42 |
Royalties | (46,610) | (6.08) | (46,993) | (6.16) | (95,163) | (6.07) | (114,337) | (7.64) |
Transportation | (25,317) | (3.30) | (21,905) | (2.87) | (48,279) | (3.08) | (44,955) | (3.00) |
Operating | (140,230) | (18.29) | (136,749) | (17.91) | (289,541) | (18.47) | (273,574) | (18.28) |
General and administration | (26,537) | (3.46) | (20,058) | (2.63) | (50,240) | (3.21) | (39,947) | (2.67) |
Corporate income tax expense | (12,096) | (1.58) | (18,928) | (2.48) | (37,738) | (2.41) | (41,190) | (2.75) |
Windfall taxes | — | — | (34,784) | (4.56) | — | — | (56,224) | (3.76) |
PRRT | (3,638) | (0.47) | — | — | (14,421) | (0.92) | — | — |
Interest expense | (21,062) | (2.75) | (20,210) | (2.65) | (39,454) | (2.52) | (42,085) | (2.81) |
Equity based compensation | (14,361) | (1.87) | — | — | (14,361) | (0.92) | — | — |
Realized gain on derivatives | 46,017 | 6.00 | 67,673 | 8.86 | 266,632 | 17.01 | 82,003 | 5.48 |
Realized foreign exchange gain (loss) | 2,267 | 0.30 | 3,679 | 0.48 | 4,138 | 0.26 | (1,092) | (0.07) |
Realized other income | (655) | (0.09) | 4,028 | 0.53 | (472) | (0.03) | 7,623 | 0.51 |
Fund flows from operations | 236,703 | 30.87 | 247,109 | 32.35 | 668,061 | 42.61 | 500,276 | 33.43 |
Equity based compensation | 3,860 | (4,998) | (1,658) | (28,523) | ||||
Unrealized (loss) gain on derivative instruments (1) | (125,789) | 11,177 | (314,533) | 103,875 | ||||
Unrealized foreign exchange gain (loss) (1) | 3,069 | 35,124 | (18,572) | 19,646 | ||||
Accretion | (18,209) | (18,599) | (36,143) | (38,650) | ||||
Depletion and depreciation | (161,184) | (154,389) | (339,618) | (302,520) | ||||
Deferred tax (expense) recovery | (20,667) | 480 | (37,312) | 36,946 | ||||
Gain on business combination | — | 12,544 | — | 445,094 | ||||
Loss on disposition | — | — | — | (226,828) | ||||
Unrealized other expense | (208) | (540) | (345) | (1,076) | ||||
Net (loss) earnings | (82,425) | 127,908 | (80,120) | 508,240 |
(1) | Unrealized (loss) gain on derivative instruments, Unrealized foreign exchange gain (loss), and Unrealized other expense are line items from the respective Consolidated Statements of Cash Flows. |
Non-GAAP Financial Measures and Non-GAAP Ratios
Free cash flow (FCF) and excess free cash flow (EFCF): Most directly comparable to cash flows from operating activities, FCF is comprised of fund flows from operations less drilling and development costs and exploration and evaluation cost and EFCF is comprised of FCF less payments on lease obligations and asset retirement obligations settled. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. EFCF is used to determine the funding available to return to shareholders after costs attributable to normal business operations.
($M) | Q2 2024 | Q2 2023 | 2024 | 2023 |
Cash flows from operating activities | 266,322 | 173,632 | 620,617 | 562,261 |
Changes in non-cash operating working capital | (41,364) | 61,584 | 30,724 | (76,432) |
Asset retirement obligations settled | 11,745 | 11,893 | 16,720 | 14,447 |
Fund flows from operations | 236,703 | 247,109 | 668,061 | 500,276 |
Drilling and development | (109,350) | (164,070) | (291,648) | (317,398) |
Exploration and evaluation | (1,260) | (2,775) | (9,404) | (4,267) |
Free cash flow | 126,093 | 80,264 | 367,009 | 178,611 |
Payments on lease obligations | (7,830) | (4,665) | (11,932) | (9,064) |
Asset retirement obligations settled | (11,745) | (11,893) | (16,720) | (14,447) |
Excess free cash flow | 106,518 | 63,706 | 338,357 | 155,100 |
Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, a capital measure disclosed above.
As at | ||
($M) | Jun 30, 2024 | Dec 31, 2023 |
Current assets | 740,882 | 823,514 |
Current derivative asset | (97,165) | (313,792) |
Current liabilities | (679,478) | (696,074) |
Current lease liability | 28,136 | 21,068 |
Current derivative liability | 16,274 | 732 |
Adjusted working capital | 8,649 | (164,552) |
Capital expenditures: Calculated as the sum of drilling and development costs and exploration and evaluation costs from the Consolidated Statements of Cash Flows and most directly comparable to cash flows used in investing activities. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital.
($M) | Q2 2024 | Q2 2023 | 2024 | 2023 |
Drilling and development | 109,350 | 164,070 | 291,648 | 317,398 |
Exploration and evaluation | 1,260 | 2,775 | 9,404 | 4,267 |
Capital expenditures | 110,610 | 166,845 | 301,052 | 321,665 |
Operating netback: Most directly comparable to net (loss) earnings and is calculated as sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the profitability and efficiency of our field operations.
Payout and payout % of FFO: A non-GAAP financial measure and non-GAAP ratio respectively most directly comparable to dividends declared. Payout is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled. The measure is used to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining production and organic growth. The reconciliation of the measure to primary financial statement measure can be found below. Management uses payout and payout as a percentage of FFO (also referred to as the payout or sustainability ratio).
($M) | Q2 2024 | Q2 2023 | 2024 | 2023 |
Dividends Declared | 18,981 | 16,430 | 38,164 | 32,656 |
Drilling and development | 109,350 | 164,070 | 291,648 | 317,398 |
Exploration and evaluation | 1,260 | 2,775 | 9,404 | 4,267 |
Asset retirement obligations settled | 11,745 | 11,893 | 16,720 | 14,447 |
Payout | 141,336 | 195,168 | 355,936 | 368,768 |
% of fund flows from operations | 60 % | 79 % | 53 % | 74 % |
Acquisitions: The sum of acquisitions and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions line items in the Consolidated Statements of Cash Flows can be found below.
($M) | Q2 2024 | Q2 2023 | 2024 | 2023 |
Acquisitions, net of cash acquired | 5,450 | 2,196 | 5,829 | 136,421 |
Acquisition of securities | — | 632 | 9,373 | 2,108 |
Acquired working capital | — | (12,544) | — | 103,527 |
Acquisitions | 5,450 | (9,716) | 15,202 | 242,056 |
Capital Management Measure
Net debt: Is in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations.
As at | ||
($M) | Jun 30, 2024 | Dec 31, 2023 |
Long-term debt | 915,364 | 914,015 |
Adjusted working capital | (8,649) | 164,552 |
Net debt | 906,715 | 1,078,567 |
Ratio of net debt to four quarter trailing fund flows from operations | 0.7 | 0.9 |
Supplementary Financial Measures
Net debt to four quarter trailing fund flows from operations: Calculated as net debt (capital management measure) over the FFO (total of segments measure) from the preceding four quarters. The measure is used to assess the ability to repay debt.
Dividends % of FFO: Calculated as dividends declared divided by FFO (total of segments measure). The measure is used by management as a metric to assess the cash distributed to shareholders.
Fund flows from operations per boe: Calculated as FFO (total of segments measure) by boe production. Fund flows from operations per boe is used by management to assess the profitability of our business units and Vermilion as a whole.
Management's Discussion and Analysis and Consolidated Financial Statements
To view Vermilion's Management's Discussion and Analysis and Interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2024 and 2023, please refer to SEDAR+ (www.sedarplus.ca) or Vermilion's website at www.vermilionenergy.com.
About Vermilion
Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets in
Vermilion's priorities are health and safety, the environment, and profitability, in that order. Nothing is more important to us than the safety of the public and those who work with us, and the protection of our natural surroundings. We have been recognized by leading ESG rating agencies for our transparency on and management of key environmental, social and governance issues. In addition, we emphasize strategic community investment in each of our operating areas.
Vermilion trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbol VET.
Disclaimer
Certain statements included or incorporated by reference in this document may constitute forward-looking statements or information 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: capital expenditures and Vermilion's ability to fund such expenditures; Vermilion's additional debt capacity providing it with additional working capital; statements regarding the return of capital; the flexibility of Vermilion's capital program and operations; business strategies and objectives; operational and financial performance; estimated volumes of reserves and resources; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion's 2024 guidance, and rates of average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange and inflation rates; significant declines in production or sales volumes due to unforeseen circumstances; the effect of possible changes in critical accounting estimates; statements regarding the growth and size of Vermilion's future project inventory, wells expected to be drilled in 2024; exploration and development plans and the timing thereof; Vermilion's ability to reduce its debt; statements regarding Vermilion's hedging program, its plans to add to its hedging positions, and the anticipated impact of Vermilion's hedging program on project economics and free cash flows; the potential financial impact of climate-related risks; acquisition and disposition plans and the timing thereof; operating and other expenses, including the payment and amount of future dividends; royalty and income tax rates and Vermilion's expectations regarding future taxes and taxability; and the timing of regulatory proceedings and approvals.
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: the ability of Vermilion to obtain equipment, services and supplies in a timely manner to carry out its activities in
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 position 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 ability of management to execute its business plan; the risks of the oil and gas industry, both domestically and internationally, such as operational risks in exploring for, developing and producing crude oil, natural gas liquids, and natural gas; risks and uncertainties involving geology of crude oil, natural gas liquids, and natural gas deposits; risks inherent in Vermilion's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life and estimates of resources and associated expenditures; the uncertainty of estimates and projections relating to production and associated expenditures; potential delays or changes in plans with respect to exploration or development projects; Vermilion's ability to enter into or renew leases on acceptable terms; fluctuations in crude oil, natural gas liquids, and natural gas prices, foreign currency exchange rates, interest rates and inflation; health, safety, and environmental risks; uncertainties as to the availability and cost of financing; the ability of Vermilion to add production and reserves through exploration and development activities; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; uncertainty in amounts and timing of royalty payments; risks associated with existing and potential future law suits and regulatory actions against or involving Vermilion; and other risks and uncertainties described elsewhere in this document or in Vermilion's other filings with Canadian securities regulatory authorities.
This document contains references to sustainability/ESG data and performance that reflect metrics and concepts that are commonly used in such frameworks as the Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures, and the Sustainability Accounting Standards Board. Vermilion has used best efforts to align with the most commonly accepted methodologies for ESG reporting, including with respect to climate data and information on potential future risks and opportunities, in order to provide a fuller context for our current and future operations. However, these methodologies are not yet standardized, are frequently based on calculation factors that change over time, and continue to evolve rapidly. Readers are particularly cautioned to evaluate the underlying definitions and measures used by other companies, as these may not be comparable to Vermilion's. While Vermilion will continue to monitor and adapt its reporting accordingly, the Company is not under any duty to update or revise the related sustainability/ESG data or statements except as required by applicable securities laws.
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.
This document contains metrics commonly used in the oil and gas industry. These oil and gas metrics do not have any standardized meaning or standard methods of calculation and therefore may not be comparable to similar measures presented by other companies where similar terminology is used and should therefore not be used to make comparisons. 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.
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SOURCE Vermilion Energy Inc.
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