Reply from IR (on IV) Re: Vermillion Energy, VET and Leucrotta purchase
Here is the reply from IR, did not really expect anything other than the 'party line':
Thank you for your email and support over the years.
Concerning the impact on normalizing the dividend, I can assure you that Management is not trying to find ways to delay the return of capital to shareholders but rather enhance it and ensure that it is sustainable for the long-term. We are focused on paying down debt and even with the announcement of today’s acquisition, we are still on track to achieve our $1.2 billion debt target in the second half of 2022, at which time we will look to increase shareholder returns in the form of an increase to the dividend, share buybacks, special dividends or any combination thereof.
Regarding, the North American Leucrotta acquisition announced today, it is aligned with our focus on a strong balance sheet and positions us for sustainable long-term shareholder returns as it is fully funded with 2022 free cash flow, significantly improves the depth and quality of our drilling inventory and when comparing our anticipated 2022 exit rate to our 2022 budgeted production base, we are adding over 13,000 boe/d of absolute production which represents production per share growth rate of 16%. Another way of looking at this, it is the equivalent of buying back 16% of our shares. Further to this, we acquired this asset for $477 MM or approximately one quarter of FCF in 2022 yet we expect it to deliver over $200 MM per year of FCF for over a decade. As you noted, our team executed significant due diligence and we are excited to integrate our new assets into our portfolio and further enhance our return of capital strategy.
I hope this provides some insight into the long-term value of this acquisition and addresses your concerns. If you have any questions, please feel free to reach out.
Regards,
Phuong