CALGARY, May 1, 2013 /CNW/ -
Vermilion Energy Inc. ("Vermilion" or the "Company") (TSX, NYSE:
VET) is pleased to report interim operating and unaudited financial
results for the three months ended March 31,
2013.
HIGHLIGHTS
- Recorded average production of 38,707 boe/d during the first
quarter of 2013, compared to 36,265 boe/d in the fourth quarter of
2012. Quarter-over-quarter growth was primarily attributable to
strong Canadian and European production volumes, partially offset
by decreased Australia production due to drilling activities and
cyclone downtime.
- Generated fund flows from operations of $163.6 million ($1.65 per share) in the first quarter of 2013, as
compared to $141.7 million
($1.43 per share) in the fourth
quarter of 2012 and $151.1 million
($1.56 per share) in the first
quarter of 2012. Fund flows from operations for the first
quarter of 2013 were 15% higher quarter-over-quarter and 8% higher
year-over-year. Due to the timing of shipments, first quarter fund
flows from operations were positively impacted by inventory draws
in France and Australia of approximately 141,000 and 103,000
barrels, respectively, accounting for part of the increase in fund
flows from operations.
- Vermilion continues to benefit from strong pricing driven by
significant exposure to Brent crude and high-netback European gas.
Brent crude, representing 40% of the Company's production, averaged
a US $18.18 per bbl premium to West
Texas Intermediate and a US $25.13
per bbl premium to Edmonton Sweet index during the first quarter.
Vermilion's natural gas production in the Netherlands, representing
approximately 16% of production, received an average price of
$10.09 per mcf during the first
quarter of 2013.
- Continued to grow production in the Company's Cardium light oil
play in Western Canada as the Company continues with the long-term
development of its position. Vermilion has increased Cardium
related production from approximately 1,000 boe/d in 2010 to over
8,400 boe/d during the first quarter of 2013. Vermilion
participated in the drilling of 20.1 net Cardium wells and the
completion of 24.0 net Cardium wells during the first quarter of
2013.
- Began horizontal development with the drilling of two gross
wells in the Mannville liquids-rich gas play in the Drayton Valley
area in west central Alberta. The first well (50% Vermilion working
interest) was put on production during the first quarter at a rate
of 3.6 mmcf/d of natural gas and 515 bbls/d of
condensate1. Subsequent to the end of the first quarter,
the second well (82% working interest) was put on production at a
rate of 2.6 mmcf/d of natural gas and 100 bbls/d of
condensate2.
- Increased the Company's position in the Duvernay liquids-rich
natural gas resource play with the acquisition of an additional
21.75 net sections in the first quarter, bringing Vermilion's total
land position to 272 net sections. Vermilion's land position spans
the breadth of the liquids-rich natural gas fairway, and was
assembled for approximately $74 million
dollars (approximately $425
per acre). In the first quarter, Vermilion completed its third
Duvernay vertical appraisal well and is currently evaluating the
results.
- Awarded an exploration license for the Akkrum concession in the
Netherlands. The Akkrum concession consists of over 54,000
acres situated directly between the Company's existing Gorredijk
and Leeuwarden concessions. Along with the Hemelum and Opmeer
concessions awarded in 2012 and with over 70 prospects identified,
Vermilion intends to increase its Netherlands activity and has
begun planning and hiring to scale up operations and technical
staff in the region.
- Drilled two sidetracked laterals from existing wells in
Australia, including the longest horizontal section drilled at
Wandoo to date at 3,400 metres. The first well produced at an
initial rate of approximately 3,000 bbls/d of oil3 prior
to the end of the first quarter. Subsequent to the end of the first
quarter, the second well produced at an initial rate of
approximately 6,000 bbls/d of oil4. With a focus on
maximizing oil recovery from the new wells, the Company intends to
produce these wells at significantly restricted rates beginning in
the second quarter of 2013. Vermilion expects to maintain
production levels at Wandoo between 6,000 and 8,000 boe/d for the
foreseeable future.
- In Ireland, Corrib tunneling activities related to the
completion of the nine kilometer onshore pipeline continued.
Tunneling, construction and installation activities, commissioning
and start-up are anticipated to take approximately two years to
complete. First gas is anticipated in late 2014 or early 2015 and
the project is expected to reach peak production levels in
mid-2015.
- In view of production results and well test data received to
date, Vermilion is tightening its production guidance range for
2013 from the previously disclosed range of 39,000-40,500 boe/d to
39,500-40,500 boe/d.
- Increased the monthly dividend 5.3% to $0.20 per share, which became effective for the
January 2013 dividend paid on
February 15, 2013.
- Vermilion began trading on the New York Stock Exchange on
March 12, 2013 under the ticker
symbol "VET". As an international oil and gas producer, Vermilion
believes the secondary listing may assist in broadening its
shareholder base and improving share trading liquidity.
- Recognized for the fourth consecutive year by the Great Place
to Work® Institute in both Canada and France. Vermilion
ranked as the 22nd Best Workplace in Canada amongst 318
corporations that participated in the study, and is the only oil
and gas company of its size to be included in this year's Top 25.
Vermilion's French subsidiary ranked as the 27th Best Workplace in
France.
Annual General and Special Meeting Webcast
As Vermilion's Annual General and Special
Meeting is being held today, May 1,
2013 at 1:30 PM MST at the
Metropolitan Centre, Calgary, Alberta, there will not be a first
quarter conference call, however, a presentation will be given by
Mr. Lorenzo Donadeo, President & CEO after the conclusion of
the formal part of this meeting. Please visit
http://www.vermilionenergy.com/ir/eventspresentations.cfm and click
on webcast under upcoming events to view the presentation which
will commence at approximately 1:45 PM
MST.
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1 |
Three-week average production rate, at 1,050
psi flowing tubing pressure, at restricted rates due to separator
capacity constraints. |
2 |
One-week average production rate, at 1,420 psi
flowing tubing pressure, at restricted rates due to compressor
capacity constraints. |
3 |
Production from sidetrack only, without
motherbore contribution. Two-week average production rate under gas
lift conditions. Final water cut was 20%. |
4 |
Production from sidetrack lateral. Motherbore
was abandoned. Five-day average production rate. No water
production. |
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|
|
ABBREVIATIONS
bbl(s) |
barrel(s) |
mbbls |
thousand barrels |
bbls/d |
barrels per day |
mcf |
thousand cubic feet |
mmcf |
million cubic feet |
bcf |
billion cubic feet |
mcf/d |
thousand cubic feet per day |
mmcf/d |
million cubic feet per day |
GJ |
gigajoules |
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) |
mboe |
thousand barrel of oil equivalent |
mmboe |
million barrel of oil equivalent |
boe/d |
barrel of oil equivalent per day |
NGLs |
natural gas liquids |
WTI |
West Texas Intermediate, the reference price paid for crude oil
of standard grade in U.S. dollars at Cushing, Oklahoma |
AECO |
the daily average benchmark price for natural gas at the AECO
'C' hub in southeast Alberta |
TTF |
the price for natural gas in the Netherlands, quoted in MWh of
natural gas per hour per day, at the Title Transfer Facility
Virtual Trading Point operated by Dutch TSO Gas Transport
Services |
$M |
thousand dollars |
$MM |
million dollars |
PRRT |
Petroleum Resource Rent Tax, a profit based tax levied on
petroleum projects in Australia |
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;
- 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;
- exploration and development plans;
- acquisition and disposition plans and the timing thereof;
- operating and other expenses, including the payment 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 strength 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;
- 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.
Initial production and short-term rates are not
necessarily indicative of long-term performance or of ultimate
recovery.
In accordance with National Instruments 51-101,
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.
HIGHLIGHTS |
|
|
|
|
|
Three
Months Ended |
($M except as indicated) |
Mar 31, |
Dec 31, |
Mar 31, |
Financial |
2013 |
2012 |
2012 |
Petroleum and natural gas sales |
309,576 |
241,233 |
310,488 |
Fund flows from operations
1 |
163,629 |
141,737 |
151,122 |
|
Fund flows from operations ($/basic share) |
1.65 |
1.43 |
1.56 |
|
Fund flows from operations ($/diluted share) |
1.61 |
1.41 |
1.54 |
Net earnings |
52,137 |
56,914 |
65,094 |
|
Net earnings per share ($/basic
share) |
0.53 |
0.58 |
0.67 |
Capital expenditures |
180,469 |
157,035 |
94,360 |
Acquisitions |
- |
209,254 |
106,184 |
Asset retirement obligations
settled |
1,388 |
8,424 |
766 |
Cash dividends ($/share) |
0.60 |
0.57 |
0.57 |
Dividends declared |
59,612 |
56,435 |
55,124 |
Net dividends 1 |
44,080 |
37,967 |
37,566 |
|
% of fund flows from operations, gross |
36% |
40% |
36% |
|
% of fund flows from operations, net |
27% |
27% |
25% |
Total net dividends, capital
expenditures and asset retirement obligations settled
1 |
225,937 |
203,426 |
132,692 |
|
% of fund flows from operations |
138% |
144% |
88% |
|
% of fund flows from operations (excluding the
Corrib project) |
127% |
129% |
80% |
Net debt 1 |
744,762 |
677,231 |
530,031 |
Operational |
Production |
|
|
|
|
Crude oil (bbls/d) |
23,583 |
23,699 |
24,492 |
|
NGLs (bbls/d) |
1,431 |
1,176 |
1,374 |
|
Natural gas (mmcf/d) |
82.16 |
68.34 |
80.39 |
|
Total (boe/d) |
38,707 |
36,265 |
39,265 |
Average realized prices |
|
|
|
|
Crude oil and NGLs ($/bbl) |
103.98 |
96.74 |
113.99 |
|
Natural gas ($/mcf) |
6.77 |
7.15 |
5.77 |
Production mix (% of production) |
|
|
|
|
% priced with reference to WTI |
24% |
25% |
23% |
|
% priced with reference to AECO |
18% |
14% |
18% |
|
% priced with reference to European gas |
18% |
17% |
16% |
|
% priced with reference to Dated Brent |
40% |
44% |
43% |
Netbacks ($/boe) 1 |
|
|
|
|
Operating netback |
59.18 |
57.54 |
58.45 |
|
Fund flows netback |
43.89 |
46.07 |
42.30 |
|
Operating expenses |
14.10 |
14.18 |
13.31 |
Average reference prices |
|
|
|
|
WTI (US $/bbl) |
94.37 |
88.18 |
102.93 |
|
Dated Brent (US $/bbl) |
112.55 |
110.02 |
118.49 |
|
AECO ($/GJ) |
3.03 |
3.05 |
2.04 |
Average foreign currency exchange
rates |
|
|
|
|
CDN $/US $ |
1.01 |
0.99 |
1.00 |
|
CDN $/Euro |
1.33 |
1.29 |
1.31 |
Share information ('000s) |
Shares outstanding - basic |
99,462 |
99,135 |
96,838 |
Shares outstanding - diluted
1 |
102,380 |
101,913 |
99,557 |
Weighted average shares outstanding -
basic |
99,301 |
98,944 |
96,644 |
Weighted average shares outstanding -
diluted |
101,349 |
100,425 |
98,191 |
1 The above table includes
non-GAAP measures which may not be comparable to other
companies. Please see the "Non-GAAP Measures" section of
Management's Discussion and Analysis.
OPERATIONAL REVIEW AND OUTLOOK
Performance during the first quarter of 2013
highlights Vermilion's strong operations and the benefits of global
commodity exposure. Vermilion achieved consolidated production
volumes of 38,707 boe/d and record quarterly fund flows from
operations of $163.6 million.
Vermilion was active in the first quarter drilling in Canada,
Australia and France, positioning the Company for growth for the
remainder of 2013.
Vermilion's global commodity exposure continues
to afford the Company a significant competitive advantage with 40%
of first quarter production volumes comprised of Brent-based crude
and 18% comprised of high-netback European gas. Vermilion's
Brent-based crude realized an average price of $113.34 per bbl, generating a nearly 30% premium
over the Edmonton Sweet index which reflects pricing for Canadian
light crude. The Company's Netherlands natural gas production
received an average price $10.09 per
mcf, a premium of $6.76 per mcf or
over 200% compared to an average first quarter price of
$3.33 per mcf for AECO natural gas in
Canada. Vermilion's significant exposure to international pricing
for the Company's high-netback liquids and European gas, enabled
fund flows from operations growth of 15% quarter-over-quarter and
outpaced production growth of 7%.
Canadian development activities continue to be
focused on the full scale development of the Cardium light oil
play. The Company's well performance to date remains consistent and
continues to outpace that of most peers in the area, demonstrating
the quality of Vermilion's land position in the West Pembina
region. Since entering the play in 2009, the Company has drilled
201 gross wells (140 net) in the Cardium and increased production
to over 8,400 boe/d. Vermilion continues to advance on a drilling
and completions learning curve, including the implementation of
water-based fracturing systems and multi-well pad drilling, and is
currently the only Company in the region employing long reach wells
(greater than one mile in length). Having generated a significant
reduction in costs by drilling longer reach 1.5 mile horizontal
wells, Vermilion is planning on drilling a higher percentage of 1.5
mile wells and potentially several 2.0 mile pilot wells over the
remainder of 2013. Drilling longer horizontal wells has allowed the
company to reduce well costs from more than $5 million per section to approximately
$3 million per section in the first
quarter of 2013. With a significant drilling inventory identified
in its full Cardium development plan, Vermilion anticipates
inventory to last five to six years at a drilling rate of 40 to 60
wells per year.
In the Mannville formation, positioned below the
Cardium in the stratigraphic column, the Company has a significant
inventory of liquids-rich natural gas horizontal drilling
prospects. Vermilion plans to drill six gross (3.2 net) horizontal
Mannville wells in 2013. Initial production results are now
available from the first two wells in the Mannville program. The
first well (50% Vermilion working interest) was put on production
during the first quarter at a rate of 3.6 mmcf/d of natural gas and
515 bbls/d of condensate1. Subsequent to the end of the
first quarter, the second well (82% working interest) was put on
production at a rate of 2.6 mmcf/d of natural gas and 100 bbls/d of
condensate2.
In the first quarter, Vermilion drilled and
cored a third vertical stratigraphic test well in the Duvernay
liquids-rich natural gas resource play. The Company has amassed 272
net sections in the Edson area capturing the full breadth of the
liquids-rich natural gas fairway for approximately $74 million ($425
per acre). Vermilion's Duvernay rights largely underlie the
Company's Cardium and Mannville positions, allowing for potential
infrastructure, operational and timing advantages should full-field
development of the Duvernay commence. The Duvernay has the
potential to provide Vermilion with very significant development
opportunities in its core Canadian operating region, and may
deliver production growth into the latter half of the decade and
beyond.
Australian activity in the first quarter of 2013
focused on the drilling program at Wandoo. Two sidetrack horizontal
laterals from existing wells were drilled, including the longest
horizontal section drilled at Wandoo to date at 3,400 metres. The
first well was spud in early February, completed in mid-March, and
put on production at an initial rate of approximately 3,000 bbls/d
of oil3 prior to the end of the first quarter. The
second well was spud in mid-March, and put on production at an
initial rate of approximately 6,000 bbls/d of oil4
subsequent to the end of the first quarter. The jack-up drilling
rig was demobilized and released in early April. The new sidetracks
tested several drilling and geological concepts at Wandoo,
including extreme long-reach horizontal drilling and further
exploitation of the less-developed southern part of the field. The
results will be incorporated into the geologic and numerical
reservoir simulation models of Wandoo, with the objective of
expanding and improving the Company's long-term drilling
inventory. While the initial production rates are indicative
of the high productivity that can be generated through extreme long
reach horizontal drilling in this very permeable reservoir, the
Company intends to significantly restrict production from these
wells after an initial production period to maximize long-term
resource recovery. Vermilion anticipates maintaining production
levels between 6,000 and 8,000 boe/d in Australia for the
foreseeable future with drilling programs approximately every 18 to
24 months. Australia continues to generate strong netbacks and
garners pricing at a premium to the Dated Brent index and incurs no
transportation cost as production is sold directly from the
platform.
During the first quarter of 2013, Vermilion
began a five well drilling program in the Champotran field
including four infill wells as a part of a waterflood expansion and
one field extension test well. The Company had two wells drilled
and a further two spud at the end of the first quarter. Additional
activities in France included workovers, recompletions and
facilities upgrades in the Paris and Aquitaine basins. Vermilion's
2012 acquisitions were a natural addition to the Company's asset
base in France and further secured the Company's position as the
leading oil producer in France. Vermilion continues to work toward
integration of these assets and the identification of further
opportunities to decrease the current cost structure and increase
production through optimized operations, water flood management and
development drilling. Vermilion's French assets are consistent with
the Company's sustainable growth-and-income model, with low base
decline rates, high quality Brent-based production, strong cash
flow generation and numerous long-term investment
opportunities.
Vermilion continues permitting and drilling
preparations in the Netherlands with respect to a three well
drilling campaign planned for 2013. The Company's Garijp
debottlenecking project was completed in the first quarter of 2013,
enabling incremental production from the existing Vinkega-1 well
and first gas from Vinkega-2 in the second quarter. Facility
construction for Langezwaag-1 is ongoing with production additions
anticipated in the second quarter of 2013. The Company is looking
to increase activity in the Netherlands to maintain a rolling
inventory of production-adding projects with the intent to
ultimately establish a reliable long-term growth profile. In March,
the Company was awarded an exploration license for the Akkrum
concession, located directly between Vermilion's existing Gorredijk
and Leeuwarden concessions. Covering more than 54,000 acres, the
Akkrum concession adds to the Company's already significant land
position and future projects in the Netherlands.
In Ireland, the tunnel boring machine was
installed on December 16, 2012 and
has begun tunneling activities related to the completion of the
nine kilometer onshore pipeline for Corrib. Tunneling,
construction and installation, commissioning and start-up are
anticipated to take approximately two years to complete with first
gas anticipated in late 2014 or early 2015. Peak production is
expected to be reached in mid-2015 with production levels of
approximately 55 mmcf/d (9,000 boe/d) net to Vermilion.
Vermilion remains positioned to deliver strong
operational and financial performance over the next several years.
The Company continues to target growth of approximately 30% to
50,000 boe/d in 2015 and fund flows from operations growth of
approximately 40% over the same period (assuming current commodity
pricing indications are realized). Near-to-medium term growth is
expected to be driven by continued Cardium and Mannville
development in Canada, high-netback natural gas in the Netherlands,
and first gas from Corrib in late 2014 or early 2015. France and
Australia production are anticipated to provide reliable production
as well as significant cash flow during this time from Brent-based
pricing, with the potential to provide production growth as
Vermilion expands its technical work to mature investment projects
in these areas.
Additional medium and long-term growth is
expected to be generated by the Company's New Growth Initiative
which is focused on the identification and development of emerging
resource plays in Canada and the greater European region, including
the Duvernay liquids-rich natural gas resource. As an example of
the Company's greater European effort, Vermilion has acquired an
exploration permit for 2.34 million acres in Morocco. This
opportunity is consistent with the Company's low-cost, early-entry
strategy to secure large positions in unconventional shale oil and
natural gas plays, providing significant optionality and potential
for growth into the latter half of the decade.
Vermilion increased its monthly dividend 5.3% in
the first quarter of 2013, from $0.19
to $0.20 per share. The
increase became effective for the January
2013 dividend paid February 15,
2013. Based on increasing certainty for Corrib development
timing and the strength of anticipated future cash flows from a
variety of sources, the Company is committed to providing a
reliable and growing dividend stream to investors.
On March 12, 2013,
Vermilion shares began trading on the New York Stock Exchange under
the ticker symbol "VET". As an international oil and gas
producer, the Company believes the secondary listing may assist in
broadening its investor base and increasing trading liquidity.
Vermilion's conservative fiscal management and
capital discipline leaves the Company well positioned to execute
its growth-and-income model and provide growth to investors on a
per share basis. The management and directors of Vermilion continue
to hold approximately 8% of the outstanding shares and remain
committed to delivering superior rewards to all stakeholders.
Continuing to be acknowledged for excellence in its business
practices, Vermilion was recognized for the fourth consecutive year
by the Great Place to Work® Institute in both Canada and France.
Vermilion ranked as the 22nd Best Workplace in Canada among more
than 315 companies. Vermilion's France subsidiary ranked as the
27th Best Workplace in the country.
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|
1 |
Three-week average production rate, at 1,050
psi flowing tubing pressure, at restricted rates due to separator
capacity constraints. |
2 |
One-week average production rate, at 1,420 psi
flowing tubing pressure, at restricted rates due to compressor
capacity constraints. |
3 |
Production from sidetrack only, without
motherbore contribution. Two-week average production rate under gas
lift conditions. Final water cut was 20%. |
4 |
Production from sidetrack lateral. Motherbore
was abandoned. Five-day average production rate. No water
production. |
|
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS
The following is Management's Discussion and
Analysis ("MD&A"), dated April 30,
2013, of Vermilion Energy Inc.'s ("Vermilion" or the
"Company") operating and financial results as at and for the three
months ended March 31, 2013 as
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, 2013 and the audited consolidated financial statements
for the year ended December 31, 2012
and 2011, 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, 2013 and comparative information have
been prepared in Canadian dollars, except where another currency
has been indicated, and in accordance with IAS 34, "Interim
financial reporting", as issued by the International Accounting
Standards Board.
NON-GAAP MEASURES
This report includes non-GAAP measures as
further described herein. These non-GAAP measures do not have
standardized meanings prescribed by International Financial
Reporting Standards ("IFRS" or, alternatively, "GAAP") and
therefore may not be comparable with the calculations of similar
measures for other entities.
"Fund flows from operations" represents
cash flows from operating activities before changes in non-cash
operating working capital and asset retirement obligations
settled. Management considers fund flows from operations and
fund flows from operations per share to be key measures as they
demonstrate Vermilion's ability to generate the cash necessary to
pay dividends, repay debt, fund asset retirement obligations and
make capital investments. Management believes that by
excluding the temporary impact of changes in non-cash operating
working capital, fund flows from operations provides a useful
measure of Vermilion's ability to generate cash that is not subject
to short-term movements in non-cash operating working capital.
"Fund flows from operations (excluding the
Corrib project)" represents fund flows from operations
excluding expenses related to the Corrib project. Management
believes that by excluding expenses related to the Corrib project,
fund flows from operations (excluding the Corrib project) provides
a useful measure of Vermilion's ability to generate cash from its
current producing assets.
The most directly comparable GAAP measure to
fund flows from operations and fund flows from operations
(excluding the Corrib project) is cash flows from operating
activities.
Cash flows from operating activities as
presented in Vermilion's consolidated statements of cash flows are
reconciled to fund flows from operations and fund flows from
operations (excluding the Corrib project) as follows:
|
|
Three
Months Ended |
|
|
Mar 31, |
Dec 31, |
Mar 31, |
($M) |
2013 |
2012 |
2012 |
Cash flows from operating
activities |
190,712 |
99,907 |
124,887 |
Changes in non-cash operating working
capital |
(28,471) |
33,406 |
25,469 |
Asset retirement obligations
settled |
1,388 |
8,424 |
766 |
Fund flows from operations |
163,629 |
141,737 |
151,122 |
Expenses related to the Corrib
project |
1,855 |
2,023 |
2,364 |
Fund flows from operations (excluding
the Corrib project) |
165,484 |
143,760 |
153,486 |
"Cash dividends per share" represents
cash dividends declared per share by Vermilion.
"Net dividends" are dividends declared
less proceeds received by Vermilion for the issuance of shares
pursuant to the dividend reinvestment plan, both as presented in
Vermilion's consolidated statements of changes in shareholders'
equity. Dividends both before and after the dividend
reinvestment plan are reviewed by management and are assessed as a
percentage of fund flows from operations to analyze the amount of
cash that is generated by Vermilion which is being used to fund
dividends. Dividends declared is the most directly comparable
GAAP measure to net dividends.
"Total net dividends, capital expenditures
and asset retirement obligations settled" are net dividends
plus the following amounts from Vermilion's consolidated statements
of cash flows: drilling and development, exploration and
evaluation, dispositions and asset retirement obligations
settled.
"Total net dividends, capital expenditures
and asset retirement obligations settled (excluding the Corrib
project)" are total net dividends, capital expenditures and
asset retirement obligations settled excluding drilling and
development and asset retirement obligations settled relating to
the Corrib project.
Total net dividends, capital expenditures and
asset retirement obligations settled and total net dividends,
capital expenditures and asset retirement obligations settled
(excluding the Corrib project) are reviewed by management and are
assessed as a percentage of fund flows from operations and fund
flows from operations (excluding the Corrib project) to analyze the
amount of cash that is generated by Vermilion that is available to
repay debt and fund potential future acquisitions and capital
expenditures.
Dividends declared, total net dividends, capital
expenditures and asset retirement obligations settled and total net
dividends, capital expenditures and asset retirement obligations
settled (excluding the Corrib project) are reconciled to their most
directly comparable GAAP measures as follows:
|
|
Three
Months Ended |
|
|
Mar 31, |
Dec 31, |
Mar 31, |
($M) |
2013 |
2012 |
2012 |
Dividends declared |
59,612 |
56,435 |
55,124 |
Issuance of shares pursuant to the
dividend reinvestment plan |
(15,532) |
(18,468) |
(17,558) |
Net dividends |
44,080 |
37,967 |
37,566 |
Drilling and development |
179,520 |
151,157 |
87,896 |
Dispositions |
(8,627) |
- |
- |
Exploration and evaluation |
9,576 |
5,878 |
6,464 |
Asset retirement obligations
settled |
1,388 |
8,424 |
766 |
Total net dividends, capital
expenditures and asset retirement obligations settled |
225,937 |
203,426 |
132,692 |
Capital expenditures and asset
retirement obligations settled related to the Corrib project |
(16,520) |
(18,092) |
(9,482) |
Total net dividends,
capital expenditures and asset retirement obligations settled
(excluding the Corrib project) |
209,417 |
185,334 |
123,210 |
"Net debt" is the sum of long-term debt
and working capital as presented in Vermilion's consolidated
balance sheets. Net debt is used by management to analyze the
financial position and leverage of Vermilion. The most
directly comparable GAAP measure is long-term debt.
Long-term debt as presented in Vermilion's
consolidated balance sheets is reconciled to net debt as
follows:
|
As
At |
|
Mar 31, |
Dec 31, |
($M) |
2013 |
2012 |
Long-term debt |
712,763 |
642,022 |
Current liabilities |
391,708 |
355,711 |
Current assets |
(359,709) |
(320,502) |
Net debt |
744,762 |
677,231 |
"Netbacks" are per boe and per mcf
measures used in operational and capital allocation decisions.
"Diluted shares outstanding" is the sum
of shares outstanding at the period end plus outstanding awards
under Vermilion's equity based compensation plan, based on current
estimates of future performance factors and forfeitures. The most
directly comparable GAAP measure is shares outstanding.
Shares outstanding is reconciled to diluted
shares outstanding as follows:
|
As
At |
|
Mar 31, |
Dec 31, |
Mar 31, |
('000s of shares) |
2013 |
2012 |
2012 |
Shares outstanding |
99,462 |
99,135 |
96,838 |
Potential shares issuable pursuant to the equity
based compensation plan |
2,918 |
2,778 |
2,719 |
Diluted shares outstanding |
102,380 |
101,913 |
99,557 |
OPERATIONAL ACTIVITIES
Canada
Vermilion drilled 24 (22.5 net) wells during the
first quarter of 2013, including 20 (20 net) operated Cardium
horizontal wells and one (0.1 net) non-operated Cardium horizontal
well. Since entering the play in 2009, the Company has drilled a
total of 201 (140 net) wells in the Cardium. In the first quarter
of 2013, Vermilion completed its third vertical test well in the
Duvernay and drilled two (1.3 net) Mannville liquids-rich natural
gas wells.
France
Vermilion commenced its Champotran drilling
program with two wells drilled and two wells spud at the end of the
first quarter. The Company completed a number of workovers in both
the Paris and Aquitaine basins. Vermilion continues to work towards
the full integration of the assets acquired through two separate
transactions in 2012 and the identification of further optimization
and infill drilling opportunities.
Netherlands
Operating activities in the first quarter
focused on facility maintenance and site construction. Surface
facilities for Vinkega-2 and Langezwaag-1 are under construction,
with first gas for both wells anticipated in the second quarter of
2013. The Company's debottlenecking project at Garijp was completed
in the first quarter, ahead of schedule, and will enable
incremental production additions from Vinkega-2 and other wells to
be brought on-stream. In March, Vermilion was awarded the
exploration license for the Akkrum concession, covering more than
54,000 acres and located between the Company's existing Gorredijk
and Leeuwarden concessions.
Australia
Vermilion conducted a two well drilling program
at Wandoo during the first quarter of 2013. These wells were
horizontal sidetracks from existing well bores. The first well was
spud early February and completed mid-March, the second was then
spud and completed late March. The rig was demobilized and released
subsequent to quarter end.
PRODUCTION
|
|
Three
Months Ended |
|
%
change |
|
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
|
|
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
|
|
|
|
|
|
|
Crude oil & NGLs (bbls/d) |
9,301 |
9,089 |
8,876 |
|
2% |
5% |
|
Natural gas (mmcf/d) |
41.04 |
31.41 |
41.83 |
|
31% |
(2%) |
|
Total (boe/d) |
16,140 |
14,323 |
15,848 |
|
13% |
2% |
|
% of consolidated |
41% |
40% |
40% |
|
|
|
France |
|
|
|
|
|
|
|
Crude oil (bbls/d) |
10,330 |
9,843 |
10,270 |
|
5% |
1% |
|
Natural gas (mmcf/d) |
4.21 |
3.91 |
3.48 |
|
8% |
21% |
|
Total (boe/d) |
11,032 |
10,495 |
10,850 |
|
5% |
2% |
|
% of consolidated |
29% |
29% |
28% |
|
|
|
Netherlands |
|
|
|
|
|
|
|
NGLs (bbls/d) |
96 |
70 |
72 |
|
37% |
33% |
|
Natural gas (mmcf/d) |
36.91 |
33.03 |
35.08 |
|
12% |
5% |
|
Total (boe/d) |
6,248 |
5,574 |
5,919 |
|
12% |
6% |
|
% of consolidated |
16% |
15% |
15% |
|
|
|
Australia |
|
|
|
|
|
|
|
Crude oil (bbls/d) |
5,287 |
5,873 |
6,648 |
|
(10%) |
(20%) |
|
% of consolidated |
14% |
16% |
17% |
|
|
|
Consolidated |
|
|
|
|
|
|
|
Crude oil & NGLs (bbls/d) |
25,014 |
24,875 |
25,866 |
|
1% |
(3%) |
|
% of consolidated |
65% |
69% |
66% |
|
|
|
|
Natural gas (mmcf/d) |
82.16 |
68.34 |
80.39 |
|
20% |
2% |
|
% of consolidated |
35% |
31% |
34% |
|
|
|
|
Total (boe/d) |
38,707 |
36,265 |
39,265 |
|
7% |
(1%) |
Average total production in Canada of 16,140
boe/d during the first quarter of 2013 represented an increase of
13% compared to 14,323 boe/d in the fourth quarter of 2012 and 2%
as compared to 15,848 boe/d in the first quarter of the prior year.
The increased volumes were largely attributable to continued
development in the Cardium and initiation of a horizontal drilling
program in the Mannville, as well as previously shut-in dry natural
gas being brought back on-stream. Vermilion's exposure to oil and
liquids represented approximately 58% of Canadian production in the
first quarter of 2013 compared to 56% in the first quarter of
2012.
France production averaged 11,032 boe/d in the
first quarter of 2013, representing a 5% increase compared to
fourth quarter 2012. This increase is largely attributable to
volumes associated with Vermilion's acquisition completed in
December 2012 and continued workover
and recompletion activities largely offsetting natural
declines.
Netherlands average production of 6,248 boe/d in
the first quarter of 2013 represented an increase of 12%
quarter-over-quarter and 6% year-over-year. Following
shutdown for facility upgrades, the Slootdorp-4 well was
reactivated in the first quarter contributing to the increased
production.
Australia production averaged 5,287 boe/d during
the first quarter of 2013, compared to 5,873 boe/d in the fourth
quarter of 2012 and 6,648 boe/d in the first quarter of 2012. The
decrease in production represents downtime associated with the
two-well drilling program and seasonal cyclone activity. Production
additions from the two wells are anticipated for the second quarter
of 2013. Vermilion expects to sustain annual average production
between 6,000 and 8,000 boe/d over the next few years with two to
three well drilling programs every other year.
FINANCIAL REVIEW
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Net earnings |
52,137 |
56,914 |
65,094 |
|
(8%) |
(20%) |
Fund flows from operations |
163,629 |
141,737 |
151,122 |
|
15% |
8% |
Cash flow from operating
activities |
190,712 |
99,907 |
124,887 |
|
91% |
53% |
Net debt |
744,762 |
677,231 |
530,031 |
|
10% |
41% |
Long-term debt |
712,763 |
642,022 |
373,798 |
|
11% |
91% |
Ratio of net debt to annualized fund
flows from operations |
1.1 |
1.2 |
0.9 |
|
(8%) |
22% |
Total net dividends,
capital expenditures and asset retirement obligations settled |
|
|
|
|
|
|
|
% of fund flows from operations |
138% |
144% |
88% |
|
|
|
|
% of fund flows from operations (excluding the
Corrib project) |
127% |
129% |
80% |
|
|
|
Fund flows from operations for the first quarter
of 2013 increased compared to both the first and fourth quarters of
2012. On a quarter-over-quarter basis, the increase was a
result of significantly higher petroleum and natural gas sales,
driven by an increase in crude oil sales volumes and favorable
crude oil and natural gas pricing. The increase in crude oil
sales volumes was due in part to a draw of crude oil inventory in
France and Australia totalling approximately 244,000 bbls during
the first quarter of 2013. On a year-over-year basis, the increase
in fund flows from operations occurred despite relatively
consistent petroleum and natural gas sales due to a decrease in
PRRT, which resulted from increased capital expenditures for the
2013 Australian drilling campaign, and the absence of the
$8.5 million of transfer taxes paid
in the first quarter of 2012 for the first of two acquisitions in
France.
Cash flow from operating activities increased
for the first quarter of 2013 compared to both the first and fourth
quarter of 2012. This increase was a result of the
aforementioned changes to fund flows from operations, coupled with
favorable timing differences pertaining to working capital.
Net earnings for the first quarter of 2013
decreased when compared to the fourth quarter of 2012. This
decrease occurred despite significantly higher petroleum and
natural gas sales due to an unrealized foreign exchange loss in the
current quarter versus an unrealized foreign exchange gain in the
previous quarter. Unrealized foreign exchange gains and
losses are non-cash charges that result from the translation of
Euro denominated loans made by Vermilion to its subsidiaries.
On a year-over-year basis, the decrease in net earnings was
primarily the result of an increase in deferred tax expense in
2013, resulting from the timing of the deductibility of capital
expenditures for tax purposes, and an increase in depletion
expense.
Vermilion's net debt and long-term debt
increased from December 31, 2012 as a
result of draws on the revolving credit facility to fund current
year development capital expenditures. The increase in net
debt and long-term debt from March 31,
2012 was the result of the second of two acquisitions in
France during 2012 and current year development capital
expenditures. In addition, December
31, 2012 and March 31, 2013
long-term debt included the impact of payment of the US$135 million deferred payment, which pertained
to the 2009 acquisition of Vermilion's 18.5% non-operated interest
in the Corrib field.
The ratio of total net dividends, capital
expenditures and asset retirement obligations settled (excluding
capital expenditures and asset retirement obligations settled on
the Corrib project) expressed as a percentage of fund flows from
operations was relatively consistent quarter-over-quarter. On
a year-over-year basis, the increase in this ratio is primarily the
result of increased capital expenditures during the current period
relating to drilling activity in Australia, Canada and France.
COMMODITY PRICES
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
|
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Average reference prices |
|
|
|
|
|
|
WTI (US $/bbl) |
94.37 |
88.18 |
102.93 |
|
7% |
(8%) |
Edmonton Sweet index (US $/bbl) |
87.42 |
84.86 |
92.44 |
|
3% |
(5%) |
Dated Brent (US $/bbl) |
112.55 |
110.02 |
118.49 |
|
2% |
(5%) |
AECO ($/GJ) |
3.03 |
3.05 |
2.04 |
|
(1%) |
49% |
Netherlands gas price ($/GJ) |
10.40 |
9.78 |
9.63 |
|
6% |
8% |
Netherlands gas price (€/GJ) |
7.81 |
7.58 |
7.35 |
|
3% |
6% |
Average realized prices ($/boe) |
|
|
|
|
|
|
Canada |
57.61 |
58.80 |
55.84 |
|
(2%) |
3% |
France |
107.17 |
102.26 |
104.84 |
|
5% |
2% |
Netherlands |
61.21 |
60.96 |
59.08 |
|
- |
4% |
Australia |
120.76 |
115.22 |
156.43 |
|
5% |
(23%) |
Consolidated |
83.04 |
78.40 |
86.90 |
|
6% |
(4%) |
Production mix (% of production) |
|
|
|
|
|
|
% priced with reference to WTI |
24% |
25% |
23% |
|
|
|
% priced with reference to AECO |
18% |
14% |
18% |
|
|
|
% priced with reference to European gas |
18% |
17% |
16% |
|
|
|
% priced with reference to Dated Brent |
40% |
44% |
43% |
|
|
|
Reference prices
Overall, crude oil prices increased during the
first quarter of 2013 as compared to the fourth quarter of
2012. WTI increased by 7% quarter-over-quarter as a result of
the U.S. economy showing signs of improving growth and improved
transportation capacity for crude oil from the U.S. Midwest to the
Gulf Coast. The increase in WTI coupled with a modest 2%
increase in Dated Brent resulted in a narrowing differential
between the two reference prices; however both WTI and the Edmonton
Sweet index continued to trade at a significant discount
($18.18 and $25.13 per barrel,
respectively) to Dated Brent.
The AECO reference price was relatively
unchanged from the fourth quarter of 2012, however AECO pricing was
significantly higher when compared to the first quarter of 2012 as
a result of relatively flat North American production coupled with
downward trending storage levels.
Realized pricing
The realized price of Vermilion's crude oil 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
Vermilion's NGLs in Canada is based on product specific
differentials pertaining to trading hubs in the U.S. The
realized price of Vermilion's natural gas in Canada is based on the
AECO spot price in Alberta.
Vermilion's crude oil in France and Australia is
priced with reference to Dated Brent.
As of January 1,
2013, the price of Vermilion's natural gas in the
Netherlands is now 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 natural
gas produced by Vermilion in the Netherlands. Prior to 2013,
the natural gas price received by Vermilion in the Netherlands was
calculated using a trailing average of Dated Brent and the natural
gas prices from European trading hubs.
Average realized prices in Vermilion's
jurisdictions will differ from their corresponding average
reference prices due to a number of factors, including the timing
of the sale of production, differences in the quality of production
and point of settlement. In Canada, average realized prices
are also impacted by the production mix of crude oil, NGLs and
natural gas.
On a consolidated basis, for the three months
ended March 31, 2013, crude oil and
NGL production represented approximately 65% of total production
(three months ended March 31, 2012 -
66%).
CAPITAL EXPENDITURES AND ACQUISITIONS
|
Three
Months Ended |
By classification |
Mar 31, |
Dec 31, |
Mar 31, |
($M) |
2013 |
2012 |
2012 |
Drilling and development |
179,520 |
151,157 |
87,896 |
Dispositions |
(8,627) |
- |
- |
Exploration and evaluation |
9,576 |
5,878 |
6,464 |
Capital expenditures |
180,469 |
157,035 |
94,360 |
|
|
|
|
Property acquisition |
- |
- |
106,184 |
Corporate acquisition |
- |
74,947 |
- |
Payment of amount due pursuant to acquisition |
- |
134,307 |
- |
Acquisitions |
- |
209,254 |
106,184 |
|
|
|
|
|
Three
Months Ended |
By category |
Mar 31, |
Dec 31, |
Mar 31, |
($M) |
2013 |
2012 |
2012 |
Land |
3,129 |
462 |
6,667 |
Seismic |
3,813 |
3,963 |
799 |
Drilling and completion |
126,185 |
76,774 |
54,858 |
Production equipment and facilities |
49,942 |
64,232 |
24,755 |
Recompletions |
4,131 |
5,040 |
2,645 |
Other |
1,896 |
6,564 |
4,636 |
Dispositions |
(8,627) |
- |
- |
Capital expenditures |
180,469 |
157,035 |
94,360 |
Acquisitions |
- |
209,254 |
106,184 |
Total capital expenditures and acquisitions |
180,469 |
366,289 |
200,544 |
|
|
|
|
|
Three
Months Ended |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
($M) |
2013 |
2012 |
2012 |
Canada |
86,636 |
84,609 |
71,982 |
France |
21,592 |
95,905 |
111,842 |
Netherlands |
372 |
8,118 |
2,570 |
Australia |
55,349 |
25,257 |
4,544 |
Ireland |
16,520 |
152,400 |
9,606 |
Capital expenditures:
Capital expenditures for the first quarter of
2013 were higher than both the first and fourth quarters of
2012. On a quarter-over-quarter basis, capital expenditures
were higher primarily as a result of increased capital expenditures
in Australia related to the 2013 drilling campaign. On a
year-over-year basis, capital expenditures were higher as a result
of the aforementioned Australia drilling campaign in addition to
increased drilling activity in both Canada and France.
PETROLEUM AND NATURAL GAS SALES
|
Three
Months Ended |
|
%
change |
By product |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe and per mcf) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Crude oil & NGLs |
259,498 |
196,286 |
268,291 |
|
32% |
(3%) |
Per boe |
103.98 |
96.74 |
113.99 |
|
7% |
(9%) |
Natural gas |
50,078 |
44,947 |
42,197 |
|
11% |
19% |
Per mcf |
6.77 |
7.15 |
5.77 |
|
(5%) |
17% |
Petroleum and natural gas sales |
309,576 |
241,233 |
310,488 |
|
28% |
- |
Per boe |
83.04 |
78.40 |
86.90 |
|
6% |
(4%) |
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
83,688 |
77,476 |
80,526 |
|
8% |
4% |
Per boe |
57.61 |
58.80 |
55.84 |
|
(2%) |
3% |
France |
121,566 |
87,702 |
103,511 |
|
39% |
17% |
Per boe |
107.17 |
102.26 |
104.84 |
|
5% |
2% |
Netherlands |
34,421 |
31,260 |
31,820 |
|
10% |
8% |
Per boe |
61.21 |
60.96 |
59.08 |
|
- |
4% |
Australia |
69,901 |
44,795 |
94,631 |
|
56% |
(26%) |
Per boe |
120.76 |
115.22 |
156.43 |
|
5% |
(23%) |
Vermilion's consolidated petroleum and natural gas sales for the
first quarter of 2013 were higher than the fourth quarter of 2012
as a result of increased sales volumes, including an inventory draw
in both Australia and France, in addition to an increase in the
realized price of crude oil.
Vermilion's consolidated petroleum and natural
gas sales for the first quarter of 2013 remained relatively
unchanged as compared to the same period in the prior year as the
impact of the decrease in crude oil volumes sold and prices was
offset by a significant increase in North American natural gas
prices.
CRUDE OIL INVENTORY
Vermilion carries an inventory of crude oil in
France and Australia, which is a result of timing differences
between production and sales.
The following table summarizes the changes in
Vermilion's crude oil inventory positions:
|
Three Months Ended |
|
Mar 31, |
Dec 31, |
Mar 31, |
(mbbls) |
2013 |
2012 |
2012 |
France |
|
|
|
|
Opening crude oil inventory |
354 |
246 |
187 |
|
Adjustments |
5 |
- |
- |
|
Crude oil production |
930 |
906 |
935 |
|
Crude oil sales |
(1,071) |
(798) |
(899) |
|
Closing crude oil inventory |
218 |
354 |
223 |
Australia |
|
|
|
|
Opening crude oil inventory |
268 |
117 |
222 |
|
Crude oil production |
476 |
540 |
605 |
|
Crude oil sales |
(579) |
(389) |
(827) |
|
Closing crude oil inventory |
165 |
268 |
- |
Inventory as at March 31, 2013 was
comprised of the following components:
|
|
|
|
|
|
|
|
($M) |
France |
|
|
Australia |
|
|
Total |
Operating expense |
3,284 |
|
|
3,701 |
|
|
6,985 |
Royalties |
1,106 |
|
|
- |
|
|
1,106 |
Depletion |
4,206 |
|
|
3,229 |
|
|
7,435 |
|
8,596 |
|
|
6,930 |
|
|
15,526 |
DERIVATIVE INSTRUMENTS
The following tables summarize Vermilion's outstanding risk
management positions as at March 31,
2013:
|
|
|
|
|
Risk Management - Oil |
Funded Cost (US
$/bbl) |
|
bbls/d |
Strike Price(s) US
$/bbl |
Swap - WTI |
|
|
|
|
January 2013 - June 2013 1 |
- |
|
1,000 |
101.18 |
January 2013 - December 2013 |
- |
|
2,000 |
93.04 |
Collar - WTI |
|
|
|
|
April 2013 - June 2013 |
- |
|
1,000 |
91.75 - 101.91 |
Fixed Price Differential - MSW |
|
|
|
|
April 2013 - June 2013 |
- |
|
2,000 |
WTI less $4.25 |
Collar - Dated Brent |
|
|
|
|
January 2013 - June 2013 |
- |
|
2,000 |
90.00 - 105.28 |
January 2013 - December 2013 |
- |
|
3,500 |
96.14 - 107.34 |
April 2013 - June 2013 |
- |
|
2,700 |
106.85 - 113.77 |
July 2013 - December 2013 |
- |
|
500 |
95.00 - 109.10 |
Swap - Dated Brent |
|
|
|
|
April 2013 - June 2013 |
- |
|
250 |
115.41 |
|
|
|
|
|
Risk Management - European natural gas
|
Funded Cost (€/GJ) |
|
GJ/d |
Strike Price €/GJ |
Swap - TTF |
|
|
|
|
April 2013 - September 2013
2 |
- |
|
1,800 |
7.12 |
|
|
|
|
|
Risk Management - Canadian natural gas
|
Funded Cost ($/GJ) |
|
GJ/d |
Strike Price(s) $/GJ |
Collar - AECO |
|
|
|
|
April 2013 - September 2013 |
- |
|
2,500 |
2.90 - 3.47 |
April 2013 - October 2013 |
- |
|
3,500 |
3.05 - 3.66 |
April 2013 - December 2013 |
- |
|
5,000 |
2.93 - 3.52 |
October 2013 - December 2013 |
- |
|
2,500 |
2.85 - 3.56 |
Collar - AECO (Physical) |
|
|
|
|
April 2012 - March 2014 |
0.10 |
|
5,500 |
2.60 - 3.78 |
June 2012 - March 2014 |
0.10 |
|
3,000 |
2.30 - 3.75 |
1 |
The counterparties to the swaps have the option on June 28,
2013 to extend the swap to December 31, 2013 at the contracted
volume and price. |
2 |
TTF collars are priced based on the TTF "day-ahead" bid and
offer quotations, which are quoted in MWh of natural gas per hour
per day. MWh of natural gas per hour per day measures are
converted at a ratio of 1 MWh to 3.6 GJ. |
From time to time Vermilion enters into new risk
management positions. Information regarding outstanding risk
management positions is available on Vermilion's website at
www.vermilionenergy.com/ir/hedging.cfm.
The following table summarizes the impact of derivative
instruments on cash flows from operating activities:
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Realized loss on derivative instruments |
2,787 |
1,559 |
5,718 |
|
79% |
(51%) |
Per boe |
0.75 |
0.51 |
1.60 |
|
47% |
(53%) |
The realized loss on derivative instruments for the first quarter
of 2013 is comprised primarily of amounts paid to settle Dated
Brent costless collars, as reference prices exceeded the ceiling
price on those instruments, partially offset by amounts received on
WTI extendable swaps. This realized loss was higher than the
previous quarter (where the loss related primarily to premiums paid
on funded collars and put options) and was lower than the same
quarter in the previous year (where the loss related both to
premiums and amounts paid for settlement).
ROYALTIES
|
Three
Months Ended |
|
%
change |
By product |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe and per mcf) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Crude oil & NGLs |
14,810 |
11,429 |
14,241 |
|
30% |
4% |
Per boe |
5.93 |
5.63 |
6.05 |
|
5% |
(2%) |
Natural gas |
980 |
509 |
211 |
|
93% |
364% |
Per mcf |
0.13 |
0.08 |
0.03 |
|
63% |
333% |
Royalties |
15,790 |
11,938 |
14,452 |
|
32% |
9% |
Per boe |
4.24 |
3.88 |
4.04 |
|
9% |
5% |
% of petroleum and natural gas sales |
5.1% |
4.9% |
4.7% |
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
8,989 |
7,401 |
8,969 |
|
21% |
- |
Per boe |
6.19 |
5.62 |
6.22 |
|
10% |
- |
% of petroleum and natural gas sales |
10.7% |
9.6% |
11.1% |
|
|
|
France |
6,801 |
4,537 |
5,483 |
|
50% |
24% |
Per boe |
6.00 |
5.29 |
5.55 |
|
13% |
8% |
% of petroleum and natural gas sales |
5.6% |
5.2% |
5.3% |
|
|
|
In Canada, royalties as a percentage of sales
for the three months ended March 31,
2013 was 10.7% as compared to 9.6% for the prior quarter and
11.1% for the comparative period of the prior year. Crude oil
and NGL royalties as a percentage of sales for the current quarter
of 11.4% increased slightly from 10.4% for the prior quarter but
decreased from 12.2% for the first quarter of 2012. The
timing of putting additional horizontal Cardium wells on production
results in slight changes to realized royalty rates arising from a
royalty incentive applied to initial production volumes from these
wells.
In France, the primary portion of the royalties
is levied in Euros and is based on units of production and that
component, therefore, is not subject to changes in commodity
prices. Royalties as a percentage of sales for the three
months ended March 31, 2013 increased
to 5.6% from 5.2% and 5.3% for the three months ended December 31, 2012 and March 31, 2012, respectively, due to the impact
of a stronger Euro year-over-year.
Production in the Netherlands and Australia is
not subject to royalties.
OPERATING EXPENSE
|
Three
Months Ended |
|
%
change |
By product |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe and per mcf) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Crude oil & NGLs |
41,855 |
31,212 |
36,866 |
|
34% |
14% |
Per boe |
16.77 |
15.38 |
15.66 |
|
9% |
7% |
Natural gas |
10,720 |
12,422 |
10,687 |
|
(14%) |
- |
Per mcf |
1.45 |
1.98 |
1.46 |
|
(27%) |
(1%) |
Operating |
52,575 |
43,634 |
47,553 |
|
20% |
11% |
Per boe |
14.10 |
14.18 |
13.31 |
|
(1%) |
6% |
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
13,841 |
14,514 |
14,267 |
|
(5%) |
(3%) |
Per boe |
9.53 |
11.01 |
9.89 |
|
(13%) |
(4%) |
France |
19,939 |
13,699 |
15,102 |
|
46% |
32% |
Per boe |
17.58 |
15.97 |
15.30 |
|
10% |
15% |
Netherlands |
3,969 |
5,713 |
4,109 |
|
(31%) |
(3%) |
Per boe |
7.06 |
11.14 |
7.63 |
|
(37%) |
(7%) |
Australia |
14,826 |
9,708 |
14,075 |
|
53% |
5% |
Per boe |
25.61 |
24.97 |
23.27 |
|
3% |
10% |
In Canada, first quarter operating expense of
$13.8 million was lower than the
$14.5 million for the fourth quarter
of 2012 as a result of costs incurred in the prior quarter
associated with two facility turnarounds partially offset by higher
costs in the first quarter of this year related to salaries and
benefits, fuel and electricity and chemical usage. Operating
expense for the first quarter of 2013 was also lower as compared to
the $14.3 million for the first
quarter of the prior year as a result of some non-operated
equalizations received in that period. Operating costs per
boe for the three months ended March 31,
2013, decreased as compared to the previous quarter and the
first quarter of 2012 as a result of lower expense and higher
volumes.
In France, first quarter operating expense of
$19.9 million was higher than both
the fourth quarter 2012 expense of $13.7
million and the expense of $15.1
million for the first quarter of 2012 largely as a result of
the inventory draw that occurred in the current quarter. When
inventoried product is sold, the related costs are expensed in the
period of sale. Despite higher production volumes in the
first quarter of 2013 as compared to the fourth quarter of 2012,
the timing of downhole work and increased electricity costs
resulted in an increase in operating expense per boe to
$17.58 for the current quarter from
$15.97 for the prior quarter.
In the Netherlands, operating expense for the
three months ended March 31, 2013 of
$4.0 million decreased from
$5.7 million in the prior quarter and
was consistent with the $4.1 million
for the first quarter of 2012. The quarter-over-quarter
decrease is attributable to the timing of project work.
Operating expense per boe for the three months ended March 31, 2013 similarly decreased versus the
previous quarter and the first quarter of 2012 as a result of lower
expenses coupled with higher volumes.
In Australia, first quarter operating expense
increased to $14.8 million from the
previous quarter's expense of $9.7
million due to a draw in crude oil inventory associated with
shipment timing. A decrease in crude oil inventory results in
the related production costs being expensed when the product is
sold. On a per boe basis, operating expense for the first
quarter of 2013 was higher than the previous quarter and the first
quarter of 2012 as a result of lower production volumes in the
current quarter due to two cyclones and drilling activities that
resulted in unplanned downtime.
TRANSPORTATION EXPENSE
|
Three
Months Ended |
|
%
change |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
2,269 |
1,922 |
2,044 |
|
18% |
11% |
Per boe |
1.56 |
1.46 |
1.42 |
|
7% |
10% |
France |
2,754 |
1,854 |
2,648 |
|
49% |
4% |
Per boe |
2.43 |
2.16 |
2.68 |
|
13% |
(9%) |
Ireland |
1,618 |
1,682 |
2,001 |
|
(4%) |
(19%) |
Transportation |
6,641 |
5,458 |
6,693 |
|
22% |
(1%) |
Per boe |
1.78 |
1.77 |
1.87 |
|
1% |
(5%) |
Consolidated transportation expense was higher
for the first quarter of 2013 as compared to the fourth quarter of
2012. This increase was primarily the result of higher sales
volumes in Canada and an increased number of shipments in France
from the Aquitaine basin.
Consolidated transportation expense for the
first quarter of 2013 was consistent with the expense for the same
period in 2012 as a result of lower payments under the ship or pay
agreement related to the Corrib project, mostly offset by higher
volumes in both Canada and France.
OTHER (INCOME) EXPENSE
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Other (income) expense |
(67) |
460 |
7,983 |
|
(115%) |
(101%) |
Per boe |
(0.02) |
0.15 |
2.24 |
|
(113%) |
(101%) |
Other expense for the three months ended
March 31, 2012 was comprised
primarily of $8.5 million relating to
transfer taxes paid to regulatory authorities in France pursuant to
the first quarter of 2012 acquisition of certain working interests
in six producing fields located in the Paris and Aquitaine basins
in France.
GENERAL AND ADMINISTRATION EXPENSE
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
General and administration |
12,610 |
8,888 |
10,148 |
|
42% |
24% |
Per boe |
3.38 |
2.89 |
2.84 |
|
17% |
19% |
General and administration expense for the first
quarter of 2013 was higher than the expense for both the previous
quarter and the first quarter of 2012 due to increased staffing
levels to support Vermilion's operational activities coupled with
expenditure timing.
EQUITY BASED COMPENSATION EXPENSE
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Equity based compensation |
16,136 |
18,484 |
10,055 |
|
(13%) |
60% |
Per boe |
4.33 |
6.01 |
2.81 |
|
(28%) |
54% |
Equity based compensation expense relates to
non-cash compensation expense attributable to long-term incentives
granted to directors, officers and employees under the Vermilion
Incentive Plan (VIP). The expense is recognized over the vesting
period based on the grant date fair value of awards, adjusted for
the ultimate number of awards that actually vest as determined by
the Company's achievement of performance conditions.
Equity based compensation expense for the first
quarter of 2013 was lower than the preceeding quarter as the fourth
quarter of 2012 included additional expense resulting from a change
in performance condition assumptions. As the first quarter of
2013 also reflected this change in performance condition
assumptions, equity based compensation expense for the current
quarter was higher than the expense for the same quarter in
2012.
INTEREST EXPENSE
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Interest expense |
8,689 |
7,656 |
6,101 |
|
13% |
42% |
Per boe |
2.33 |
2.49 |
1.71 |
|
(6%) |
36% |
Interest expense increased during the current
quarter as compared to both the prior quarter and same quarter in
the previous year primarily due to increased borrowings under
Vermilion's revolving credit facility.
DEPLETION AND DEPRECIATION, ACCRETION, IMPAIRMENTS AND GAIN
ON ACQUISITION
|
Three
Months Ended |
|
%
change |
|
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Depletion and depreciation |
81,448 |
66,642 |
75,848 |
|
22% |
7% |
Per boe |
21.85 |
21.66 |
21.23 |
|
1% |
3% |
Accretion |
5,824 |
6,119 |
5,238 |
|
(5%) |
11% |
Per boe |
1.56 |
1.99 |
1.47 |
|
(22%) |
6% |
Impairments |
- |
- |
65,800 |
|
- |
(100%) |
Per boe |
- |
- |
18.42 |
|
- |
(100%) |
Gain on acquisition |
- |
- |
(45,309) |
|
- |
(100%) |
Per boe |
- |
- |
(12.68) |
|
- |
(100%) |
Depletion and depreciation expense on a per boe
basis was relatively consistent for the first quarter of 2013 as
compared to both the first and fourth quarters of 2012. The
slight increase in the current quarter was higher primarily due to
the result of higher finding, development and acquisition costs
incurred from additional liquids development in Canada and the
acquisitions in France in 2012.
Accretion expense decreased for the first
quarter of 2013 as compared to the fourth quarter of 2012 as a
result of a decrease in asset retirement obligations. This
decrease occurred in Canada, due to a change in estimate recorded
in the fourth quarter of 2012, and was partially offset by asset
retirement obligations recorded on the fourth quarter of 2012
acquisition in France. On a year-over-year basis, accretion
expense increased as the aforementioned decrease in Canada's asset
retirement obligations were offset by asset retirement obligations
assumed on the France acquisition in the fourth quarter of
2012.
The impairment losses for the first quarter of
2012 pertained to impairment losses recorded on Vermilion's
conventional deep gas and shallow coal bed methane natural gas
plays. These impairment charges were the result of
significant declines in the forward pricing assumptions for natural
gas in Canada.
The gain on acquisition for the first quarter of
2012 relates to Vermilion's acquisition of certain working
interests in the Paris and Aquitaine basins in France. The
gain arose as a result of the increase in the fair value of the
acquired petroleum and natural gas reserves from the time when the
acquisition was negotiated to the acquisition date. The
increase resulted from a change in the underlying commodity price
forecasts used to determine the fair value of the acquired
reserves.
TAXES
|
Three
Months Ended |
|
%
change |
By classification |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Current taxes before PRRT |
35,557 |
21,470 |
32,364 |
|
66% |
10% |
Per boe |
9.54 |
6.98 |
9.06 |
|
37% |
5% |
PRRT |
11,153 |
1,598 |
27,269 |
|
598% |
(59%) |
Per boe |
2.99 |
0.52 |
7.63 |
|
475% |
(61%) |
Current taxes |
46,710 |
23,068 |
59,633 |
|
102% |
(22%) |
Per boe |
12.53 |
7.50 |
16.69 |
|
67% |
(25%) |
|
|
|
|
|
|
|
|
Three
Months Ended |
|
%
change |
By country |
Mar 31, |
Dec 31, |
Mar 31, |
|
Q1/13 vs. |
Q1/13 vs. |
($M except per boe) |
2013 |
2012 |
2012 |
|
Q4/12 |
Q1/12 |
Canada |
251 |
259 |
442 |
|
(3%) |
(43%) |
Per boe |
0.17 |
0.20 |
0.31 |
|
(15%) |
(45%) |
France |
18,659 |
13,335 |
12,895 |
|
40% |
45% |
Per boe |
16.45 |
15.55 |
13.06 |
|
6% |
26% |
Netherlands |
9,434 |
1,102 |
9,057 |
|
756% |
4% |
Per boe |
16.78 |
2.15 |
16.82 |
|
680% |
- |
Australia |
18,366 |
8,372 |
37,239 |
|
119% |
(51%) |
Per boe |
31.73 |
21.53 |
61.56 |
|
47% |
(48%) |
Vermilion pays current taxes in France, the
Netherlands and Australia. Corporate income taxes in France
and the Netherlands apply to taxable income after eligible
deductions. In France, taxable income is taxed at a rate of
approximately 34.4%, plus an additional profit tax of 1.7% levied
until 2014 if annual gross revenues exceed 250 million Euros. In the Netherlands,
taxable income is taxed at a rate of approximately 46%. As a
function of the impact of Vermilion's Canadian tax pools, the
Company does not presently pay current taxes in Canada. The
Canadian segment includes holding companies that pay current taxes
in foreign jurisdictions.
In Australia, current taxes include both
corporate income taxes and PRRT. Corporate income taxes are
applied at a rate of approximately 30% on taxable income after
eligible deductions, which include PRRT. PRRT is a profit
based tax applied at a rate of 40% on sales less eligible
expenditures, including operating expenses and capital
expenditures.
Total current taxes before PRRT was higher in
the first quarter of 2013 as compared to the fourth quarter of 2012
as a result of increased sales in France and Australia, in addition
to the absence of certain deductions for asset retirement
obligations and depletion recorded in the Netherlands for the
fourth quarter of 2012. Total current taxes before PRRT was
relatively consistent for the first quarter of 2013 as compared to
the same period in the prior year.
PRRT increased for the first quarter of 2013
compared to fourth quarter of 2012 as a result of an inventory draw
in the current quarter. On a year-over-year basis, the
decrease in PRRT is a result of higher capital expenditures in
Australia.
FOREIGN EXCHANGE
|
Three
Months Ended |
|
Mar 31, |
Dec 31, |
Mar 31, |
($M except per boe) |
2013 |
2012 |
2012 |
Unrealized foreign exchange loss (gain) |
2,519 |
(13,873) |
(5,247) |
Per boe |
0.68 |
(4.50) |
(1.47) |
Realized foreign exchange loss (gain) |
617 |
(2,459) |
820 |
Per boe |
0.17 |
(0.81) |
0.23 |
Foreign exchange loss (gain) |
3,136 |
(16,332) |
(4,427) |
Per boe |
0.85 |
(5.31) |
(1.24) |
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 U.S. Dollar, the Euro and the Australian Dollar.
Foreign exchange gains and losses are comprised
of both unrealized and realized amounts. 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. Realized gains and losses are the result of
foreign exchange fluctuations and the timing of payments on
transactions conducted in non-functional currencies and as such are
subject to fluctuations.
For the first quarter of 2013, the unrealized
foreign exchange loss primarily resulted from the impact of the
appreciation of the Canadian dollar against the Euro and the
resultant impact on Euro denominated loans made by Vermilion to its
subsidiaries.
SUMMARY OF RESULTS
|
|
Three
Months Ended |
|
|
Mar 31, |
Dec 31, |
Sept 30, |
Jun 30, |
Mar 31, |
Dec 31, |
Sept 30, |
Jun 30, |
($M except per share) |
2013 |
2012 |
2012 |
2012 |
2012 |
2011 |
2011 |
2011 |
Petroleum and natural gas sales |
309,576 |
241,233 |
284,838 |
246,544 |
310,488 |
275,172 |
248,361 |
278,297 |
Net earnings (loss) |
52,137 |
56,914 |
30,798 |
37,816 |
65,094 |
(30,243) |
64,442 |
81,429 |
Net earnings (loss) per share |
|
|
|
|
|
|
|
|
|
Basic |
0.53 |
0.58 |
0.31 |
0.39 |
0.67 |
(0.32) |
0.71 |
0.90 |
|
Diluted |
0.51 |
0.57 |
0.31 |
0.38 |
0.66 |
(0.32) |
0.70 |
0.89 |
The fluctuations in Vermilion's petroleum and
natural gas sales and net earnings (loss) from quarter-to-quarter
are primarily caused by variations in sales volumes, crude oil and
natural gas prices and the impact of royalties and tax legislation
in the jurisdictions in which Vermilion operates. In
addition, petroleum and natural gas prices may impact gains and
losses on derivative instruments and may result in impairment
charges or the reversal of impairment charges incurred in previous
periods.
LIQUIDITY AND CAPITAL RESOURCES
Vermilion's net debt as at March 31,
2013 was $744.8 million
compared to $677.2 million as at
December 31, 2012.
Long-term debt was comprised of the following:
|
As
At |
|
Mar 31, |
|
Dec 31, |
($M) |
2013 |
|
2012 |
Revolving credit facility |
490,303 |
|
419,784 |
Senior unsecured notes |
222,460 |
|
222,238 |
Long-term debt |
712,763 |
|
642,022 |
Revolving Credit Facility
At March 31, 2013,
Vermilion had in place a bank revolving credit facility totalling
$950 million, of which approximately
$490.3 million was drawn. The
facility, which matures in May of 2015, 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 repayable on the
maturity date. This facility bears interest at a rate
applicable to demand loans plus applicable margins.
The amount available to Vermilion under this
facility is reduced by outstanding letters of credit associated
with Vermilion's operations totalling $49.1
million as at March 31, 2013
(December 31, 2012 - $49.2 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 of not
greater than 4.0. In addition, Vermilion must maintain a
ratio of consolidated total senior debt (consolidated total debt
excluding unsecured and subordinated debt) to consolidated net
earnings before interest, income taxes, depreciation, accretion and
other certain non-cash items of not greater than 3.0.
As at March 31,
2013, Vermilion was in compliance with its financial
covenants.
Senior Unsecured Notes
On February 10,
2011, Vermilion issued $225.0
million of senior unsecured notes at par. The notes
bear interest at a rate of 6.5% per annum and will mature on
February 10, 2016. As direct
senior unsecured obligations of Vermilion, the notes rank pari
passu with all other present and future unsecured and
unsubordinated indebtedness of the Company.
Vermilion may, at its option, prior to
February 10, 2014, redeem up to 35%
of the notes with net proceeds of equity offerings by the Company
at a redemption price equal to 106.5% of the principal amount of
the notes to be redeemed, plus accrued and unpaid interest, if any,
to the applicable redemption date. Subsequently, Vermilion
may, on or after February 10, 2014,
redeem all or part of the notes at fixed redemption prices, plus,
in each case, accrued and unpaid interest, if any, to the
applicable redemption date. The notes were initially
recognized at fair value net of transaction costs and are
subsequently measured at amortized cost using an effective interest
rate of 7.1%.
ASSET RETIREMENT OBLIGATIONS
|
As
At |
|
Mar 31, |
|
Dec 31, |
($M) |
2013 |
|
2012 |
Asset retirement obligations |
362,113 |
|
371,063 |
The decrease in asset retirement obligations was
primarily the result of an overall increase in the discount rates
applied to the obligations. This decrease was partially
offset by accretion and additions from new wells drilled during the
quarter.
DIVIDENDS
|
Three Months
Ended |
|
|
Year Ended |
|
Mar 31, |
|
|
Dec 31, |
($M) |
2013 |
|
|
2012 |
Cash flows from operating activities |
190,712 |
|
|
496,580 |
Net earnings |
52,137 |
|
|
190,622 |
Dividends declared |
59,612 |
|
|
223,717 |
Excess of cash flows from operating activities
over dividends declared |
131,100 |
|
|
272,863 |
(Shortfall) of net earnings over dividends
declared |
(7,475) |
|
|
(33,095) |
During the three months ended March 31, 2013, Vermilion maintained monthly
dividends at $0.20 per share and
declared dividends totalling $59.6
million.
Excess cash flows from operating activities over
dividends declared are used to fund capital expenditures, asset
retirement obligations and debt repayments.
Following Vermilion's conversion to a trust in
January 2003, the distribution
remained at $0.17 per unit per month
until it was increased to $0.19 per
unit per month in December
2007. Effective September 1,
2010, Vermilion converted to a dividend paying corporation
and dividends remained at $0.19 per
share per month until increased to $0.20 per share per month in January 2013. The January 2013 increase was announced on
November 14, 2012 and resulted in an
increase in the monthly cash dividends by 5.3% to $0.20 per share per month beginning with the
January 2013 dividend (paid on
February 15, 2013).
Vermilion's 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,
Vermilion will initially maintain dividends and allow the ratio to
rise. Should low commodity price cycles remain for an
extended period of time, Vermilion will evaluate the necessity of
changing the level of dividends, taking into consideration capital
development requirements, debt levels and acquisition
opportunities.
Over the next two years, Vermilion anticipates
that Corrib, Cardium and other exploration and development
activities will require a significant capital investment by
Vermilion. Although Vermilion currently expects to be able to
maintain its current dividend, Vermilion's fund flows from
operations may not be sufficient during this period to fund cash
dividends, capital expenditures and asset retirement
obligations. Vermilion will evaluate its 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.
SHAREHOLDERS' EQUITY
During the three months ended March 31, 2013, Vermilion issued 0.3 million
shares pursuant to the dividend reinvestment plan and Vermilion's
equity based compensation programs. Shareholders' capital
increased by $16.2 million as a
result of the issuance of those shares.
As at March 31,
2013, there were 99.5 million shares outstanding. As
at April 30, 2013, there were 101.2
million shares outstanding.
CORRIB PROJECT
Vermilion holds an 18.5% non-operating interest
in the offshore Corrib gas field located off the northwest coast of
Ireland. Production from Corrib is expected to increase
Vermilion's volumes by approximately 55 mmcf/d (9,000 boe/d) once
the field reaches peak production. Vermilion acquired its
18.5% working interest in the project on July 30, 2009. The project comprises five
offshore wells, both offshore and onshore pipeline segments as well
as a natural gas processing facility. At the time of the
acquisition most of the key components of the project, with the
exception of the onshore pipeline, were either complete or in the
latter stages of development. Vermilion's interest was
acquired for cash consideration of $136.8
million with subsequent capital expenditures to March 31, 2013 of $319.1
million, primarily related to completion of the natural gas
processing facility, sub-surface well work, and permitting,
preparations and construction of the onshore pipeline.
Furthermore, pursuant to the terms of the acquisition agreement,
Vermilion made an additional payment to the vendor of $134.3 million (US$135
million) at the end of 2012. In 2011, approvals and
permissions were granted for the onshore gas pipeline and tunneling
activities commenced in December of 2012. Vermilion expects
to continue significant capital investment on this project over the
next two years and currently expects to achieve initial gas
production from this field in late 2014 or early 2015, and to reach
peak production levels in mid-2015.
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, 2012.
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, certain of these estimates may
change from period to period due to the availability of new
information. 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.
The following outlines what management believes
to be the most critical accounting policies involving the use of
estimates and assumptions:
|
i. |
Depletion and depreciation charges are based on estimates of
total proven and probable reserves that Vermilion expects to
recover in the future. |
|
ii. |
Asset retirement obligations are based on past experience and
current economic factors which management believes are
reasonable. |
|
iii. |
Impairment tests are performed at the cash generating unit
(CGU) level, which is determined based on management's
judgment. The calculation of the recoverable amount of a CGU
is based on market factors as well as estimates of PNG reserves and
future costs required to develop reserves. |
|
iv. |
Deferred tax amounts recognized in the consolidated financial
statements are based on management's assessment of the tax
positions at the end of each reporting period. |
OFF BALANCE SHEET ARRANGEMENTS
Vermilion has certain lease agreements that are
entered into in the normal course of operations, all of which are
operating leases and accordingly no asset or liability value has
been assigned to the consolidated balance sheet as at March 31, 2013.
Vermilion has not entered into any guarantee or
off balance sheet arrangements that would materially impact
Vermilion's financial position or results of operations.
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.
RECENTLY ADOPTED ACCOUNTING
PRONOUNCEMENTS
As of January 1,
2013, Vermilion adopted the following standards and
amendments as issued by the IASB. The adoption of these
standards did not have a material impact on Vermilion's
consolidated financial statements.
IFRS 10 "Consolidated Financial
Statements"
IFRS 10 replaced Standing Interpretations Committee 12,
"Consolidation - Special Purpose Entities" and the consolidation
requirements of IAS 27 "Consolidated and Separate Financial
Statements". The new standard replaces the existing risk and
rewards based approaches and establishes control as the determining
factor when determining whether an interest in another entity
should be included in the consolidated financial
statements.
IFRS 11 "Joint Arrangements"
IFRS 11 replaced IAS 31 "Interests in Joint Ventures". The
new standard focuses on the rights and obligations of an
arrangement, rather than its legal form. The standard
redefines joint operations and joint ventures and requires joint
operations to be proportionately consolidated and joint ventures to
be equity accounted.
IFRS 12 "Disclosure of Interests in Other
Entities"
IFRS 12 provides comprehensive disclosure requirements on interests
in other entities, including joint arrangements, associates, and
special purpose entities. The new disclosures are intended to
assist financial statement users in evaluating the nature, risks
and financial effects of an entity's interest in subsidiaries and
joint arrangements.
IFRS 13 "Fair Value Measurement"
IFRS 13 provides a common definition of fair value within
IFRS. The new standard provides measurement and disclosure
guidance and applies when another IFRS requires or permits an item
to be measured at fair value, with limited exceptions.
IAS 34 "Interim Financial Reporting"
Amendments to IAS 34 require specific disclosure on the fair value
of financial instruments for interim reporting.
ACCOUNTING PRONOUNCEMENTS NOT YET
ADOPTED
The adoption of the following standards is not
expected to have a material impact on Vermilion's consolidated
financial statements:
IFRS 9 "Financial Instruments"
As of January 1, 2015, Vermilion will
be required to adopt IFRS 9, as part of the first phase of the
IASB's project to replace IAS 39, "Financial Instruments:
Recognition and Measurement". The new standard replaces the current
multiple classification and measurement models for financial assets
and liabilities with a single model that has only two
classification categories: amortized cost and fair value.
NETBACKS
The following table includes segmented financial statement
information on a per unit basis. 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 Mar 31, 2013 |
|
|
Three Months Ended
Mar 31, 2012 |
|
|
Oil & NGLs |
Natural Gas |
Total |
|
|
Total |
|
|
$/bbl |
$/mcf |
$/boe |
|
|
$/boe |
Canada |
|
|
|
|
|
|
|
Price |
|
85.26 |
3.33 |
57.61 |
|
|
55.84 |
Realized hedging gain (loss) |
|
0.28 |
- |
0.16 |
|
|
(0.44) |
Royalties |
|
(9.71) |
(0.23) |
(6.19) |
|
|
(6.22) |
Transportation |
|
(1.99) |
(0.16) |
(1.56) |
|
|
(1.42) |
Operating |
|
(9.23) |
(1.66) |
(9.53) |
|
|
(9.89) |
Operating netback |
|
64.61 |
1.28 |
40.49 |
|
|
37.87 |
France |
|
|
|
|
|
|
|
Price |
|
109.54 |
11.17 |
107.17 |
|
|
104.84 |
Realized hedging loss |
|
(1.89) |
- |
(1.78) |
|
|
(4.98) |
Royalties |
|
(6.24) |
(0.30) |
(6.00) |
|
|
(5.55) |
Transportation |
|
(2.57) |
- |
(2.43) |
|
|
(2.68) |
Operating |
|
(18.02) |
(1.68) |
(17.58) |
|
|
(15.30) |
Operating netback |
|
80.82 |
9.19 |
79.38 |
|
|
76.33 |
Netherlands |
|
|
|
|
|
|
|
Price |
|
102.96 |
10.09 |
61.21 |
|
|
59.08 |
Operating |
|
- |
(1.19) |
(7.06) |
|
|
(7.63) |
Operating netback |
|
102.96 |
8.90 |
54.15 |
|
|
51.45 |
Australia |
|
|
|
|
|
|
|
Price |
|
120.76 |
- |
120.76 |
|
|
156.43 |
Realized hedging loss |
|
(1.74) |
- |
(1.74) |
|
|
(0.27) |
Operating |
|
(25.61) |
- |
(25.61) |
|
|
(23.27) |
PRRT 1 |
|
(19.27) |
- |
(19.27) |
|
|
(45.08) |
Operating netback |
|
74.14 |
- |
74.14 |
|
|
87.81 |
Total Company |
|
|
|
|
|
|
|
Price |
|
103.98 |
6.77 |
83.04 |
|
|
86.90 |
Realized hedging loss |
|
(1.12) |
- |
(0.75) |
|
|
(1.60) |
Royalties |
|
(5.93) |
(0.13) |
(4.24) |
|
|
(4.04) |
Transportation |
|
(1.77) |
(0.30) |
(1.78) |
|
|
(1.87) |
Operating |
|
(16.77) |
(1.45) |
(14.10) |
|
|
(13.31) |
PRRT 1 |
|
(4.47) |
- |
(2.99) |
|
|
(7.63) |
Operating netback |
|
73.92 |
4.89 |
59.18 |
|
|
58.45 |
General and administration |
|
|
|
(3.38) |
|
|
(2.84) |
Interest expense |
|
|
|
(2.33) |
|
|
(1.71) |
Realized foreign exchange loss |
|
|
|
(0.17) |
|
|
(0.23) |
Other income (expense) |
|
|
|
0.13 |
|
|
(2.31) |
Current income taxes 1 |
|
|
|
(9.54) |
|
|
(9.06) |
Fund flows netback |
|
|
|
43.89 |
|
|
42.30 |
Accretion |
|
|
|
(1.56) |
|
|
(1.47) |
Depletion and depreciation |
|
|
|
(21.85) |
|
|
(21.23) |
Impairments |
|
|
|
- |
|
|
(18.42) |
Gain on acquisition |
|
|
|
- |
|
|
12.68 |
Deferred taxes |
|
|
|
(1.09) |
|
|
7.96 |
Unrealized other (expense) income |
|
|
|
(0.11) |
|
|
0.07 |
Unrealized foreign exchange (loss) gain |
|
|
|
(0.68) |
|
|
1.47 |
Unrealized loss on derivative instruments |
|
|
|
(0.30) |
|
|
(2.33) |
Equity based compensation |
|
|
|
(4.33) |
|
|
(2.81) |
Earnings netback |
|
|
|
13.97 |
|
|
18.22 |
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. |
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
March 31, |
|
December 31, |
|
Note |
|
2013 |
|
2012 |
ASSETS |
|
|
|
|
|
Current |
|
|
|
|
|
Cash and cash equivalents |
|
|
176,513 |
|
102,125 |
Accounts receivable |
|
|
156,966 |
|
180,064 |
Crude oil inventory |
|
|
15,526 |
|
25,719 |
Derivative instruments |
|
|
746 |
|
2,086 |
Prepaid expenses |
|
|
9,958 |
|
10,508 |
|
|
|
359,709 |
|
320,502 |
|
|
|
|
|
|
Deferred taxes |
|
|
194,354 |
|
193,354 |
Exploration and evaluation assets |
4 |
|
125,775 |
|
117,161 |
Capital assets |
3 |
|
2,523,959 |
|
2,445,240 |
|
|
|
3,203,797 |
|
3,076,257 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Current |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
321,775 |
|
300,682 |
Dividends payable |
7 |
|
19,892 |
|
18,836 |
Derivative instruments |
|
|
8,257 |
|
8,484 |
Income taxes payable |
|
|
41,784 |
|
27,709 |
|
|
|
391,708 |
|
355,711 |
|
|
|
|
|
|
Long-term debt |
6 |
|
712,763 |
|
642,022 |
Asset retirement obligations |
5 |
|
362,113 |
|
371,063 |
Deferred taxes |
|
|
295,706 |
|
288,815 |
|
|
|
1,762,290 |
|
1,657,611 |
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
Shareholders' capital |
7 |
|
1,497,506 |
|
1,481,345 |
Contributed surplus |
|
|
85,088 |
|
69,581 |
Accumulated other comprehensive loss |
|
|
(33,741) |
|
(32,409) |
Deficit |
|
|
(107,346) |
|
(99,871) |
|
|
|
1,441,507 |
|
1,418,646 |
|
|
|
3,203,797 |
|
3,076,257 |
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 |
|
2013 |
|
2012 |
REVENUE |
|
|
|
|
|
Petroleum and natural gas sales |
|
|
309,576 |
|
310,488 |
Royalties |
|
|
(15,790) |
|
(14,452) |
Petroleum and natural gas revenue |
|
|
293,786 |
|
296,036 |
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
Operating |
|
|
52,575 |
|
47,553 |
Transportation |
|
|
6,641 |
|
6,693 |
Equity based compensation |
8 |
|
16,136 |
|
10,055 |
Loss on derivative instruments |
|
|
3,900 |
|
14,057 |
Interest expense |
|
|
8,689 |
|
6,101 |
General and administration |
|
|
12,610 |
|
10,148 |
Foreign exchange loss (gain) |
|
|
3,136 |
|
(4,427) |
Other (income) expense |
|
|
(67) |
|
7,983 |
Accretion |
5 |
|
5,824 |
|
5,238 |
Depletion and depreciation |
3, 4 |
|
81,448 |
|
75,848 |
Impairments |
3 |
|
- |
|
65,800 |
Gain on acquisition |
|
|
- |
|
(45,309) |
|
|
|
190,892 |
|
199,740 |
EARNINGS BEFORE INCOME TAXES |
|
|
102,894 |
|
96,296 |
|
|
|
|
|
|
INCOME TAXES |
|
|
|
|
|
Deferred |
|
|
4,047 |
|
(28,431) |
Current |
|
|
46,710 |
|
59,633 |
|
|
|
50,757 |
|
31,202 |
|
|
|
|
|
|
NET EARNINGS |
|
|
52,137 |
|
65,094 |
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) INCOME |
|
|
|
|
|
Currency translation adjustments |
|
|
(1,332) |
|
7,381 |
COMPREHENSIVE INCOME |
|
|
50,805 |
|
72,475 |
|
|
|
|
|
|
NET EARNINGS PER SHARE |
|
|
|
|
|
Basic |
|
|
0.53 |
|
0.67 |
Diluted |
|
|
0.51 |
|
0.66 |
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
('000s) |
|
|
|
|
|
Basic |
|
|
99,301 |
|
96,644 |
Diluted |
|
|
101,349 |
|
98,191 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
|
Three
Months Ended |
|
|
|
March 31, |
|
March 31, |
|
Note |
|
2013 |
|
2012 |
OPERATING |
|
|
|
|
|
Net earnings |
|
|
52,137 |
|
65,094 |
Adjustments: |
|
|
|
|
|
|
Accretion |
5 |
|
5,824 |
|
5,238 |
|
Depletion and depreciation |
3, 4 |
|
81,448 |
|
75,848 |
|
Impairments |
3 |
|
- |
|
65,800 |
|
Gain on acquisition |
|
|
- |
|
(45,309) |
|
Unrealized loss on derivative instruments |
|
|
1,113 |
|
8,339 |
|
Equity based compensation |
8 |
|
16,136 |
|
10,055 |
|
Unrealized foreign exchange loss (gain) |
|
|
2,519 |
|
(5,247) |
|
Unrealized other expense (income) |
|
|
405 |
|
(265) |
|
Deferred taxes |
|
|
4,047 |
|
(28,431) |
Asset retirement obligations
settled |
5 |
|
(1,388) |
|
(766) |
Changes in non-cash operating working
capital |
|
|
28,471 |
|
(25,469) |
Cash flows from operating
activities |
|
|
190,712 |
|
124,887 |
|
|
|
|
|
|
INVESTING |
|
|
|
|
|
Drilling and development |
3 |
|
(179,520) |
|
(87,896) |
Exploration and evaluation |
4 |
|
(9,576) |
|
(6,464) |
Property acquisitions |
3 |
|
- |
|
(106,184) |
Dispositions |
3 |
|
8,627 |
|
- |
Changes in non-cash investing working
capital |
|
|
38,210 |
|
(6,754) |
Cash flows used in investing
activities |
|
|
(142,259) |
|
(207,298) |
|
|
|
|
|
|
FINANCING |
|
|
|
|
|
Increase in long-term debt |
|
|
69,429 |
|
- |
Issuance of shares pursuant to the
dividend reinvestment plan |
|
|
- |
|
17,558 |
Cash dividends |
|
|
(43,024) |
|
(55,047) |
Cash flows from (used in) financing
activities |
|
|
26,405 |
|
(37,489) |
Foreign exchange (loss) gain on cash
held in foreign currencies |
|
|
(470) |
|
30 |
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
74,388 |
|
(119,870) |
Cash and cash equivalents, beginning
of period |
|
|
102,125 |
|
234,507 |
Cash and cash equivalents, end of
period |
|
|
176,513 |
|
114,637 |
|
|
|
|
|
|
Supplementary information for
operating activities - cash payments |
|
|
|
|
|
|
Interest paid |
|
|
12,092 |
|
9,507 |
|
Income taxes paid |
|
|
32,635 |
|
19,699 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(THOUSANDS OF CANADIAN DOLLARS, UNAUDITED)
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Other |
|
Total |
|
|
Shareholders' |
Contributed |
Comprehensive |
|
Shareholders' |
|
Note |
Capital |
Surplus |
|
Loss |
Deficit |
Equity |
Balances as at January 1, 2012 |
|
|
1,368,145 |
|
56,468 |
|
(33,387) |
|
(59,625) |
|
1,331,601 |
Net earnings |
|
|
- |
|
- |
|
- |
|
65,094 |
|
65,094 |
Currency translation adjustments |
|
|
- |
|
- |
|
7,381 |
|
- |
|
7,381 |
Equity based compensation expense |
|
|
- |
|
9,419 |
|
- |
|
- |
|
9,419 |
Dividends declared |
7 |
|
- |
|
- |
|
- |
|
(55,124) |
|
(55,124) |
Issuance of shares pursuant to the |
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan |
7 |
|
17,558 |
|
- |
|
- |
|
- |
|
17,558 |
Shares issued pursuant to the bonus plan |
7 |
|
636 |
|
- |
|
- |
|
- |
|
636 |
Balances as at March 31, 2012 |
|
|
1,386,339 |
|
65,887 |
|
(26,006) |
|
(49,655) |
|
1,376,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Other |
|
Total |
|
|
Shareholders' |
Contributed |
Comprehensive |
|
Shareholders' |
|
Note |
Capital |
Surplus |
|
Loss |
Deficit |
Equity |
Balances as at January 1, 2013 |
|
|
1,481,345 |
|
69,581 |
|
(32,409) |
|
(99,871) |
|
1,418,646 |
Net earnings |
|
|
- |
|
- |
|
- |
|
52,137 |
|
52,137 |
Currency translation adjustments |
|
|
- |
|
- |
|
(1,332) |
|
- |
|
(1,332) |
Equity based compensation expense |
|
|
- |
|
15,507 |
|
- |
|
- |
|
15,507 |
Dividends declared |
7 |
|
- |
|
- |
|
- |
|
(59,612) |
|
(59,612) |
Issuance of shares pursuant to the |
|
|
|
|
|
|
|
|
|
|
|
dividend reinvestment plan |
7 |
|
15,532 |
|
- |
|
- |
|
- |
|
15,532 |
Shares issued pursuant to the bonus plan |
7 |
|
629 |
|
- |
|
- |
|
- |
|
629 |
Balances as at March 31, 2013 |
|
|
1,497,506 |
|
85,088 |
|
(33,741) |
|
(107,346) |
|
1,441,507 |
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
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.
Retained earnings (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,
2013 AND 2012
(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, 2012, except as discussed in Note
2.
These condensed consolidated interim financial
statements should be read in conjunction with Vermilion's
consolidated financial statements for the year ended December 31, 2012, which are contained within
Vermilion's Annual Report for the year ended December 31, 2012 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 April 30,
2013.
2. RECENTLY ADOPTED ACCOUNTING
PRONOUNCEMENTS
As of January 1, 2013, Vermilion
adopted the following standards and amendments as issued by the
IASB. The adoption of these standards did not have a material
impact on Vermilion's consolidated financial statements.
IFRS 10 "Consolidated Financial Statements"
IFRS 10 replaced Standing Interpretations Committee 12,
"Consolidation - Special Purpose Entities" and the consolidation
requirements of IAS 27 "Consolidated and Separate Financial
Statements". The new standard replaces the existing risk and
rewards based approaches and establishes control as the determining
factor when determining whether an interest in another entity
should be included in the consolidated financial
statements.
IFRS 11 "Joint Arrangements"
IFRS 11 replaced IAS 31 "Interests in Joint Ventures". The
new standard focuses on the rights and obligations of an
arrangement, rather than its legal form. The standard
redefines joint operations and joint ventures and requires joint
operations to be proportionately consolidated and joint ventures to
be equity accounted.
IFRS 12 "Disclosure of Interests in Other Entities"
IFRS 12 provides comprehensive disclosure requirements on interests
in other entities, including joint arrangements, associates, and
special purpose entities. The new disclosures are intended to
assist financial statement users in evaluating the nature, risks
and financial effects of an entity's interest in subsidiaries and
joint arrangements.
IFRS 13 "Fair Value Measurement"
IFRS 13 provides a common definition of fair value within
IFRS. The new standard provides measurement and disclosure
guidance and applies when another IFRS requires or permits an item
to be measured at fair value, with limited exceptions.
IAS 34 "Interim Financial Reporting"
Amendments to IAS 34 require specific disclosure on the fair value
of financial instruments for interim reporting. These
disclosures are included in Note 11.
3. 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, 2012 |
|
2,016,611 |
|
15,071 |
|
2,031,682 |
Additions |
|
407,973 |
|
5,248 |
|
413,221 |
Transfers from exploration and evaluation
assets |
|
10,528 |
|
- |
|
10,528 |
Property acquisitions |
|
206,260 |
|
- |
|
206,260 |
Corporate acquisitions |
|
136,297 |
|
- |
|
136,297 |
Borrowing costs capitalized |
|
9,994 |
|
- |
|
9,994 |
Changes in estimate for asset retirement
obligations |
|
1,334 |
|
- |
|
1,334 |
Depletion and depreciation 1 |
|
(289,194) |
|
(5,165) |
|
(294,359) |
Impairments |
|
(65,800) |
|
- |
|
(65,800) |
Effect of movements in foreign exchange rates |
|
(3,882) |
|
(35) |
|
(3,917) |
Balance at December 31, 2012 |
|
2,430,121 |
|
15,119 |
|
2,445,240 |
Additions |
|
178,013 |
|
1,507 |
|
179,520 |
Dispositions |
|
(8,627) |
|
- |
|
(8,627) |
Changes in estimate for asset retirement
obligations |
|
(13,657) |
|
- |
|
(13,657) |
Depletion and depreciation 1 |
|
(75,395) |
|
(2,150) |
|
(77,545) |
Effect of movements in foreign exchange rates |
|
(961) |
|
(11) |
|
(972) |
Balance at March 31, 2013 |
|
2,509,494 |
|
14,465 |
|
2,523,959 |
1 |
Depletion and depreciation above excludes depletion recorded as
a component of crude oil inventory. |
4. EXPLORATION AND EVALUATION ASSETS
The following table reconciles the change in Vermilion's
exploration and evaluation assets:
($M) |
Exploration and Evaluation
Assets |
Balance at January 1, 2012 |
|
92,301 |
Additions |
|
39,317 |
Transfers to petroleum
and natural gas assets |
|
(10,528) |
Depreciation |
|
(3,485) |
Effect of movements in
foreign exchange rates |
|
(444) |
Balance at December 31,
2012 |
|
117,161 |
Additions |
|
9,576 |
Depreciation |
|
(903) |
Effect of movements in
foreign exchange rates |
|
(59) |
Balance at March 31, 2013 |
|
125,775 |
5. ASSET RETIREMENT OBLIGATIONS
The following table reconciles the change in
Vermilion's asset retirement obligations:
($M) |
Asset Retirement
Obligations |
Balance at January 1, 2012 |
|
|
310,531 |
Additional obligations recognized |
|
|
55,228 |
Changes in estimates for existing obligations |
|
|
(26,560) |
Obligations settled |
|
|
(13,739) |
Accretion |
|
|
23,040 |
Changes in discount rates |
|
|
22,807 |
Effect of movements in foreign exchange rates |
|
|
(244) |
Balance at December 31, 2012 |
|
|
371,063 |
Additional obligations recognized |
|
|
1,023 |
Obligations settled |
|
|
(1,388) |
Accretion |
|
|
5,824 |
Changes in discount rates |
|
|
(14,680) |
Effect of movements in foreign exchange rates |
|
|
271 |
Balance at March 31, 2013 |
|
|
362,113 |
6. LONG-TERM DEBT
The following table summarizes Vermilion's
outstanding long-term debt:
|
As
At |
($M) |
Mar 31,
2013 |
Dec 31,
2012 |
Revolving credit facility |
|
490,303 |
|
419,784 |
Senior unsecured notes |
|
222,460 |
|
222,238 |
Long-term debt |
|
712,763 |
|
642,022 |
Revolving Credit Facility
At March 31, 2013,
Vermilion had in place a bank revolving credit facility totalling
$950 million, of which approximately
$490.3 million was drawn. The
facility, which matures in May of 2015, 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 repayable on the
maturity date. This facility bears interest at a rate
applicable to demand loans plus applicable margins.
The amount available to Vermilion under this
facility is reduced by outstanding letters of credit associated
with Vermilion's operations totalling $49.1
million as at March 31, 2013
(December 31, 2012 - $49.2 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 of not
greater than 4.0. In addition, Vermilion must maintain a
ratio of consolidated total senior debt (consolidated total debt
excluding unsecured and subordinated debt) to consolidated net
earnings before interest, income taxes, depreciation, accretion and
other certain non-cash items of not greater than 3.0.
As at March 31,
2013, Vermilion was in compliance with its financial
covenants.
Senior Unsecured Notes
On February 10,
2011, Vermilion issued $225.0
million of senior unsecured notes at par. The notes
bear interest at a rate of 6.5% per annum and will mature on
February 10, 2016. As direct
senior unsecured obligations of Vermilion, the notes rank pari
passu with all other present and future unsecured and
unsubordinated indebtedness of the Company.
Vermilion may, at its option, prior to
February 10, 2014, redeem up to 35%
of the notes with net proceeds of equity offerings by the Company
at a redemption price equal to 106.5% of the principal amount of
the notes to be redeemed, plus accrued and unpaid interest, if any,
to the applicable redemption date. Subsequently, Vermilion
may, on or after February 10, 2014,
redeem all or part of the notes at fixed redemption prices, plus,
in each case, accrued and unpaid interest, if any, to the
applicable redemption date. The notes were initially
recognized at fair value net of transaction costs and are
subsequently measured at amortized cost using an effective interest
rate of 7.1%.
7. SHAREHOLDERS' CAPITAL
The following tables reconcile the change in
Vermilion's shareholders' capital:
Shareholders' Capital |
Number of Shares
('000s) |
|
Amount ($M) |
Balance as at January 1, 2012 |
|
96,430 |
|
1,368,145 |
Issuance of shares pursuant to the dividend
reinvestment plan |
|
1,631 |
|
72,058 |
Vesting of equity based awards |
|
904 |
|
33,355 |
Share-settled dividends on vested equity based
awards |
|
157 |
|
7,151 |
Shares issued pursuant to the bonus plan |
|
13 |
|
636 |
Balance as at December 31, 2012 |
|
99,135 |
|
1,481,345 |
Issuance of shares pursuant to the dividend
reinvestment plan |
|
315 |
|
15,532 |
Shares issued pursuant to the bonus plan |
|
12 |
|
629 |
Balance as at March 31, 2013 |
|
99,462 |
|
1,497,506 |
Dividends declared to shareholders for the three
months ended March 31, 2013 were
$59.6 million.
Subsequent to the end of the period and prior to
the condensed consolidated interim financial statements being
authorized for issue on April 30,
2013, Vermilion declared dividends totalling $20.2 million or $0.20 per share.
8. EQUITY BASED COMPENSATION
The following table summarizes the number of
awards outstanding under the Vermilion Incentive Plan ("VIP"):
Number of Awards ('000s) |
2013 |
|
2012 |
Opening balance |
1,690 |
|
1,750 |
Granted |
57 |
|
681 |
Vested |
- |
|
(596) |
Forfeited |
(3) |
|
(145) |
Closing balance |
1,744 |
|
1,690 |
The fair value of a VIP award is determined on
the grant date at the closing price of Vermilion's common shares on
the Toronto Stock Exchange, adjusted by the estimated performance
factor that will ultimately be achieved. Dividends, which
notionally accrue to the awards during the vesting period, are not
included in the determination of grant date fair values.
9. SEGMENTED INFORMATION
The following segment information has been
prepared by segregating the results into the geographic areas in
which Vermilion operates. The following amounts include
transactions between segments, which are recorded at fair value at
the date of recognition.
|
|
Three
Months Ended March 31, 2013 |
($M) |
Canada |
France |
Netherlands |
Australia |
Ireland |
Total |
Total assets |
1,289,888 |
|
842,756 |
|
140,269 |
|
342,107 |
|
588,777 |
|
3,203,797 |
Drilling and development |
84,060 |
|
21,592 |
|
1,999 |
|
55,349 |
|
16,520 |
|
179,520 |
Exploration and evaluation |
9,576 |
|
- |
|
- |
|
- |
|
- |
|
9,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external
customers |
83,688 |
|
121,566 |
|
34,421 |
|
69,901 |
|
- |
|
309,576 |
Royalties |
(8,989) |
|
(6,801) |
|
- |
|
- |
|
- |
|
(15,790) |
Revenue from external customers |
74,699 |
|
114,765 |
|
34,421 |
|
69,901 |
|
- |
|
293,786 |
Realized gain (loss) on derivative
instruments |
237 |
|
(2,019) |
|
- |
|
(1,005) |
|
- |
|
(2,787) |
Transportation expense |
(2,269) |
|
(2,754) |
|
- |
|
- |
|
(1,618) |
|
(6,641) |
Operating expense |
(13,841) |
|
(19,939) |
|
(3,969) |
|
(14,826) |
|
- |
|
(52,575) |
Operating income (loss) |
58,826 |
|
90,053 |
|
30,452 |
|
54,070 |
|
(1,618) |
|
231,783 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
251 |
|
18,659 |
|
9,434 |
|
7,213 |
|
- |
|
35,557 |
PRRT |
- |
|
- |
|
- |
|
11,153 |
|
- |
|
11,153 |
Current income taxes |
251 |
|
18,659 |
|
9,434 |
|
18,366 |
|
- |
|
46,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2012 |
($M) |
Canada |
France |
Netherlands |
Australia |
Ireland |
Total |
Total assets |
1,181,389 |
|
727,854 |
|
145,102 |
|
260,736 |
|
511,918 |
|
2,826,999 |
Drilling and development |
65,546 |
|
5,727 |
|
2,473 |
|
4,544 |
|
9,606 |
|
87,896 |
Exploration and evaluation |
6,367 |
|
- |
|
97 |
|
- |
|
- |
|
6,464 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales to external
customers |
80,526 |
|
103,511 |
|
31,820 |
|
94,631 |
|
- |
|
310,488 |
Royalties |
(8,969) |
|
(5,483) |
|
- |
|
- |
|
- |
|
(14,452) |
Revenue from external customers |
71,557 |
|
98,028 |
|
31,820 |
|
94,631 |
|
- |
|
296,036 |
Realized loss on derivative
instruments |
(638) |
|
(4,914) |
|
- |
|
(166) |
|
- |
|
(5,718) |
Transportation expense |
(2,044) |
|
(2,648) |
|
- |
|
- |
|
(2,001) |
|
(6,693) |
Operating expense |
(14,267) |
|
(15,102) |
|
(4,109) |
|
(14,075) |
|
- |
|
(47,553) |
Operating income (loss) |
54,608 |
|
75,364 |
|
27,711 |
|
80,390 |
|
(2,001) |
|
236,072 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income taxes |
442 |
|
12,895 |
|
9,057 |
|
9,970 |
|
- |
|
32,364 |
PRRT |
- |
|
- |
|
- |
|
27,269 |
|
- |
|
27,269 |
Current income taxes |
442 |
|
12,895 |
|
9,057 |
|
37,239 |
|
- |
|
59,633 |
Reconciliation of operating income to net earnings
|
|
Three
Months Ended |
($M) |
|
Mar 31, 2013 |
|
Mar 31, 2012 |
Operating income |
|
231,783 |
|
236,072 |
Equity based compensation |
|
(16,136) |
|
(10,055) |
Unrealized loss on derivative instruments |
|
(1,113) |
|
(8,339) |
Interest expense |
|
(8,689) |
|
(6,101) |
General and administration |
|
(12,610) |
|
(10,148) |
Foreign exchange (loss) gain |
|
(3,136) |
|
4,427 |
Other income (expense) |
|
67 |
|
(7,983) |
Accretion |
|
(5,824) |
|
(5,238) |
Depletion and depreciation |
|
(81,448) |
|
(75,848) |
Impairments |
|
- |
|
(65,800) |
Gain on acquisition |
|
- |
|
45,309 |
Earnings before income taxes |
|
102,894 |
|
96,296 |
Income taxes |
|
(50,757) |
|
(31,202) |
Net earnings |
|
52,137 |
|
65,094 |
10. CAPITAL DISCLOSURES
|
|
Three
Months Ended |
($M except as indicated) |
|
Mar 31, 2013 |
Mar 31, 2012 |
Long-term debt |
|
712,763 |
373,798 |
Current liabilities |
|
391,708 |
493,465 |
Current assets |
|
(359,709) |
(337,232) |
Net debt [1] |
|
744,762 |
530,031 |
|
|
|
|
Cash flows from operating activities |
|
190,712 |
124,887 |
Changes in non-cash operating working capital |
|
(28,471) |
25,469 |
Asset retirement obligations settled |
|
1,388 |
766 |
Fund flows from operations |
|
163,629 |
151,122 |
Annualized fund flows from operations [2] |
|
654,516 |
604,488 |
|
|
|
|
Ratio of net debt to annualized fund flows from
operations ([1] ÷ [2]) |
|
1.1 |
0.9 |
The ratio of net debt to annualized fund flows
from operations was higher in the current year as compared to the
prior year primarily as a result of an increase in net debt.
The increase in net debt was the result of the two acquisitions
that occurred in France during the first and fourth quarter of 2012
and capital expenditures pertaining to the Ireland assets, which
are currently under development.
Vermilion is subject to certain externally
imposed capital requirements under its revolving credit
facility. During the periods covered by these consolidated
financial statements, Vermilion continued to comply with these
requirements.
11. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
The following table summarizes information relating to
Vermilion's financial instruments as at March 31, 2013 and December 31, 2012:
|
|
|
|
|
|
|
As at March 31, 2013 |
|
|
As at December 31, 2012 |
|
|
|
Class of financial
instrument |
Consolidated balance sheet caption |
Accounting designation |
Related caption on Statement of Net
Earnings |
|
|
Carrying
value
($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) |
|
|
176,513 |
|
176,513 |
|
|
102,125 |
|
102,125 |
|
|
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 |
|
|
156,966 |
|
156,966 |
|
|
180,064 |
|
180,064 |
|
|
Not applicable |
Derivative assets |
Derivative instruments |
HFT |
Loss on derivative instruments |
|
|
746 |
|
746 |
|
|
2,086 |
|
2,086 |
|
|
Level 2 |
Derivative liabilities |
Derivative instruments |
HFT |
Loss on derivative instruments |
|
|
(8,257) |
|
(8,257) |
|
|
(8,484) |
|
(8,484) |
|
|
Level 2 |
Payables |
Accounts payable and accrued liabilities |
OTH |
Gains and losses on foreign exchange are included
in foreign exchange loss (gain) |
|
|
(341,667) |
|
(341,667) |
|
|
(319,518) |
|
(319,518) |
|
|
Not applicable |
|
|
Dividends payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
Long-term debt |
OTH |
Interest expense |
|
|
(712,763) |
|
(728,101) |
|
|
(642,022) |
|
(656,315) |
|
|
Not applicable |
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, 2013 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.
|
March 31,
2013 |
|
Before tax effect on
comprehensive income |
Risk ($M) |
Description of change in risk variable |
Increase
(decrease) |
Currency risk - Euro to Canadian |
Increase in strength of the
Canadian dollar against the |
|
(6,953) |
|
Euro by 5% over the relevant closing
rates on March 31, 2013 |
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
6,953 |
|
Euro by 5% over the relevant closing
rates on March 31, 2013 |
|
|
Currency risk - US $ to Canadian |
Increase in strength of the
Canadian dollar against the |
|
(1,440) |
|
US$ by 5% over the relevant closing
rates on March 31, 2013 |
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
1,440 |
|
US$ by 5% over the relevant closing
rates on March 31, 2013 |
|
|
Currency risk - AUD $ to Canadian |
Increase in strength of the
Canadian dollar against the |
|
(1,898) |
|
AUD$ by 5% over the relevant closing
rates on March 31, 2013 |
|
|
|
Decrease in strength of the
Canadian dollar against the |
|
1,898 |
|
AUD$ by 5% over the relevant closing
rates on March 31, 2013 |
|
|
Commodity price risk |
Increase in relevant oil
reference price within option pricing models used to |
|
(13,178) |
|
determine the fair value of financial
derivative positions by US$5.00/bbl at March 31, 2013 |
|
|
|
Decrease in relevant oil
reference price within option pricing models used to |
|
6,014 |
|
determine the fair value of financial
derivative positions by US$5.00/bbl at March 31, 2013 |
|
|
Interest rate risk |
Increase in average Canadian
prime interest rate |
|
(1,021) |
|
by 100 basis points during the three months ended
March 31, 2013 |
|
|
|
|
Decrease in average Canadian
prime interest rate |
|
1,021 |
|
by 100 basis points during the three months ended
March 31, 2013 |
|
|
|
SOURCE Vermilion Energy Inc.