VET Q4 2018Excerpts from RBC's assessment:
Our view: Vermilion’s solid finish to 2018 reminded us of its competitive strengths—portfolio depth and diversity—and high margins given its exposure to Brent and European natural gas prices. The company’s Corrib field off-shore Ireland continues to punch above its weight, accounting for about one-third of our 2019 free cash flow outlook (before dividends). We maintain our Outperform recommendation and one-year price target price of $40.
Key points: Strong Finish. Vermilion Energy delivered a strong finish to 2018 amid in-line fourth-quarter production of 101,600 boe/d and robust European natural gas realizations. The company’s limited exposure to Alberta’s wide oil differentials was also evident in its Canadian oil & ngl realization of C$48.70/bbl (a $5.74 premium to Edmonton Par). Vermilion also reaffirmed its 2019 midpoint production guidance of 103,500 boe/d and $530 million capital spending program.
Balance Sheet in Good Shape. Vermilion’s balance sheet remains in good shape, with an average net debt-to-trailing cash flow ratio of 2.1x (vs. our North American intermediate peer group avg. of 2.7x) in 2019 (US$56 WTI) and 1.8x (vs. our peer group avg. of 2.1x) in 2020 (US$64 WTI).
DPS Outlook. The company remains committed to its common dividend and possesses flexibility in its capital program should conditions warrant. Under our base 2019 outlook, Vermilion’s $530 million capital program and $422 million dividend are relatively balanced with its operating cash flow.