Vermilion Energy Inc T.VET

Free cash flow over 50% in 2022

[clamlinguine]

According to the Feb presentation metrics and page 36 sensitivities and my suspect calculations. Using $150 ttf and $97 oil which is about the current strip. Any new hedging in the interim will have been a mistake, so that's going to be the big question to be answered on Monday. I'd hedge the whole year today, lol.

[The1Wolf1]

They are already 70% hedged for the next two years on Euro gas.  So not as much upside but better than nothing

[mnztr]

That 30% though..WOW!!!

[GregC24]

Latest presentation shows just of 50% in 2022 and less than 30% in 2023 including Corib. Slide 28. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/viewer.html?pdfurl=https%3A%2F%2Fwww.vermilionenergy.com%2Ffiles%2FVermilion_Energy_-_Corporate_Presentation_-_February_2022.pdf&chunk=true

[clamlinguine]

My calculation considers the acknowledged hedging as per the detail on page 36. If the werent hedged in 2022 there'd be another $2 per share fcf by my calculations.

[mnztr]

The impact depends on how they hedge no? If they buy puts, then those may go to zero but they then benefit from the prices. 

[The1Wolf1]

Unfortunately the hedges are swaps  (sold at low fixed pric) and costless three-way collars. Those are not true  hedges as they do not protect on the upside. 

[The1Wolf1]

The sensitivity to NBP/TTF gas is $1 mmbtu increase in gas price results in $16MM increase in CF. If they were unhedged that $1 increase results in $40MM increase in CF

[clamlinguine]

Correct. Here is my calculation for fcf at todays prices for 2022 using page 36. Vet says they make fcf of $1.5 Billion at $82 wti 85 brent and $34 ttf.(the main drivers) Add  $72 CAD ttf- $34 CAD ttf= $38 CAD over baseline  $38 X $16 = $608 million fcf addition $100 US wti - $82 US wti=$18 US over baseline     $18 x $16=   $288 million fcf addition (assume

[Oldnagger]

here is my up to date calc replacing your  numbers with the latest values Vet says they make fcf of $1.5 Billion at $82 wti 85 brent and $34 ttf.(the main drivers) Add  $78 CAD ttf- $34 CAD ttf= $44CAD over baseline  $44 X $16 = $704 million fcf addition $115 US wti - $82 US wti=$33 US over baseline     $33 x $16=   $528 million fcf addition (assume brent also

[clamlinguine]

Thanks for the info! My calculation is an average of todays prices on the futures market for the remaining months of 2022. But yeah, I like the projection for today's price too. Wow! Hope they haven't done any additional hedging yet. (do it now, but not past 2023, prices there on the lowside imo)

[Oldnagger]

Hard to say which numbers are more realistic, since the Crude prices as you state are in severe backwardation and more importantly the Euro gas price has very high volatility. Nevertheless, it strikes me that we will have probably a better fcf than CNQ at one third of the share price. I am also guessing that the reserves value to share price will be equal or better than for CNQ. The reason is a

[Oldnagger]

Updated to current pricing

[delissio]

Thanks Oldnagger for the calculation and the high quality post as always. I will share my thought process, please feel free to correct any calculation errors or wrong assumptions.    After the review of the last presentation, my understanding is the company is  estimating to make 2022 FCF of 1.9B hedged (slide 10), using  the prices from slide 37 (as per their footnotes 1

[Oldnagger]

You are on the right track, the only thing anyone can argue about is the assumptions. Mine is that VET may already have allowed for backwardation for everything for their FCF calculations. The other assumption I make is that their production rates, operating and transportation costs ,royalty rates have been held by VET to remain constant. The costs and royalty rates however will likely rise in

[clamlinguine]

I'd like to thank you officially for your feedback as well. Too bad you can't see who gives limes on this platform. 

[clamlinguine]

Thanks for doing a cleaned up version of what I was doing. I think a mistake you're making is that you're using the unhedged number. I believe that is the wishful projection as if we weren't hedged at some lower prices this year. If we weren't laden with hedges on the eurogas we'd be making an extra 34 million for every dollar over $58 cad. So for this years projections you

[delissio]

Fair points, thank you for your contribution to this topic, inluding your calculations. So by using all hedged numbers we would get: WTI $17 X 10.6M= 180M TFF $6.5 x 13.7M = 89M FCF 1900M+180M+89M = 2.17B Certainly, the commodity prices used in the calculation are relatively very high. Also, I think an important part in the budget estimate is if the company used any backwardation as

[clamlinguine]

Yes, that "backwardation" question occurred to me too. I don't know if they are accounting for that or not but as we move on in the year it is becoming a more relevant qusetion.

[clamlinguine]

Here's what I get for this moment with the new sensitivities. TTF is at 216 ($90 cad) , wti oil is 107 average futures price for the rest of 2022. $90 CAD euro gas- $58 base = $32 x $13.7 FFO per dollar= $438 million over baseline estimate. $107 US wti- $93 US baseline= $14 x $10.6 FFO per dollar=$148 million over baseline estimate $438mill. gas+ 148mill. oil + 1900 mill baseline FCF= $2.486

[Richard795]

You do you convert Dutch TTF and UK Gas to us funds. Right now ttf is 227.2 and UK gas is 501. Thanks

[Oldnagger]

Take the price and divide by 3.41 that will get you to Euros per mmbtu (or kscf of gas) then multiply by exchange rate for Euros ( google Euros to USD ) Currently 1.09

[clamlinguine]

Wow. I had no idea the NBP UK gas had taken off from the Dutch TTF price like that. I thought they were basically tracking together. Honestly, to get the $/mmbtu, I thought dividing by 3 essentially gave the US dollar price, then convert by the CAD exchange rate. Now I'm in doubt. Must reevaluate.  Thanks.

[Oldnagger]

The NBP price is quoted in pence per therm . A therm is 0.1 mmbtu So divide the price by 10 and multiply by the pound to USD rate. Most likely an equivalent price as they both compete for the same LNG cargos and are both supplied by pipe from Norway  The TTF is a larger market and thus more transparent !!

[clamlinguine]

FCF is 42% for 2022 using todays average futures prices for the rest of the year by my rough calculation. 0il $89 so $US-3 x 10.6= -$32 million  euro gas $47 so  $-11 x $13.7= -$151 million Subtract $183 million from projected $1.9 FCF = $1.72 billion /165 shares= $10.42 FCF/share 10.42 fcf/ 24.63 share price=42% fcf at todays metrics.