Stockwatch Energy courtesy of loonietunes.


"Canadian oil stocks fell with oil prices. Vermilion Energy Inc. (VET) lost 83 cents to $31.69 on 2.91 million shares, despite trying to stir up some good feelings last Friday, when it released its second quarter financials (as discussed on Friday). Following the financials, president Dion Hatcher headed to BNN to hype the results and an accompanying dividend increase.

"The international diversified nature of our business ... generates outsized free cash flow," declared Mr. Hatcher. He noted that while Vermilion gets about two-thirds of its production from Canada, these operations are providing only about one-third of its cash flow. The real cash cow at the moment is Vermilion's international operations, especially in Europe. Geopolitical tensions and lack of sufficient non-Russian supplies are pushing gas prices toward record highs. As nearly one-quarter of Vermilion's output is European gas, Mr. Hatcher said the company is enjoying some "really robust free cash flow."

With that extra cash flow, Vermilion decided to increase its quarterly dividend to eight cents from six cents. The yield remains relatively low, at 1.0 per cent, but Mr. Hatcher said the company wanted to make sure that the dividend is "resilient" even if oil prices retreat as far back as $55 (U.S.) a barrel. He is "open to other options" for rewarding shareholders, and emphasized that he sees share buybacks as a particularly "compelling opportunity." (Since announcing a share buyback program on July 4, Vermilion has spent $35-million repurchasing 1.25 million shares. Interestingly, SEDI also shows that Vermilion has spent about $2.5-million over the same period buying shares of a junior Montney investment, Coelacanth Energy Inc. (CEI: $0.73). It now owns 58.5 million of Coelacanth's 399 million shares.)

As peppy as Vermilion is about its European gas operations, Mr. Hatcher dubbed himself "a proud Canadian" who would love to see Canada play a larger role in the global market, particularly for LNG (liquefied natural gas). "I think there is a real opportunity for Canada to continue to be a leader and provide some of the most responsibly produced, safest, cleanest gas in the world, and I'm fully supportive" of LNG export projects, he said. He did not identify any by name. The Canadian LNG project that is closest to reality is the Shell-backed LNG Canada terminal in Kitimat, B.C., scheduled to open in 2025. (It would focus on exports to Asia, but would still indirectly help Europe by freeing up other global LNG for rerouting to European customers.)"

GLTA