- 2024 fund flows from operations ("FFO")(1) and free cash flow ("FCF")(2) are forecasted to be approximately
$1.3 billion and$700 million , respectively, based on forward commodity prices(3); FCF represents an approximately 40% increase versus our 2023 forecast. - 2024 capital expenditure budget of
$600 –$625 million includes increased investment in our BC Montney asset and advancement of key growth projects inGermany andCroatia . - 2024 production guidance of 82,000 – 86,000 boe/d reflects a mid-year start-up of the new BC Montney battery and
Croatia gas plant and underpins the forecasted 40% increase to FCF. - Vermilion continues to provide investors with market diversification as 40% of our 2024 natural gas production will be produced in
Europe and receive European gas benchmark pricing, which is approximately six times higher than forward AECO pricing(3) and supports our peer leading netbacks. - On
November 30, 2023 , theEuropean Union published a review of the temporary windfall tax and subsequent market developments in the energy sector. The report stated that the situation in energy markets is very different from the exceptional circumstances when the temporary windfall tax was initially established inOctober 2022 , and therefore theEuropean Union has not proposed to extend the mandate beyond 2023. - Quarterly cash dividend increased by 20% to
$0.12 CDN per share, effective with the Q1 2024 dividend payable inApril 2024 . - Plan to increase return of capital allocation target to 50% of excess FCF ("EFCF")(4), starting
April 1, 2024 . When combined with our forecasted 40% increase in FCF, the amount of capital allocated to share buybacks in 2024 is expected to double from 2023 levels. - Since initiating our share buyback program in
July 2022 , we have repurchased and retired 7.2 million shares including 4.9 million in 2023 year-to-date. During the month ofNovember 2023 , we repurchased 671,000 shares for approximately$12 million and plan to further increase the amount of share repurchases in December. - We continue to employ an active commodity hedge program and currently have 30% of our 2024 production (net of royalties) hedged. This is comprised of 39% of our European gas hedged at an average floor of
$33 per mmbtu, 29% of our North American gas at an average floor of$3 per mmbtu and 26% of our crude oil hedged at an average floor ofUS$80 per barrel. - Vermilion remains well positioned to generate strong FCF in the years ahead which will support our future development plans and return of capital strategy.
Vermilion's Board of Directors has approved an E&D capital budget of
Based on forward commodity prices, we forecast 2024 FFO of
In
We are not planning operated drilling operations in
The development of our BC
We plan to invest approximately
In
In
Our messaging on return of capital has been consistent throughout 2023. We set a net debt target of
Since initiating our share buyback program in
Starting
Vermilion is well positioned for 2024 as we gain operational momentum, achieve our net debt target and increase our return of capital. We are forecasting a significant increase in 2024 FCF, which we expect to translate into higher shareholders returns through an increased base dividend and potential doubling of our share buybacks. Vermilion has a long track record of returning capital to shareholders having paid out over
We continue to employ an active commodity hedge program and currently have 30% of our 2024 production (net of royalties) hedged. This is comprised of 39% of our European gas hedged at an average floor of
2024 Guidance
Category | Guidance* |
Production (boe/d) | 82,000 – 86,000 |
E&D Capital Expenditures ($MM) | |
Royalty rate (% of sales) | 7 – 9% |
Operating ($/boe) | |
Transportation ($/boe) | |
General and administration ($/boe) | |
Cash taxes (% of pre-tax FFO) | 5 – 7% |
Asset retirement obligations settled ($MM) | |
Payments on lease obligations ($MM)** |
*2024 guidance reflects foreign exchange assumptions of CAD/
(1) | Fund flows from operations ("FFO") is a total of segments measure comparable to net earnings that is comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized gain (loss) on derivatives, realized foreign exchange gain (loss), and realized other income (expense). The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations, and make capital investments. FFO does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to primary financial statement measures can be found in the "Non-GAAP and Other Specified Financial Measures" section of Vermilion's MD&A for the three and nine months ended |
(2) | Free cash flow ("FCF") is a non-GAAP financial measure comparable to cash flows from operating activities and is comprised of FFO less drilling and development and exploration and evaluation expenditures. More information and a reconciliation to primary financial statement measures can be found in the "Non-GAAP and Other Specified Financial Measures" section of Vermilion's MD&A for the three and nine months ended |
(3) | 2024 forward strip pricing as at |
(4) | Excess free cash flow ("EFCF") is a non-GAAP financial measure comparable to cash flows from operating activities. EFCF is comprised of FCF less asset retirement obligations settled and capital lease payments, which are ongoing costs associated with running our business, and more accurately reflects the free cash available to return to shareholders. |
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 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; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion's 2023 and 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 2023 and 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
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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