Vermilion Energy Inc T.VET

Alternate Symbol(s): VET

Energy Oil & Gas E&P

Vermilion Energy Inc. is a Canada-based international energy producer. The Company seeks to create value through the acquisition, exploration, development, and optimization of producing assets in North America, Europe, and Australia. Its business model emphasizes free cash flow generation and returning capital to investors when economically warranted, augmented by value-adding acquisitions. The Company’s operations are focused on the exploitation of light oil and liquids-rich natural gas conventional and unconventional resource plays in North America and the exploration and development of conventional natural gas and oil opportunities in Europe and Australia. The Company operates through seven geographical segments: Canada, the United States, France, Netherlands, Germany, Ireland, and Australia. In Canada, the Company is a key player in the highly productive Mannville condensate-rich gas play. It holds a 100% working interest in the Wandoo field, offshore Australia.

TSX:VET - Post by User

Vermilion Energy Inc

Bullboard Posts

Comment by BJohnson1979on Mar 06, 2020 11:18am

190 Views

Post# 30775497

RE:Going Forward

sclarda wrote:
Now that the cut has been made and we know where we stand lets take a look at the situation going forward.

With the reduced dividend which now equals aprox. $ 215 million and capex of $450 they will be spending aprox. $635 million in capex and diividends.

In looking at their presentation which appears to be new at $40 oil they will generate $621 million. So it appear that with the new lowered dividend they are coverd down to aprox. $40 oil. If things get worse and oil tanks even further they could also cut capex from the current $450 million estimate. If they were to cut capex by $90 million they could fund the dividend down to $ 35 oil. If things got really bad and they cut the dividend completely they could survive down to $ 22 oil.

On the other hand if things get back to normal and oil rises they will also be generating a lot of free cashflow for the first time in many years. If oil were to go up and average in the $52.50 range aprox. where it has been for the last several years VET would generate aprox. $840 million in cashflow. After dividend and capex of $ 635 million that would leae aprox. $205 million in free cashflow. At oil prices of $60 they would generate $955 million which would leave them aprox. $280 million in free cashflow after capex and dividends.

So basically we have a company that can sustain the lowered dividend which yields aprox. 11.5% at todays shareprice which with a 20% cut to capex could be funded down to aprox. $35 oil and in a normalized situation will bring in quite a lot of free cashflow for share buybacks, debt reduction, asset purchases etc.

It appears they also have 40% of their oil production hedged for the first quarter which should help for the short term until hopefully things start to settle down.

The cut is a little more than i was thinking but it has made this company a lot stronger in that it can survive virtually any resonable oil price while still paying the dividend. It also gives the company a lot of free cash when oil prices normalize to strengthen itself.

When things settle down hopefully in the months to come and oil prices normalize and the quarterly reports start showing that VET starts to bring in excess cashflow of $50 million every quarter it will give the market confidence that this company i a lot stronger and more sustainable going forward.

The one good thing is that at least they have done what the market has been predicting for a long time and all the uncertainty is now over at least in regards to VET and the dividend.

I added today.