Vermilion Energy Inc. Announces Results for the Year Ended December 31, 2022.
CALGARY, AB: Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX: VET) (NYSE: VET) is pleased to report operating and condensed financial results for the year ended December 31, 2022.
Highlights
Year-end 2022 Results
2022 fund flows from operations ("FFO")(1) was a record $1.6 billion ($10.00/basic share)(2), representing a year-over year increase of 78%, including the impact of $406 million of realized hedging losses and $223 million of temporary European windfall taxes.
2022 exploration and development ("E&D") capital expenditures(3) were $552 million, resulting in record free cash flow ("FCF")(4) of $1.1 billion ($6.62/basic share)(5), representing a year-over-year increase of 99%, including the impact of hedging losses and temporary windfall taxes.
Record FCF in 2022 allowed us to fund over $500 million of strategic acquisitions, reduce net debt by over $300 million and return over $100 million to our shareholders through dividends and share buybacks. We exited the year with net debt(6) of $1.3 billion, resulting in a net debt to trailing FFO ratio(7) of 0.8 times at December 31, 2022.
Following the reinstatement of our quarterly dividend in Q1 2022 and the approval of a normal course issuer bid ("NCIB") in Q3 2022, we declared $46 million in dividends and repurchased $72 million of Vermilion shares in 2022, representing 11% of FCF.
Net earnings were $1.3 billion ($8.03/basic share) for 2022, representing a 14% increase over the prior year.
Production in 2022 averaged 85,187 boe/d(8) which is consistent with 2021 production levels.
Total proved plus probable ("2P") reserves increased 9% from the prior year to 523 mmboe(9). Including acquisitions, we replaced 234% of production on a proved plus probable basis and increased our total proved plus probable reserve life index to 16.8 years.
The after-tax net present value of 2P reserves(9), discounted at 10%, increased 36% from the prior year to $8.9 billion ($54.72/basic share), with proved developed producing ("PDP") reserves making up more than 50% of this value.
2P finding, development and acquisition ("FD&A") costs, including changes in future development costs ("FDC") were $19.22/boe, resulting in a 2022 2P FD&A Operating Recycle Ratio of 4.4 times.
Fourth Quarter 2022 Results
Q4 2022 FFO was $284 million ($1.74/basic share)(2), including the full year impact of the temporary European windfall tax of $223 million. Without the temporary windfall tax, FFO would have been $507 million ($3.11/basic share), in line with the prior quarter.
Q4 2022 E&D capital expenditures(3) were $169 million, resulting in FCF of $115 million ($0.70/basic share)(5), including the full year impact of the temporary European windfall tax noted above. Without the impact of the temporary windfall tax, FCF would have been $338 million ($2.07/basic share), an increase of 4% over the prior quarter.
Q4 2022 production averaged 85,450 boe/d(8) an increase of 1% from the previous quarter. During the fourth quarter, production was impacted by unplanned downtime in Australia, cold weather and third-party downtime in North America and the delayed startup of our six-well Montney pad in Alberta.
Production from our North American operations averaged 58,499 boe/d(8) in Q4 2022, an increase of 2% from the prior quarter primarily due to new production from our Montney assets in Canada and a full quarter contribution from our 2022 drilling program in the United States.
Production from our International operations averaged 26,953 boe/d(8) in Q4 2022, a decrease of 1% from the prior quarter, primarily due to natural decline in Netherlands and Germany, as well as lower than anticipated production in Australia due to unplanned downtime.
Outlook
The Corrib acquisition has a planned close on March 31, 2023. This acquisition is expected to add approximately 7,000 boe/d of European gas production which was incorporated from March 31, 2023 onwards in our original production guidance of 87,000 to 91,000 boe/d.
Subsequent to year-end, we signed an agreement to sell approximately 5,500 boe/d of non-core light oil production in southeast Saskatchewan for total cash consideration of $225 million, before closing adjustments. The transaction has an effective date of September 1, 2022 and is expected to close in March 2023. The net proceeds will be used to pay down debt.
Taking into account the southeast Saskatchewan asset sale and Australia downtime, we are revising our 2023 production guidance to 82,000 to 86,000 boe/d. Our 2023 capital budget remains unchanged at $570 million.
In conjunction with our Q4 2022 release, we declared a quarterly cash dividend of $0.10 CDN per share for Q1 2023, representing a 25% increase over the prior quarterly dividend. In addition, we resumed share buybacks in early January 2023, and have repurchased 1.1 million shares in 2023 to date.
($M except as indicated)
Q4 2022
Q3 2022
Q4 2021
2022
2021
Financial
Petroleum and natural gas sales
842,693
964,678
765,915
3,476,394
2,079,761
Cash flows from operating activities
495,195
447,608
250,352
1,814,220
834,453
Fund flows from operations (1)
284,220
507,876
322,173
1,634,865
919,862
Fund flows from operations ($/basic share) (2)
1.74
3.10
1.99
10.00
5.71
Fund flows from operations ($/diluted share) (2)
1.70
3.01
1.93
9.71
5.58
Net earnings
395,408
271,079
344,588
1,313,062
1,148,696
Net earnings ($/basic share)
2.42
1.65
2.12
8.03
7.13
Cash flows used in investing activities
168,053
168,275
134,873
1,059,292
469,700
Capital expenditures (3)
169,305
184,015
145,807
551,817
374,796
Acquisitions
4,558
6,220
23,633
539,713
130,965
Asset retirement obligations settled
16,508
10,386
13,039
37,514
28,525
Repurchase of shares
--
71,659
--
71,659
--
Cash dividends ($/share)
0.08
0.08
--
0.28
--
Dividends declared
13,058
13,031
--
45,769
--
% of fund flows from operations (10)
5 %
3 %
-- %
3 %
-- %
Payout (11)
198,871
207,432
158,846
635,100
403,321
% of fund flows from operations (11)
70 %
41 %
49 %
39 %
44 %
Free cash flow (4)
114,915
323,861
176,366
1,083,048
545,066
Long-term debt
1,081,351
1,409,507
1,651,569
1,081,351
1,651,569
Net debt (6)
1,344,586
1,412,052
1,644,786
1,344,586
1,644,786
Net debt to four quarter trailing fund flows from operations (7)
0.8
0.8
1.8
0.8
1.8
Operational
Production (8)
Crude oil and condensate (bbls/d)
38,915
37,315
36,264
37,530
38,143
NGLs (bbls/d)
7,497
7,901
8,461
7,961
8,325
Natural gas (mmcf/d)
234.23
234.12
238.16
238.18
233.64
Total (boe/d)
85,450
84,237
84,417
85,187
85,408
Average realized prices
Crude oil and condensate ($/bbl)
115.02
123.02
96.88
123.89
83.78
NGLs ($/bbl)
39.93
44.64
47.27
45.95
34.44
Natural gas ($/mcf)
17.43
24.68
17.89
18.99
9.53
Production mix (% of production)
% priced with reference to WTI
38 %
38 %
38 %
38 %
38 %
% priced with reference to Dated Brent
18 %
17 %
16 %
16 %
17 %
% priced with reference to AECO
30 %
30 %
28 %
30 %
29 %
% priced with reference to TTF and NBP
14 %
15 %
18 %
16 %
16 %
Netbacks ($/boe)
Operating netback (12)
70.00
78.42
48.07
70.15
34.06
Fund flows from operations ($/boe) (13)
35.08
67.07
40.73
52.65
29.54
Operating expenses
16.81
16.64
14.24
15.75
13.27
General and administration expenses
1.65
1.90
2.20
1.86
1.70
Average reference prices
WTI (US $/bbl)
82.65
91.56
77.19
94.23
67.92
Dated Brent (US $/bbl)
88.71
100.85
79.73
101.19
70.73
AECO ($/mcf)
4.64
4.16
4.66
5.25
3.62
TTF ($/mcf)
38.36
75.56
38.86
48.35
19.86
Share information ('000s)
Shares outstanding - basic
163,227
162,883
162,261
163,227
162,261
Shares outstanding - diluted (14)
168,616
168,574
168,746
168,616
168,746
Weighted average shares...
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