RE:Good Earnings Vermilion Energy Inc. Announces Results for the Year Ended December 31, 2015
Canada NewsWire
CALGARY, Feb. 29, 2016
CALGARY, Feb. 29, 2016 /CNW/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report operating and audited financial results for the year ended December 31, 2015.
HIGHLIGHTS
Vermilion's annual production volumes increased by 11% in 2015 to 54,922 boe/d. This strong production performance was achieved despite a nearly 4,000 boe/d shortfall in anticipated Corrib volumes associated with regulatory delays and a 30% decrease in exploration and development ("E&D") capital spending as compared to the prior year.
Production volumes for Q4 2015 increased by 8% as compared to the prior quarter to a record 61,058 boe/d. Each of Vermilion's business units increased production, with the most significant increases driven by drilling successes in Canada, Australia and the Netherlands.
Fund flows from operations in 2015 was $516.2 million ($4.71/basic share(1)) as compared to $804.9 million ($7.63/basic share) in 2014. Higher production in 2015 partially offset the impact of a 48% decrease in oil prices. Q4 2015 fund flows from operations of $136.4 million ($1.22/basic share) was higher than the $129.4 million ($1.17/basic share) in Q3 2015 as a result of higher production volumes, realized hedging gains and lower taxes, partially offset by lower commodity pricing.
Subsequent to the end of the year, we released a $285 million E&D capital budget for 2016 that represented a decrease in spending of over 40% from 2015 levels and a decrease of nearly 60% from 2014 levels. Since that time, we have further reduced our E&D budget by another $50 million in response to still lower commodity prices. Our new E&D capital budget for 2016 is $235 million, with the flexibility to restore certain projects if commodity prices improve. We still expect to deliver nearly 15% production growth year-over-year with only a modest impact expected in 2016 from this further reduction in capital.
Following the receipt of final regulatory approval, first gas production started at our Corrib project in Ireland on December 30, 2015. Corrib is expected to provide significant high-margin production growth and generate meaningful free cash flow(1) in 2016. To date, production has been in-line with forecasts, with well deliverability better than our expectations. Production levels at Corrib are expected to rise over a period of approximately six months to an estimated peak rate of 58 mmcf/d (9,700 boe/d), net to Vermilion.
Total proved ("1P") reserves increased 6% to 160.7(2) mmboe, while total proved plus probable ("2P") reserves also increased 6% to 260.9(2) mmboe. This represents year-over-year 1P and 2P per share reserves growth of 2% and 1%, respectively.
Finding and Development ("F&D")(3) and Finding, Development and Acquisition ("FD&A")(3) costs, including Future Development Capital ("FDC")(3) for 2015 on a 2P basis decreased 48% to $8.98/boe and 55% to $10.03/boe, respectively. Similarly, our three-year F&D and FD&A, including FDC, on a 2P basis were $14.82/boe and $17.81/boe, respectively.
Recycle ratio(5) (including FDC) was 3.6x during 2015, an increase over 3.2x achieved during 2014, indicating that we were able to not only maintain but improve our high level of investment efficiency in 2015 despite the decline in commodity prices. We increased Proved Developed Producing reserves (net of production) by 25% at an average F&D cost (including FDC) of $10.67/boe generating a recycle ratio (including FDC) of 3.0x.
Our independent GLJ 2015 Resource Assessment(4) indicates low, best, and high estimates for contingent resources in the Development Pending category are 95.1 mmboe, 160.7 mmboe, and 254.7 mmboe, respectively. Approximately 80% of our best estimate contingent resources evaluated reside in the Development Pending category, reflecting the high quality nature of our contingent resource base.
In Q4 2015 we drilled and completed a horizontal sidetrack well at the Wandoo A platform in Australia. The well was successfully brought on production in mid-November. We produced the well through December 31, 2015 at an average rate of approximately 3,900 boe/d.
The Diever-02 exploration well in the Netherlands (45% working interest), drilled in 2014, came on production at the end of October 2015 at a gross rate of 28.5 mmcf/d (4,750 boe/d). Our net incremental production increase from this well is presently limited to approximately 6 mmcf/d (1,000 boe/d) due to current pipeline constraints in the multi-well system that Diever-02 produces into.
We continued to make progress in mitigating the impact of third-party plant capacity and transportation restrictions on our Canadian production volumes. At the end of Q4, approximately 1,600 boe/d remained shut-in, pending capacity availability.
Vermilion was recently awarded two additional exploration licenses in Germany, adding approximately 110,000 net acres to our land position.
We continued to prioritize preserving the strength of our balance sheet through our Profitability Enhancement Program ("PEP") initiative. Associated cost savings related to capital spending, operating expense and G&A expenditures reached nearly $90 million for full-year 2015.
(1) Non-GAAP Financial Measure. Please see the "Non-GAAP Financial Measures" section of Management's Discussion and Analysis.
(2) Estimated proved and proved plus probable reserves attributable to the assets as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ") in a report dated February 8, 2016 with an effective date of December 31, 2015 (the "2015 GLJ Reserves Evaluation")
(3) F&D (finding and development) and FD&A (finding, development and acquisition) costs are used as a measure of capital efficiency and are calculated by dividing the applicable capital costs for the period, including the change in undiscounted future development capital ("FDC"), by the change in the reserves, incorporating revisions and production, for the same period.
(4) Vermilion retained GLJ to conduct an independent resource evaluation dated February 8, 2016 to assess contingent resources across all of the Company's key operating regions with an effective date of December 31, 2015 (the "GLJ 2015 Resource Assessment"). The associated chance of development for each of the low, best, and high estimate for contingent resources in the Development Pending category are 83%, 82%, and 81%, respectively. There is uncertainty that it will be commercially viable to produce any portion of the resources.
(5) Recycle ratio is Operating Netback divided by F&D (including FDC)
ORGANIZATIONAL UPDATE
As announced on November 30, 2015, Mr. Lorenzo Donadeo will be retiring as Chief Executive Officer ("CEO"), effective March 1, 2016, at which time he will become Chair of the Board of Directors. Mr. Anthony Marino, currently President and Chief Operating Officer ("COO"), will assume the role of President and CEO. Mr. Larry Macdonald, the Board of Director's current Chair, will transition to the newly created role of Lead Independent Director.
Concurrent with those changes, Vermilion is pleased to announce the appointments of Mr. Michael Kaluza to the position of Executive Vice President and COO, and Mr. Dion Hatcher to the position of Vice President of our Canadian Business Unit.
Mr. Kaluza joined Vermilion in February 2013 as Director of our Canadian Business Unit, and was promoted to Vice President of our Canadian Business Unit in May 2014. Mr. Kaluza has over 30 years of operations and executive management experience, and has a Bachelor of Science in Petroleum Engineering (Honors) from the Montana College of Mineral, Science and Technology.
Mr. Hatcher joined Vermilion in 2006 and has over 18 years of industry experience focused on operations engineering and project management. He has a Bachelor of Science in Mechanical Engineering (Honors) from Memorial University of Newfoundland.
Conference Call and Audio Webcast Details
Vermilion will discuss these results in a conference call to be held on Monday, February 29, 2016 at 9:00 AM MST (11:00 AM EST). To participate, you may call 1-888-231-8191 (Canada and US Toll Free) or 1-647-427-7450 (International and Toronto Area). The conference call will also be available on replay by calling 1-855-859-2056 using conference ID number 21667130. The replay will be available until midnight mountain time on March 7, 2016.
You may also listen to the audio webcast by clicking https://event.on24.com/r.htm?e=1117164&s=1&k=1F2188A24FF5A3DA8F83BE1F0C213F7B or visit Vermilion's website at www.vermilionenergy.com/ir/eventspresentations.cfm.
HIGHLIGHTS
Three Months Ended Year Ended
($M except as indicated) Dec 31, Sep 30, Dec 31, Dec 31, Dec 31,
Financial 2015 2015 2014 2015 2014
Petroleum and natural gas sales 234,319 245,051 306,073 939,586 1,419,628
Fund flows from operations 136,441 129,435 185,528 516,167 804,865
Fund flows from operations ($/basic share) (1) 1.22 1.17 1.73 4.71 7.63
Fund flows from operations ($/diluted share) (1) 1.21 1.16 1.71 4.65 7.51
Net earnings (loss) (142,080) (83,310) 58,642 (217,302) 269,326
Net earnings (loss) ($/basic share) (1.28) (0.76) 0.55 (1.98) 2.55
Capital expenditures 128,996 93,381 166,243 486,861 687,724
Acquisitions 6,227 22,155 1,652 28,897 601,865
Asset retirement obligations settled 4,921 2,123 6,247 11,369 15,956
Cash dividends ($/share) 0.645 0.645 0.645 2.580 2.580
Dividends declared 71,965 71,244 69,119 283,575 272,732
% of fund flows from operations 53% 55% 37% 55% 34%
Net dividends (1) 25,201 26,654 48,139 128,542 193,302
% of fund flows from operations 18% 21% 26% 25% 24%
Payout (1) 159,118 122,158 220,629 626,772 896,982
% of fund flows from operations 117% 94% 119% 121% 111%
% of fund flows from operations (excluding the Corrib project) (1) 106% 77% 106% 107% 99%
Net debt 1,381,951 1,363,043 1,265,650 1,381,951 1,265,650
Ratio of net debt to annualized fund flows from operations 2.5 2.6 1.7 2.7 1.6
Operational
Production
Crude oil (bbls/d) 28,745 28,164 28,846 28,502 28,879
NGLs (bbls/d) 5,298 4,622 2,822 4,214 2,553
Natural gas (mmcf/d) 162.09 140.97 107.42 133.24 108.85
Total (boe/d) 61,058 56,280 49,571 54,922 49,573
Average realized prices
Crude oil and NGLs ($/bbl) 51.64 56.57 78.64 58.80 100.06
Natural gas ($/mcf) 4.55 5.36 5.90 4.98 6.42
Production mix (% of production)
% priced with reference to WTI 21% 24% 28% 25% 28%
% priced with reference to AECO 24% 22% 20% 22% 18%
% priced with reference to TTF 20% 20% 16% 19% 18%
% priced with reference to Dated Brent 35% 34% 36% 34% 36%
Netbacks ($/boe)
Operating netback 28.44 32.25 45.85 32.09 55.50
Fund flows from operations netback 23.91 24.58 38.67 25.86 44.09
Operating expenses 11.50 10.99 12.48 11.32 12.72
Average reference prices
WTI (US $/bbl) 42.18 46.43 73.15 48.80 93.00
Edmonton Sweet index (US $/bbl) 39.72 43.01 66.79 44.91 85.83
Dated Brent (US $/bbl) 43.69 50.26 76.27 52.46 98.99
AECO ($/mmbtu) 2.46 2.90 3.60 2.69 4.50
TTF ($/mmbtu) 7.28 8.48 9.16 8.23 8.96
Average foreign currency exchange rates
CDN $/US $ 1.34 1.31 1.14 1.28 1.10
CDN $/Euro 1.46 1.46 1.42 1.42 1.47
Share information ('000s)
Shares outstanding - basic 111,991 110,818 107,303 111,991 107,303
Shares outstanding - diluted (1) 115,025 113,643 110,334 115,025 110,334
Weighted average shares outstanding - basic 111,393 110,293 107,102 109,642 105,448
Weighted average shares outstanding - diluted (1) 112,543 111,193 108,646 111,051 107,187
(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.
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