CALGARY, May 8, 2015 /PRNewswire/ - Vermilion Energy Inc. ("Vermilion", "We",
"Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report
operating and unaudited financial results for the three months ended March 31, 2015.
HIGHLIGHTS
-
Achieved average production of 50,386 boe/d during the first quarter of
2015, an increase of 2% as compared to 49,571 boe/d in the prior
quarter, and 8% versus 46,677 boe/d during the first quarter of 2014.
Production increased in Canada, France and the Netherlands from the
previous quarter due to successful drilling, workover and tie-in
activity, more than offsetting mid-stream restrictions in Canada and
modest decreases in production in other business units. We continue to
manage Australian production to maximize proceeds during this period of
lower oil prices.
-
Fund flows from operations ("FFO")(1) for Q1 2015 of $120.8 million ($1.12/basic share) represented a
decrease of 35% quarter-over-quarter and 41% year-over-year. The
decrease in FFO was attributable to lower commodity prices and
inventory builds (due to the timing of crude liftings in France and
Australia), partially offset by lower operating expenses from our
ongoing cost reduction program and a recovery of costs in France.
-
Concluded the successful drilling of a four (4.0 net) well program in
France at our Champotran field in the Paris Basin. Subsequent to Q1
2015, all four wells have been tied-in and are currently producing at a
combined average production rate of approximately 980 bbls/d. This was
our third successive drilling program since 2013, comprising a total of
13 wells at Champotran, with a 100% drilling success rate.
-
Initiated production from our Langezwaag-02 well in the Netherlands at a
facility-limited rate of 4.0 mmcf/d from the Zechstein formation. This
discovery well on the Gorredijk concession was part of our 2014
drilling program. Subsequent to the end of the Q1 2015, we reached
total depth and logged the first well in our 2015 Netherlands drilling
program. Based on electric logs, the Slootdorp-06 well in the province
of North Holland (93% working interest), is a field-extending
discovery, logging 71 metres of gross gas column in the Rotliegend
Sand. Production from the Slootdorp-06 well is expected to commence in
the second half of 2015.
-
Our Corrib project in Ireland has continued to progress as expected.
Project operator Shell E&P Ireland Limited ("SEPIL") is systematically
preparing gas compression and other systems at the Bellanaboy gas
processing terminal for the processing of offshore gas production from
the field. The Irish Environmental Protection Agency issued its
Proposed Determination for the Corrib Industrial Emissions License
("IEL") in April. Based on remaining terminal activities and typical
approval timelines for the final form of the IEL, we estimate that the
most likely date for start-up is approximately mid-year, with a modest
range of outcomes around that estimate. Production at Corrib is
expected to increase over the first few months toward peak production
levels estimated at approximately 58 mmcf/d (approximately 9,700
boe/d), net to Vermilion.
-
Despite a 40% reduction in planned capital spending for 2015 as compared
to 2014, we are maintaining our original production guidance of between
55,000 and 57,000 boe/d. There is also no change to our 2015 capital
spending guidance of $415 million.
-
To further enhance the long-term and sustainable profitability of our
business in the current environment, we are also directing considerable
focus to our Profitability Enhancement Program ("PEP") initiative.
Prior installments of PEP achieved strong results in both the 1998
industry downturn and the financial crisis of 2008-2009. Based on
savings identified to-date, our third installment of PEP will result in
cost reductions estimated at between $50 and $60 million for full-year
2015 in capital spending, operating expense and G&A. This is reflected
in unit operating expense for Q1 2015 that is down 15%
quarter-over-quarter, and down 22% year-over-year.
-
Subsequent to Q1 2015, we negotiated a further expansion and extension
of our existing revolving credit facilities from $1.75 billion to $2
billion. In Q1 2015, we had previously increased our credit facility
from $1.5 billion to $1.75 billion. After the most recent expansion to
our credit facility, we have approximately $820 million of borrowing
capacity available. The facility, which matures in May 2019, is fully
revolving up to the date of maturity and is subject to standard form
covenants. We are, and expect to continue to be, in compliance with
all applicable debt covenants and maintain our current dividend of
$0.215 per share per month ($2.58 per share per year).
-
During Q1 2015, Vermilion was awarded a judgment in the amount of €25
million for the costs incurred as a result of an oil spill at the Ambès
oil terminal in France that occurred in 2007. Vermilion expects to
receive 50% of the judgment in Q2 2015, with the remainder due upon
conclusion of the appeal process. Based on the recent court decision
and the conclusions of the expert engaged by the French court,
Vermilion is highly confident that the award will be upheld.
-
Subsequent to Q1 2015, Vermilion was recognized by the Great Place to
Work® Institute as a Best Workplace in Canada and France for the sixth
consecutive year. Vermilion was also recognized for a second
consecutive year as a Best Workplace in the Netherlands in 2015, after
becoming eligible for ranking in 2014. Vermilion is the only energy
company in the medium sized category to rank on the Best Workplaces
lists in Canada and the Netherlands, and the highest scoring energy
company on the Best Workplaces list in France. These Great Place to
Work awards are a reflection of Vermilion's strong corporate culture
which is a key driver of Vermilion's long-term strong corporate
performance.
-
In addition, Vermilion was recently ranked 15th by Corporate Knights on
the Future 40 Responsible Corporate Leaders in Canada list (the highest
ranking for an oil and gas company, and an increase over the Company's
debut ranking of 32nd last year), as well as being named Top
International Producer of the year by The Explorers and Producers
Association of Canada. This recognition reflects Vermilion's continued
focus on financial results combined with exemplary environmental,
social and governance performance. Strong workplace practices and a
culture that respects both people and communities are key elements in
our success. Please refer to our Sustainability Report at http://sustainability.vermilionenergy.com/ for more information about our environmental and social stewardship.
|
(1)
|
Additional GAAP Financial Measure. Please see the "Additional and
Non-GAAP Financial Measures" section of Management's Discussion and
Analysis.
|
ANNUAL GENERAL MEETING WEBCAST
As Vermilion's Annual General Shareholders Meeting is being held today,
May 8, 2015 at 10:00 AM MST at the Metropolitan Centre, 333 - 4th
Avenue S.W., Calgary, Alberta, there will not be a first quarter
conference call, however, a presentation will be given by Mr. Lorenzo
Donadeo, Chief Executive Officer, concluding the formal business
portion of the meeting.
Please visit http://event.on24.com/r.htm?e=975216&s=1&k=8EF642AF4951C1D3776D76241E30DC52 or Vermilion's website at http://www.vermilionenergy.com/ir/eventspresentations.cfm and click on webcast under the upcoming events to view the webcast
which will commence at approximately 10:15 AM MST.
DISCLAIMER
Certain statements included or incorporated by reference in this
document may constitute forward looking statements or financial
outlooks under applicable securities legislation. Such forward looking
statements or information typically contain statements with words such
as "anticipate", "believe", "expect", "plan", "intend", "estimate",
"propose", or similar words suggesting future outcomes or statements
regarding an outlook. Forward looking statements or information in
this document may include, but are not limited to: capital
expenditures; business strategies and objectives; operational and
financial performance; estimated reserve quantities and the discounted
present value of future net cash flows from such reserves; petroleum
and natural gas sales; future production levels (including the timing
thereof) and rates of average annual production growth; estimated
contingent resources and prospective resources; exploration and
development plans; acquisition and disposition plans and the timing
thereof; operating and other expenses, including the payment and amount
of future dividends; royalty and income tax rates; the timing of
regulatory proceedings and approvals; and the timing of first
commercial natural gas and the estimate of Vermilion's share of the
expected natural gas production from the Corrib field.
Such forward looking statements or information are based on a number of
assumptions all or any of which may prove to be incorrect. In addition
to any other assumptions identified in this document, assumptions have
been made regarding, among other things: the ability of Vermilion to
obtain equipment, services and supplies in a timely manner to carry out
its activities in Canada and internationally; the ability of Vermilion
to market crude oil, natural gas liquids and natural gas successfully
to current and new customers; the timing and costs of pipeline and
storage facility construction and expansion and the ability to secure
adequate product transportation; the timely receipt of required
regulatory approvals; the ability of Vermilion to obtain financing on
acceptable terms; foreign currency exchange rates and interest rates;
future crude oil, natural gas liquids and natural gas prices; and
management's expectations relating to the timing and results of
exploration and development activities.
Although Vermilion believes that the expectations reflected in such
forward looking statements or information are reasonable, undue
reliance should not be placed on forward looking statements because
Vermilion can give no assurance that such expectations will prove to be
correct. Financial outlooks are provided for the purpose of
understanding Vermilion's financial position and business objectives
and the information may not be appropriate for other purposes. Forward
looking statements or information are based on current expectations,
estimates and projections that involve a number of risks and
uncertainties which could cause actual results to differ materially
from those anticipated by Vermilion and described in the forward
looking statements or information. These risks and uncertainties
include but are not limited to: the ability of management to execute
its business plan; the risks of the oil and gas industry, both
domestically and internationally, such as operational risks in
exploring for, developing and producing crude oil, natural gas liquids
and natural gas; risks and uncertainties involving geology of crude
oil, natural gas liquids and natural gas deposits; risks inherent in
Vermilion's marketing operations, including credit risk; the
uncertainty of reserves estimates and reserves life and estimates of
resources and associated expenditures; the uncertainty of estimates and
projections relating to production and associated expenditures;
potential delays or changes in plans with respect to exploration or
development projects; Vermilion's ability to enter into or renew leases
on acceptable terms; fluctuations in crude oil, natural gas liquids and
natural gas prices, foreign currency exchange rates and interest rates;
health, safety and environmental risks; uncertainties as to the
availability and cost of financing; the ability of Vermilion to add
production and reserves through exploration and development activities;
the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; uncertainty in
amounts and timing of royalty payments; risks associated with existing
and potential future law suits and regulatory actions against
Vermilion; and other risks and uncertainties described elsewhere in
this document or in Vermilion's other filings with Canadian securities
regulatory authorities.
The forward looking statements or information contained in this document
are made as of the date hereof and Vermilion undertakes no obligation
to update publicly or revise any forward looking statements or
information, whether as a result of new information, future events or
otherwise, unless required by applicable securities laws.
All oil and natural gas reserve information contained in this document
has been prepared and presented in accordance with National Instrument
51-101 Standards of Disclosure for Oil and Gas Activities. The actual
oil and natural gas reserves and future production will be greater than
or less than the estimates provided in this document. The estimated
future net revenue from the production of oil and natural gas reserves
does not represent the fair market value of these reserves.
Natural gas volumes have been converted on the basis of six thousand
cubic feet of natural gas to one barrel of oil equivalent. Barrels of
oil equivalent (boe) may be misleading, particularly if used in
isolation. A boe conversion ratio of six thousand cubic feet to one
barrel of oil is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
Financial data contained within this document are reported in Canadian
dollars, unless otherwise stated.
ABBREVIATIONS
|
$M
|
|
thousand dollars
|
|
$MM
|
|
million dollars
|
|
AECO
|
|
the daily average benchmark price for natural gas at the AECO 'C' hub in
southeast Alberta
|
|
bbl(s)
|
|
barrel(s)
|
|
bbls/d
|
|
barrels per day
|
|
bcf
|
|
billion cubic feet
|
|
boe
|
|
barrel of oil equivalent, including: crude oil, natural gas liquids and
natural gas (converted on the basis of one boe for
|
|
|
|
six mcf of natural gas)
|
|
boe/d
|
|
barrel of oil equivalent per day
|
|
GJ
|
|
gigajoules
|
|
HH
|
|
Henry Hub, a reference price paid for natural gas in US dollars at
Erath, Louisiana
|
|
mbbls
|
|
thousand barrels
|
|
mboe
|
|
thousand barrel of oil equivalent
|
|
mcf
|
|
thousand cubic feet
|
|
mcf/d
|
|
thousand cubic feet per day
|
|
mmboe
|
|
million barrel of oil equivalent
|
|
mmcf
|
|
million cubic feet
|
|
mmcf/d
|
|
million cubic feet per day
|
|
MWh
|
|
megawatt hour
|
|
NGLs
|
|
natural gas liquids
|
|
PRRT
|
|
Petroleum Resource Rent Tax, a profit based tax levied on petroleum
projects in Australia
|
|
TTF
|
|
the day-ahead price for natural gas in the Netherlands, quoted in MWh of
natural gas, at the Title Transfer Facility
|
|
|
|
Virtual Trading Point operated by Dutch TSO Gas Transport Services
|
|
WTI
|
|
West Texas Intermediate, the reference price paid for crude oil of
standard grade in US dollars at Cushing, Oklahoma
|
MESSAGE TO SHAREHOLDERS
While crude oil indices have risen from the 5-year lows reached during
Q1 2015, the global price environment for crude oil remained depressed
as we exited the first quarter of 2015. Although this price
environment poses significant challenges for many energy sector
participants, Vermilion remains comparatively well-positioned given our
disciplined approach to financial management and our commodity
diversification. In particular, our exposure to European natural gas
markets, where fundamentals and pricing remain strong, is a key
advantage differentiating Vermilion from its competitors.
Current European natural gas prices are more than triple those in North
America, and our planned 2015 capital activities will allow us to
continue to take advantage of this opportunity. In 2014, we expanded
our European natural gas business with our entry into Germany, a
producing region with a long history of development activity and strong
market fundamentals. This acquisition increased our existing European
natural gas production base by nearly 50% in 2014. With continued
organic growth in our Netherlands gas production combined with
additional gas production from our Corrib project in Ireland, we expect
that European gas will comprise nearly 35% of total production by Q4
2015. In 2016, with a full year of Corrib production and assuming no
changes in commodity pricing, European natural gas may generate as much
as 45% of Vermilion's FFO(1).
Notwithstanding the general weakness in crude prices globally, the
advantages of international crude exposure in fiscally competitive
regions like France and Australia were also evident during Q1 2015. The
operating netback from our Brent-based crude oil sales in Australia and
France was a blended $44.76/boe, as compared to operating netbacks of
$31.68/boe from WTI-based crude oil sales in North America.
In response to the depressed crude oil and North American natural gas
price environment, we previously announced a reduction in our 2015
exploration and development program to $415 million, representing a 40%
decrease versus 2014. With this reduction, assuming average WTI
pricing for 2015 in the mid-$50 range, we would expect our cash inflows
to nearly match our net cash outflows (excluding Corrib related capital
expenditures). Despite this significant reduction in planned capital
expenditures, we remain on target to achieve the lower end our original
full year 2015 production guidance of 55,000 to 57,000 boe/d. This
represents year-over-year production growth exceeding 10%, and we
expect to achieve consolidated organic production growth in each
quarter of 2015.
To further enhance the long-term and sustainable profitability of our
business, we reinstated our Profitability Enhancement Program ("PEP").
Prior installments of PEP achieved strong results in both the 1998
industry downturn and the financial crisis of 2008-2009. Based on
savings identified to-date, our third installment of PEP is expected to
result in cost reductions estimated at between $50 and $60 million for
full-year 2015 capital spending, operating expense and G&A. This is
reflected in Q1 2015 operating expense per unit, which is 15% lower
than Q4 2014 and 22% lower than Q1 2014.
Our European capital programs remain robust. In France, we completed a
successful four (4.0 net) well drilling program at Champotran during Q1
2015. Subsequent to Q1 2015, all four wells were tied-in and are
currently producing at a combined average rate of 980 bbls/d. This
was our third successive drilling program since 2013, comprising a
cumulative 13 wells at Champotran, with a 100% drilling success rate.
After-tax rates of return associated with our Champotran oil drilling
program remain in excess of 100%(2) at today's oil prices. The remainder of our 2015 capital expenditures
in France will target highly economic workovers and optimization
projects, as well as infrastructure and facility maintenance. During
the second quarter, we expect to restore approximately 2 mmcf/d of
shut-in natural gas production from our Vic Bilh field.
In the Netherlands, we plan to drill three (2.4 net) wells during Q2
2015 with volumes from these wells, if successful, expected to be
on-stream during the second half of 2015. Subsequent to the end of Q1
2015, we reached total depth and logged the first well in our 2015
Netherlands drilling program, the Slootdorp-06 well in the province of
North Holland (93% working interest). Based on electric logs, this
well is a field-extending discovery, logging 71 m of gross gas column
in the Rotliegend Sand. Production from the Slootdorp-06 well is
expected to begin during the second half of 2015.
In Germany, our operating partner is drilling one (0.25 net) well in
2015, which was spudded late in Q1 2015. If successful, production
from this well should be on-stream in mid-Q3 2015.
Our Corrib project in Ireland has continued to progress as expected.
Remaining work includes the ongoing testing of all systems and
processes required for the safe operation of the Bellanaboy gas
processing terminal. The Irish Environmental Protection Agency issued
its Proposed Determination for the Corrib Industrial Emissions License
("IEL") in April 2015. Based on remaining terminal activities and
typical approval timelines for the final form of the IEL, we estimate
that the most likely date for start-up is approximately mid-year, with
a modest range of outcomes around that estimate. Production at Corrib
is expected to increase over the first few months toward peak
production levels estimated at approximately 58 mmcf/d (approximately
9,700 boe/d) net to Vermilion.
With strong fundamentals in our international operations and the
significant flexibility offered by our Canadian asset base, we reduced
our 2015 investment activity as compared to prior years. In our
Cardium light-oil resource play, economics remain robust with capital
investment rates of return in excess of 30%(2) . Results to-date have been strong, with better-than-forecasted
production volumes on our two-mile extended reach horizontal wells. In
Q1 2015, we participated in the drilling of only seven (3.1 net)
Cardium wells in the quarter, which represents our planned Cardium
drilling activities for 2015 (compared to 30 to 50 net wells in
previous years). For the remainder of 2015, we will be focused
predominately on the completion and tie-in of previously drilled wells.
Our Mannville condensate-rich conventional natural gas play remains the
most economic play in our Canadian portfolio with current rates of
return in excess of 85%(2). During Q1 2015, we participated in drilling 13 (8.9 net) wells,
representing approximately half of our planned 28 (16.0 net) well
program for 2015. In Saskatchewan, we reduced our drilling activity to
five (4.1 net) wells in 2015, all of which were drilled in Q1 2015. New
well results in our downdip Midale play in Saskatchewan have been
better than we expected at the time we entered this region in 2014.
Duvernay drilling activities have been deferred to beyond 2015 as we
monitor the performance of our two appraisal wells drilled in 2014. We
achieved increased Canadian production despite having approximately
1,600 boe/d of production offline as a result of plant capacity
restrictions and interruptible service curtailments on the NGTL system.
Our balance sheet remains a further source of strength. Subsequent to
Q1 2015, we negotiated with our lenders for a further expansion and
extension of our existing revolving credit facilities from $1.75
billion to $2 billion, which was previously increased from $1.5 billion
in Q1 2015. Taking into account the most recent expansion to our credit
facility, we have approximately $820 million of borrowing capacity
available. The facility, which matures in May 2019, is fully revolving
up to the date of maturity and subject to standard form covenants
(discussed in the "Financial Position Review" section of our MD&A). We
are, and expect to continue to be, in compliance with all applicable
debt covenants, and expect to maintain our current dividend of $0.215
per share per month ($2.58 per share per year). With a nearly balanced
budget at current commodity prices, we currently anticipate our balance
sheet leverage to remain at current levels assuming current commodity
prices, and then to naturally de-lever with the addition of FFO from
our Corrib asset in the second half of 2015. While this represents
higher financial leverage than we would normally carry, it is lower
than the debt ratios of the majority of our peers, and should allow us
the flexibility to manage our business effectively by providing
continued growth and returns for shareholders in the current price
environment.
Vermilion was recently ranked 15th by Corporate Knights on the Future 40
Responsible Corporate Leaders in Canada list (the highest ranking for
an oil and gas company, and improved from our debut ranking of 32nd
last year). We were also named Top International Producer of the year
by The Explorers and Producers Association of Canada. This recognition
reflects Vermilion's continued focus on achieving robust shareholder
returns combined with environmental, social and governance performance.
Our non-financial initiatives and performance are also articulated in
the company's first annual CDP submission and sustainability report in
2014. Strong workplace practices and a culture that respects both
people and communities are key elements in our success.
Subsequent to Q1 2015, Vermilion was pleased to announce that for a
sixth consecutive year, it has been recognized by the Great Place to
Work® Institute as a Best Workplace in Canada and France. Vermilion
was also recognized for a second consecutive year as a Best Workplace
in the Netherlands in 2015, after becoming eligible for ranking in
2014. Vermilion is the only energy company in its category to rank on
the Best Workplaces lists in Canada and the Netherlands, and the
highest scoring energy company on the Best Workplaces list in France.
The management and directors of Vermilion continue to hold approximately
6% of the outstanding shares and remain committed to delivering
superior rewards to all stakeholders. In spite of the challenges posed
by the current business environment, we continue to believe that
Vermilion is situated for long-term, diversified growth. We remain
confident that the assets in our portfolio can support organic growth
for years to come, and in the current environment, we also find
ourselves well positioned to take advantage of potential acquisition
activity in both North American and international markets. Our
long-term focus on the creation of real value through our technical
capabilities, combined with our conservative financial approach and
patience, should allow us to compete and transact for the benefit of
our existing shareholders if suitable opportunities arise.
|
(1)
|
The above discussion includes additional GAAP and non-GAAP measures
which may not be comparable to other companies. Please see the
"ADDITIONAL AND NON-GAAP FINANCIAL MEASURES" section of Management's
Discussion and Analysis.
|
|
(2)
|
Economics calculated using the following commodity price deck
assumptions: $55/bbl WTI; $60/bbl Dated Brent; $2.75/mmbtu AECO;
US$3.00/mmbtu Nymex; $9.00/mmbtu Title Transfer Facility (Netherlands);
CAD/USD 1.20; CAD/EUR 1.40
|
HIGHLIGHTS
|
|
|
|
Three Months Ended
|
|
($M except as indicated)
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
Financial
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Petroleum and natural gas sales
|
|
|
195,885
|
|
|
306,073
|
|
|
381,183
|
|
Fund flows from operations (1)
|
|
|
120,795
|
|
|
185,528
|
|
|
205,363
|
|
|
Fund flows from operations ($/basic share)
|
|
|
1.12
|
|
|
1.73
|
|
|
2.01
|
|
|
Fund flows from operations ($/diluted share)
|
|
|
1.11
|
|
|
1.71
|
|
|
1.97
|
|
Net earnings
|
|
|
1,275
|
|
|
58,642
|
|
|
102,788
|
|
|
Net earnings ($/basic share)
|
|
|
0.01
|
|
|
0.55
|
|
|
1.00
|
|
Capital expenditures
|
|
|
174,311
|
|
|
166,243
|
|
|
196,375
|
|
Acquisitions
|
|
|
35
|
|
|
1,652
|
|
|
178,227
|
|
Asset retirement obligations settled
|
|
|
3,107
|
|
|
6,247
|
|
|
2,651
|
|
Cash dividends ($/share)
|
|
|
0.645
|
|
|
0.645
|
|
|
0.645
|
|
Dividends declared
|
|
|
69,390
|
|
|
69,119
|
|
|
66,007
|
|
|
% of fund flows from operations
|
|
|
57%
|
|
|
37%
|
|
|
32%
|
|
Net dividends (1)
|
|
|
48,012
|
|
|
48,139
|
|
|
47,122
|
|
|
% of fund flows from operations
|
|
|
40%
|
|
|
26%
|
|
|
23%
|
|
Payout (1)
|
|
|
225,430
|
|
|
220,629
|
|
|
246,148
|
|
|
% of fund flows from operations
|
|
|
187%
|
|
|
119%
|
|
|
120%
|
|
|
% of fund flows from operations (excluding the Corrib project)
|
|
|
173%
|
|
|
106%
|
|
|
111%
|
|
Net debt (1)
|
|
|
1,388,603
|
|
|
1,265,650
|
|
|
966,310
|
|
Ratio of net debt to annualized fund flows from operations (1)
|
|
|
2.9
|
|
|
1.7
|
|
|
1.2
|
|
Operational
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
28,181
|
|
|
28,846
|
|
|
27,318
|
|
|
NGLs (bbls/d)
|
|
|
3,039
|
|
|
2,822
|
|
|
2,140
|
|
|
Natural gas (mmcf/d)
|
|
|
115.00
|
|
|
107.42
|
|
|
103.32
|
|
|
Total (boe/d)
|
|
|
50,386
|
|
|
49,571
|
|
|
46,677
|
|
Average realized prices
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and NGLs ($/bbl)
|
|
|
58.25
|
|
|
78.64
|
|
|
111.62
|
|
|
Natural gas ($/mcf)
|
|
|
5.26
|
|
|
5.90
|
|
|
7.99
|
|
Production mix (% of production)
|
|
|
|
|
|
|
|
|
|
|
|
% priced with reference to WTI
|
|
|
28%
|
|
|
28%
|
|
|
25%
|
|
|
% priced with reference to AECO
|
|
|
20%
|
|
|
20%
|
|
|
17%
|
|
|
% priced with reference to TTF
|
|
|
18%
|
|
|
16%
|
|
|
19%
|
|
|
% priced with reference to Dated Brent
|
|
|
34%
|
|
|
36%
|
|
|
39%
|
|
Netbacks ($/boe) (1)
|
|
|
|
|
|
|
|
|
|
|
|
Operating netback
|
|
|
31.30
|
|
|
45.85
|
|
|
63.20
|
|
|
Fund flows from operations netback
|
|
|
29.07
|
|
|
38.67
|
|
|
47.76
|
|
|
Operating expenses
|
|
|
10.56
|
|
|
12.48
|
|
|
13.49
|
|
Average reference prices
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl)
|
|
|
48.63
|
|
|
73.15
|
|
|
98.68
|
|
|
Edmonton Sweet index (US $/bbl)
|
|
|
41.83
|
|
|
66.79
|
|
|
90.43
|
|
|
Dated Brent (US $/bbl)
|
|
|
53.97
|
|
|
76.27
|
|
|
108.22
|
|
|
AECO ($/GJ)
|
|
|
2.60
|
|
|
3.41
|
|
|
5.42
|
|
|
TTF ($/GJ)
|
|
|
8.25
|
|
|
8.69
|
|
|
10.19
|
|
Average foreign currency exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
CDN $/US $
|
|
|
1.24
|
|
|
1.14
|
|
|
1.10
|
|
|
CDN $/Euro
|
|
|
1.40
|
|
|
1.42
|
|
|
1.51
|
|
Share information ('000s)
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding - basic
|
|
|
107,718
|
|
|
107,303
|
|
|
102,453
|
|
Shares outstanding - diluted(1)
|
|
|
110,761
|
|
|
110,334
|
|
|
105,167
|
|
Weighted average shares outstanding - basic
|
|
|
107,513
|
|
|
107,102
|
|
|
102,278
|
|
Weighted average shares outstanding - diluted
|
|
|
109,305
|
|
|
108,646
|
|
|
104,171
|
|
(1)
|
The above table includes additional GAAP and non-GAAP financial measures
which may not be comparable to other companies. Please see the
"ADDITIONAL AND NON-GAAP FINANCIAL MEASURES" section of Management's
Discussion and Analysis.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is Management's Discussion and Analysis ("MD&A"), dated
May 7, 2015, of Vermilion Energy Inc.'s ("Vermilion", "We", "Our", "Us"
or the "Company") operating and financial results as at and for the
three months ended March 31, 2015 compared with the corresponding
period in the prior year.
This discussion should be read in conjunction with the unaudited
condensed consolidated interim financial statements for the three
months ended March 31, 2015 and the audited consolidated financial
statements for the year ended December 31, 2014 and 2013, together with
accompanying notes. Additional information relating to Vermilion,
including its Annual Information Form, is available on SEDAR at www.sedar.com or on Vermilion's website at www.vermilionenergy.com.
The unaudited condensed consolidated interim financial statements for
the three months ended March 31, 2015 and comparative information have
been prepared in Canadian dollars, except where another currency is
indicated, and in accordance with IAS 34, "Interim Financial
Reporting", as issued by the International Accounting Standard Board
("IASB").
This MD&A includes references to certain financial measures which do not
have standardized meanings prescribed by International Financial
Reporting Standards ("IFRS"). As such, these financial measures are
considered additional GAAP or non-GAAP financial measures and therefore
are unlikely to be comparable with similar financial measures presented
by other issuers. These additional GAAP and non-GAAP financial
measures include:
-
Fund flows from operations: This additional GAAP financial measure is
calculated as cash flows from operating activities before changes in
non-cash operating working capital and asset retirement obligations
settled. We analyze fund flows from operations both on a consolidated
basis and on a business unit basis in order to assess the contribution
of each business unit to our ability to generate cash necessary to pay
dividends, repay debt, fund asset retirement obligations and make
capital investments.
-
Netbacks: These non-GAAP financial measures are per boe and per mcf
measures used in the analysis of operational activities. We assess
netbacks both on a consolidated basis and on a business unit basis in
order to compare and assess the operational and financial performance
of each business unit versus other business units and third party crude
oil and natural gas producers.
For a full description of these and other non-GAAP financial measures
and a reconciliation of these measures to their most directly
comparable GAAP measures, please refer to "ADDITIONAL AND NON-GAAP
FINANCIAL MEASURES".
VERMILION'S BUSINESS
Vermilion is a Calgary, Alberta based international oil and gas producer
focused on the acquisition, development and optimization of producing
properties in North America, Europe, and Australia. We manage our
business through our Calgary head office and our international business
unit offices.
This MD&A separately discusses each of our business units in addition to
our corporate segment.
-
Canada business unit: Relates to our assets in Alberta and Saskatchewan.
-
France business unit: Relates to our operations in France in the Paris
and Aquitaine Basins.
-
Netherlands business unit: Relates to our operations in the Netherlands.
-
Germany business unit: Relates to our 25% contractual participation
interest in a four-partner consortium in Germany.
-
Ireland business unit: Relates to our 18.5% non-operated interest in the
Corrib offshore natural gas field.
-
Australia business unit: Relates to our operations in the Wandoo
offshore crude oil field.
-
United States business unit: Relates to our operations in Wyoming in the
Powder River Basin.
-
Corporate: Includes expenditures related to our global hedging program,
financing expenses, and general and administration expenses, primarily
incurred in Canada and not directly related to the operations of a
specific business unit.
GUIDANCE
We first issued 2015 capital expenditure guidance of $525 million on
December 8, 2014. We subsequently adjusted our 2015 capital
expenditure guidance to $415 million on February 27, 2015, in response
to the continued weakness in commodity prices. The $110 million
reduction in capital reflects lower planned activity levels, including
the deferral of our Australian drilling campaign. Despite the reduction
in our capital budget, we are maintaining our previous production
guidance of 55,000-57,000 boe/d.
The following table summarizes our 2015 guidance:
|
|
|
|
|
Date
|
|
|
|
|
|
Capital Expenditures ($MM)
|
|
|
|
|
|
Production (boe/d)
|
|
2015 - Guidance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Guidance
|
|
|
|
December 8, 2014
|
|
|
|
|
|
525
|
|
|
|
|
|
55,000 to 57,000
|
|
2015 Guidance
|
|
|
|
February 27, 2015
|
|
|
|
|
|
415
|
|
|
|
|
|
55,000 to 57,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER RETURN
Vermilion strives to provide investors with reliable and growing
dividends in addition to sustainable, global production growth. The
following table, as of March 31, 2015, reflects our trailing one,
three, and five year performance:
|
Total return (1)
|
|
|
Trailing One Year
|
|
|
|
Trailing Three Year
|
|
|
|
Trailing Five Year
|
|
Dividends per Vermilion share
|
|
|
$2.58
|
|
|
|
$7.34
|
|
|
|
$11.90
|
|
Capital appreciation per Vermilion share
|
|
|
-$15.80
|
|
|
|
$7.24
|
|
|
|
$17.86
|
|
Total return per Vermilion share
|
|
|
-19.1%
|
|
|
|
31.7%
|
|
|
|
84.1%
|
|
Annualized total return per Vermilion share
|
|
|
-19.1%
|
|
|
|
9.6%
|
|
|
|
13.0%
|
|
Annualized total return on the S&P TSX High Income Energy Index
|
|
|
-22.1%
|
|
|
|
-3.6%
|
|
|
|
0.2%
|
|
(1)
|
The above table includes non-GAAP financial measures which may not be
comparable to other companies. Please see the "ADDITIONAL AND NON-GAAP
FINANCIAL MEASURES" section of this MD&A.
|
CONSOLIDATED RESULTS OVERVIEW
|
|
|
|
Three Months Ended
|
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
28,181
|
|
|
28,846
|
|
|
27,318
|
|
|
(2%)
|
|
|
3%
|
|
|
NGLs (bbls/d)
|
|
|
3,039
|
|
|
2,822
|
|
|
2,140
|
|
|
8%
|
|
|
42%
|
|
|
Natural gas (mmcf/d)
|
|
|
115.00
|
|
|
107.42
|
|
|
103.32
|
|
|
7%
|
|
|
11%
|
|
|
Total (boe/d)
|
|
|
50,386
|
|
|
49,571
|
|
|
46,677
|
|
|
2%
|
|
|
8%
|
|
|
Build (draw) in inventory (mbbl)
|
|
|
383
|
|
|
(238)
|
|
|
(98)
|
|
|
|
|
|
|
|
Financial metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund flows from operations ($M)
|
|
|
120,795
|
|
|
185,528
|
|
|
205,363
|
|
|
(35%)
|
|
|
(41%)
|
|
|
|
Per share ($/basic share)
|
|
|
1.12
|
|
|
1.73
|
|
|
2.01
|
|
|
(35%)
|
|
|
(44%)
|
|
|
Net earnings ($M)
|
|
|
1,275
|
|
|
58,642
|
|
|
102,788
|
|
|
(98%)
|
|
|
(99%)
|
|
|
|
Per share ($/basic share)
|
|
|
0.01
|
|
|
0.55
|
|
|
1.00
|
|
|
(98%)
|
|
|
(99%)
|
|
|
Cash flows from operating activities ($M)
|
|
|
22,647
|
|
|
229,146
|
|
|
178,238
|
|
|
(90%)
|
|
|
(87%)
|
|
|
Net debt ($M)
|
|
|
1,388,603
|
|
|
1,265,650
|
|
|
966,310
|
|
|
10%
|
|
|
44%
|
|
|
Cash dividends ($/share)
|
|
|
0.645
|
|
|
0.645
|
|
|
0.645
|
|
|
-
|
|
|
-
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
174,311
|
|
|
166,243
|
|
|
196,375
|
|
|
5%
|
|
|
(11%)
|
|
|
Acquisitions ($M)
|
|
|
35
|
|
|
1,652
|
|
|
178,227
|
|
|
(98%)
|
|
|
(100%)
|
|
|
Gross wells drilled
|
|
|
29.00
|
|
|
26.00
|
|
|
24.00
|
|
|
|
|
|
|
|
|
Net wells drilled
|
|
|
20.04
|
|
|
16.58
|
|
|
18.83
|
|
|
|
|
|
|
Operational review
-
Recorded consolidated average production of 50,386 boe/d during Q1 2015,
which was a 2% increase above Q4 2014 production.
-
Recorded a build in crude oil inventory in Australia (281,000 bbls) and
France (102,000 bbls), which resulted in lower sold volumes versus the
comparable quarters.
-
Increased consolidated average production from Q1 2014 by 8%, primarily
driven by incremental production from our acquisitions in southeast
Saskatchewan in Q2 2014 and Germany, which was acquired with an
effective date of February 1, 2014. In Canada, production growth of 22%
compared to Q1 2014 resulted from continued development of the Cardium
and Mannville plays in Alberta, coupled with incremental production
from southeast Saskatchewan following our acquisition in April 2014 of
Elkhorn Resources Inc. These production increases were partially
offset by decreased production in the Netherlands, which was managed
throughout the quarter to optimize facility use and regulate declines.
Production in Australia also decreased due to active management to
control inventory levels and meet marketing schedules.
-
Activity during the quarter included capital expenditures totalling
$174.3 million, incurred primarily in Canada, France, and Ireland. In
Canada, capital expenditures totalling $114.8 million were 34% higher
than the $85.4 million incurred in Q4 2014 and included costs related
to facility work and the drilling of 16.04 net wells compared to 15.16
net wells in Q4 2014. In France, capital expenditures of $34.1 million
related to the drilling of 4.0 net wells and workovers. In Ireland,
$13.0 million of capital expenditures were incurred, the majority of
which related primarily to facility commissioning activities, as well
as the completion of the 4.9 km tunnel.
Financial review
Net earnings
-
Net earnings for Q1 2015 were $1.3 million ($0.01/basic share) as
compared to $58.6 million ($0.55/basic share) for Q4 2014. The decrease
quarter-over-quarter is primarily attributable to lower petroleum and
natural gas sales driven by lower commodity prices and lower sales
volumes, as well as a $13.7 million loss on derivative instruments,
compared to a $40.0 million gain in the prior quarter. The decrease in
sales was partially offset by lower operating costs and royalties, as
well as the awarded recovery of costs resulting from the oil spill at
the Ambès terminal that occurred in 2007.
-
Net earnings for Q1 2015 were lower as compared to Q1 2014 primarily due
to the decrease in sales as a result of lower commodity prices, an
unrealized loss of $20.0 million on derivative instruments, and a loss
on foreign exchange of $1.5 million (compared to gains of $3.9 million
and $20.0 million, respectively, in the prior year). This was partially
offset by a decrease in operating costs, a realized gain on derivative
instruments of $6.3 million, and the previously mentioned recovery in
France.
Cash flows from operating activities
-
Cash flows from operating activities decreased by 90% and 87% as
compared to Q4 2014 and Q1 2014, respectively. The decrease is
primarily related to lower sales and timing differences pertaining to
working capital, partially offset by lower operating expenses and
royalties.
Fund flows from operations
-
Generated fund flows from operations of $120.8 million during Q1 2015, a
decrease of $64.7 million (35%) versus Q4 2014. This
quarter-over-quarter decrease was the result of lower sales and lower
realized gains on derivative instruments. This was partially offset by
lower royalties and operating expenses, as well as the previously
mentioned recovery in France.
-
Fund flows from operations decreased by $84.6 million (41%) versus Q1
2014. This decrease was primarily the result of commodity price
decreases and lower volumes sold in Australia and France (due to
inventory builds in the period). This was partially offset by higher
sales volumes in Canada, Germany, and the United States due to
incremental production from acquisitions occurring in 2014, as well as
lower royalties, operating expenses, and the previously mentioned
recovery in France.
Net debt
-
Net debt increased by $123.0 million to $1.39 billion as at March 31,
2015, due to capital expenditures in Canada and Ireland coupled with
the decrease in fund flows from operations, which was driven by weak
commodity prices and lower sales volumes.
Dividends
-
Declared dividends remained consistent at $0.215 per common share per
month during the first quarter of 2015, totalling $0.645 per common
share for the quarter.
COMMODITY PRICES
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Average reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl)
|
|
|
48.63
|
|
|
73.15
|
|
|
98.68
|
|
|
(34%)
|
|
|
(51%)
|
|
Edmonton Sweet index (US $/bbl)
|
|
|
41.83
|
|
|
66.79
|
|
|
90.43
|
|
|
(37%)
|
|
|
(54%)
|
|
Dated Brent (US $/bbl)
|
|
|
53.97
|
|
|
76.27
|
|
|
108.22
|
|
|
(29%)
|
|
|
(50%)
|
|
AECO ($/GJ)
|
|
|
2.60
|
|
|
3.41
|
|
|
5.42
|
|
|
(24%)
|
|
|
(52%)
|
|
TTF ($/GJ)
|
|
|
8.25
|
|
|
8.69
|
|
|
10.19
|
|
|
(5%)
|
|
|
(19%)
|
|
TTF (€/GJ)
|
|
|
5.91
|
|
|
6.12
|
|
|
6.75
|
|
|
(3%)
|
|
|
(12%)
|
|
Average foreign currency exchange rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDN $/US $
|
|
|
1.24
|
|
|
1.14
|
|
|
1.10
|
|
|
9%
|
|
|
13%
|
|
CDN $/Euro
|
|
|
1.40
|
|
|
1.42
|
|
|
1.51
|
|
|
(1%)
|
|
|
(7%)
|
|
Average realized prices ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
35.81
|
|
|
51.27
|
|
|
69.26
|
|
|
(30%)
|
|
|
(48%)
|
|
France
|
|
|
64.33
|
|
|
79.25
|
|
|
117.54
|
|
|
(19%)
|
|
|
(45%)
|
|
Netherlands
|
|
|
48.60
|
|
|
52.07
|
|
|
63.60
|
|
|
(7%)
|
|
|
(24%)
|
|
Germany
|
|
|
45.21
|
|
|
49.19
|
|
|
55.85
|
|
|
(8%)
|
|
|
(19%)
|
|
Australia
|
|
|
83.80
|
|
|
90.37
|
|
|
127.26
|
|
|
(7%)
|
|
|
(34%)
|
|
United States
|
|
|
48.79
|
|
|
74.08
|
|
|
-
|
|
|
(34%)
|
|
|
100%
|
|
Consolidated
|
|
|
47.17
|
|
|
63.79
|
|
|
88.67
|
|
|
(26%)
|
|
|
(47%)
|
|
Production mix (% of production)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% priced with reference to WTI
|
|
|
28%
|
|
|
28%
|
|
|
25%
|
|
|
|
|
|
|
|
% priced with reference to AECO
|
|
|
20%
|
|
|
20%
|
|
|
17%
|
|
|
|
|
|
|
|
% priced with reference to TTF
|
|
|
18%
|
|
|
16%
|
|
|
19%
|
|
|
|
|
|
|
|
% priced with reference to Dated Brent
|
|
|
34%
|
|
|
36%
|
|
|
39%
|
|
|
|
|
|
|
Reference prices
-
The first quarter of 2015 proved to be a challenging period for energy
prices, particularly crude oil. For the three months ended March 31,
2015, the average price for Dated Brent was US$53.97/bbl, a decrease of
29% from Q4 2014 and 50% lower than Q1 2014.
-
Downward pressure was even greater for North American crude grades as
inventory builds and robust production left little fundamental
support. During Q1 2015, WTI averaged US$48.63/bbl versus US$73.15/bbl
in Q4 2014 and US$98.68/bbl in Q1 2014. Edmonton Sweet Index averaged
US$41.83/bbl in Q1 2015, down 37% and 54% versus Q4 2014 and Q1 2014,
respectively.
-
AECO natural gas declined by 24% versus Q4 2014 and 52% versus Q1 2014
as warmer weather in Western Canada kept the supply/demand balance at a
lower equilibrium.
-
Despite lower quarter-over-quarter and year-over-year results, European
natural gas performed relatively well due to both geopolitical and
fundamental support. Compared to the previous quarter, TTF decreased
5% in Canadian dollar terms and 3% in Euro terms, whereas on a
year-over-year basis, Q1 2015 TTF decreased 19% in Canadian dollar
terms and 12% in Euro terms.
-
US dollar strength was a highlight for the first quarter, posting
sizeable gains against major currency pairs such as the Canadian dollar
and the Euro. For the three months ended March 31, 2015, CDN $/US $
increased 9% and 13% as compared to Q4 2014 and Q1 2014, respectively.
Realized prices
-
Consolidated realized price for Q1 2015 decreased by 26% and 47% as
compared to Q4 2014 and Q1 2014, respectively. The decreases were the
result of weaker crude oil and natural gas prices, partially offset by
a weaker Canadian dollar versus the US dollar during Q1 2015 versus the
comparable quarters.
FUND FLOWS FROM OPERATIONS
|
|
Three Months Ended
|
|
|
|
|
Mar 31, 2015
|
|
|
Dec 31, 2014
|
|
|
Mar 31, 2014
|
|
|
|
|
$M
|
|
|
$/boe
|
|
|
$M
|
|
|
$/boe
|
|
|
$M
|
|
|
$/boe
|
|
Petroleum and natural gas sales
|
|
|
195,885
|
|
|
47.17
|
|
|
306,073
|
|
|
63.79
|
|
|
381,183
|
|
|
88.67
|
|
Royalties
|
|
|
(16,424)
|
|
|
(3.95)
|
|
|
(25,963)
|
|
|
(5.41)
|
|
|
(24,024)
|
|
|
(5.59)
|
|
Petroleum and natural gas revenues
|
|
|
179,461
|
|
|
43.22
|
|
|
280,110
|
|
|
58.38
|
|
|
357,159
|
|
|
83.08
|
|
Transportation expense
|
|
|
(9,540)
|
|
|
(2.30)
|
|
|
(9,489)
|
|
|
(1.98)
|
|
|
(9,861)
|
|
|
(2.29)
|
|
Operating expense
|
|
|
(43,851)
|
|
|
(10.56)
|
|
|
(59,881)
|
|
|
(12.48)
|
|
|
(57,986)
|
|
|
(13.49)
|
|
General and administration
|
|
|
(13,560)
|
|
|
(3.27)
|
|
|
(13,236)
|
|
|
(2.76)
|
|
|
(14,467)
|
|
|
(3.37)
|
|
PRRT
|
|
|
(2,354)
|
|
|
(0.57)
|
|
|
(13,568)
|
|
|
(2.83)
|
|
|
(20,239)
|
|
|
(4.71)
|
|
Corporate income taxes
|
|
|
(17,623)
|
|
|
(4.24)
|
|
|
(8,304)
|
|
|
(1.73)
|
|
|
(38,603)
|
|
|
(8.98)
|
|
Interest expense
|
|
|
(13,298)
|
|
|
(3.20)
|
|
|
(12,943)
|
|
|
(2.70)
|
|
|
(11,460)
|
|
|
(2.67)
|
|
Realized gain on derivative instruments
|
|
|
6,257
|
|
|
1.51
|
|
|
22,816
|
|
|
4.76
|
|
|
2,640
|
|
|
0.61
|
|
Realized foreign exchange gain (loss)
|
|
|
3,306
|
|
|
0.78
|
|
|
(179)
|
|
|
(0.03)
|
|
|
(2,041)
|
|
|
(0.47)
|
|
Realized other income
|
|
|
31,997
|
|
|
7.70
|
|
|
202
|
|
|
0.04
|
|
|
221
|
|
|
0.05
|
|
Fund flows from operations
|
|
|
120,795
|
|
|
29.07
|
|
|
185,528
|
|
|
38.67
|
|
|
205,363
|
|
|
47.76
|
The following table shows a reconciliation of the change in fund flows
from operations:
|
($M)
|
|
|
Q1/15 vs. Q4/14
|
|
|
Q1/15 vs. Q1/14
|
|
Fund flows from operations - Comparative period
|
|
|
185,528
|
|
|
205,363
|
|
Sales volume variance:
|
|
|
|
|
|
|
|
|
Canada
|
|
|
(2,893)
|
|
|
26,315
|
|
|
France
|
|
|
(8,789)
|
|
|
(8,235)
|
|
|
Netherlands
|
|
|
3,268
|
|
|
(6,434)
|
|
|
Germany
|
|
|
(951)
|
|
|
5,172
|
|
|
Australia
|
|
|
(50,175)
|
|
|
(60,690)
|
|
United States
|
|
|
(310)
|
|
|
672
|
|
Pricing variance on sold volumes:
|
|
|
|
|
|
|
|
|
WTI
|
|
|
(27,784)
|
|
|
(57,543)
|
|
|
AECO
|
|
|
(4,281)
|
|
|
(14,068)
|
|
|
Dated Brent
|
|
|
(15,390)
|
|
|
(59,493)
|
|
|
TTF
|
|
|
(2,883)
|
|
|
(10,994)
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Royalties
|
|
|
9,539
|
|
|
7,600
|
|
|
Transportation
|
|
|
(51)
|
|
|
321
|
|
|
Operating expense
|
|
|
16,030
|
|
|
14,135
|
|
|
General and administration
|
|
|
(324)
|
|
|
907
|
|
|
PRRT
|
|
|
11,214
|
|
|
17,885
|
|
|
Corporate income taxes
|
|
|
(9,319)
|
|
|
20,980
|
|
|
Interest
|
|
|
(355)
|
|
|
(1,838)
|
|
|
Realized derivatives
|
|
|
(16,559)
|
|
|
3,617
|
|
|
Realized foreign exchange
|
|
|
3,485
|
|
|
5,347
|
|
|
Realized other income
|
|
|
31,795
|
|
|
31,776
|
|
Fund flows from operations - Current period
|
|
|
120,795
|
|
|
120,795
|
Fund flows from operations of $120.8 million during Q1 2015 represent a
decrease of $64.7 million (35%) versus Q4 2014. This
quarter-over-quarter decrease was principally the result of lower sales
volumes and weaker commodity pricing. The decrease in sales included
$50.3 million of pricing variance, of which $43.2 million was due to a
decrease in crude oil prices, as well as a $59.9 million sales volume
variance, of which $59.0 million related to Australia and France (due
to inventory builds in the period). The decrease in royalties and
operating expenses is consistent with decreased sales in the quarter,
and the increase in other income is related to the previously mentioned
recovery in France.
On a year-over-year basis, fund flows from operations decreased 41% for
the three months ended March 31, 2015, versus the comparable period in
2014. The decreases were primarily the result of a $185.3 million
decrease in sales, including a $142.1 million pricing variance driven
by a $117.0 million variance attributable to declines in crude oil
prices. The decrease also included a $43.2 million sales volume
variance, of which $68.9 million related to Australia and France (due
to inventory builds in the period) and was partially offset by a $31.5
million positive variance related to production from Canada and
Germany. Lower revenue was partially offset by decreases in operating
expenses and taxes, as well as the previously mentioned recovery in
France.
Fluctuations in fund flows from operations (and correspondingly net
earnings and cash flows from operating activities) may occur as a
result of changes in commodity prices and costs to produce petroleum
and natural gas. In addition, fund flows from operations may be highly
affected by the timing of crude oil shipments in Australia and France.
When crude oil inventory is built up, the related operating expense,
royalties, and depletion expense are deferred and carried as inventory
on the balance sheet. When the crude oil inventory is subsequently
drawn down, the related expenses are recognized in fund flows from
operations.
CANADA BUSINESS UNIT
Overview
-
Production and assets focused in West Pembina near Drayton Valley,
Alberta and Northgate in southeast Saskatchewan.
-
Potential for three significant resource plays sharing the same surface
infrastructure in the West Pembina region:
-
Cardium light oil (1,800m depth) - in development phase
-
Mannville condensate-rich gas (2,400 - 2,700m depth) - in development
phase
-
Duvernay condensate-rich gas (3,200 - 3,400m depth) - in appraisal phase
-
Canadian cash flows are fully tax-sheltered for the foreseeable future.
Operational review
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
Canada business unit
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
10,893
|
|
|
11,384
|
|
|
9,437
|
|
|
(4%)
|
|
|
15%
|
|
|
NGLs (bbls/d)
|
|
|
2,976
|
|
|
2,741
|
|
|
2,071
|
|
|
9%
|
|
|
44%
|
|
|
Natural gas (mmcf/d)
|
|
|
61.78
|
|
|
58.36
|
|
|
49.53
|
|
|
6%
|
|
|
25%
|
|
|
Total (boe/d)
|
|
|
24,165
|
|
|
23,851
|
|
|
19,763
|
|
|
1%
|
|
|
22%
|
|
Production mix (% of total)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
|
|
|
45%
|
|
|
48%
|
|
|
48%
|
|
|
|
|
|
|
|
|
NGLs
|
|
|
12%
|
|
|
11%
|
|
|
10%
|
|
|
|
|
|
|
|
|
Natural gas
|
|
|
43%
|
|
|
41%
|
|
|
42%
|
|
|
|
|
|
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
114,849
|
|
|
85,442
|
|
|
114,939
|
|
|
34%
|
|
|
-
|
|
|
Acquisitions ($M)
|
|
|
35
|
|
|
1,671
|
|
|
4,768
|
|
|
|
|
|
|
|
|
Gross wells drilled
|
|
|
25.00
|
|
|
23.00
|
|
|
20.00
|
|
|
|
|
|
|
|
|
Net wells drilled
|
|
|
16.04
|
|
|
15.16
|
|
|
14.97
|
|
|
|
|
|
|
Production
-
Production in Canada increased by 1% quarter-over-quarter and by 22%
year-over year. The year-over-year increase in average production
volumes was primarily attributable to strong organic production growth
in our Mannville condensate-rich gas resource play. We achieved
increased Canadian production despite having approximately 1,600 boe/d
of production offline as a result of plant capacity restrictions and
interruptible service curtailments on the NGTL system.
-
Cardium production averaged more than 9,800 boe/d in Q1 2015, a 2%
decrease quarter-over-quarter. Some non-operated volume is currently
constrained due to pipeline restrictions.
-
Mannville production averaged approximately 4,850 boe/d in Q1 2015, a
12% increase quarter-over-quarter. As with Cardium production,
non-operated Mannville volume was constrained due to pipeline
restrictions.
-
Production from our southeast Saskatchewan assets averaged approximately
2,800 boe/d in Q1 2015, a 5% decrease quarter-over-quarter. The North
Portal Gas Plant was commissioned late in Q1. The plant will enable the
processing of approximately 6,000 mcf/d (5,500 mcf/d net) of gas which
was previously being flared.
Activity review
-
Vermilion drilled a total of 14 (11.8 net) operated wells during Q1
2015.
Cardium
-
We participated in a total of seven (3.1 net) wells, including drilling
one (1.0 net) operated well and brought 10 (9.3 net) operated wells on
production during Q1 2015.
-
Since 2009, we have drilled or participated in 285 (201.9 net) wells.
-
In 2015, we plan to drill or participate in the seven (3.1 net) wells
executed in Q1, and complete, equip and tie-in an additional 8.2 net
wells which were drilled in 2014.
Mannville
-
During Q1 2015, we participated in a total of 13 (8.9 net) wells,
including eight (6.7 net) operated wells and brought three (2.5 net)
operated wells on production.
-
In 2015, we expect to drill or participate in approximately 28 (16.0
net) wells and complete, equip and tie-in an additional 1.0 net well
which was drilled in 2014.
Saskatchewan
-
We drilled and brought on production five (4.1 net) operated Midale
wells during Q1 2015, completing our 2015 drilling activity in
Saskatchewan.
Financial review
|
|
|
|
Three Months Ended
|
|
% change
|
|
Canada business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Sales
|
|
|
77,884
|
|
|
112,494
|
|
|
123,180
|
|
|
(31%)
|
|
|
(37%)
|
|
|
Royalties
|
|
|
(8,592)
|
|
|
(15,626)
|
|
|
(12,663)
|
|
|
(45%)
|
|
|
(32%)
|
|
|
Transportation expense
|
|
|
(3,942)
|
|
|
(3,455)
|
|
|
(3,098)
|
|
|
14%
|
|
|
27%
|
|
|
Operating expense
|
|
|
(19,099)
|
|
|
(19,315)
|
|
|
(16,610)
|
|
|
(1%)
|
|
|
15%
|
|
|
General and administration
|
|
|
(4,015)
|
|
|
(2,840)
|
|
|
(2,868)
|
|
|
41%
|
|
|
40%
|
|
|
Fund flows from operations
|
|
|
42,236
|
|
|
71,258
|
|
|
87,941
|
|
|
(41%)
|
|
|
(52%)
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
35.81
|
|
|
51.27
|
|
|
69.26
|
|
|
(30%)
|
|
|
(48%)
|
|
|
Royalties
|
|
|
(3.95)
|
|
|
(7.12)
|
|
|
(7.12)
|
|
|
(45%)
|
|
|
(45%)
|
|
|
Transportation expense
|
|
|
(1.81)
|
|
|
(1.57)
|
|
|
(1.74)
|
|
|
15%
|
|
|
4%
|
|
|
Operating expense
|
|
|
(8.78)
|
|
|
(8.80)
|
|
|
(9.34)
|
|
|
-
|
|
|
(6%)
|
|
|
General and administration
|
|
|
(1.85)
|
|
|
(1.29)
|
|
|
(1.61)
|
|
|
43%
|
|
|
15%
|
|
|
Fund flows from operations netback
|
|
|
19.42
|
|
|
32.49
|
|
|
49.45
|
|
|
(40%)
|
|
|
(61%)
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl)
|
|
|
48.63
|
|
|
73.15
|
|
|
98.68
|
|
|
(34%)
|
|
|
(51%)
|
|
|
Edmonton Sweet index (US $/bbl)
|
|
|
41.83
|
|
|
66.79
|
|
|
90.43
|
|
|
(37%)
|
|
|
(54%)
|
|
|
Edmonton Sweet index ($/bbl)
|
|
|
51.92
|
|
|
75.85
|
|
|
99.79
|
|
|
(32%)
|
|
|
(48%)
|
|
|
AECO ($/GJ)
|
|
|
2.60
|
|
|
3.41
|
|
|
5.42
|
|
|
(24%)
|
|
|
(52%)
|
Sales
-
The realized price for our crude oil production in Canada is directly
linked to WTI but is subject to market conditions in Western Canada.
These market conditions can result in fluctuations in the pricing
differential, as reflected by the Edmonton Sweet index price. The
realized price of our NGLs in Canada is based on product specific
differentials pertaining to trading hubs in the United States. The
realized price of our natural gas in Canada is based on the AECO spot
price in Canada.
-
Sales per boe decreased by 30% quarter-over-quarter as a result of a 37%
decrease in Edmonton Sweet index pricing and a 24% decrease in AECO
pricing. This decrease, coupled with relatively consistent production
volumes, resulted in a 31% decrease in sales.
-
On a year-over-year basis, sales per boe decreased by 48% for the three
months ended March 31, 2015 versus the same period in 2014. Lower
commodity prices were partially offset by a 22% increase in production
due to production growth in the Cardium and Mannville resource plays
and incremental production from our Saskatchewan acquisition, resulting
in a 37% decrease in sales.
Royalties
-
Royalty expense as a percentage of sales for Q1 2015 decreased to 11.0%
versus the 13.9% for Q4 2014 as a result of the impact of lower prices
on the sliding scale used to determine royalty rates.
-
Royalty expense as a percentage of sales for Q1 2015 was relatively
consistent with Q1 2014 (10.3%) despite lower pricing due to fewer
wells benefiting from incentive royalty rates in the current quarter
versus Q1 2014.
Transportation
-
Transportation expense relates to the delivery of crude oil and natural
gas production to major pipelines where legal title transfers.
-
Transportation expense for Q1 2015 was higher than Q4 2014 as a result
of higher crude oil production subject to transportation costs coupled
with a prior period amendment received from a pipeline.
-
On a year-over-year basis, transportation expense for Q1 2015 was higher
than Q1 2014 as a result of incremental trucking costs from Vermilion's
Saskatchewan properties, which were acquired in Q2 2014.
Operating expense
-
On a per boe and dollar basis, operating expenses were relatively
unchanged quarter-over-quarter.
-
Year-over-year, operating expense increased on a dollar basis due to
incremental operating expenses associated with Vermilion's Saskatchewan
properties. This dollar increase was offset by a wide range of cost
reduction initiatives undertaken in response to commodity price
weakness and an increase in production volumes resulting in reduced
operating expense on a per boe basis.
General and administration
-
General and administration expense in Canada was higher in Q1 2015 as
compared to Q4 2014. This resulted from expenditure timing as well as
higher allocations of shared costs to Vermilion's other operating
jurisdictions in the prior quarter.
-
Year-over-year, the increase in general and administration expense for
Q1 2015 as compared to Q1 2014 is primarily associated with higher
staffing levels required to support Vermilion's organic growth
initiatives as well as the 2014 Saskatchewan acquisition.
FRANCE BUSINESS UNIT
Overview
-
Entered France in 1997 and completed three subsequent acquisitions,
including two in 2012.
-
Largest oil producer in France.
-
Producing assets include large conventional fields with high working
interests located in the Aquitaine and Paris Basins with an identified
inventory of workover, infill drilling, and secondary recovery
opportunities.
-
Production is characterized by Brent-based crude pricing and low base
decline rates.
Operational review
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
France business unit
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
11,463
|
|
|
11,133
|
|
|
10,771
|
|
|
3%
|
|
|
6%
|
|
Inventory (mbbls)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening crude oil inventory
|
|
|
197
|
|
|
214
|
|
|
269
|
|
|
|
|
|
|
|
|
Crude oil production
|
|
|
1,032
|
|
|
1,024
|
|
|
969
|
|
|
|
|
|
|
|
|
Crude oil sales
|
|
|
(930)
|
|
|
(1,041)
|
|
|
(1,000)
|
|
|
|
|
|
|
|
|
Closing crude oil inventory
|
|
|
299
|
|
|
197
|
|
|
238
|
|
|
|
|
|
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
34,114
|
|
|
37,189
|
|
|
37,967
|
|
|
(8%)
|
|
|
(10%)
|
|
|
Gross wells drilled
|
|
|
4.00
|
|
|
1.00
|
|
|
2.00
|
|
|
|
|
|
|
|
|
Net wells drilled
|
|
|
4.00
|
|
|
0.50
|
|
|
2.00
|
|
|
|
|
|
|
Production
-
Quarter-over-quarter and year-over-year production growth of 3% and 6%,
respectively.
-
In late September 2013, the third party Lacq processing facility that
processed our Vic Bilh gas production was permanently closed. As a
result, our Vic Bilh gas production has been temporarily shut-in while
preparations to transfer to an alternative facility are completed. As
a result of the shut-in, current production volumes remain 100%
weighted to Brent-based crude.
Activity review
-
Vermilion drilled four (4.0 net) wells in the Champotran field in the
Paris Basin in Q1 2015, completing our planned France drilling program
for 2015.
-
In 2015, additional activity includes an 18-well workover program and
the resumption of sales from a portion of our shut-in natural gas at
Vic Bilh.
Financial review
|
|
|
|
Three Months Ended
|
|
% change
|
|
France business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Sales
|
|
|
59,832
|
|
|
82,499
|
|
|
117,560
|
|
|
(27%)
|
|
|
(49%)
|
|
|
Royalties
|
|
|
(5,102)
|
|
|
(6,319)
|
|
|
(7,351)
|
|
|
(19%)
|
|
|
(31%)
|
|
|
Transportation expense
|
|
|
(3,011)
|
|
|
(4,096)
|
|
|
(4,753)
|
|
|
(26%)
|
|
|
(37%)
|
|
|
Operating expense
|
|
|
(10,826)
|
|
|
(13,544)
|
|
|
(16,420)
|
|
|
(20%)
|
|
|
(34%)
|
|
|
General and administration
|
|
|
(5,111)
|
|
|
(3,765)
|
|
|
(5,194)
|
|
|
36%
|
|
|
(2%)
|
|
|
Other income
|
|
|
31,775
|
|
|
-
|
|
|
-
|
|
|
100%
|
|
|
100%
|
|
|
Current income taxes
|
|
|
(14,281)
|
|
|
(6,132)
|
|
|
(25,264)
|
|
|
133%
|
|
|
(43%)
|
|
|
Fund flows from operations
|
|
|
53,276
|
|
|
48,643
|
|
|
58,578
|
|
|
10%
|
|
|
(9%)
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
64.33
|
|
|
79.25
|
|
|
117.54
|
|
|
(19%)
|
|
|
(45%)
|
|
|
Royalties
|
|
|
(5.49)
|
|
|
(6.07)
|
|
|
(7.35)
|
|
|
(10%)
|
|
|
(25%)
|
|
|
Transportation expense
|
|
|
(3.24)
|
|
|
(3.94)
|
|
|
(4.75)
|
|
|
(18%)
|
|
|
(32%)
|
|
|
Operating expense
|
|
|
(11.64)
|
|
|
(13.01)
|
|
|
(16.42)
|
|
|
(11%)
|
|
|
(29%)
|
|
|
General and administration
|
|
|
(5.49)
|
|
|
(3.62)
|
|
|
(5.19)
|
|
|
52%
|
|
|
6%
|
|
|
Other income
|
|
|
34.16
|
|
|
-
|
|
|
-
|
|
|
100%
|
|
|
100%
|
|
|
Current income taxes
|
|
|
(15.35)
|
|
|
(5.89)
|
|
|
(25.26)
|
|
|
161%
|
|
|
(39%)
|
|
|
Fund flows from operations netback
|
|
|
57.28
|
|
|
46.72
|
|
|
58.57
|
|
|
23%
|
|
|
(2%)
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated Brent (US $/bbl)
|
|
|
53.97
|
|
|
76.27
|
|
|
108.22
|
|
|
(29%)
|
|
|
(50%)
|
|
|
Dated Brent ($/bbl)
|
|
|
66.98
|
|
|
86.62
|
|
|
119.42
|
|
|
(23%)
|
|
|
(44%)
|
Sales
-
Crude oil production in France is priced with reference to Dated Brent.
-
Sales per boe decreased by 19% quarter-over-quarter, consistent with a
29% decrease in the Dated Brent reference price. This decrease, coupled
with an increase in ending inventory of 102,000 bbls, resulted in a 27%
decrease in sales.
-
On a year-over-year basis, sales per boe decreased by 45% for the three
months ended March 31, 2015, as compared to the same period in 2014.
This decrease was primarily driven by the 50% decrease in the Dated
Brent reference price, and, combined with a build in inventory,
resulted in a 49% decrease in sales.
Royalties
-
Royalties in France relate to two components: RCDM (levied on units of
production and not subject to changes in commodity prices) and R31
(based on a percentage of revenue).
-
Royalties as a percentage of sales was 8.5% in Q1 2015, an increase over
both Q4 2014 (7.7%) and Q1 2014 (6.3%) due to the impact of fixed RCDM
royalties coupled with lower realized pricing.
Transportation
-
Transportation expense decreased for Q1 2015 as compared to Q4 2014
primarily as a result of a reduced number of shipments from the Ambès
terminal during the current quarter due to unusually high tides at the
end of March coupled with reduced trucking activity.
-
Transportation expense for Q1 2015 was $1.7 million lower than Q1 2014.
This decrease related to reduced maintenance and project activity at
the Ambès terminal coupled with cost savings associated with fewer
shipments at the terminal due to the usage of larger shipping vessels.
Operating expense
-
Operating expense was lower in Q1 2015 as compared to both Q4 2014 and
Q1 2014 due to cost reduction initiatives undertaken in response to
commodity price weakness including lower costs on downhole and other
activities, lower labour usage and costs, and savings from service
contract renegotiations. In addition, operating expense also decreased
due to the impact of deferring costs following a build in crude oil
inventory related to the aforementioned unusually high tides at the end
of March.
-
On a year-over-year basis, operating expenses further benefited from a
favorable foreign exchange impact of a strengthening of the Canadian
dollar versus the Euro.
General and administration
-
General and administration expense for Q1 2015 was higher than Q4 2014
due to the timing of expenditures. On a year-over-year basis, Q1 2015
general and administration expense was relatively unchanged.
Other income
-
During Q1 2015, Vermilion was awarded a judgment pertaining to costs
incurred as a result of an oil spill at the Ambès oil terminal in
France that occurred in 2007. As a result of the award $31.8 million
(before taxes) was recognized as other income.
Current income taxes
-
Current income taxes in France are applied to taxable income, after
eligible deductions, at a statutory rate of 34.4% for 2015. In
addition, a 10.7% temporary surtax is applicable for tax year 2015 if
annual revenue exceeds €250 million. For 2015, the effective rate on
current income taxes is expected to be between approximately 20% and
22%. This rate is subject to change in response to commodity price
fluctuations, the timing of capital expenditures, and other eligible
in-country adjustments.
-
Current income taxes for Q1 2015 increased compared to Q4 2014 due to
the accelerated depletion on certain assets in the prior year.
-
Current income taxes for Q1 2015 decreased compared to Q1 2014. The
decrease was the result of lower funds from operations as a result of
the decline in the Dated Brent reference price.
NETHERLANDS BUSINESS UNIT
Overview
-
Entered the Netherlands in 2004.
-
Second largest onshore gas producer.
-
Interests include 16 licenses in the northeast region, five licenses in
the central region, and two offshore licenses.
-
Licenses include more than 800,000 net acres of undeveloped land.
-
High impact natural gas drilling and development.
-
Natural gas produced in the Netherlands is priced off the TTF index,
which receives a significant premium over North American gas prices.
Operational review
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
Netherlands business unit
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs (bbls/d)
|
|
|
63
|
|
|
81
|
|
|
69
|
|
|
(22%)
|
|
|
(9%)
|
|
|
Natural gas (mmcf/d)
|
|
|
36.41
|
|
|
31.35
|
|
|
43.15
|
|
|
16%
|
|
|
(16%)
|
|
|
Total (boe/d)
|
|
|
6,132
|
|
|
5,306
|
|
|
7,260
|
|
|
16%
|
|
|
(16%)
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
4,333
|
|
|
10,022
|
|
|
20,118
|
|
|
(57%)
|
|
|
(78%)
|
|
|
Gross wells drilled
|
|
|
-
|
|
|
2.00
|
|
|
2.00
|
|
|
|
|
|
|
|
|
Net wells drilled
|
|
|
-
|
|
|
0.92
|
|
|
1.86
|
|
|
|
|
|
|
Production
-
Production increased 16% quarter-over-quarter due to increased
production from our Langezwaag-02 well which was tied in January 23,
2015 and partially offset by the anticipated loss of production from
our Middenmeer-3 well, which was fully depleted and taken off
production in February 2015.
-
Year-over-year production decreased 16%, as production volumes in Q1
2014 benefited from the increased throughput capacity following a
retrofit at our Middenmeer Treatment Centre completed in late 2013.
-
Production in the Netherlands is actively managed to optimize facility
use and regulate declines.
Activity review
-
Langezwaag-02 well (42% working interest), drilled in the Gorredijk
concession during Q4 2014, was placed on production in Q1 2015 with an
average rate of production from the Zechstein formation of 4.0 mmcf/d
(with surface facility constraints).
-
In 2015, we are planning a three-well development drilling program and
expect to equip and tie-in four previous discovery wells.
Financial review
|
|
|
|
|
Three Months Ended
|
|
% change
|
|
Netherlands business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Sales
|
|
|
26,818
|
|
|
25,420
|
|
|
41,554
|
|
|
5%
|
|
|
(35%)
|
|
|
Royalties
|
|
|
(926)
|
|
|
(1,171)
|
|
|
(2,208)
|
|
|
(21%)
|
|
|
(58%)
|
|
|
Operating expense
|
|
|
(5,826)
|
|
|
(6,200)
|
|
|
(6,042)
|
|
|
(6%)
|
|
|
(4%)
|
|
|
General and administration
|
|
|
(737)
|
|
|
(2,489)
|
|
|
(598)
|
|
|
(70%)
|
|
|
23%
|
|
|
Current income taxes
|
|
|
(2,388)
|
|
|
2,124
|
|
|
(3,788)
|
|
|
(212%)
|
|
|
(37%)
|
|
|
Fund flows from operations
|
|
|
16,941
|
|
|
17,684
|
|
|
28,918
|
|
|
(4%)
|
|
|
(41%)
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
48.60
|
|
|
52.07
|
|
|
63.60
|
|
|
(7%)
|
|
|
(24%)
|
|
|
Royalties
|
|
|
(1.68)
|
|
|
(2.40)
|
|
|
(3.38)
|
|
|
(30%)
|
|
|
(50%)
|
|
|
Operating expense
|
|
|
(10.56)
|
|
|
(12.70)
|
|
|
(9.25)
|
|
|
(17%)
|
|
|
14%
|
|
|
General and administration
|
|
|
(1.34)
|
|
|
(5.10)
|
|
|
(0.91)
|
|
|
(74%)
|
|
|
47%
|
|
|
Current income taxes
|
|
|
(4.33)
|
|
|
4.35
|
|
|
(5.80)
|
|
|
(200%)
|
|
|
(25%)
|
|
|
Fund flows from operations netback
|
|
|
30.69
|
|
|
36.22
|
|
|
44.26
|
|
|
(15%)
|
|
|
(31%)
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TTF ($/GJ)
|
|
|
8.25
|
|
|
8.69
|
|
|
10.19
|
|
|
(5%)
|
|
|
(19%)
|
|
|
TTF (€/GJ)
|
|
|
5.91
|
|
|
6.12
|
|
|
6.75
|
|
|
(3%)
|
|
|
(12%)
|
Sales
-
The price of our natural gas in the Netherlands is based on the TTF
day-ahead index, as determined on the Title Transfer Facility Virtual
Trading Point operated by Dutch TSO Gas Transport Services, plus
various fees. GasTerra, a state owned entity, continues to purchase
all of the natural gas we produce in the Netherlands.
-
The 5% increase in sales quarter-over-quarter primarily related to a 16%
increase in production, offset by a 7% decrease in sales per boe which
is consistent with the 5% decrease in the Canadian dollar equivalent of
the TTF reference price.
-
On a year-over-year basis, sales per boe declined by 24% for the three
months ended March 31, 2015, versus the comparable period in 2014. This
was consistent with a 19% decrease in the TTF reference price in
Canadian dollar terms, and, coupled with a 16% decrease in production,
resulted in a 35% decrease in sales.
Royalties
-
In the Netherlands, we pay overriding royalties on certain wells
associated with an acquisition completed by the Netherlands business
unit in October 2013. As such, fluctuations in royalties expense in
the quarters presented relate to the amount of production from those
wells subject to overriding royalties.
Transportation expense
-
Our production in the Netherlands is not subject to transportation
expense as gas is sold at the plant gate.
Operating expense
-
Operating expense decreased for Q1 2015 as compared to both Q4 2014 and
Q1 2014. The decrease from Q4 2014 was largely the result of reduced
project work, including the absence of an emergency response exercise
conducted in Q4 2014. This decrease, coupled with increased volumes
quarter-over-quarter, resulted in a decrease in operating expense per
boe.
-
The decrease in operating expense from Q1 2014 was largely driven by a
strengthening of the Canadian dollar versus the Euro. Operating
expense per boe increased from the same quarter of the prior year due
to lower production.
General and administration
-
On a quarter-over-quarter basis, general and administration expenses
decreased in Q1 2015 versus Q4 2014 as the fourth quarter included
higher allocations from Vermilion's Corporate segment. On a
year-over-year basis, general and administration expense for Q1 2015
was relatively consistent with Q1 2014.
Current income taxes
-
Current income taxes in the Netherlands apply to taxable income after
eligible deductions at a statutory tax rate of approximately 46%. For
2015, the effective rate on current taxes is expected to be between
approximately 10% and 12%. This rate is subject to change in response
to commodity price fluctuations, the timing of capital expenditures,
and other eligible in-country adjustments.
-
Current income taxes in Q1 2015 were higher than Q4 2014. This increase
was a result of higher tax deductions for depletion on two unsuccessful
wells in Q4 2014, combined with accelerated tax deductions for certain
capital expenditures and other eligible in-country tax adjustments also
taken in Q4 2014.
-
Current income taxes in Q1 2015 were lower than Q1 2014 as a result of
decreased revenues from lower TTF reference prices.
GERMANY BUSINESS UNIT
Overview
-
Vermilion entered Germany in February 2014 with the purchase of a 25%
participation interest in a four-partner consortium.
-
The assets include four gas producing fields across 11 production
licenses and an exploration license in surrounding fields.
-
Total license area comprises 204,000 gross acres, of which 85% is in the
exploration license.
Operational review
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
Germany business unit
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
|
16.80
|
|
|
17.71
|
|
|
10.64
|
|
|
(5%)
|
|
|
58%
|
|
|
Total (boe/d)
|
|
|
2,801
|
|
|
2,952
|
|
|
1,773
|
|
|
(5%)
|
|
|
58%
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
968
|
|
|
563
|
|
|
196
|
|
|
72%
|
|
|
394%
|
|
|
Acquisitions ($M)
|
|
|
-
|
|
|
-
|
|
|
172,871
|
|
|
|
|
|
|
Production
-
Q1 2015 production of 2,801 boe/d represented a decrease of 5% as
compared to the prior quarter. Year-over-year production increased 58%,
due to Q1 2014 volumes only reflecting production from the
acquisition's effective date of February 1, 2014.
Activity review
-
Participating in the drilling of the Burgmoor Z3a sidetrack well (25%
working interest), which was spud in Q1 2015. The well is expected to
be tied in and placed on production in Q3 2015.
Financial review
|
|
|
|
Three Months Ended
|
|
% change
|
|
Germany business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Sales
|
|
|
11,395
|
|
|
13,359
|
|
|
8,915
|
|
|
(15%)
|
|
|
28%
|
|
|
Royalties
|
|
|
(1,598)
|
|
|
(2,481)
|
|
|
(1,802)
|
|
|
(36%)
|
|
|
(11%)
|
|
|
Transportation expense
|
|
|
(894)
|
|
|
(218)
|
|
|
(422)
|
|
|
310%
|
|
|
112%
|
|
|
Operating expense
|
|
|
(1,999)
|
|
|
(2,862)
|
|
|
(1,554)
|
|
|
(30%)
|
|
|
29%
|
|
|
General and administration
|
|
|
(1,608)
|
|
|
(2,200)
|
|
|
(568)
|
|
|
(27%)
|
|
|
183%
|
|
|
Current income taxes
|
|
|
-
|
|
|
1,145
|
|
|
(537)
|
|
|
(100%)
|
|
|
(100%)
|
|
|
Fund flows from operations
|
|
|
5,296
|
|
|
6,743
|
|
|
4,032
|
|
|
(21%)
|
|
|
31%
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
45.21
|
|
|
49.19
|
|
|
55.85
|
|
|
(8%)
|
|
|
(19%)
|
|
|
Royalties
|
|
|
(6.34)
|
|
|
(9.13)
|
|
|
(11.29)
|
|
|
(31%)
|
|
|
(44%)
|
|
|
Transportation expense
|
|
|
(3.55)
|
|
|
(0.80)
|
|
|
(2.64)
|
|
|
344%
|
|
|
34%
|
|
|
Operating expense
|
|
|
(7.93)
|
|
|
(10.54)
|
|
|
(9.74)
|
|
|
(25%)
|
|
|
(19%)
|
|
|
General and administration
|
|
|
(6.38)
|
|
|
(8.10)
|
|
|
(3.56)
|
|
|
(21%)
|
|
|
79%
|
|
|
Current income taxes
|
|
|
-
|
|
|
4.21
|
|
|
(3.36)
|
|
|
(100%)
|
|
|
(100%)
|
|
|
Fund flows from operations netback
|
|
|
21.01
|
|
|
24.83
|
|
|
25.26
|
|
|
(15%)
|
|
|
(17%)
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TTF ($/GJ)
|
|
|
8.25
|
|
|
8.69
|
|
|
10.19
|
|
|
(5%)
|
|
|
(19%)
|
|
|
TTF (€/GJ)
|
|
|
5.91
|
|
|
6.12
|
|
|
6.75
|
|
|
(3%)
|
|
|
(12%)
|
Sales
-
The price of our natural gas in Germany is based on the TTF month-ahead
index, as determined on the Title Transfer Facility Virtual Trading
Point operated by Dutch TSO Gas Transport Services, plus various fees.
-
The 15% decrease in sales quarter-over-quarter is due to an 8% decrease
in sales per boe, consistent with the 5% decrease in the Canadian
dollar equivalent of the TTF reference price, and a 5% decrease in
production.
-
On a year-over-year basis, sales per boe declined by 19%, consistent
with a 19% decrease in the Canadian dollar equivalent of the TTF
reference price. This was offset by a 58% increase in recorded
production following the Q1 2014 acquisition, resulting in a 28%
increase in sales.
Royalties expense
-
Our production in Germany is subject to state and private royalties on
sales after certain eligible deductions. As a percentage of sales,
royalties are expected to range from 15% to 20% in 2015.
-
Q1 2015 royalties as a percentage of sales of 14.0% was lower than the
18.6% for Q4 2014 and 20.2% for Q1 2014, primarily as a result of lower
state royalty rates for 2015.
Transportation expense
-
Transportation expense in Germany relates to costs incurred to deliver
natural gas from the processing facility to the customer.
-
Transportation expense for Q1 2015 was higher than Q4 2014 as the first
quarter included a higher level of seasonal maintenance activity on
transportation infrastructure. Q1 2014 included two months of costs
due to the timing of our Germany acquisition and as such, was lower
than the current quarter.
Operating expense
-
Operating expenses for Germany are billed monthly by the joint venture
operator and primarily relate to tariffs charged for gas processing.
-
Q1 2015 had lower operating expense on both a dollar and per boe basis
as compared to Q4 2014 due to gas processing tariff adjustments
recorded in Q4 2014.
-
Q1 2015 had higher operating expenses on a dollar basis than Q1 2014 as
the first quarter of 2014 included two months of costs. On a per boe
basis, the year-over-year decrease resulted from reduced gas processing
tariffs in 2015.
General and administration
-
General and administration expense decreased quarter-over-quarter as a
result of the timing of allocations from Vermilion's Corporate segment.
Current income taxes
-
Current income taxes in Germany apply to taxable income after eligible
deductions at a statutory tax rate of approximately 24%. As a function
of Germany's tax pools, the company does not presently pay taxes in
Germany.
IRELAND BUSINESS UNIT
Overview
-
18.5% non-operating interest in the offshore Corrib gas field located
approximately 83 km off the northwest coast of Ireland.
-
Project comprises six offshore wells, offshore and onshore sales and
transportation pipeline segments as well as a natural gas processing
facility.
-
Corrib is expected to produce approximately 58 mmcf/d (9,700 boe/d) net
to Vermilion at peak production rates.
Operational and financial review
|
|
|
|
Three Months Ended
|
|
% change
|
|
Ireland business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Transportation expense
|
|
|
(1,693)
|
|
|
(1,720)
|
|
|
(1,588)
|
|
|
(2%)
|
|
|
7%
|
|
|
General and administration
|
|
|
(512)
|
|
|
(579)
|
|
|
(282)
|
|
|
(12%)
|
|
|
82%
|
|
|
Fund flows from operations
|
|
|
(2,205)
|
|
|
(2,299)
|
|
|
(1,870)
|
|
|
(4%)
|
|
|
18%
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
12,955
|
|
|
20,932
|
|
|
16,236
|
|
|
(38%)
|
|
|
(20%)
|
Activity review
-
Our Corrib project in Ireland has continued to progress as expected.
Project operator Shell E&P Ireland Limited is systematically preparing
gas compression and other systems at the Bellanaboy gas processing
terminal for safe and reliable processing of gas production. The Irish
Environmental Protection Agency issued its Proposed Determination for
the Corrib Industrial Emissions License ("IEL") in April 2015. Based
on remaining terminal activities and typical approval timelines for the
final form of the IEL, we estimate that the most likely date for
start-up is approximately mid-year, with a modest range of outcomes
around that estimate.
-
Production at Corrib is expected to increase over the first few months
toward peak production levels estimated at approximately 58 mmcf/d
(approximately 9,700 boe/d), net to Vermilion.
Transportation expense
-
Transportation expense in Ireland relates to payments under a ship or
pay agreement related to the Corrib project.
AUSTRALIA BUSINESS UNIT
Overview
-
Entered Australia in 2005.
-
Hold a 100% operated working interest in the Wandoo field, located
approximately 80 km offshore on the northwest shelf of Australia.
-
Production is operated from two off-shore platforms, and originates from
21 producing well bores.
-
Wells that utilize horizontal legs (ranging in length from 500 to 3,000
plus metres) are located 600 metres below the seabed in approximately
55 metres of water depth.
-
Contracted crude oil production is priced with reference to Dated Brent.
Operational review
|
|
|
|
Three Months Ended
|
|
% change
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
Australia business unit
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
5,672
|
|
|
6,134
|
|
|
7,110
|
|
|
(8%)
|
|
|
(20%)
|
|
Inventory (mbbls)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening crude oil inventory
|
|
|
37
|
|
|
258
|
|
|
130
|
|
|
|
|
|
|
|
|
Crude oil production
|
|
|
511
|
|
|
564
|
|
|
640
|
|
|
|
|
|
|
|
|
Crude oil sales
|
|
|
(230)
|
|
|
(785)
|
|
|
(707)
|
|
|
|
|
|
|
|
|
Closing crude oil inventory
|
|
|
318
|
|
|
37
|
|
|
63
|
|
|
|
|
|
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures ($M)
|
|
|
6,455
|
|
|
11,616
|
|
|
5,691
|
|
|
(44%)
|
|
|
13%
|
Production
-
Quarterly production decreased 8% quarter-over-quarter and 20%
year-over-year. Production volumes are managed within corporate
targets while meeting customer demands and the requirements of
long-term supply agreements.
-
We continue to plan for long-term production levels of between 6,000 and
8,000 bbls/d.
Activity review
-
In Q1 2015, efforts were largely focused on facilities enhancement and
engineering studies, including inspection work relating to platform
life extension and pigging of the export line.
-
With the deferral of the drilling program, 2015 planned activities
include ongoing facilities maintenance, enhancement, and refurbishment,
as well as preparation and permitting activities in advance of our next
drilling program.
Financial review
|
|
|
|
Three Months Ended
|
|
% change
|
|
Australia business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Q1/15 vs.
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
|
Q4/14
|
|
|
Q1/14
|
|
|
Sales
|
|
|
19,284
|
|
|
70,971
|
|
|
89,974
|
|
|
(73%)
|
|
|
(79%)
|
|
|
Operating expense
|
|
|
(5,886)
|
|
|
(17,719)
|
|
|
(17,360)
|
|
|
(67%)
|
|
|
(66%)
|
|
|
General and administration
|
|
|
(1,454)
|
|
|
(1,628)
|
|
|
(1,206)
|
|
|
(11%)
|
|
|
21%
|
|
|
PRRT
|
|
|
(2,354)
|
|
|
(13,568)
|
|
|
(20,239)
|
|
|
(83%)
|
|
|
(88%)
|
|
|
Corporate income taxes
|
|
|
(577)
|
|
|
(4,799)
|
|
|
(8,841)
|
|
|
(88%)
|
|
|
(93%)
|
|
|
Fund flows from operations
|
|
|
9,013
|
|
|
33,257
|
|
|
42,328
|
|
|
(73%)
|
|
|
(79%)
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
83.80
|
|
|
90.37
|
|
|
127.26
|
|
|
(7%)
|
|
|
(34%)
|
|
|
Operating expense
|
|
|
(25.58)
|
|
|
(22.56)
|
|
|
(24.55)
|
|
|
13%
|
|
|
4%
|
|
|
General and administration
|
|
|
(6.32)
|
|
|
(2.07)
|
|
|
(1.71)
|
|
|
205%
|
|
|
270%
|
|
|
PRRT
|
|
|
(10.23)
|
|
|
(17.28)
|
|
|
(28.63)
|
|
|
(41%)
|
|
|
(64%)
|
|
|
Corporate income taxes
|
|
|
(2.51)
|
|
|
(6.11)
|
|
|
(12.51)
|
|
|
(59%)
|
|
|
(80%)
|
|
|
Fund flows from operations netback
|
|
|
39.16
|
|
|
42.35
|
|
|
59.86
|
|
|
(8%)
|
|
|
(35%)
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated Brent (US $/bbl)
|
|
|
53.97
|
|
|
76.27
|
|
|
108.22
|
|
|
(29%)
|
|
|
(50%)
|
|
|
Dated Brent ($/bbl)
|
|
|
66.98
|
|
|
86.62
|
|
|
119.42
|
|
|
(23%)
|
|
|
(44%)
|
Sales
-
Our production in Australia currently receives a premium to Dated Brent.
-
During Q1 2015, inventory increased by 281,000 bbls versus a 221,000
bbls draw in Q4 2014 and a 67,000 bbls draw in Q1 2014.
-
Sales per boe for Q1 2015 decreased by 7% versus Q4 2014 as a result of
the 23% decrease in the Dated Brent reference price in Canadian dollar
terms. This decrease was coupled with the aforementioned build in
inventory, resulting in a 73% decrease in sales.
-
Sales per boe for the three months ended March 31, 2015 decreased 34%
versus the same period in 2014, consistent with a 44% decrease in the
Dated Brent reference price in Canadian dollar terms. Combined with an
increase in inventory, this resulted in a 79% decrease in sales.
Royalties and transportation expense
-
Our production in Australia is not subject to royalties or
transportation expense as crude oil is sold directly at the Wandoo B
platform.
Operating expense
-
The decrease in operating expense for Q1 2015 as compared to Q4 2014 and
Q1 2014 was largely the result of a build in inventory during the
quarter.
-
Absent the impact of inventory adjustments, operating expenses on a
dollar basis decreased for Q1 2015 as compared to both Q4 2014 and Q1
2014 as a result of savings from a wide range of cost reduction
initiatives undertaken in response to commodity price weakness
including reduced vessel usage and lower diesel consumption. On a per
boe basis, these cost reductions were offset by lower production
volumes causing increased per barrel costs.
General and administration
-
General and administration expense for 2015 was relatively unchanged
versus the comparative 2014 periods. The timing of expenditures
resulted in variances from quarter-to-quarter.
PRRT and corporate income taxes
-
In Australia, current income taxes include both PRRT and corporate
income taxes. PRRT is a profit based tax applied at a rate of 40% on
sales less eligible expenditures, including operating expenses and
capital expenditures. Corporate income taxes are applied at a rate of
30% on taxable income after eligible deductions, which include PRRT.
-
For 2015, the combined corporate income tax and PRRT effective rate is
expected to be between approximately 25% and 27%. This rate is subject
to change in response to commodity price fluctuations, the timing of
capital expenditures and other eligible in-country adjustments.
-
Combined corporate income taxes and PRRT for Q1 2015 were lower relative
to both comparable periods in 2014. The decrease was consistent with
lower sales.
UNITED STATES BUSINESS UNIT
Overview
-
Entered the United States in September 2014.
-
Interests include approximately 68,000 acres of land (98% undeveloped)
in the Powder River Basin of northeastern Wyoming.
-
Promising tight oil development targeting the Turner Sand at a depth of
approximately 1,500 metres.
Operational and financial review
|
|
|
|
Three Months Ended
|
|
|
% change
|
|
United States business unit
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Q1/15 vs.
|
|
($M except as indicated)
|
|
|
2015
|
|
|
2014
|
|
|
Q4/14
|
|
|
Sales
|
|
|
672
|
|
|
1,330
|
|
|
(49%)
|
|
|
Royalties
|
|
|
(206)
|
|
|
(366)
|
|
|
(44%)
|
|
|
Operating expense
|
|
|
(215)
|
|
|
(241)
|
|
|
(11%)
|
|
|
General and administration
|
|
|
(1,080)
|
|
|
(959)
|
|
|
13%
|
|
|
Fund flows from operations
|
|
|
(829)
|
|
|
(236)
|
|
|
251%
|
|
Netbacks ($/boe)
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
48.79
|
|
|
74.08
|
|
|
(34%)
|
|
|
Royalties
|
|
|
(14.98)
|
|
|
(20.38)
|
|
|
(26%)
|
|
|
Operating expense
|
|
|
(15.61)
|
|
|
(13.44)
|
|
|
16%
|
|
|
General and administration
|
|
|
(78.41)
|
|
|
(53.44)
|
|
|
47%
|
|
|
Fund flows from operations netback
|
|
|
(60.21)
|
|
|
(13.18)
|
|
|
357%
|
|
Reference prices
|
|
|
|
|
|
|
|
|
|
|
|
WTI (US $/bbl)
|
|
|
48.63
|
|
|
73.15
|
|
|
(34%)
|
|
|
WTI ($/bbl)
|
|
|
60.35
|
|
|
83.08
|
|
|
(27%)
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
|
153
|
|
|
195
|
|
|
(22%)
|
|
Activity
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
637
|
|
|
460
|
|
|
38%
|
Activity review
-
The most recently completed well on this land block (70% working
interest) is currently producing approximately 130 bbls/d of oil in its
tenth month of production, from an approximately 1,100 metre
hydraulically-fractured horizontal lateral.
-
Drilling commenced subsequent to the end of Q1 for the one well planned
in the East Finn prospect for 2015.
Sales
-
The price of crude oil in the United States is directly linked to WTI,
subject to market conditions in the United States.
Royalties expense
-
Our production in the United States is subject to federal and private
royalties, severance tax, and ad valorem tax at a combined rate of
approximately 27.5% of sales.
Operating expense
-
Operating expense was consistent with the prior quarter.
General and administration
-
General and administration expense was consistent with the prior
quarter.
CORPORATE
Overview
-
Our Corporate segment includes costs related to our global hedging
program, financing expenses, and general and administration expenses,
primarily incurred in Canada and not directly related to the operations
of our business units.
Financial review
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
General and administration
|
|
|
957
|
|
|
1,224
|
|
|
(3,751)
|
|
Current income taxes
|
|
|
(377)
|
|
|
(642)
|
|
|
(173)
|
|
Interest expense
|
|
|
(13,298)
|
|
|
(12,943)
|
|
|
(11,460)
|
|
Realized gain on derivatives
|
|
|
6,257
|
|
|
22,816
|
|
|
2,640
|
|
Realized foreign exchange gain (loss)
|
|
|
3,306
|
|
|
(179)
|
|
|
(2,041)
|
|
Realized other income
|
|
|
222
|
|
|
202
|
|
|
221
|
|
Fund flows from operations
|
|
|
(2,933)
|
|
|
10,478
|
|
|
(14,564)
|
General and administration
-
General and administration expense for Q1 2015 was consistent with Q4
2014.
-
On a year-over-year basis, the decrease in general and administration
costs for the three months ended March 31, 2015, as compared to 2014 is
due to a decrease in staff-related expenditures, general cost saving
initiatives in response to declining crude prices, and increased salary
allocations to the various segments.
Current income taxes
-
Taxes in our corporate segment relate to holding companies that pay
current taxes in foreign jurisdictions.
Interest expense
-
Interest expense is incurred on our senior unsecured notes and on
borrowings under our revolving credit facility. The increase in Q1
2015 versus Q4 2014 and Q1 2014 is due to increased borrowings under
our revolving credit facility.
Hedging
-
The nature of our operations results in exposure to fluctuations in
commodity prices, interest rates and foreign currency exchange rates.
We monitor and, when appropriate, use derivative financial instruments
to manage our exposure to these fluctuations. All transactions of this
nature entered into are related to an underlying financial position or
to future crude oil and natural gas production. We do not use
derivative financial instruments for speculative purposes. We have
elected not to designate any of our derivative financial instruments as
accounting hedges and thus account for changes in fair value in net
earnings at each reporting period. We have not obtained collateral or
other security to support our financial derivatives as we review the
creditworthiness of our counterparties prior to entering into
derivative contracts.
-
Our hedging philosophy is to hedge solely for the purposes of risk
mitigation. Our approach is to hedge centrally to manage our global
risk (typically with an outlook of 12 to 18 months) for up to 50% of
net of royalty volumes through a portfolio of forward collars, swaps,
and physical fixed price arrangements.
-
We believe that our hedging philosophy and approach increases the
stability of revenues, cash flows and future dividends while also
assisting us in the execution of our capital and development plans.
-
The realized gain in Q1 2015 related primarily to amounts received on
our TTF, AECO, and Dated Brent derivatives, partially offset by
payments made on our foreign exchange derivatives.
-
A listing of derivative positions as at March 31, 2015 is included in
"Supplemental Table 2" in this MD&A.
FINANCIAL PERFORMANCE REVIEW
|
|
|
Three Months Ended
|
|
|
|
Mar 31,
|
|
Dec 31,
|
|
Sep 30,
|
|
Jun 30,
|
|
Mar 31,
|
|
Dec 31,
|
|
Sep 30,
|
|
Jun 30,
|
|
($M except per share)
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
|
2014
|
|
2013
|
|
2013
|
|
2013
|
|
Petroleum and natural gas sales
|
|
195,885
|
|
306,073
|
|
344,688
|
|
387,684
|
|
381,183
|
|
325,108
|
|
327,185
|
|
311,966
|
|
Net earnings
|
|
1,275
|
|
58,642
|
|
53,903
|
|
53,993
|
|
102,788
|
|
101,510
|
|
67,796
|
|
106,198
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.01
|
|
0.55
|
|
0.50
|
|
0.51
|
|
1.00
|
|
1.00
|
|
0.67
|
|
1.05
|
|
|
Diluted
|
|
0.01
|
|
0.54
|
|
0.50
|
|
0.50
|
|
0.99
|
|
0.98
|
|
0.66
|
|
1.04
|
The following table shows a reconciliation of the change in net
earnings:
|
($M)
|
|
|
Q1/15 vs. Q4/14
|
|
|
Q1/15 vs. Q1/14
|
|
Net earnings - Comparative period
|
|
|
58,642
|
|
|
102,788
|
|
Changes in:
|
|
|
|
|
|
|
|
Fund flows from operations
|
|
|
(64,733)
|
|
|
(84,568)
|
|
Equity based compensation
|
|
|
(647)
|
|
|
(2,568)
|
|
Unrealized gain or loss on derivative instruments
|
|
|
(37,127)
|
|
|
(23,905)
|
|
Unrealized foreign exchange gain or loss
|
|
|
(859)
|
|
|
(26,845)
|
|
Unrealized other expense
|
|
|
484
|
|
|
(7)
|
|
Accretion
|
|
|
512
|
|
|
37
|
|
Depletion and depreciation
|
|
|
26,224
|
|
|
8,495
|
|
Deferred tax
|
|
|
18,779
|
|
|
27,848
|
|
Net earnings - Current period
|
|
|
1,275
|
|
|
1,275
|
The fluctuations in net earnings from quarter-to-quarter and from
year-to-year are caused by changes in both cash and non-cash based
income and charges. Cash based items are reflected in fund flows from
operations and include: sales, royalties, operating expenses,
transportation, general and administration expense, current tax
expense, interest expense, realized gains and losses on derivative
instruments, and realized foreign exchange gains and losses. Non-cash
items include: equity based compensation expense, unrealized gains and
losses on derivative instruments, unrealized foreign exchange gains and
losses, accretion, depletion and depreciation expense, and deferred
taxes. In addition, non-cash items may also include amounts resulting
from acquisitions or charges resulting from impairment or impairment
recoveries.
Equity based compensation
Equity based compensation expense relates to non-cash compensation
expense attributable to long-term incentives granted to directors,
officers and employees under the Vermilion Incentive Plan ("VIP"). The
expense is recognized over the vesting period based on the grant date
fair value of awards, adjusted for the ultimate number of awards that
actually vest as determined by the Company's achievement of performance
conditions.
Equity based compensation expense in Q1 2015 was relatively consistent
as compared to Q4 2014. The increase of $2.6 million (16%) as compared
to Q1 2014 is due to a higher number of VIP awards outstanding, as well
as an upward revision of future performance condition assumptions that
occurred in Q2 2014.
Unrealized gain or loss on derivative instruments
Unrealized gain or loss on derivative instruments arise as a result of
changes in forecasted future commodity prices. As Vermilion uses
derivative instruments to manage the commodity price exposure of our
future crude oil and natural gas production, we will normally recognize
unrealized gains on derivative instruments when forecasted future
commodity prices decline and vice-versa.
For the three months ended March 31, 2015, we recognized an unrealized
loss on derivative instruments of $20.0 million, relating primarily to
our TTF and US dollar swaps and collars. As at March 31, 2015, we have
a net derivative asset position of $4.8 million.
Unrealized foreign exchange gain or loss
As a result of Vermilion's international operations, Vermilion conducts
business in currencies other than the Canadian dollar and has monetary
assets and liabilities (including cash, receivables, payables,
derivative assets and liabilities, and intercompany loans) denominated
in such currencies. Vermilion's exposure to foreign currencies
includes the US dollar, the Euro and the Australian Dollar.
Unrealized foreign exchange gains and losses are the result of
translating monetary assets and liabilities held in non-functional
currencies to the respective functional currencies of Vermilion and its
subsidiaries. Unrealized foreign exchange primarily results from the
translation of Euro denominated financial assets. As such, an
appreciation in the Euro against the Canadian dollar will result in an
unrealized foreign exchange gain, and vice-versa.
For the three months ended March 31, 2015, the Canadian dollar
strengthened slightly versus the Euro, which partially offset by a
weakening of the Canadian dollar versus the US dollar, resulting in an
unrealized foreign exchange loss of $4.8 million.
Accretion
Fluctuations in accretion expense are primarily the result of changes in
discount rates applicable to the balance of asset retirement
obligations and additions resulting from drilling and acquisitions.
Q1 2015 accretion expense was relatively consistent compared to Q4 2014
and Q1 2014.
Depletion and depreciation
Fluctuations in depletion and depreciation expense are primarily the
result of changes in produced crude oil and natural gas volumes.
Depletion and depreciation on a per boe basis of $21.90 in Q1 2015 was
lower as compared to $24.42 in Q4 2014 and $23.13 in Q1 2014. The
decrease is due to increased production from the Mannville
condensate-rich gas play in Canada and natural gas properties in the
Netherlands, which have lower per boe depletion expense as compared to
2014.
Deferred tax
Deferred tax expense arises primarily as a result of changes in the
accounting basis and tax basis for capital assets and asset retirement
obligations and changes in available tax losses.
FINANCIAL POSITION REVIEW
Balance sheet strategy
We believe that our balance sheet supports our defined growth
initiatives and our focus is on managing and maintaining a conservative
balance sheet. To ensure that our balance sheet continues to support
our defined growth initiatives, we regularly review whether forecasted
fund flows from operations is sufficient to finance planned capital
expenditures, dividends, and abandonment and reclamation expenditures.
To the extent that forecasted fund flows from operations is not
expected to be sufficient to fulfill such expenditures, we will
evaluate our ability to finance any excess with debt (including
borrowing using the unutilized capacity of our existing revolving
credit facility) or issue equity.
To ensure that we maintain a conservative balance sheet, we monitor the
ratio of net debt to fund flows from operations and typically strive to
maintain an internally targeted ratio of approximately 1.0 to 1.3 in a
normalized commodity price environment. Where prices trend higher, we
may target a lower ratio and conversely, in a lower commodity price
environment, the acceptable ratio may be higher. At times, we will use
our balance sheet to finance acquisitions and, in these situations, we
are prepared to accept a higher ratio in the short term but will
implement a strategy to reduce the ratio to acceptable levels within a
reasonable period of time, usually considered to be no more than 12 to
24 months. This plan could potentially include an increase in hedging
activities, a reduction in capital expenditures, an issuance of equity
or the utilization of excess fund flows from operations to reduce
outstanding indebtedness.
In the current low commodity price environment, Vermilion's net debt to
fund flows ratio is expected to be higher than the longer term target
ratio. During this period, Vermilion will remain focused on maintaining
a strong balance sheet and will manage the business accordingly.
Long-term debt
Our long-term debt consists of our revolving credit facility and our
senior unsecured notes. The applicable annual interest rates and the
balances recognized on our balance sheet are as follows:
|
|
|
|
Annual Interest Rate
|
|
|
As At
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Revolving credit facility
|
|
|
3.0%
|
|
|
3.1%
|
|
|
1,168,614
|
|
|
1,014,067
|
|
Senior unsecured notes (1)
|
|
|
6.5%
|
|
|
6.5%
|
|
|
224,235
|
|
|
224,013
|
|
Long-term debt
|
|
|
3.6%
|
|
|
3.8%
|
|
|
1,392,849
|
|
|
1,238,080
|
|
(1)
|
The senior unsecured notes, which will mature on February 10, 2016, are
included in the current portion of long-term debt as at March 31, 2015.
|
Revolving Credit Facility
On January 30, 2015, Vermilion exercised its option to increase its
credit facility from $1.5 billion to $1.75 billion. Subsequent to Q1
2015, we negotiated a further expansion and extension of our existing
revolving credit facilities from $1.75 billion to $2 billion with a
maturity of May 2019. The facility bears interest at rates applicable
to demand loans plus applicable margins. The following table outlines
the terms of our revolving credit facility:
|
|
|
|
|
|
|
As At
|
|
|
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
Total facility amount
|
|
|
|
|
|
$1.75 billion
|
|
|
$1.50 billion
|
|
Amount drawn
|
|
|
|
|
|
$1.2 billion
|
|
|
$1.0 billion
|
|
Letters of credit outstanding
|
|
|
|
|
|
$9.8 million
|
|
|
$8.6 million
|
|
Facility maturity date
|
|
|
|
|
|
31-May-17
|
|
|
31-May-17
|
In addition, the revolving credit facility is subject to the following
covenants:
|
|
|
|
|
|
As At
|
|
|
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
Financial covenant
|
|
|
Limit
|
|
|
2015
|
|
|
2014
|
|
Consolidated total debt to consolidated EBITDA
|
|
|
4.0
|
|
|
1.55
|
|
|
1.21
|
|
Consolidated total senior debt to consolidated EBITDA
|
|
|
3.0
|
|
|
1.30
|
|
|
0.99
|
|
Consolidated total senior debt to total capitalization
|
|
|
50%
|
|
|
35%
|
|
|
31%
|
Our covenants include financial measures defined within our revolving
credit facility agreement that are not defined under GAAP. These
financial measures are defined by our revolving credit facility
agreement as follows:
-
Consolidated total debt: Includes all amounts classified as "Long-term
debt" on our balance sheet, including the current portion.
-
Consolidated total senior debt: Defined as consolidated total debt
excluding unsecured and subordinated debt.
-
Consolidated EBITDA: Defined as consolidated net earnings before
interest, income taxes, depreciation, accretion and certain other
non-cash items.
-
Total capitalization: Includes all amounts on our balance sheet
classified as "Long-term debt", including the current portion, and
"Shareholders' equity".
Vermilion was in compliance with its financial covenants for all periods
presented.
Senior Unsecured Notes
We have outstanding senior unsecured notes that are senior unsecured
obligations and rank pari passu with all our other present and future
unsecured and unsubordinated indebtedness. The following table
outlines the terms of these notes:
|
|
|
|
|
|
|
|
|
Total issued and outstanding amount
|
|
|
|
|
|
$225.0 million
|
|
Interest rate
|
|
|
|
|
|
6.5% per annum
|
|
Issued date
|
|
|
|
|
|
February 10, 2011
|
|
Maturity date
|
|
|
|
|
|
February 10, 2016
|
Vermilion may redeem all or part of the senior unsecured notes at 100%
of their principal amount plus any accrued and unpaid interest. The
notes were initially recognized at fair value net of transaction costs
and are subsequently measured at amortized cost using an effective
interest rate of 7.1%.
Net debt
Net debt is reconciled to its most directly comparable GAAP measure,
long-term debt, as follows:
|
|
|
|
As At
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
Long-term debt
|
|
|
1,168,614
|
|
|
1,238,080
|
|
Current liabilities(1)
|
|
|
549,580
|
|
|
365,729
|
|
Current assets
|
|
|
(329,591)
|
|
|
(338,159)
|
|
Net debt
|
|
|
1,388,603
|
|
|
1,265,650
|
|
|
|
|
|
|
|
|
|
Ratio of net debt to annualized fund flows from operations
|
|
|
2.9
|
|
|
1.6
|
|
(1)
|
Includes the current portion of long-term debt, which, as at March 31,
2015, represents the senior unsecured notes that will mature on
February 10, 2016.
|
Long term debt, including the current portion, as at March 31, 2015
increased to $1.39 billion from $1.24 billion as at December 31, 2014
as a result of draws on the revolving credit facility during the
current year to fund capital expenditures, particularly relating to
development expenditures in Canada and Ireland. The increase in
long-term debt resulted in an increase to net debt from $1.27 billion
to $1.39 billion. As a result of this increase to long-term debt and
weak commodity prices, the ratio of net debt to fund flows from
operations increased from 1.6 times as at December 31, 2014 to 2.9
times as at March 31, 2015.
Shareholders' capital
During the three months ended March 31, 2015, we maintained monthly
dividends at $0.215 per share and declared dividends which totalled
$69.4 million.
The following table outlines our dividend payment history:
|
Date
|
|
|
|
|
|
Monthly dividend per unit or share
|
|
January 2003 to December 2007
|
|
|
|
|
|
$0.17
|
|
January 2008 to December 2012
|
|
|
|
|
|
$0.19
|
|
January 2013 to December 31, 2013
|
|
|
|
|
|
$0.20
|
|
January 2014 to Present
|
|
|
|
|
|
$0.215
|
Our policy with respect to dividends is to be conservative and maintain
a low ratio of dividends to fund flows from operations. During low
price commodity cycles, we will initially maintain dividends and allow
the ratio to rise. Should low commodity price cycles remain for an
extended period of time, we will evaluate the necessity of changing the
level of dividends, taking into consideration capital development
requirements, debt levels and acquisition opportunities. In a further
step to preserve our financial flexibility and conservatively exercise
our access to capital, an amendment to our existing DRIP to include a
Premium Dividend™ Component was announced in February 2015. The
Premium Dividend™ Component, when combined with our continuing Dividend
Reinvestment Component, is expected to increase our access, at the
election of shareholders, to the lowest cost sources of equity capital
available. While the Premium Dividend™ is expected to result in a
modest amount of equity issuance, we believe it represents the most
prudent approach to preserving near-term balance sheet strength. We
view implementation of a Premium Dividend™ as a short-term measure to
maintain our financial flexibility while we continue to lower our unit
costs and await further clarity on the direction of commodity prices.
Both components of our program can be turned off at the company's
discretion, offering considerable flexibility. We will actively
monitor our ongoing needs and manage our continued use of each
component as circumstances dictate. It is not currently expected that
Vermilion will be required to change its dividend in 2015.
Although we currently expect to be able to maintain our current
dividend, fund flows from operations may not be sufficient during this
period to fund cash dividends, capital expenditures and asset
retirement obligations. We will evaluate our ability to finance any
shortfalls with debt, issuances of equity or by reducing some or all
categories of expenditures to ensure that total expenditures do not
exceed available funds.
The following table reconciles the change in shareholders' capital:
|
Shareholders' Capital
|
|
|
Number of Shares ('000s)
|
|
|
Amount ($M)
|
|
Balance as at December 31, 2014
|
|
|
107,303
|
|
|
1,959,021
|
|
Issuance of shares pursuant to the dividend reinvestment plan
|
|
|
405
|
|
|
21,378
|
|
Shares issued pursuant to the bonus plan
|
|
|
10
|
|
|
532
|
|
Balance as at March 31, 2015
|
|
|
107,718
|
|
|
1,980,931
|
As at March 31, 2015, there were approximately 1.8 million VIP awards
outstanding. As at May 7, 2015, there were approximately 109.3 million
common shares issued and outstanding.
ASSET RETIREMENT OBLIGATIONS
As at March 31, 2015, asset retirement obligations were $377.0 million
compared to $350.8 million as at December 31, 2014.
The increase in asset retirement obligations is largely attributable to
an overall decrease in the discount rates applied to the abandonment
obligations, as well as accretion and additions from new wells drilled
year to date.
OFF BALANCE SHEET ARRANGEMENTS
We have certain lease agreements that are entered into in the normal
course of operations, including operating leases for which no asset or
liability value has been assigned to the consolidated balance sheet as
at March 31, 2015.
We have not entered into any guarantee or off balance sheet arrangements
that would materially impact our financial position or results of
operations.
RISK MANAGEMENT
Vermilion is exposed to various market and operational risks. For a
detailed discussion of these risks, please see Vermilion's Annual
Report for the year ended December 31, 2014.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS requires
management to make estimates, judgments and assumptions that affect
reported assets, liabilities, revenues and expenses, gains and losses,
and disclosures of any possible contingencies. These estimates and
assumptions are developed based on the best available information which
management believed to be reasonable at the time such estimates and
assumptions were made. As such, these assumptions are uncertain at the
time estimates are made and could change, resulting in a material
impact on Vermilion's consolidated financial statements. Estimates are
reviewed by management on an ongoing basis and as a result may change
from period to period due to the availability of new information or
changes in circumstances. Additionally, as a result of the unique
circumstances of each jurisdiction that Vermilion operates in, the
critical accounting estimates may affect one or more jurisdictions.
There have been no changes to our critical accounting estimates used in
applying accounting policies for the three months ended March 31,
2015. Further information, including a discussion of critical
accounting estimates, can be found in the notes to the Consolidated
Financial Statements and annual MD&A for the year ended December 31,
2014, available on SEDAR at www.sedar.com or on Vermilion's website at www.vermilionenergy.com.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There was no change in Vermilion's internal control over financial
reporting that occurred during the period covered by this MD&A that has
materially affected, or is reasonably likely to materially affect, its
internal control over financial reporting.
Supplemental Table 1: Netbacks
The following table includes financial statement information on a per
unit basis by business unit. Natural gas sales volumes have been
converted on a basis of six thousand cubic feet of natural gas to one
barrel of oil equivalent.
|
|
|
|
Three Months Ended March 31, 2015
|
|
Three Months Ended March 31, 2014
|
|
|
|
|
Oil & NGLs
|
|
|
Natural Gas
|
|
|
Total
|
|
|
Oil & NGLs
|
|
|
Natural Gas
|
|
|
Total
|
|
|
|
|
$/bbl
|
|
|
$/mcf
|
|
|
$/boe
|
|
|
$/bbl
|
|
|
$/mcf
|
|
|
$/boe
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
49.15
|
|
|
2.97
|
|
|
35.81
|
|
|
95.25
|
|
|
5.50
|
|
|
69.26
|
|
Royalties
|
|
|
(5.87)
|
|
|
(0.23)
|
|
|
(3.95)
|
|
|
(10.75)
|
|
|
(0.34)
|
|
|
(7.12)
|
|
Transportation
|
|
|
(2.42)
|
|
|
(0.16)
|
|
|
(1.81)
|
|
|
(2.27)
|
|
|
(0.17)
|
|
|
(1.74)
|
|
Operating
|
|
|
(9.02)
|
|
|
(1.41)
|
|
|
(8.78)
|
|
|
(10.99)
|
|
|
(1.17)
|
|
|
(9.34)
|
|
Operating netback
|
|
|
31.84
|
|
|
1.17
|
|
|
21.27
|
|
|
71.24
|
|
|
3.82
|
|
|
51.06
|
|
General and administration
|
|
|
|
|
|
|
|
|
(1.85)
|
|
|
|
|
|
|
|
|
(1.61)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
19.42
|
|
|
|
|
|
|
|
|
49.45
|
|
France
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
64.33
|
|
|
-
|
|
|
64.33
|
|
|
117.54
|
|
|
-
|
|
|
117.54
|
|
Royalties
|
|
|
(5.48)
|
|
|
-
|
|
|
(5.49)
|
|
|
(7.35)
|
|
|
-
|
|
|
(7.35)
|
|
Transportation
|
|
|
(3.24)
|
|
|
-
|
|
|
(3.24)
|
|
|
(4.75)
|
|
|
-
|
|
|
(4.75)
|
|
Operating
|
|
|
(11.64)
|
|
|
-
|
|
|
(11.64)
|
|
|
(16.42)
|
|
|
-
|
|
|
(16.42)
|
|
Operating netback
|
|
|
43.97
|
|
|
-
|
|
|
43.96
|
|
|
89.02
|
|
|
-
|
|
|
89.02
|
|
General and administration
|
|
|
|
|
|
|
|
|
(5.49)
|
|
|
|
|
|
|
|
|
(5.19)
|
|
Other income
|
|
|
|
|
|
|
|
|
34.16
|
|
|
|
|
|
|
|
|
-
|
|
Current income taxes
|
|
|
|
|
|
|
|
|
(15.35)
|
|
|
|
|
|
|
|
|
(25.26)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
57.28
|
|
|
|
|
|
|
|
|
58.57
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
52.93
|
|
|
8.09
|
|
|
48.60
|
|
|
106.96
|
|
|
10.53
|
|
|
63.60
|
|
Royalties
|
|
|
-
|
|
|
(0.28)
|
|
|
(1.68)
|
|
|
-
|
|
|
(0.57)
|
|
|
(3.38)
|
|
Operating
|
|
|
-
|
|
|
(1.78)
|
|
|
(10.56)
|
|
|
-
|
|
|
(1.56)
|
|
|
(9.25)
|
|
Operating netback
|
|
|
52.93
|
|
|
6.03
|
|
|
36.36
|
|
|
106.96
|
|
|
8.40
|
|
|
50.97
|
|
General and administration
|
|
|
|
|
|
|
|
|
(1.34)
|
|
|
|
|
|
|
|
|
(0.91)
|
|
Current income taxes
|
|
|
|
|
|
|
|
|
(4.33)
|
|
|
|
|
|
|
|
|
(5.80)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
30.69
|
|
|
|
|
|
|
|
|
44.26
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
-
|
|
|
7.53
|
|
|
45.21
|
|
|
-
|
|
|
9.31
|
|
|
55.85
|
|
Royalties
|
|
|
-
|
|
|
(1.06)
|
|
|
(6.34)
|
|
|
-
|
|
|
(1.88)
|
|
|
(11.29)
|
|
Transportation
|
|
|
-
|
|
|
(0.59)
|
|
|
(3.55)
|
|
|
-
|
|
|
(0.44)
|
|
|
(2.64)
|
|
Operating
|
|
|
-
|
|
|
(1.32)
|
|
|
(7.93)
|
|
|
-
|
|
|
(1.62)
|
|
|
(9.74)
|
|
Operating netback
|
|
|
-
|
|
|
4.56
|
|
|
27.39
|
|
|
-
|
|
|
5.37
|
|
|
32.18
|
|
General and administration
|
|
|
|
|
|
|
|
|
(6.38)
|
|
|
|
|
|
|
|
|
(3.56)
|
|
Current income taxes
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
(3.36)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
21.01
|
|
|
|
|
|
|
|
|
25.26
|
|
Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
83.80
|
|
|
-
|
|
|
83.80
|
|
|
127.26
|
|
|
-
|
|
|
127.26
|
|
Operating
|
|
|
(25.58)
|
|
|
-
|
|
|
(25.58)
|
|
|
(24.55)
|
|
|
-
|
|
|
(24.55)
|
|
PRRT (1)
|
|
|
(10.23)
|
|
|
-
|
|
|
(10.23)
|
|
|
(28.63)
|
|
|
-
|
|
|
(28.63)
|
|
Operating netback
|
|
|
47.99
|
|
|
-
|
|
|
47.99
|
|
|
74.08
|
|
|
-
|
|
|
74.08
|
|
General and administration
|
|
|
|
|
|
|
|
|
(6.32)
|
|
|
|
|
|
|
|
|
(1.71)
|
|
Corporate income taxes
|
|
|
|
|
|
|
|
|
(2.51)
|
|
|
|
|
|
|
|
|
(12.51)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
39.16
|
|
|
|
|
|
|
|
|
59.86
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
48.79
|
|
|
-
|
|
|
48.79
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Royalties
|
|
|
(14.98)
|
|
|
-
|
|
|
(14.98)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating
|
|
|
(15.61)
|
|
|
-
|
|
|
(15.61)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating netback
|
|
|
18.20
|
|
|
-
|
|
|
18.20
|
|
|
-
|
|
|
-
|
|
|
-
|
|
General and administration
|
|
|
|
|
|
|
|
|
(78.41)
|
|
|
|
|
|
|
|
|
-
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
(60.21)
|
|
|
|
|
|
|
|
|
-
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
58.25
|
|
|
5.26
|
|
|
47.17
|
|
|
111.62
|
|
|
7.99
|
|
|
88.67
|
|
Realized hedging gain
|
|
|
0.75
|
|
|
0.43
|
|
|
1.51
|
|
|
0.26
|
|
|
0.21
|
|
|
0.61
|
|
Royalties
|
|
|
(5.21)
|
|
|
(0.37)
|
|
|
(3.95)
|
|
|
(6.72)
|
|
|
(0.60)
|
|
|
(5.59)
|
|
Transportation
|
|
|
(2.49)
|
|
|
(0.34)
|
|
|
(2.30)
|
|
|
(2.58)
|
|
|
(0.30)
|
|
|
(2.29)
|
|
Operating
|
|
|
(11.61)
|
|
|
(1.51)
|
|
|
(10.56)
|
|
|
(16.43)
|
|
|
(1.38)
|
|
|
(13.49)
|
|
PRRT (1)
|
|
|
(0.97)
|
|
|
-
|
|
|
(0.57)
|
|
|
(7.36)
|
|
|
-
|
|
|
(4.71)
|
|
Operating netback
|
|
|
38.72
|
|
|
3.47
|
|
|
31.30
|
|
|
78.79
|
|
|
5.92
|
|
|
63.20
|
|
General and administration
|
|
|
|
|
|
|
|
|
(3.27)
|
|
|
|
|
|
|
|
|
(3.37)
|
|
Interest expense
|
|
|
|
|
|
|
|
|
(3.20)
|
|
|
|
|
|
|
|
|
(2.67)
|
|
Realized foreign exchange gain (loss)
|
|
|
|
|
|
|
|
|
0.78
|
|
|
|
|
|
|
|
|
(0.47)
|
|
Other income
|
|
|
|
|
|
|
|
|
7.70
|
|
|
|
|
|
|
|
|
0.05
|
|
Corporate income taxes (1)
|
|
|
|
|
|
|
|
|
(4.24)
|
|
|
|
|
|
|
|
|
(8.98)
|
|
Fund flows from operations netback
|
|
|
|
|
|
|
|
|
29.07
|
|
|
|
|
|
|
|
|
47.76
|
|
(1)
|
Vermilion considers Australian PRRT to be an operating item and
accordingly has included PRRT in the calculation of operating
netbacks. Current income taxes presented above excludes PRRT.
|
Supplemental Table 2: Hedges
The following tables outline Vermilion's outstanding risk management
positions as at March 31, 2015:
|
|
|
|
Note
|
|
|
Volume
|
|
|
Strike Price(s)
|
|
Crude Oil
|
|
|
|
|
|
|
|
|
|
|
WTI - Collar
|
|
|
|
|
|
|
|
|
|
|
January 2015 - June 2015
|
|
|
1
|
|
|
250 bbl/d
|
|
|
75.00 - 82.75 US $
|
|
March 2015 - May 2015
|
|
|
|
|
|
1,000 bbl/d
|
|
|
48.00 - 59.23 US $
|
|
April 2015 - June 2015
|
|
|
2
|
|
|
500 bbl/d
|
|
|
54.50 - 66.28 US $
|
|
Dated Brent - Collar
|
|
|
|
|
|
|
|
|
|
|
March 2015 - May 2015
|
|
|
|
|
|
1,000 bbl/d
|
|
|
52.00 - 62.21 US $
|
|
March 2015 - June 2015
|
|
|
|
|
|
250 bbl/d
|
|
|
58.00 - 69.35 US $
|
|
April 2015 - September 2015
|
|
|
1
|
|
|
250 bbl/d
|
|
|
60.00 - 74.15 US $
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Natural Gas
|
|
|
|
|
|
|
|
|
|
|
AECO - Collar
|
|
|
|
|
|
|
|
|
|
|
April 2015 - October 2015
|
|
|
|
|
|
2,500 GJ/d
|
|
|
2.75 - 3.52 CAD $
|
|
April 2015 - December 2015
|
|
|
|
|
|
2,500 GJ/d
|
|
|
2.75 - 3.52 CAD $
|
|
AECO - Swap
|
|
|
|
|
|
|
|
|
|
|
April 2015 - October 2015
|
|
|
3
|
|
|
10,000 GJ/d
|
|
|
2.98 CAD $
|
|
April 2015 - December 2015
|
|
|
4
|
|
|
2,500 GJ/d
|
|
|
2.99 CAD $
|
|
AECO Basis - Fixed Price Differential
|
|
|
|
|
|
|
|
|
|
|
January 2015 - December 2015
|
|
|
|
|
|
5,000 mmbtu/d
|
|
|
Nymex HH less 0.68 US $
|
|
April 2015 - October 2015
|
|
|
|
|
|
7,500 mmbtu/d
|
|
|
Nymex HH less 0.62 US $
|
|
Nymex HH - Collar
|
|
|
|
|
|
|
|
|
|
|
April 2015 - October 2015
|
|
|
|
|
|
10,000 mmbtu/d
|
|
|
3.36 - 4.01 US $
|
|
April 2015 - December 2015
|
|
|
|
|
|
2,500 mmbtu/d
|
|
|
3.50 - 4.11 US $
|
|
November 2015 - March 2016
|
|
|
5
|
|
|
5,000 mmbtu/d
|
|
|
3.25 - 3.86 US $
|
|
(1)
|
The contracted volumes increase to 750 boe/d for any monthly settlement
periods above the contracted ceiling price.
|
|
(2)
|
The contracted volumes increase to 1,500 boe/d for any monthly
settlement periods above the contracted ceiling price.
|
|
(3)
|
On the last business day of each month, the counterparty has the option
to increase the contracted volumes by an additional 10,000 GJ/d at the
contracted price, for the following month.
|
|
(4)
|
On the last business day of each month, the counterparty has the option
to increase the contracted volumes by an additional 2,500 GJ/d at the
contracted price, for the following month.
|
|
(5)
|
The contracted volumes increase to 10,000 mmbtu/d for any monthly
settlement periods above the contracted ceiling price.
|
|
|
|
|
|
|
|
|
|
|
|
|
European Natural Gas
|
|
|
|
|
|
|
|
|
|
|
NBP - Swap
|
|
|
|
|
|
|
|
|
|
|
July 2015 - March 2016
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.42 EUR €
|
|
October 2015 - March 2016
|
|
|
|
|
|
10,368 GJ/d
|
|
|
6.54 EUR €
|
|
January 2016 - June 2016
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.32 EUR €
|
|
January 2016 - June 2016
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.82 US $
|
|
TTF - Collar
|
|
|
|
|
|
|
|
|
|
|
January 2015 - December 2015
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.11 - 6.83 EUR €
|
|
TTF - Swap
|
|
|
|
|
|
|
|
|
|
|
January 2015 - December 2015
|
|
|
|
|
|
11,664 GJ/d
|
|
|
6.45 EUR €
|
|
January 2015 - March 2016
|
|
|
|
|
|
5,184 GJ/d
|
|
|
6.40 EUR €
|
|
January 2015 - June 2016
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.07 EUR €
|
|
February 2015 - March 2016
|
|
|
|
|
|
5,184 GJ/d
|
|
|
6.24 EUR €
|
|
April 2015 - December 2015
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.30 EUR €
|
|
April 2015 - March 2016
|
|
|
|
|
|
5,832 GJ/d
|
|
|
6.18 EUR €
|
|
October 2015 - December 2015
|
|
|
|
|
|
2,592 GJ/d
|
|
|
5.69 EUR €
|
|
October 2015 - March 2016
|
|
|
|
|
|
2,592 GJ/d
|
|
|
6.64 EUR €
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
|
|
|
|
|
|
|
|
AESO - Swap
|
|
|
|
|
|
|
|
|
|
|
January 2016 - December 2016
|
|
|
|
|
|
31.2 MWh/d
|
|
|
39.00 CAD $
|
|
AESO - Swap (Physical)
|
|
|
|
|
|
|
|
|
|
|
January 2013 - December 2015
|
|
|
|
|
|
72.0 MWh/d
|
|
|
53.17 CAD $
|
|
|
|
|
|
|
|
|
|
|
|
|
US Dollar
|
|
|
|
|
|
|
|
|
|
|
USD - Collar
|
|
|
|
|
|
|
|
|
|
|
January 2015 - June 2015
|
|
|
1
|
|
|
5,000,000 US $/month
|
|
|
1.162 - 1.181 CAD $
|
|
February 2015 - December 2015
|
|
|
|
|
|
2,500,000 US $/month
|
|
|
1.180 - 1.223 CAD $
|
|
USD - Forward
|
|
|
|
|
|
|
|
|
|
|
February 2015 - December 2015
|
|
|
|
|
|
2,500,000 US $/month
|
|
|
1.198 CAD $
|
|
(1)
|
Vermilion has upside participation on this hedge up to the limit price
of 1.253 CAD; above which, settlement will occur at the conditional
call level of 1.181 CAD.
|
Supplemental Table 3: Capital Expenditures
|
|
|
|
Three Months Ended
|
|
By classification
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Drilling and development
|
|
|
174,311
|
|
|
151,395
|
|
|
168,840
|
|
Exploration and evaluation
|
|
|
-
|
|
|
14,848
|
|
|
27,535
|
|
Capital expenditures
|
|
|
174,311
|
|
|
166,243
|
|
|
196,375
|
|
Property acquisition
|
|
|
35
|
|
|
1,652
|
|
|
178,227
|
|
Acquisitions
|
|
|
35
|
|
|
1,652
|
|
|
178,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
By category
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Land
|
|
|
742
|
|
|
1,457
|
|
|
4,753
|
|
Seismic
|
|
|
1,493
|
|
|
7,598
|
|
|
3,432
|
|
Drilling and completion
|
|
|
82,343
|
|
|
69,691
|
|
|
106,536
|
|
Production equipment and facilities
|
|
|
74,755
|
|
|
77,272
|
|
|
68,755
|
|
Recompletions
|
|
|
7,115
|
|
|
7,696
|
|
|
4,226
|
|
Other
|
|
|
7,863
|
|
|
2,529
|
|
|
8,673
|
|
Capital expenditures
|
|
|
174,311
|
|
|
166,243
|
|
|
196,375
|
|
Acquisitions
|
|
|
35
|
|
|
1,652
|
|
|
178,227
|
|
Total capital expenditures and acquisitions
|
|
|
174,346
|
|
|
167,895
|
|
|
374,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
By country
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Canada
|
|
|
114,884
|
|
|
87,113
|
|
|
119,707
|
|
France
|
|
|
34,114
|
|
|
37,189
|
|
|
37,967
|
|
Netherlands
|
|
|
4,333
|
|
|
10,022
|
|
|
20,118
|
|
Germany
|
|
|
968
|
|
|
563
|
|
|
173,067
|
|
Ireland
|
|
|
12,955
|
|
|
20,932
|
|
|
16,236
|
|
Australia
|
|
|
6,455
|
|
|
11,616
|
|
|
5,691
|
|
United States
|
|
|
637
|
|
|
460
|
|
|
-
|
|
Corporate
|
|
|
-
|
|
|
-
|
|
|
1,816
|
|
Total capital expenditures and acquisitions
|
|
|
174,346
|
|
|
167,895
|
|
|
374,602
|
Supplemental Table 4: Production
|
|
|
Q1/15
|
|
Q4/14
|
|
Q3/14
|
|
Q2/14
|
|
Q1/14
|
|
Q4/13
|
|
Q3/13
|
|
Q2/13
|
|
Q1/13
|
|
Q4/12
|
|
Q3/12
|
|
Q2/12
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
10,893
|
|
11,384
|
|
11,469
|
|
12,676
|
|
9,437
|
|
8,719
|
|
7,969
|
|
8,885
|
|
7,966
|
|
7,983
|
|
7,322
|
|
7,757
|
|
|
NGLs (bbls/d)
|
|
2,976
|
|
2,741
|
|
2,291
|
|
2,796
|
|
2,071
|
|
1,699
|
|
1,897
|
|
1,725
|
|
1,335
|
|
1,106
|
|
1,204
|
|
1,321
|
|
|
Natural gas (mmcf/d)
|
|
61.78
|
|
58.36
|
|
57.07
|
|
57.59
|
|
49.53
|
|
41.43
|
|
43.40
|
|
43.69
|
|
41.04
|
|
31.41
|
|
35.54
|
|
41.32
|
|
|
Total (boe/d)
|
|
24,165
|
|
23,851
|
|
23,272
|
|
25,070
|
|
19,763
|
|
17,322
|
|
17,099
|
|
17,892
|
|
16,140
|
|
14,323
|
|
14,449
|
|
15,965
|
|
|
% of consolidated
|
|
48%
|
|
49%
|
|
47%
|
|
49%
|
|
42%
|
|
43%
|
|
41%
|
|
42%
|
|
41%
|
|
40%
|
|
40%
|
|
40%
|
|
France
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
11,463
|
|
11,133
|
|
11,111
|
|
11,025
|
|
10,771
|
|
11,131
|
|
11,625
|
|
10,390
|
|
10,330
|
|
9,843
|
|
9,767
|
|
9,931
|
|
|
Natural gas (mmcf/d)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5.23
|
|
4.19
|
|
4.21
|
|
3.91
|
|
3.39
|
|
3.57
|
|
|
Total (boe/d)
|
|
11,463
|
|
11,133
|
|
11,111
|
|
11,025
|
|
10,771
|
|
11,131
|
|
12,496
|
|
11,088
|
|
11,032
|
|
10,495
|
|
10,333
|
|
10,526
|
|
|
% of consolidated
|
|
23%
|
|
22%
|
|
22%
|
|
21%
|
|
23%
|
|
27%
|
|
30%
|
|
26%
|
|
29%
|
|
29%
|
|
28%
|
|
27%
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs (bbls/d)
|
|
63
|
|
81
|
|
63
|
|
96
|
|
69
|
|
62
|
|
48
|
|
50
|
|
96
|
|
70
|
|
41
|
|
84
|
|
|
Natural gas (mmcf/d)
|
|
36.41
|
|
31.35
|
|
38.07
|
|
40.35
|
|
43.15
|
|
37.53
|
|
28.78
|
|
38.52
|
|
36.91
|
|
33.03
|
|
34.59
|
|
33.74
|
|
|
Total (boe/d)
|
|
6,132
|
|
5,306
|
|
6,407
|
|
6,822
|
|
7,260
|
|
6,318
|
|
4,845
|
|
6,470
|
|
6,248
|
|
5,574
|
|
5,806
|
|
5,707
|
|
|
% of consolidated
|
|
12%
|
|
11%
|
|
13%
|
|
13%
|
|
16%
|
|
15%
|
|
12%
|
|
15%
|
|
16%
|
|
15%
|
|
16%
|
|
15%
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
16.80
|
|
17.71
|
|
15.38
|
|
16.13
|
|
10.64
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Total (boe/d)
|
|
2,801
|
|
2,952
|
|
2,563
|
|
2,689
|
|
1,773
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
% of consolidated
|
|
6%
|
|
6%
|
|
5%
|
|
5%
|
|
4%
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
5,672
|
|
6,134
|
|
6,567
|
|
6,483
|
|
7,110
|
|
6,189
|
|
7,070
|
|
7,363
|
|
5,287
|
|
5,873
|
|
5,958
|
|
6,970
|
|
|
% of consolidated
|
|
11%
|
|
12%
|
|
13%
|
|
12%
|
|
15%
|
|
15%
|
|
17%
|
|
17%
|
|
14%
|
|
16%
|
|
16%
|
|
18%
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
153
|
|
195
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil & NGLs (bbls/d)
|
|
31,220
|
|
31,668
|
|
31,501
|
|
33,076
|
|
29,458
|
|
27,800
|
|
28,609
|
|
28,413
|
|
25,014
|
|
24,875
|
|
24,292
|
|
26,063
|
|
|
% of consolidated
|
|
62%
|
|
64%
|
|
63%
|
|
63%
|
|
63%
|
|
68%
|
|
69%
|
|
66%
|
|
65%
|
|
69%
|
|
66%
|
|
67%
|
|
|
Natural gas (mmcf/d)
|
|
115.00
|
|
107.42
|
|
110.52
|
|
114.08
|
|
103.32
|
|
78.96
|
|
77.41
|
|
86.40
|
|
82.16
|
|
68.34
|
|
73.52
|
|
78.63
|
|
|
% of consolidated
|
|
38%
|
|
36%
|
|
37%
|
|
37%
|
|
37%
|
|
32%
|
|
31%
|
|
34%
|
|
35%
|
|
31%
|
|
34%
|
|
33%
|
|
|
Total (boe/d)
|
|
50,386
|
|
49,571
|
|
49,920
|
|
52,089
|
|
46,677
|
|
40,960
|
|
41,510
|
|
42,813
|
|
38,707
|
|
36,265
|
|
36,546
|
|
39,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
10,893
|
|
11,248
|
|
8,387
|
|
7,659
|
|
4,701
|
|
2,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs (bbls/d)
|
|
2,976
|
|
2,476
|
|
1,666
|
|
1,232
|
|
1,297
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
61.78
|
|
55.67
|
|
42.39
|
|
37.50
|
|
43.38
|
|
43.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (boe/d)
|
|
24,165
|
|
23,001
|
|
17,117
|
|
15,142
|
|
13,227
|
|
11,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
48%
|
|
47%
|
|
41%
|
|
40%
|
|
38%
|
|
36%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
France
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
11,463
|
|
11,011
|
|
10,873
|
|
9,952
|
|
8,110
|
|
8,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
-
|
|
-
|
|
3.40
|
|
3.59
|
|
0.95
|
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (boe/d)
|
|
11,463
|
|
11,011
|
|
11,440
|
|
10,550
|
|
8,269
|
|
8,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
23%
|
|
22%
|
|
28%
|
|
28%
|
|
23%
|
|
26%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs (bbls/d)
|
|
63
|
|
77
|
|
64
|
|
67
|
|
58
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
36.41
|
|
38.20
|
|
35.42
|
|
34.11
|
|
32.88
|
|
28.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (boe/d)
|
|
6,132
|
|
6,443
|
|
5,967
|
|
5,751
|
|
5,538
|
|
4,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
12%
|
|
13%
|
|
15%
|
|
15%
|
|
16%
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
16.80
|
|
14.99
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (boe/d)
|
|
2,801
|
|
2,498
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
6%
|
|
5%
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
5,672
|
|
6,571
|
|
6,481
|
|
6,360
|
|
8,168
|
|
7,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
11%
|
|
13%
|
|
16%
|
|
17%
|
|
23%
|
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (bbls/d)
|
|
153
|
|
49
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil & NGLs (bbls/d)
|
|
31,220
|
|
31,432
|
|
27,471
|
|
25,270
|
|
22,334
|
|
19,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
62%
|
|
63%
|
|
67%
|
|
67%
|
|
63%
|
|
62%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (mmcf/d)
|
|
115.00
|
|
108.85
|
|
81.21
|
|
75.20
|
|
77.21
|
|
73.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of consolidated
|
|
38%
|
|
37%
|
|
33%
|
|
33%
|
|
37%
|
|
38%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (boe/d)
|
|
50,386
|
|
49,573
|
|
41,005
|
|
37,803
|
|
35,202
|
|
32,132
|
Supplemental Table 5: Segmented Financial Results
|
|
Three Months Ended March 31, 2015
|
|
($M)
|
Canada
|
|
France
|
|
Netherlands
|
|
Germany
|
|
Ireland
|
|
Australia
|
|
United States
|
|
Corporate
|
|
Total
|
|
Drilling and development
|
114,849
|
|
34,114
|
|
4,333
|
|
968
|
|
12,955
|
|
6,455
|
|
637
|
|
-
|
|
174,311
|
|
Oil and gas sales to external customers
|
77,884
|
|
59,832
|
|
26,818
|
|
11,395
|
|
-
|
|
19,284
|
|
672
|
|
-
|
|
195,885
|
|
Royalties
|
(8,592)
|
|
(5,102)
|
|
(926)
|
|
(1,598)
|
|
-
|
|
-
|
|
(206)
|
|
-
|
|
(16,424)
|
|
Revenue from external customers
|
69,292
|
|
54,730
|
|
25,892
|
|
9,797
|
|
-
|
|
19,284
|
|
466
|
|
-
|
|
179,461
|
|
Transportation expense
|
(3,942)
|
|
(3,011)
|
|
-
|
|
(894)
|
|
(1,693)
|
|
-
|
|
-
|
|
-
|
|
(9,540)
|
|
Operating expense
|
(19,099)
|
|
(10,826)
|
|
(5,826)
|
|
(1,999)
|
|
-
|
|
(5,886)
|
|
(215)
|
|
-
|
|
(43,851)
|
|
General and administration
|
(4,015)
|
|
(5,111)
|
|
(737)
|
|
(1,608)
|
|
(512)
|
|
(1,454)
|
|
(1,080)
|
|
957
|
|
(13,560)
|
|
PRRT
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,354)
|
|
-
|
|
-
|
|
(2,354)
|
|
Corporate income taxes
|
-
|
|
(14,281)
|
|
(2,388)
|
|
-
|
|
-
|
|
(577)
|
|
-
|
|
(377)
|
|
(17,623)
|
|
Interest expense
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(13,298)
|
|
(13,298)
|
|
Realized gain on derivative instruments
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,257
|
|
6,257
|
|
Realized foreign exchange gain
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,306
|
|
3,306
|
|
Realized other income
|
-
|
|
31,775
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
222
|
|
31,997
|
|
Fund flows from operations
|
42,236
|
|
53,276
|
|
16,941
|
|
5,296
|
|
(2,205)
|
|
9,013
|
|
(829)
|
|
(2,933)
|
|
120,795
|
ADDITIONAL AND NON-GAAP FINANCIAL MEASURES
This MD&A includes references to certain financial measures which do not
have standardized meanings prescribed by IFRS. As such, these
financial measures are considered additional GAAP or non-GAAP financial
measures and therefore may not be comparable with similar measures
presented by other issuers.
Fund flows from operations: We define fund flows from operations as cash flows from operating
activities before changes in non-cash operating working capital and
asset retirement obligations settled. Management believes that by
excluding the temporary impact of changes in non-cash operating working
capital, fund flows from operations provides a measure of our ability
to generate cash (that is not subject to short-term movements in
non-cash operating working capital) necessary to pay dividends, repay
debt, fund asset retirement obligations and make capital investments.
As we have presented fund flows from operations in the "Segmented
Information" note of our unaudited condensed consolidated interim
financial statements for the three months ended March 31, 2015, we
consider fund flows from operations to be an additional GAAP financial
measure.
Free cash flow: Represents fund flows from operations in excess of capital
expenditures. We consider free cash flow to be a key measure as it is
used to determine the funding available for investing and financing
activities, including payment of dividends, repayment of long-term
debt, reallocation to existing business units, and deployment into new
ventures.
Net dividends: We define net dividends as dividends declared less proceeds received for
the issuance of shares pursuant to the dividend reinvestment plan.
Management monitors net dividends and net dividends as a percentage of
fund flows from operations to assess our ability to pay dividends.
Payout: We define payout as net dividends plus drilling and development,
exploration and evaluation, dispositions and asset retirement
obligations settled. Management uses payout to assess the amount of
cash distributed back to shareholders and re-invested in the business
for maintaining production and organic growth.
Fund flows from operations (excluding Corrib) and Payout (excluding
Corrib): Management excludes expenditures relating to the Corrib project in
assessing fund flows from operations (an additional GAAP financial
measure) and payout in order to assess our ability to generate cash and
finance organic growth from our current producing assets.
Net debt: We define net debt as the sum of long-term debt and working capital.
Management uses net debt, and the ratio of net debt to fund flows from operations, to analyze our financial position and leverage. Please refer to the
preceding "Net Debt" section for a reconciliation of the net debt
non-GAAP financial measure.
Diluted shares outstanding: Is the sum of shares outstanding at the period end plus outstanding
awards under the VIP, based on current estimates of future performance
factors and forfeiture rates.
Cash dividends per share: Represents cash dividends declared per share.
Netbacks: Per boe and per mcf measures used in the analysis of operational
activities.
Total returns: Includes cash dividends per share and the change in Vermilion's share
price on the Toronto Stock Exchange.
The following tables reconcile fund flows from operations, net
dividends, payout, and diluted shares outstanding to their most
directly comparable GAAP measures as presented in our financial
statements:
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Cash flows from operating activities
|
|
|
22,647
|
|
|
229,146
|
|
|
178,238
|
|
Changes in non-cash operating working capital
|
|
|
95,041
|
|
|
(49,865)
|
|
|
24,474
|
|
Asset retirement obligations settled
|
|
|
3,107
|
|
|
6,247
|
|
|
2,651
|
|
Fund flows from operations
|
|
|
120,795
|
|
|
185,528
|
|
|
205,363
|
|
Expenses related to Corrib
|
|
|
2,205
|
|
|
2,299
|
|
|
1,870
|
|
Fund flows from operations (excluding Corrib)
|
|
|
123,000
|
|
|
187,827
|
|
|
207,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Dividends declared
|
|
|
69,390
|
|
|
69,119
|
|
|
66,007
|
|
Issuance of shares pursuant to the dividend reinvestment plan
|
|
|
(21,378)
|
|
|
(20,980)
|
|
|
(18,885)
|
|
Net dividends
|
|
|
48,012
|
|
|
48,139
|
|
|
47,122
|
|
Drilling and development
|
|
|
174,311
|
|
|
151,395
|
|
|
168,840
|
|
Exploration and evaluation
|
|
|
-
|
|
|
14,848
|
|
|
27,535
|
|
Asset retirement obligations settled
|
|
|
3,107
|
|
|
6,247
|
|
|
2,651
|
|
Payout
|
|
|
225,430
|
|
|
220,629
|
|
|
246,148
|
|
Corrib drilling and development
|
|
|
(12,955)
|
|
|
(20,932)
|
|
|
(16,236)
|
|
Payout (excluding Corrib)
|
|
|
212,475
|
|
|
199,697
|
|
|
229,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As At
|
|
|
|
|
Mar 31,
|
|
|
Dec 31,
|
|
|
Mar 31,
|
|
('000s of shares)
|
|
|
2015
|
|
|
2014
|
|
|
2014
|
|
Shares outstanding
|
|
|
107,718
|
|
|
107,303
|
|
|
102,453
|
|
Potential shares issuable pursuant to the VIP
|
|
|
3,043
|
|
|
3,031
|
|
|
2,714
|
|
Diluted shares outstanding
|
|
|
110,761
|
|
|
110,334
|
|
|
105,167
|
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
Note
|
|
|
2015
|
|
|
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
88,192
|
|
|
120,405
|
|
Accounts receivable
|
|
|
|
|
169,378
|
|
|
171,820
|
|
Crude oil inventory
|
|
|
|
|
26,358
|
|
|
9,510
|
|
Derivative instruments
|
|
|
|
|
10,000
|
|
|
23,391
|
|
Income tax receivable
|
|
|
|
|
19,394
|
|
|
-
|
|
Prepaid expenses
|
|
|
|
|
16,269
|
|
|
13,033
|
|
|
|
|
|
|
329,591
|
|
|
338,159
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments
|
|
|
|
|
-
|
|
|
1,403
|
|
Deferred taxes
|
|
|
|
|
154,532
|
|
|
154,816
|
|
Exploration and evaluation assets
|
|
3
|
|
|
378,276
|
|
|
380,621
|
|
Capital assets
|
|
2
|
|
|
3,599,999
|
|
|
3,511,092
|
|
|
|
|
|
|
4,462,398
|
|
|
4,386,091
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
283,885
|
|
|
298,196
|
|
Current portion of long-term debt
|
|
5
|
|
|
224,235
|
|
|
-
|
|
Dividends payable
|
|
6
|
|
|
23,159
|
|
|
23,070
|
|
Derivative instruments
|
|
|
|
|
5,176
|
|
|
-
|
|
Income taxes payable
|
|
|
|
|
13,125
|
|
|
44,463
|
|
|
|
|
|
|
549,580
|
|
|
365,729
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
5
|
|
|
1,168,614
|
|
|
1,238,080
|
|
Finance lease obligation
|
|
2
|
|
|
26,751
|
|
|
-
|
|
Asset retirement obligations
|
|
4
|
|
|
377,003
|
|
|
350,753
|
|
Deferred taxes
|
|
|
|
|
386,935
|
|
|
410,183
|
|
|
|
|
|
|
2,508,883
|
|
|
2,364,745
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Shareholders' capital
|
|
6
|
|
|
1,980,931
|
|
|
1,959,021
|
|
Contributed surplus
|
|
|
|
|
110,696
|
|
|
92,188
|
|
Accumulated other comprehensive (loss) income
|
|
|
|
|
(34,412)
|
|
|
5,722
|
|
Deficit
|
|
|
|
|
(103,700)
|
|
|
(35,585)
|
|
|
|
|
|
|
1,953,515
|
|
|
2,021,346
|
|
|
|
|
|
|
4,462,398
|
|
|
4,386,091
|
CONSOLIDATED STATEMENTS OF NET EARNINGS AND COMPREHENSIVE INCOME
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS,
UNAUDITED)
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Note
|
|
|
2015
|
|
|
2014
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
Petroleum and natural gas sales
|
|
|
|
|
195,885
|
|
|
381,183
|
|
Royalties
|
|
|
|
|
(16,424)
|
|
|
(24,024)
|
|
Petroleum and natural gas revenue
|
|
|
|
|
179,461
|
|
|
357,159
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
43,851
|
|
|
57,986
|
|
Transportation
|
|
|
|
|
9,540
|
|
|
9,861
|
|
Equity based compensation
|
|
7
|
|
|
19,040
|
|
|
16,472
|
|
Loss (gain) on derivative instruments
|
|
|
|
|
13,713
|
|
|
(6,575)
|
|
Interest expense
|
|
|
|
|
13,298
|
|
|
11,460
|
|
General and administration
|
|
|
|
|
13,560
|
|
|
14,467
|
|
Foreign exchange loss (gain)
|
|
|
|
|
1,539
|
|
|
(19,959)
|
|
Other (income) expense
|
|
11
|
|
|
(31,736)
|
|
|
33
|
|
Accretion
|
|
4
|
|
|
5,675
|
|
|
5,712
|
|
Depletion and depreciation
|
|
2, 3
|
|
|
90,957
|
|
|
99,452
|
|
|
|
|
|
|
179,437
|
|
|
188,909
|
|
EARNINGS BEFORE INCOME TAXES
|
|
|
|
|
24
|
|
|
168,250
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
(21,228)
|
|
|
6,620
|
|
Current
|
|
|
|
|
19,977
|
|
|
58,842
|
|
|
|
|
|
|
(1,251)
|
|
|
65,462
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS
|
|
|
|
|
1,275
|
|
|
102,788
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
|
|
(40,134)
|
|
|
45,535
|
|
COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
(38,859)
|
|
|
148,323
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
0.01
|
|
|
1.00
|
|
Diluted
|
|
|
|
|
0.01
|
|
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING ('000s)
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
107,513
|
|
|
102,278
|
|
Diluted
|
|
|
|
|
109,305
|
|
|
104,171
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Note
|
|
|
2015
|
|
|
2014
|
|
OPERATING
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
1,275
|
|
|
102,788
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Accretion
|
|
4
|
|
|
5,675
|
|
|
5,712
|
|
|
Depletion and depreciation
|
|
2, 3
|
|
|
90,957
|
|
|
99,452
|
|
|
Unrealized loss (gain) on derivative instruments
|
|
|
|
|
19,970
|
|
|
(3,935)
|
|
|
Equity based compensation
|
|
7
|
|
|
19,040
|
|
|
16,472
|
|
|
Unrealized foreign exchange loss (gain)
|
|
|
|
|
4,845
|
|
|
(22,000)
|
|
|
Unrealized other expense
|
|
|
|
|
261
|
|
|
254
|
|
|
Deferred taxes
|
|
|
|
|
(21,228)
|
|
|
6,620
|
|
Asset retirement obligations settled
|
|
4
|
|
|
(3,107)
|
|
|
(2,651)
|
|
Changes in non-cash operating working capital
|
|
|
|
|
(95,041)
|
|
|
(24,474)
|
|
Cash flows from operating activities
|
|
|
|
|
22,647
|
|
|
178,238
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
|
|
|
|
|
|
|
|
|
|
Drilling and development
|
|
2
|
|
|
(174,311)
|
|
|
(168,840)
|
|
Exploration and evaluation
|
|
3
|
|
|
-
|
|
|
(27,535)
|
|
Property acquisitions
|
|
2, 3
|
|
|
(35)
|
|
|
(178,227)
|
|
Changes in non-cash investing working capital
|
|
|
|
|
12,143
|
|
|
39,473
|
|
Cash flows used in investing activities
|
|
|
|
|
(162,203)
|
|
|
(335,129)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in long-term debt
|
|
|
|
|
154,914
|
|
|
(50,000)
|
|
Cash dividends
|
|
|
|
|
(47,923)
|
|
|
(45,520)
|
|
Cash flows from (used in) financing activities
|
|
|
|
|
106,991
|
|
|
(95,520)
|
|
Foreign exchange gain on cash held in foreign currencies
|
|
|
|
|
352
|
|
|
14,189
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
|
(32,213)
|
|
|
(238,222)
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
120,405
|
|
|
389,559
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
88,192
|
|
|
151,337
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary information for operating activities - cash payments
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
18,245
|
|
|
14,094
|
|
|
Income taxes paid
|
|
|
|
|
70,513
|
|
|
21,074
|
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
|
Shareholders'
|
|
|
Contributed
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Shareholders'
|
|
|
Note
|
|
|
Capital
|
|
|
Surplus
|
|
|
Income
|
|
|
Earnings
|
|
|
Equity
|
|
Balances as at January 1, 2014
|
|
|
|
1,618,443
|
|
|
75,427
|
|
|
47,142
|
|
|
(24,637)
|
|
|
1,716,375
|
|
Net earnings
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
102,788
|
|
|
102,788
|
|
Currency translation adjustments
|
|
|
|
-
|
|
|
-
|
|
|
45,535
|
|
|
-
|
|
|
45,535
|
|
Equity based compensation expense
|
|
|
|
-
|
|
|
15,751
|
|
|
-
|
|
|
-
|
|
|
15,751
|
|
Dividends declared
|
6
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(66,007)
|
|
|
(66,007)
|
|
Shares issued pursuant to the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan
|
6
|
|
|
18,885
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,885
|
|
Modification of equity based awards
|
|
|
|
-
|
|
|
(2,396)
|
|
|
-
|
|
|
-
|
|
|
(2,396)
|
|
Shares issued pursuant to the bonus plan
|
6
|
|
|
721
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
721
|
|
Balances as at March 31, 2014
|
|
|
|
1,638,049
|
|
|
88,782
|
|
|
92,677
|
|
|
12,144
|
|
|
1,831,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
|
|
Shareholders'
|
|
|
Contributed
|
|
|
Comprehensive
|
|
|
|
|
|
Shareholders'
|
|
|
Note
|
|
|
Capital
|
|
|
Surplus
|
|
|
Loss
|
|
|
Deficit
|
|
|
Equity
|
|
Balances as at January 1, 2015
|
|
|
|
1,959,021
|
|
|
92,188
|
|
|
5,722
|
|
|
(35,585)
|
|
|
2,021,346
|
|
Net earnings
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,275
|
|
|
1,275
|
|
Currency translation adjustments
|
|
|
|
-
|
|
|
-
|
|
|
(40,134)
|
|
|
-
|
|
|
(40,134)
|
|
Equity based compensation expense
|
7
|
|
|
-
|
|
|
18,508
|
|
|
-
|
|
|
-
|
|
|
18,508
|
|
Dividends declared
|
6
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(69,390)
|
|
|
(69,390)
|
|
Shares issued pursuant to the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan
|
6
|
|
|
21,378
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21,378
|
|
Shares issued pursuant to the bonus plan
|
6
|
|
|
532
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
532
|
|
Balances as at March 31, 2015
|
|
|
|
1,980,931
|
|
|
110,696
|
|
|
(34,412)
|
|
|
(103,700)
|
|
|
1,953,515
|
DESCRIPTION OF EQUITY RESERVES
Shareholders' capital
Represents the recognized amount for common shares when issued, net of
equity issuance costs and deferred taxes.
Contributed surplus
Represents the recognized value of employee awards which are settled in
shares. Once vested, the value of the awards is transferred to
shareholders' capital.
Accumulated other comprehensive (loss) income
Represents the cumulative income and expenses which are not recorded
immediately in net earnings and are accumulated until an event triggers
recognition in net earnings. The current balance consists of currency
translation adjustments resulting from translating financial statements
of subsidiaries with a foreign functional currency to Canadian dollars
at period-end rates.
Deficit
Represents the cumulative net earnings less distributed earnings of
Vermilion Energy Inc.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER
SHARE AMOUNTS, UNAUDITED)
1. BASIS OF PRESENTATION
Vermilion Energy Inc. (the "Company" or "Vermilion") is a corporation
governed by the laws of the Province of Alberta and is actively engaged
in the business of crude oil and natural gas exploration, development,
acquisition and production.
These condensed consolidated interim financial statements are in
compliance with IAS 34, "Interim financial reporting" and have been
prepared using the same accounting policies and methods of computation
as Vermilion's consolidated financial statements for the year ended
December 31, 2014.
These condensed consolidated interim financial statements should be read
in conjunction with Vermilion's consolidated financial statements for
the year ended December 31, 2014, which are contained within
Vermilion's Annual Report for the year ended December 31, 2014 and are
available on SEDAR at www.sedar.com or on Vermilion's website at www.vermilionenergy.com.
These condensed consolidated interim financial statements were approved
and authorized for issuance by the Board of Directors of Vermilion on
May 7, 2015.
2. CAPITAL ASSETS
The following table reconciles the change in Vermilion's capital assets:
|
|
|
|
Petroleum and
|
|
|
Furniture and
|
|
|
Total
|
|
($M)
|
|
|
Natural Gas Assets
|
|
|
Office Equipment
|
|
|
Capital Assets
|
|
Balance at January 1, 2014
|
|
|
2,784,634
|
|
|
15,211
|
|
|
2,799,845
|
|
Additions
|
|
|
608,709
|
|
|
9,980
|
|
|
618,689
|
|
Property acquisitions
|
|
|
176,625
|
|
|
-
|
|
|
176,625
|
|
Corporate acquisitions
|
|
|
390,523
|
|
|
-
|
|
|
390,523
|
|
Changes in estimate for asset retirement obligations
|
|
|
19,107
|
|
|
-
|
|
|
19,107
|
|
Depletion and depreciation
|
|
|
(412,768)
|
|
|
(5,072)
|
|
|
(417,840)
|
|
Effect of movements in foreign exchange rates
|
|
|
(75,635)
|
|
|
(222)
|
|
|
(75,857)
|
|
Balance at December 31, 2014
|
|
|
3,491,195
|
|
|
19,897
|
|
|
3,511,092
|
|
Additions
|
|
|
173,612
|
|
|
699
|
|
|
174,311
|
|
Property acquisitions
|
|
|
35
|
|
|
-
|
|
|
35
|
|
Changes in estimate for asset retirement obligations
|
|
|
29,006
|
|
|
-
|
|
|
29,006
|
|
Depletion and depreciation
|
|
|
(97,440)
|
|
|
(1,210)
|
|
|
(98,650)
|
|
Recognition of finance lease obligation
|
|
|
31,028
|
|
|
-
|
|
|
31,028
|
|
Effect of movements in foreign exchange rates
|
|
|
(46,674)
|
|
|
(149)
|
|
|
(46,823)
|
|
Balance at March 31, 2015
|
|
|
3,580,762
|
|
|
19,237
|
|
|
3,599,999
|
As part of the Elkhorn acquisition, Vermilion assumed an agreement for
the construction and use of a solution gas facility which was under
construction at the time of acquisition. The substance of the
arrangement has been determined to be a lease and has been classified
as a finance lease. The carrying amount of the asset and liability at
the commencement date was $31.0 million, with the liability being
apportioned between current ($3.9 million) and long-term ($27.1
million).
3. EXPLORATION AND EVALUATION ASSETS
The following table reconciles the change in Vermilion's exploration and
evaluation assets:
|
($M)
|
|
|
|
Exploration and Evaluation Assets
|
|
Balance at January 1, 2014
|
|
|
|
136,259
|
|
Additions
|
|
|
|
69,035
|
|
Changes in estimate for asset retirement obligations
|
|
|
|
22
|
|
Property Acquisitions
|
|
|
|
46,135
|
|
Corporate acquisitions
|
|
|
|
138,264
|
|
Depreciation
|
|
|
|
(5,038)
|
|
Effect of movements in foreign exchange rates
|
|
|
|
(4,056)
|
|
Balance at December 31, 2014
|
|
|
|
380,621
|
|
Changes in estimate for asset retirement obligations
|
|
|
|
12
|
|
Depreciation
|
|
|
|
(956)
|
|
Effect of movements in foreign exchange rates
|
|
|
|
(1,401)
|
|
Balance at March 31, 2015
|
|
|
|
378,276
|
4. ASSET RETIREMENT OBLIGATIONS
The following table reconciles the change in Vermilion's asset
retirement obligations:
|
($M)
|
|
|
Asset Retirement Obligations
|
|
Balance at January 1, 2014
|
|
|
326,162
|
|
Additional obligations recognized
|
|
|
22,565
|
|
Changes in estimates for asset retirement obligations
|
|
|
(3,434)
|
|
Obligations settled
|
|
|
(15,956)
|
|
Accretion
|
|
|
23,913
|
|
Changes in discount rates
|
|
|
9,404
|
|
Effect of movements in foreign exchange rates
|
|
|
(11,901)
|
|
Balance at December 31, 2014
|
|
|
350,753
|
|
Additional obligations recognized
|
|
|
681
|
|
Obligations settled
|
|
|
(3,107)
|
|
Accretion
|
|
|
5,675
|
|
Changes in discount rates
|
|
|
28,337
|
|
Effect of movements in foreign exchange rates
|
|
|
(5,336)
|
|
Balance at March 31, 2015
|
|
|
377,003
|
5. LONG-TERM DEBT
The following table summarizes Vermilion's outstanding long-term debt:
|
|
|
|
As At
|
|
($M)
|
|
|
Mar 31, 2015
|
|
|
Dec 31, 2014
|
|
Revolving credit facility
|
|
|
1,168,614
|
|
|
1,014,067
|
|
Senior unsecured notes (1)
|
|
|
224,235
|
|
|
224,013
|
|
Long-term debt
|
|
|
1,392,849
|
|
|
1,238,080
|
|
(1)
|
The senior unsecured notes, which will mature on February 10, 2016, are
included in the current portion of long-term debt as at March 31, 2015.
|
Revolving Credit Facility
At March 31, 2015, Vermilion had in place a bank revolving credit
facility totalling $1.75 billion, of which approximately $1.17 billion
was drawn. The facility, which matures on May 31, 2017, is fully
revolving up to the date of maturity.
The facility is extendable from time to time, but not more than once per
year, for a period not longer than three years, at the option of the
lenders and upon notice from Vermilion. If no extension is granted by
the lenders, the amounts owing pursuant to the facility are due at the
maturity date. This facility bears interest at a rate applicable to
demand loans plus applicable margins. For the three months ended March
31, 2015, the interest rate on the revolving credit facility was
approximately 3.0% (2014 - 3.1%).
The amount available to Vermilion under this facility is reduced by
certain outstanding letters of credit associated with Vermilion's
operations totalling $9.8 million as at March 31, 2015 (December 31,
2014 - $8.6 million).
The facility is secured by various fixed and floating charges against
the subsidiaries of Vermilion. Under the terms of the facility,
Vermilion must maintain:
-
A ratio of total bank borrowings (defined as consolidated total debt),
to consolidated net earnings before interest, income taxes,
depreciation, accretion and other certain non-cash items (defined as
consolidated EBITDA) of not greater than 4.0.
-
A ratio of consolidated total senior debt (defined as consolidated total
debt excluding unsecured and subordinated debt) to consolidated EBITDA
of not greater than 3.0.
-
A ratio of consolidated total senior debt to total capitalization
(defined as amounts classified as "Long-term debt", including the
current portion, and "Shareholders' Equity" on the balance sheet) of
less than 50%.
As at March 31, 2015, Vermilion was in compliance with all financial
covenants.
Subsequent to March 31, 2015, Vermilion negotiated a further expansion
and extension of its existing revolving credit facilities from $1.75
billion to $2 billion, with a maturity of May 2019.
Senior Unsecured Notes
On February 10, 2011, Vermilion issued $225.0 million of senior
unsecured notes at par. The notes bear interest at a rate of 6.5% per
annum and will mature on February 10, 2016. As direct senior unsecured
obligations of Vermilion, the notes rank pari passu with all other
present and future unsecured and unsubordinated indebtedness of the
Company. Vermilion may redeem all or part of the senior unsecured
notes at 100% of their principal amount plus any accrued and unpaid
interest. The notes were initially recognized at fair value net of
transaction costs and are subsequently measured at amortized cost using
an effective interest rate of 7.1%.
6. SHAREHOLDERS' CAPITAL
The following table reconciles the change in Vermilion's shareholders'
capital:
|
Shareholders' Capital
|
|
|
Number of Shares ('000s)
|
|
|
Amount ($M)
|
|
Balance as at January 1, 2014
|
|
|
102,123
|
|
|
1,618,443
|
|
Shares issued pursuant to corporate acquisition
|
|
|
2,827
|
|
|
204,960
|
|
Shares issued pursuant to the dividend reinvestment plan
|
|
|
1,279
|
|
|
79,430
|
|
Vesting of equity based awards
|
|
|
955
|
|
|
47,925
|
|
Share-settled dividends on vested equity based awards
|
|
|
108
|
|
|
7,542
|
|
Shares issued pursuant to the bonus plan
|
|
|
11
|
|
|
721
|
|
Balance as at December 31, 2014
|
|
|
107,303
|
|
|
1,959,021
|
|
Shares issued pursuant to the dividend reinvestment plan
|
|
|
405
|
|
|
21,378
|
|
Shares issued pursuant to the bonus plan
|
|
|
10
|
|
|
532
|
|
Balance as at March 31, 2015
|
|
|
107,718
|
|
|
1,980,931
|
Dividends declared to shareholders for the three months ended March 31,
2015 were $69.4 million (2014 - $66.0 million).
Subsequent to the end of the period and prior to the condensed
consolidated interim financial statements being authorized for issue on
May 7, 2015, Vermilion declared dividends totalling $23.5 million or
$0.215 per share.
7. EQUITY BASED COMPENSATION
The following table summarizes the number of awards outstanding under
the Vermilion Incentive Plan ("VIP"):
|
Number of Awards ('000s)
|
|
|
|
|
|
2015
|
|
|
2014
|
|
Opening balance
|
|
|
|
|
|
1,775
|
|
|
1,665
|
|
Granted
|
|
|
|
|
|
-
|
|
|
707
|
|
Vested
|
|
|
|
|
|
-
|
|
|
(515)
|
|
Modified
|
|
|
|
|
|
-
|
|
|
(21)
|
|
Forfeited
|
|
|
|
|
|
(18)
|
|
|
(61)
|
|
Closing balance
|
|
|
|
|
|
1,757
|
|
|
1,775
|
The fair value of a VIP award is determined on the grant date at the
closing price of Vermilion's common shares on the Toronto Stock
Exchange, adjusted by the estimated performance factor that will
ultimately be achieved.
8. SEGMENTED INFORMATION
Vermilion has operations in three core areas North America, Europe, and
Australia. Vermilion's operating activities in each country relate
solely to the exploration, development and production of petroleum and
natural gas. Vermilion has a Corporate head office located in Calgary,
Alberta. Costs incurred in the Corporate segment relate to Vermilion's
global hedging program and expenses incurred in financing and managing
our operating business units.
Vermilion's chief operating decision maker reviews the financial
performance of the Company by assessing the fund flows from operations
of each country individually. Fund flows from operations provides a
measure of each business unit's ability to generate cash (that is not
subject to short-term movements in non-cash operating working capital)
necessary to pay dividends, fund asset retirement obligations, and make
capital investments.
|
|
Three Months Ended March 31, 2015
|
|
($M)
|
Canada
|
|
France
|
|
Netherlands
|
|
Germany
|
|
Ireland
|
|
Australia
|
|
United States
|
|
Corporate
|
|
Total
|
|
Drilling and development
|
114,849
|
|
34,114
|
|
4,333
|
|
968
|
|
12,955
|
|
6,455
|
|
637
|
|
-
|
|
174,311
|
|
Oil and gas sales to external customers
|
77,884
|
|
59,832
|
|
26,818
|
|
11,395
|
|
-
|
|
19,284
|
|
672
|
|
-
|
|
195,885
|
|
Royalties
|
(8,592)
|
|
(5,102)
|
|
(926)
|
|
(1,598)
|
|
-
|
|
-
|
|
(206)
|
|
-
|
|
(16,424)
|
|
Revenue from external customers
|
69,292
|
|
54,730
|
|
25,892
|
|
9,797
|
|
-
|
|
19,284
|
|
466
|
|
-
|
|
179,461
|
|
Transportation expense
|
(3,942)
|
|
(3,011)
|
|
-
|
|
(894)
|
|
(1,693)
|
|
-
|
|
-
|
|
-
|
|
(9,540)
|
|
Operating expense
|
(19,099)
|
|
(10,826)
|
|
(5,826)
|
|
(1,999)
|
|
-
|
|
(5,886)
|
|
(215)
|
|
-
|
|
(43,851)
|
|
General and administration
|
(4,015)
|
|
(5,111)
|
|
(737)
|
|
(1,608)
|
|
(512)
|
|
(1,454)
|
|
(1,080)
|
|
957
|
|
(13,560)
|
|
PRRT
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,354)
|
|
-
|
|
-
|
|
(2,354)
|
|
Corporate income taxes
|
-
|
|
(14,281)
|
|
(2,388)
|
|
-
|
|
-
|
|
(577)
|
|
-
|
|
(377)
|
|
(17,623)
|
|
Interest expense
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(13,298)
|
|
(13,298)
|
|
Realized gain on derivative instruments
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6,257
|
|
6,257
|
|
Realized foreign exchange gain
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,306
|
|
3,306
|
|
Realized other income
|
-
|
|
31,775
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
222
|
|
31,997
|
|
Fund flows from operations
|
42,236
|
|
53,276
|
|
16,941
|
|
5,296
|
|
(2,205)
|
|
9,013
|
|
(829)
|
|
(2,933)
|
|
120,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
($M)
|
Canada
|
|
France
|
|
Netherlands
|
|
Germany
|
|
Ireland
|
|
Australia
|
|
United States
|
|
Corporate
|
|
Total
|
|
Drilling and development
|
101,673
|
|
29,853
|
|
15,191
|
|
196
|
|
16,236
|
|
5,691
|
|
-
|
|
-
|
|
168,840
|
|
Exploration and evaluation
|
13,266
|
|
8,114
|
|
4,927
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,228
|
|
27,535
|
|
Oil and gas sales to external customers
|
123,180
|
|
117,560
|
|
41,554
|
|
8,915
|
|
-
|
|
89,974
|
|
-
|
|
-
|
|
381,183
|
|
Royalties
|
(12,663)
|
|
(7,351)
|
|
(2,208)
|
|
(1,802)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(24,024)
|
|
Revenue from external customers
|
110,517
|
|
110,209
|
|
39,346
|
|
7,113
|
|
-
|
|
89,974
|
|
-
|
|
-
|
|
357,159
|
|
Transportation expense
|
(3,098)
|
|
(4,753)
|
|
-
|
|
(422)
|
|
(1,588)
|
|
-
|
|
-
|
|
-
|
|
(9,861)
|
|
Operating expense
|
(16,610)
|
|
(16,420)
|
|
(6,042)
|
|
(1,554)
|
|
-
|
|
(17,360)
|
|
-
|
|
-
|
|
(57,986)
|
|
General and administration
|
(2,868)
|
|
(5,194)
|
|
(598)
|
|
(568)
|
|
(282)
|
|
(1,206)
|
|
-
|
|
(3,751)
|
|
(14,467)
|
|
PRRT
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(20,239)
|
|
-
|
|
-
|
|
(20,239)
|
|
Corporate income taxes
|
-
|
|
(25,264)
|
|
(3,788)
|
|
(537)
|
|
-
|
|
(8,841)
|
|
-
|
|
(173)
|
|
(38,603)
|
|
Interest expense
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(11,460)
|
|
(11,460)
|
|
Realized gain on derivative instruments
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,640
|
|
2,640
|
|
Realized foreign exchange loss
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,041)
|
|
(2,041)
|
|
Realized other income
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
221
|
|
221
|
|
Fund flows from operations
|
87,941
|
|
58,578
|
|
28,918
|
|
4,032
|
|
(1,870)
|
|
42,328
|
|
-
|
|
(14,564)
|
|
205,363
|
Reconciliation of fund flows from operations to net earnings
|
|
|
|
Three Months Ended
|
|
|
|
|
Mar 31,
|
|
|
Mar 31,
|
|
($M)
|
|
|
2015
|
|
|
2014
|
|
Fund flows from operations
|
|
|
120,795
|
|
|
205,363
|
|
Equity based compensation
|
|
|
(19,040)
|
|
|
(16,472)
|
|
Unrealized (loss) gain on derivative instruments
|
|
|
(19,970)
|
|
|
3,935
|
|
Unrealized foreign exchange (loss) gain
|
|
|
(4,845)
|
|
|
22,000
|
|
Unrealized other expense
|
|
|
(261)
|
|
|
(254)
|
|
Accretion
|
|
|
(5,675)
|
|
|
(5,712)
|
|
Depletion and depreciation
|
|
|
(90,957)
|
|
|
(99,452)
|
|
Deferred taxes
|
|
|
21,228
|
|
|
(6,620)
|
|
Net earnings
|
|
|
1,275
|
|
|
102,788
|
9. CAPITAL DISCLOSURES
|
|
|
|
Three Months Ended
|
|
($M except as indicated)
|
|
|
Mar 31, 2015
|
|
|
Mar 31, 2014
|
|
Long-term debt
|
|
|
1,168,614
|
|
|
944,109
|
|
Current liabilities(1)
|
|
|
549,580
|
|
|
409,070
|
|
Current assets
|
|
|
(329,591)
|
|
|
(386,869)
|
|
Net debt [1]
|
|
|
1,388,603
|
|
|
966,310
|
|
Cash flows from operating activities
|
|
|
22,647
|
|
|
178,238
|
|
Changes in non-cash operating working capital
|
|
|
95,041
|
|
|
24,474
|
|
Asset retirement obligations settled
|
|
|
3,107
|
|
|
2,651
|
|
Fund flows from operations
|
|
|
120,795
|
|
|
205,363
|
|
Annualized fund flows from operations [2]
|
|
|
483,180
|
|
|
821,452
|
|
Ratio of net debt to annualized fund flows from operations ([1] ÷ [2])
|
|
|
2.9
|
|
|
1.2
|
|
(1)
|
Includes the current portion of long-term debt, which, as at March 31,
2015, represents the senior unsecured notes that will mature on
February 10, 2016.
|
Long-term debt, including the current portion, as at March 31, 2015
increased to $1.39 billion from $1.24 billion as at December 31, 2014,
primarily as a result of draws on the revolving credit facility to fund
capital expenditures as first quarter fund flows from operations were
lower due to weakening crude oil and North American natural gas
prices. The increase in long-term debt resulted in an increase in net
debt from $1.27 billion to $1.39 billion.
Due to this increase in net debt as well as the lower commodity price
environment, lower sales volumes, and the aforementioned capital
expenditures, the ratio of net debt to fund flows increased to 2.9.
10. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
The following table summarizes information relating to Vermilion's
financial instruments as at March 31, 2015 and December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
As at Mar 31, 2015
|
|
|
As at Dec 31, 2014
|
|
|
|
Class of financial
instrument
|
|
|
Consolidated balance
sheet caption
|
|
|
Accounting
designation
|
|
|
Related caption on
Statement of Net Earnings
|
|
|
Carrying
value ($M)
|
|
|
Fair value
($M)
|
|
|
Carrying
value ($M)
|
|
|
Fair value
($M)
|
|
|
Fair value
measurement
hierarchy
|
|
Cash
|
|
|
Cash and cash
equivalents
|
|
|
HFT
|
|
|
Gains and losses on foreign exchange
are included in foreign exchange loss
(gain)
|
|
|
88,192
|
|
|
88,192
|
|
|
120,405
|
|
|
120,405
|
|
|
Level 1
|
|
Receivables
|
|
|
Accounts receivable
|
|
|
LAR
|
|
|
Gains and losses on foreign exchange
are included in foreign exchange loss
(gain) and impairments are recognized
as general and administration expense
|
|
|
169,378
|
|
|
169,378
|
|
|
171,820
|
|
|
171,820
|
|
|
Not applicable
|
|
Derivative assets
|
|
|
Derivative instruments
|
|
|
HFT
|
|
|
Loss (gain) on derivative instruments
|
|
|
10,000
|
|
|
10,000
|
|
|
24,794
|
|
|
24,794
|
|
|
Level 2
|
|
Derivative liabilities
|
|
|
Derivative instruments
|
|
|
HFT
|
|
|
Loss (gain) on derivative instruments
|
|
|
(5,176)
|
|
|
(5,176)
|
|
|
-
|
|
|
-
|
|
|
Level 2
|
|
Payables
|
|
|
Accounts payable and
accrued liabilities
|
|
|
OTH
|
|
|
Gains and losses on foreign exchange
are included in foreign exchange loss
(gain)
|
|
|
(307,044)
|
|
|
(307,044)
|
|
|
(321,266)
|
|
|
(321,266)
|
|
|
Not applicable
|
|
|
|
|
Dividends payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
Long-term debt
|
|
|
OTH
|
|
|
Interest expense
|
|
|
(1,392,849)
|
|
|
(1,394,739)
|
|
|
(1,238,080)
|
|
|
(1,238,505)
|
|
|
Level 2
|
The accounting designations used in the above table refer to the
following:
HFT - Classified as "Held for trading" in accordance with International
Accounting Standard 39 "Financial Instruments: Recognition and
Measurement". These financial assets and liabilities are carried at
fair value on the consolidated balance sheets with associated gains and
losses reflected in net earnings.
LAR - "Loans and receivables" are initially recognized at fair value and
are subsequently measured at amortized cost. Impairments and foreign
exchange gains and losses are recognized in net earnings.
OTH - "Other financial liabilities" are initially recognized at fair
value net of transaction costs directly attributable to the issuance of
the instrument and subsequently are measured at amortized cost.
Interest is recognized in net earnings using the effective interest
method. Foreign exchange gains and losses are recognized in net
earnings.
Level 1 - Fair value measurement is determined by reference to
unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 - Fair value measurement is determined based on inputs other
than unadjusted quoted prices that are observable, either directly or
indirectly.
Level 3 - Fair value measurement is based on inputs for the asset or
liability that are not based on observable market data.
Determination of Fair Values
The level in the fair value hierarchy into which the fair value
measurements are categorized is determined on the basis of the lowest
level input that is significant to the fair value measurement.
Transfers between levels on the fair value hierarchy are deemed to have
occurred at the end of the reporting period.
Fair values for derivative assets and derivative liabilities are
determined using pricing models incorporating future prices that are
based on assumptions which are supported by prices from observable
market transactions and are adjusted for credit risk.
The carrying value of receivables approximate their fair value due to
their short maturities.
The carrying value of long-term debt outstanding on the revolving credit
facility approximates its fair value due to the use of short-term
borrowing instruments at market rates of interest.
The fair value of the senior unsecured notes changes in response to
changes in the market rates of interest payable on similar instruments
and was determined with reference to prevailing market rates for such
instruments.
Nature and Extent of Risks Arising from Financial Instruments
Market risk:
Vermilion's financial instruments are exposed to currency risk related
to changes in foreign currency denominated financial instruments and
commodity price risk related to outstanding derivative positions. The
following table summarizes what the impact on comprehensive income
before tax would be for the three months ended March 31, 2015 given
changes in the relevant risk variables that Vermilion considers were
reasonably possible at the balance sheet date. The impact on
comprehensive income before tax associated with changes in these risk
variables for assets and liabilities that are not considered financial
instruments are excluded from this analysis. This analysis does not
attempt to reflect any interdependencies between the relevant risk
variables.
|
|
|
Before tax effect on comprehensive
|
|
|
|
income - increase (decrease)
|
|
Risk ($M)
|
Description of change in risk variable
|
Mar 31, 2015
|
|
Currency risk - Euro to Canadian
|
Increase in strength of the Canadian dollar against the Euro by 5% over the
relevant closing rates
|
(3,466)
|
|
|
|
|
|
|
Decrease in strength of the Canadian dollar against the Euro by 5% over the
relevant closing rates
|
3,466
|
|
|
|
|
|
Currency risk - US $ to Canadian
|
Increase in strength of the Canadian dollar against the US $ by 5% over the
relevant closing rates
|
(5,770)
|
|
|
|
|
|
|
Decrease in strength of the Canadian dollar against the US $ by 5% over the
relevant closing rates
|
5,770
|
|
|
|
|
|
Commodity price risk
|
Increase in relevant oil reference price within option pricing models used to
determine
|
(1,038)
|
|
|
the fair value of financial derivatives by US $5.00/bbl at the relevant
valuation dates
|
|
|
|
|
|
|
|
Decrease in relevant oil reference price within option pricing models used to
determine
|
1,175
|
|
|
the fair value of financial derivatives by US $5.00/bbl at the relevant
valuation dates
|
|
|
|
|
|
|
|
Increase in relevant TTF reference price within option pricing models used to
determine
|
(7,975)
|
|
|
the fair value of financial derivatives by € 0.5/GJ at the relevant
valuation dates
|
|
|
|
|
|
|
|
Decrease in relevant TTF reference price within option pricing models used to
determine
|
8,459
|
|
|
the fair value of financial derivatives by € 0.5/GJ at the relevant
valuation dates
|
|
|
|
|
|
|
Interest rate risk
|
Increase in average Canadian prime interest rate by 100 basis points during the
relevant periods
|
(2,555)
|
|
|
|
|
|
|
Decrease in average Canadian prime interest rate by 100 basis points during the
relevant periods
|
2,555
|
11. SIGNIFICANT TRANSACTIONS
During Q1 2015, Vermilion was awarded a recovery of costs resulting from
an oil spill at the Ambès oil terminal in France that occurred in 2007.
The French court awarded Vermilion approximately €25 million (before
taxes), of which 50% is immediately due to Vermilion upon posting a
surety bond. This payment is expected to be received in Q2 2015, with
the remainder due upon conclusion of the appeal process. Based on the
recent court decision and the conclusions of an expert engaged by the
French court, Vermilion is virtually certain that the award will be
upheld.
SOURCE Vermilion Energy Inc.