UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
Pursuant
to Rule 13a-16 or 15d-16
Under
the Securities Exchange Act of 1934
For
the month of July 2017
Commission
File Number: 001-35829
Vermilion
Energy Inc.
(Exact
name of registrant as specified in its charter)
3500,
520 – 3rd Avenue S.W., Calgary, Alberta T2P 0R3
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).
Note:
Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual
report to security holders.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
Note:
Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document
that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant
is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country
exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already
been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate
by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If
“Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
.
Exhibit
| Exhibit |
|
Description |
| |
|
|
| 99.1 |
|
Q2
Report |
| 99.2 |
|
CEO Certificate |
| 99.3 |
|
CFO Certificate |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VERMILION
ENERGY INC.
| |
|
|
| By: |
|
/s/ Curtis
W. Hicks |
| Title: |
|
Curtis W. Hicks, Executive VP and Chief Financial Officer |
Date: July 26, 2017
Exhibit 99.1
| Vermilion Energy Inc. | 2017 Second Quarter Report |
DISCLAIMER
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; business strategies and objectives; operational and financial performance; estimated
reserve quantities and the discounted net present value of future net revenue from such reserves; petroleum and natural gas sales;
future production levels (including the timing thereof) and rates of average annual production growth; exploration and development
plans; 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 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 Canada and internationally; the ability of Vermilion to market crude
oil, natural gas liquids, and natural gas successfully to current and new customers; the timing and costs of pipeline and storage
facility construction and expansion and the ability to secure adequate product transportation; the timely receipt of required regulatory
approvals; the ability of Vermilion to obtain financing on acceptable terms; foreign currency exchange rates and interest rates;
future crude oil, natural gas liquids, and natural gas prices; and management’s expectations relating to the timing and results
of exploration and development activities.
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.
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.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
ABBREVIATIONS
| $M |
thousand dollars |
| $MM |
million dollars |
| AECO |
the daily average benchmark price for natural gas at the AECO ‘C’ hub in Alberta |
| bbl(s) |
barrel(s) |
| bbls/d |
barrels per day |
| boe |
barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf of natural gas) |
| boe/d |
barrel of oil equivalent per day |
| GJ |
gigajoules |
| HH |
Henry Hub, a reference price paid for natural gas in US dollars at Erath, Louisiana |
| mbbls |
thousand barrels |
| mcf |
thousand cubic feet |
| mmbtu |
million British thermal units |
| mmcf/d |
million cubic feet per day |
| MWh |
megawatt hour |
| NBP |
the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point. |
| NGLs |
natural gas liquids, which includes butane, propane, and ethane |
| PRRT |
Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia |
| TTF |
the price for natural gas in the Netherlands at the Title Transfer Facility Virtual Trading Point |
| WTI |
West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
HIGHLIGHTS
|
| • | Average production increased by
4% in Q2 2017 to 67,240 boe/d as compared to 64,537 boe/d in the prior quarter. The increase was primarily attributable to higher
volumes in Canada, France and the US. |
|
|
| • | Fund flows from operations ("FFO")
for Q2 2017 was $147.1 million ($1.22/basic share(1)), an increase of 3% as compared to $143.4 million ($1.21/basic
share) in Q1 2017. Higher FFO was primarily due to higher sales volumes, which more than offset the impact of lower commodity prices.
Year-over-year, FFO increased by 16% as compared to Q2 2016 as a result of higher commodity prices and production growth. |
|
|
| • | We placed an additional 13 (11.5 net) wells on production in Canada during the second quarter, resulting in
quarterly production growth of 14% for the Canadian business unit. Our drilling programs in the Mannville, Cardium and Midale projects
continue to deliver predictable growth
and improving cost efficiencies. |
|
|
| • | In the United States, the
three (3.0 net) Turner Sand wells drilled in the first quarter were put on production during the second quarter. After a
period of intermittent production testing, the three wells are now producing at a combined rate of 760 boe/d, with two of
the wells
performing above our type curve. |
|
|
| • | In France, we drilled and completed
our first four (4.0 net) wells in the Neocomian fields, with all four wells on production during the second quarter. The combined
IP30 oil rate from the four Neocomian wells was 600 bbls/d, which exceeded our expectations. We believe the 100% success rate and
better-than-expected production results on this inaugural drilling program validate the long-term development potential of the
Neocomian fields. |
|
|
| • | We received the required permits
to execute our two-well (1.0 net) exploration drilling program and 220 square kilometre 3D seismic survey in the Netherlands. The
new wells will be drilled during the third quarter. Subsequent to the quarter, we received ministry authorization to increase production
on a key well, pending a public comment period on the ministry’s authorization. With the receipt of these permits,
we expect to resume production growth from our Netherlands business unit in the second half of this year and through 2018, while
we continue to pursue additional permits to support our long-term growth plans. |
|
|
| • | In Ireland, Corrib continues to
outperform our expectations with production averaging 63.8 mmcf/d (10,634 boe/d) in Q2 2017 and 64.3 mmcf/d (10,718 boe/d) through
the first half of 2017, representing approximately 98% of rated plant capacity. |
|
|
| • | On July 12, Vermilion and Canada
Pension Plan Investment Board (“CPPIB”) announced a strategic partnership in Corrib, whereby CPPIB will acquire Shell
Exploration Company B.V.’s 45% interest in Corrib for total cash consideration of €830 million, subject to customary closing
adjustments and future contingent value payments based on performance and realized pricing. The acquisition has an effective date
of January 1, 2017 and is anticipated to close in the first half of 2018. At closing, Vermilion expects to assume operatorship
of Corrib, and CPPIB plans to transfer the operating entity and a 1.5% working interest to Vermilion for €19.4 million, before
closing adjustments. |
|
|
| • | We have elected to accelerate additional Canadian drilling and completion activity in the fourth quarter of
2017 that was originally planned for 2018. This will allow us to lock-in current services costs and avoid the pre-breakup service
constraints we experienced in Q1 2017. Consequently, we are increasing our 2017 capital budget to $315 million, from $295 million
previously, to reflect this acceleration. The incremental activity will include additional Cardium and Mannville drilling, completion
and well tie-in activities, and some pre-drill expenditures for our 2018 program. Because the increased capital investment will
occur late in 2017, our production guidance for 2017 is unaffected at 69,000 boe/d to 70,000 boe/d. However, we expect that the
additional capital investment in 2017 will positively impact 2018, either by reducing capital investment or increasing production
rates as compared to our previously-announced targets. |
|
|
| • | Effective with the July 2017 dividend
payment, we have fully discontinued the Premium DividendTM Component of our Premium DividendTM and Dividend
Reinvestment Plan. |
|
|
| • | Vermilion’s MSCI ESG (Environment, Social and Governance) rating increased from BBB to A for 2017, and our Governance Metrics score ranked in the 90th percentile globally. This follows our 13th-place ranking in the 2017 Corporate Knights Future 40 Responsible Corporate Leaders in Canada List. These recognitions reflect Vermilion’s continued focus on combining financial results with exemplary environmental, social and governance performance.
|
|
| |
|
(1) |
Non-GAAP Financial Measure. Please see the “Non-GAAP
Financial Measures” section of Management’s Discussion and Analysis. |
|
| |
|
TM |
Denotes trademark of Canaccord Genuity Capital Corporation |
|
| Vermilion Energy Inc. | 2017 Second Quarter Report |
| |
HIGHLIGHTS |
|
|
|
|
|
|
|
|
| |
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
($M except as indicated) |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
|
| |
Financial |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
|
| |
Petroleum and natural gas sales |
271,391 |
261,601 |
212,855 |
|
|
532,992 |
390,240 |
|
| |
Fund flows from operations |
147,123 |
143,434 |
126,568 |
|
|
290,557 |
220,235 |
|
| |
|
Fund flows from operations ($/basic share) (1) |
1.22 |
1.21 |
1.10 |
|
|
2.43 |
1.93 |
|
| |
|
Fund flows from operations ($/diluted share) (1) |
1.20 |
1.19 |
1.09 |
|
|
2.39 |
1.91 |
|
| |
Net earnings (loss) |
48,264 |
44,540 |
(55,696) |
|
|
92,804 |
(141,544)
|
|
| |
|
Net earnings (loss) ($/basic share) |
0.40 |
0.38 |
(0.48) |
|
|
0.78 |
(1.24) |
|
| |
Capital expenditures |
58,875 |
95,889 |
71,714 |
|
|
154,764 |
134,487 |
|
| |
Acquisitions |
993 |
2,620 |
8,550 |
|
|
3,613 |
9,420 |
|
| |
Asset retirement obligations settled |
2,120 |
2,249 |
2,200 |
|
|
4,369 |
4,224 |
|
| |
Cash dividends ($/share) |
0.645 |
0.645 |
0.645 |
|
|
1.290 |
1.290 |
|
| |
Dividends declared |
77,858 |
76,593 |
74,662 |
|
|
154,451 |
147,509 |
|
| |
|
% of fund flows from operations |
53% |
53% |
59% |
|
|
53% |
67% |
|
| |
Net dividends (1) |
48,617 |
41,087 |
24,146 |
|
|
89,704 |
49,003 |
|
| |
|
% of fund flows from operations |
33% |
29% |
19% |
|
|
31% |
22% |
|
| |
Payout (1) |
109,612 |
139,225 |
98,060 |
|
|
248,837 |
187,714 |
|
| |
|
% of fund flows from operations |
75% |
97% |
78% |
|
|
86% |
85% |
|
| |
Net debt |
1,314,766 |
1,377,636 |
1,398,950 |
|
|
1,314,766 |
1,398,950 |
|
| |
Ratio of net debt to annualized fund flows from operations |
2.2 |
2.4 |
2.8 |
|
|
2.3 |
3.2 |
|
| |
Operational |
|
| |
Production |
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate (bbls/d) |
28,525 |
26,832 |
28,416 |
|
|
27,683 |
28,808 |
|
| |
|
NGLs (bbls/d) |
3,821 |
2,694 |
2,713 |
|
|
3,260 |
2,693 |
|
| |
|
Natural gas (mmcf/d) |
209.36 |
210.07 |
198.93 |
|
|
209.71 |
200.02 |
|
| |
|
Total (boe/d) |
67,240 |
64,537 |
64,285 |
|
|
65,896 |
64,837 |
|
| |
Average realized prices |
|
|
|
|
|
|
|
|
| |
|
Crude oil, condensate and NGLs ($/bbl) |
59.40 |
64.14 |
53.90 |
|
|
61.50 |
46.63 |
|
| |
|
Natural gas ($/mcf) |
4.75 |
5.62 |
3.53 |
|
|
5.18 |
3.65 |
|
| |
Production mix (% of production) |
|
|
|
|
|
|
|
|
| |
|
% priced with reference to WTI |
20% |
17% |
20% |
|
|
19% |
20% |
|
| |
|
% priced with reference to AECO |
24% |
22% |
22% |
|
|
23% |
24% |
|
| |
|
% priced with reference to TTF and NBP |
28% |
32% |
29% |
|
|
30% |
28% |
|
| |
|
% priced with reference to Dated Brent |
28% |
29% |
29% |
|
|
28% |
28% |
|
| |
Netbacks ($/boe) |
|
|
|
|
|
|
|
|
| |
|
Operating netback (1) |
28.72 |
31.62 |
27.66 |
|
|
30.08 |
24.64 |
|
| |
|
Fund flows from operations netback |
23.66 |
25.75 |
21.90 |
|
|
24.63 |
19.00 |
|
| |
|
Operating expenses |
10.14 |
9.35 |
9.02 |
|
|
9.77 |
9.30 |
|
| |
Average reference prices |
|
|
|
|
|
|
|
|
| |
|
WTI (US $/bbl) |
48.28 |
51.92 |
45.59 |
|
|
50.10 |
39.52 |
|
| |
|
Edmonton Sweet index (US $/bbl) |
46.03 |
48.37 |
42.51 |
|
|
47.20 |
36.13 |
|
| |
|
Dated Brent (US $/bbl) |
49.83 |
53.78 |
45.57 |
|
|
51.81 |
39.73 |
|
| |
|
AECO ($/mmbtu) |
2.78 |
2.69 |
1.40 |
|
|
2.74 |
1.61 |
|
| |
|
NBP ($/mmbtu) |
6.52 |
7.96 |
5.78 |
|
|
7.26 |
5.88 |
|
| |
|
TTF ($/mmbtu) |
6.74 |
7.65 |
5.61 |
|
|
7.21 |
5.66 |
|
| |
Average foreign currency exchange rates |
|
|
|
|
|
|
|
|
| |
|
CDN $/US $ |
1.34 |
1.32 |
1.29 |
|
|
1.33 |
1.33 |
|
| |
|
CDN $/Euro |
1.48 |
1.41 |
1.46 |
|
|
1.44 |
1.49 |
|
| |
Share information ('000s) |
|
| |
Shares outstanding - basic |
120,947 |
119,046 |
116,173 |
|
|
120,947 |
116,173 |
|
| |
Shares outstanding - diluted (1) |
123,794 |
122,135 |
118,948 |
|
|
123,794 |
118,948 |
|
| |
Weighted average shares outstanding - basic |
120,514 |
118,632 |
115,366 |
|
|
119,578 |
114,046 |
|
| |
Weighted average shares outstanding - diluted (1) |
122,660 |
120,722 |
116,587 |
|
|
121,488 |
115,090 |
|
| (1) | The above table includes non-GAAP financial measures which may not
be comparable to other companies. Please see the “NON-GAAP FINANCIAL MEASURES” section
of Management’s Discussion and Analysis. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
MESSAGE TO SHAREHOLDERS
Oil
prices were lower in the second quarter as the market remains focused on US supply growth and relatively high inventories. OPEC’s
decision in late May to extend its production cuts until March 2018 did little to ease concerns about the current global supply
glut. These industry conditions, and the resulting oil price retracement, have led the financial markets once again to a focus
on sustainability in a “lower-for-longer” environment. At Vermilion, sustainability is central to our business model
as we remained focused on self-funded growth and income. Despite the recent weakness in oil prices, we continue to operate our
business with a sustainability ratio(1) under 100% based on the current forward strip. Our diversified global asset
portfolio provides many inherent defensive characteristics that support this business model, including both commodity and project
diversification. Our commodity diversification reduces the volatility of our revenue stream, while our project diversification
allows us to allocate capital to the highest return projects depending on relative commodity prices.
All
of our major business units remain free cash flow(1) positive under current strip pricing, as we continue to operate
our business with a prudent focus on costs and profitability. Our Canadian business unit in particular has demonstrated the most
dramatic improvement across our portfolio in recent years. As a result of having to compete for capital with our highly profitable
and sustainable business units in Europe and Australia, the Canadian business unit has successfully transitioned into a free cash
flow business over the past two years, and is on track to deliver double digit production growth this year while generating approximately
30% free cash flow, based on current strip pricing. Our Canadian business unit delivered 14% quarter-over-quarter production growth
in Q2 2017, and in recent weeks has achieved a notable milestone with production exceeding 30,000 boe/d for the first time. Our
Canadian assets are concentrated in two core areas, in west-central Alberta where we have a dominant position in the Mannville
condensate play and the Cardium light oil play, and in the down-dip Midale light oil play in southeast Saskatchewan. With a deep
inventory of high return, liquids-focused drilling locations, we project sustained production and free cash flow growth from our
Canadian business unit.
We
achieved another milestone during the second quarter, celebrating our 20-year anniversary in France. France remains a
profitable and economically sustainable business unit. In addition, we are proud of our record of environmental and carbon
sustainability in our French business. Consistent with President Macron’s previously-announced campaign platform, the
newly elected French government announced its intention to not grant new exploration permits beyond those already in
progress. We do not expect this new legislation, if passed, to have a material impact on Vermilion as our operations are
focused on development activities such as well workovers, infill drilling and waterflood optimization. We look forward to the
next twenty years of development activities in France, and to continue demonstrating that oil and gas production can be a
sustainable part of the long-term energy transition.
In the Netherlands, we received the required
permits to execute our drilling and seismic programs for 2017. In addition, we recently received ministry authorization to increase
production on a key well, pending a public comment period on the ministry’s authorization. With the receipt of these
permits, we expect to resume production growth from our Netherlands business unit in the second half of this year and through 2018,
while we continue to advance various permits to support our longer-term growth plans. Permitting in the Netherlands has always
been a time-consuming and challenging process, but we believe the new permitting framework will ultimately improve the process
for both communities and operators. We have a strong track record of profitable growth in the Netherlands, delivering seven years
of consecutive growth at a 13% CAGR prior to 2017. While we were disappointed to break this string of production increases during
2017 due to the permitting delays, we remain committed to the Netherlands and are confident in the longer-term growth opportunities
there.
We recently announced a strategic partnership
with Canada Pension Plan Investment Board (“CPPIB”) in the Corrib Natural Gas Field in Ireland, whereby CPPIB will
acquire Shell Exploration Company B.V.’s (“Shell”) 45% interest in the project. At closing, Vermilion expects
to assume operatorship, and CPPIB plans to transfer the operating entity (SEPIL) along with the 1.5% working interest to Vermilion
for €19.4 million ($28.4 million at current exchange rates) before closing adjustments, increasing our stake to 20%. We expect
the acquisition to be accretive for all pertinent per share metrics including production, fund flows from operations, reserves
and net asset value. We view the acquisition and assumption of operatorship of Corrib as a strategic milestone for Vermilion, and
one that will add value over the long-term. Following the assumption of operatorship of Corrib, we estimate that we will operate
87% of our production base as compared to 72% currently.
We have elected to accelerate additional Canadian drilling and completion activity in the fourth quarter of
2017 that was originally planned for 2018. This will allow us to lock-in current services costs and avoid the pre-breakup service
constraints we experienced in Q1 2017. Consequently, we are increasing our 2017 capital budget to $315 million, from $295 million
previously, to reflect this accelerated activity. The incremental activity will include the drilling of two (2.0 net) Cardium wells,
two (1.4 net) Mannville wells, additional completion and well tie-in activities, and other pre-drill expenditures for our 2018
program. Because the increased capital investment will occur late in 2017, our production guidance for 2017 is unaffected at 69,000
boe/d to 70,000 boe/d. However, we expect that the additional capital investment in 2017 will positively impact 2018, either by
reducing capital investment or increasing production rates as compared to our previously-announced targets.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Q2 2017 Review
Vermilion's second quarter production
increased by 4% to 67,240 boe/d from 64,537 boe/d in the prior quarter. The increase was primarily attributable to higher volumes
in Canada, France and the US, where new production from our Q1 2017 drilling program more than offset lower volumes in the Netherlands
and Australia. This increase was consistent with our expectation of sequential quarterly production growth throughout 2017 to achieve
our full year production guidance of between 69,000 to 70,000 boe/d.
Fund flows from operations ("FFO")
for Q2 2017 was $147.1 million ($1.22/basic share(1)) as compared to $143.4 million ($1.21/basic share) in Q1 2017.
FFO increased 3% quarter-over-quarter, primarily due to higher sales volumes which more than offset the impact of lower commodity
prices. Year-over-year, FFO increased by 16% as compared to Q2 2016 as a result of higher commodity prices and production growth.
Vermilion generated net earnings of $48.2 million ($0.40/basic share) during the second quarter, representing our second consecutive
quarter of positive net income.
Despite commodity price volatility, we
continue to deliver profitable production growth with a strict focus on cost management, maintaining a payout ratio of less than
100%.
Effective with the July 2017 dividend
payment, we have fully discontinued the Premium DividendTM Component of our Premium DividendTM and Dividend
Reinvestment Plan.
Europe
In France, we drilled and completed our
first wells in the Neocomian fields and have now placed all four wells on production. The combined IP30 oil rate from the four
horizontal Neocomian wells was 600 bbls/d, which exceeded our expectations. The 100% success rate and better-than-expected production
results on this inaugural drilling program validate the long-term development potential of the Neocomian fields. We believe the
success of our Neocomian drilling program provides further depth to our low-risk development inventory in France.
In
the Netherlands, as stated earlier, we received the required permits to execute our two-well (1.0 net) exploration drilling program
in the Gorredjik and Drenthe VI production licenses. The new wells will be drilled during the third quarter. In addition, we received
permits for a 220 square kilometre 3D seismic survey in the Akkrum and South Friesland III exploration licenses, which will be
shot in the second half of this year. As previously mentioned, in mid-July, the Ministry of Economic Affairs published its approval
for a production rate increase on a key well, which will become effective following a six-week public comment period.
In Germany, Vermilion assumed operatorship of the assets acquired in
December 2016 from Engie E&P Deutschland GmbH. We commenced workover and artificial lift optimization operations on the acquired
assets in February resulting in Q2 average production from the acquired assets of 2,200 boe/d, a 10% increase from Q1 levels. In
March 2017, we were awarded an exploration license in Lower Saxony comprising 50,000 net acres surrounding the acquired oil fields.
The combination of our 2016 Engie acquisition, assumption of production operatorship, and the additional exploration acreage awarded
in Lower Saxony further advance our objective of developing a material business unit in Germany.
Production from Corrib averaged 63.8
mmcf/d (10,634 boe/d) in Q2 2017 and has averaged 64.3 mmcf/d (10,718 boe/d) through the first half of 2017, representing approximately
98% of rated plant capacity. The project has continued to outperform expectations for well deliverability and downtime.
On July 12, Vermilion and CPPIB announced
a strategic partnership in Corrib, whereby CPPIB will acquire Shell Exploration Company B.V.’s 45% interest in Corrib for
total cash consideration of €830 million, subject to customary closing adjustments and future contingent value payments based
on performance and realized pricing. The acquisition has an effective date of January 1, 2017 and is anticipated to close in the
first half of 2018. At closing, Vermilion expects to assume operatorship of Corrib, and CPPIB plans to transfer the operating entity
and a 1.5% working interest to Vermilion for €19.4 million ($28.4 million at current exchange rates), before closing adjustments.
Vermilion’s incremental 1.5% ownership of Corrib would represent production rate capability of approximately 850 boe/d based
on 2017 production expectations, and approximately 2.0 million boe(2) of 2P reserves based on an independent evaluation
by GLJ Petroleum Consultants Ltd. with an effective date of December 31, 2016. Assuming a purchase price of €19.4 million ($28.4
million at current exchange rates), before closing adjustments, the transaction metrics are estimated at approximately $33,400
per boe per day, $15.40 per boe of proved plus probable reserves(2) including future development capital (generating
a 2P recycle ratio of 1.9 times based on projected 2017 netbacks), and 3.3 times estimated 2017 operating cash flow(1) using
the forward commodity strip. The acquisition is expected to be accretive for all pertinent per share metrics including production,
funds flow from operations, reserves, and net asset value. The Corrib acquisition significantly increases our degree of operating
control over our asset base. Following the assumption of operatorship of Corrib, we estimate that we will operate 87% of our production
base as compared to 72% currently.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
North America
In
Canada, capital activity decreased from the previous quarter due to spring break-up, resulting in limited drilling activity. Following
an active drilling program in the first quarter, we brought 13 (11.5 net) wells on production during the second quarter, for a
total of 34 (27.6 net) wells placed on production in the first half of 2017. The new wells contributed to quarter-over-quarter
production growth of 14% for the Canadian business unit. The Mannville program continues to deliver predictable growth from
the 15 (10.3 net) wells brought on production so far this year, delivering an average IP60 of 470 boe/d. We have placed five (5.0
net) Cardium wells and 14 (12.3 net) Midale wells on production during the first half of 2017, with production results that are
in line with expected well performance. In the Cardium, Drill, Complete, Equip and Tie-in (“DCET”) well costs averaged
$2.3 million on a per-section basis for the 2017 program compared to $3.2 million during our last Cardium program in 2014.
Cardium costs were reduced in part by utilizing smaller pump jacks, which restrict production rates early in well life but should
achieve the same ultimate recovery. In the Midale, per well costs decreased to $1.7 million for the 2017 program compared to $3.0
million in 2014. We also continued to advance an infrastructure project supporting the continued growth of our Upper Mannville
development in the Ferrier area. We plan to start the construction of a 14 mmcf/d compressor station in Q4 2017 with start-up
scheduled for Q2 2018.
In
the United States, the three (3.0 net) Turner Sand wells drilled in the first quarter were put on production during the
second quarter. After a period of intermittent production testing, the three wells are now producing at a combined rate of
760 boe/d in their third month of production. Two of the wells are performing above our type curve for the southern part
of this play at current rates of approximately 330 boe/d and 325 boe/d respectively, with production still gradually
increasing. The third well reached a peak IP30 of 140 boe/d, and is currently producing approximately 110 boe/d. Average DCET
well costs decreased to US$3.5 million for the 2017 program, compared to US$4.2 million in 2016, even though average lateral
length increased to 5,300 feet as compared to 4,600 feet previously. Our learning curve advancements in mechanical success
and cost reduction in the 2017 program set the stage for increased future development in this project.
Australia
In Australia, progress continues on our
debottlenecking project to further improve fluid handling capability on the Wandoo B platform. Once completed, we expect that this
infrastructure enhancement will allow us to increase oil production on the platform by 600 to 700 bbls/d later in 2017.
Environmental, Social & Governance
Vermilion’s MSCI ESG
(Environment, Social and Governance) rating increased from BBB to A for 2017 and our Governance Metrics score ranked in the 90th
percentile globally. This follows our 13th-place ranking in the 2017 Corporate Knights Future 40 Responsible Corporate Leaders
in Canada List. These recognitions reflect Vermilion’s continued focus on combining financial results with exemplary environmental,
social and governance performance.
Board of Directors
Vermilion recently announced
the appointment of Mr. Stephen Larke to the Board of Directors. Mr. Larke brings over 20 years of experience in energy capital
markets, including research, sales, trading and equity finance. He is currently an Operating Partner and Advisory Board member
with Azimuth Capital Management, an energy-focused private equity fund based in Calgary, Alberta. Prior to joining Azimuth, Mr.
Larke was Managing Director and Executive Committee member with Peters & Co., an independent energy investment firm based in
Calgary. Before Peters & Co., he was Vice-President and Director with TD Newcrest, serving in the role of energy equity analyst.
Both at Peters & Co. and TD Newcrest, Mr. Larke received leading rankings in the Brendan Wood International survey of institutional
investors. He holds a Bachelor of Commerce (Distinction) degree from the University of Calgary and the Chartered Financial Analyst
designation.
(signed “Anthony
Marino”)
Anthony Marino
President & Chief Executive Officer
July 25, 2017
|
| (1) | Non-GAAP Financial Measure. Please see the “Non-GAAP Financial Measures” section
of Management’s Discussion and Analysis. |
|
|
| (2) | Estimated proved plus probable reserves attributed to the assets as evaluated by GLJ Petroleum
Consultants Ltd. in a report dated February 27, 2017 with an effective date of December 31, 2016. |
|
|
|
TM |
Denotes trademark of Canaccord Genuity
Capital Corporation |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following is Management’s
Discussion and Analysis (“MD&A”), dated July 25, 2017, of Vermilion Energy Inc.’s (“Vermilion”,
“We”, “Our”, “Us” or the “Company”) operating and financial results as at and for
the three and six months ended June 30, 2017 compared with the corresponding periods in the prior year.
This discussion should be read in conjunction
with the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2017 and the
audited consolidated financial statements for the year ended December 31, 2016 and 2015, together with accompanying notes. Additional
information relating to Vermilion, including its Annual Information Form, is available on SEDAR at www.sedar.com
or on Vermilion’s website at www.vermilionenergy.com.
The unaudited condensed consolidated
interim financial statements for the three and six months ended June 30, 2017 and comparative information have been prepared in
Canadian dollars, except where another currency is indicated, and in accordance with IAS 34, “Interim Financial Reporting”,
as issued by the International Accounting Standard Board (“IASB”).
This MD&A includes references to
certain financial and performance measures which do not have standardized meanings prescribed by International Financial Reporting
Standards (“IFRS”). These measures include:
|
| • | Fund flows from operations: Fund
flows from operations is a measure of profit or loss in accordance with IFRS 8 “Operating Segments”. Please see SEGMENTED
INFORMATION in the NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS for a reconciliation of fund flows from operations
to net earnings. We analyze fund flows from operations both on a consolidated basis and on a business unit basis in order to assess
the contribution of each business unit to our ability to generate income necessary to pay dividends, repay debt, fund asset retirement
obligations and make capital investments. |
|
|
| • | Netbacks: Netbacks are per boe and
per mcf performance measures used in the analysis of operational activities. We assess netbacks both on a consolidated basis and
on a business unit basis in order to compare and assess the operational and financial performance of each business unit versus
other business units and also versus third party crude oil and natural gas producers. |
|
In addition, this MD&A includes references
to certain financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-GAAP
financial measures. These non-GAAP financial measures are unlikely to be comparable to similar financial measures presented by
other issuers. For a full description of these non-GAAP financial measures and a reconciliation of these measures to their most
directly comparable GAAP measures, please refer to “NON-GAAP FINANCIAL MEASURES”.
VERMILION’S BUSINESS
Vermilion is a Calgary, Alberta based
international oil and gas producer focused on the acquisition, exploration, development and optimization of producing properties
in North America, Europe, and Australia. We manage our business through our Calgary head office and our international business
unit offices.
This MD&A separately discusses each
of our business units in addition to our corporate segment.
CONDENSATE PRESENTATION
We report our condensate production
in Canada and the Netherlands business units within the crude oil and condensate production line. We believe that this presentation
better reflects the historical and forecasted pricing for condensate, which is more closely correlated with crude oil pricing than
with pricing for propane, butane and ethane (collectively “NGLs” for the purposes of this report).
2017 GUIDANCE
On October 31, 2016, we released our
2017 capital expenditure guidance of $295 million and associated production guidance of between 69,000-70,000 boe/d. On July 26,
2017 we announced an increase in our capital expenditure guidance from $295 million to $315 million following the acceleration
of 2018 activities in our Canadian business unit.
The following table summarizes our guidance:
| |
|
Date |
Capital Expenditures ($MM) |
Production (boe/d) |
|
| |
2017 Guidance |
|
|
|
|
| |
2017 Guidance |
October 31, 2016 |
295 |
69,000 to 70,000 |
|
| |
2017 Guidance |
July 26, 2017 |
315 |
69,000 to 70,000 |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
CONSOLIDATED RESULTS OVERVIEW
| |
|
|
Three Months Ended |
|
% change |
|
|
Six Months Ended |
|
%
change |
|
| |
|
|
Jun 30, |
Mar 31, |
Jun 30, |
|
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
|
2017 vs. |
|
| |
|
|
2017 |
2017 |
2016 |
|
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
|
2016 |
|
| |
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate (bbls/d) |
28,525 |
26,832 |
28,416 |
|
6% |
- |
|
|
27,683 |
28,808 |
|
(4%) |
|
| |
|
NGLs (bbls/d) |
3,821 |
2,694 |
2,713 |
|
42% |
41% |
|
|
3,260 |
2,693 |
|
21% |
|
| |
|
Natural gas (mmcf/d) |
209.36 |
210.07 |
198.93 |
|
- |
5% |
|
|
209.71 |
200.02 |
|
5% |
|
| |
|
Total (boe/d) |
67,240 |
64,537 |
64,285 |
|
4% |
5% |
|
|
65,896 |
64,837 |
|
2% |
|
| |
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate (bbls/d) |
29,639 |
24,218 |
27,644 |
|
22% |
7% |
|
|
26,943 |
27,646 |
|
(3%) |
|
| |
|
NGLs (bbls/d) |
3,821 |
2,694 |
2,713 |
|
42% |
41% |
|
|
3,260 |
2,693 |
|
21% |
|
| |
|
Natural gas (mmcf/d) |
209.36 |
210.07 |
198.93 |
|
- |
5% |
|
|
209.71 |
200.02 |
|
5% |
|
| |
|
Total (boe/d) |
68,355 |
61,923 |
63,514 |
|
10% |
8% |
|
|
65,157 |
63,676 |
|
2% |
|
| |
|
Build (draw) in inventory (mbbls) |
(102) |
235 |
70 |
|
|
|
|
|
133 |
212 |
|
|
|
| |
Financial metrics |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fund flows from operations ($M) |
147,123 |
143,434 |
126,568 |
|
3% |
16% |
|
|
290,557 |
220,235 |
|
32% |
|
| |
|
Per share ($/basic share) |
1.22 |
1.21 |
1.10 |
|
1% |
11% |
|
|
2.43 |
1.93 |
|
26% |
|
| |
|
Net earnings (loss) |
48,264 |
44,540 |
(55,696) |
|
8% |
N/A |
|
|
92,804 |
(141,544) |
|
N/A |
|
| |
|
Per share ($/basic share) |
0.40 |
0.38 |
(0.48) |
|
5% |
N/A |
|
|
0.78 |
(1.24) |
|
N/A |
|
| |
|
Net debt ($M) |
1,314,766 |
1,377,636 |
1,398,950 |
|
(5%) |
(6%) |
|
|
1,314,766 |
1,398,950 |
|
(6%) |
|
| |
|
Cash dividends ($/share) |
0.645 |
0.645 |
0.645 |
|
- |
- |
|
|
1.290 |
1.290 |
|
- |
|
| |
Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital expenditures ($M) |
58,875 |
95,889 |
71,714 |
|
(39%) |
(18%) |
|
|
154,764 |
134,487 |
|
15% |
|
| |
|
Acquisitions ($M) |
993 |
2,620 |
8,550 |
|
(62%) |
(88%) |
|
|
3,613 |
9,420 |
|
(62%) |
|
| |
|
Gross wells drilled |
2.00 |
29.00 |
4.00 |
|
|
|
|
|
31.00 |
16.00 |
|
|
|
| |
|
Net wells drilled |
1.40 |
25.41 |
3.1 |
|
|
|
|
|
26.81 |
11.40 |
|
|
|
Operational review
|
| • | Consolidated
average production increased by 4% in Q2 2017 versus Q1 2017. This increase in production was primarily attributable to higher
volumes in Canada, France, and the US. |
|
|
| • | Consolidated average production
increased by 5% and 2% for the three and six months ended June 30, 2017, versus the comparable periods in 2016. This increase was
primarily due to increased production in Ireland, as well as incremental volumes from our acquisition in Germany that closed in
late 2016. |
|
|
| • | For the three months ended June
30, 2017, capital expenditures of $58.9 million related primarily to Canada, France, and Australia. In Canada, capital expenditures
of $20.6 million related primarily to completion and tie-in activities for wells drilled in the prior quarter. In France, capital
expenditures of $16.7 million largely related to a subsurface and workover program. In Australia, capital expenditures of $9.2
million related primarily to improvements to oil and water processing capacity at our Wandoo B platform. |
|
Financial review
Net earnings
|
| • | Net earnings for Q2 2017 was $48.3
million ($0.40/basic share), an 8% increase from net earnings of $44.5 million ($0.38/basic share) in Q1 2017. The increase in
net earnings was primarily due to higher revenue resulting from higher sales volumes and a $38.6 million unrealized foreign exchange
gain due to the strengthening of the Euro relative to the Canadian dollar. |
|
|
| • | Net
earnings for the three and six months ended June 30, 2017 of $48.3 million ($0.40/basic share) and $92.8 million ($0.78/basic
share), respectively, compared to net losses of $55.7 million ($0.48/basic share) and $141.5 million ($1.24/basic share) in the
comparable periods in 2016. The change in net earnings was primarily attributable to higher revenue as a result of higher commodity
prices, as well as the impact of unrealized gains on derivative instruments and foreign exchange. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Fund flows from operations
|
| • | Generated fund flows from operations
of $147.1 million during Q2 2017, an increase of 3% from Q1 2017. This quarter-over-quarter increase occurred despite lower commodity
prices due to higher sales volumes in Australia and France which was a result of favourable inventory variances and higher production
in Canada. |
|
|
| • | Fund flows from operations increased
by 16% and 32% for the three and six months ended June 30, 2017, driven by higher commodity prices and higher sales volumes in
Ireland, Germany, and Australia. |
|
Net debt
|
| • | Net debt decreased to $1.31 billion
as at June 30, 2017 from $1.43 billion at December 31, 2016 as fund flows from operations generated in excess of capital expenditures
and net dividends was used to reduce long-term debt. |
|
Dividends
|
| • | Declared dividends
of $0.215 per common share per month during the six months ended June 30, 2017, totalling $1.29 per common share. |
|
COMMODITY
PRICES
| |
|
Three Months Ended |
|
% change |
|
|
Six Months Ended |
|
% change |
|
| |
|
Jun 30, |
Mar 31, |
Jun 30, |
|
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
|
2017 vs. |
|
| |
|
2017 |
2017 |
2016 |
|
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
|
2016 |
|
| |
Average reference prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
WTI (US $/bbl) |
48.28 |
51.92 |
45.59 |
|
(7%) |
6% |
|
|
50.10 |
39.52 |
|
27% |
|
| |
Edmonton Sweet index (US $/bbl) |
46.03 |
48.37 |
42.51 |
|
(5%) |
8% |
|
|
47.20 |
36.13 |
|
31% |
|
| |
Dated Brent (US $/bbl) |
49.83 |
53.78 |
45.57 |
|
(7%) |
9% |
|
|
51.81 |
39.73 |
|
30% |
|
| |
Natural gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AECO ($/mmbtu) |
2.78 |
2.69 |
1.40 |
|
3% |
99% |
|
|
2.74 |
1.61 |
|
70% |
|
| |
NBP ($/mmbtu) |
6.52 |
7.96 |
5.78 |
|
(18%) |
13% |
|
|
7.26 |
5.88 |
|
23% |
|
| |
NBP (€/mmbtu) |
4.41 |
5.64 |
3.97 |
|
(22%) |
11% |
|
|
5.02 |
3.96 |
|
27% |
|
| |
TTF ($/mmbtu) |
6.74 |
7.65 |
5.61 |
|
(12%) |
20% |
|
|
7.21 |
5.66 |
|
27% |
|
| |
TTF (€/mmbtu) |
4.56 |
5.43 |
3.86 |
|
(16%) |
18% |
|
|
4.99 |
3.81 |
|
31% |
|
| |
Henry Hub ($/mmbtu) |
4.28 |
4.38 |
2.52 |
|
(2%) |
70% |
|
|
4.33 |
2.69 |
|
61% |
|
| |
Henry Hub (US $/mmbtu) |
3.18 |
3.31 |
1.95 |
|
(4%) |
63% |
|
|
3.25 |
2.02 |
|
61% |
|
| |
Average foreign currency exchange rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
CDN $/US $ |
1.34 |
1.32 |
1.29 |
|
2% |
4% |
|
|
1.33 |
1.33 |
|
- |
|
| |
CDN $/Euro |
1.48 |
1.41 |
1.46 |
|
5% |
1% |
|
|
1.44 |
1.49 |
|
(3%) |
|
|
| • | While crude oil
prices for the six months ended June 30, 2017 were significantly higher than the 2016 period, they have been volatile during the
comparative quarters presented. Crude oil prices in Q2 2017 were 5% to 7% lower than Q1 2017 but 6% to 9% higher than Q2 2016. |
|
|
| • | Field maintenance, strong early
quarter US exports, and domestic demand resulted in increased AECO prices of 3% versus Q1 2017 and 99% versus Q2 2016. |
|
|
| • | Weaker demand, increasing liquefied
natural gas imports, and issues related to the UK’s Rough storage facility resulted in weaker European natural gas prices
in Q2 2017 as compared to Q1 2017. |
|
|
| • | In Q2 2017, the Canadian dollar
weakened slightly against both the US dollar and the Euro as compared to Q1 2017. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
FUND FLOWS FROM OPERATIONS
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
Jun 30, 2017 |
|
Mar 31, 2017 |
|
Jun 30, 2016 |
|
|
Jun 30, 2017 |
|
Jun 30, 2016 |
|
| |
|
$M |
$/boe |
|
$M |
$/boe |
|
$M |
$/boe |
|
|
$M |
$/boe |
|
$M |
$/boe |
|
| |
Petroleum and natural gas sales |
271,391 |
43.63 |
|
261,601 |
46.94 |
|
212,855 |
36.83 |
|
|
532,992 |
45.19 |
|
390,240 |
33.67 |
|
| |
Royalties |
(17,736) |
(2.85) |
|
(16,205) |
(2.91) |
|
(12,355) |
(2.14) |
|
|
(33,941) |
(2.88) |
|
(26,316) |
(2.27) |
|
| |
Petroleum and natural gas revenues |
253,655 |
40.78 |
|
245,396 |
44.03 |
|
200,500 |
34.69 |
|
|
499,051 |
42.31 |
|
363,924 |
31.40 |
|
| |
Transportation |
(10,843) |
(1.74) |
|
(9,819) |
(1.76) |
|
(9,860) |
(1.71) |
|
|
(20,662) |
(1.75) |
|
(20,250) |
(1.75) |
|
| |
Operating |
(63,074) |
(10.14) |
|
(52,121) |
(9.35) |
|
(52,116) |
(9.02) |
|
|
(115,195) |
(9.77) |
|
(107,744) |
(9.30) |
|
| |
General and administration |
(13,167) |
(2.12) |
|
(13,151) |
(2.36) |
|
(15,493) |
(2.68) |
|
|
(26,318) |
(2.23) |
|
(29,070) |
(2.51) |
|
| |
PRRT |
(6,468) |
(1.04) |
|
(5,434) |
(0.97) |
|
(144) |
(0.02) |
|
|
(11,902) |
(1.01) |
|
(272) |
(0.02) |
|
| |
Corporate income taxes |
(4,047) |
(0.65) |
|
(7,479) |
(1.34) |
|
(5,564) |
(0.96) |
|
|
(11,526) |
(0.98) |
|
(8,724) |
(0.75) |
|
| |
Interest expense |
(15,508) |
(2.49) |
|
(14,695) |
(2.64) |
|
(13,647) |
(2.36) |
|
|
(30,203) |
(2.56) |
|
(28,397) |
(2.45) |
|
| |
Realized gain (loss) on derivatives |
5,342 |
0.86 |
|
(1,851) |
(0.33) |
|
21,501 |
3.72 |
|
|
3,491 |
0.30 |
|
49,924 |
4.31 |
|
| |
Realized foreign exchange gain |
981 |
0.16 |
|
2,546 |
0.46 |
|
1,329 |
0.23 |
|
|
3,527 |
0.30 |
|
677 |
0.06 |
|
| |
Realized other income |
252 |
0.04 |
|
42 |
0.01 |
|
62 |
0.01 |
|
|
294 |
0.02 |
|
167 |
0.0 |
|
| |
Fund flows from operations |
147,123 |
23.66 |
|
143,434 |
25.75 |
|
126,568 |
21.90 |
|
|
290,557 |
24.63 |
|
220,235 |
19.00 |
|
The following table shows a reconciliation
of the change in fund flows from operations:
| |
($M) |
Q2/17 vs. Q1/17 |
Q2/17 vs. Q2/16 |
2017 vs. 2016 |
|
| |
Fund flows from operations - Comparative period |
143,434 |
126,568 |
220,235 |
|
| |
Sales volume variance: |
|
|
|
|
| |
Canada |
14,421 |
4,190 |
(6,757) |
|
| |
France |
9,917 |
(1,972) |
(13,418) |
|
| |
Netherlands |
(5,110) |
(8,396) |
(15,641) |
|
| |
Germany |
113 |
7,591 |
15,047 |
|
| |
Ireland |
(255) |
8,143 |
23,262 |
|
| |
Australia |
16,939 |
7,722 |
8,514 |
|
| |
United States |
2,423 |
1,542 |
1,218 |
|
| |
Pricing variance on sales volumes: |
|
|
|
|
| |
WTI |
(5,318) |
5,331 |
29,096 |
|
| |
AECO |
(1,401) |
12,750 |
20,539 |
|
| |
Dated Brent |
(10,137) |
10,622 |
47,813 |
|
| |
TTF and NBP |
(11,802) |
11,013 |
33,079 |
|
| |
Changes in: |
|
|
|
|
| |
Royalties |
(1,531) |
(5,381) |
(7,625) |
|
| |
Transportation |
(1,024) |
(983) |
(412) |
|
| |
Operating |
(10,953) |
(10,958) |
(7,451) |
|
| |
General and administration |
(16) |
2,326 |
2,752 |
|
| |
PRRT |
(1,034) |
(6,324) |
(11,630) |
|
| |
Corporate income taxes |
3,432 |
1,517 |
(2,802) |
|
| |
Interest |
(813) |
(1,861) |
(1,806) |
|
| |
Realized derivatives |
7,193 |
(16,159) |
(46,433) |
|
| |
Realized foreign exchange |
(1,565) |
(348) |
2,850 |
|
| |
Realized other income |
210 |
190 |
127 |
|
| |
Fund flows from operations - Current period |
147,123 |
147,123 |
290,557 |
|
Please see CONSOLIDATED RESULTS OVERVIEW
for a discussion of the key variances for the periods presented.
Fluctuations in fund flows from operations
may occur as a result of changes in commodity prices and costs to produce petroleum and natural gas. In addition, fund flows from
operations may be significantly affected by the timing of crude oil shipments in Australia and France. When crude oil inventory
is built up, the related operating expense, royalties, and depletion expense are deferred and carried as inventory on the consolidated
balance sheet. When the crude oil inventory is subsequently drawn down, the related expenses are recognized.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
CANADA BUSINESS UNIT
Overview
|
| • | Production and assets focused in
West Pembina near Drayton Valley, Alberta and Northgate in southeast Saskatchewan. |
|
| • | Potential for three significant
resource plays sharing the same surface infrastructure in the West Pembina region in Alberta: |
- Cardium
light oil (1,800m depth) - in development phase
- Mannville
condensate-rich gas (2,400 - 2,700m depth) - in development phase
- Duvernay
condensate-rich gas (3,200 - 3,400m depth) - in appraisal phase with no investment at present
|
• | Southeast Saskatchewan light oil
development:: |
- Primary
target is the Mississippian Midale formation (1,400 - 1,700m depth)
- Secondary
targets of Mississippian Frobisher (1,400 - 1,700m depth) and Devonian Bakken/Three Forks (2,000 - 2,100m depth)
Operational and financial review
| |
|
|
Three Months Ended |
% change |
|
|
Six Months Ended |
% change |
|
| |
Canada business unit |
Jun 30, |
Mar 31, |
Jun 30, |
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
2017 vs. |
|
| |
($M except as indicated) |
2017 |
2017 |
2016 |
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
2016 |
|
| |
Production and sales |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate (bbls/d) |
9,205 |
7,987 |
9,453 |
15% |
(3%) |
|
|
8,599 |
9,885 |
(13%) |
|
| |
|
NGLs (bbls/d) |
3,745 |
2,670 |
2,687 |
40% |
39% |
|
|
3,210 |
2,660 |
21% |
|
| |
|
Natural gas (mmcf/d) |
93.68 |
85.74 |
87.44 |
9% |
7% |
|
|
89.73 |
92.30 |
(3%) |
|
| |
|
Total (boe/d) |
28,563 |
24,947 |
26,713 |
14% |
7% |
|
|
26,765 |
27,928 |
(4%) |
|
| |
Production mix (% of total) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate |
32% |
32% |
35% |
|
|
|
|
32% |
35% |
|
|
| |
|
NGLs |
13% |
11% |
10% |
|
|
|
|
12% |
10% |
|
|
| |
|
Natural gas |
55% |
57% |
55% |
|
|
|
|
56% |
55% |
|
|
| |
Activity |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital expenditures |
20,599 |
57,457 |
5,619 |
(64%) |
267% |
|
|
78,056 |
35,390 |
121% |
|
| |
|
Acquisitions |
935 |
576 |
796 |
|
|
|
|
1,511 |
1,551 |
|
|
| |
|
Gross wells drilled |
1.00 |
22.00 |
2.00 |
|
|
|
|
23.00 |
14.0 |
|
|
| |
|
Net wells drilled |
0.40 |
18.41 |
1.14 |
|
|
|
|
18.81 |
9.40 |
|
|
| |
Financial results |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
83,643 |
75,500 |
61,731 |
11% |
35% |
|
|
159,143 |
117,841 |
35% |
|
| |
|
Royalties |
(8,805) |
(8,499) |
(3,770) |
4% |
134% |
|
|
(17,304) |
(9,268) |
87% |
|
| |
|
Transportation |
(3,944) |
(4,103) |
(3,759) |
(4%) |
5% |
|
|
(8,047) |
(7,910) |
2% |
|
| |
|
Operating |
(19,347) |
(16,670) |
(16,460) |
16% |
18% |
|
|
(36,017) |
(37,803) |
(5%) |
|
| |
|
General and administration |
(3,127) |
(1,698) |
(4,305) |
84% |
(27%) |
|
|
(4,825) |
(6,781) |
(29%) |
|
| |
|
Fund flows from operations |
48,420 |
44,530 |
33,437 |
9% |
45% |
|
|
92,950 |
56,079 |
66% |
|
| |
Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
32.18 |
33.63 |
25.39 |
(4%) |
27% |
|
|
32.85 |
23.18 |
42% |
|
| |
|
Royalties |
(3.39) |
(3.79) |
(1.55) |
(11%) |
119% |
|
|
(3.57) |
(1.82) |
96% |
|
| |
|
Transportation |
(1.52) |
(1.83) |
(1.55) |
(17%) |
(2%) |
|
|
(1.66) |
(1.56) |
6% |
|
| |
|
Operating |
(7.44) |
(7.42) |
(6.77) |
- |
10% |
|
|
(7.43) |
(7.44) |
- |
|
| |
|
General and administration |
(1.20) |
(0.76) |
(1.77) |
58% |
(32%) |
|
|
(1.00) |
(1.33) |
(25%) |
|
| |
|
Fund flows from operations netback |
18.63 |
19.83 |
13.75 |
(6%) |
35% |
|
|
19.19 |
11.03 |
74% |
|
| |
Realized prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil and condensate ($/bbl) |
62.46 |
64.76 |
56.67 |
(4%) |
10% |
|
|
63.52 |
47.81 |
33% |
|
| |
|
NGLs ($/bbl) |
21.11 |
24.12 |
9.56 |
(12%) |
121% |
|
|
22.35 |
8.4 |
164% |
|
| |
|
Natural gas ($/mmbtu) |
2.83 |
2.99 |
1.34 |
(5%) |
111% |
|
|
2.91 |
1.65 |
76% |
|
| |
|
Total ($/boe) |
32.18 |
33.63 |
25.39 |
(4%) |
27% |
|
|
32.85 |
23.18 |
42% |
|
| |
Reference prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
WTI (US $/bbl) |
48.28 |
51.92 |
45.59 |
(7%) |
6% |
|
|
50.10 |
39.52 |
27% |
|
| |
|
Edmonton Sweet index (US $/bbl) |
46.03 |
48.37 |
42.51 |
(5%) |
8% |
|
|
47.20 |
36.13 |
31% |
|
| |
|
Edmonton Sweet index ($/bbl) |
61.90 |
63.99 |
54.78 |
(3%) |
13% |
|
|
62.96 |
48.11 |
31% |
|
| |
|
AECO ($/mmbtu) |
2.78 |
2.69 |
1.40 |
3% |
99% |
|
|
2.74 |
1.61 |
70% |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Production
|
| • | Q2 2017 average production increased
by 14% from Q1 2017 primarily due to organic production growth in our Mannville condensate-rich gas resource play and organic production
growth in southeast Saskatchewan. On a year-over-year basis, production increased 7% as a result of strong organic production growth
in the Mannville. |
|
|
| • | Mannville production averaged approximately
14,700 boe/d in Q2 2017 representing a 23% increase quarter-over-quarter. |
|
|
| • | Cardium production averaged approximately
5,700 boe/d in Q2 2017, in line with prior quarter. |
|
|
| • | Production from southeast Saskatchewan
averaged approximately 2,900 boe/d in Q2 2017, an increase of 45% quarter-over-quarter. |
|
Activity review
|
| • | Vermilion did not drill any operated
wells in the second quarter and participated in the drilling of one (0.4 net) non-operated well. |
|
Mannville
| |
• | During Q2 2017, we brought four
(3.2 net) operated wells on production. We participated in the drilling of one (0.4 net) non-operated well. |
|
| |
• | In 2017, we plan to drill or participate
in 23 (16.3 net) wells. |
|
Cardium
| |
• | In Q2 2017, we brought three (3.0
net) operated wells on production. |
|
| |
• | Our 2017 program has been expanded
to drill seven (7.0 net) wells. |
|
Saskatchewan
| |
• | In Q2 2017 we brought five (5.0
net) operated wells on production and placed one (0.3 net) non-operated wells on production. |
|
| |
• | In 2017, we plan to drill or participate
in 13 (11.3 net) wells. |
|
Sales
|
| • | The realized price for our crude
oil and condensate production in Canada is linked to WTI, and is also subject to market conditions in western Canada. These market
conditions can result in fluctuations in the pricing differential to WTI, as reflected by the Edmonton Sweet index price. The realized
price of our NGLs in Canada is based on product specific differentials pertaining to trading hubs in the United States. The realized
price of our natural gas in Canada is based on the AECO index in Canada. |
|
|
| • | Q2 2017 sales per boe decreased
compared to Q1 2017 due to lower crude oil pricing. |
|
|
| • | For the three and six months ended
June 30, 2017, sales per boe increased versus the comparable periods in 2016 as a result of higher average crude oil and natural
gas pricing. |
|
Royalties
|
| • | In Q2 2017, royalties as a percentage
of sales decreased to 10.5% from 11.3% in Q1 2017 due to the impact of a favourable gas cost allowance adjustment in Alberta in
Q2 2017. |
|
|
| • | For the three and six months ended
June 30, 2017, royalties as a percentage of sales increased to 10.5% and 10.9%, respectively, compared to 6.1% and 7.9% in the
comparable periods in the prior year due to the impact of higher commodity prices on the sliding scale used to determine royalty
rates. |
|
Transportation
|
| • | Transportation expense relates to
the delivery of crude oil and natural gas production to major pipelines where legal title transfers. |
|
|
| • | In Q2 2017, transportation expense
on a per unit basis decreased compared to Q1 2017 due to the absence of a prior period adjustment that was recorded in Q1 2017.
Absent this prior period adjustment, transportation expense was relatively consistent quarter-over-quarter. On a dollar basis,
transportation expense was relatively consistent with Q1 2017 as higher volumes in Q2 2017 offset the impact of the prior period
adjustment recorded in the prior quarter. |
|
|
| • | For the three and six months ended
June 30, 2017, transportation expense on a per unit and dollar basis were relatively consistent with the comparable periods in
2016. |
|
Operating
|
| • | In Q2 2017, operating expense on
a per unit basis was relatively consistent with Q1 2017. Operating expense on a dollar basis increased compared to Q1 2017 as a
result of higher volumes. |
|
|
| • | Operating expense was higher on
a per unit and dollar basis in Q2 2017 versus Q2 2016 due to expenditure timing. For the six months ended June 30, 2017, operating
expense was relatively consistent on a per unit basis as compared to the same period in the prior year. On a dollar basis, operating
expense decreased modestly year-over-year due to lower volumes. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
General and administration
|
| • | The increase in
general and administration expense for Q2 2017 as compared to Q1 2017 was primarily the result of expenditure timing. |
|
|
| • | For the three and
six months ended June 30, 2017, the decreases in general and administration expense versus the comparable periods in the prior
year were due to ongoing initiatives to reduce our cost structure. |
|
Current income taxes
|
| • | As a result of
our tax pools in Canada, we do not expect to incur current income taxes in the Canada Business Unit for the foreseeable future.
|
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
FRANCE BUSINESS UNIT
Overview
|
| • | Entered France in 1997 and completed
three subsequent acquisitions, including two in 2012. |
|
|
| • | Largest oil producer in France,
constituting approximately three-quarters of domestic oil production. |
|
|
| • | Low base decline producing assets
comprised of large conventional oil fields with high working interests located in the Aquitaine and Paris Basins. |
|
|
| • | Identified inventory of workover,
infill drilling, and secondary recovery opportunities. |
|
Operational and financial review
| |
|
|
Three Months Ended |
|
% change |
|
|
Six Months Ended |
% change |
|
| |
France business unit |
Jun 30, |
Mar 31, |
Jun 30, |
|
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
2017 vs. |
|
| |
($M except as indicated) |
2017 |
2017 |
2016 |
|
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
2016 |
|
| |
Production |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil (bbls/d) |
11,368 |
10,834 |
12,326 |
|
5% |
(8%) |
|
|
11,103 |
12,273 |
(10%) |
|
| |
|
Natural gas (mmcf/d) |
- |
0.01 |
0.54 |
|
(100%) |
(100%) |
|
|
- |
0.49 |
(100%) |
|
| |
|
Total (boe/d) |
11,368 |
10,836 |
12,416 |
|
5% |
(8%) |
|
|
11,103 |
12,354 |
(10%) |
|
| |
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil (bbls/d) |
11,259 |
9,760 |
11,616 |
|
15% |
(3%) |
|
|
10,514 |
11,899 |
(12%) |
|
| |
|
Natural gas (mmcf/d) |
- |
0.01 |
0.54 |
|
(100%) |
(100%) |
|
|
- |
0.49 |
(100%) |
|
| |
|
Total (boe/d) |
11,259 |
9,761 |
11,706 |
|
15% |
(4%) |
|
|
10,514 |
11,980 |
(12%) |
|
| |
Inventory (mbbls) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Opening crude oil inventory |
245 |
148 |
247 |
|
|
|
|
|
148 |
243 |
|
|
| |
|
Crude oil production |
1,034 |
975 |
1,122 |
|
|
|
|
|
2,010 |
2,234 |
|
|
| |
|
Crude oil sales |
(1,025) |
(878) |
(1,057) |
|
|
|
|
|
(1,904) |
(2,165) |
|
|
| |
|
Closing crude oil inventory |
254 |
245 |
312 |
|
|
|
|
|
254 |
312 |
|
|
| |
Activity |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital expenditures |
16,682 |
20,916 |
12,772 |
|
(20%) |
31% |
|
|
37,598 |
26,235 |
43% |
|
| |
|
Gross wells drilled |
1.00 |
4.00 |
- |
|
|
|
|
|
5.00 |
- |
|
|
| |
|
Net wells drilled |
1.00 |
4.00 |
- |
|
|
|
|
|
5.00 |
- |
|
|
| |
Financial results |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
63,615 |
59,610 |
61,591 |
|
7% |
3% |
|
|
123,225 |
109,716 |
12% |
|
| |
|
Royalties |
(6,247) |
(5,320) |
(6,564) |
|
17% |
(5%) |
|
|
(11,567) |
(13,330) |
(13%) |
|
| |
|
Transportation |
(3,686) |
(3,032) |
(3,476) |
|
22% |
6% |
|
|
(6,718) |
(7,189) |
(7%) |
|
| |
|
Operating |
(12,153) |
(11,369) |
(11,265) |
|
7% |
8% |
|
|
(23,522) |
(25,585) |
(8%) |
|
| |
|
General and administration |
(3,713) |
(3,070) |
(4,734) |
|
21% |
(22%) |
|
|
(6,783) |
(9,410) |
(28%) |
|
| |
|
Current income taxes |
(1,830) |
(4,982) |
(921) |
|
(63%) |
99% |
|
|
(6,812) |
(955) |
613% |
|
| |
|
Fund flows from operations |
35,986 |
31,837 |
34,631 |
|
13% |
4% |
|
|
67,823 |
53,247 |
27% |
|
| |
Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
62.09 |
67.85 |
57.82 |
|
(8%) |
7% |
|
|
64.75 |
50.32 |
29% |
|
| |
|
Royalties |
(6.10) |
(6.06) |
(6.16) |
|
1% |
(1%) |
|
|
(6.08) |
(6.11) |
- |
|
| |
|
Transportation |
(3.60) |
(3.45) |
(3.26) |
|
4% |
10% |
|
|
(3.53) |
(3.30) |
7% |
|
| |
|
Operating |
(11.86) |
(12.94) |
(10.57) |
|
(8%) |
12% |
|
|
(12.36) |
(11.73) |
5% |
|
| |
|
General and administration |
(3.62) |
(3.49) |
(4.44) |
|
4% |
(18%) |
|
|
(3.56) |
(4.32) |
(18%) |
|
| |
|
Current income taxes |
(1.79) |
(5.67) |
(0.86) |
|
(68%) |
108% |
|
|
(3.58) |
(0.44) |
714% |
|
| |
|
Fund flows from operations |
35.12 |
36.24 |
32.53 |
|
(3%) |
8% |
|
|
35.64 |
24.42 |
46% |
|
| |
Realized prices |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil ($/bbl) |
62.09 |
67.86 |
58.19 |
|
(9%) |
7% |
|
|
64.75 |
50.60 |
28% |
|
| |
|
Natural gas ($/mmbtu) |
- |
1.52 |
1.58 |
|
(100%) |
(100%) |
|
|
1.52 |
1.62 |
(6%) |
|
| |
|
Total ($/boe) |
62.09 |
67.85 |
57.82 |
|
(8%) |
7% |
|
|
64.75 |
50.32 |
29% |
|
| |
Reference prices |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dated Brent (US $/bbl) |
49.83 |
53.78 |
45.57 |
|
(7%) |
9% |
|
|
51.81 |
39.73 |
30% |
|
| |
|
Dated Brent ($/bbl) |
67.01 |
71.15 |
58.72 |
|
(6%) |
14% |
|
|
69.10 |
52.91 |
31% |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Production
|
| • | Q2 2017 production increased 5%
versus the prior quarter due to production additions from our Champotran and Neocomian drilling programs. Production decreased
by 8% versus Q2 2016 due to production declines, well downtime and third party restrictions impacting Vic Bilh gas production.
These decreases more than offset new well production and optimization activities. |
|
Activity review
|
| • | During Q2 2017 we drilled one (1.0
net) well in the Neocomian field, completing our first drilling program with all four (4.0 net) wells successfully brought on production. |
|
|
| • | We have completed our drilling and
completion activity for 2017, which included the drilling and completion of four (4.0 net) Neocomian wells and one (1.0 net) horizontal
sidetrack well in the Vulaines field as well as the completion of four (4.0 net) Champotran wells that were drilled in Q4 2016. |
|
|
| • | In addition to the drilling and
completion activity, we will continue to focus on workover and optimization activities throughout the remainder of 2017. |
|
Sales
|
| • | Crude oil in France is priced with
reference to Dated Brent. |
|
|
| • | Q2 2017 sales per boe decreased
versus Q1 2017 as a result of lower Dated Brent prices. The decrease in price was more than offset by higher sales volumes, resulting
in an increase in sales. |
|
|
| • | Sales per boe for the three and
six months ended June 30, 2017 increased versus the comparable periods in 2016 due to stronger Dated Brent pricing. For the three
and six months ended June 30, 2017, the increase in price was partially offset by lower sales volumes. Based on anticipated shipment
schedules, we expect that the inventory build that occurred in the first half of 2017 will reverse over the course of the year. |
|
Royalties
|
| • | Royalties in France relate to two
components: RCDM (levied on units of production and not subject to changes in commodity prices) and R31 (based on a percentage
of sales). |
|
|
| • | Royalties as a percentage of sales
of 9.8% in Q2 2017 was higher than 8.9% in Q1 2017 as a result of the impact of fixed RCDM royalties coupled with lower realized
pricing in the quarter. |
|
|
| • | For the three and six months ended
June 30, 2017, royalties as a percentage of sales of 9.8% and 9.4%, respectively, were lower than the comparable periods in the
prior year (10.7% and 12.1%, respectively) as a result of the impact of fixed RCDM royalties coupled with higher realized pricing
in the current year. |
|
Transportation
|
| • | Transportation expense increased
in Q2 2017 compared to Q1 2017 and Q2 2016 due to increased vessel-based shipments of crude oil in the current quarter versus the
comparable quarters. |
|
|
| • | For the six months ended June 30,
2017, transportation expense decreased compared to the same period in 2016 due to fewer vessel-based shipments of crude oil and
the strengthening of the Canadian dollar versus the Euro. |
|
Operating
|
| • | Operating expense on a per unit
basis decreased 8% quarter-over-quarter as the unfavourable foreign exchange impact of the Euro strengthening against the Canadian
dollar was offset by higher sales volumes. On a dollar basis, operating expense increased 7% in Q2 2017 compared to Q1 2017 due
to the unfavourable foreign exchange impact. |
|
|
| • | Operating expense on both a per
unit and dollar basis increased in Q2 2017 compared to Q2 2016 largely due to higher electricity costs. For the six months ended
June 30, 2017, operating expense on a per unit basis increased year-over-year due to higher electricity costs. On a dollar basis,
operating expense decreased due to lower sales volumes. |
|
General and administration
|
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
|
Current income taxes
|
| • | In France, current
income taxes are applied to taxable income, after eligible deductions, at a statutory rate of 34.4%. For 2017, the effective rate
on current taxes is expected to be between approximately 6% to 8% of pre-tax fund flows from operations. This is subject to change
in response to production variations, commodity price fluctuations, the timing of capital expenditures, and other eligible in-country
adjustments. |
|
|
| • | Current income
taxes in Q2 2017 were lower compared to Q1 2017 as increased sales in Q2 2017 were offset by a lower forecasted full year effective
tax rate. Current income taxes for the three and six months ended June 30, 2017 were higher than the comparable periods in the
prior year due to increased sales in 2017. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
NETHERLANDS BUSINESS UNIT
Overview
|
| • | Entered the Netherlands in 2004.
|
|
|
| • | Second largest onshore gas producer. |
|
|
| • | Interests include 24 onshore licenses
and two offshore licenses. |
|
|
| • | Licenses include more than 800,000
net acres of land, 95% of which is undeveloped. |
|
Operational and financial review
| |
|
|
Three Months Ended |
% change |
|
|
Six Months Ended |
% change |
|
| |
Netherlands business unit |
Jun 30, |
Mar 31, |
Jun 30, |
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
2017 vs. |
|
| |
($M except as indicated) |
2017 |
2017 |
2016 |
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
2016 |
|
| |
Production and sales |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Condensate (bbls/d) |
104 |
76 |
96 |
37% |
8% |
|
|
90 |
105 |
(14%) |
|
| |
|
Natural gas (mmcf/d) |
31.58 |
39.92 |
49.18 |
(21%) |
(36%) |
|
|
35.73 |
51.29 |
(30%) |
|
| |
|
Total (boe/d) |
5,368 |
6,729 |
8,293 |
(20%) |
(35%) |
|
|
6,044 |
8,654 |
(30%) |
|
| |
Activity |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital expenditures |
5,973 |
1,712 |
8,566 |
249% |
(30%) |
|
|
7,685 |
11,562 |
(34%) |
|
| |
|
Acquisitions |
(16) |
16 |
- |
|
|
|
|
- |
- |
|
|
| |
Financial results |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
19,126 |
26,762 |
23,973 |
(29%) |
(20%) |
|
|
45,888 |
51,259 |
(10%) |
|
| |
|
Royalties |
(296) |
(419) |
(396) |
(29%) |
(25%) |
|
|
(715) |
(856) |
(16%) |
|
| |
|
Operating |
(4,892) |
(4,841) |
(4,306) |
1% |
14% |
|
|
(9,733) |
(10,282) |
(5%) |
|
| |
|
General and administration |
(560) |
(596) |
(1,223) |
(6%) |
(54%) |
|
|
(1,156) |
(1,996) |
(42%) |
|
| |
|
Current income taxes |
(754) |
(907) |
(3,260) |
(17%) |
(77%) |
|
|
(1,661) |
(5,460) |
(70%) |
|
| |
|
Fund flows from operations |
12,624 |
19,999 |
14,788 |
(37%) |
(15%) |
|
|
32,623 |
32,665 |
0% |
|
| |
Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
39.16 |
44.19 |
31.77 |
(11%) |
23% |
|
|
41.94 |
32.55 |
29% |
|
| |
|
Royalties |
(0.61) |
(0.69) |
(0.52) |
(12%) |
17% |
|
|
(0.65) |
(0.54) |
20 |
|
| |
|
Operating |
(10.01) |
(7.99) |
(5.71) |
25% |
75% |
|
|
(8.90) |
(6.53) |
36% |
|
| |
|
General and administration |
(1.14) |
(0.98) |
(1.62) |
16% |
(30%) |
|
|
(1.06) |
(1.27) |
(17%) |
|
| |
|
Current income taxes |
(1.54) |
(1.50) |
(4.32) |
3% |
(64%) |
|
|
(1.52) |
(3.47) |
(56%) |
|
| |
|
Fund flows from operations netback |
25.86 |
33.03 |
19.60 |
(22%) |
32% |
|
|
29.81 |
20.74 |
44% |
|
| |
Realized prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Condensate ($/bbl) |
49.59 |
58.33 |
45.05 |
(15%) |
10% |
|
|
53.26 |
38.10 |
40% |
|
| |
|
Natural gas ($/mmbtu) |
6.49 |
7.34 |
5.27 |
(12%) |
23% |
|
|
6.96 |
5.41 |
29% |
|
| |
|
Total ($/boe) |
39.16 |
44.19 |
31.77 |
(11%) |
23 |
|
|
41.94 |
32.55 |
29% |
|
| |
Reference prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
TTF ($/mmbtu) |
6.74 |
7.65 |
5.61 |
(12%) |
20% |
|
|
7.2 |
5.66 |
27% |
|
| |
|
TTF (€/mmbtu) |
4.56 |
5.43 |
3.86 |
(16%) |
18% |
|
|
4.99 |
3.81 |
31% |
|
Production
|
| • | Q2 2017 production decreased 20%
quarter-over-quarter and 35% year-over-year due to the restriction of production related to permitting delays and the scheduled
major turnaround project at our Garjip Treatment Centre that occurred in June. |
|
|
| • | Production in the Netherlands is currently restricted as we
await production permits on certain wells. |
|
Activity review
|
| • | Q2 2017 was focused on preparation
for our 2017 two (1.0 net) well drilling program, which commenced in early July as well as addressing production permitting delays. |
|
|
| • | During the remainder of 2017, we
plan to drill two (1.0 net) exploration wells and execute a 220 square kilometre 3D seismic survey. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Sales
|
| • | The price of our natural gas in
the Netherlands is based on the TTF index. |
|
|
| • | Q2 2017 sales per boe decreased
versus Q1 2017, consistent with a decrease in the TTF reference price. |
|
|
| • | Sales per boe for the three and
six months ended June 30, 2017 increased versus the comparable periods in the prior year, consistent with increases in the TTF
reference price. |
|
Royalties
|
| • | In the Netherlands, we pay overriding
royalties on certain wells. As such, fluctuations in royalty expense in the periods presented primarily relates to the amount
of production from those wells subject to overriding royalties. |
|
Transportation
|
| • | Our production in the Netherlands is not subject to transportation
expense as gas is sold at the plant gate. |
|
Operating
|
| • | Q2 2017 operating expense on a per
boe basis increased versus Q1 2017 due to the impact of relatively consistent total amounts of fixed costs on lower volumes and
unfavourable foreign exchange variances. In dollars, operating expense was relatively consistent. |
|
|
| • | For the three and six months ended
June 30, 2017, operating expense on a per boe basis increased versus the comparable periods in the prior year due to the impact
of lower volumes. For the three months ended June 30, 2017, operating expense increased as compared to the same quarter in the
prior year due to lower cost recoveries from the Garijp Treatment Centre resulting from a reduction in volumes. For the six months
ended June 30, 2017, operating expense decreased as compared to the same period in the prior year due to a favourable foreign exchange
impact. |
|
General and administration
|
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
|
Current income taxes
|
| • | In the Netherlands,
current income taxes are applied to taxable income, after eligible deductions and a 10% uplift deduction applied to operating expenses,
eligible G&A and tax deductions for depletion and abandonment retirement obligations, at a tax rate of 50%. For 2017, the effective
rate on current taxes is expected to be between approximately 4% and 6% of pre-tax fund flows from operations. This rate is subject
to change in response to production variations, commodity price fluctuations, the timing of capital expenditures, and other eligible
in-country adjustments. |
|
|
| • | Current income
taxes in Q2 2017 were lower compared to Q1 2017 due to decreased sales in Q2 2017. |
|
|
| • | Current income
taxes in the three and six months ended June 30, 2017 were lower compared to the 2016 periods mainly due to a lower forecasted
full year effective tax rate in 2017 compared to 2016. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
GERMANY BUSINESS UNIT
Overview
|
| • | Vermilion entered Germany in February
2014. |
|
|
| • | Vermilion successfully integrated
the December 2016 acquisition of operated and non-operated interests in five oil and three gas producing fields from Engie E&P
Deutschland GmbH (“Engie Acquisition”). Vermilion has assumed operatorship of six of the eight producing fields, representing
our first operated producing properties in Germany. |
|
|
| • | Hold a 25% interest in a four partner
consortium. Associated assets include four gas producing fields spanning 11 production licenses as well as an exploration license
in surrounding fields. Total license area comprises 204,000 gross acres, of which 85% is in the exploration license. |
|
|
| • | Entered into a farm-in agreement
in July 2015 that provides Vermilion with participating interest in 18 onshore exploration licenses in northwest Germany, comprising
approximately 850,000 net undeveloped acres of oil and natural gas rights. Vermilion will operate 11 of the 18 licenses during
the exploration phase. |
|
|
| • | Awarded an exploration license in Lower Saxony in March 2017 comprising 50,000 net acres surrounding the operated
oil fields acquired in December 2016. |
|
Operational and financial review
| |
|
|
Three Months Ended |
% change |
|
|
Six Months Ended |
% change |
|
| |
Germany business unit |
Jun 30, |
Mar 31, |
Jun 30, |
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
2017 vs. |
|
| |
($M except as indicated) |
2017 |
2017 |
2016 |
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
2016 |
|
| |
Production |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil (bbls/d) |
1,047 |
989 |
- |
6% |
100% |
|
|
1,018 |
- |
100% |
|
| |
|
Natural gas (mmcf/d) |
19.86 |
19.39 |
14.31 |
2% |
39% |
|
|
19.63 |
15.13 |
30% |
|
| |
|
Total (boe/d) |
4,357 |
4,220 |
2,385 |
3% |
83% |
|
|
4,289 |
2,522 |
70% |
|
| |
Production mix (% of total) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil |
24% |
23% |
- |
|
|
|
|
24% |
- |
|
|
| |
|
Natural gas |
76% |
77% |
100% |
|
|
|
|
76% |
100% |
|
|
| |
Activity |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital expenditures |
326 |
906 |
592 |
(64%) |
(45%) |
|
|
1,232 |
1,131 |
9% |
|
| |
Financial results |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
16,167 |
17,968 |
6,280 |
(10%) |
157% |
|
|
34,135 |
13,972 |
144% |
|
| |
|
Royalties |
(1,228) |
(1,368) |
(964) |
(10%) |
27% |
|
|
(2,596) |
(1,831) |
42% |
|
| |
|
Transportation |
(1,955) |
(1,485) |
(1,051) |
32% |
86% |
|
|
(3,440) |
(1,938) |
78% |
|
| |
|
Operating |
(5,753) |
(4,921) |
(2,506) |
17% |
130% |
|
|
(10,674) |
(5,099) |
109% |
|
| |
|
General and administration |
(2,099) |
(1,880) |
(2,474) |
12% |
(15%) |
|
|
(3,979) |
(4,902) |
(19%) |
|
| |
|
Fund flows from operations |
5,132 |
8,314 |
(715) |
(38%) |
N/A |
|
|
13,446 |
202 |
6,556% |
|
| |
Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
41.96 |
47.30 |
28.94 |
(11%) |
45% |
|
|
44.61 |
30.44 |
47% |
|
| |
|
Royalties |
(3.19) |
(3.60) |
(4.44) |
(11%) |
(28%) |
|
|
(3.39) |
(3.99) |
(15%) |
|
| |
|
Transportation |
(5.07) |
(3.91) |
(4.84) |
30% |
5% |
|
|
(4.50) |
(4.22) |
7% |
|
| |
|
Operating |
(14.93) |
(12.96) |
(11.55) |
15% |
29% |
|
|
(13.95) |
(11.11) |
26% |
|
| |
|
General and administration |
(5.45) |
(4.95) |
(11.40) |
10% |
(52%) |
|
|
(5.20) |
(10.68) |
(51%) |
|
| |
|
Fund flows from operations netback |
13.32 |
21.88 |
(3.29) |
(39%) |
N/A |
|
|
17.57 |
0.44 |
3,893% |
|
| |
Realized prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Crude oil ($/bbl) |
61.34 |
65.62 |
- |
(7%) |
100% |
|
|
63.54 |
- |
100% |
|
| |
|
Natural gas ($/mmbtu) |
6.09 |
6.95 |
4.82 |
(12%) |
26% |
|
|
6.51 |
5.07 |
28% |
|
| |
|
Total ($/boe) |
41.96 |
47.30 |
28.94 |
(11%) |
45% |
|
|
44.61 |
30.44 |
47% |
|
| |
Reference prices |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dated Brent (US $/bbl) |
49.83 |
53.78 |
45.57 |
(7%) |
9% |
|
|
51.81 |
39.73 |
30% |
|
| |
|
Dated Brent ($/bbl) |
67.01 |
71.15 |
58.72 |
(6%) |
14% |
|
|
69.10 |
52.91 |
31% |
|
| |
|
TTF ($/mmbtu) |
6.74 |
7.65 |
5.61 |
(12%) |
20% |
|
|
7.21 |
5.66 |
27% |
|
| |
|
TTF (€/mmbtu) |
4.56 |
5.43 |
3.86 |
(16%) |
18% |
|
|
4.99 |
3.81 |
31% |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Production
|
| • | Q2 2017 production increased 3%
from the prior quarter due to well optimization activities and 83% year-over-year due to production additions from the Engie Acquisition
that closed December 2016. |
|
Activity review
|
| • | Q2 2017 activity focused on the
identification of optimization opportunities on the acquired assets. |
|
|
| • | In 2017, we plan to continue our
ongoing analysis of the geologic data associated with the farm-in assets and to continue integration activities associated with
the asset acquisition. We will also continue permitting and pre-drill activities associated with our first operated well in Germany,
Burgmoor Z5 (25% working interest) in the Dümmersee-Uchte area, which we plan to drill in 2018 or 2019. |
|
Sales
|
| • | The price of our natural gas in
Germany is based on the TTF index. Crude oil in Germany is priced with reference to Dated Brent. |
|
|
| • | Q2 2017 sales per boe decreased
versus Q1 2017, consistent with decreases in the Dated Brent and TTF reference prices. |
|
|
| • | Sales per boe for the three and
six months ended June 30, 2017 increased as a result of stronger TTF prices and the addition of crude oil production in 2017. |
|
Royalties
|
| • | Our production in Germany is subject
to state and private royalties on sales after certain eligible deductions. |
|
|
| • | Q2 2017 royalties as a percentage
of sales remained consistent with Q1 2017 at 7.6%. |
|
|
| • | Royalties as a percentage of sales
for the three and six months ended June 30, 2017 of 7.6% decreased from 15.4% and 13.1% in the comparable periods in 2016 due to
lower royalties associated with the crude oil properties acquired in December 2016. |
|
Transportation
|
| • | Transportation expense in Germany
relates to costs incurred to deliver natural gas from the processing facility to the customer and deliver crude oil to the refinery. |
|
|
| • | Q2 2017 transportation expense increased
versus Q1 2017 on both a per unit and dollar basis due to a prior period amendment relating to 2016 recorded in the current quarter. |
|
|
| • | For the three and six months ended
June 30, 2017, transportation expense on a per boe basis increased 5% and 7% versus the comparable periods in the prior year due
to the prior period amendment as well as the aforementioned acquisition. |
|
Operating
|
| • | Operating expense increased in Q2
2017 versus Q1 2017 on both a per unit and dollar basis due to higher maintenance activity as compared to Q1 2017 and unfavourable
foreign exchange variances. |
|
|
| • | For the three and six months ended
June 30, 2017, operating expense on both a per unit and dollar basis increased versus the comparable periods in the prior year
due to the aforementioned acquisition. |
|
General and administration
|
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
|
|
| • | On a per unit basis, general and
administration costs have improved compared to 2016 as a result of our growing production base in Germany. |
|
Current income taxes
|
| • | As a result of our tax pools in Germany, we do not expect to
incur current income taxes in the Germany Business Unit for the foreseeable future. |
|
| Vermilion Energy Inc. |
2017 Second Quarter Report |
IRELAND BUSINESS UNIT
Overview
| • | Vermilion entered Ireland in 2009. |
| • | Initial investment was an 18.5%
non-operating interest in the offshore Corrib gas field located approximately 83 km off the northwest coast of Ireland. |
| • | On July 12, 2017 Vermilion and Canada
Pension Plan Investment Board (“CPPIB”) announced a strategic partnership that is expected to result in Vermilion increasing
ownership in Corrib to 20% and taking over operatorship upon close of the acquisition. |
| • | Project comprises six offshore wells,
offshore and onshore sales and transportation pipeline segments as well as a natural gas processing facility. |
| • | Production volumes reached full
plant capacity of approximately 65 mmcf/d (10,900 boe/d), net to Vermilion, at the end of Q2 2016. |
Operational and financial review
| |
|
Three Months Ended |
|
% change |
|
|
Six Months Ended |
|
% change |
| Ireland business unit |
Jun 30, |
Mar 31, |
Jun 30, |
|
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
|
2017 vs. |
| ($M except as indicated) |
2017 |
2017 |
2016 |
|
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
|
2016 |
| Production and sales |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Natural gas (mmcf/d) |
63.81 |
64.82 |
47.26 |
|
(2%) |
35% |
|
|
64.31 |
40.58 |
|
58% |
| |
Total (boe/d) |
10,634 |
10,803 |
7,877 |
|
(2%) |
35% |
|
|
10,718 |
6,763 |
|
58% |
| Activity |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
(73) |
(804) |
2,172 |
|
(91%) |
N/A |
|
|
(877) |
5,248 |
|
N/A |
| Financial results |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Sales |
36,671 |
44,648 |
23,360 |
|
(18%) |
57% |
|
|
81,319 |
40,364 |
|
101% |
| |
Transportation |
(1,258) |
(1,199) |
(1,574) |
|
5% |
(20%) |
|
|
(2,457) |
(3,213) |
|
(24%) |
| |
Operating |
(4,903) |
(3,999) |
(5,177) |
|
23% |
(5%) |
|
|
(8,902) |
(8,803) |
|
1% |
| |
General and administration |
(695) |
(438) |
(1,106) |
|
59% |
(37%) |
|
|
(1,133) |
(2,294) |
|
(51%) |
| |
Fund flows from operations |
29,815 |
39,012 |
15,503 |
|
(24%) |
92% |
|
|
68,827 |
26,054 |
|
164% |
| Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Sales |
37.90 |
45.92 |
32.59 |
|
(17%) |
16% |
|
|
41.92 |
32.79 |
|
28% |
| |
Transportation |
(1.30) |
(1.23) |
(2.20) |
|
6% |
(41%) |
|
|
(1.27) |
(2.61) |
|
(51%) |
| |
Operating |
(5.07) |
(4.11) |
(7.22) |
|
23% |
(30%) |
|
|
(4.59) |
(7.15) |
|
(36%) |
| |
General and administration |
(0.72) |
(0.45) |
(1.54) |
|
60% |
(53%) |
|
|
(0.58) |
(1.86) |
|
(69%) |
| |
Fund flows from operations netback |
30.81 |
40.13 |
21.63 |
|
(23%) |
42% |
|
|
35.48 |
21.17 |
|
68% |
| Reference prices |
|
|
|
|
|
|
|
|
|
|
|
|
| |
NBP ($/mmbtu) |
6.52 |
7.96 |
5.78 |
|
(18%) |
13% |
|
|
7.26 |
5.88 |
|
23% |
| |
NBP (€/mmbtu) |
4.41 |
5.64 |
3.97 |
|
(22%) |
11% |
|
|
5.02 |
3.96 |
|
27% |
Production
| • | Natural gas began to flow from our
Corrib gas project on December 30, 2015 and production volumes reached full plant capacity of approximately 65 mmcf/d (10,900 boe/d),
net to Vermilion at the end of Q2 2016. |
| • | Q2 2017 production was in-line with
prior quarter production and increased 35% year-over-year as Q2 2016 production volumes were restricted during the commissioning
period that occurred in the first half of 2016. |
| • | Production results continued to
benefit from better-than-expected well deliverability and minimal downtime. |
Activity review
| • | On July 12, 2017 Vermilion and CPPIB
announced a strategic partnership in Corrib, whereby CPPIB will acquire Shell Exploration Company B.V.’s 45% interest in
Corrib for total cash consideration of €830 million, subject to customary closing adjustments and future contingent value payments
based on performance and realized pricing. At closing, Vermilion expects to assume operatorship of Corrib. In addition to operatorship,
CPPIB plans to transfer a 1.5% working interest to Vermilion for €19.4 million ($28.4 million), before closing adjustments.
Vermilion’s incremental 1.5% ownership of Corrib would represent approximately 850 boe/d (100% gas) based on 2017 production
expectations for Corrib. The acquisition has an effective date of January 1, 2017 and is anticipated to close in the first half
of 2018. |
| • | There is limited capital activity
planned for 2017. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Sales
| • | The price of our natural gas in
Ireland is based on the NBP index. |
| • | Q2 2017 sales per boe decreased
relative to Q1 2017, consistent with decreases in the NBP reference price. |
| • | Sales per boe for three and six
months ended June 30, 2017 increased relative to the comparable periods in the prior year, consistent with increases in the NBP
reference price. |
Royalties
| • | Our production in Ireland is not
subject to royalties. |
Transportation
| • | Transportation expense in Ireland
relates to payments under a ship-or-pay agreement related to the Corrib project. |
| • | Q2 2017 transportation expense was
consistent with Q1 2017 in Euros, and the increase in Canadian dollars was solely due to the impact of the strengthening Euro versus
the Canadian dollar. |
| • | Transportation expense for the three
and six months ended June 30, 2017 decreased relative to the comparable periods in the prior year due a decrease in the current
year ship-or-pay obligation. |
Operating
| • | Q2 2017 operating expense on a per
unit and dollar basis increased as compared to Q1 2017 due to general operations and onshore maintenance activities, as well as
unfavourable foreign exchange variances. |
| • | Operating expense on a per unit
basis decreased for the three and six months ended June 30, 2017 versus the comparable periods in 2016 as a result of increased
production. Operating expense on a dollar basis was relatively consistent with the comparable periods. |
General and administration
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
Current income taxes
| • | As a result of our tax pools in Ireland, we do not expect to
incur current income taxes in the Ireland Business Unit for the foreseeable future. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
AUSTRALIA BUSINESS UNIT
Overview
| • | Entered Australia in 2005. |
| • | Hold a 100% operated working interest
in the Wandoo field, located approximately 80 km offshore on the northwest shelf of Australia. |
| • | Production is operated from two
off-shore platforms, and originates from 18 well bores and five lateral sidetrack wells. |
| • | Wells that utilize horizontal legs
(ranging in length from 500 to 3,000 plus metres) are located 600 metres below the seabed in approximately 55 metres of water depth.
|
Operational and financial review
| |
|
Three Months Ended |
% change |
|
|
Six Months Ended |
|
% change |
| Australia business unit |
Jun 30, |
Mar 31, |
Jun 30, |
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
|
2017 vs. |
| ($M except as indicated) |
2017 |
2017 |
2016 |
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
|
2016 |
| Production |
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
6,054 |
6,581 |
6,083 |
(8%) |
- |
|
|
6,316 |
6,132 |
|
3% |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
7,400 |
5,041 |
6,021 |
47% |
23% |
|
|
6,227 |
5,345 |
|
17% |
| Inventory (mbbls) |
|
|
|
|
|
|
|
|
|
|
|
| |
Opening crude oil inventory |
253 |
115 |
213 |
120% |
19% |
|
|
115 |
75 |
|
53% |
| |
Crude oil production |
550 |
592 |
554 |
(7%) |
(1%) |
|
|
1,143 |
1,116 |
|
2% |
| |
Crude oil sales |
(672) |
(454) |
(549) |
48% |
22% |
|
|
(1,127) |
(973) |
|
16% |
| |
Closing crude oil inventory |
131 |
253 |
218 |
|
|
|
|
131 |
218 |
|
|
| Activity |
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
9,158 |
3,438 |
39,939 |
166% |
(77%) |
|
|
12,596 |
47,766 |
|
(74%) |
| |
Gross wells drilled |
- |
- |
2.00 |
|
|
|
|
- |
2.00 |
|
|
| |
Net wells drilled |
- |
- |
2.00 |
|
|
|
|
- |
2.00 |
|
|
| Financial results |
|
|
|
|
|
|
|
|
|
|
|
| |
Sales |
48,061 |
34,987 |
33,713 |
37% |
43% |
|
|
83,048 |
53,648 |
|
55% |
| |
Operating |
(15,639) |
(10,036) |
(12,100) |
56% |
29% |
|
|
(25,675) |
(19,591) |
|
31% |
| |
General and administration |
(896) |
(2,430) |
(1,788) |
(63%) |
(50%) |
|
|
(3,326) |
(3,113) |
|
7% |
| |
Current income taxes |
(7,660) |
(6,830) |
(1,270) |
12% |
503% |
|
|
(14,490) |
(2,175) |
|
566% |
| |
Fund flows from operations |
23,866 |
15,691 |
18,555 |
52% |
29% |
|
|
39,557 |
28,769 |
|
37% |
| Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
| |
Sales |
71.37 |
77.11 |
61.53 |
(7%) |
16% |
|
|
73.68 |
55.15 |
|
34% |
| |
Operating |
(23.22) |
(22.12) |
(22.08) |
5% |
5% |
|
|
(22.78) |
(20.14) |
|
13% |
| |
General and administration |
(1.33) |
(5.35) |
(3.26) |
(75%) |
(59%) |
|
|
(2.95) |
(3.20) |
|
(8%) |
| |
PRRT |
(9.61) |
(11.98) |
(0.26) |
(20%) |
3,596% |
|
|
(10.56) |
(0.28) |
|
3,671% |
| |
Corporate income taxes |
(1.77) |
(3.08) |
(2.05) |
(43%) |
(14%) |
|
|
(2.30) |
(1.96) |
|
17% |
| |
Fund flows from operations netback |
35.44 |
34.58 |
33.88 |
2% |
5% |
|
|
35.09 |
29.57 |
|
19% |
| Reference prices |
|
|
|
|
|
|
|
|
|
|
|
| |
Dated Brent (US $/bbl) |
49.83 |
53.78 |
45.57 |
(7%) |
9% |
|
|
51.81 |
39.73 |
|
30% |
| |
Dated Brent ($/bbl) |
67.01 |
71.15 |
58.72 |
(6%) |
14% |
|
|
69.10 |
52.91 |
|
31% |
Production
| • | Q2 2017 production decreased 8%
quarter-over-quarter and was consistent with Q2 2016. |
| • | Production volumes are managed within
corporate targets while meeting customer demands and the requirements of long-term supply agreements. |
| • | We
continue to plan for long-term production levels of between 6,000 and 8,000 bbls/d. |
Activity review
| • | Q2 2017 efforts were largely focused
on facilities enhancement, including work relating to platform life extension. |
| • | Following our successful 2015 and
2016 drilling campaigns, we do not expect to drill any additional wells in Australia until 2019. |
| • | 2017 activity will be focused on
adding value through asset optimization and targeted proactive maintenance. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Sales
| • | Crude oil in Australia is priced
with reference to Dated Brent. |
| • | Q2 2017 sales per boe decreased
versus Q1 2017, consistent with lower Dated Brent prices. This decrease in price was more than offset by higher sales volumes due
to a 122,000 bbl inventory draw during Q2 as compared to a 138,000 bbl build in Q1. |
| • | Sales per boe for the three and
six months ended June 30, 2017 increased versus the comparable periods in the prior year, consistent with higher Dated Brent prices.
In both periods, the increase in price was coupled with higher sales volumes, resulting in a greater increase in sales. |
Royalties and transportation
| • | Our production in Australia is not
subject to royalties or transportation expense as crude oil is sold directly at the Wandoo B platform. |
Operating
| • | Operating expense on a per unit
basis increased versus all comparable periods due to the timing of maintenance work. On a dollar basis, operating expense increased
due to higher sales volumes. |
General and administration
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
Current income taxes
| • | In Australia, current
income taxes include both PRRT and corporate income taxes. PRRT is a profit based tax applied at a rate of 40% on sales less eligible
expenditures, including operating expenses and capital expenditures. Corporate income taxes are applied at a rate of 30% on taxable
income after eligible deductions, which include PRRT paid. |
| • | For 2017, the effective
tax rate for current income taxes is expected to be between approximately 25% and 27% of pre-tax fund flows from operations. This
is subject to change in response to production variations, commodity price fluctuations, the timing of capital expenditures and
other eligible in-country adjustments. |
| • | Current income
taxes in the three and six months ended June 30, 2017 were higher versus the comparable periods due to increased sales. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
UNITED STATES BUSINESS UNIT
Overview
| • | Entered the United States in September
2014. |
| • | Interests include approximately
94,600 net acres of land (97% undeveloped) in the Powder River Basin of northeastern Wyoming. |
| • | Tight oil development targeting
the Turner Sand at a depth of approximately 1,500 metres. |
Operational and financial review
| |
|
Three Months Ended |
% change |
|
|
Six Months Ended |
% change |
| United States business unit |
Jun 30, |
Mar 31, |
Jun 30, |
Q2/17 vs. |
Q2/17 vs. |
|
|
Jun 30, |
Jun 30, |
2017 vs. |
| ($M except as indicated) |
2017 |
2017 |
2016 |
Q1/17 |
Q2/16 |
|
|
2017 |
2016 |
2016 |
| Production and sales |
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
747 |
365 |
458 |
105% |
63% |
|
|
557 |
413 |
35% |
| |
NGLs (bbls/d) |
76 |
24 |
26 |
217% |
192% |
|
|
50 |
33 |
52% |
| |
Natural gas (mmcf/d) |
0.44 |
0.20 |
0.20 |
120% |
119% |
|
|
0.32 |
0.23 |
40% |
| |
Total (boe/d) |
896 |
422 |
518 |
112% |
73% |
|
|
660 |
484 |
36% |
| Activity |
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
5,155 |
11,539 |
1,636 |
(55%) |
215% |
|
|
16,694 |
6,737 |
148% |
| |
Acquisitions |
49 |
2,013 |
5,432 |
|
|
|
|
2,062 |
5,547 |
|
| |
Gross wells drilled |
- |
3.00 |
- |
|
|
|
|
3.00 |
- |
|
| |
Net wells drilled |
- |
3.00 |
- |
|
|
|
|
3.00 |
- |
|
| Financial results |
|
|
|
|
|
|
|
|
|
|
| |
Sales |
4,108 |
2,126 |
2,207 |
93% |
86% |
|
|
6,234 |
3,440 |
81% |
| |
Royalties |
(1,160) |
(599) |
(661) |
94% |
75% |
|
|
(1,759) |
(1,031) |
71% |
| |
Operating |
(387) |
(285) |
(302) |
36% |
28% |
|
|
(672) |
(581) |
16% |
| |
General and administration |
(1,127) |
(1,005) |
(697) |
12% |
62% |
|
|
(2,132) |
(1,829) |
17% |
| |
Fund flows from operations |
1,434 |
237 |
547 |
505% |
162% |
|
|
1,671 |
(1) |
N/A |
| Netbacks ($/boe) |
|
|
|
|
|
|
|
|
|
|
| |
Sales |
50.37 |
55.99 |
46.80 |
(10%) |
8% |
|
|
52.15 |
39.03 |
34% |
| |
Royalties |
(14.21) |
(15.79) |
(14.02) |
(10%) |
1% |
|
|
(14.71) |
(11.70) |
26% |
| |
Operating |
(4.74) |
(7.51) |
(6.39) |
(37%) |
(26%) |
|
|
(5.62) |
(6.59) |
(15%) |
| |
General and administration |
(13.82) |
(26.46) |
(14.77) |
(48%) |
(6%) |
|
|
(17.83) |
(20.76) |
(14%) |
| |
Fund flows from operations netback |
17.60 |
6.23 |
11.62 |
183% |
51% |
|
|
13.99 |
(0.02) |
N/A |
| Realized prices |
|
|
|
|
|
|
|
|
|
|
| |
Crude oil ($/bbl) |
58.05 |
61.68 |
52.56 |
(6%) |
10% |
|
|
59.23 |
45.09 |
31% |
| |
NGLs ($/bbl) |
14.70 |
25.67 |
3.25 |
(43%) |
352% |
|
|
17.32 |
4.18 |
314% |
| |
Natural gas ($/mmbtu) |
1.55 |
2.48 |
0.37 |
(38%) |
319% |
|
|
1.84 |
0.54 |
241% |
| |
Total ($/boe) |
50.37 |
55.99 |
46.80 |
(10%) |
8% |
|
|
52.15 |
39.03 |
34% |
| Reference prices |
|
|
|
|
|
|
|
|
|
|
| |
WTI (US $/bbl) |
48.28 |
51.92 |
45.59 |
(7%) |
6% |
|
|
50.10 |
39.52 |
27% |
| |
WTI ($/bbl) |
64.92 |
68.69 |
58.75 |
(5%) |
11% |
|
|
66.82 |
52.63 |
27% |
| |
Henry Hub (US $/mmbtu) |
3.18 |
3.31 |
1.95 |
(4%) |
63% |
|
|
3.25 |
2.02 |
61% |
| |
Henry Hub ($/mmbtu) |
4.28 |
4.38 |
2.52 |
(2%) |
70% |
|
|
4.33 |
2.69 |
61% |
Production
| • | Q2 2017 production increased 112%
from the prior quarter and 73% year-over-year as a result of production additions from our three (3.0 net) well drilling program.
|
Activity
| • | In Q2 2017, we brought on production
three (3.0 net) wells targeting the light oil bearing Turner Sand in the Powder River Basin. The wells were completed late in the
first quarter and into the second quarter with frac stages ranging from 31 to 40 stages per well. |
| • | In Q4 2016, we completed the Seedy
Draw East Federal well. The nearly 1,400 metre horizontal lateral was stimulated with 32 frac stages, but due to a screen-out during
treatment, only 23 stages were completed. We initiated the clean out of sand from this well during the first quarter resulting
in an additional 18 stages being completed. The well was returned to production in Q2 2017. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Sales
| • | The price of crude oil in the United
States is directly linked to WTI, but is also subject to market conditions in the United States. |
| • | Q2 2017 sales per boe decreased
versus Q1 2017 consistent with lower crude oil prices. |
| • | For the three and six months ended
June 30, 2017, sales per boe increased relative to the comparable periods in the prior year, consistent with stronger crude oil
pricing. |
Royalties
| • | Our production in the United States
is subject to federal and private royalties, severance tax, and ad valorem tax. |
| • | Royalties (including severance and
ad valorem taxes) as a percentage of sales for Q2 2017 of 28.2% was consistent with Q1 2017. |
| • | For the three and six months ended
June 30, 2017, royalties as a percentage of sales decreased to 28.2% from 30.0% in the comparable periods in the prior year. This
decrease is a result of our purchase of overriding royalty interests (ranging from 0.83% to 5%) for US$1.5 million, effective January
1, 2017. On a go-forward basis, we expect royalties as a percentage of sales to remain at approximately 28%. |
Operating
| • | Operating expense on a per unit
basis decreased across all periods presented due to the impact of fixed costs on higher volumes. In dollars, the increase in operating
expense across all periods presented was consistent with higher production. |
General and administration
| • | Fluctuations in general and administration
expense for all comparable periods were due to the timing of expenditures and allocations from our corporate segment. |
Current income taxes
| • | As a result of our tax pools in the United States, we do not
expect to incur current income taxes in the United States Business Unit for the foreseeable future. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
CORPORATE
Overview
| • | Our Corporate segment
includes costs related to our global hedging program, financing expenses, and general and administration expenses that are primarily
incurred in Canada and are not directly related to the operations of our business units. Expenditures relating to our activities
in Central and Eastern Europe are also included in the Corporate segment. |
Financial review
| |
Three Months Ended |
|
|
Six Months Ended |
| CORPORATE |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Activity |
|
|
|
|
|
|
|
| Capital expenditures |
1,055 |
725 |
418 |
|
|
1,780 |
418 |
| Acquisitions |
25 |
15 |
2,322 |
|
|
40 |
2,322 |
| Financial Results |
|
|
|
|
|
|
|
| General and administration (expense) recovery |
(950) |
(2,034) |
834 |
|
|
(2,984) |
1,255 |
| Current income taxes |
(271) |
(194) |
(257) |
|
|
(465) |
(406) |
| Interest expense |
(15,508) |
(14,695) |
(13,647) |
|
|
(30,203) |
(28,397) |
| Realized gain (loss) on derivatives |
5,342 |
(1,851) |
21,501 |
|
|
3,491 |
49,924 |
| Realized foreign exchange gain |
981 |
2,546 |
1,329 |
|
|
3,527 |
677 |
| Realized other income |
252 |
42 |
62 |
|
|
294 |
167 |
| Fund flows from operations |
(10,154) |
(16,186) |
9,822 |
|
|
(26,340) |
23,220 |
General and administration
| • | Fluctuations in general and administration
costs for the three and six months ended June 30, 2017 versus all comparable periods were due to allocations to the various business
unit segments. |
Current income taxes
| • | Taxes in our corporate segment relate
to holding companies that pay current taxes in foreign jurisdictions. |
Interest expense
| • | The increase in interest expense
for the three and six months ended June 30, 2017 versus all comparable periods was primarily due to the recognition of a full quarter
of interest on the senior unsecured notes issued in Q1 2017, which bear interest at a higher rate than the revolving credit facility.
|
Realized gain or loss on derivatives
| • | The realized gain on derivatives
for the three and six months ended June 30, 2017 related primarily to amounts received on our crude oil hedges. Additionally, the
realized gain on derivatives for the three months ended June 30, 2017 also related to amounts received on our European natural
gas hedges. |
| • | A listing of derivative positions
as at June 30, 2017 is included in “Supplemental Table 2” of this MD&A. |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
FINANCIAL PERFORMANCE REVIEW
| |
|
Three Months Ended |
| |
|
Jun 30, |
Mar 31, |
Dec 31, |
Sep 30, |
Jun 30, |
Mar 31, |
Dec 31, |
Sep 30, |
| ($M except per share) |
2017 |
2017 |
2016 |
2016 |
2016 |
2016 |
2015 |
2015 |
| Petroleum and natural gas sales |
271,391 |
261,601 |
259,891 |
232,660 |
212,855 |
177,385 |
234,319 |
245,051 |
| Net earnings (loss) |
48,264 |
44,540 |
(4,032) |
(14,475) |
(55,696) |
(85,848) |
(142,080) |
(83,310) |
| Net earnings (loss) per share |
|
|
|
|
|
|
|
|
| |
Basic |
0.40 |
0.38 |
(0.03) |
(0.12) |
(0.48) |
(0.76) |
(1.28) |
(0.76) |
| |
Diluted |
0.39 |
0.37 |
(0.03) |
(0.12) |
(0.48) |
(0.76) |
(1.28) |
(0.76) |
The following table shows a reconciliation
from fund flows from operations to net earnings (loss):
| |
|
Three Months Ended |
|
|
|
Six Months Ended |
|
| |
|
Jun 30, |
Mar 31, |
Jun 30, |
|
|
|
Jun 30, |
Jun 30, |
|
| |
|
2017 |
2017 |
2016 |
|
|
|
2017 |
2016 |
|
| Fund flows from operations |
147,123 |
143,434 |
126,568 |
|
|
|
290,557 |
220,235 |
|
| Equity based compensation |
(13,896) |
(18,738) |
(13,267) |
|
|
|
(32,634) |
(34,104) |
|
| Unrealized gain (loss) on derivative instruments |
23,283 |
79,865 |
(72,436) |
|
|
|
103,148 |
(63,382) |
|
| Unrealized foreign exchange gain (loss) |
38,616 |
(4,518) |
(2,804) |
|
|
|
34,098 |
(1,234) |
|
| Unrealized other expense |
(210) |
(30) |
(20) |
|
|
|
(240) |
(107) |
|
| Accretion |
(6,748) |
(6,382) |
(6,025) |
|
|
|
(13,130) |
(12,134) |
|
| Depletion and depreciation |
(126,269) |
(115,409) |
(131,793) |
|
|
|
(241,678) |
(257,591) |
|
| Deferred taxes |
(13,635) |
(33,682) |
44,081 |
|
|
|
(47,317) |
21,535 |
|
| Impairment |
- |
- |
- |
|
|
|
- |
(14,762) |
|
| Net earnings (loss) |
48,264 |
44,540 |
(55,696) |
|
|
|
92,804 |
(141,544) |
|
The fluctuations in net income
from period-to-period are caused by changes in both cash and non-cash based income and charges. Cash based items are reflected
in fund flows from operations. Non-cash items include: equity based compensation expense, unrealized gains and losses on derivative
instruments, unrealized foreign exchange gains and losses, accretion, depletion and depreciation expense, and deferred taxes. In
addition, non-cash items may also include amounts resulting from business combinations or charges resulting from impairment or
impairment reversals.
Equity based compensation
Equity based compensation expense relates
primarily to non-cash compensation expense attributable to long-term incentives granted to directors, officers, and employees under
the Vermilion Incentive Plan (“VIP”).
Equity based compensation in Q2 2017
decreased as compared to Q1 2017 due to the absence of the settlement of the employee bonus plan with equity that occurred in Q1
2017. For the six months ended June 30, 2017, the decrease in equity based compensation is primarily due to a reduction in the
value of VIP outstanding.
Unrealized gain or loss on derivative
instruments
Unrealized gain or loss on derivative
instruments arise as a result of changes in forecasted future commodity prices. As Vermilion uses derivative instruments to manage
the commodity price exposure of our future crude oil and natural gas production, we will normally recognize unrealized gains on
derivative instruments when forecasted future commodity prices decline and vice-versa.
For the six months ended June 30, 2017, we recognized an unrealized gain on derivative instruments of $103.1 million. This unrealized
gain resulted from lower forward prices for crude oil and European natural gas as at June 30, 2017. As at June 30, 2017, we have
a net derivative asset position of $33.5 million as compared to a net derivative liability position of $69.7 million as at December
31, 2016.
Unrealized foreign exchange gain
or loss
As a result of Vermilion’s international
operations, Vermilion has monetary assets and liabilities denominated in currencies other than the Canadian dollar. These monetary
assets and liabilities include cash, receivables, payables, long-term debt, derivative instruments and intercompany loans, primarily
denominated in the US dollar and Euro.
Unrealized foreign exchange gains and
losses result from translating these monetary assets and liabilities from their underlying currency to the functional currency
of Vermilion and its subsidiaries. Unrealized foreign exchange primarily results from the translation of Euro denominated financial
assets and US dollar denominated financial liabilities. As such, an appreciation in the Euro against the Canadian dollar will result
in an unrealized foreign exchange gain while an appreciation in the US dollar against the Canadian dollar will result in an unrealized
foreign exchange loss (and vice-versa).
| Vermilion Energy Inc. |
2017 Second Quarter Report |
As at June 30, 2017, the Canadian dollar
weakened against the Euro but strengthened against the US dollar for both the three and six month periods, resulting in unrealized
foreign exchange gains in both periods.
Accretion
Accretion expense is recognized to update
the present value of the asset retirement obligation balance. Accretion expense was relatively consistent with all comparative
periods.
Depletion and depreciation
Depletion and depreciation expense is
recognized to allocate the capitalized cost of extracting natural resources and the cost of material assets over the useful life
of the respective assets. Fluctuations in depletion and depreciation expense are primarily the result of changes in produced crude
oil and natural gas volumes and changes in depletion and depreciation rates. Fluctuations in depletion and depreciation rates are
primarily the result of changes in reserves and future development costs.
Depletion and depreciation on a per boe
basis for Q2 2017 of $20.30 was relatively consistent with $20.71 in Q1 2017. For the three and six months ended June 30, 2017,
depletion and depreciation on a per boe basis of $20.30 and $20.49, respectively, were lower than $22.80 and $22.23 in the respective
comparable periods in 2016 due to reduced depletion and depreciation rates as a result of increased reserves coupled with lower
estimated future development costs.
Deferred tax
Deferred tax recovery arises primarily
as a result of changes in the accounting basis and tax basis for capital assets and asset retirement obligations and changes in
available tax losses.
FINANCIAL POSITION REVIEW
Balance sheet strategy
We believe that our balance sheet
supports our defined growth initiatives and our focus is on managing and maintaining a conservative balance sheet. To ensure that
our balance sheet continues to support our defined growth initiatives, we regularly review whether forecasted fund flows from operations
is sufficient to finance planned capital expenditures, dividends, and abandonment and reclamation expenditures. To the extent that
forecasted fund flows from operations is not expected to be sufficient to fulfill such expenditures, we will evaluate our ability
to finance any shortfall with debt (including borrowing using the unutilized capacity of our existing revolving credit facility),
issue equity, or by reducing some or all categories of expenditures to ensure that total expenditures do not exceed available funds.
To ensure that we maintain a conservative
balance sheet, we monitor the ratio of net debt to fund flows from operations and typically strive to maintain an internally targeted
ratio of approximately 1.0 to 1.5 in a normalized commodity price environment. Where prices trend higher, we may target a lower
ratio and conversely, in a lower commodity price environment, an acceptable ratio may be higher. At times, we will use our balance
sheet to finance acquisitions and, in these situations, we are prepared to accept a higher ratio in the short term but will implement
a strategy to reduce the ratio to acceptable levels within a reasonable period of time, usually considered to be no more than 12
to 24 months. This plan could potentially include an increase in hedging activities, a reduction in capital expenditures, an issuance
of equity or the utilization of excess fund flows from operations to reduce outstanding indebtedness.
In the current low commodity price
environment, Vermilion’s net debt to fund flows from operations ratio is expected to be higher than the internally targeted
ratio. During this period, Vermilion will remain focused on maintaining a strong balance sheet by aligning capital expenditures
and net dividends within forecasted fund flows from operations, which is continually monitored for revised forward price estimates,
as well as by hedging additional volumes to maintain a diversified commodity portfolio.
The balances recognized on our
balance sheet are as follows:
| |
|
As at |
| |
|
Jun 30, |
Dec 31, |
| ($M) |
|
2017 |
2016 |
| Revolving credit facility |
|
879,169 |
1,362,192 |
| Senior unsecured notes |
|
383,066 |
- |
| Long-term debt |
|
1,262,235 |
1,362,192 |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Revolving Credit Facility
As at June 30, 2017, Vermilion had in
place a bank revolving credit facility maturing May 31, 2021 with the following terms:
| |
As at |
| |
Jun 30, |
|
Dec 31, |
| ($M) |
2017 |
|
2016 |
| Total facility amount |
1,400,000 |
|
2,000,000 |
| Amount drawn |
(879,169) |
|
(1,362,192) |
| Letters of credit outstanding |
(4,500) |
|
(20,100) |
| Unutilized capacity |
516,331 |
|
617,708 |
In April of 2017, we negotiated
an extension of our revolving credit facility with our syndicate of lenders from May 31, 2019 to May 31, 2021. Further, as
a result of projected liquidity requirements and the proceeds from our senior unsecured notes issuance, we elected to reduce the
total facility amount from $2.0 billion to $1.4 billion.
As at June 30, 2017, the revolving
credit facility was subject to the following covenants:
| |
|
|
As at |
| |
|
|
June 30, |
|
Dec 31, |
| Financial covenant |
Limit |
|
2017 |
|
2016 |
| Consolidated total debt to consolidated EBITDA |
4.0 |
|
1.91 |
|
2.36 |
| Consolidated total senior debt to consolidated EBITDA |
3.5 |
|
1.30 |
|
2.32 |
| Consolidated total senior debt to total capitalization |
55% |
|
30% |
|
46% |
Our covenants include financial
measures defined within our revolving credit facility agreement that are not defined under IFRS. These financial measures are defined
by our revolving credit facility agreement as follows:
| • | Consolidated total debt: Includes
all amounts classified as “Long-term debt” and “Finance lease obligation” on our balance sheet. |
| • | Consolidated total senior debt:
Defined as consolidated total debt excluding unsecured and subordinated debt. |
| • | Consolidated EBITDA: Defined as
consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items. |
| • | Total capitalization: Includes all
amounts on our balance sheet classified as “Shareholders’ equity” plus consolidated total debt as defined above. |
Senior Unsecured Notes
On March 13, 2017, Vermilion issued US
$300 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum, to be paid semi-annually
on March 15 and September 15, and mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes rank
equally in right of payment with existing and future senior indebtedness of the Company.
The senior unsecured notes were recognized
at amortized cost and include the transaction costs directly related to the issuance.
Vermilion may, at its option, redeem
the notes prior to maturity as follows:
| • | Prior to March 15, 2020, Vermilion
may redeem up to 35% of the original principal amount of the senior unsecured notes with the proceeds of certain equity offerings
by the Company at a redemption price of 105.625% of the principal amount, plus any accrued and unpaid interest to but excluding
the applicable redemption date. |
| • | Prior to March 15, 2020, Vermilion
may redeem some or all of the senior unsecured notes at a price equal to 100% of the principal amount of the senior unsecured notes,
plus a “make-whole” premium and any accrued and unpaid interest. |
| • | On or after March 15, 2020, Vermilion
may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table, plus any accrued
and unpaid interest. |
| Year |
Redemption price |
| 2020 |
|
|
104.219% |
| 2021 |
|
|
102.819% |
| 2022 |
|
|
101.406% |
| 2023 and thereafter |
|
|
100.000% |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Net debt
Net debt is reconciled to long-term
debt, as follows:
| |
As at |
| |
Jun 30, |
Dec 31, |
| ($M) |
2017 |
2016 |
| Long-term debt |
1,262,235 |
1,362,192 |
| Current liabilities |
247,768 |
290,862 |
| Current assets |
(195,237) |
(225,906) |
| Net debt |
1,314,766 |
1,427,148 |
| |
|
|
| Ratio of net debt to annualized fund flows from operations |
2.3 |
2.8 |
As at June 30, 2017, long term
debt decreased to $1.26 billion (December 31, 2016 - $1.36 billion) as fund flows from operations generated in excess of expenditures
was used to reduce debt. This decrease in long-term debt, in addition to an increase in net current derivative assets, decreased
net debt from $1.43 billion at December 31, 2016 to $1.31 billion at June 30, 2017. The decrease in net debt coupled with an increase
in fund flows from operations resulted in a decrease in the ratio of net debt to annualized fund flows from operations from 2.8
to 2.3.
Shareholders’ capital
During the six months ended June
30, 2017, we maintained monthly dividends at $0.215 per share and declared $154.5 million of dividends.
The following table outlines our
dividend payment history:
| Date |
Monthly dividend per unit or share |
| January 2003 to December 2007 |
$0.170 |
| January 2008 to December 2012 |
$0.190 |
| January 2013 to December 31, 2013 |
$0.200 |
| January 2014 to Present |
$0.215 |
Our policy with respect to dividends
is to be conservative and maintain a low ratio of dividends to fund flows from operations. During low commodity price cycles, we
will initially maintain dividends and allow the ratio to rise. Should low commodity price cycles remain for an extended period
of time, we will evaluate the necessity of changing the level of dividends, taking into consideration capital development requirements,
debt levels, and acquisition opportunities.
We commenced proration of the
Premium Dividend Component in 2016 and continued proration throughout 2017. We have discontinued the Premium Dividend™ Component
of our Dividend Reinvestment Plan beginning with the July 2017 dividend payment.
Although we expect to be able
to maintain our current dividend, fund flows from operations may not be sufficient to fund cash dividends, capital expenditures,
and asset retirement obligations. We will evaluate our ability to finance any shortfall with debt, issuances of equity, or by reducing
some or all categories of expenditures to ensure that total expenditures do not exceed available funds.
The following table reconciles
the change in shareholders’ capital:
| Shareholders’ Capital |
Number of Shares ('000s) |
|
Amount ($M) |
| Balance as at December 31, 2016 |
|
118,263 |
|
2,452,722 |
| Shares issued for the Dividend Reinvestment Plan |
|
1,325 |
|
64,747 |
| Vesting of equity based awards |
|
1,059 |
|
69,675 |
| Share-settled dividends on vested equity based awards |
|
170 |
|
8,473 |
| Shares issued for equity based compensation |
|
130 |
|
6,397 |
| Balance as at June 30, 2017 |
|
120,947 |
|
2,602,014 |
As at June 30, 2017, there were
approximately 1.7 million VIP awards outstanding. As at July 25, 2017, there were approximately 121.2 million common shares issued
and outstanding.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
ASSET RETIREMENT OBLIGATIONS
As at June 30, 2017, asset retirement
obligations were $550.4 million compared to $525.0 million as at December 31, 2016.
The increase in asset retirement
obligations is largely attributable to accretion and the impact of foreign exchange fluctuations.
OFF BALANCE SHEET ARRANGEMENTS
We have certain lease agreements
that are entered into in the normal course of operations, including operating leases for which no asset or liability value has
been assigned to the consolidated balance sheet as at June 30, 2017.
We have not entered into any guarantee
or off balance sheet arrangements that would materially impact our financial position or results of operations.
RISK MANAGEMENT
Vermilion is exposed to various
market and operational risks. For a detailed discussion of these risks, please see Vermilion’s Annual Report for the year
ended December 31, 2016.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements
in accordance with IFRS requires management to make estimates, judgments and assumptions that affect reported assets, liabilities,
revenues and expenses, gains and losses, and disclosures of any possible contingencies. These estimates and assumptions are developed
based on the best available information which management believed to be reasonable at the time such estimates and assumptions were
made. As such, these assumptions are uncertain at the time estimates are made and could change, resulting in a material impact
on Vermilion’s consolidated financial statements. Estimates are reviewed by management on an ongoing basis and as a result
may change from period to period due to the availability of new information or changes in circumstances. Additionally, as a result
of the unique circumstances of each jurisdiction that Vermilion operates in, the critical accounting estimates may affect one or
more jurisdictions. There have been no material changes to our critical accounting estimates used in applying accounting policies
for the six months ended June 30, 2017. Further information, including a discussion of critical accounting estimates, can be found
in the notes to the Consolidated Financial Statements and annual MD&A for the year ended December 31, 2016, available on SEDAR
at www.sedar.com or on Vermilion’s website at www.vermilionenergy.com.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in Vermilion’s
internal control over financial reporting that occurred during the period covered by this MD&A that has materially affected,
or is reasonably likely to materially affect, its internal control over financial reporting.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
The following IFRS have been issued by the IASB but
are not yet effective:
| |
• |
IFRS 9 “Financial Instruments” will be adopted January 1, 2018. IFRS 9 includes changes to the classification and measurement of financial instruments and general hedge accounting. |
| |
• |
IFRS 15 “Revenue from Contracts with Customers” will be adopted January 1, 2018. IFRS 15 specifies recognition and measurement requirements for contracts with customers. |
| |
• |
IFRS 16 “Leases” will be adopted January 1, 2019. IFRS 16 requires lessees to recognize a lease obligation and right-of-use asset for the majority of leases. |
On the adoption of IFRS 9, Vermilion
does not currently anticipate changes to the measured amount of financial instruments and correspondingly does not currently anticipate
material changes to net earnings.
In the adoption of IFRS 15, Vermilion
has in place a transition team that has been performing a detailed review of the Company’s standard contracts with customers
in accordance with the issued IFRS to determine the impact, if any, the adoption of IFRS 15 will have on its financial statements.
Vermilion continues to assess this new standard and review its impacts.
The impact of the adoption of
IFRS 16 is currently being evaluated.
| Vermilion Energy Inc. |
2017 Second Quarter Report |
Supplemental Table 1: Netbacks
The following table includes financial
statement information on a per unit basis by business unit. Natural gas sales volumes have been converted on a basis of six thousand
cubic feet of natural gas to one barrel of oil equivalent.
| |
|
|
|
|
|
|
|
|
|
Three Months |
|
Six Months |
| |
|
|
|
|
|
|
|
|
|
Ended June |
|
Ended June |
| |
Three Months Ended June 30, 2017 |
|
Six Months Ended June 30, 2017 |
|
|
30, 2016 |
|
30, 2016 |
| |
Crude Oil, |
|
|
|
Crude Oil, |
|
|
|
|
|
|
| |
Condensate |
|
|
|
Condensate |
|
|
|
|
|
|
| |
& NGLs |
Natural Gas |
Total |
|
& NGLs |
Natural Gas |
Total |
|
|
Total |
|
Total |
| |
$/bbl |
$/mcf |
$/boe |
|
$/bbl |
$/mcf |
$/boe |
|
|
$/boe |
|
$/boe |
| Canada |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
50.50 |
2.83 |
32.18 |
|
52.37 |
2.91 |
32.85 |
|
|
25.39 |
|
23.18 |
| Royalties |
(6.82) |
(0.09) |
(3.39) |
|
(6.98) |
(0.15) |
(3.57) |
|
|
(1.55) |
|
(1.82) |
| Transportation |
(1.96) |
(0.19) |
(1.52) |
|
(2.21) |
(0.20) |
(1.66) |
|
|
(1.55) |
|
(1.56) |
| Operating |
(6.92) |
(1.31) |
(7.44) |
|
(7.43) |
(1.24) |
(7.43) |
|
|
(6.77) |
|
(7.44) |
| Operating netback |
34.80 |
1.24 |
19.83 |
|
35.75 |
1.32 |
20.19 |
|
|
15.52 |
|
12.36 |
| General and administration |
|
|
(1.20) |
|
|
|
(1.00) |
|
|
(1.77) |
|
(1.33) |
| Fund flows from operations netback |
|
|
18.63 |
|
|
|
19.19 |
|
|
13.75 |
|
11.03 |
| France |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
62.09 |
- |
62.09 |
|
64.75 |
1.52 |
64.75 |
|
|
57.82 |
|
50.32 |
| Royalties |
(6.10) |
- |
(6.10) |
|
(6.08) |
(0.41) |
(6.08) |
|
|
(6.16) |
|
(6.11) |
| Transportation |
(3.60) |
- |
(3.60) |
|
(3.53) |
- |
(3.53) |
|
|
(3.26) |
|
(3.30) |
| Operating |
(11.86) |
- |
(11.86) |
|
(12.36) |
(1.21) |
(12.36) |
|
|
(10.57) |
|
(11.73) |
| Operating netback |
40.53 |
- |
40.53 |
|
42.78 |
(0.10) |
42.78 |
|
|
37.83 |
|
29.18 |
| General and administration |
|
|
(3.62) |
|
|
|
(3.56) |
|
|
(4.44) |
|
(4.32) |
| Current income taxes |
|
|
(1.79) |
|
|
|
(3.58) |
|
|
(0.86) |
|
(0.44) |
| Fund flows from operations netback |
|
|
35.12 |
|
|
|
35.64 |
|
|
32.53 |
|
24.42 |
| Netherlands |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
49.59 |
6.49 |
39.16 |
|
53.26 |
6.96 |
41.94 |
|
|
31.77 |
|
32.55 |
| Royalties |
- |
(0.10) |
(0.61) |
|
- |
(0.11) |
(0.65) |
|
|
(0.52) |
|
(0.54) |
| Operating |
- |
(1.70) |
(10.01) |
|
- |
(1.51) |
(8.90) |
|
|
(5.71) |
|
(6.53) |
| Operating netback |
49.59 |
4.69 |
28.54 |
|
53.26 |
5.34 |
32.39 |
|
|
25.54 |
|
25.48 |
| General and administration |
|
|
(1.14) |
|
|
|
(1.06) |
|
|
(1.62) |
|
(1.27) |
| Current income taxes |
|
|
(1.54) |
|
|
|
(1.52) |
|
|
(4.32) |
|
(3.47) |
| Fund flows from operations netback |
|
|
25.86 |
|
|
|
29.81 |
|
|
19.60 |
|
20.74 |
| Germany |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
61.34 |
6.09 |
41.96 |
|
63.54 |
6.51 |
44.61 |
|
|
28.94 |
|
30.44 |
| Royalties |
1.25 |
(0.74) |
(3.19) |
|
(1.28) |
(0.67) |
(3.39) |
|
|
(4.44) |
|
(3.99) |
| Transportation |
(9.22) |
(0.65) |
(5.07) |
|
(8.65) |
(0.55) |
(4.50) |
|
|
(4.84) |
|
(4.22) |
| Operating |
(20.99) |
(2.21) |
(14.93) |
|
(18.70) |
(2.09) |
(13.95) |
|
|
(11.55) |
|
(11.11) |
| Operating netback |
32.38 |
2.49 |
18.77 |
|
34.91 |
3.20 |
22.77 |
|
|
8.11 |
|
11.12 |
| General and administration |
|
|
(5.45) |
|
|
|
(5.20) |
|
|
(11.40) |
|
(10.68) |
| Fund flows from operations netback |
|
|
13.32 |
|
|
|
17.57 |
|
|
(3.29) |
|
0.44 |
| Ireland |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
- |
6.32 |
37.90 |
|
- |
6.99 |
41.92 |
|
|
32.59 |
|
32.79 |
| Transportation |
- |
(0.22) |
(1.30) |
|
- |
(0.21) |
(1.27) |
|
|
(2.20) |
|
(2.61) |
| Operating |
- |
(0.84) |
(5.07) |
|
- |
(0.76) |
(4.59) |
|
|
(7.22) |
|
(7.15) |
| Operating netback |
- |
5.26 |
31.53 |
|
- |
6.02 |
36.06 |
|
|
23.17 |
|
23.03 |
| General and administration |
|
|
(0.72) |
|
|
|
(0.58) |
|
|
(1.54) |
|
(1.86) |
| Fund flows from operations netback |
|
|
30.81 |
|
|
|
35.48 |
|
|
21.63 |
|
21.17 |
| Australia |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
71.37 |
- |
71.37 |
|
73.68 |
- |
73.68 |
|
|
61.53 |
|
55.15 |
| Operating |
(23.22) |
- |
(23.22) |
|
(22.78) |
- |
(22.78) |
|
|
(22.08) |
|
(20.14) |
| PRRT (1) |
(9.61) |
- |
(9.61) |
|
(10.56) |
- |
(10.56) |
|
|
(0.26) |
|
(0.28) |
| Operating netback |
38.54 |
- |
38.54 |
|
40.34 |
- |
40.34 |
|
|
39.19 |
|
34.73 |
| General and administration |
|
|
(1.33) |
|
|
|
(2.95) |
|
|
(3.26) |
|
(3.20) |
| Corporate income taxes |
|
|
(1.77) |
|
|
|
(2.30) |
|
|
(2.05) |
|
(1.96) |
| Fund flows from operations netback |
|
|
35.44 |
|
|
|
35.09 |
|
|
33.88 |
|
29.57 |
| Vermilion Energy Inc. |
2017 Second Quarter Report |
| |
|
|
|
|
|
|
|
|
|
Three Months |
|
Six Months |
| |
|
|
|
|
|
|
|
|
|
Ended June |
|
Ended June |
| |
Three Months Ended June 30, 2017 |
|
Six Months Ended June 30, 2017 |
|
|
30, 2016 |
|
30, 2016 |
| |
Crude Oil, |
|
|
|
Crude Oil, |
|
|
|
|
|
|
| |
Condensate |
|
|
|
Condensate |
|
|
|
|
|
|
| |
& NGLs |
Natural Gas |
Total |
|
& NGLs |
Natural Gas |
Total |
|
|
Total |
|
Total |
| |
$/bbl |
$/mcf |
$/boe |
|
$/bbl |
$/mcf |
$/boe |
|
|
$/boe |
|
$/boe |
| United States |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
54.05 |
1.55 |
50.37 |
|
55.77 |
1.84 |
52.15 |
|
|
46.80 |
|
39.03 |
| Royalties |
(15.13) |
(0.66) |
(14.21) |
|
(15.60) |
(0.78) |
(14.71) |
|
|
(14.02) |
|
(11.70) |
| Operating |
(5.16) |
- |
(4.74) |
|
(6.11) |
- |
(5.62) |
|
|
(6.39) |
|
(6.59) |
| Operating netback |
33.76 |
0.89 |
31.42 |
|
34.06 |
1.06 |
31.82 |
|
|
26.39 |
|
20.74 |
| General and administration |
|
|
(13.82) |
|
|
|
(17.83) |
|
|
(14.77) |
|
(20.76) |
| Fund flows from operations netback |
|
|
17.60 |
|
|
|
13.99 |
|
|
11.62 |
|
(0.02) |
| Total Company |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
59.40 |
4.75 |
43.63 |
|
61.50 |
5.18 |
45.19 |
|
|
36.83 |
|
33.67 |
| Realized hedging gain |
0.76 |
0.16 |
0.86 |
|
0.60 |
0.01 |
0.30 |
|
|
3.72 |
|
4.31 |
| Royalties |
(5.03) |
(0.13) |
(2.85) |
|
(5.20) |
(0.15) |
(2.88) |
|
|
(2.14) |
|
(2.27) |
| Transportation |
(2.22) |
(0.21) |
(1.74) |
|
(2.37) |
(0.20) |
(1.75) |
|
|
(1.71) |
|
(1.75) |
| Operating |
(12.51) |
(1.31) |
(10.14) |
|
(12.62) |
(1.22) |
(9.77) |
|
|
(9.02) |
|
(9.30) |
| PRRT (1) |
(2.12) |
- |
(1.04) |
|
(2.18) |
- |
(1.01) |
|
|
(0.02) |
|
(0.02) |
| Operating netback |
38.28 |
3.26 |
28.72 |
|
39.73 |
3.62 |
30.08 |
|
|
27.66 |
|
24.64 |
| General and administration |
|
|
(2.12) |
|
|
|
(2.23) |
|
|
(2.68) |
|
(2.51) |
| Interest expense |
|
|
(2.49) |
|
|
|
(2.56) |
|
|
(2.36) |
|
(2.45) |
| Realized foreign exchange gain |
|
|
0.16 |
|
|
|
0.30 |
|
|
0.23 |
|
0.06 |
| Other income |
|
|
0.04 |
|
|
|
0.02 |
|
|
0.01 |
|
0.01 |
| Corporate income taxes (1) |
|
|
(0.65) |
|
|
|
(0.98) |
|
|
(0.96) |
|
(0.75) |
| Fund flows from operations netback |
|
|
23.66 |
|
|
|
24.63 |
|
|
21.90 |
|
19.00 |
| (1) | Vermilion
considers Australian PRRT to be an operating item and, accordingly, has included PRRT
in the calculation of operating netbacks. Current income taxes presented above excludes
PRRT. |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
Supplemental Table 2: Hedges
The prices in these tables may
represent the weighted averages for several contracts. The weighted average price for the portfolio of options listed below may
not have the same payoff profile as the individual contracts. As such, the presentation of the weighted average prices is purely
for indicative purposes.
The following tables outline Vermilion’s outstanding
risk management positions as at June 30, 2017:
| Crude Oil |
Period |
Exercise date(1) |
Currency |
Bought Put Volume (bbl/d) |
Weighted Average Bought Put Price / bbl |
Sold Call Volume
(bbl/d) |
Weighted Average Sold Call Price / bbl |
Sold Put Volume (bbl/d) |
Weighted Average
Sold Put
Price / bbl |
Swap Volume (bbl/d) |
Weighted Average Swap Price / bbl |
Additional Swap Volume (mmbtu/d) (2) |
| Dated Brent |
|
|
|
|
|
|
|
|
|
|
|
|
| 3-Way Collar |
Jan 2017 - Dec 2017 |
|
USD |
2,500 |
51.00 |
2,500 |
60.50 |
2,500 |
41.50 |
- |
- |
- |
| 3-Way Collar |
Jul 2017 - Jun 2018 |
|
USD |
2,000 |
55.00 |
2,000 |
64.06 |
2,000 |
45.00 |
- |
- |
- |
| 3-Way Collar |
Jul 2017 - Dec 2018 |
|
USD |
1,000 |
48.70 |
1,000 |
55.00 |
1,000 |
42.50 |
- |
- |
- |
| Collar |
Jan 2018 - Dec 2018 |
|
USD |
500 |
50.00 |
500 |
57.50 |
- |
- |
- |
- |
- |
| Put Spread |
Apr 2017 - Dec 2017 |
|
USD |
600 |
56.00 |
- |
- |
600 |
46.25 |
- |
- |
- |
| Put Spread |
May 2017 - Dec 2017 |
|
USD |
680 |
55.00 |
- |
- |
680 |
46.00 |
- |
- |
- |
| Put Spread |
Jul 2017 - Dec 2017 |
|
USD |
500 |
55.00 |
- |
- |
500 |
47.50 |
- |
- |
- |
| Swaption |
Jan 2018 - Dec 2018 |
Sep 29, 2017 |
USD |
- |
- |
- |
- |
- |
- |
1,000 |
55.00 |
- |
| Swaption |
Jan 2018 - Dec 2018 |
Dec 29, 2017 |
USD |
- |
- |
- |
- |
- |
- |
500 |
49.00 |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| WTI |
|
|
|
|
|
|
|
|
|
|
|
|
| 3-Way Collar |
Jan 2017 - Dec 2017 |
|
CAD |
1,500 |
70.00 |
1,500 |
75.00 |
1,500 |
55.00 |
- |
- |
- |
| 3-Way Collar |
Jul 2017 - Dec 2017 |
|
USD |
3,000 |
54.33 |
3,000 |
65.58 |
3,000 |
45.00 |
- |
- |
- |
| Put |
Jul 2017 - Sep 2017 |
|
USD |
3,000 |
42.50 |
- |
- |
- |
- |
- |
- |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| North American Gas |
Period |
Exercise date(1) |
Currency |
Bought Put Volume (mmbtu/d) |
Weighted Average Bought Put Price / mmbtu |
Sold Call Volume (mmbtu/d) |
Weighted Average Sold Call Price / mmbtu |
Sold Put Volume (mmbtu/d) |
Weighted Average
Sold Put
Price / mmbtu |
Swap Volume (mmbtu/d) |
Weighted Average Swap Price / mmbtu |
Additional Swap Volume (mmbtu/d)(2) |
| AECO |
|
|
|
|
|
|
|
|
|
|
|
|
| Collar |
Nov 2016 - Oct 2017 |
|
CAD |
7,109 |
2.18 |
9,478 |
2.86 |
- |
- |
- |
- |
- |
| Collar |
Nov 2016 - Dec 2017 |
|
CAD |
9,478 |
2.33 |
9,478 |
3.02 |
- |
- |
- |
- |
- |
| Collar |
Jan 2017 - Dec 2017 |
|
CAD |
4,739 |
2.37 |
4,739 |
3.25 |
- |
- |
- |
- |
- |
| Collar |
Nov 2017 - Dec 2017 |
|
CAD |
4,739 |
2.95 |
4,739 |
3.38 |
- |
- |
- |
- |
- |
| Swap |
Nov 2016 - Dec 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
2,370 |
2.99 |
- |
| Swap |
Jan 2017 - Dec 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
7,109 |
2.94 |
- |
| Swap |
Apr 2017 - Oct 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
7,109 |
3.01 |
- |
| Swap |
Jun 2017 - Oct 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
4,739 |
2.91 |
- |
| Swap |
Jul 2017 - Sep 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
4,739 |
3.17 |
- |
| Swap |
Nov 2017 - Dec 2017 |
|
CAD |
- |
- |
- |
- |
- |
- |
7,109 |
3.35 |
- |
| Swap |
Jan 2018 - Dec 2018 |
|
CAD |
- |
- |
- |
- |
- |
- |
9,478 |
2.80 |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| AECO Basis (AECO less NYMEX HH) |
|
|
|
|
|
|
|
|
|
|
|
| Swap |
Jan 2017 - Dec 2017 |
|
USD |
- |
- |
- |
- |
- |
- |
5,000 |
(0.75) |
- |
| Swap |
Oct 2017 - Dec 2018 |
|
USD |
- |
- |
- |
- |
- |
- |
10,000 |
(1.03) |
- |
| Swap |
Jan 2018 - Dec 2018 |
|
USD |
- |
- |
- |
- |
- |
- |
20,000 |
(0.95) |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| NYMEX HH |
|
|
|
|
|
|
|
|
|
|
|
|
| 3-Way Collar |
Oct 2017 - Dec 2018 |
|
USD |
10,000 |
3.11 |
10,000 |
3.40 |
10,000 |
2.40 |
- |
- |
- |
| 3-Way Collar |
Jan 2018 - Dec 2018 |
|
USD |
10,000 |
3.06 |
10,000 |
3.40 |
10,000 |
2.40 |
- |
- |
- |
| Swap |
Jan 2017 - Dec 2017 |
|
USD |
- |
- |
- |
- |
- |
- |
5,000 |
3.00 |
- |
| Swap |
Jan 2018 - Dec 2018 |
|
USD |
- |
- |
- |
- |
- |
- |
10,000 |
3.10 |
- |
| Swaption |
Jan 2018 - Dec 2018 |
Oct 31, 2017 |
USD |
- |
- |
- |
- |
- |
- |
5,000 |
3.10 |
- |
| (1) | The sold swaption instrument allows the counterparty, at the specified date, to enter into a swap with Vermilion at the above
detailed terms. |
| (2) | On the last business day of each month, the counterparty has the option to increase the contracted volumes for the following
month. |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
| European Gas |
Period |
Exercise date(1) |
Currency |
Bought Put Volume (mmbtu/d) |
Weighted Average Bought Put Price / mmbtu |
Sold Call Volume (mmbtu/d) |
Weighted Average Sold Call Price / mmbtu |
Sold Put Volume (mmbtu/d) |
Weighted Average
Sold Put
Price / mmbtu |
Swap Volume (mmbtu/d) |
Weighted Average Swap price / mmbtu |
Additional Swap Volume (mmbtu/d) (2) |
| NBP |
|
|
|
|
|
|
|
|
|
|
|
|
| Collar |
Oct 2016 - Sep 2017 |
|
GBP |
5,000 |
3.25 |
10,000 |
4.03 |
- |
- |
- |
- |
- |
| Collar |
Oct 2016 - Dec 2017 |
|
GBP |
5,000 |
3.25 |
10,000 |
4.07 |
- |
- |
- |
- |
- |
| Collar |
Jan 2017 - Dec 2017 |
|
GBP |
5,000 |
3.30 |
7,500 |
3.77 |
- |
- |
- |
- |
- |
| Collar |
Jan 2018 - Dec 2018 |
|
GBP |
2,500 |
3.15 |
2,500 |
3.82 |
- |
- |
- |
- |
- |
| Swap |
Jan 2017 - Dec 2017 |
|
GBP |
- |
- |
- |
- |
- |
- |
2,500 |
4.22 |
2,500 |
| Swap |
Apr 2017 - Mar 2018 |
|
GBP |
- |
- |
- |
- |
- |
- |
5,300 |
4.20 |
- |
| Swap |
Jul 2017 - Dec 2017 |
|
GBP |
- |
- |
- |
- |
- |
- |
2,500 |
3.95 |
- |
| Swap |
Jan 2018 - Dec 2018 |
|
GBP |
- |
- |
- |
- |
- |
- |
2,500 |
4.04 |
5,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| NBP Basis (NBP less NYMEX HH) |
|
|
|
|
|
|
|
|
|
|
| Collar |
Jan 2017 - Dec 2017 |
|
USD |
2,500 |
1.85 |
2,500 |
4.00 |
- |
- |
- |
- |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| TTF |
|
|
|
|
|
|
|
|
|
|
|
|
| 3-Way Collar |
Apr 2017 - Sep 2017 |
|
EUR |
9,827 |
4.18 |
9,827 |
5.06 |
9,827 |
3.08 |
- |
- |
- |
| 3-Way Collar |
Oct 2017 - Dec 2019 |
|
EUR |
7,370 |
4.59 |
7,370 |
5.42 |
7,370 |
2.93 |
- |
- |
- |
| 3-Way Collar |
Jan 2018 - Dec 2018 |
|
EUR |
12,284 |
4.75 |
12,284 |
5.48 |
12,284 |
3.25 |
- |
- |
- |
| 3-Way Collar |
Jan 2018 - Dec 2019 |
|
EUR |
3,685 |
4.74 |
3,685 |
5.52 |
3,685 |
3.13 |
- |
- |
- |
| 3-Way Collar |
Jan 2019 - Dec 2019 |
|
EUR |
7,370 |
5.00 |
7,370 |
5.54 |
7,370 |
3.57 |
- |
- |
- |
| Collar |
Jul 2016 - Mar 2018 |
|
EUR |
2,457 |
5.61 |
4,913 |
6.90 |
- |
- |
- |
- |
- |
| Collar |
Oct 2016 - Dec 2017 |
|
EUR |
2,457 |
5.28 |
2,457 |
6.21 |
- |
- |
- |
- |
- |
| Collar |
Jan 2017 - Dec 2017 |
|
EUR |
9,827 |
5.06 |
22,111 |
6.37 |
- |
- |
- |
- |
- |
| Collar |
Apr 2017 - Sep 2017 |
|
EUR |
2,457 |
3.81 |
4,913 |
4.47 |
- |
- |
- |
- |
- |
| Collar |
Jan 2018 - Dec 2018 |
|
EUR |
4,913 |
4.40 |
4,913 |
5.31 |
- |
- |
- |
- |
- |
| Swap |
Jul 2016 - Jun 2018 |
|
EUR |
- |
- |
- |
- |
- |
- |
2,559 |
5.89 |
- |
| Swap |
Jan 2017 - Dec 2017 |
|
EUR |
- |
- |
- |
- |
- |
- |
2,457 |
5.32 |
2,457 |
| Swap |
Apr 2017 - Jun 2018 |
|
EUR |
- |
- |
- |
- |
- |
- |
4,299 |
4.50 |
- |
| Swap |
Oct 2017 - Dec 2018 |
|
EUR |
- |
- |
- |
- |
- |
- |
17,197 |
4.80 |
- |
| Swap |
Oct 2017 - Dec 2019 |
|
EUR |
- |
- |
- |
- |
- |
- |
7,370 |
4.87 |
- |
| Swap |
Jan 2018 - Dec 2019 |
|
EUR |
- |
- |
- |
- |
- |
- |
1,228 |
5.00 |
- |
| Swap |
Jan 2019 - Dec 2019 |
|
EUR |
- |
- |
- |
- |
- |
- |
2,457 |
4.92 |
- |
| Put Spread |
Apr 2017 - Sep 2017 |
|
EUR |
14,740 |
4.40 |
- |
- |
14,740 |
3.15 |
- |
- |
- |
| Swaption |
Jul 2018 - Dec 2019 |
Oct 31, 2017 |
EUR |
- |
- |
- |
- |
- |
- |
4,913 |
4.98 |
- |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Fuel and Electricity |
Period |
|
Currency |
|
|
|
|
|
|
Swap Volume (unit/d) |
|
Weighted Average Swap
price / unit |
| AESO (mwh) |
|
|
|
|
|
|
|
|
|
|
|
|
| Swap |
Jan 2017 - Dec 2017 |
|
CAD |
|
|
|
|
|
|
65 |
|
33.47 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest Rate |
|
|
|
|
|
|
|
|
|
Notional amount |
|
Rate (%) |
| CDOR SWAP |
Sep 2015 - Sep 2019 |
|
CAD |
|
|
|
|
|
|
100,000,000 |
|
1.00 |
| CDOR SWAP |
Oct 2015 - Oct 2019 |
|
CAD |
|
|
|
|
|
|
100,000,000 |
|
1.10 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cross Currency Interest Rate |
|
|
|
|
Receive Notional amount(USD) |
|
Rate (USD%) |
|
Pay Notional amount(CAD) |
|
Rate (CAD%) |
| Swap (3) |
Jul 2017 |
|
|
|
|
587,615,392 |
|
2.73 |
|
775,800,000 |
|
2.31 |
| (1) | The sold swaption instrument allows the counterparty, at the specified date, to enter into a swap with Vermilion at the above
detailed terms. |
| (2) | On the last business day of each month, the counterparty has the option to increase the contracted volumes for the following
month. |
| (3) | In July 2017, Vermilion repaid $0.6 billion of borrowings on the revolving credit facility bearing interest at CDOR plus applicable
margins and simultaneously borrowed US $0.5 billion on the revolving credit facility bearing interest at LIBOR plus applicable
margins. |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
Supplemental Table 3: Capital
Expenditures and Acquisitions
| |
Three Months Ended |
|
|
Six Months Ended |
| By classification |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Drilling and development |
57,681 |
95,164 |
71,296 |
|
|
152,845 |
134,069 |
| Exploration and evaluation |
1,194 |
725 |
418 |
|
|
1,919 |
418 |
| Capital expenditures |
58,875 |
95,889 |
71,714 |
|
|
154,764 |
134,487 |
| |
|
|
|
|
|
|
|
| Property acquisitions |
993 |
2,620 |
8,550 |
|
|
3,613 |
9,420 |
| Acquisitions |
993 |
2,620 |
8,550 |
|
|
3,613 |
9,420 |
| |
|
|
|
|
|
|
|
| |
Three Months Ended |
|
|
Six Months Ended |
| By category |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Land |
1,103 |
1,445 |
493 |
|
|
2,548 |
1,532 |
| Seismic |
2,028 |
2,011 |
1,323 |
|
|
4,039 |
7,591 |
| Drilling and completion |
19,942 |
55,386 |
36,542 |
|
|
75,328 |
64,395 |
| Production equipment and facilities |
27,146 |
30,176 |
35,612 |
|
|
57,322 |
41,850 |
| Recompletions |
4,071 |
5,501 |
768 |
|
|
9,572 |
4,366 |
| Other |
4,585 |
1,370 |
(3,024) |
|
|
5,955 |
14,753 |
| Capital expenditures |
58,875 |
95,889 |
71,714 |
|
|
154,764 |
134,487 |
| Acquisitions |
993 |
2,620 |
8,550 |
|
|
3,613 |
9,420 |
| Total capital expenditures and acquisitions |
59,868 |
98,509 |
80,264 |
|
|
158,377 |
143,907 |
| |
|
|
|
|
|
|
|
| |
Three Months Ended |
|
|
Six Months Ended |
| Capital expenditures by country |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Canada |
20,599 |
57,457 |
5,619 |
|
|
78,056 |
35,390 |
| France |
16,682 |
20,916 |
12,772 |
|
|
37,598 |
26,235 |
| Netherlands |
5,973 |
1,712 |
8,566 |
|
|
7,685 |
11,562 |
| Germany |
326 |
906 |
592 |
|
|
1,232 |
1,131 |
| Ireland |
(73) |
(804) |
2,172 |
|
|
(877) |
5,248 |
| Australia |
9,158 |
3,438 |
39,939 |
|
|
12,596 |
47,766 |
| United States |
5,155 |
11,539 |
1,636 |
|
|
16,694 |
6,737 |
| Corporate |
1,055 |
725 |
418 |
|
|
1,780 |
418 |
| Total capital expenditures |
58,875 |
95,889 |
71,714 |
|
|
154,764 |
134,487 |
| |
|
|
|
|
|
|
|
| |
Three Months Ended |
|
|
Six Months Ended |
| Acquisitions by country |
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Canada |
935 |
576 |
796 |
|
|
1,511 |
1,551 |
| Netherlands |
(16) |
16 |
- |
|
|
- |
- |
| United States |
49 |
2,013 |
5,432 |
|
|
2,062 |
5,547 |
| Corporate |
25 |
15 |
2,322 |
|
|
40 |
2,322 |
| Total acquisitions |
993 |
2,620 |
8,550 |
|
|
3,613 |
9,420 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
Supplemental Table 4: Production
| |
|
Q2/17 |
Q1/17 |
Q4/16 |
Q3/16 |
Q2/16 |
Q1/16 |
Q4/15 |
Q3/15 |
Q2/15 |
Q1/15 |
Q4/14 |
Q3/14 |
| Canada |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil & condensate (bbls/d) |
9,205 |
7,987 |
7,945 |
8,984 |
9,453 |
10,317 |
10,413 |
11,030 |
11,843 |
12,163 |
12,681 |
12,755 |
| |
NGLs (bbls/d) |
3,745 |
2,670 |
2,444 |
2,448 |
2,687 |
2,633 |
2,710 |
2,678 |
2,094 |
1,706 |
1,444 |
1,005 |
| |
Natural gas (mmcf/d) |
93.68 |
85.74 |
75.12 |
77.62 |
87.44 |
97.16 |
87.90 |
71.94 |
64.66 |
61.78 |
58.36 |
57.07 |
| |
Total (boe/d) |
28,563 |
24,947 |
22,910 |
24,368 |
26,713 |
29,141 |
27,773 |
25,698 |
24,713 |
24,165 |
23,851 |
23,272 |
| |
% of consolidated |
43% |
38% |
38% |
37% |
42% |
44% |
45% |
47% |
48% |
48% |
49% |
47% |
| France |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
11,368 |
10,834 |
11,220 |
11,827 |
12,326 |
12,220 |
12,537 |
12,310 |
12,746 |
11,463 |
11,133 |
11,111 |
| |
Natural gas (mmcf/d) |
- |
0.01 |
0.38 |
0.42 |
0.54 |
0.44 |
1.36 |
1.47 |
1.03 |
- |
- |
- |
| |
Total (boe/d) |
11,368 |
10,836 |
11,283 |
11,897 |
12,416 |
12,293 |
12,763 |
12,555 |
12,917 |
11,463 |
11,133 |
11,111 |
| |
% of consolidated |
17% |
17% |
19% |
19% |
19% |
19% |
21% |
22% |
25% |
23% |
22% |
22% |
| Netherlands |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Condensate (bbls/d) |
104 |
76 |
57 |
86 |
96 |
114 |
110 |
109 |
112 |
63 |
81 |
63 |
| |
Natural gas (mmcf/d) |
31.58 |
39.92 |
41.15 |
47.62 |
49.18 |
53.40 |
56.34 |
53.56 |
32.43 |
36.41 |
31.35 |
38.07 |
| |
Total (boe/d) |
5,368 |
6,729 |
6,915 |
8,023 |
8,293 |
9,015 |
9,500 |
9,035 |
5,517 |
6,132 |
5,306 |
6,407 |
| |
% of consolidated |
8% |
10% |
11% |
13% |
13% |
14% |
16% |
16% |
11% |
12% |
11% |
13% |
| Germany |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
1,047 |
989 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
| |
Natural gas (mmcf/d) |
19.86 |
19.39 |
14.80 |
14.52 |
14.31 |
15.96 |
16.17 |
14.00 |
16.18 |
16.80 |
17.71 |
15.38 |
| |
Total (boe/d) |
4,357 |
4,220 |
2,467 |
2,420 |
2,385 |
2,660 |
2,695 |
2,333 |
2,696 |
2,801 |
2,952 |
2,563 |
| |
% of consolidated |
6% |
7% |
4% |
4% |
4% |
4% |
4% |
4% |
5% |
6% |
6% |
5% |
| Ireland |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Natural gas (mmcf/d) |
63.81 |
64.82 |
62.92 |
59.28 |
47.26 |
33.90 |
0.12 |
- |
- |
- |
- |
- |
| |
Total (boe/d) |
10,634 |
10,803 |
10,486 |
9,879 |
7,877 |
5,650 |
20 |
- |
- |
- |
- |
- |
| |
% of consolidated |
16% |
17% |
17% |
16% |
12% |
9% |
- |
- |
- |
- |
- |
- |
| Australia |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
6,054 |
6,581 |
6,388 |
6,562 |
6,083 |
6,180 |
7,824 |
6,433 |
5,865 |
5,672 |
6,134 |
6,567 |
| |
% of consolidated |
9% |
10% |
10% |
10% |
9% |
9% |
13% |
11% |
11% |
11% |
12% |
13% |
| United States |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
747 |
365 |
362 |
383 |
458 |
368 |
420 |
226 |
123 |
153 |
195 |
- |
| |
NGLs (bbls/d) |
76 |
24 |
23 |
30 |
26 |
39 |
29 |
- |
- |
- |
- |
- |
| |
Natural gas (mmcf/d) |
0.44 |
0.20 |
0.18 |
0.20 |
0.20 |
0.26 |
0.20 |
- |
- |
- |
- |
- |
| |
Total (boe/d) |
896 |
422 |
414 |
447 |
518 |
450 |
483 |
226 |
123 |
153 |
195 |
- |
| |
% of consolidated |
1% |
1% |
1% |
1% |
1% |
1% |
1% |
- |
- |
- |
- |
- |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil, condensate |
|
|
|
|
|
|
|
|
|
|
|
|
| |
& NGLs (bbls/d) |
32,346 |
29,526 |
28,439 |
30,320 |
31,129 |
31,871 |
34,043 |
32,786 |
32,783 |
31,220 |
31,668 |
31,501 |
| |
% of consolidated |
48% |
46% |
47% |
48% |
48% |
49% |
56% |
58% |
63% |
62% |
64% |
63% |
| |
Natural gas (mmcf/d) |
209.36 |
210.07 |
194.54 |
199.65 |
198.93 |
201.11 |
162.09 |
140.97 |
114.29 |
115.00 |
107.42 |
110.52 |
| |
% of consolidated |
52% |
54% |
53% |
52% |
52% |
51% |
44% |
42% |
37% |
38% |
36% |
37% |
| |
Total (boe/d) |
67,240 |
64,537 |
60,863 |
63,596 |
64,285 |
65,389 |
61,058 |
56,280 |
51,831 |
50,386 |
49,571 |
49,920 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
| |
|
YTD 2017 |
2016 |
2015 |
2014 |
2013 |
2012 |
| Canada |
|
|
|
|
|
|
| |
Crude oil & condensate (bbls/d) |
8,599 |
9,171 |
11,357 |
12,491 |
8,387 |
7,659 |
| |
NGLs (bbls/d) |
3,210 |
2,552 |
2,301 |
1,233 |
1,666 |
1,232 |
| |
Natural gas (mmcf/d) |
89.73 |
84.29 |
71.65 |
55.67 |
42.39 |
37.50 |
| |
Total (boe/d) |
26,765 |
25,771 |
25,598 |
23,001 |
17,117 |
15,142 |
| |
% of consolidated |
40% |
40% |
46% |
47% |
41% |
40% |
| France |
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
11,103 |
11,896 |
12,267 |
11,011 |
10,873 |
9,952 |
| |
Natural gas (mmcf/d) |
- |
0.44 |
0.97 |
- |
3.40 |
3.59 |
| |
Total (boe/d) |
11,103 |
11,970 |
12,429 |
11,011 |
11,440 |
10,550 |
| |
% of consolidated |
17% |
19% |
23% |
22% |
28% |
28% |
| Netherlands |
|
|
|
|
|
|
| |
Condensate (bbls/d) |
90 |
88 |
99 |
77 |
64 |
67 |
| |
Natural gas (mmcf/d) |
35.73 |
47.82 |
44.76 |
38.20 |
35.42 |
34.11 |
| |
Total (boe/d) |
6,044 |
8,058 |
7,559 |
6,443 |
5,967 |
5,751 |
| |
% of consolidated |
9% |
13% |
14% |
13% |
15% |
15% |
| Germany |
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
1,018 |
- |
- |
- |
- |
- |
| |
Natural gas (mmcf/d) |
19.63 |
14.90 |
15.78 |
14.99 |
- |
- |
| |
Total (boe/d) |
4,289 |
2,483 |
2,630 |
2,498 |
- |
- |
| |
% of consolidated |
7% |
4% |
5% |
5% |
- |
- |
| Ireland |
|
|
|
|
|
|
| |
Natural gas (mmcf/d) |
64.31 |
50.89 |
0.03 |
- |
- |
- |
| |
Total (boe/d) |
10,718 |
8,482 |
5 |
- |
- |
- |
| |
% of consolidated |
16% |
13% |
- |
- |
- |
- |
| Australia |
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
6,316 |
6,304 |
6,454 |
6,571 |
6,481 |
6,360 |
| |
% of consolidated |
10% |
10% |
12% |
13% |
16% |
17% |
| United States |
|
|
|
|
|
|
| |
Crude oil (bbls/d) |
557 |
393 |
231 |
49 |
- |
- |
| |
NGLs (bbls/d) |
50 |
29 |
7 |
- |
- |
- |
| |
Natural gas (mmcf/d) |
0.32 |
0.21 |
0.05 |
- |
- |
- |
| |
Total (boe/d) |
660 |
457 |
247 |
49 |
- |
- |
| |
% of consolidated |
1% |
1% |
- |
- |
- |
- |
| Consolidated |
|
|
|
|
|
|
| |
Crude oil, condensate & NGLs (bbls/d) |
30,943 |
30,433 |
32,716 |
31,432 |
27,471 |
25,270 |
| |
% of consolidated |
47% |
48% |
60% |
63% |
67% |
67% |
| |
Natural gas (mmcf/d) |
209.71 |
198.55 |
133.24 |
108.85 |
81.21 |
75.20 |
| |
% of consolidated |
53% |
52% |
40% |
37% |
33% |
33% |
| |
Total (boe/d) |
65,895 |
63,526 |
54,922 |
49,573 |
41,005 |
37,803 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
NON-GAAP FINANCIAL MEASURES
This MD&A includes references
to certain financial measures which do not have standardized meanings and may not be comparable to similar measures presented by
other issuers. These financial measures include fund flows from operations, a measure of profit or loss in accordance with IFRS
8 “Operating Segments” (please see SEGMENTED INFORMATION in the NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS) and net debt, a measure of capital in accordance with IAS 1 “Presentation of Financial Statements” (please
see CAPITAL DISCLOSURES in the NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS).
In addition, this MD&A includes
financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-GAAP financial measures
and may not be comparable to similar measures presented by other issuers. These non-GAAP financial measures include:
Capital expenditures: The sum
of drilling and development and exploration and evaluation from the Consolidated Statement of Cash Flows. 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.
Cash dividends per share: Represents
cash dividends declared per share and is a useful measure of the dividends a common shareholder was entitled to during the period.
Covenants: The financial covenants
on our revolving credit facility contain non-GAAP measures. The definitions for these financial covenants are included in FINANCIAL
POSITION REVIEW.
Diluted shares outstanding: The
sum of shares outstanding at the period end plus outstanding awards under the VIP, based on current estimates of future performance
factors and forfeiture rates.
Free cash flow: Represents
fund flows from operations in excess of capital expenditures. We consider free cash flow to be a key measure as it 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.
Fund flows from operations
per basic and diluted share: 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. Fund flows from operations per basic share is calculated by dividing fund flows from operations by the basic weighted average
shares outstanding as defined under IFRS. 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 VIP as determined
using the treasury stock method.
Net dividends: We
define net dividends as dividends declared less proceeds received for the issuance of shares pursuant to the Dividend Reinvestment
Plan. Management monitors net dividends and net dividends as a percentage of fund flows from operations to assess our ability to
pay dividends.
Operating netback: 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. In contrast, fund
flows from operations netback also includes general and administration expense, corporate income taxes and interest. Fund flows
from operations netback is used by management to assess the profitability of our business units and Vermilion as a whole.
Payout: We define payout as net
dividends plus drilling and development costs, exploration and evaluation costs, dispositions, and asset retirement obligations
settled. Management uses payout and payout as a percentage of fund flows from operations (also referred to as the sustainability
ratio) to assess the amount of cash distributed back to shareholders and re-invested in the business for maintaining production
and organic growth.
| Vermilion Energy Inc. | 2017 Second Quarter Report |
The following tables reconcile net dividends,
payout, and diluted shares outstanding from their most directly comparable GAAP measures as presented in our financial statements:
| |
|
Three Months Ended |
|
|
Six Months Ended |
| |
|
Jun 30, |
Mar 31, |
Jun 30, |
|
|
Jun 30, |
Jun 30, |
| ($M) |
2017 |
2017 |
2016 |
|
|
2017 |
2016 |
| Dividends declared |
77,858 |
76,593 |
74,662 |
|
|
154,451 |
147,509 |
| Shares issued for the Dividend Reinvestment Plan |
(29,241) |
(35,506) |
(50,516) |
|
|
(64,747) |
(98,506) |
| Net dividends |
48,617 |
41,087 |
24,146 |
|
|
89,704 |
49,003 |
| Drilling and development |
57,681 |
95,164 |
71,296 |
|
|
152,845 |
134,069 |
| Exploration and evaluation |
1,194 |
725 |
418 |
|
|
1,919 |
418 |
| Asset retirement obligations settled |
2,120 |
2,249 |
2,200 |
|
|
4,369 |
4,224 |
| Payout |
109,612 |
139,225 |
98,060 |
|
|
248,837 |
187,714 |
| |
As at |
| |
Jun 30, |
Mar 31, |
Jun 30, |
| ('000s of shares) |
2017 |
2017 |
2016 |
| Shares outstanding |
120,947 |
119,046 |
116,173 |
| Potential shares issuable pursuant to the VIP |
2,847 |
3,089 |
2,775 |
| Diluted shares outstanding |
123,794 |
122,135 |
118,948 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
| |
|
June 30, |
December 31, |
| |
Note |
|
2017 |
|
2016 |
| ASSETS |
|
|
|
|
|
| Current |
|
|
|
|
|
| Cash and cash equivalents |
|
|
15,724 |
|
62,775 |
| Accounts receivable |
|
|
110,222 |
|
131,719 |
| Crude oil inventory |
|
|
18,659 |
|
14,528 |
| Derivative instruments |
|
|
31,199 |
|
4,336 |
| Prepaid expenses |
|
|
19,433 |
|
12,548 |
| |
|
|
195,237 |
|
225,906 |
| |
|
|
|
|
|
| Derivative instruments |
|
|
9,229 |
|
1,157 |
| Deferred taxes |
|
|
96,326 |
|
152,046 |
| Exploration and evaluation assets |
4 |
|
273,957 |
|
274,830 |
| Capital assets |
3 |
|
3,438,181 |
|
3,433,245 |
| |
|
|
4,012,930 |
|
4,087,184 |
| |
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
| Current |
|
|
|
|
|
| Accounts payable and accrued liabilities |
|
|
172,648 |
|
181,557 |
| Dividends payable |
7 |
|
26,004 |
|
25,426 |
| Derivative instruments |
|
|
4,578 |
|
47,660 |
| Income taxes payable |
|
|
44,538 |
|
36,219 |
| |
|
|
247,768 |
|
290,862 |
| |
|
|
|
|
|
| Derivative instruments |
|
|
2,353 |
|
27,484 |
| Long-term debt |
6 |
|
1,262,235 |
|
1,362,192 |
| Finance lease obligation |
|
|
18,570 |
|
19,628 |
| Asset retirement obligations |
5 |
|
550,403 |
|
525,022 |
| Deferred taxes |
|
|
283,869 |
|
283,533 |
| |
|
|
2,365,198 |
|
2,508,721 |
| |
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| Shareholders’ capital |
7 |
|
2,602,014 |
|
2,452,722 |
| Contributed surplus |
|
|
58,350 |
|
101,788 |
| Accumulated other comprehensive income |
|
|
63,874 |
|
30,339 |
| Deficit |
|
|
(1,076,506) |
|
(1,006,386) |
| |
|
|
1,647,732 |
|
1,578,463 |
| |
|
|
4,012,930 |
|
4,087,184 |
APPROVED BY THE BOARD
| (Signed “Catherine L. Williams”) |
(Signed
“Anthony Marino”) |
| |
|
| Catherine L. Williams, Director |
Anthony Marino,
Director |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND
PER SHARE AMOUNTS, UNAUDITED)
| |
|
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
| Note |
2017 |
|
2016 |
|
2017 |
|
2016 |
| REVENUE |
|
|
|
|
|
|
|
|
|
| Petroleum and natural gas sales |
|
|
271,391 |
|
212,855 |
|
532,992 |
|
390,240 |
| Royalties |
|
|
(17,736) |
|
(12,355) |
|
(33,941) |
|
(26,316) |
| Petroleum and natural gas revenue |
|
|
253,655 |
|
200,500 |
|
499,051 |
|
363,924 |
| |
|
|
|
|
|
|
|
|
|
| EXPENSES |
|
|
|
|
|
|
|
|
|
| Operating |
|
|
63,074 |
|
52,116 |
|
115,195 |
|
107,744 |
| Transportation |
|
|
10,843 |
|
9,860 |
|
20,662 |
|
20,250 |
| Equity based compensation |
9 |
|
13,896 |
|
13,267 |
|
32,634 |
|
34,104 |
| (Gain) loss on derivative instruments |
|
|
(28,625) |
|
50,935 |
|
(106,639) |
|
13,458 |
| Interest expense |
|
|
15,508 |
|
13,647 |
|
30,203 |
|
28,397 |
| General and administration |
|
|
13,167 |
|
15,493 |
|
26,318 |
|
29,070 |
| Foreign exchange (gain) loss |
|
|
(39,597) |
|
1,475 |
|
(37,625) |
|
557 |
| Other income |
|
|
(42) |
|
(42) |
|
(54) |
|
(60) |
| Accretion |
5 |
|
6,748 |
|
6,025 |
|
13,130 |
|
12,134 |
| Depletion and depreciation |
3, 4 |
|
126,269 |
|
131,793 |
|
241,678 |
|
257,591 |
| Impairment |
|
|
- |
|
- |
|
- |
|
14,762 |
| |
|
|
181,241 |
|
294,569 |
|
335,502 |
|
518,007 |
| EARNINGS (LOSS) BEFORE INCOME TAXES |
|
|
72,414 |
|
(94,069) |
|
163,549 |
|
(154,083) |
| |
|
|
|
|
|
|
|
|
|
| TAXES |
|
|
|
|
|
|
|
|
|
| Deferred |
|
|
13,635 |
|
(44,081) |
|
47,317 |
|
(21,535) |
| Current |
|
|
10,515 |
|
5,708 |
|
23,428 |
|
8,996 |
| |
|
|
24,150 |
|
(38,373) |
|
70,745 |
|
(12,539) |
| |
|
|
|
|
|
|
|
|
|
| NET EARNINGS (LOSS) |
|
|
48,264 |
|
(55,696) |
|
92,804 |
|
(141,544) |
| |
|
|
|
|
|
|
|
|
|
| OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
| Currency translation adjustments |
|
|
22,357 |
|
(41,526) |
|
33,535 |
|
(68,856) |
| COMPREHENSIVE INCOME (LOSS) |
|
|
70,621 |
|
(97,222) |
|
126,339 |
|
(210,400) |
| |
|
|
|
|
|
|
|
|
|
| NET EARNINGS (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
| Basic |
|
|
0.40 |
|
(0.48) |
|
0.78 |
|
(1.24) |
| Diluted |
|
|
0.39 |
|
(0.48) |
|
0.76 |
|
(1.24) |
| |
|
|
|
|
|
|
|
|
|
| WEIGHTED AVERAGE SHARES OUTSTANDING ('000s) |
|
|
|
|
|
|
|
|
|
| Basic |
|
|
120,514 |
|
115,366 |
|
119,578 |
|
114,046 |
| Diluted |
|
|
122,660 |
|
115,366 |
|
121,488 |
|
114,046 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
| |
|
|
Three Months Ended |
|
Six Months Ended |
| |
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
Note |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| OPERATING |
|
|
|
|
|
|
|
|
|
| Net earnings (loss) |
|
|
48,264 |
|
(55,696) |
|
92,804 |
|
(141,544) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
| Accretion |
5 |
|
6,748 |
|
6,025 |
|
13,130 |
|
12,134 |
| Depletion and depreciation |
3, 4 |
|
126,269 |
|
131,793 |
|
241,678 |
|
257,591 |
| Impairment |
|
|
- |
|
- |
|
- |
|
14,762 |
| Unrealized (gain) loss on derivative instruments |
|
|
(23,283) |
|
72,436 |
|
(103,148) |
|
63,382 |
| Equity based compensation |
|
|
13,896 |
|
13,267 |
|
32,634 |
|
34,104 |
| Unrealized foreign exchange (gain) loss |
|
|
(38,616) |
|
2,804 |
|
(34,098) |
|
1,234 |
| Unrealized other expense |
|
|
210 |
|
20 |
|
240 |
|
107 |
| Deferred taxes |
|
|
13,635 |
|
(44,081) |
|
47,317 |
|
(21,535) |
| Asset retirement obligations settled |
5 |
|
(2,120) |
|
(2,200) |
|
(4,369) |
|
(4,224) |
| Changes in non-cash operating working capital |
|
|
(16,064) |
|
(720) |
|
15,387 |
|
(18,480) |
| Cash flows from operating activities |
|
|
128,939 |
|
123,648 |
|
301,575 |
|
197,531 |
| |
|
|
|
|
|
|
|
|
|
| INVESTING |
|
|
|
|
|
|
|
|
|
| Drilling and development |
3 |
|
(57,681) |
|
(71,296) |
|
(152,845) |
|
(134,069) |
| Exploration and evaluation |
4 |
|
(1,194) |
|
(418) |
|
(1,919) |
|
(418) |
| Property acquisitions |
3, 4 |
|
(993) |
|
(8,550) |
|
(3,613) |
|
(9,420) |
| Changes in non-cash investing working capital |
|
|
(12,039) |
|
1,477 |
|
(4,845) |
|
(2,610) |
| Cash flows used in investing activities |
|
|
(71,907) |
|
(78,787) |
|
(163,222) |
|
(146,517) |
| |
|
|
|
|
|
|
|
|
|
| FINANCING |
|
|
|
|
|
|
|
|
|
| Borrowings (repayments) on the revolving credit facility |
6 |
|
5,269 |
|
(77,893) |
|
(488,759) |
|
191,667 |
| Issuance (repayment) of senior unsecured notes |
6 |
|
- |
|
- |
|
391,906 |
|
(225,000) |
| Decrease in finance lease obligation |
|
|
(1,150) |
|
(998) |
|
(2,381) |
|
(1,893) |
| Cash dividends |
|
|
(48,206) |
|
(23,562) |
|
(89,126) |
|
(48,104) |
| Cash flows used in financing activities |
|
|
(44,087) |
|
(102,453) |
|
(188,360) |
|
(83,330) |
| Foreign exchange gain (loss) on cash held in foreign currencies |
|
|
1,631 |
|
(459) |
|
2,956 |
|
(4,165) |
| |
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
|
14,576 |
|
(58,051) |
|
(47,051) |
|
(36,481) |
| Cash and cash equivalents, beginning of period |
|
|
1,148 |
|
63,246 |
|
62,775 |
|
41,676 |
| Cash and cash equivalents, end of period |
|
|
15,724 |
|
5,195 |
|
15,724 |
|
5,195 |
| |
|
|
|
|
|
|
|
|
|
| Supplementary information for cash flows from operating activities |
|
|
|
|
|
|
|
|
|
| Interest paid |
|
|
10,843 |
|
19,414 |
|
23,177 |
|
40,725 |
| Income taxes paid (refunded) |
|
|
10,101 |
|
(7,869) |
|
15,109 |
|
(5,479) |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
| |
|
|
Six Months Ended |
| |
|
|
June 30, |
|
June 30, |
| |
|
|
2017 |
|
2016 |
| SHAREHOLDERS' CAPITAL |
|
|
|
|
| |
Balance, beginning of period |
|
2,452,722 |
|
2,181,089 |
| |
Shares issued for the Dividend Reinvestment Plan |
|
64,747 |
|
98,506 |
| |
Vesting of equity based awards |
|
69,675 |
|
67,146 |
| |
Equity based compensation |
|
6,397 |
|
5,328 |
| |
Share-settled dividends on vested equity based awards |
|
8,473 |
|
3,242 |
| |
Balance, end of period |
|
2,602,014 |
|
2,355,311 |
| CONTRIBUTED SURPLUS |
|
|
|
|
| |
Balance, beginning of period |
|
101,788 |
|
107,946 |
| |
Equity based compensation |
|
26,237 |
|
28,776 |
| |
Vesting of equity based awards |
|
(69,675) |
|
(67,146) |
| |
Balance, end of period |
|
58,350 |
|
69,576 |
| ACCUMULATED OTHER COMPREHENSIVE INCOME |
|
|
|
|
| |
Balance, beginning of period |
|
30,339 |
|
113,647 |
| |
Currency translation adjustments |
|
33,535 |
|
(68,856) |
| |
Balance, end of period |
|
63,874 |
|
44,791 |
| DEFICIT |
|
|
|
|
| |
Balance, beginning of period |
|
(1,006,386) |
|
(544,023) |
| |
Net earnings (loss) |
|
92,804 |
|
(141,544) |
| |
Dividends declared |
|
(154,451) |
|
(147,509) |
| |
Share-settled dividends on vested equity based awards |
|
(8,473) |
|
(3,242) |
| |
Balance, end of period |
|
(1,076,506) |
|
(836,318) |
| |
|
|
|
|
|
| TOTAL SHAREHOLDERS' EQUITY |
|
1,647,732 |
|
1,633,360 |
Please refer to Financial Statement
Note 7 (Shareholders’ Capital) and Note 9 (Equity Based Compensation) for additional information.
| Vermilion Energy Inc. | 2017 Second Quarter Report |
notes
to the CONDENSED Consolidated INTERIM Financial Statements
For
the three and six months ended June 30, 2017 and 2016
(Tabular
amounts in thousands of Canadian dollars, except share and per share amounts, UNAUDITED)
1. BASIS OF PRESENTATION
Vermilion Energy Inc. (the “Company”
or “Vermilion”) is a corporation governed by the laws of the Province of Alberta and is actively engaged in the business
of crude oil and natural gas exploration, development, acquisition and production.
These condensed consolidated interim
financial statements are in compliance with International Accounting Standard (“IAS”) 34, “Interim financial
reporting” and have been prepared using the same accounting policies and methods of computation as Vermilion’s consolidated
financial statements for the year ended December 31, 2016.
These condensed consolidated interim
financial statements should be read in conjunction with Vermilion’s consolidated financial statements for the year ended
December 31, 2016, which are contained within Vermilion’s Annual Report for the year ended December 31, 2016 and are available
on SEDAR at www.sedar.com or on Vermilion’s website at www.vermilionenergy.com.
These condensed consolidated interim
financial statements were approved and authorized for issuance by the Board of Directors of Vermilion on July 25, 2017.
2. SEGMENTED INFORMATION
Vermilion’s chief operating
decision maker regularly reviews fund flows from operations generated by each of Vermilion’s operating segments. Fund flows
from operations is a measure of profit or loss that provides the chief operating decision maker with the ability to assess the
operating segments’ profitability and, correspondingly, the ability of each operating segment to fund its share of dividends,
asset retirement obligations, and capital investments.
| |
Three Months Ended June 30, 2017 |
| ($M) |
Canada |
|
France |
|
Netherlands |
|
Germany |
|
Ireland |
|
Australia |
|
United States |
|
Corporate |
|
Total |
| Drilling and development |
20,599 |
|
16,543 |
|
5,973 |
|
326 |
|
(73) |
|
9,158 |
|
5,155 |
|
- |
|
57,681 |
| Exploration and evaluation |
- |
|
139 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,055 |
|
1,194 |
| Oil and gas sales to external customers |
83,643 |
|
63,615 |
|
19,126 |
|
16,167 |
|
36,671 |
|
48,061 |
|
4,108 |
|
- |
|
271,391 |
| Royalties |
(8,805) |
|
(6,247) |
|
(296) |
|
(1,228) |
|
- |
|
- |
|
(1,160) |
|
- |
|
(17,736) |
| Revenue from external customers |
74,838 |
|
57,368 |
|
18,830 |
|
14,939 |
|
36,671 |
|
48,061 |
|
2,948 |
|
- |
|
253,655 |
| Transportation |
(3,944) |
|
(3,686) |
|
- |
|
(1,955) |
|
(1,258) |
|
- |
|
- |
|
- |
|
(10,843) |
| Operating |
(19,347) |
|
(12,153) |
|
(4,892) |
|
(5,753) |
|
(4,903) |
|
(15,639) |
|
(387) |
|
- |
|
(63,074) |
| General and administration |
(3,127) |
|
(3,713) |
|
(560) |
|
(2,099) |
|
(695) |
|
(896) |
|
(1,127) |
|
(950) |
|
(13,167) |
| PRRT |
- |
|
- |
|
- |
|
- |
|
- |
|
(6,468) |
|
- |
|
- |
|
(6,468) |
| Corporate income taxes |
- |
|
(1,830) |
|
(754) |
|
- |
|
- |
|
(1,192) |
|
- |
|
(271) |
|
(4,047) |
| Interest expense |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(15,508) |
|
(15,508) |
| Realized gain on derivative instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
5,342 |
|
5,342 |
| Realized foreign exchange gain |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
981 |
|
981 |
| Realized other income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
252 |
|
252 |
| Fund flows from operations |
48,420 |
|
35,986 |
|
12,624 |
|
5,132 |
|
29,815 |
|
23,866 |
|
1,434 |
|
(10,154) |
|
147,123 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
| |
Three Months Ended June 30, 2016 |
| ($M) |
Canada |
|
France |
|
Netherlands |
|
Germany |
|
Ireland |
|
Australia |
|
United States |
|
Corporate |
|
Total |
| Drilling and development |
5,619 |
|
12,772 |
|
8,566 |
|
592 |
|
2,172 |
|
39,939 |
|
1,636 |
|
- |
|
71,296 |
| Exploration and evaluation |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
418 |
|
418 |
| Oil and gas sales to external customers |
61,731 |
|
61,591 |
|
23,973 |
|
6,280 |
|
23,360 |
|
33,713 |
|
2,207 |
|
- |
|
212,855 |
| Royalties |
(3,770) |
|
(6,564) |
|
(396) |
|
(964) |
|
- |
|
- |
|
(661) |
|
- |
|
(12,355) |
| Revenue from external customers |
57,961 |
|
55,027 |
|
23,577 |
|
5,316 |
|
23,360 |
|
33,713 |
|
1,546 |
|
- |
|
200,500 |
| Transportation |
(3,759) |
|
(3,476) |
|
- |
|
(1,051) |
|
(1,574) |
|
- |
|
- |
|
- |
|
(9,860) |
| Operating |
(16,460) |
|
(11,265) |
|
(4,306) |
|
(2,506) |
|
(5,177) |
|
(12,100) |
|
(302) |
|
- |
|
(52,116) |
| General and administration |
(4,305) |
|
(4,734) |
|
(1,223) |
|
(2,474) |
|
(1,106) |
|
(1,788) |
|
(697) |
|
834 |
|
(15,493) |
| PRRT |
- |
|
- |
|
- |
|
- |
|
- |
|
(144) |
|
- |
|
- |
|
(144) |
| Corporate income taxes |
- |
|
(921) |
|
(3,260) |
|
- |
|
- |
|
(1,126) |
|
- |
|
(257) |
|
(5,564) |
| Interest expense |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(13,647) |
|
(13,647) |
| Realized gain on derivative instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
21,501 |
|
21,501 |
| Realized foreign exchange gain |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,329 |
|
1,329 |
| Realized other income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
62 |
|
62 |
| Fund flows from operations |
33,437 |
|
34,631 |
|
14,788 |
|
(715) |
|
15,503 |
|
18,555 |
|
547 |
|
9,822 |
|
126,568 |
| |
Six Months Ended June 30, 2017 |
| ($M) |
Canada |
|
France |
|
Netherlands |
|
Germany |
|
Ireland |
|
Australia |
|
United States |
|
Corporate |
|
Total |
| Total assets |
1,532,263 |
|
830,551 |
|
203,918 |
|
294,665 |
|
707,000 |
|
261,176 |
|
77,824 |
|
105,533 |
|
4,012,930 |
| Drilling and development |
78,056 |
|
37,459 |
|
7,685 |
|
1,232 |
|
(877) |
|
12,596 |
|
16,694 |
|
- |
|
152,845 |
| Exploration and evaluation |
- |
|
139 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,780 |
|
1,919 |
| Oil and gas sales to external customers |
159,143 |
|
123,225 |
|
45,888 |
|
34,135 |
|
81,319 |
|
83,048 |
|
6,234 |
|
- |
|
532,992 |
| Royalties |
(17,304) |
|
(11,567) |
|
(715) |
|
(2,596) |
|
- |
|
- |
|
(1,759) |
|
- |
|
(33,941) |
| Revenue from external customers |
141,839 |
|
111,658 |
|
45,173 |
|
31,539 |
|
81,319 |
|
83,048 |
|
4,475 |
|
- |
|
499,051 |
| Transportation |
(8,047) |
|
(6,718) |
|
- |
|
(3,440) |
|
(2,457) |
|
- |
|
- |
|
- |
|
(20,662) |
| Operating |
(36,017) |
|
(23,522) |
|
(9,733) |
|
(10,674) |
|
(8,902) |
|
(25,675) |
|
(672) |
|
- |
|
(115,195) |
| General and administration |
(4,825) |
|
(6,783) |
|
(1,156) |
|
(3,979) |
|
(1,133) |
|
(3,326) |
|
(2,132) |
|
(2,984) |
|
(26,318) |
| PRRT |
- |
|
- |
|
- |
|
- |
|
- |
|
(11,902) |
|
- |
|
- |
|
(11,902) |
| Corporate income taxes |
- |
|
(6,812) |
|
(1,661) |
|
- |
|
- |
|
(2,588) |
|
- |
|
(465) |
|
(11,526) |
| Interest expense |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(30,203) |
|
(30,203) |
| Realized gain on derivative instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,491 |
|
3,491 |
| Realized foreign exchange gain |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,527 |
|
3,527 |
| Realized other income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
294 |
|
294 |
| Fund flows from operations |
92,950 |
|
67,823 |
|
32,623 |
|
13,446 |
|
68,827 |
|
39,557 |
|
1,671 |
|
(26,340) |
|
290,557 |
| |
Six Months Ended June 30, 2016 |
| ($M) |
Canada |
|
France |
|
Netherlands |
|
Germany |
|
Ireland |
|
Australia |
|
United States |
|
Corporate |
|
Total |
| Total assets |
1,542,342 |
|
811,724 |
|
180,403 |
|
152,627 |
|
809,690 |
|
263,723 |
|
52,651 |
|
131,625 |
|
3,944,785 |
| Drilling and development |
35,390 |
|
26,235 |
|
11,562 |
|
1,131 |
|
5,248 |
|
47,766 |
|
6,737 |
|
- |
|
134,069 |
| Exploration and evaluation |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
418 |
|
418 |
| Oil and gas sales to external customers |
117,841 |
|
109,716 |
|
51,259 |
|
13,972 |
|
40,364 |
|
53,648 |
|
3,440 |
|
- |
|
390,240 |
| Royalties |
(9,268) |
|
(13,330) |
|
(856) |
|
(1,831) |
|
- |
|
- |
|
(1,031) |
|
- |
|
(26,316) |
| Revenue from external customers |
108,573 |
|
96,386 |
|
50,403 |
|
12,141 |
|
40,364 |
|
53,648 |
|
2,409 |
|
- |
|
363,924 |
| Transportation |
(7,910) |
|
(7,189) |
|
- |
|
(1,938) |
|
(3,213) |
|
- |
|
- |
|
- |
|
(20,250) |
| Operating |
(37,803) |
|
(25,585) |
|
(10,282) |
|
(5,099) |
|
(8,803) |
|
(19,591) |
|
(581) |
|
- |
|
(107,744) |
| General and administration |
(6,781) |
|
(9,410) |
|
(1,996) |
|
(4,902) |
|
(2,294) |
|
(3,113) |
|
(1,829) |
|
1,255 |
|
(29,070) |
| PRRT |
- |
|
- |
|
- |
|
- |
|
- |
|
(272) |
|
- |
|
- |
|
(272) |
| Corporate income taxes |
- |
|
(955) |
|
(5,460) |
|
- |
|
- |
|
(1,903) |
|
- |
|
(406) |
|
(8,724) |
| Interest expense |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(28,397) |
|
(28,397) |
| Realized gain on derivative instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
49,924 |
|
49,924 |
| Realized foreign exchange gain |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
677 |
|
677 |
| Realized other income |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
167 |
|
167 |
| Fund flows from operations |
56,079 |
|
53,247 |
|
32,665 |
|
202 |
|
26,054 |
|
28,769 |
|
(1) |
|
23,220 |
|
220,235 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
Reconciliation of fund flows from operations to net
earnings (loss)
| |
Three Months Ended |
|
Six Months Ended |
| ($M) |
June 30, 2017 |
|
June 30, 2016 |
|
June 30, 2017 |
|
June 30, 2016 |
| Fund flows from operations |
147,123 |
|
126,568 |
|
290,557 |
|
220,235 |
| Accretion |
(6,748) |
|
(6,025) |
|
(13,130) |
|
(12,134) |
| Depletion and depreciation |
(126,269) |
|
(131,793) |
|
(241,678) |
|
(257,591) |
| Impairment |
- |
|
- |
|
- |
|
(14,762) |
| Unrealized gain (loss) on derivative instruments |
23,283 |
|
(72,436) |
|
103,148 |
|
(63,382) |
| Equity based compensation |
(13,896) |
|
(13,267) |
|
(32,634) |
|
(34,104) |
| Unrealized foreign exchange gain (loss) |
38,616 |
|
(2,804) |
|
34,098 |
|
(1,234) |
| Unrealized other expense |
(210) |
|
(20) |
|
(240) |
|
(107) |
| Deferred taxes |
(13,635) |
|
44,081 |
|
(47,317) |
|
21,535 |
| Net earnings (loss) |
48,264 |
|
(55,696) |
|
92,804 |
|
(141,544) |
3. CAPITAL ASSETS
The following table reconciles the change in Vermilion's
capital assets:
| ($M) |
2017 |
| Balance at January 1 |
3,433,245 |
| Additions |
152,845 |
| Property acquisitions |
3,573 |
| Changes in asset retirement obligations |
(1,598) |
| Depletion and depreciation |
(237,869) |
| Foreign exchange |
87,985 |
| Balance at June 30 |
3,438,181 |
4. EXPLORATION AND EVALUATION ASSETS
The following table reconciles the change in Vermilion's exploration
and evaluation assets:
| ($M) |
2017 |
| Balance January 1 |
274,830 |
| Additions |
1,919 |
| Property acquisitions |
40 |
| Changes in asset retirement obligations |
4 |
| Depreciation |
(4,826) |
| Foreign exchange |
1,990 |
| Balance June 30 |
273,957 |
5. ASSET RETIREMENT OBLIGATIONS
The following table reconciles
the change in Vermilion’s asset retirement obligations:
| ($M) |
2017 |
| Balance at January 1 |
525,022 |
| Additional obligations recognized |
1,151 |
| Changes in estimates |
(112) |
| Obligations settled |
(4,369) |
| Accretion |
13,130 |
| Changes in discount rates |
(2,633) |
| Foreign exchange |
18,214 |
| Balance at June 30 |
550,403 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
6. LONG-TERM DEBT
The
following table summarizes Vermilion’s outstanding long-term debt:
| |
As at |
| ($M) |
June 30, 2017 |
|
Dec 31, 2016 |
| Revolving credit facility |
879,169 |
|
1,362,192 |
| Senior unsecured notes |
383,066 |
|
- |
| Long-term debt |
1,262,235 |
|
1,362,192 |
The fair value of the revolving
credit facility is equal to its carrying value due to the use of short-term borrowing instruments at market rates of interest.
The fair value of the senior unsecured notes as at June 30, 2017 is $386.7 million.
The following table reconciles
the change in Vermilion’s long-term debt:
| ($M) |
2017 |
| Balance at January 1 |
1,362,192 |
| Repayments on the revolving credit facility |
(488,759) |
| Issuance of senior unsecured notes |
391,906 |
| Amortization of transaction costs and prepaid interest |
624 |
| Foreign exchange |
(3,728) |
| Balance at June 30 |
1,262,235 |
Revolving Credit Facility
At June 30, 2017, Vermilion had
in place a bank revolving credit facility maturing May 31, 2021 with the following terms:
| |
As at |
| |
June 30, |
|
Dec 31, |
| ($M) |
2017 |
|
2016 |
| Total facility amount |
1,400,000 |
|
2,000,000 |
| Amount drawn |
(879,169) |
|
(1,362,192) |
| Letters of credit outstanding |
(4,500) |
|
(20,100) |
| Unutilized capacity |
516,331 |
|
617,708 |
The facility is extendable from
time to time at the option of the lenders and upon notice from Vermilion. If no extension is granted by the lenders, the amounts
owing pursuant to the facility are due at the maturity date. The facility is secured by various fixed and floating charges against
the subsidiaries of Vermilion. The facility bears interest at a rate applicable to demand loans plus applicable margins. As at
June 30, 2017, a 1% increase in the average Canadian prime interest rate would decrease comprehensive income before tax by $4.5
million (and vice versa).
In April 2017, as a result of
proceeds from the issuance of the senior unsecured notes and projected liquidity requirements, Vermilion elected to reduce the
total facility amount from $2.0 billion to $1.4 billion.
As at June 30, 2017, the revolving
credit facility was subject to the following financial covenants:
| |
|
|
As at |
| |
|
|
June 30, |
|
Dec 31, |
| Financial covenant |
Limit |
|
2017 |
|
2016 |
| Consolidated total debt to consolidated EBITDA |
4.0 |
|
1.91 |
|
2.36 |
| Consolidated total senior debt to consolidated EBITDA |
3.5 |
|
1.30 |
|
2.32 |
| Consolidated total senior debt to total capitalization |
55% |
|
30% |
|
46% |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
The financial covenants include financial
measures defined within the revolving credit facility agreement that are not defined under International Financial Reporting Standards.
These financial measures are defined by the revolving credit facility agreement as follows:
| • | Consolidated total debt: Includes
all amounts classified as “Long-term debt” and “Finance lease obligation”. |
| • | Consolidated total senior debt:
Defined as consolidated total debt excluding unsecured and subordinated debt. |
| • | Consolidated EBITDA: Defined as
consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items. |
| • | Total capitalization: Includes all
amounts on the balance sheet classified as “Shareholders’ equity” plus consolidated total debt as defined above. |
As
at June 30, 2017 and December 31, 2016, Vermilion was in compliance with the above covenants.
Senior Unsecured Notes
On March 13, 2017, Vermilion
issued US $300.0 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum, to be paid semi-annually
on March 15 and September 15, and mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes rank
equally with existing and future senior indebtedness of the Company.
The senior unsecured notes
were recognized at amortized cost and include the transaction costs directly related to the issuance.
Vermilion may, at its option,
redeem the notes prior to maturity as follows:
| • | Prior to March 15, 2020, Vermilion
may redeem up to 35% of the original principal amount of the senior unsecured notes with the proceeds of certain equity offerings
by the Company at a redemption price of 105.625% of the principal amount plus any accrued and unpaid interest to the applicable
redemption date. |
| • | Prior to March 15, 2020, Vermilion
may redeem some or all of the senior unsecured notes at a price equal to 100% of the principal amount of the senior unsecured notes,
plus an applicable premium and any accrued and unpaid interest. |
| • | On or after March 15, 2020, Vermilion
may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table plus any accrued
and unpaid interest. |
| Year |
Redemption price |
| 2020 |
|
|
104.219% |
| 2021 |
|
|
102.819% |
| 2022 |
|
|
101.406% |
| 2023 and thereafter |
|
|
100.000% |
7. SHAREHOLDERS’ CAPITAL
The following table reconciles
the change in Vermilion’s shareholders’ capital:
| |
Shares |
|
|
| Shareholders’ Capital |
('000s) |
|
Amount ($M) |
| Balance as at January 1 |
118,263 |
|
2,452,722 |
| Shares issued for the Dividend Reinvestment Plan |
1,325 |
|
64,747 |
| Vesting of equity based awards |
1,059 |
|
69,675 |
| Shares issued for equity based compensation |
130 |
|
6,397 |
| Share-settled dividends on vested equity based awards |
170 |
|
8,473 |
| Balance as at June 30 |
120,947 |
|
2,602,014 |
Dividends declared to shareholders
for the six months ended June 30, 2017 were $154.5 million (2016 - $147.5 million).
Subsequent to the end of the period
and prior to the condensed consolidated interim financial statements being authorized for issue, Vermilion declared dividends totalling
$26.1 million or $0.215 per share.
| Vermilion Energy Inc. | 2017 Second Quarter Report |
8. CAPITAL DISCLOSURES
Vermilion defines capital as net
debt (long-term debt plus net working capital) and shareholders’ capital.
In managing capital, Vermilion
reviews whether fund flows from operations is sufficient to fund capital expenditures, dividends, and asset retirement obligations.
The following table calculates
Vermilion’s ratio of net debt to annualized fund flows from operations:
| |
Three Months Ended |
Six Months Ended |
| ($M except as indicated) |
June 30, 2017 |
|
June 30, 2016 |
June 30, 2017 |
|
June 30, 2016 |
| Long-term debt |
1,262,235 |
|
1,349,366 |
1,262,235 |
|
1,349,366 |
| Current liabilities |
247,768 |
|
278,831 |
247,768 |
|
278,831 |
| Current assets |
(195,237) |
|
(229,247) |
(195,237) |
|
(229,247) |
| Net debt |
1,314,766 |
|
1,398,950 |
1,314,766 |
|
1,398,950 |
| |
|
|
|
|
|
|
| Fund flows from operations |
147,123 |
|
126,568 |
290,557 |
|
220,235 |
| Annualized fund flows from operations |
588,492 |
|
506,272 |
581,114 |
|
440,470 |
| |
|
|
|
|
|
|
| Ratio of net debt to annualized fund flows from operations |
2.2 |
|
2.8 |
2.3 |
|
3.2 |
9. EQUITY BASED COMPENSATION
The following table summarizes
the number of awards outstanding under the Vermilion Incentive Plan (“VIP”):
| |
|
| Number of Awards ('000s) |
2017 |
| Opening balance |
1,738 |
| Granted |
524 |
| Vested |
(539) |
| Forfeited |
(27) |
| Closing balance |
1,696 |
| Vermilion Energy Inc. | 2017 Second Quarter Report |
10. FINANCIAL INSTRUMENTS
The following table summarizes
the increase (positive values) or decrease (negative values) to comprehensive income before tax due to a change in the value of
Vermilion’s financial instruments as a result of a change in the relevant market risk variable. This analysis does not attempt
to reflect any interdependencies between the relevant risk variables.
| |
|
| ($M) |
June 30, 2017 |
| Currency risk - Euro to Canadian |
|
| 5% increase in strength of the Canadian dollar against the Euro |
(1,468) |
| 5% decrease in strength of the Canadian dollar against the Euro |
1,468 |
| |
|
|
| Currency risk - US $ to Canadian |
|
| 5% increase in strength of the Canadian dollar against the US $ |
(13,821) |
| 5% decrease in strength of the Canadian dollar against the US $ |
13,821 |
| |
|
|
| Commodity price risk |
|
| US $5.00/bbl increase in crude oil price used to determine the fair value of derivatives |
(16,700) |
| US $5.00/bbl decrease in crude oil price used to determine the fair value of derivatives |
18,636 |
| |
|
|
| € 0.5/GJ increase in European natural gas price used to determine the fair value of derivatives |
(31,202) |
| € 0.5/GJ decrease in European natural gas price used to determine the fair value of derivatives |
37,920 |
| |
|
|
The above table shows the before
tax effect on comprehensive income for a 5% change in the US dollar to Canadian dollar exchange rate based on derivative instruments,
long-term debt, and other financial instruments as at June 30, 2017. A 5% increase in the strength of the Canadian dollar
against the US dollar would result in a $13.8 million decrease to comprehensive income before tax due to the impact of US $0.6
billion notional of cross currency interest rate swaps outstanding as at June 30, 2017 and effective for July 2017.
Subsequent to June 30, 2017, Vermilion
repaid $0.6 billion of borrowings on the revolving credit facility bearing interest at CDOR (Canadian Dollar Offered Rate) plus
applicable margins and simultaneously borrowed US $0.5 billion on the revolving credit facility bearing interest at LIBOR plus
applicable margins. As this transaction occurred subsequent to the balance sheet date, it is not included in the calculations
shown in the above table. If included, a 5% increase in strength of the Canadian dollar against the US dollar as at June 30, 2017
would increase comprehensive income before tax by $18.2 million (and vice versa).
| Vermilion Energy Inc. | 2017 Second Quarter Report |
|
DIRECTORS
Lorenzo Donadeo
1
Calgary, Alberta
Larry J. Macdonald 2, 3, 4, 5
Chairman & CEO, Point Energy Ltd.
Calgary, Alberta
Stephen P. Larke 3, 4
Calgary, Alberta
Loren M. Leiker 6
Houston, Texas
William F. Madison 5, 6
Sugar Land, Texas
Timothy R. Marchant 5, 6
Calgary, Alberta
Anthony Marino
Calgary, Alberta
Robert Michaleski 3, 4
Calgary, Alberta
Sarah E. Raiss 4, 5
Calgary, Alberta
William Roby 5, 6
Katy, Texas
Catherine L. Williams 3, 4
Calgary, Alberta
1 Chairman
of the Board
2 Lead Director
3 Audit
Committee
4 Governance
and Human Resources Committee
5 Health,
Safety and Environment Committee
6 Independent
Reserves Committee
ABBREVIATIONS
$M thousand dollars
$MM million dollars
AECO the daily average
benchmark price for natural gas at the AECO
‘C’ hub in
Alberta
bbl(s) barrel(s)
bbls/d barrels per
day
boe barrel of oil
equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf
of natural gas)
boe/d barrel of
oil equivalent per day
GJ gigajoules
HH Henry
Hub, a reference price paid for natural gas in US dollars at Erath, Louisiana
mbbls thousand barrels
mcf thousand cubic
feet
mmbtu million British
thermal units
mmcf/d million cubic
feet per day
MWh megawatt hour
NBP the reference
price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point.
NGLs natural gas
liquids, which includes butane, propane, and ethane
PRRT Petroleum Resource
Rent Tax, a profit based tax levied on petroleum projects in Australia
TTF the price for
natural gas in the Netherlands at the Title Transfer Facility Virtual Trading Point.
WTI West Texas Intermediate,
the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma
|
OFFICERS AND KEY PERSONNEL
CANADA
Anthony Marino
President & Chief Executive Officer
Curtis W. Hicks
Executive Vice President & Chief Financial Officer
Mona Jasinski
Executive Vice President, People and Culture
Michael Kaluza
Executive Vice President &
Chief Operating Officer
Dion Hatcher
Vice President Canada Business
Unit
Terry Hergott
Vice President Marketing
Daniel Goulet
Director Corporate HSE
Bryce Kremnica
Director Field Operations - Canada
Business Unit
Kyle Preston
Director Investor Relations
Mike Prinz
Director Information Technology
& Information Systems
Jenson Tan
Director Business Development
Robert (Bob) J. Engbloom
Corporate Secretary
UNITED STATES
Daniel G. Anderson
Managing Director - U.S. Business
Unit
Timothy R. Morris
Director U.S. Business Development
- U.S.
Business Unit
EUROPE
Gerard Schut
Vice President European Operations
Darcy Kerwin
Managing Director - France Business
Unit
Scott Seatter
Managing Director - Netherlands
Business Unit
Albrecht Moehring
Managing Director - Germany Business
Unit
Bryan Sralla
Managing Director - Central &
Eastern Europe Business Unit
AUSTRALIA
Bruce D. Lake
Managing Director - Australia
Business Unit |
AUDITORS
Deloitte LLP
Calgary, Alberta
BANKERS
The Toronto-Dominion Bank
Bank of Montreal
Canadian Imperial Bank of Commerce
National Bank of Canada
Royal Bank of Canada
The Bank of Nova Scotia
Alberta Treasury Branches
Bank of America N.A., Canada Branch
BNP Paribas, Canada Branch
Citibank N.A., Canadian Branch - Citibank Canada
HSBC Bank Canada
JPMorgan Chase Bank, N.A., Toronto Branch
La Caisse Centrale Desjardins du Québec
Wells Fargo Bank N.A., Canadian Branch
Barclays Bank PLC
Canadian Western Bank
Goldman Sachs Lending Partners LLC
EVALUATION ENGINEERS
GLJ Petroleum Consultants Ltd.
Calgary, Alberta
LEGAL COUNSEL
Norton Rose Fulbright Canada LLP
Calgary, Alberta
TRANSFER AGENT
Computershare Trust Company of Canada
STOCK EXCHANGE LISTINGS
The Toronto Stock Exchange (“VET”)
The New York Stock Exchange (“VET”)
INVESTOR RELATIONS
Kyle Preston
Director Investor Relations
403-476-8431 TEL
403-476-8100 FAX
1-866-895-8101 IR TOLL FREE
investor_relations@vermilionenergy.com |
54
Exhibit 99.2
FORM
52-109F2
CERTIFICATION OF INTERIM FILINGS
- FULL CERTIFICATE
I,
Anthony Marino, President & Chief Executive Officer, of Vermilion Energy Inc.,
certify
the following:
| 1. | Review: I have
reviewed
the interim financial
report
and interim
MD&A (together,
the “interim
filings”)
of Vermilion Energy Inc. (the “issuer”) for the interim period ended June 30,
2017. |
| 2. | No misrepresentations:
Based
on my knowledge,
having exercised
reasonable
diligence,
the interim filings
do not contain any
untrue statement of a material
fact or omit
to state a material
fact required
to be stated or that is necessary
to make a statement
not misleading
in light of the circumstances
under which it was
made,
with respect
to the period
covered
by the interim filings. |
| 3. | Fair presentation:
Based
on my knowledge,
having exercised
reasonable diligence,
the interim financial
report together
with the other
financial information
included
in the interim
filings fairly
present
in all material
respects
the financial condition,
financial performance
and cash flows
of the issuer, as
of the date of and
for the periods presented
in the interim
filings. |
| 4. | Responsibility:
The issuer’s
other certifying
officer(s)
and I are
responsible for establishing
and maintaining disclosure controls
and procedures
(DC&P)
and internal
control over financial
reporting
(ICFR),
as those terms
are defined
in National
Instrument
52-109 Certification
of Disclosure in Issuers’ Annual
and Interim Filings, for the issuer. |
| 5. | Design:
Subject to
the limitations,
if any,
described
in paragraphs
5.2 and 5.3, the issuer’s
other certifying
officer(s)
and I have,
as at the
end of the period covered
by the interim
filings |
| (a) | designed
DC&P, or caused
it to be designed
under our supervision, to
provide reasonable
assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
| (b) | designed
ICFR, or caused
it to be designed
under our supervision,
to provide reasonable
assurance
regarding the reliability
of financial
reporting and
the preparation
of financial
statements for external
purposes in accordance
with the issuer’s
GAAP. |
| 5.1 | Control
framework:
The control framework
the issuer’s
other certifying
officer(s)
and I used to design the issuer’s
ICFR
is the Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR - material
weakness
relating to design: NA |
| 5.3 | Limitation
on scope of design:
NA |
| 6. | Reporting
changes
in ICFR: The issuer
has disclosed
in its interim
MD&A any
change
in the issuer’s
ICFR that occurred
during the period
beginning
on April 1, 2017 and ended on June 30, 2017 that has materially
affected,
or is reasonably
likely
to materially
affect,
the issuer’s
ICFR. |
Dated: July
26, 2017
(Signed:
“Anthony Marino”)
Anthony
Marino, President & Chief Executive Officer
Exhibit 99.3
FORM
52-109F2
CERTIFICATION OF INTERIM FILINGS
- FULL CERTIFICATE
I,
Curtis Hicks, Executive Vice President and Chief Financial Officer, of Vermilion Energy
Inc., certify
the following:
| 1. | Review: I have
reviewed
the interim financial
report
and interim
MD&A (together,
the “interim
filings”)
of Vermilion Energy Inc. (the “issuer”) for the interim period ended June 30,
2017. |
| 2. | No misrepresentations:
Based
on my knowledge,
having exercised
reasonable
diligence,
the interim filings
do not contain any
untrue statement of a material
fact or omit
to state a material
fact required
to be stated or that is necessary
to make a statement
not misleading
in light of the circumstances
under which it was
made,
with respect
to the period
covered
by the interim filings. |
| 3. | Fair presentation:
Based
on my knowledge,
having exercised
reasonable diligence,
the interim financial
report together
with the other
financial information
included
in the interim
filings fairly
present
in all material
respects
the financial condition,
financial performance
and cash flows
of the issuer, as
of the date of and
for the periods presented
in the interim
filings. |
| 4. | Responsibility:
The issuer’s
other certifying
officer(s)
and I are
responsible for establishing
and maintaining disclosure controls
and procedures
(DC&P)
and internal
control over financial
reporting
(ICFR),
as those terms
are defined
in National
Instrument
52-109 Certification
of Disclosure in Issuers’ Annual
and Interim Filings, for the issuer. |
| 5. | Design:
Subject to
the limitations,
if any,
described
in paragraphs
5.2 and 5.3, the issuer’s
other certifying
officer(s)
and I have,
as at the
end of the period covered
by the interim
filings |
| (a) | designed
DC&P, or caused
it to be designed
under our supervision, to
provide reasonable
assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed
ICFR, or caused
it to be designed
under our supervision,
to provide reasonable
assurance
regarding the reliability
of financial
reporting and
the preparation
of financial
statements for external
purposes in accordance
with the issuer’s
GAAP. |
| 5.1 | Control
framework:
The control framework
the issuer’s
other certifying
officer(s)
and I used to design the issuer’s
ICFR
is the Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR -
material weakness
relating to design: NA |
| 5.3 | Limitation
on scope of design:
NA |
| 6. | Reporting
changes
in ICFR: The issuer
has disclosed
in its interim
MD&A any
change
in the issuer’s
ICFR that occurred
during the period
beginning
on April 1, 2017 and ended on June 30, 2017 that has materially
affected,
or is reasonably
likely
to materially
affect,
the issuer’s
ICFR. |
Dated:
July 26, 2017
(Signed:
“Curtis Hicks”)
Curtis
Hicks, Executive Vice President and Chief Financial Officer
This regulatory filing also includes additional resources:
ex991.pdf
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