Vermilion Energy Inc T.VET

pay attention to the cash flow

[halitosis8]

It's hard to project VET cash flow, but here's what we know.  Their last presentation forecast a 2021 debt reduction of $350 million based on $60 WTI and gas prices TTF $7.54/mmbtu; AECO $2.87/mmbtu;

We have $70+ WTI and AECO is $3.13 and TTF is $12.077 (or higher depending on the settling date).

We've all focussed on the oil side of the leger because the data is easier to find, but they are raking in boatloads of cash with nat gas.

increase of $1 in Dutch gas = $28 million FCF. 
So, we could be looking at $170 million (wti metrics) + $112 million (dutch gas) + the base $350 million, for an annual debt reduction in the neighbourhood of $632 milllion, ie 33% of the debt.

I would welcome a review by one of the old-timers here who knows these numbers better than me.

[Natgasbc2021]

those numbers would be if all production was unhedged I assume?

[halitosis8]

I'm assuming that VET built the hedging into the price sensitivity metrics, Natgasbc.  Otherwise it would be a pretty deceptive presentation.

[Natgasbc2021]

interesting

[Oldnagger]

Unfortunately, on page 14 of the presentation they state that FFO sensitivities are on an unhedged basis.  The biggest effect will be on EURO gas which is still 60-70% hedged for the balance of the year, and 30%  next year Investors really need to spend time poring over these presentations ( as I am increasingly coming to realize myself) Normally I try to look past the hedges in order to

[Oldnagger]

On a positive note, remember that VET's FCF projections are based on forward strip pricing. While logically this is the correct way to do it. We should remember that forward Crude prices are in steep backwardation. I believe that backwardation is overly pessimistic and so I would see a much greater repayment of debt over the coming year . And even more so after that once the hedges are either

[halitosis8]

re the hedge: nice catch--thanks! I'll revisit this later today.  I didn't include NA gas in my numbers, so that's a positive.  the hedge hurts for sure (unless OPEC explodes--then we'll be glad we're hedged).  even with the hedging, they will make a serious dent in that debt this year

[Oldnagger]

With the UAE agreement recently signed, the backwardation should ease significantly , since the Opec+ agreement is now extended til April 2022. !!

[halitosis8]

yes, the OPEC deal is great news because it de-risks the market.  apparently the market hasn't figured that out yet.  oil went down a couple of weeks ago because OPEC failed to reach a deal and today oil went down because OPEC reached a deal. anyway, WTI should hold at $70+ and that is a very comfortable price for VET.

[stockmarket1]

Bingo and that is why VET share price will swiftly move upwards a lot sooner than later. It's inivitable because when it's all said and done.....it's all about earnings and cash flow.  WTI, Brent and N.G have risen much more than we all expected in 2021. Yes, we knew a bounce back would occur after 2020 but I don't think we expected to see above $65 so soon and for as long as

[mnztr]

Depends on how they hedge. If they sell callz hedgeing can actually generate cashflow. They sell calls and puts as well as buying puts. In a fast rising market hedging can be profitable in itself

[rino27]

Add on the $669,383 that they just sold the gas licenses for.