Vermilion Energy Inc. Announces 2023 Budget and Guidance, 25% Dividend Increase and Resumption of Share Buybacks
Highlights
- 2023 capital budget of
$570 million reflects consistent investment levels inNorth America and increased capital allocation to continental European gas drilling - 2023 production guidance of 87,000 – 91,000 boe/d represents a year-over-year increase of approximately 3% at the midpoint. This production guidance assumes a
March 31, 2023 , closing of the Corrib Acquisition, as well as the optimization of our Montney development to minimize incremental Alberta infrastructure due to recent progress obtaining permits on ourBritish Columbia lands - Obtained formal Irish government consent for the Corrib Acquisition, which is another key milestone towards completing the transaction
- Forecast 2023 free cash flow ("FCF") of approximately
$800 million based on forward commodity prices and including the impact of temporary windfall taxes and hedging losses - Expect to return up to 25% of FCF to shareholders in 2023 through base dividend and resumption of share buybacks, with the balance allocated to debt reduction
- Quarterly cash dividend increased by 25% to
$0.10 CDN per share, effective with the Q1 2023 dividend - Vermilion remains well positioned to generate strong FCF in the years ahead which will support our future development plans and return of capital strategy
Vermilion's Board of Directors has approved an E&D capital budget of
Based on forward commodity prices and assuming a
We have included a windfall tax estimate range in our guidance table below, however these percentages and amounts are highly sensitive to European gas prices and may fluctuate as commodity prices change. Our FCF estimate also factors in higher anticipated operating costs, which is primarily driven by our European operations where power costs are directly linked to European gas prices.
2023 Guidance
Category |
2023 Guidance* |
Production (boe/d) |
87,000 – 91,000 |
E&D Capital Expenditures ($MM) |
|
Royalty rate (%)** |
8 - 10% |
Operating ($/boe) |
|
Transportation ($/boe) |
|
General and administration ($/boe) |
|
Cash taxes (% of pre-tax FFO) |
11 – 13% |
Windfall tax (% of pre-tax FFO)*** |
14 – 16% |
*2023 guidance reflects foreign exchange assumptions of CAD/
In
During the second half of 2022 we completed the six wells on our first
We continue to see positive developments on the Blueberry
We plan to invest approximately
In
We expect our windfall tax exposure for both 2022 and 2023 to be at the lower end of our previous estimates, primarily due to lower 2023 European gas strip pricing. Based on the windfall tax frameworks outlined to date, we estimate a windfall tax of approximately
Included in these estimates is the assumption that
As part of our 2023 return of capital strategy, we are pleased to announce a 25% increase to our Q1 2023 quarterly cash dividend to
As a result of the unexpected windfall tax, our current debt levels are higher than we anticipated. As such, we believe it is prudent to remain focused on debt reduction in 2023. We are targeting net debt of
Vermilion will discuss its 2023 Budget and Guidance in a conference call and webcast presentation on
You may also access the webcast at https://app.webinar.net/4NYQORYME5v. The webcast link, along with conference call slides, will be available on Vermilion's website at https://www.vermilionenergy.com/invest-with-us/events--presentations.cfm under Upcoming Events prior to the conference call
(1) |
This document references free cash flow which is not specified, defined, or determined under International Financial Reporting Standards ("IFRS") and is therefore considered non-GAAP financial measures and may not be comparable to similar measures presented by other issuers. Free cash flow represents fund flows from operations in excess of capital expenditures and is used to determine the funding available for investing and financing activities, including payment of dividends, repayment of long-term debt, reallocation to existing business units, and deployment into new ventures. |
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(2) |
2023 forward strip pricing as at |
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
Certain statements included or incorporated by reference in this document may constitute forward-looking statements or financial outlooks under applicable securities legislation. Such forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this document may include, but are not limited to: capital expenditures and Vermilion's ability to fund such expenditures; Vermilion's additional debt capacity providing it with additional working 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 2022 and 2023 guidance, and rates of average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange rates and 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, and the wells expected to be drilled in 2022 and 2023; exploration and development plans and the timing thereof; Vermilion's ability to reduce its debt, including its ability to redeem senior unsecured notes prior to maturity; 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 and interest rates; 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 Vermilion; and other risks and uncertainties described elsewhere in this document or in Vermilion's other filings with Canadian securities regulatory authorities.
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.
All crude oil and natural gas reserve and resource information contained in this document has been prepared and presented in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. Reserves estimates have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of funding required for such development. The actual crude oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document.
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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