Vermilion Energy Inc. Announces Results for the Year Ended December 31, 2024 and Significant European Gas Discovery
PR Newswire
CALGARY, AB, March 5, 2025
CALGARY, AB, March 5, 2025 /PRNewswire/ - Vermilion Energy Inc. ("Vermilion" or the "Company") (TSX: VET) $(VET)$ is pleased to report operating and condensed financial results for the year ended December 31, 2024.
The audited financial statements, management discussion and analysis and annual information form for the year ended December 31, 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
Year End 2024 Results
-- Fund flows from operations ("FFO")(1) was $1,206 million ($7.63/basic
share)(2), representing a 6% increase over the prior year, or 9% on a per
basic share basis, reflecting the positive impact from our share
repurchase program. Free cash flow ("FCF")(4) of $583 million increased
9% on a per basic share basis relative to 2023.
-- Net loss was $47 million ($0.30/basic share) compared to $238 million net
loss ($1.45/basic share) in the prior year. The current year net loss was
impacted by unrealized losses on derivative instruments and unrealized
foreign exchange losses due to a weakening Canadian dollar.
-- Net debt(5) decreased by over $110 million to $967 million, representing
a net debt to four quarter trailing FFO ratio(6) of 0.8 times. The
Company fully repaid the $79 million lease obligation associated with the
Montney Battery construction completed in 2024, implying approximately
$190 million of effective debt reduction.
-- Vermilion returned $216 million ($1.37/basic share) to shareholders
through dividends and share buybacks, representing 52% of excess free
cash flow ("EFCF")(4), including the repurchase and cancellation of 9.3
million shares which reduced the outstanding common shares by 5% to 154.3
million as at December 31, 2024.
-- Production averaged 84,543 boe/d(7) (54% natural gas and 46% crude oil
and liquids), comprised of 53,542 boe/d(7) from the North American assets
and 31,001 boe/d(7) from the International assets. Production increased
by 1% over the prior year, or 4% on a per share basis.
-- Year end proved developed producing ("PDP") reserves were 168 mmboe(16)
and total proved plus probable ("2P") reserves were 435 mmboe(16),
reflecting a reserve life index of 5.4 years and 14.1 years,
respectively.
-- The after-tax net present value of PDP reserves, discounted at 10%, is
$2.8 billion(16) and the after-tax net present value of 2P reserves,
discounted at 10%, is $5.2 billion(16), or $27.62 per basic share(16)
after deducting year-end net debt.
Q4 2024 Results
-- Generated $263 million ($1.70/basic share)(2) of FFO(1) and $62 million
of FCF(4), compared to $372 million and $229 million, respectively, in
the prior year. .
-- As a result of strong European gas prices, Vermilion's corporate average
realized natural gas price in Q4 2024 was $8.47/mcf, compared to
$1.48/mcf for the AECO 5A benchmark.
-- Returned $36 million to shareholders, including $18 million in share
repurchases and $18 million in dividends.
-- Net loss was $18 million compared to an $803 million net loss in the
prior year.
-- Exploration and development ("E&D") capital expenditures(3) were $201
million and include capital associated with drilling the Weissenmoor Sud
deep gas exploration well in Germany, which was accelerated from Q1 2025.
-- Production averaged 83,536 boe/d(7) (56% natural gas and 44% crude oil
and liquids), comprised of 52,293 boe/d(7) from the North American assets
and 31,243 boe/d(7) from the International assets.
-- In Germany, Vermilion successfully tested the Wisselshorst deep gas
exploration well (0.6 net) at a restricted rate of 21 mmcf/d(14) of
natural gas with a flowing wellhead pressure of 6,200 psi. Subsequent to
year-end, the Company tested a second zone in this well at a restricted
rate of 20 mmcf/d(14) of natural gas with a flowing wellhead pressure of
6,200 psi. Based on these initial test results and evaluation performed,
this well is estimated to contain 68 Bcf of recoverable natural gas(19),
representing Vermilion's largest discovery in Europe over the past
decade.
-- Subsequent to year-end, Vermilion completed drilling operations on the
Weissenmoor Sud deep gas exploration well (1.0 net) and discovered
hydrocarbons, marking a third discovery in Germany. The well is currently
being tested.
Outlook
-- Subsequent to year-end, closed the acquisition of Westbrick Energy Ltd. ("Westbrick"), adding approximately 50,000 boe/d(16) of Deep Basin liquids-rich natural gas. The integration of the Westbrick assets and employees is underway and progressing as planned, including the continuation of the two-rig Q1 2025 drilling program initiated by Westbrick prior to the deal announcement. -- 2025 capital budget and production guidance have been revised to incorporate the closing of the Westbrick acquisition for an end of February 2025 close date versus the previously forecasted mid-February 2025 close. Production is expected to range between 125,000 to 130,000 boe/d(17) (62% natural gas including 14% European gas)(17) with E&D capital expenditures(3) of $730 to $760 million (68% North America, 32% International, with over 70% of total capital expenditures to be invested in its global gas franchise)(17). -- In aggregate, 38% of expected net-of-royalty production is hedged for 2025. In particular, western Canadian gas hedges in 2025 and 2026 have been undertaken at pricing that exceeds the pricing assumed in acquiring Westbrick and locks in strong economics for the ensuing capital program. -- Based on forward commodity prices, Vermilion forecasts 2025 FCF(4) of approximately $400 million. Approximately 60% of EFCF(4) will be allocated to debt reduction with 40% of EFCF allocated to shareholder returns, inclusive of the $0.13 per share quarterly base dividend. The variable component of shareholder returns will continue to be allocated towards share buybacks. -- Declared a quarterly cash dividend of $0.13 per common share, payable on April 15, 2025 to shareholders of record on March 31, 2025. This represents an 8% increase over the Q4 2024 dividend, marking the fourth increase to Vermilion's quarterly dividend since 2021. ($M except as indicated) Q4 2024 Q3 2024 Q4 2023 2024 2023 Financial -------------------------- -------- ------- --------- --------- --------- Petroleum and natural gas sales 504,352 490,095 522,969 1,981,407 2,022,555 Cash flows from operating activities 212,587 134,547 343,831 967,751 1,024,528 Fund flows from operations (1) 262,698 275,024 372,117 1,205,783 1,142,611 Fund flows from operations ($/basic share) (2) 1.70 1.76 2.27 7.63 6.98 Fund flows from operations ($/diluted share) (2) 1.68 1.75 2.27 7.55 6.98 Net earnings (loss) (18,316) 51,697 (803,136) (46,739) (237,587) Net (loss) earnings ($/basic share) (0.12) 0.33 (4.91) (0.30) (1.45) Cash flows used in investing activities 154,672 145,828 132,932 634,868 576,435 Capital expenditures (3) 200,659 121,269 142,887 622,980 590,191 Acquisitions (9) 5,257 1,642 25,724 22,101 273,018 Dispositions -- -- 14,855 -- 197,007 Asset retirement obligations settled 23,282 15,332 28,937 55,334 56,966 Repurchase of shares 17,637 40,106 28,736 140,707 94,838 Cash dividends ($/share) 0.12 0.12 0.10 0.48 0.40 Dividends declared 18,521 18,642 16,227 75,327 65,248 % of fund flows from operations (10) 7 % 7 % 4 % 6 % 6 % Payout (12) 242,462 155,243 188,051 753,641 712,405 % of fund flows from operations (11) 92 % 56 % 51 % 63 % 62 % Free cash flow (4) 62,039 153,755 229,230 582,803 552,420 Long-term debt 963,456 903,354 914,015 963,456 914,015 Net debt (6) 966,882 833,331 1,078,567 966,882 1,078,567 Net debt to four quarter trailing fund flows from operations (7) 0.8 0.6 0.9 0.8 0.9 Operational ------------------------------------------------------------------------------ Production (8) Crude oil and condensate (bbls/d) 30,327 29,837 32,866 31,427 31,727 NGLs (bbls/d) 6,612 7,547 7,412 7,100 7,296 Natural gas (mmcf/d) 279.59 280.73 283.91 276.10 269.83 Total (boe/d) 83,536 84,173 87,597 84,543 83,994 Average realized prices Crude oil and condensate ($/bbl) 100.06 103.55 107.91 104.29 102.43 NGLs ($/bbl) 29.38 27.49 33.38 30.61 31.54 Natural gas ($/mcf) 8.47 6.57 8.48 6.72 8.17 Production mix (% of production) % priced with reference to WTI 29 % 32 % 29 % 31 % 33 %
% priced with reference
to Dated Brent 15 % 13 % 17 % 15 % 13 %
% priced with reference
to AECO 33 % 33 % 31 % 32 % 33 %
% priced with reference
to TTF and NBP 23 % 22 % 23 % 22 % 21 %
Netbacks
Operating netback
($/boe)(12) 43.92 41.89 57.48 47.18 49.22
Fund flows from
operations ($/boe)
(13) 34.67 34.78 48.83 38.71 37.90
Average reference prices
WTI (US $/bbl) 70.27 75.10 78.32 75.72 77.63
Dated Brent (US $/bbl) 74.67 80.18 84.05 80.76 82.62
AECO ($/mcf) 1.48 0.69 2.30 1.46 2.64
TTF ($/mcf) 18.73 15.52 17.45 14.89 17.40
Share information ('000s)
------------------------------------------------------------------------------
Shares outstanding - basic 154,344 155,348 162,271 154,344 162,271
Shares outstanding -
diluted (14) 157,837 158,912 166,456 157,837 166,456
Weighted average shares
outstanding - basic 154,954 156,624 163,335 158,068 163,719
Weighted average shares
outstanding - diluted
(14) 156,184 157,502 163,335 158,068 163,719
-------------------------- -------- ------- --------- --------- ---------
(1) Fund flows from operations (FFO) is a total of segments and non-GAAP
financial measure most directly comparable to net loss and is calculated
as sales less royalties, transportation expense, operating expense, G&A
expense, corporate income tax expense (recovery), PRRT expense, 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 by management 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 Accounting Standards and therefore may
not be comparable to similar measures provided by other issuers. More
information and a reconciliation to net earnings (loss), the most
directly comparable primary financial statement measure, can be found in
the "Non-GAAP and Other Specified Financial Measures" section of this
document.
(2) Fund flows from operations per basic share and diluted share is
calculated by dividing fund flows from operations (total of segments and
non-GAAP financial measure) by the basic weighted average shares
outstanding as defined under IFRS Accounting Standards. Fund flows from
operations per diluted share is calculated by dividing fund flows from
operations by the sum of basic weighted average shares outstanding and
incremental shares issuable under the equity based compensation plans as
determined using the treasury stock method. Management assesses fund
flows from operations on a per share basis as we believe this provides a
measure of our operating performance after taking into account the
issuance and potential future issuance of Vermilion common shares. More
information and a reconciliation to cash flows used in investing
activities, the most directly comparable primary financial statement
measure, can be found in the "Non-GAAP and Other Specified Financial
Measures" section of this document. Capital expenditures is also
referred to as E&D capital expenditures.
(3) Capital expenditures is a non-GAAP financial measure most directly
comparable to cash flows used in investing activities and is calculated
as the sum of drilling and development costs and exploration and
evaluation costs. Management considers capital expenditures to be a
useful measure of our investment in our existing asset base. Capital
expenditures does not have a standardized meaning under IFRS Accounting
Standards and therefore may not be comparable to similar measures
provided by other issuers. More information and a reconciliation to cash
flows used in investing activities, the most directly comparable primary
financial statement measure, can be found in the "Non-GAAP and Other
Specified Financial Measures" section of this document. Capital
expenditures is also referred to as E&D capital expenditures.
(4) Free cash flow $(FCF)$ and excess free cash flow (EFCF) are non-GAAP
financial measures most directly comparable to cash flows from operating
activities. FCF is calculated as FFO less drilling and development costs
and exploration and evaluation costs and EFCF is calculated as FCF less
payments on lease obligations and asset retirement obligations settled.
FCF is used by management 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 by management to
determine the funding available to return to shareholders after costs
attributable to normal business operations. FCF and EFCF do not have
standardized meanings under IFRS Accounting Standards and therefore may
not be comparable to similar measures provided by other issuers. More
information and a reconciliation to cash flows from operating
activities, the most directly comparable primary financial statement
measure, 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 financial measure and is
not a standardized financial measure under IFRS Accounting Standards and
may not be comparable to similar measures disclosed by other issuers. It
is calculated using FCF and basic shares outstanding.FCF is used by
management 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.
(6) Net debt is a capital management measure in accordance with IAS 1
"Presentation of Financial Statements" that is most directly comparable
to long-term debt and is calculated as long-term debt (excluding
unrealized foreign exchange on swapped USD borrowings) plus adjusted
working deficit (capital), a non-GAAP financial measure described in the
"Non-GAAP and Other Specified Financial Measures" section of this
document. Management considers this a helpful representation of
Vermilion's net financing obligations after adjusting for the timing of
working capital fluctuations. More information and a reconciliation to
long-term debt, the most directly comparable primary financial statement
measure, 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
non-GAAP ratio and is not a standardized financial measure under IFRS
Accounting Standards and therefore may not be comparable to similar
measures disclosed by other issuers. Net debt to four quarter FFO is
calculated as net debt divided by FFO from the preceding four quarters.
Management uses this measure to assess the Company's ability to repay
debt. More information can be found in 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 and is not a standardized
financial measure under IFRS Accounting Standards and therefore may not
be comparable to similar measures disclosed by other issuers.
Acquisitions is calculated as the sum of acquisitions, net of cash
acquired, acquisitions of securities and net acquired working capital
(deficit). Management believes 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. More information and a reconciliation to
acquisitions, net of cash acquired and acquisition of securities, the
most directly comparable primary financial statement measure, can be
found in the "Non-GAAP and Other Specified Financial Measures" section
of this document.
(10) Dividends % of FFO is a non-GAAP ratio that is not standardized under
IFRS Accounting Standards and may not be comparable to similar measures
disclosed by other issuers. Dividends % of FFO is calculated as
dividends declared divided by FFO. The ratio is used by management as a
metric to assess the cash distributed to shareholders. More information
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
Accounting Standards and may not be comparable to similar measures
disclosed by other issuers. Payout is most directly comparable to
dividends declared. Payout is calculated as dividends declared plus
drilling and development costs, exploration and evaluation costs, and
asset retirement obligations settled, and payout % of FFO is calculated
as payout divided by FFO. More information and a reconciliation to
dividends declared, the most directly comparable primary financial
statement measure, 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 that is not
standardized under IFRS Accounting Standards and may not be comparable
to similar measures disclosed by other issuers. Operating netback is
most directly comparable to net (loss) earnings and is calculated as
sales less royalties, operating expense, transportation expense, PRRT
expense, and realized hedging (gain) loss, and when presented on a per
unit basis is a non-GAAP ratio. Management assesses operating netback as
a measure of the profitability and efficiency of our field operations.
More information and a reconciliation to net (loss) earnings, the most
directly comparable primary financial statement measure, 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 non-GAAP ratio that is not
standardized under IFRS Accounting Standards and may not be comparable
to similar measures disclosed by other issuers. FFO per boe is
calculated as FFO divided by boe production. FFO per boe is used by
management to assess the profitability of Vermilion's business units and
Vermilion as a whole. More information can be found in the "Non-GAAP and
Other Specified Financial Measures" section of this document.
(14) Diluted shares outstanding represents the sum of shares outstanding at
the period end plus outstanding awards under the Long-term Incentive
Plan, based on current estimates of future performance factors and
forfeiture rates.
(15) Wisselshorst Z1a well (64% working interest) was tested in December
2024. Flow rates, during the initial clean-up phase, of up to 21.2
mmcf/d with a flowing wellhead pressure of 6,150 psi on an adjustable
choke were achieved. The completion fluid was recovered during the
clean-up flow period. During the main flow period the well tested at a
rate of 20.1mmcf/d over a five-hour flow period with a flowing wellhead
pressure 6,250 psi on a 24/64" fixed choke. A final shut-in pressure of
7,020 psi and a bottom hole pressure of 8,679 psi were recorded
following the well test of this zone. The zone being tested is the
Rotliegend Havel formation, which was encountered at 5,054m measured
depth ("MD") and a 124.4m gas column was logged with 50.8m of net
reservoir and average effective porosity of 9.3%. A second zone in the
well was tested in January 2025 where peak rates of 20.3 mmcf/d at a
flowing well head pressure of 6,189 psi were recorded. During the main
flow period rates of 18.8 mmcf/d over a five-hour flow period with a
flowing wellhead pressure of 6,334 psi were achieved on a 24/64" fixed
choke. A final shut-in pressure of 7,001 psi and a bottom hole pressure
of 8,756 psi were recorded following the well test of this zone. The
second zone in the well is the Rotliegend Dethlingen formation, which
was encountered at 5,000m MD and a 38.2m gas column was logged with
25.5m of net reservoir and average effective porosity of 9.9%. Test
results are not necessarily indicative of production performance or
ultimate recovery.
(16) Estimated gross proved, developed and producing, total proved, and total
proved plus probable reserves as evaluated by McDaniel & Associates
Consultants Ltd. ("McDaniel") in a report dated March 4, 2025 with an
effective date of December 31, 2024 (the "McDaniel Reserves Report").
See Vermilion's annual information form for the year ended December 31,
2024 for additional information, including reserve pricing assumptions.
Per share metrics calculated using basic shares outstanding at December
31, 2024.
(17) Estimated 2025 Westbrick production based on Company estimates as of
March 5, 2025.
(18) Based on Company 2025 estimates and 2025 full year average reference
prices as at March 3, 2025: Brent US$71.29/bbl; WTI US$67.56/bbl; LSB =
WTI less US$6.83/bbl; TTF $20.49/mmbtu; NBP $20.36/mmbtu; AECO
$2.21/mcf; CAD/USD 1.43; CAD/EUR 1.51 and CAD/AUD 0.90.
(19) At March 5, 2025, Wisselshorst Z1a well has been assigned 68.3 Bcf
Property Gross total proved plus probable conventional natural gas
reserves, as evaluated by McDaniel & Associated Consultants Ltd.
("McDaniel"), a qualified reserves evaluator, in the Rotliegend Havel
zone and recently tested Dethlingen zone. This represents a significant
increase in the reserves assigned by McDaniel effective December 31,
2024, of 32.9 Bcf Property Gross total proved plus probable conventional
natural gas reserves, due to the strong test results in existing
Rotliegend Havel and Dethlingen zones. Vermilion has recorded 21.1 Bcf
of Gross proved plus probable reserves as of December 31, 2024 based on
its 64.165% working interest. The evaluation was prepared in accordance
with National Instrument 51-101 - Standards of Disclosure for Oil and
Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluations
Handbook ("COGEH"). "Property Gross" reserves are total reserves before
working interest has been applied. "Gross" means in relation to
Vermilion's interest in production or reserves, Vermilion's working
interest (operating or non-operating) share before deduction of royalty
obligations and without including any royalty interests of Vermilion.
Message to Shareholders
Vermilion delivered strong operational and financial results in 2024, achieving annual production above the mid-point of guidance while executing a $623 million E&D capital expenditures program, including several early-stage investments that will contribute to future production growth. Production for the year averaged 84,543 boe/d(1) , representing annual production per share growth of 4%. The Company generated $1.2 billion, or $7.63 per basic share of fund flows from operations ("FFO") in 2024, representing a 9% increase over 2023 on a per basic share basis. Free cash flow ("FCF") of $583 million increased 9% on a per basic share basis relative to 2023. This FCF provided funding for asset retirement obligations and lease obligations, including the full repayment of the $79 million lease associated with the Montney Battery construction completed in 2024, which will result in immediate interest cost savings. Approximately $216 million, or 52% of excess FCF, was returned to shareholders in 2024 including $75 million in dividends and $141 million of share repurchases, resulting in a 5% reduction in outstanding common shares which further enhanced per share metrics. Late in the year, Vermilion announced an 8% increase to the quarterly dividend for 2025, marking the fourth increase to the Company's quarterly dividend since 2021. Net debt decreased by 10% in 2024 to $967 million at the end of the year, representing a net debt to four quarter trailing FFO ratio of 0.8 times.
The Company executed its largest ever exploration drilling campaign in Europe in 2024, achieving 100% success on six exploration wells. Most notable were the two (1.6 net) deep gas exploration wells drilled in Germany, Osterheide and Wisselshorst, which tested at restricted rates of 17 mmcf/d(2) and 21 mmcf/d(3) , respectively. Subsequent to year-end 2024, Vermilion tested an additional zone on the Wisselshorst well at a restricted rate of 20 mmcf/d(3) with 6,200 psi of flowing wellhead pressure, resulting in a combined test rate of over 40 mmcf/d. Based on the initial test data and evaluation performed, this well is estimated to contain 68 Bcf of recoverable natural gas(10) , representing Vermilion's largest discovery in Europe over the past decade. Based on Vermilion's assessment, the Wisselshorst structure is large enough to support an additional 4 to 6 follow-up drilling locations as part of our future development plans In addition, the Company completed drilling operations on the Weissenmoor Sud deep gas exploration well in Germany in early 2025 which encountered multiple hydrocarbon-bearing zones.
In aggregate, the Osterheide and Wisselshorst wells tested at a combined rate of 56 mmcf/d(2,3) , or equivalent to 50% of Vermilion's current European natural gas production. In Croatia, Vermillion drilled four successful exploration wells (2.4 net) on the SA-7 block and tested three of these wells in 2024. The discoveries in Germany and Croatia have proven up multiple producing zones and de-risked future exploration and development targets to support future organic development within the Company's most profitable operating region. The Company is moving forward with production tie-in operations and evaluating de-bottlenecking options to enhance future production capacity from these new discoveries, which are expected to generate significant FCF in the years ahead. Vermilion has operated in Europe for nearly 30 years and continues to view the region as a key strategic asset within the portfolio and one that offers significant organic and inorganic growth opportunities. European natural gas prices averaged $18.73/mmbtu in Q4 2024 and have remained strong in recent months with forward prices over $19/mmbtu for the remainder of 2025.
In Canada, Vermilion executed a strategic expansion of its Montney asset with the completion and start-up of the new BC Mica Battery in 2024. This allowed the Company to nearly double its Montney production capacity to approximately 14,000 boe/d while providing the platform for future expansion to 28,000 boe/d. Vermilion has drilled a total of 32 wells in the Montney since acquiring the asset in 2022 and continues to see improvements in well costs and productivity, with total well costs trending toward our targeted range of $9.0 to $9.5 million per well. As the Company executes the remaining expansion phases over the next couple years, production from the Montney is expected to increase to approximately 28,000 boe/d which will translate to strong and sustainable FCF supported by over 15 years of drilling inventory.
Vermilion has made significant progress in its asset high grading strategy over the past few years, including the consolidation of working interest in the Corrib natural gas project in Ireland, the acquisition of an early stage Montney growth asset in Canada and most recently the acquisition of Westbrick Energy Ltd. ("Westbrick") in the Deep Basin of Canada. The Westbrick acquisition significantly advances Vermilion's North American high-grading initiative, adding approximately 50,000 boe/d(4) of liquids rich natural gas production and increasing the Company's operational scale and depth and quality of inventory in the Deep Basin. With the closing of this acquisition, approximately 80% of Vermilion's production now comes from its global gas portfolio comprised of Canadian liquids-rich natural gas fairway in the Deep Basin and Montney and premium-priced natural gas in Europe. Vermilion's European gas production provide direct exposure to premium European gas prices and generate strong FCF today, while the growing liquids-rich gas asset base in Canada generates strong full-cycle margins while providing exposure to an improving macro environment for North American gas prices.
In conjunction with the closing of the Westbrick acquisition, and as part of the Company's broader asset high-grading initiative, Vermilion recently launched a formal sales process for its southeast Saskatchewan and United States assets. These are high quality assets with strong retention values that will be incorporated into the decision-making process on how to best maximize shareholder value. The potential sale of these assets would help accelerate Vermilion's deleveraging efforts as the Company remains committed to reducing its net debt to FFO ratio to a target range of one times or less. Vermilion also recently issued US$400 million of eight-year senior unsecured notes which further enhances the Company's liquidity. Vermilion is in a very strong financial position today with over $1 billion of financial liquidity and over 35% of its 2025 production hedged(5) , which will contribute to Vermilion's deleveraging efforts.
Q4 2024 Operations Review
North America
Production from Vermilion's North American operations averaged 52,293 boe/d(1) in Q4 2024, a decrease of 3% from the previous quarter due to planned third-party turnaround activity in Alberta, partial shut-in of some Canadian gas production in response to weak AECO prices, and natural declines in the United States, partially offset by increased production at Mica. Production from the Mica Montney increased due to a full quarter contribution from the five-well 9-21 pad which started up in Q3 2024 and strong throughput on the 8-33 BC Montney battery.
In Q4 2024, Vermilion drilled six (6.0 net) Montney liquids-rich shale gas wells, including five (5.0 net) wells on the new 8-4 pad in BC and one land retention well in Alberta. In the Deep Basin, we drilled five (5.0 net), completed five (4.5 net), and brought on production five (3.8 net) liquids-rich conventional natural gas wells. In Saskatchewan, we drilled six (5.9 net), completed six (5.9 net), and brought on production seven (6.9 net) light and medium crude oil wells, while in the United States, we participated in the drilling and completion of five (0.6 net) non-operated light and medium crude oil wells.
Vermillion continues to demonstrate success with its open hole multilateral drilling program in Saskatchewan, efficiently maintaining production of over 10,000 boe/d in the quarter. The Company also had an active drilling program in the Deep Basin, where we have drilled over 300 wells over the past three decades and continue to see success across numerous zones.
International
Production from Vermilion's International operations averaged 31,243 boe/d(1) in Q4 2024, an increase of 3% from the previous quarter primarily due to a full quarter of production in Australia following planned maintenance in Q3 2024.
In Germany, Vermilion successfully tested the Wisselshorst deep gas exploration well (0.6 net) in December 2024. The well flow tested at a restricted rate of 21 mmcf/d(3) of natural gas with a flowing wellhead pressure of 6,200 psi. Subsequent to year-end, the Company tested a second zone in this well which flow tested at a restricted rate of 20 mmcf/d(3) of natural gas with a flowing wellhead pressure of 6,200 psi. Both tests were restricted due to limitations of the testing equipment. Vermilion expects to bring this well on production in the first half of 2026 and is currently evaluating follow-up drilling locations and de-bottlenecking options to optimize production and future development plans. Vermilion's operated working interest in this well increased from 30% to 64% during the fourth quarter of 2024, increasing the Company's exposure to this potentially large gas resource.
Subsequent to year-end, Vermilion completed drilling operations on the Weissenmoor Sud deep gas exploration well (1.0 net) and discovered hydrocarbons, marking a third discovery in Germany. The well is currently being tested. Tie-in operations on the Osterheide well (1.0 net) are proceeding as planned with first production anticipated in the first half of 2025. The success of the Company's deep gas exploration program in Germany is expected to add meaningful, long-life production and FCF in the years ahead as well as providing technical confidence on future drilling locations.
In Croatia, production averaged 1,869 boe/d, up slightly from the previous quarter following start-up of the gas plant on the SA-10 block in June 2024. Planning and permitting activities continued during the fourth quarter for the third well to be drilled in the SA-10 block later this year to offset anticipated declines from the initial two wells. Testing operations on the fourth discovery well (0.6 net) in the SA-7 block were initiated in the fourth quarter and are continuing. This well encountered hydrocarbons across multiple prospective zones and will require additional testing to determine the optimal producing zone and completion method for development. Vermilion continues to work with its partner in evaluating the results of the 2024 exploration program and is planning for the second drilling campaign which may include four to five additional wells in 2026.
2024 Reserves Update
Total proved plus probable ("2P") reserves increased by 1% from the prior year to 435.1 mmboe(6) , primarily due to extensions and improved recovery on the Mica Montney asset. Vermilion added 26.2 mmboe of proved developed producing ("PDP") reserves and 36.2 mmboe of 2P reserves at an average finding, development and acquisition ("FD&A")(8) cost, including future development costs, of $22.81 per boe and $15.77 per boe, respectively, resulting in a recycle ratio(9) of 1.6x on a PDP basis and 2.3x on a 2P basis. The 2024 FD&A figures include upfront capital costs associated with several early-stage growth projects, such as Montney infrastructure and Germany/Croatia exploration, from which minimal reserves have been recognized to date.
The PDP and 2P reserve life index at December 31, 2024 is 5.4 years and 14.1 years, respectively, both of which are consistent with our long-term average. The after-tax net present value of PDP reserves, discounted at 10%, is $2.8 billion(6) and the after-tax net present value of 2P reserves, discounted at 10%, is $5.2 billion(6) , or $27.62 per basic share(6) after deducting year-end net debt.
The following table provides a summary of company interest reserves by reserve category and region on an oil equivalent basis. Please refer to Vermilion's 2024 Annual Information Form for the year ended December 31, 2024 ("2024 Annual Information Form") for detailed information by country and product type.
Proved Proved Proved
Developed Developed Proved Plus
BOE (mboe) Producing Non-Producing Undeveloped Proved Probable Probable
-------------- --------- ------------- ----------- ------- -------- --------
North America 114,376 4,785 91,509 210,670 119,942 330,612
International 53,600 6,037 8,815 68,453 36,043 104,496
-------------- --------- ------------- ----------- ------- -------- --------
Vermilion 167,976 10,822 100,324 279,123 155,986 435,109
-------------- --------- ------------- ----------- ------- -------- --------
The following table provides a reconciliation of changes in company interest reserves by reserve category and region. Please refer to Vermilion's 2024 Annual Information Form for detailed information by country and product type and for an explanation concerning the reserve change categories. The following tables may not total due to rounding.
PDP (mboe) North America International Vermilion ------------------------------- ------------- ------------- --------- December 31, 2023 112,204 60,502 172,706 Discoveries -- -- -- Extensions & Improved Recovery 3,994 100 4,095 Technical Revisions 18,563 4,162 22,726 Acquisitions -- -- -- Dispositions (36) -- (36) Economic Factors (754) 182 (572) Production (19,596) (11,347) (30,943) ------------------------------- ------------- ------------- --------- December 31, 2024 114,376 53,600 167,976 ------------------------------- ------------- ------------- --------- 1P (mboe) North America International Vermilion ------------------------------- ------------- ------------- --------- December 31, 2023 195,685 72,700 268,385 Discoveries -- 2,782 2,782 Extensions & Improved Recovery 31,271 2,568 33,839 Technical Revisions 4,064 334 4,398 Acquisitions 1,782 1,161 2,943 Dispositions (1,473) -- (1,473) Economic Factors (1,063) 254 (809) Production (19,596) (11,347) (30,943) ------------------------------- ------------- ------------- --------- December 31, 2024 210,670 68,453 279,123 ------------------------------- ------------- ------------- --------- 2P (mboe) North America International Vermilion ------------------------------- ------------- ------------- --------- December 31, 2023 316,040 113,798 429,838 Discoveries -- 4,861 4,861 Extensions & Improved Recovery 35,273 1,327 36,600 Technical Revisions 1,366 (6,100) (4,734) Acquisitions 2,302 1,825 4,128 Dispositions (3,317) -- (3,317) Economic Factors (1,455) 133 (1,323) Production (19,596) (11,347) (30,943) ------------------------------- ------------- ------------- --------- December 31, 2024 330,612 104,496 435,109 ------------------------------- ------------- ------------- ---------
Additional information about the McDaniel Reserves Report can be found in our Annual Information Form on our website at www.vermilionenergy.com and on SEDAR+ at www.sedarplus.ca.
Outlook and Guidance Update
Subsequent to year-end, Vermilion announced the closing of the Westbrick acquisition, adding approximately 50,000 boe/d(4) of Deep Basin liquids-rich natural gas. The integration of the Westbrick assets and employees is underway and progressing as planned with numerous synergies already identified. Vermilion plans to continue with the two-rig Q1 2025 drilling program initiated by Westbrick and expects to maintain this program on the acquired assets post break-up. During the first quarter of 2025, Vermilion launched a formal sales process for its Southeast Saskatchewan and Wyoming assets. The Saskatchewan assets include approximately 10,000 boe/d (85% liquids) of production with moderate declines and multi-lateral development upside. The Wyoming assets include approximately 5,000 boe/d (80% liquids) of production with multi-zone development potential, including the Niobrara and the Parkman.
The 2025 capital budget and production guidance have been revised to incorporate the closing of the Westbrick acquisition. Annual production is now expected to range between 125,000 to 130,000 boe/d(5) (62% natural gas including 14% European gas)(5) with E&D capital expenditures of $730 to $760 million (68% North America and 32% International, with over 70% of total capital to be invested in Vermilion's global gas franchise)(5) . The revised capital program includes an additional 13 (12.3 net) wells to be drilled on the Westbrick assets, bringing the total Deep Basin well count to 28 (24.9 net) wells for 2025.
Based on forward commodity prices, Vermilion forecasts 2025 FCF of approximately $400 million. Approximately 60% of excess FCF ("EFCF") will be allocated to debt reduction with 40% of EFCF allocated to shareholder returns, inclusive of the $0.13 per share quarterly base dividend. The variable component of shareholder returns will continue to be allocated towards share buybacks. Since initiating the share buyback program in July 2022, Vermilion has repurchased and retired 17.8 million shares.
Vermilion's updated 2025 capital expenditure and production guidance following the closing of the Westbrick acquisition is:
Category 2025 Prior(7) 2025 Current(7) ------------------------------------------ --------------- ----------------- Production (boe/d) 84,000 - 88,000 125,000 - 130,000 E&D capital expenditures ($MM) $600 - 625 $730 - 760 Royalty rate (% of sales) 8 - 10% 9 - 11% Operating ($/boe) $17.00 - 18.00 $13.50 - 14.50 Transportation ($/boe) $3.50 - 4.00 $3.00 - 3.50 General and administration ($/boe) $2.75 - 3.25 $2.25 - 2.75 Cash taxes (% of pre-tax FFO) 7 - 9% 6 - 10% Asset retirement obligations settled ($MM) $60 $60 Payments on lease obligations ($MM)(2) $20 $20 ------------------------------------------ --------------- -----------------
Based on the closing date of the Westbrick acquisition, Q1 2025 production is expected to be approximately 100,000 boe/d(5) .
The United States recently announced tariffs on all goods imported from Canada, including a 10% tariff on Canadian energy imports, effective March 4, 2025. Over half of Vermilion's revenue is derived from assets located outside of Canada which provides a partial hedge against these tariffs. Vermilion will continue to monitor the situation as it relates to its Canadian production and operations, but at this time it does not expect the tariffs to have a material financial impact on the Company.
Commodity Hedging
Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, we have 38% of our expected net-of-royalty production hedged for 2025. With respect to individual commodity products, we have hedged 54% of our European natural gas production, 34% of our crude oil production, and 35% of our North American natural gas volumes, respectively. Please refer to the Hedging section of our website under Invest With Us for further details using the following link:
https://www.vermilionenergy.com/invest-with-us/hedging.
(Signed "Dion Hatcher")
Dion Hatcher
President & Chief Executive Officer
March 5, 2025
(1) Please refer to Supplemental Table 4 "Production" of the accompanying
Management's Discussion and Analysis for disclosure by product type.
(2) Osterheide Z2-2 well (100% working interest) tested at a rate of 17.3
mmcf/d during an eight-hour flow period with flowing wellhead pressure
of 4,625 psi during initial well cleanup on an adjustable choke. The
completion fluid was recovered during the clean-up flow period. A final
shut-in wellhead pressure of 5,757 psi and bottom hole pressure of 7,235
psi were recorded following the well test. The tested zone is the
Rotliegend Wustrow formation which was encountered at 5,757m measured
depth ("MD") and a 42.0m gas column was logged with 13.8m of net
reservoir and average effective porosity of 8.3%. Test results are not
necessarily indicative of long-term performance or ultimate recovery.
(3) Wisselshorst Z1a well (64% working interest) was tested in December
2024. Flow rates, during the initial clean-up phase, of up to 21.2
mmcf/d with a flowing wellhead pressure of 6,150 psi on an adjustable
choke were achieved. The completion fluid was recovered during the
clean-up flow period. During the main flow period the well tested at a
rate of 20.1mmcf/d over a five-hour flow period with a flowing wellhead
pressure 6,250 psi on a 24/64" fixed choke. A final shut-in pressure of
7,020 psi and a bottom hole pressure of 8,679 psi were recorded
following the well test of this zone. The zone being tested is the
Rotliegend Havel formation, which was encountered at 5,054m MD and a
124.4m gas column was logged with 50.8m of net reservoir and average
effective porosity of 9.3%. A second zone in the well was tested in
January 2025 where peak rates of 20.3 mmcf/d at a flowing well head
pressure of 6,189 psi were recorded. During the main flow period rates
of 18.8 mmcf/d over a five-hour flow period with a flowing wellhead
pressure of 6,334 psi were achieved on a 24/64" fixed choke. A final
shut-in pressure of 7,001 psi and a bottom hole pressure of 8,756 psi
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