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Bullboard - Stock Discussion Forum Vermilion Energy Inc T.VET

Alternate Symbol(s):  VET

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... see more

TSX:VET - Post Discussion

Vermilion Energy Inc > How did they lose all their money?
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Post by geemonet on Aug 16, 2021 10:33am

How did they lose all their money?

Seems like they made money from selling oil but then lost it all on derivatives... can some one explain this? Who takes all the profits outta the company?
Comment by Tommy123 on Aug 16, 2021 10:34am
This post has been removed in accordance with Community Policy
Comment by Quintessential1 on Aug 16, 2021 10:45am
Hedging aka the banks. Hedging will cause some losses when commodity prices are rising but but allow for gains when the commidity prices are falling,  In the end it will avergae out. In the meantime that was quite an EPS beat.  If they can increase production like they say they can and there are no more mechanical failures it should be a better Q3. 
Comment by geemonet on Aug 16, 2021 10:52am
I understand how hedging will diminish profits when prices go up... but they blew ALL the FCF on derivatives.... like... did someone hit the wrong button on a keyboard when executing a trade or something? Makes no sense thay they can have almost 100 million in fcf and the debt goes up... like... what the hell? 
Comment by Oldnagger on Aug 16, 2021 11:08am
Most of the hedging provisions are probably against Euro Nat Gas. The price is now about 8 USD per Mmbtu over the stike price and volumes are heavy till 2022 when they lighten up a bit. The hedges were put on when European gas prices were very weak due to Covid and were probably necessary in order to maintain credit lines. This is the reason why all Oil companies want to tell creditors where to go ...more  
Comment by mnztr on Aug 16, 2021 11:49am
With European NG there is probably some fear of the impact of Nord Stream 2. This is a legit fear, but I don't think the Russians are dumb enough to flood the market with cheap gas, they know they can undercut LNG if needed and make very good money, and they also know very will how much domestic production is available. They will price to make money and not cause any economic damage to EU ...more  
Comment by Oldnagger on Aug 16, 2021 10:50am
They did not lose all the money they made in Q2 outside of what has been reported , In fact cash flows were as projected and profits were very high (probably due to a reversal of previous write downs. The increase in debt levels is probably solely due to accounting provisions for future losses on their hedge book (mark tp market) These provisions are very misleading. They will disappear if the ...more  
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