Q4 2021 Vermilion Energy Inc Earnings Call

Please standby we're about to begin.

Good morning afternoon evening My name is Paula and I will be your conference operator today at this time I would like to welcome everyone to the Vermilion energy 2021 year end earnings conference call today's call is being recorded.

Lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question. Please press star two.

Thank you Mr. D. On Hatcher, you may begin your conference.

Good morning, ladies and gentlemen, thank you for joining us I'm, Don Hatcher President of Vermilion Energy with me today are Larry <unk>, Vice President and CFO , Darcy Kurland, Vice President International and HSE, Chris <unk>, Vice President North America.

And Tien Vice President business development and call Preston Vice President of Investor Relations.

We will be referencing a powerpoint presentation to discuss the Q4 2021 and year end results, we announced this morning.

Presentation can be found on our website under invest with us and events and presentations.

Please refer to our advisory on forward looking statements at the end of the presentation. It describes forward looking information non <unk>.

GAAP measures and oil and gas terms used today and outline the risk factors and assumptions relevant to this discussion.

Before I begin the formal part of the presentation I would like to start off with a comment on the current situation in Ukraine.

Invasion into Ukraine by Russia is causing great hardship and tragic outcomes for the cleaning people all of us at Vermilion are saddened by these tragic events, our hearts thoughts and prayers are with the Ukrainian people at our hope is that a negotiated settlement can be achieved quickly in the near future Vermillion will be making.

Donation to support Ukrainian people.

Now I will resume the formal part of the call on slide two with a summary of our Q4 2021 results.

We generated record funds flow from operations of $322 million in Q4, which was mainly driven by strong commodity prices all of the global benchmarks that we have exposure to increase in the fourth quarter European natural gas prices were exceptionally strong increasing approximately 88% compared to the previous.

Quarter of.

The TPS benchmark averaged approximately $39 Canadian per <unk> during the fourth quarter and reached close to $80 towards the end of December due to colder weather supply constraints geopolitical tension in the region.

We remain structurally bullish on European gas due to the recent very concerning geopolitical events in the market.

Even more susceptible to short term price spikes I'll provide more insights on our outlook for European gas later in the presentation.

During the fourth quarter, we invested $146 million in E&E capital expenditures, resulting in $176 million of free cash flow, which was mainly used to reduce net debt to $1 6 billion.

Net earnings increased to $345 million in Q4, representing a $492 million increase compared to the prior quarter. This increase was mainly due to higher fund flows from operations and lower unrealized hedging losses, which is accounted for on a mark to market basis production.

Production was relatively flat from the prior quarter as production from our Netherlands NRC business units.

<unk> natural declines in North America, and the planned turnaround in Australia.

Moving on to our operational highlights on slide three.

<unk> from our international assets averaged 29123 views a day in Q4, representing about one third of the total corporate production.

The strong European gas and premium Brent oil prices, our international assets contributed 65% of our bundles and 76% of our free cash flow.

Which illustrates the advantages of our international diversified asset base International production benefited from continued strong performance from the <unk> in the Netherlands production increased at core following a successful turnaround in the prior quarter with the plant operating at peak performance during Q4.

Elsewhere in Europe , we commenced drilling of our three well 2022 program in Germany and completed a small European gas acquisition to further consolidate our interest in the region. We expect this acquisition to reach payout in the first half of 2022.

Although this is a relatively small acquisition that provides another example of the low risk high return and high netback consolidating opportunities we have preferential access to in Europe .

In Croatia, we received approval for the spatial plan on the SA 10 gas plant, where we continue to advance both design and regulatory work in preparation for the 2023 tie in of the standing gas wells, which we drilled in 2019. These wells tested at 15, and 17 million standard cubic feet per day, respectively.

As outlined on slide four production from our North American operations averaged 55295 user day in Q4.

During the fourth quarter, we drilled and brought on production seven gross seven net light oil wells in southeast Saskatchewan.

In West Central Alberta, we commenced our condensate rich Manville gas program, where we drilled 14 gross 11, five net wells and completed nine gross eight nine net wells.

By executing the majority of this program in Q4 ahead of the busy winter season, we were able to secure our preferred service providers and reduce overall costs.

<unk> in approximately $85000 of savings per well the wells were brought on production in early 2022.

In the U S. Similar to 2021 and Q2, we plan to move an experienced drilling crew from an Alberta program down to Wyoming for the Turner drilling program.

Plan to drill 659, net wells, including 329, net two mile wells, which are significantly more economics in the one mile laterals.

I wanted to step back and provide you an overview of what we accomplished in 2021 as outlined on slide five we entered 2021 with an over leveraged balance sheet at four times net debt to trailing fund flows at our number one priority financial priority was to reduce debt with.

This goal and focus we announced a modest capital program aimed at preserving liquidity maximizing free cash flow and reducing debt while positioning the company for long term success.

On the operational front, we delivered average annual production of 85408, Boe's a day, which was at the top end of our upwardly revised guidance range of 84, 5% to $85 five.

We have met or exceeded market expectations for seven consecutive quarters, which is a reflection of our strong execution and shift to a more load leveled optimize capital program with the help of strong commodity pricing environment, we generated a record $920 million of fund flows.

$545 million of free cash flow in 2021.

As a result of this strong free cash flow generation, we were able to make significant progress on debt reduction we reduced our net debt by 365 million in 2021 and exited the year with a net debt to trailing fund flow ratio of one eight times less than half of what it was at the start of the year.

We have now reduced net debt by over $500 million from our peak debt level of $2 2 billion in Q2 2020.

In addition to accelerating debt reduction in 2021, we announced over $700 million of strategic acquisitions, including an inventory consolidation deal in the U S and a high return low risk acquisition to consolidate our operated natural gas asset in Ireland.

We did all of this without selling assets into a distressed market or issuing equity. This ensures we maximize per share value for our long term shareholders.

Shifting to our year end reserve update our 2021 total proved plus probable reserves increased 3% from the prior year to 481 million views.

The increase is mainly due to strategic acquisitions and positive economic revisions, resulting from stronger commodity prices we.

We added total proved plus probable reserves in 2021 at an F DNA costs, including future development costs of $10 91 per Boe.

Resulting in a total of 2021 total proved plus probable MD&A operating recycle ratio of four one times. This.

This strong recycle ratio is a reflection of our low SG&A costs combined with our top decile operating net backs, which come from our exposure to premium global commodity prices to put this into better perspective. We are currently forecasting a pro forma operating netback of over $110 per Boe in 2022 using the current.

Commodity strip.

Excluding acquisitions, we replaced 140% of our production on approved plus probable basis increased our total proved plus probable reserve life index to in excess of 15 years as shown on slide six.

The reason for the increase in reserve Life Index decision, we made last year to right size, our production base in order to optimize our free cash flow you will note that over the past 12 years, we have consistently maintained a one P to P Reserve life index of approximately 8% and 13 years respectively.

Conventional and semi conventional asset base requires low capital reinvestment due to the lower decline profiles and strong capital efficiencies are globally diversified asset base provides the flexibility to combine high return PDP deals with longer life inventory acquisitions.

Slide seven provides a summary of the core acquisition, we announced on November 29, 2021, as a reminder, we consolidated an additional 36, 5% working interest in our operated core project in Ireland for a total consideration of approximately $600 million, including the anticipated contingent payments.

The acquisition is highly accretive to all pertinent per share metrics and is expected to significantly enhance our free cash flow profile and ability to return capital to our shareholders.

An important point to understand is that the transaction has an effective date of Jan one 2022, which means all of the incremental free cash flow generated from this asset accrues to Vermilion from Jan one forward.

At the time of the deal announcement, we estimated that 2022 free cash flow from this asset at $361 million. However, with the increase in euro gas prices since that time, we now estimate the 2022 free cash flow at approximately $500 million, which represent over 80% of the estimated purchase price.

Anticipated payback period is now less than two years and a rate of return is in excess of 50% compared to 41% at the time of the announcement and closing procedures for the core acquisitions are moving along as planned. We recently received competition clearance from the competition and consumer Protection Commission, we will continue to anticipate a deal.

Those in the second half of 2022.

On slides eight and nine I will spend a few minutes talking about our outlook for European gas prices have increased substantially in recent months and the foraker remains strong the.

For price for the balance of 2022 is over $60 per <unk> and about $30 in 2023 with approximately 22% of our production base being European gas. These prices are very very impactful to vermilions puzzles, we have significant leverage to higher European prices is every dollar increase adds approximately 30.

$9 million of Unhedged fund flows from operations.

We continue to be bullish on European gas prices in the near and long term in summary storage levels are low domestic production is declining and the use of gas for power generation is increasing all of which is creating greater dependence on LNG lastly, the geopolitical backdrop, we are seeing in the region today and the risk of ongoing conflict likely.

There will be a risk premium in European gas prices for some time.

Slide nine for more some more context on the underlying fundamentals that we believe supported structurally higher European gas price to put the market into context.

Europe consumes $45 50 Bcf a day of gas and we expect demand to grow with the planned closure of coal and nuclear plants and the extended timelines to construct large scale renewable energy projects in Europe .

Natural gas is now recognized by the EU as it necessary transition fuel and as a result, the use of gas in the power sector is rising.

As you can see in the plot from the EIA domestic supply has been declining for the past decade the.

The North Sea and onshore production is in decline the Dutch government has committed to shutting in the Groningen field in October of 2022. This is the largest gas field in Europe . It was producing over two Bcf a day a few years ago.

Europe is depending more on Russia, and LNG imports today, Russia supplies, 40% of Continental Europe's gas due to the recent events Europe now recognizes the need to diversify its energy sources.

Approval of Russia's Nord stream two pipeline into Germany is now officially suspended.

That leaves LNG as a critical part of Europe's gas supply LNG is a very competitive market due to increasing global demand and there is a limited amount of new LNG export supply capacity being added over the next few years do LNG projects are very capital intensive and will require longer term contracts to ensure <unk>.

<unk> proceeds.

Given all of these factors, we expect to see increased volatility in structurally higher euro gas prices for many years to come we recently updated our mid cycle Euro gas price assumption to $12 50 per <unk> from $8 50.

This updated prices still 98% and 70% below current strip for 'twenty two 'twenty three in 2024, respectively.

Our mid cycle WGNA oil price remains at $55 in April at $2 50.

Moving onto hedging on slide 10, we target to be 25% to 50% hedged on a rolling four quarter basis for 2022, we have approximately 35% that includes the 70% of the core acquisition bonds that we hedged at the time of the transaction to create additional certainty for less than two year payout.

We are underweight oil and the majority of our 2022 oil position was added over the past three months through participating structures, allowing us to benefit from high to ATI and Brent prices.

Gas prices continue to be volatile and have increased since our press release, we have a plan to layer in additional European hedges. Our most recent transaction for the summer 'twenty two was a swap at $95 Canadian per <unk>.

As you can see on the plot on the right in 2023, we now have less than 10% of our production hedged should prompt prices hold this positions us well to achieve similar cash flows in 2022, especially when you factor in the hedge loss in 2022.

Slide 11 provides a summary of our current pro forma financial forecast based on forward strip pricing as of March 2nd. We currently estimate pro forma fund flows from operations of $2 3 billion or $3 $2 billion on an unhedged basis. After deducting E&E capital expenditures this translates to a free cash flow.

$1 9 billion or $2 8 billion on an unhedged basis as noted on the last slide we have less than 10% of our 2023 production hedged.

We will continue to allocate the majority of our free cash flow to debt reduction based on this forecast. We estimate 2022 year end net debt of approximately 400 million with a net debt to trailing funds flow ratio of two times.

This is quite remarkable when you consider we were four times leverage just over a year ago and rebalanced, our focus on debt reduction, while announcing $700 million of acquisitions as you can see our assets have the ability to generate significant free cash flow and we believe align well with investors focus on return of capital.

Moving to slide 12, our priority over the past two years with debt reduction and our message was that we would reinstate a dividend once we had a line of sight to our targeted net debt to funds flow ratio of one five times. We have delivered on this commitment with the reinstatement of a <unk> <unk> quarterly dividend declared today. This is a modest dividend.

That represents less than 2% of our forecasted 2022 fund flows going forward, we will continue to prioritize free cash flow to debt reduction until we reach our next mid cycle that target of $1 2 billion of total debt, but this debt target approaching in the second half of 2022, we will look to increase the amount of capital returned to shareholders.

Either in the form of an increase to the base dividend share buybacks issuance of a special dividend or a combination of these options at a current valuations buybacks are compelling and even more impactful as we did not issue equity over the past two years.

In addition, we will continue to be opportunistic for compelling acquisitions that enhance our portfolio and create long term value for our shareholders.

Based on our forecast, we expect to exit 2022, with a total debt of $400 million that would be effectively debt free in 2023 under the status quo.

<unk> is in a very strong financial position.

As shown on slide 13, Vermillion continues to trade at the highest free cash flow yield among our peers approximately twice the average in 2022 and 2023 based on these estimates from RBC, our 2022 free cash flow per share was over $11, including the hedges that the current price the free cash flow yield is over 40.

Percent. This is despite the outlook for strong free cash flow in years to come.

Before we open it up for Q&A I want to make some closing remarks on our recent leadership changes my view on the company going forward as you would have read in the press release, our executive Chairman Lorenzo <unk> has announced his intention to retire from <unk> effective September one 2020 to.

As many of you are aware Lorenzo was a co founder of Vermillion and instrumental in creating while Vermilion is today, along with creating significant value for our shareholders. During his tenure.

He served as our leader for nearly a decade and a half and has provided his guidance as our chairman of the board for the past six years, Mr. Bob <unk> will be appointed lead director effective May 12, and will assume the role of independent chairman on Lorenzo's departure effective September one.

I would like to thank Lorenzo as well as Curtis Hicks for their Mentorship and leadership. During these difficult past few years, which has positioned the company for long term success.

After 16 years with the company I am truly honored and excited to become the president I'm fortunate to have worked on the majority of our assets and more importantly had the pleasure to work with many of our talented employees.

With our new leadership team in place engage staff diversify portfolio focused on ESG in a much stronger balance sheet I believe vermilion is very well positioned to move forward with our long term strategy of creating value for our shareholders that concludes my prepared remarks, and with that I would like to open it up for questions.

Thank you to signal for a question. Please press star one on your telephone keypad Oscar with you are using a speaker phone. Please make sure. Your mute button is turned off to allow your signal to reach our equipment.

Once again star one at this time for questions.

We will take our first question from Patrick O'rourke with <unk> capital markets.

Oh, Hey, good morning, guys just a few questions for you here this morning.

First one is with respect to cash taxability of the business I know Ireland. For example is an asset where we never thought it would hit.

Taxability, but I don't think we really anyone envisioned some prices and FX that you're realizing there I know you do have.

In and around pre the acquisition here about $1 billion in capital loss pool, but maybe could you give us the outlook in terms of cash taxability for the business over the next few years.

Jurisdictional and complicated.

Thanks, Patrick ill pass it over to <unk> to talk about that yeah. Good morning, Patrick. Thanks for the question in terms of 2022 cash taxability the way to think about it is a range of approximately 9% to 11% for full year 2022.

That includes the pro forma impact of the.

The <unk> acquisition for the full year.

We are not forecasting to be cash taxable in Ireland, just because of the.

Investments that were made historically in terms of go forward I think thats, an appropriate cash tax range to think about things, obviously things are very fluid right now with strip pricing.

But thats a good range to think about it in terms of the next few years here.

Okay. Thanks, and then in.

In terms of the outlook and the ability from a regulatory from an operational and a geological perspective is there any ability to accelerate operations in the Netherlands to cash in on.

The strong pricing that youre seeing in Europe , right now where is it.

And it kind of be steady state I know historically.

<unk> permitting has been.

A little bit slower than I think.

You have.

Hoped for and obviously, a little bit different than we are.

Seat here in Canada, and North America, but is there any ability to accelerate or increase production in the near term.

Well, Thanks, Patrick Xeon I'll take this one.

Those discussions I think were occurring before the current.

Situation, we work closely with regulatory bodies.

Worked through the established well established permitting process. If you look at our.

Plans for the near term, we've got two wells planned for Netherlands, and the mid year and we like that area. There is some additional targets out for those well bores as well as it's an area. We've had some success with larger discoveries and then we've got three wells that are in the later stages of permitting which we would hope to drill in the first half of 2023.

As a reminder, in CE, we do have the two wells there that tested at 15, and 17 million a day and we're working to get that infrastructure in place we've shot <unk> seismic there and we plan to drill two more wells on that permit which is to follow up on those successful gas wells.

So I think the conversation continues to evolve its quite fluid right now, but security of supply is something that is prevalent and I think these discussions will continue.

As we go forward. So no no near term changes that I can speak to but I think the conversations and again the need for security supplier are likely going to increase in the upcoming weeks and months.

Okay, and then final question here.

Hang up and listen but.

In terms of the return of capital mechanism I think you guys had some really good metrics and disclosure here above pro.

Pro forma where the balance sheet gets too by the end of this year payout ratio on that dividend is pretty small can you maybe.

Give us your thoughts on how youre thinking potential return of capital mechanism, whether it would be.

Dividend increases, how the kind of trajectory and cadence of that would look.

<unk> special or variable dividends or buybacks.

Oh fastest wonder Lars again, yes, Hey, Patrick Lars here again, and just a bit of background as well in terms of why our priorities are in the order they are.

Our priority today is to continue allocating free cash flow beyond that base dividend to debt reduction and that will be until we reach that next that target of $1 $2 billion net debt target is fully burdened with the acquisitions that we announced in 2021, we did in excess of $700 million of acquisitions, while we were deleveraging and we did that without issuing <unk>.

Any shares and I think thats something with hindsight now that was very key to our success in 2021, and we want to continue on that and make sure that we are in a position to be opportunistic when compelling acquisitions are available now as we get to that $1 2 billion target, we will look to augment the return of capital to shareholders.

Right now what we're contemplating our increases to the fixed dividend to put it into perspective, a 10% increase to that dividend would equate to about $4 million per annum of increased dividend and then I think when we want to return capital beyond that we'll look at some of the variable structures. At this point share buybacks are screening very high in terms of what that.

<unk> mechanism would be just based on the valuation that we're seeing here. So I think that as we.

Have line of sight to that $1 $2 billion target second half of this year, you can look to us to augment that return of capital through those methods.

Thank you very much.

Thanks, Patrick.

Moving on we'll go to Greg Pardy with RBC capital markets.

Thanks, Good morning, and thanks for the rundown so I wanted.

Well I guess, the first thing I should be doing is distinguishing absolute best wishes to to Lorenzo and his next adventure. So it's been great to work with them.

But don.

You've talked about security of supply I guess.

Question is have you already.

<unk> been approached either by <unk>.

Politicians or regulators or what have you because you're again one of the very few onshore gas players in Europe in terms of.

Either not so much in terms of accelerating activity, but even being incentivized to start to grow production or do you think it's too early with.

With where we sit today for those types of messages to be sent.

Thanks, Greg for the question I think it's too early I mean, the situation is very very fluid.

And so at this point our plan is to work on our inventory, we're actually adding some staff in the Netherlands unit to further enhance our technical capabilities, which are already strong but.

It's just too early and so we're ready and prepared for those discussions when they do occur and.

Again.

No easy answers here Unfortunately, given the current situation.

Okay. Okay, and then just two quick ones I, just want to make sure I heard Lars.

Correctly, then so when you hit the 1 billion too.

Are you going to look to increase the dividend and then go to a share buyback or is everything on the table at the same time I just want to make sure I've got it straight.

Yes, I would see at that point, Greg everything is on the table, but one thing that we are going to do with the fixed dividend is maintain a sense of discipline. There in terms of not exceeding 5% to 10% of cash flows at that mid cycle price deck.

So we think that that's going to instill a level of discipline and then when there is capital to return above and beyond that that's when we would look at some of the variable structures and right now we feel that buybacks would screen the highest of those opportunities.

Okay. Okay, Great and then last question for me is.

It's a small chunk of production, but what is the profile what does the production profile look like with Australia, you mentioned the planned turnaround in the in the fourth quarter and so forth, but how does that how does that production look shape wise over the course of this year.

I'll, just talk a little bit to our corporate.

First in our capacity to <unk> to talk about <unk>.

Mentioned earlier those manville wells, we did get a good jump on the North American program in which we kicked off.

14 drills and nine completion last year. So it allowed us to bring those wells are early in Q1, So I think what youre going to see.

North American point of view some good production there internationally, we did have strong production on that Netherlands 900, well.

As well as strong run rates in Ireland, and finally, the Australia, we do budget or cycle, there and we haven't seen that to date. So I think Q1 is trending well Greg.

As a reminder, we do schedule to a lot of our planned turnaround activity in Q2 and to some degree Q3, So I think youll see us on the upper end of the range of Q1 and potentially on the lower end of range on Q2, just with the planned activities that we want to do.

Side of the weather season to get those done in the second half of the year before I pass over to Darcy I think what Youll see is with our U S program kicking off in April that's really a second half volume SaaS kicks off June one so again second half volume and then these Australia wells, which are very.

In fact the wells.

Typically in excess of 1500 barrels a day again that volume would contribute in the second half of the year, but with that I'll pass over to <unk> to talk about the <unk> profile.

Yes, so Greg as you know we have planned a two well drilling program in Australia. This year, we've got a jackup drilling rig contracted for that program.

Rig will mobilize from from Don here, which is the closest towards to our tier one new facility. So we're first in line for that rig.

The cyclone season in Australia kind of runs out to March end of March and as soon as we get past that kind of cycle in season and see a good weather window, we'll mobilize that reach out to the field to kickoff that drilling program. So that would mean first production from those wells coming on.

Okay.

Ken early early Q2.

I'm, sorry, Q2 there.

June end of June .

In our summer.

John said their highway rate wells, those we hope those wells will be capable of producing kind of will.

Over 500 barrels a day Ips and.

We will restrict that to optimize our crude marketing agreements and then program is quite robust economics. So you can expect to see on the Australian.

<unk> kind of wrap up towards the second half of the second half of the year.

Got it thanks Darren.

Thanks very much.

Thanks, Greg and just a reminder, that crude is we're actually.

Freedom has actually increased to $14. It's it's been a good good market for us.

With that I'll open it up for the next question.

Thank you and then as a quick reminder, starwood for questions next we will go to middle Holzstoff with TD Securities.

Hi, good morning, everyone and thanks for taking my questions I Might've misheard this but I thought.

I heard you say that you did a $95.

Per annum Btu gas well can you just.

If I heard that correctly can you just elaborate on how that was structured and whether youre seeing other opportunities too.

Strengthens sorts of deals.

No you heard that correct.

We did layer in a $90 plus hedged for the summer, but I'm going to pass over to <unk>.

We've been doing a lot of work on this we have a plan in place, but <unk> can elaborate a little more on our.

Our strategy with respect to these volatility and obviously high prices, we're seeing in Europe right now.

Yes, so just to recap as well, we're about 55% hedged for European gas full year 2022, what we did as an executive team and then a subset of that is we met about a month ago to ensure that we were ready to be prepared for any kind of volatility in that European gas market.

What we have concluded internally as we would be comfortable going up to a 75% hedged position on European gas. So the transaction that <unk> alluded to was a piece of that what we're looking to do is not be.

Overly speculative in terms of trying to time the top of the market, but we would like to do is layer in with some hedges that were comfortable with that align with what we want to achieve from a financial priority perspective, so the summer 'twenty to hedge at $95 Canadian <unk> that was done as an outright swapped and as part of the execution of that strategy.

Terrific. Thanks, that's super helpful and I'll, just pivot over to Hungary.

Hungary, Slovakia, and some slight bump right up against the Ukraine can you just remind us of your.

Our commitments for this region.

I'm pretty sure you are not doing a whole lot this year, but maybe over the next several years and I think we're pretty small but if.

If you could confirm that that'd be great and then more generally how are you thinking about managing geopolitical risks for that part of the portfolio.

Sorry, I might have missed the last part of the question how do you plan to.

Yes, how are you thinking about managing geopolitical risk.

Hungary, and Slovakia, specifically.

Great. Thank you.

Okay.

For our CE business unit, if you look at our activities planned for 2022.

I'll start with Croatia, we have the.

Two wells that we plan to drill in follow up to you those mentioned earlier, where we tested two wells at 15% and 17 million a day.

Our activities and well are focused on the gas plant, which is physically moved to Croatia, and we're doing the necessary permitting and regulatory work to just to get that installed and bringing online in 2022. So.

From a <unk> point of view of that.

Preceding our Hungary plans now we've got three wells planned tour then are in our current will be called <unk>, which is an oil play.

We've shot <unk> seismic over that region.

North of a 10000 barrel a day production on trend with us. So we like the prospectively of those two wells. In addition, we have one well, which we plan to test a shallow gas concept. So relatively cheap just over $1 million, but it is something that works and we think it will but there is always.

Some risks with these type of wells, but if it works again, we would see some running rate for that as an opportunity to bring more European gas into the portfolio.

In the future years, if you looked at 'twenty three 'twenty four onward, I think it'll be partially contingent on our results. This year, but again, we're quite excited with the <unk> activity of what we see especially in light of the additional <unk> seismic work that we did.

<unk> do you want to comment on the geopolitical risk and any potential impact on our business.

Yes sure Thanks, Ken.

As you as you correctly status.

Both Hungary, and Slovakia share borders with with the Ukraine, We don't really have any activities planned in Slovakia the near term.

We've got a couple of wells.

Planned this year.

I would point out that.

Hungary, where we do have some activity planned.

NATO country.

I think the kind of noises coming from that country today is that.

They are aligned with the rest of Europe .

Condemning the auctions of Russia, So let's see.

Geopolitical risk of this over spilling into Hungary.

Probably no different than any other NATO countries today.

We do here.

Gosh humans monetary and prices at the border.

All the Ukrainians borders including Hungary.

But.

I don't see that that has really any impact to our current small operations in Hungary.

<unk> gas flow there that's producing.

That small rates I don't really see any issues for us something we will have to continue to monitor though as we as we move through the year and as this situation continues to evolve.

Thanks Darcy.

Thanks, guys.

Moving on we'll go to Josef Schachter with Schachter Energy research.

Good morning.

And and thanks for taking my calls first of all I wanted to ask was about Ukraine.

Doing some work there or did you have employees in country.

That's our locals have you been able to get them out of the country. If you didnt have any working for you.

Hi, Joseph we did just to clarify we do not have operations in Ukraine, we did have.

A permit there at one point and we relinquished it quite a while ago. So no.

No lands no permits and no staff in Ukraine.

The second question for me.

Brian .

With the operations you have there.

Talking about some of the other countries.

It will take some time for them to realize they need to speed up any potential for domestic increases are there any big upsides in terms of your operations in France.

It could be reactivated or move forward.

Biden, and NATO decided to cut off.

Imports from Russia oil and products going forward.

Oh, Thanks, Joseph I would say not at this time I mean, we continue to meet regulatory.

Frequently with.

With our.

Again, like all jurisdictions, which we operate in but at this point Theres been no plans to further enhance the development 2040 years is a long way evidence that we have we leave sufficient time to.

Produce those reserves and we have some opportunities due to drill our focus right now has been on Workovers Waterflood management, it's a very low decline asset for us and generate significant free cash flow. So at this point, that's the role play in our portfolio as.

As we every year go through the budgeting process, we would look to allocate capital to our.

Uh huh.

Highest rate of return projects fundamentally and so France will be one of those considerations, but at this point no no changes too.

The plant.

Stick by those governments with respect to 2040.

And one last one I wonder if I can.

Correct.

In Ireland.

Is there would land in the area that you've done seismic on that potentially might give you.

Some potential.

For more drilling and extension of the life of the project.

Yeah. Thanks, just to start the year I'll take your question so <unk>.

<unk> I'll start with the existing assets, we do see.

And are working on some optimization potential within the existing core appeal, both with the gas flat part of the assets. We're looking at compression optimization trying to lower the inlet pressure to that plan to be able to extend the field life. There. We also see some workover opportunities within that field.

The team is currently looking at.

Some potential.

Bypass pay and a couple of the wells that we would look to activate again.

Think extending the life of that deal.

Thirdly, this is something thats, a little bit further out but the team will be looking at it as we see in our existing core of acreage or some some other targets that.

Yes.

Perhaps some seismic that we will we will look at and again the idea there would be two to extend the life and the increase of production from that field and then finally, there is some acreage around us that's owned by other operators that if they have success could potentially.

Tie in and then further extending the life of the infrastructure there.

Okay. Thanks, Dorothy and thanks for taking my questions congratulations.

Thanks Joseph.

And that does conclude our question and answer session I would like to turn it back to the presenters for any additional or closing comments.

Well I want to thank everyone for participating in our Q4 'twenty one results our conference call and with that you enjoy the rest of your day.

Thank you and that does conclude today's call we'd like to thank everyone for their participation you may now disconnect.