Vermilion Energy Inc. · TSX:VET
Vermilion Energy — Shareholder Meeting (April 2017)
37 slides from Vermilion Energy's shareholder meeting presentation, Apr 28, 2017
Slide 1: Annual General Meeting April 28, 2017
ANNUAL GENERAL MEETING APRIL 28, 2017
Slide 2: Q1 2017 Highlights
Q1 2017 HIGHLIGHTS Q1 2017 Q4 2016 % Change Average Production (boe/d) 64,537 60,863 6% Production per share (boe/d per million basic shares) 535 509 5% Fund Flows from Operations ($MM)* $143.4 $149.6 (4%) Fund Flows from Operations ($/basic share) $1.21 $1.27 (5%) Operating Expense ($/boe) $9.35 $1
Slide 3: Vermilion Overview
VERMILION OVERVIEW 3
Slide 4: Vermilion Overview
VERMILION OVERVIEW ► International E&P with leading positions in Europe, North America and Australia ► Self-funded growth-and-income model ► Consistent production growth from high-return, conventional and semi-conventional projects ► Project inventory depth more typical of an unconventional producer
Slide 5: Capital Markets Summary
CAPITAL MARKETS SUMMARY Market Summary Trading Price (April 24, 2017) $48.12 (TSX), $35.61 (NYSE) Ticker Symbol (TSX & NYSE) VET Shares Outstanding 120.5 million Average Daily Trading Volume (shares) 0.6 million Monthly Dividend $0.215/share Dividend Yield 5.4% Director and Officer Ownership 5% Capi
Slide 6: Vermilion History
VERMILION HISTORY Issued senior Launched as an Alberta-based oil & unsecured notes in Canadian gas exploration and production company Converted to High Yield market Issued senior Vermilion Energy Trust IPO on April 15, unsecured notes in US Converted from an income Listed First 1996 at $0.10 per sha
Slide 7: Sustainable Growth-and-Income Model
SUSTAINABLE GROWTH-AND-INCOME MODEL 7
Slide 8: Production Growth
PRODUCTION GROWTH ► Vermilion is self-funded for E&D CAPEX and cash dividends Y/Y Y/Y E&D Capital 2017 GUIDANCE – 69,000 TO 70,000 BOE/D Production Year Production PPS CAPEX Intensity (BOE/D) 80,000 Growth* Growth* ($MM) ($/BOE/D)** 70,000 2011 35,202 10% 6% 491 13,900 13% CAGR 60,000 2012 37,803 7%
Slide 9: Reserves and Resource Base
RESERVES AND RESOURCE BASE RESERVES* 2016 RESOURCES* 350 350 300 300 16% CAGR 250 250 200 200 MMBOE 7% CAGR MMBOE 150 150 100 100 50 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Contingent Prospective Proved Reserves Probable Reserves Low Best Estimate High VERMILION’
Slide 10: Reliable and Growing Dividends
RELIABLE AND GROWING DIVIDENDS CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q1 2017) = $32.24 $0.25 $0.215 MONTHLY DIVIDENDS $0.20 $0.20 $0.19 $0.17 $0.15 $0.10 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 VERMILION HAS BEEN PAYING A MONTHLY DIVIDEND SINCE 2003 10
Slide 11: Sustainability Ratio
SUSTAINABILITY RATIO 200% 175% 162% 150% TOTAL EXPENDITURES / FFO* 140% 125% 121% 117% 121% 111% 109% 111% 100% 108% 75% 81% 87% 81% 74% 73% 70% 50% 59% 25% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E Cash Dividends Base E&D Capex (Excludes Corrib) New Ventur
Slide 12: Elements of Sustainable Model
ELEMENTS OF SUSTAINABLE MODEL SELF-FUNDED GROWTH-AND-INCOME MODEL 1. High Margins 2. Low Base Production Decline Rates 3. Strong Capital Efficiencies Profitability on a per boe basis Required production replacement before growth Cost per boe/d to replace and grow production ► High margins provide in
Slide 13: Relative Netbacks
RELATIVE NETBACKS 2016 OPERATING NETBACK EXCL. HEDGING* 2016 AFTER-TAX CASH NETBACK EXCL. HEDGING* $25 $20 $20 $15 $/BOE $/BOE $15 $10 $10 $5 $5 $0 $0 -$5 MEG BTE PEY BIR VET PXT NVA CPG TOG TOU ERF ARX CR BNP BNE GTE PWT SGY WCP PGF POU VII PEY BIR BTE MEG PXT NVA VET TOU ERF CPG GTE ARX CR BNP TOG
Slide 14: Base Production Decline Rates
BASE PRODUCTION DECLINE RATES Effective Natural Country Decline Decline 50% Rate* Rate* VET CANADA VET ONLY CORPORATE France 11% 11% 40% DECLINE NATURAL DECLINE VET Netherlands** 0% 19% CORPORATE EFFECTIVE 30% DECLINE Germany 14% 14% Ireland 0% 18% 20% Australia** 0% 20% 10% Canada 23% 27% United St
Slide 15: Capital Intensity
CAPITAL INTENSITY ► Strong capital efficiencies support self- 16,000 funded production growth with free cash flow 14,000 generation 12,000 10,000 $ / BOED ► Reduction in capital intensity driven by 8,000 6,000 ► Shift to less capital-intensive project slate 4,000 ► Learning curve in well costs and p
Slide 16: Cost Reductions
COST REDUCTIONS OPERATIONAL EFFICIENCY CAPITAL EFFICIENCY 14.00 40.00 27% Reduction 12.00 35.00 84% Reduction 30.00 10.00 25.00 8.00 $ / BOE $ / BOE 20.00 6.00 15.00 29% Reduction 4.00 4% Reduction 10.00 2.00 5.00 0.00 0.00 OPEX Transportation G&A 2P F&D (Including FDC) 2012 2013 2014 2015 2016 2011
Slide 17: Free Cash Flow Generation
FREE CASH FLOW GENERATION $500 80,000 8% 7% $400 70,000 FFO LESS E&D CAPEX* ($MM) 2017E DAFCF** YIELDS ($MM) 6% PRODUCTION (BOE/D) $300 60,000 5% 4% $200 50,000 3% $100 40,000 2% $0 30,000 1% 0% -$100 20,000 PEY MEG VET SU HSE CVE CPG TOU ECA ARX CNQ IMO VII 2011 2012 2013 2014 2015 2016 2017E 2018E
Slide 18: International Diversification
INTERNATIONAL DIVERSIFICATION 18
Slide 19: Core Operating Areas
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 19
Slide 20: Vermilion's International Advantage
VERMILION’S INTERNATIONAL ADVANTAGE ► Global asset portfolio provides commodity diversification and premium pricing ► Diversified product portfolio reduces price correlation, increasing the stability of our cash flows ► Project diversification allows allocation of CAPEX to the highest return commodi
Slide 21: Commodity Mix
COMMODITY MIX PRODUCTION (2017)* 2P RESERVES (YE 2016)** ESTIMATED FFO CONTRIBUTION (2017)* United Australia Australia France France Australia States 12% United 10% 17% 22% 6% 1% States United 2% Germany France States Germany 6% 23% 4% 8% Canada OIL (BRENT) OIL (BRENT) 31% 28% 30% OIL/ OIL (BRENT) O
Slide 22: European Natural Gas Pricing Advantage
EUROPEAN NATURAL GAS PRICING ADVANTAGE ► Futures markets continue to reflect a significant premium NATURAL GAS* for European natural gas versus AECO and Henry Hub $12 ► Realized forward prices are expected to be influenced $10 by imports of US Gulf Coast LNG into Europe, GAS PRICE (C$/MMBTU) LNG-BUI
Slide 23: Balance Sheet / Risk Management
BALANCE SHEET / RISK MANAGEMENT 23
Slide 24: Conservative Balance Sheet
CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C$1.8 BILLION NET DEBT TO FFO RATIO* PRO-FORMA ESTIMATE AS AT MARCH 31, 2017 4.0 $0.5 B 3.0 $0.4 B 2.0 $0.9 B 1.0 REVOLVING CREDIT FACILITY 0.0 2017E 2018E 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bank Debt US$ Senior Notes Unut
Slide 25: Annual Commodity Hedge Position
ANNUAL COMMODITY HEDGE POSITION Full Year 2017 Full Year 2018 Full Year 2019 WTI Percent of Production Hedged 36% - - Average Floor / Ceiling / Swap ($/bbl) $71.21 / $79.91 / $71.94 -/-/- -/-/- Brent Percent of Production Hedged 28% 5% - Average Floor / Ceiling / Swap ($/bbl) $71.57 / $83.53 / $74.8
Slide 26: Record of Value Creation
RECORD OF VALUE CREATION 26
Slide 27: Value Creation 1994 – 2017
VALUE CREATION 1994 – 2017 $8,000 $6,909 $5,937 $6,000 MILLIONS $4,000 TOTAL VALUE $2,723 MARKET CREATION CAPITALIZATION(2) $2,000 DIVIDENDS PAID(2) $0 EQUITY ISSUED(1) -$2,000 $(1,750) MORE THAN 20-YEAR RECORD OF STRONG VALUE CREATION (1) Equity issued for cash and acquisitions since 1994. (2) Divi
Slide 28: Relative Market Performance
RELATIVE MARKET PERFORMANCE Since Inception Indices 1 Year 3 Year 5 Year 10 Year 15 Year (23 Years) S&P TSX Oil & Gas E&P Index 52.5% -9.1% -6.7% -5.1% 4.4% 4.9% ENERGY INDICES S&P TSX Oil & Gas E&P Total Return Index 55.9% -6.2% -3.6% -1.8% 7.3% - S&P TSX High Income Energy Index 30.4% -8.2% -4.1%
Slide 29: Corporate Citizenship
CORPORATE CITIZENSHIP Vermilion Enersy Family Centre 29
Slide 30: Governance
GOVERNANCE ► Vermilion’s external awards and recognition provide important benchmarks for our strong performance The Globe and Mail, Report on Business, Board Games ► In 2016, Vermilion ranked 3rd within the oil and gas sector, and among the top quartile of companies in the S&P/TSX composite index ►
Slide 31: Health, Safety and Environment (HSE)
HEALTH, SAFETY AND ENVIRONMENT (HSE) PHILOSOPHY ► Safety, environmental protection, and regulatory compliance go hand-in-hand with VERMILION’S PRIORITIES maximizing profitability WE CONDUCT ALL ACTIVITIES TO: ► These priorities should never be in conflict; but if they prove to be, our personnel 1. P
Slide 32: Sustainability
SUSTAINABILITY ► Vermilion is recognized as a responsible oil and gas producer in our industry Carbon Disclosure Project (CDP) ► Vermilion was named to the CDP Climate ‘A’ List, one of 193 companies globally, and the only North American energy company to make the list ► Across all sectors, only thre
Slide 33: Strategic Community Investment
STRATEGIC COMMUNITY INVESTMENT ► Vermilion is committed to giving back to Canada France Netherlands Australia the communities in which we operate ► We assess the critical needs in each community, and determine where our financial resources and volunteer time can make a difference ► We focus our flag
Slide 34: Corporate Culture
CORPORATE CULTURE “GREAT PLACE TO WORK” INSTITUTE’S ANNUAL RANKING ► Great Place to Work Institute evaluates companies by analyzing results of a Trust Index© survey provided to employees and evaluating the workplace through a Culture Audit© ► Since 2010, Vermilion has been ranked among the Top 30 Be
Slide 35: Thank you
TO OUR EMPLOYEES AND SHAREHOLDERS . . . Vielen Dank Ta Go raibh maith agat Merci Köszönöm Thank you Hvala ti Dank je 35
Slide 36: Advisory
ADVISORY This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an offer to sell or the solicitation of an offer to buy, securities of Vermilion. This presentation and its contents should not be construed, under any circumstances, as inv
Slide 37: Advisory on Reserves and Resource Disclosure
ADVISORY ON RESERVES AND RESOURCE DISCLOSURE Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 1, 2017 with an effective date of December 31, 2016) prepared by GLJ Petroleum Consultants Ltd. (“GLJ”), an indep