CALGARY,
Dec. 8, 2014 /PRNewswire/ - Vermilion
Energy Inc. ("Vermilion", "We", or "Our") (TSX, NYSE: VET) is
pleased to announce that our Board of Directors has approved a
capital program of $525 million for
2015, a decrease of $150 million
(22%) from our projected 2014 capital program expenditures of
approximately $675 million. In
light of the decrease in crude oil prices since mid-2014, we have
reduced our 2015 capital investment plans to ensure the continued
strength of our balance sheet and the sustainability of our
dividend should weak oil prices prevail over a protracted
period. Should commodity prices weaken significantly, we have
the flexibility to make further reductions in our capital
program.
Despite our decreased 2015 capital budget, we
continue to anticipate production growth of approximately 15%
year-over-year and are maintaining our previous outlook for average
2015 production volumes of 55,000 to 57,000 boe/d. This
production guidance includes first gas from our Corrib gas field in
Ireland beginning in mid-2015.
The diversity of our project portfolio allows us
to shift the focus of our development program in response to
changing commodity market conditions. Because of the recent
drop in oil prices, our 2015 program will feature proportionately
higher spending toward development of our European gas
opportunities. European gas price fundamentals remain strong
and our exposure will expand significantly in 2015 through our
strong drilling results in the
Netherlands, our recent acquisition in Germany, the expected resumption of gas
production in France, and the
future initiation of production in Ireland. In addition, our
capital program continues modest early stage investment on our
concessions in Hungary for
gas-prone prospects.
Outside of European gas projects, we will enhance
asset value by funding previous commitments to drilling activity,
managing land expiries, participating in joint venture activities,
investing in the strategic infrastructure necessary to support
future growth and advancing long-term strategic projects.
Drilling activity will occur in all of our business
units in 2015, and we expect all business units to achieve
year-over-year production growth.
In Canada we
will see an overall decrease in spending and an investment shift
from our Cardium light oil play to our Mannville condensate-rich natural gas
project. Our Cardium development offers significant
flexibility with high levels of operatorship and limited
expiries. Development of the Cardium will continue in 2015,
but at reduced activity levels compared with prior years. In
2015, we currently anticipate drilling approximately 9 (3.9 net)
new Cardium wells in addition to the completion, equip and tie-in
of an additional 9.2 net wells drilled in 2014. In the
Mannville, we expect to drill or
participate in approximately 30 (16.7 net) Mannville wells in 2015, a nearly 50% increase
versus 2014. This increase in anticipated spending reflects
the strong economics of our Mannville opportunities in the current price
environment, as well as our anticipation of higher levels of
partner-operated drilling proposals in 2015. Our Saskatchewan
drilling activity for 2015 is expected to stay roughly flat
year-over-year at approximately eight (6.4 net) wells as we
continue to improve completion results and generate strong returns
on the assets we acquired in April 2014.
We currently anticipate capital expenditures of
$10 million in our recently
established U.S. business unit in 2015. We are planning a
three (2.1 net) well drilling program targeting the oil-prone
Turner Sandstone in the Powder River Basin in northeastern
Wyoming. These wells will be follow-ups to the highly
successful test well drilled and completed just prior to our
acquisition of our Wyoming assets
in the third quarter of 2014.
Our Netherlands
activity will be comprised of a three-well drilling program and the
tie-in of five previously drilled wells. While we have
recently identified promising light oil projects on our land base
in the Netherlands, our 2015
capital program will be entirely directed toward natural gas
projects.
Our Corrib project in Ireland has continued to progress on schedule
following the completion of tunnel boring operations in May
2014. Project operator Shell E&P Ireland Ltd. is expected
to complete tunnel outfitting operations prior to year end
2014. For 2015, we are planning for a $60 million capital program which will include
grouting the tunnel, finalization of permits and gas plant
start-up. We continue to anticipate first gas from Corrib in
approximately mid-2015, with peak production estimated at
approximately 58 mmcf/d (approximately 9,700 boe/d), net to
Vermilion. We expect Corrib to contribute approximately 3,800
boe/d to production during 2015.
We anticipate capital expenditures of
$7 million for our German business
unit in 2015. Our expected activities include participation
in the drilling of a sidetrack gas well at a 25% working
interest.
Champotran will continue to be our main
development project in France in
2015. We plan a four-well drilling program which is expected
to kick-off during the first quarter. This program is a
follow-up to our highly successful 2013 and 2014 programs.
While oil focused, these highly productive, lower decline drilling
opportunities continue to have attractive economics and rapid
payback at current oil prices and align well with future
development plans. At Vic Bihl, we are planning to restore
approximately 150 to 400 boe/d of gas production that was
previously shut-in due to the closure of the Lacq processing
facility. With the staged introduction of a new processing
alternative in 2015, we expect this gas production to be on-stream
at the end of the first quarter of 2015. The remainder of our
shut-in gas production, approximately 350 to 600 boe/d, is expected
to be back on-stream during 2016.
As a follow up to our successful 2013 two-well
drilling program, we have committed to a two-well sidetrack
drilling program in Australia in
2015. The majority of the projected $80
million development capital expenditures for Australia are for the drilling program, with
the remainder budgeted for ongoing facilities maintenance,
enhancement and refurbishment.
Capital Expenditures by Country
Country
|
2014
Estimate
($mm)
|
|
2015
Budget
($mm)
|
Canada
|
$
|
|
|
325
|
|
$
|
210
|
France
|
|
|
|
145
|
|
|
100
|
Netherlands
|
|
|
|
62
|
|
|
58
|
Germany
|
|
|
|
3
|
|
|
7
|
Australia
|
|
|
|
45
|
|
|
80
|
USA
|
|
|
|
|
|
|
10
|
|
$
|
|
|
580
|
|
$
|
465
|
Ireland
|
|
|
|
95
|
|
|
60
|
Total Development
Capital
|
$
|
|
|
675
|
|
$
|
525
|
|
|
|
|
|
|
|
|
Acquisition of assets
in Germany*
|
|
|
|
173
|
|
|
-
|
Acquisition of assets
in Saskatchewan**
|
|
|
|
413
|
|
|
-
|
Acquisition of assets
in Wyoming***
|
|
|
|
11
|
|
|
-
|
Other
|
|
|
|
9
|
|
|
-
|
Total Capital
Expenditures
|
$
|
|
|
1,281
|
|
$
|
525
|
*February 2014 completed
acquisition of 25% contractual participation interest in consortium
of exploration and production companies with interests in
Germany from GDF Suez E&P
Deutschland GmbH. (see Nov 6, 2013
news release available on Company website at
www.vermilionenergy.com or at the Company's profile on SEDAR at
www.sedar.com).
**April 29, 2014 completed
acquisition of Elkhorn Resources Inc. (see April 29, 2014 news release available on Company
website at www.vermilionenergy.com or at the Company's profile on
SEDAR at www.sedar.com).
***September 2014, completed
acquisition of 68,000 acres of land (98% undeveloped) in the Powder
River Basin of northeastern Wyoming. (see November
10, 2014 news release available on Company website at
www.vermilionenergy.com or at the Company's profile on SEDAR at
www.sedar.com).
Total Development Capital by Category
Category
|
2014
Estimate
($mm)
|
|
2015
Budget
($mm)
|
Drilling, completion,
workovers and recompletions
|
$
|
337
|
|
$
|
280
|
Production equipment,
facilities, new well equipment and tie-in (including
Ireland)
|
|
278
|
|
|
195
|
Seismic, studies,
land and other
|
|
60
|
|
|
50
|
Total Development
Capital
|
$
|
675
|
|
$
|
525
|
While we remain committed to growing production
and providing a reliable and growing dividend to shareholders over
the long term, our top priorities in the prevailing commodity
environment are to protect our balance sheet and the sustainability
of our current dividend. With that focus, in mid-October, we
instituted a comprehensive, company-wide Profitability Enhancement
Program ("PEP") to support Vermilion's long-term and sustainable
profitability. This is the third installment of our PEP
program in our 20-year history with the prior two initiatives
having achieved strong results in both 1998 and during the
financial crisis in 2008-09. Our PEP program will help
to ensure our people remain acutely focused on enhancing revenues,
reducing capital costs, operating expenses and general and
administrative outlays, as well as improving efficiencies to
maximize profitability throughout our organization.
Over the long-term, Vermilion believes that a
reliable and growing dividend is a return-maximizing strategy for
our shareholders, and that our broad-based and diversified
production growth capability should allow future dividend
growth. Vermilion has always prioritized the sustainability
of its dividend and has never reduced its dividend since initiating
monthly payments in 2003. Over the past twelve years, we have
paid out over $2 billion in dividends
to our shareholders. We are committed to delivering our
current $0.215 per share monthly
dividend in the current weak commodity price environment, and will
continue to consider increasing our dividend as production grows
and commodity prices recover.
About Vermilion
Vermilion is an oil-leveraged producer that seeks
to create value through the acquisition, exploration, development
and optimization of producing properties in Western Canada, Europe and Australia. Our business model targets annual
organic production growth of 5% or more along with providing
reliable and increasing dividends to investors. Vermilion is
targeting growth in production primarily through the exploitation
of light oil and liquids-rich natural gas conventional resource
plays in Western Canada, the
exploration and development of high impact natural gas
opportunities in the Netherlands
and Germany, 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. Vermilion pays a monthly
dividend of Canadian $0.215 per
share, which provides a current yield of approximately 5%.
Management and directors of Vermilion hold approximately 6% of the
outstanding shares, are committed to consistently delivering
superior rewards for all stakeholders, and have delivered a 20-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.
DISCLAIMER
Certain statements included or incorporated by
reference in this press release 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
press release may include, but are not limited to:
- anticipated 2015 development capital program amount, including
the location, type and impact of expenditures;
- anticipated amount of 2014 development capital;
- our balance sheet strength and the sustainability of our
dividend in a protracted weak oil price environment;
- anticipated 2015 average daily production, including
anticipated overall annual production growth rates and
year-over-year business unit growth;
- timing for initiation of production, peak level of net
production, and contribution to production in 2015 from Corrib
field in Ireland;
- ability to further reduce 2015 capital program in weaker price
environment;
- continued strength in price and fundamentals for European
gas;
- anticipated timing for resumption and estimated volumes of
France gas production;
- ability to preserve asset value by funding previous commitments
to drilling activity, managing land expiries, participating in
joint venture activities, investing in strategic infrastructure and
advancing long-term strategic projects;
- ability to provide production growth and a reliable and growing
dividend over the long-term.
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.