Vermilion Energy Inc T.VET

5% Production Increase based on share buybacks (YTD 2024)

[MyHoneyPot]

8 million shares were bought back in 2024 todate, which effectively means a 5% increase in CF, FCF, Production on a per share. 

Every 3 million shares repurchased, increases the production per share by roughly 2%. (The cost is in the 40 million dollars ball park.)

In Q3 VET spent 40 million dollars in share buybacks. 

In theory when you buy back 2% of the shares every quarter which is effectively what VET did in Q3, you should get a 2 percent rerating of business metrics,  absense of changes in commodity prices meaning you should get 2% better share price, (27 cents roughly, value marker, market driven) 

In Q3 they Also paid off 73 million in debt, which is effectively 47 cents a share. That is the increase in enterprise value as a product of paying down the debt. (47 cents is real debt reduciton per share)

Also you get a 12 cent dividend this quarter. (This is cash in your pocket)

So for a share holder holding VET you effectively got

( 27 cents attributed to share buyback, + 47 cents debt reduction + 12 cents dividend)
In q3  = 86 cents a share returned to share holder this quarter

Effectively with respect to a $13.25 share price, a 6.5% quarter over quarter return. (Anualized 26%) 

In Q4 FCF was 154 million dollars so 40 million in share buybacks is roughly 26% of the FCF.

There is effectively a 2% quarterly compounding impact of share buybacks, and the impact of reduced debt costs, and the steading progress they make on Production. 

It amazing in Q3 the work at Mica, the Croiata production that was increased from 122 boe/day to 1855 boe/day and is now over 2000 boe/day (understated), and the Germany success. 

Really compelling opportunity with a ton of gas (and growing) at the right end of the LNG deliveries. 

IMHO

[Trapped]

I'm confused. In the past you've said buybacks are a complete waste of money. Why is it okay for VET but bad for other names?

[MyHoneyPot]

It is easy they can buy back 40 million million dollars worth of share and increase production per share 2% compounded every quarter. They don't have a bloated float and only 155 million shares. The FFO was 275 million last quarter and ARX FFO was 592 million, and their market is 2 billion and ARX is 15 billion, it a screaming buy, way undervalued. VET has FCF of 154 million Arx had FCF of

[Quintessential1]

Yup every measurement  but share price accreation and ROI but I expect that will change.  Soon With VET buying back in large amounts I expect VET and ARX to meet in the $30 per share range. Hopefully they gobble that 10% NCIB up fairly quickly without the market catching on. If they keep the dividend low, that shouldn't be a problem. Once the share price bounces VET can start

[MyHoneyPot]

Interesting Arc is $25.71 and pays a new 19 cents a share a quarter                   Vet is $14.00 and pays an existing dividend of 12 cents a quarter So for  every $25.71 dollars of Vet stock you own you get, 22 cents in dividends, Vet stock is already 22% higher than ARX dividend. In terms of FFO per share ARC 99 cents per share VET $1.76

[Quintessential1]

The only number that i think ARX leads in is Market Cap Yeah it's too bad that doesn't translate into share price accreation and ROI huh? GLTA

[MyHoneyPot]

Arx stock is amout twice the cost of VET and Vet has also acheived the same debt target.  1: So VET FFO is almost double that of ARX, so with every share Vet buys back they get 4X times the  impact on FFO as ARX does and their share are half the price.  2. So lets talke FCF Vet FCF is greater  than ARX FCF and VET has roughly 1/4 of the shares ARX has, so for every share VET

[Quintessential1]

So why did you buy ARX then? GLTA