CALGARY, Nov. 30, 2018 /CNW/ - Vermilion Energy Inc.
("Vermilion") (TSX, NYSE: VET) is pleased to announce the
completion of the sale of Shell Overseas Holdings Limited's
("Shell") 45% interest in the Corrib Natural Gas Project in
Ireland ("Corrib") to Nephin
Energy Holdings Limited (NEHL), a wholly owned subsidiary of Canada
Pension Plan Investment Board (CPPIB), and the transfer of
operatorship to Vermilion. NEHL has acquired 100% of Shell
E&P Ireland Limited ("SEPIL"), which holds 45% interest in
Corrib (the "Acquisition").
Effective immediately, Vermilion has assumed contract
operatorship of Corrib on behalf of the joint venture partners.
CPPIB plans to transfer SEPIL along with a 1.5% working
interest to Vermilion. This transfer has received all
required government approvals and is expected to be completed in
the coming weeks. The estimated purchase price after interim
period adjustments is approximately €6 million.
Following the transfer to Vermilion, ownership in Corrib will be
as follows:
- Vermilion will hold a 20% operated interest
- NEHL will hold a 43.5% non-operated interest
- Equinor (formerly Statoil) continues to hold a 36.5%
non-operated interest
Vermilion's incremental 1.5% ownership of Corrib represents
approximately 700 boe/d at current production rates and
approximately 1.8 million boe of 2P reserves(1) based on
an independent evaluation by GLJ Petroleum Consultants Ltd. with an
effective date of December 31,
2017. Based on a final purchase price of €6 million
($9.1 million at current exchange
rates), the transaction metrics are estimated at approximately
$13,000 per boe per day, $5.05 per boe of proved plus probable
reserves(1) including future development capital
(generating a 2P recycle ratio of 9.4 times based on projected 2018
netbacks(2)), and 0.7 times estimated 2018 operating
cash flow(2) using the current forward commodity
strip. Vermilion expects the acquisition to be accretive for
all pertinent per share metrics including production, fund flows
from operations(2), reserves and net asset value.
In addition, Vermilion expects to receive approximately €13 million
of net working capital with the transfer of SEPIL.
Following the assumption of operatorship of Corrib, Vermilion
estimates that it will operate 89% of its global production base as
compared to 81% prior to the transaction.
About Vermilion
Vermilion is an international energy producer that seeks to
create value through the acquisition, exploration, development and
optimization of producing properties in North America, Europe and Australia. Our business model emphasizes
organic production growth augmented with value-adding acquisitions,
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 Canada and the
United States, the exploration and development of high
impact natural gas opportunities in the
Netherlands and Germany,
and through oil drilling and workover programs in France and Australia. Vermilion currently holds an
18.5% working interest in the Corrib gas field in Ireland. Vermilion pays a monthly
dividend of Canadian $0.23 per share,
which provides a current yield of approximately 8%.
Vermilion's priorities are health and safety, the environment,
and profitability, in that order. Nothing is more important
to us than the safety of the public and those who work with us, and
the protection of our natural surroundings. We have been
recognized as a top decile performer amongst Canadian publicly
listed companies in governance practices, as a Climate Leadership
level (A-) performer by the CDP, and a Best Workplace in the Great
Place to Work® Institute's annual rankings in Canada, the
Netherlands and Germany. In addition, Vermilion
emphasizes strategic community investment in each of our operating
areas.
Employees and directors hold approximately 5% of our fully
diluted shares, are committed to consistently delivering superior
rewards for all stakeholders, and have delivered over 20 years 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 ("mcf") 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 total proved and
proved plus probable reserves attributable to the Assets as
evaluated by GLJ Petroleum Consultants Ltd. in a report dated
February 1, 2018 with an effective
date of December 31, 2017, in
accordance with National Instrument 51-101 – Standards of
Disclosure For Oil and Gas Activities of the Canadian Securities
Administrators, using the GLJ (2018-01) price forecast (the "GLJ
Report")
(2) This news release includes
references to certain financial and performance measures which do
not have standardized meanings prescribed by International
Financial Reporting Standards ("IFRS"). These measures include
netbacks and fund flows from operations. "Netbacks" are per
boe and per mcf measures used in operational and capital allocation
decisions. "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.
In addition, this news includes references to certain financial
measures which are not specified, defined, or determined under IFRS
and are therefore considered non-GAAP financial measures, including
after-tax fund flows recycle ratio and debt-adjusted cash
flow. These non-GAAP financial measures are unlikely to be
comparable to similar financial measures presented by other
issuers. After-tax fund flows recycle ratio represents the
after-tax netback per boe divided by FD&A costs in dollars per
boe. Management considers after-tax fund flows recycle ratio
to be a useful measure of capital efficiency. "Debt-adjusted
cash flow" represents fund flows from operations prior to the
impact of interest charges. Management considers
debt-adjusted cash flow to be a useful measure to compare
transaction metrics on an unlevered basis. For relevant
operating netback related disclosures please refer to the
reconciliation in management's discussion and analysis contained in
Vermilion's 2017 Annual Report for the year ended December 31, 2017 available on SEDAR or at the
company's website (www.vermilionenergy.com).
DISCLAIMER
Certain statements included or incorporated by reference in this
news 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 news release may include, but are not
limited to:
- the sources of existing production and future development
drilling opportunities;
- the annual decline rate of the Assets;
- the number and classification of future development drilling
opportunities;
- the composition of future production and reserves;
- the potential for additional potential development requiring
further evaluation;
- the pricing received for production, and resulting operating
and after-tax cash flow netbacks for the Assets;
- the estimate of annualized 2018 fund flows from operations, and
ratios to year-end 2018 debt;
- the anticipated acquisition metrics and benefits; and
- development plans and strategic objectives.
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:
- 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;
- 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 (including the Acquisition), 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.
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SOURCE Vermilion Energy Inc.