As mentioned yesterday, I reached out to Investor Relations at Vermilion to discuss Euro-NG dynamics. An hour ago, I received a callback from Kyle Preston, our VP Investor Relations. We had 2 areas of discussion:
1. The dividend
2. Opportunities to expand Euro-NG production
1. I prefaced this part of our conversation by reassuring him I was cognizant that he could not selectively disclose anything pertaining to the Q4 announcement next week. So I asked him to take to our CEO, Lorenzo Donadeo, a message from a not insubstantial retail investor, which he agreed to do. I put the following to Kyle:
- "Notwithstanding the Nov. 2021 Corrib acquisition, and our pronouncement of a 2022 year end target of approx. .5x debt to cash flow, I know our financials well enough to be sure we will be debt-free unless there is additional M&A."
- I can tell you that his answer was "yes, that's right."
- I also mentioned that I was a long-time shareholder who has remained loyal through the massive loss of value in the 2018-2020 time period, a time when the rest of the market barreled ahead. As such, I commented that I felt the team had a moral obligation to the foregone $7.20 since the dividend was curtailed. And that while I did not expect this to be rectified entirely next Monday (yes, stating the obvious), I would not be happy if the increases were incremental in nature. Ths was when he indicated he woud pass on my comments.
- Furthermore, I put it to Kyle (politely) that our financial position was radically improved even since Q4. And that the resources we both knew the company had were so substantial the company could afford to move forward in an "all of the above" fashion (those being: rapid debt reduction; significantly increased dividends; and buying shares). While he did not show any ankle (as expected) he did not push back on my contention we had the means to move significantly this Monday (although I must admit, if I were them, I might reserve some moves till the AGM in May). So, I won't be surprised if next Monday's gratification leaves ample room for more pleasant surprises soon.
- I feel obliged to remind readers that all this was me talking and making my priorities known, he only agreed with one thing, that inthe current environment, we could feasibly pay off all debt, including thst incurred to buy 37% of Corrib, by year-end (editors comment....and all the wonderful things that $11/sh. FCF implies!!!)
2. Opportunities to expand Euro-NG production: I asked whether we were looking at ways to increase our production in Central Europe. We specifically discussed Holland (where we have lots of production and more prospects) and Croatia (where we made a discovery 2 years ago, 15-17 mmcf/d, still not in production). His comment with respect to both areas is that it takes such a long time to get permits. He professed the governments are supportive (for example, he told me that the law in Holland gives the government a 40% profit interest, "and they want the money") but it has to go through local, regional and national bureaucracies. He said if it was faster (the approval process), we would drill as many as 6 wells/yr in Holland where it currently takes 18-24 months to obtain one permit. He mentioned that to expedite matters in Croatia, they had bought and relocated a gas plant from Germany but they won't have the permits to install it till year end and don't expect tie-in till 2023. I sardonically suggested now might be a good time to send some emails to senior government ministers requesting they intercede given the obvious geopolitical concerns with gas supplies. Anyhow, I did not come away from this part of our conversations with the warm fuzzies. It appears thst if you wish to dramatically alter your production profile in Europe, you'll have to buy it (this we did not discuss, so this is the editor's musings only).
That's it, but I encourage active discussion with your companies. You'd be surprised how willing they are to respond
Regards,
Naamkat