CALGARY,
Oct. 1, 2013 /CNW/ - Vermilion Energy
Inc. ("Vermilion", "We" or "Our") (TSX, NYSE: VET) is pleased to
announce that it has entered into a definitive purchase and sale
agreement with Northern Petroleum Plc. ("Northern") whereby
Vermilion, through its wholly-owned subsidiary, will acquire 100%
of the shares of Northern Petroleum Nederland B.V. ("NPN") (the
"Acquisition"). NPN is the
Netherlands subsidiary of UK-based Northern. The
purchase price, which is subject to customary closing adjustments
(including working capital and cash flows between the effective and
closing dates), is $27.5
million. Vermilion will also grant Northern minority
net profit participation rights on select license interests
included in the Acquisition. The Acquisition has an effective date
of January 1, 2013, and remains
subject to customary conditions and receipt of all necessary
regulatory approvals. The Acquisition is anticipated to close
before the end of October, 2013, and will be funded with existing
credit facilities.
The Acquisition includes interests in nine
concessions, including six onshore licences in production or
development, three onshore exploration licenses, and one
offshore production license ("P12") in the Netherlands (the "Assets"). The
interests in the Drenthe IIIb, Drenthe IV, Oosterwolde, and Zuid
Friesland III licenses are located in the northeastern region of
the Netherlands in close proximity
to Vermilion's existing concessions. The remaining five
onshore licenses include interests in Andel V, Engelen, Papekop,
Utrecht, and Waalwijk, which are
located in the southwestern region of the
Netherlands.
All of the Assets to be acquired will be
operated by Vermilion following closing of the Acquisition, with
the exception of the offshore license P12, in which Vermilion will
hold a 23.6% non-operated interest. The Assets cover
approximately 298,500 net acres, of which approximately 98 percent
is currently undeveloped. Production from the Assets is expected to
average approximately 600 boe per day in 2013, comprised of 99%
natural gas that is expected to produce an operating netback
in-line with Vermilion's operating netback for natural gas in
the Netherlands. Proved plus
probable reserves have been estimated for Vermilion by GLJ
Petroleum Consultants Ltd. ("GLJ") to be approximately
2.3(1) million boe as of the effective date of the
purchase.
Disregarding any value attributable to
undeveloped land, acquisition metrics are estimated at $46,000 per boe per day and $11.74 per boe of proved plus probable
reserves. Using Vermilion's second quarter 2013 Netherland's
operating netback for natural gas of $54.72 per boe(2) as a proxy and
estimated 2013 production levels, the cost of the Acquisition is
approximately 2.3 times estimated 2013 operating cash flow. Upon
closing of the Acquisition, Vermilion will continue to maintain
considerable financial flexibility, with approximately $700 million of remaining borrowing capacity and
a net debt-to-fund flows from operations(2) ratio of
approximately 1.1 times.
The Acquisition increases our undeveloped land
base in the Netherlands to more
than 780,000 net acres. Vermilion has identified several
development opportunities on the Assets that increase the already
significant inventory of investment projects on our existing
Netherlands asset base. The
Assets enhance our position as the second largest natural gas
producer onshore in the
Netherlands, and offer a strong fit with our current
operations. We believe this Acquisition is well aligned with
our strategic objective to expand our exposure to European
commodity markets.
About Vermilion
Vermilion is an oil-leveraged producer that
adheres to a value creation strategy through the execution of full
cycle exploration and production programs focused on the
acquisition, exploration, development and optimization of producing
properties in Western Canada,
Europe and Australia. Our business model targets annual
organic production growth of approximately 5% along with providing
reliable and growing dividends. Vermilion is targeting growth
in production primarily through the exploitation of conventional
resource plays in Western Canada,
including Cardium light oil and liquids rich natural gas, the
exploration and development of high impact natural gas
opportunities in the Netherlands
and through drilling and workover programs in France and Australia. Vermilion also holds an 18.5%
working interest in the Corrib gas field in Ireland. In addition, Vermilion pays a monthly
dividend of Canadian $0.20 per share,
which provides a current yield in excess of 4%. Management
and directors of Vermilion hold approximately 8% of the outstanding
shares and are dedicated to consistently delivering superior
rewards for all stakeholders, featuring an 18-year history of
market outperformance. Vermilion trades on the Toronto Stock
Exchange and the New York Stock Exchange under the symbol VET.
Natural gas volumes have been converted on the
basis of six thousand cubic feet of natural gas to one barrel
equivalent of oil. 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.
(1) |
Estimated proved plus probable reserves
attributable to the Assets as evaluated by GLJ in a report dated
September 16, 2013, with an effective date of December 31,
2012. |
|
|
(2) |
Fund flows from operations, net debt and netbacks
are non-GAAP (as defined herein) measures that 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. "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. "Netbacks" are per boe and per mcf measures used in
operational and capital allocation decisions. For relevant
operating netback related disclosures please refer to the
reconciliation contained on page 27 of management's discussion and
analysis contained in Vermilion's Second Quarter 2013 Financial
Report for the six months ended June 30, 2013 available on SEDAR or
at the company's website (www.vermilionenergy.com). |
DISCLAIMER
Certain statements included or incorporated by
reference in this press release may constitute forward-looking
statements under applicable securities legislation.
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
press release may include, but are not limited to:
- anticipated closing date, sources of funds and anticipated
acquisition metrics;
- post-closing debt levels, remaining borrowing capacity, and net
debt to funds flow ratio;
- anticipated 2013 average production levels and anticipated
netbacks from the Assets;
- natural gas weighting of 2013 production;
- development plans and strategic objectives;
- the timing of regulatory proceedings and approvals and closing
of the Acquisition;
- post-closing working interests in the Assets;
Statements relating to reserves are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated, and can
be profitably produced in the future. 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:
- satisfaction of all conditions to the proposed Acquisition and
receipt of all necessary regulatory approvals.
- the ability of Vermilion to obtain equipment, services and
supplies in a timely manner to carry out planned development
activities;
- the ability of Vermilion to market oil 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;
- currency, exchange and interest rates;
- future oil and natural gas prices; and
- Management's expectations relating to the timing and results of
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.
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 and natural gas and market
demand;
- risks and uncertainties involving geology of oil 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, costs and expenses;
- potential delays or changes in plans with respect to proposed
acquisitions, exploration or development projects or capital
expenditures;
- Vermilion's ability to enter into or renew leases;
- fluctuations in oil 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
development and exploration activities;
- general economic and business conditions;
- 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.
SOURCE Vermilion Energy Inc.