Q1 2024 Vermilion Energy Inc Earnings Call and Annual Shareholders Meeting
Permitted to vote again by way of ballot.
If theres any shareholder or proxy holder, who has not received a ballot. Please identify yourself to us.
Operator: and you're not permitted to vote again by way of ballot. If there is any shareholder or proxy holder who has not received a ballot, please identify yourself to us. The first item of business is fixing the number of directors of Vermilion Energy to be elected at 10. May I have a motion to fix the number of directors to be elected at 10? My name is Yvonne Guthrie, and I am a representative of Vermilion and a shareholder. I move that the number of directors of Vermilion Energy Inc. to be elected be fixed at ten. Thanks, Yvonne. May I have the motion seconded? My name is Terry Hergott. I'm a district representative.
The first item of business is fixing the number of directors of Vermilion energy to be elected at 10.
May I have a motion to fix the number of directors to be elected at 10.
Yvonne Jeffrey: My name is Yvonne Jeffrey and I'm, a representative of Vermilion and shareholder.
Speaker Change: Is that the number of directors of Vermilion Energy, Inc. Co pays to be elected be fixed at 10.
Terry Hergott: My name is Terry Hurgot. I'm a representative of Vermilion and a shareholder. I second the motion.
Yvonne Jeffrey: They have the motion seconded.
Jerry: My name is Jerry here got a representative up $1 million.
Speaker Change: And the shareholder value.
Jerry: Second the motion Thanks Terry.
Jerry: Is there any discussion.
Operator: Voting on the election of directors will be conducted by way of ballot. The blue ballot is to be used for this matter of business. If you have not yet received one, please raise your hand.
Jerry: Voting on the election of directors will be conducted by a way of by way of ballot. The blue ballot is to be used for this matter of business if.
Speaker Change: If you are not have not yet received one please raise your hand.
Operator: If you have not already completed your ballot and deposited it with a scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and a scrutineer will collect the ballot. Thank you.
Speaker Change: If you have already completed.
Speaker Change: You have not already completed your ballot and deposited with the scrutineer. Please complete the ballot now and sign your name clearly at the bottom of the ballot.
Speaker Change: Please raise your hand, if you have the data to be collected and the scrutineer will collect the ballots.
Speaker Change: Thank you based on preliminary voting results for this matter. It is expected that this resolution will be carried.
Operator: Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting's business while the Scrutineer tabulates the results of the ballot voting and advises us as to the final results prior to the termination of this meeting. The next item of business is the election of the directors of Vermilion for the ensuing year or until their successors are elected or appointed.
Speaker Change: Continue with the remainder of this meetings business, while the scrutineer tabulate the results of the novel coating and values us as to the final results prior to the termination of this meeting.
Speaker Change: The next item of business is the election of the directors of Vermilion for the ensuing year or until their successors are elected or appointed.
Operator: As we have done in previous years, we will be nominating and approving individual directors and not a slate of directors. The Board of Directors has adopted a policy stipulating that if a director nominee receives a greater number of votes withheld from the election of that director than votes for the election, the nominee will offer to resign. The Governance and Human Resources Committee will then review the matter and recommend to the Board whether to accept the resignation, and the board's decision to accept or reject the resignation will be publicly announced within 90 days of the meeting.
Speaker Change: As we have done in previous years, we will be nominating and approving individual directors and not a slate of directors.
Speaker Change: The board of directors has adopted policies tripling that if a director nominee.
Speaker Change: <unk> has a greater number of votes withheld from the election of that director than votes for the election, the nominee will offer to resign.
Speaker Change: Governance and human Resources Committee will then review the matter and recommend to the board whether to accept or reject the resignation.
Speaker Change: And the board's decision to accept or reject the resignation will be publicly announced with 90 days of the meeting.
Operator: It is expected that resignations will be accepted, except in situations where exceptional circumstances would warrant that the applicable director continue to serve as a board member. The Board of Directors has also adopted bylaw number 2, providing for advance notice of director nominations. I have been advised that no director nominations were received by the company, and accordingly, the nominees for election as a director are the nominees set forth in the information circular for this meeting.
Speaker Change: It is expected that the.
Speaker Change: Resignations will be accepted.
Speaker Change: Except in situations, where exceptional circumstances would warrant that the applicable director continue to serve as a board member.
Speaker Change: The board of Directors has also adopted bylaw number two providing for advance notice of director nominations.
Speaker Change: I've been advised that no director nominations were received by the company.
Speaker Change: And accordingly, the nominees for election as a director are the nominees set forth in the information circular for this meeting.
Operator: The number of directors to be elected at the meeting has been fixed at 10. Information with respect to each of the nominees was set forth in the information circular for this meeting. May I have a motion to nominate each of the nominees as a director of Vermilion Energy Inc.?
Speaker Change: The number of directors to be elected at the meeting has been fixed at 10.
Speaker Change: Information with respect to each of the nominees were set forth in the information circular for this meeting.
Speaker Change: May I have a motion to nominate each of the nominees as a director of Vermilion Energy Inc.
Avril Shraven: My name is Avril Shraven, and I'm a representative of Vermilion and a shareholder. I nominate each of the following to act as a director for the ensuing year: Dion Hatcher, Robert Michaleski, James Kletner, Jr., Karen Mikkel, Steve Lark, Timothy Marchand, Manjeet Sharma, Myron Stadnik, and Judy Steele.
<unk>: My name is <unk> and I'm, a representative of Vermilion and the shareholder I nominate each of the following to act as a director for the ensuing year.
<unk>: John Hutton, Sir Robert Mitchel Laskey, Jim Kleckner Junior.
<unk>: Erin nickel.
<unk>: Larry.
<unk>: Yeah.
<unk>: Timothy Marchant.
<unk>: William Roby Manley.
<unk>: <unk> Sharma.
<unk>: Myron Stadnyk.
Judy Steele: Judy Steele.
Speaker Change: Thanks Pavel.
Operator: I will now ask to move the resolution electing those individuals nominated as directors of Vermilion Energy to serve as directors until the close of the next annual meeting of the shareholders or until their successors are duly appointed.
Speaker Change: I'll ask I'll ask to move the resolution electing those individuals nominated as directors of Vermilion energy to serve as directors until the close of the next annual meeting of the shareholders or until their successors are duly appointed.
Jeff McDonald: My name is Jeff McDonald, and I'm a representative of Vermilion and a shareholder. I move that each of the ten persons nominated be elected as a director of Vermilion Energy Inc. to hold office until the close of the next annual meeting of shareholders or until a successor is duly elected or appointed. Thanks, Jeff.
Jeff McDonald: My name is Jeff Mcdonald, and I'm, a representative of Vermilion and a shareholder I move that each of the 10 persons nominated be elected as a director of Vermilion Energy, Inc. To hold office until the close of the next annual meeting of shareholders or until a successor is duly elected or appointed.
Operator: May I have the motion seconded?
Speaker Change: Jeff.
Speaker Change: You have the motion seconded.
Kyle Preston: My name is Kyle Preston, and I am a representative of Vermilion and a shareholder, and I second the motion. Thanks, Kyle.
Kyle Preston: My name is Kyle Preston and I'm, a representative of Vermilion and a shareholder and I second the motion. Thanks Carl.
Operator: As previously stated, the directors will be elected individually and not as a slate. For a nominee to be elected as a director of Vermilion Energy Inc., the votes cast in favor of the election of the director nominee should represent no less than a majority of the votes cast by shareholders represented in person or by proxy at this meeting. Is there any discussion?
Kyle Preston: As previously stated the directors will be left until acted individually and not as a slate for a nominee to be elected as a director of Vermilion Energy, Inc. The votes cast in favor of the election of the director nominee should represent no less than a majority of the votes cast by shareholders represented in person or by proxy at this meeting.
Kyle Preston: <unk>.
Speaker Change: Is there any discussion.
Operator: Voting on the election of directors will be conducted by way of ballot. The white ballot is to be used for this matter of business. If you have not yet received one, please raise your hand.
Speaker Change: Voting on the election of directors will be conducted by way about the white ballot is to be used for this matter of business. If you have not yet received one please raise your hand.
Operator: If you have not already completed your ballot and deposited it with Scrooge Neer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and a scrutineer will collect the ballot. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of the meeting's business while the scrutineer tabulates and provides the results of the ballots prior to the termination of the meeting.
Speaker Change: If you have not already completed your ballot and deposited with the scrutineer. Please complete the ballot now and sign your name clearly at the bottom of the ballot.
Speaker Change: Please raise your hand, if you have a ballot to be collected and the scrutineer will collect the ballots.
Speaker Change: Based on preliminary voting results for this matter. It is expected that this resolution will be carried.
Speaker Change: Continue with the remainder of the meetings business, while the scrutineer <unk>.
Speaker Change: I believe that provides the results of the ballots prior to the termination of the meeting.
Operator: The next item of business is the appointment of the auditors of Vermilion. Deloitte LLP are Vermilion's current auditors and have agreed to act as auditors of Vermilion if appointed. May I have a motion for the appointment of auditors?
Speaker Change: The next item of business is the appointment of the auditors of Vermilion.
Speaker Change: Deloitte LLP are millions current auditors and have agreed to act upon hacked as auditors of $1 million if appointed.
Speaker Change: May I have a motion for the appointment of auditors.
Operator: I move that Deloitte LLP be appointed as the auditors of Vermilion to hold office until the next annual meeting of shareholders. Thanks, Kyle. May I have the motion?
Speaker Change: I move that Deloitte LLP be appointed as the auditors of Vermilion to hold office until the next annual meeting of shareholders.
Operator: Thanks Kyle. May I have a motion, to second the motion? I second the motion. Thanks, everyone. Is there any discussion?
Speaker Change: Thanks, Kyle may have emotions.
Speaker Change: The motion.
Speaker Change: Second the motion thanks, everyone.
Speaker Change: Is there any discussion.
Operator: Voting on the election of the Director will be conducted by way of ballot. The pink ballot will be used for this matter of business. If you have not yet received one, please raise your hand.
Speaker Change: Voting on the <unk>.
Speaker Change: Excuse me voting on the election of the directors will be conducted by way of ballot.
Speaker Change: Pink ballot will be used for this matter of business. If you have not yet received one please raise your hand.
Operator: If you have not already completed your ballot and deposited it in the Scrutineer, please complete your ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and the Scrutineer will collect the ballot. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting's business while the scrutineer tabulates and provides the results of the ballot voting prior to the termination of the meeting.
Speaker Change: If you have not already completed your ballot and positive as scrutineer. Please complete your ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand, if you have a ballot to be collected in the scrutineer will collect the ballots.
Speaker Change: Yes.
Speaker Change: Based on preliminary voting results for this matter.
Speaker Change: It is expected that this resolution will be carried we will continue with the remainder of this meetings business, while the scrutineer tabulate and provides the results of the ballot.
Speaker Change: Voting prior to the termination of the knee.
Operator: The next item of business is the confirmation and approval of bylaw number 2, which, as previously mentioned, requires advance notice of director nomination. Bylaw No. 2 was adopted as part of Vermilion's commitment to facilitating an orderly and efficient process for shareholders' meetings, ensuring that shareholders receive adequate notice and sufficient information regarding director nominees, and allow shareholders to register and form votes. Further information with respect to bylaw number 2 was set forth in the information circulator for this meeting. May I have a motion for the confirmation and approval of bylaw number two?
Speaker Change: The next item of business is the confirmation and approval of bylaw number two which as previously mentioned requires advance notice director nominations.
Speaker Change: <unk> was adopted as part of Vermilions commitment to facilitating an orderly and efficient process for shareholders' meetings.
Speaker Change: As shareholders receive adequate notice and sufficient information regarding director nominees.
Speaker Change: Let me share shareholders to register informed vote.
Speaker Change: Further information with respect to bylaw number two was set forth in the information circular for this meeting.
Speaker Change: May I have a motion for the confirmation approval of bylaw number two.
Operator: I move that the ordinary resolution to confirm and approve bylaw number two as a bylaw of the company, the full text of which is set out on page 22 of the information circular accompanying the notice of this meeting, be approved. Thanks, Jeff.
Speaker Change: I move that the ordinary resolution to confirm an approved bylaw number two as a biologic company. The full text of which is set out on page 22 of the information circular accompanying the notice of this meeting be approved thanks, Jeff.
Operator: May I have the motion seconded? I second the motion. Thanks, April.
Speaker Change: May I have the motion seconded.
Jeff McDonald: I second the motion thanks Apple.
Speaker Change: Is there any discussion.
Operator: Voting on Confirmation Approval By-Law Number 2 will be conducted by way of ballot. The green ballot is to be used for this matter of business. If you have not yet received one, please raise your hand.
Speaker Change: Voting on confirmation approval by number two.
Speaker Change: <unk> will be conducted by way of ballot. The green ballot is to be used for the matter this matter of business.
Speaker Change: If you have not received yet received our please raise your hand.
Operator: If you have not already completed your ballot, deposit it with a screen reader. Please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting's business while the student retabulates and provides the results of the ballot voting prior to the termination of the meeting.
Speaker Change: If you have not already completed your ballot deposited skewing. Your please complete now and sign your name clearly at the bottom of the ballot.
Speaker Change: Please raise your hand, if you have developed to be collected.
Speaker Change: Based on preliminary preliminary voting results for this matter. It is expected that this resolution will be carried.
Speaker Change: We will continue with the remainder of this meetings business, while the scrutineer tabulate. So it provides a results of the ballot voting prior to termination of the meeting.
Operator: The next item of business is the advisory vote on executive compensation. As part of Vermilion's ongoing commitment to strong corporate governance practices, we continue to hold a non-binding advisory vote on the approach to executive compensation, commonly referred to as, say, pay. In 2023, 93.25% of shareholders supported our say on pay vote. In respect to this meeting, two leading independent third-party proxy advisory firms, ISS and Glass-Lewis, have both recommended that shareholders vote for the approval of the proposed say-on-pay vote at this meeting. May I have a motion for the C on P advisory vote?
Speaker Change: The next item of business is the advisory advisory vote on executive compensation.
Speaker Change: As part of our millions of ongoing commitment to strong corporate governance practices. We continue to hold a nonbinding advisory vote vote on the approach to executive compensation, commonly referred to as <unk>.
Speaker Change: Hey on PE.
Speaker Change: In 2023, 93, 5% of shareholder supported our say on pay vote.
Speaker Change: In respect to this meeting two leading independent third party proxy advisory firms ISS and glass Lewis both recommended that shareholders vote for the approval of the proposed say on pay vote at this meeting.
Speaker Change: Hey, I have a motion for the say on pay Advisory Board.
Operator: I move, on an advisory basis, and not to diminish the roles and responsibilities of the Board of Directors, that the shareholders accept Vermilion's approach to executive compensation disclosed in the information circular accompanying the notice of this meeting. May I have the motion seconded?
Speaker Change: I move that on an advisory basis, and not to diminish the roles and responsibilities of the board of directors that the shareholders accept the approach to executive compensation disclosed in the information circular accompanying the notice of this meeting.
Yvonne Guthrie: I second the motion. Thanks, Yvonne.
Speaker Change: May I have the motion seconded.
Speaker Change: I second the motion. Thanks, Ivan is there any discussion.
Operator: Is there any discussion? Transcribed by https://otter.ai. Voting on this AMPA advisory vote will be conducted by way of ballot. The yellow ballot is to be used for this matter of business. If you have no idea how to receive ballots, please raise your hand.
Speaker Change: <unk> crowd.
Speaker Change: Oh pardon me loading on the say on pay advisory vote will be conducted by way of ballot. The yellow ballot to be used for this matter of business. If you have not received one please raise your hand.
Operator: If you have not already completed your ballot and deposited it with the scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and the scrutineer will collect the ballot. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of the meeting's business while the scrutineer tabulates and provides the results of the ballot voting prior to the termination of the meeting.
Speaker Change: If you are not have not already completed your ballot to positive with the scrutineer. Please complete the ballot now and sign your name clearly at the bottom of the ballot.
Speaker Change: Please raise your hand, if you have to have a ballot to be collected and the scrutineer will collect the ballots.
Speaker Change: Based on preliminary vote voting.
Speaker Change: With this matter it is expected that this resolution will be carried.
Speaker Change: We will continue with the remainder to the meetings business for the Scrutineer Tabulate and provides the results of the ballot voting prior to termination of the meeting.
Operator: The next item of business is to table the consolidated audited financial statements of Vermilion for the year ended December 31, 2023 and the report of the auditors thereon. These financial statements were included in Vermilion's annual report, which was mailed to those shareholders who requested the financial statements along with the notice of meeting and the information circular. For your ease of reference, links to Vermilion's annual report, which includes the financial statements, are available on our website under the heading Invest With Us, subheadings, reports, and filings. Are there any questions regarding the financial statements?
Speaker Change: The next item of business is to table the consolidated audited financial statements of Vermilion for the year ended December 31, 2023, and the report of the auditors thereon.
Speaker Change: These financial statements were included in the in Vermilions Annual report, which was mailed to those shareholders, who requested the financial statements along with the notice of meeting and the information circular.
Speaker Change: For your ease of reference links to Vermilions annual report, which includes the financial statements are available on our website under the heading invest with us sub headings reports and filings.
Speaker Change: Are there any questions regarding the financial statements.
Speaker Change: Okay.
Speaker Change: Yeah.
Operator: I have the results of the voting on the ballots. On the matter of fixing the number of directors of Vermilion at 10, and Energy at 10, I'm advised by the Scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution. Therefore, I declare that this... Ocean is Carried.
Speaker Change: I have the results of the voting on the balance.
Speaker Change: On the matter of fixing the number of directors of Vermilion Energy, Inc. Tim I'm advised by the Scrutineer.
Speaker Change: That greater than a majority of the votes cast have been voted in favor of this resolution.
Speaker Change: Therefore, I declare that this <unk>.
Speaker Change: <unk> is carried.
Operator: On the matter of electing directors of Vermilion Energy Inc., I am advised by the scrutineer that for each of the director nominees, greater than a majority of the votes cast have been voted in favor of the election of each director. Therefore, I declare that this motion is carried, and each of the nominees for election as directors has been elected. On the matter of appointing the late LLP as auditors of Vermilion to hold office until the next annual meeting of shareholders, I'm advised by the scrutiny here that greater than a majority of the votes cast have been voted in favor of the resolution.
Speaker Change: On the matter of electing directors of Vermilion Energy, Inc.
Speaker Change: Advised by the scrutineer that.
Speaker Change: Each of the director nominees greater than a majority of the votes cast have been voted in favor of election of each director.
Operator: Therefore, I declare that this motion is carried. On the matter of approving the confirmation approval of bylaw number two, I'm advised by the scrutineer that a greater than a majority of the votes cast have been voted in favor of this resolution. Therefore, I declare that this motion is carried. On the matter of the approval of the Sayon Paye advisory vote, I am advised by the Scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution.
Speaker Change: Therefore, I declare that this motion is carried and each of the nominees for election as director has been elected.
Speaker Change: On the matter of appointing Deloitte LLP as auditors of Vermilion to hold office until the next annual meeting of shareholders I'm advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of the resolution.
Speaker Change: Therefore, I declare that this motion is carried.
Speaker Change: On the matter of approving the confirmation approval of bylaw number two I'm advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution.
Speaker Change: Therefore, I declare that this motion is carried.
Speaker Change: On the matter of the approval of the say on pay advisory vote I am.
Speaker Change: Advice by the scrutineer and greater than a majority of the votes cast have been voted in favor of this resolution.
Speaker Change: Therefore, I declare that this motion is carried.
Operator: Therefore, I declare that this motion is carried. Now, is there any further business? As there is no further business to be brought before this meeting, the meeting is concluded. I will now turn it over to Dion Hatcher, President and Chief Executive Officer of Vermilion, to provide you with an update on our business and strategy moving forward. If you have any questions at the end of the presentation, a microphone will be available to you. We would also like to welcome the people who have just joined us via webcast. Questions can also be addressed from a webcast audience after the presentation is complete.
Speaker Change: Is there any further business.
Speaker Change: As there's no further business to be brought before before this meeting at the meeting has concluded.
Speaker Change: I will now turn it over to Dion Hatcher, President and Chief Executive Officer of Vermillion to provide you with an update on our business strategy moving forward.
Anthony Hatcher: If you have any questions at the end of the presentation of my microphone.
Anthony Hatcher: Available to you.
Anthony Hatcher: We would like to also welcome the people who have just joined us by webcast.
Speaker Change: <unk> can also be addressed through our webcast audience. After the presentation is complete.
Speaker Change: British steel.
Speaker Change: Excuse me.
Speaker Change: Thanks, Bob.
Anthony Hatcher: Well, good afternoon everyone on this snowy, feels like winter day. We'll start with the informal part of the presentation, and we'll just take a few minutes to talk about our Q1 results and the outlook for 24 and beyond. Before we do that, just to remind you, we will be referencing a presentation that can be found on our website. You can invest with us and advance the presentations. Also, the disclaimer, the advisory information of forward-looking statements, is at the end of the presentation. It describes the forward-looking information, non-GAAP measures, and oil and gas terms used today. And it outlines the risk factors and assumptions relevant to this discussion.
Speaker Change: Good afternoon, everyone on this snowy feels like winter day.
Speaker Change: We'll start with the informal part of the presentation I will just take a few minutes to talk about our Q1 results and the outlook for 'twenty four and beyond.
Speaker Change: Before we do that I'll, just remind you we will be referencing a presentation that can be found on our website under invest with us and events and presentations.
Speaker Change: Well on the disclaimer the advisory information are forward looking statements as at the end of the presentation describes forward looking information non-GAAP measures and oil and gas terms use today and they were lines of risk factors and assumptions relevant to this discussion.
Anthony Hatcher: So 2024 is actually a key milestone year for the company. It was in 1994 that we were a small junior oil and gas company. Lorenzo, Claudio, and Jeff.
Speaker Change: So 'twenty 'twenty four is actually a key milestone year for the company. It was a 1994 that we were a small junior oil and gas company.
Speaker Change: The vision of our founders Lorenzo Claudio and Jeff.
Anthony Hatcher: When they started this company, they had a differentiated strategy to be an E&P company, one that grew globally through a series of acquisitions. Those acquisitions started in 1997 with France; that was our first international acquisition. After that, we followed up with other acquisitions in Europe, in France, as well as, which was key in 1997, but then in Australia as well as the U.S. This global diversification has several strategic advantages.
Speaker Change: We started this company they had a differentiated strategy to be an E&P company that won that grew globally through a series of acquisitions.
Speaker Change: Those acquisitions started in 97 with France that was our first international acquisition.
Speaker Change: After that we followed up with other acquisitions in Europe, and France, as well as which was key in 97.
Speaker Change: Then in Australia, as well as the U S.
Speaker Change: This global diversification has several strategic advantages it provides vermilion, what's your exposure to premium price global products, which helps to provide that outsides netback.
Anthony Hatcher: It provides Vermilion with exposure to premium-priced global products, which helps to provide that outsized netback. It provides us with an opportunity for capital efficient, often underexploited conventional assets, and it provides access to high-return international acquisition opportunities. Vermilion is unique in this strategy.
Speaker Change: It provides us opportunity for capital efficient often underexploited conventional assets and it provides access to high return international acquisition opportunities.
Anthony Hatcher: Because of this advantageous business model, we've been able to return a significant portion of our capital to investors over the years, over $40 a share in dividends. The past four years have been some of the more challenging years in the company's history. We've made a relentless effort to reduce debt and improve the asset base. We have made significant progress on these measures, as we'll talk about today, but we do recognize there's still more work to do. I do believe the company is much, much better positioned today with a stronger balance sheet and a stronger asset base. We are much more resilient.
Speaker Change: <unk> is unique in this strategy because of this advantaged business model, we've been able to return a significant portion of our capital to the investors over the years.
Speaker Change: Over $40 a share in dividends.
Speaker Change: Past four years have been some of our challenging years in the company's history.
Speaker Change: <unk> taken a relentless effort on reducing debt and high grading our asset base. We have made significant progress on these measures as we'll talk today, but we do recognize there's still more work to do.
Speaker Change: I do believe the company is much much better position today with a stronger balance sheet and a stronger asset base, we are much more resilient.
Speaker Change: Extremely proud of all the hard work of our team has done to achieving these goals and repositioning the company for the next 30 years.
Anthony Hatcher: I'm extremely proud of all the hard work our team has done in achieving these goals and repositioning the company for the next 30 years. Well, the first quarter of 24 was another strong quarter for Vermilion. We delivered strong operational results, which was above the upper end of our production guidance. It was really driven by Germany and the U.S. We generated $431 million in fund flows, we invested $190 million in A&E capital, and we generated $241 million of free cash flow for the quarter.
Speaker Change: While the first quarter 'twenty four was another strong quarter for Vermilion, we delivered strong operational results, which was above the upper end of our production guidance that was really driven by Germany and the U S.
Speaker Change: We generated $431 million of fund flows we invested $190 million of A&D capital and we generated $241 million of free cash flow for the quarter.
Anthony Hatcher: This free cash flow helped us reduce debt by another $134 million and achieve our net debt target of $1 billion during the quarter. We finished the quarter with a net debt of $944 million, which is the lowest in over a decade.
Speaker Change: This free cash flow helped us to reduce debt by another $134 million and achieve our net debt target of $1 billion during the quarter.
Speaker Change: We finished the quarter with a net debt of $944 million, which is the lowest in over a decade.
Anthony Hatcher: Reaching our net debt target was a key milestone and allowed us to accelerate our return to capital strategy, and we increased our allocation to 50% of excess free cash flow. This was announced in Q4, and immediately after this announcement, we significantly increased the pace of our shareholder buybacks. We repurchased a million shares in the month of March, bringing the total for Q1 to 2.4 million shares.
Speaker Change: Reaching our net debt target was a key milestone and allowed us to accelerate our return of capital strategy and we increased our allocation to 50% of excess free cash flow.
Speaker Change: This was announced in Q4 and immediately after this announcement, we significantly increased the pace of our shareholder buybacks, we repurchased 1 million shares in the month of March bringing the total for Q1 to two 4 million shares.
Anthony Hatcher: We've continued this pace into April, and we brought back another million shares in the month of April as well. In addition to delivering strong production and financial results, we have also advanced all of our key growth projects, in particular in Montigny, the Liquid Rich Rich Gas Development in Germany, and our Croatian gas development. So, starting with our international operations, production came in at 32,546 BUEs per day.
Speaker Change: We've continued this pace in April and we bought back another 1 million shares in the month of April as well in.
Speaker Change: In addition to delivering strong production and financial results. We've also advanced all of our key growth projects in particular in the Montney liquids rich gas development.
Speaker Change: Gas project in Germany, and our creature gas development.
Speaker Change: Expand on each of these projects in the following slides.
Speaker Change: So starting with our international operations production came in at 32546 Boe's per day in Germany were successfully drilled our first deep gas exploration well discovered gas in the targeted zone, we plan to commence drilling the second well in Q2.
Anthony Hatcher: In Germany, we successfully drilled our first deep gas exploration well and discovered gas in the targeted zone. We plan to commence drilling the second well in Q2. We also made several discoveries in Croatia, where we encountered hydrocarbons in multiple zones in the first three of the four wells we've drilled to date.
Speaker Change: <unk> also made several discoveries in Croatia, where we encountered hydrocarbons in multiple zones in the first three or four three of the four wells, we've drilled to date investor.
Anthony Hatcher: Investments in these programs are quite key as they're intended to support the longer-term free cash flow generation of the business, and we're excited to test the results of these wells in Germany and Croatia in the second quarter. Also, in Croatia, construction of our gas plant on the SA-10 block is nearing completion and is on schedule for mid-year start-up. This will allow us to bring on 2,000 barrels a day of gas that's behind the pipe, and that will help to immediately increase our free cash flow.
Speaker Change: Investments in these programs are quite key as they are intended to support the longer term free cash flow generation of the business and we're excited to test the results of these wells in Germany, and Croatia in the second quarter.
Speaker Change: Also in Croatia construction of our gas plant on the SA 10 block is nearing completion and is on schedule for midyear startup. This will allow us to bring on 2000 Boes a day of gas that's behind pipe that will help to immediately increase our free cash flow.
Anthony Hatcher: In Australia, we continue to see strong performance from that unit as well as strong pricing in Wondoo. We generated the highest net VEC of our asset base with a $65 BWE net VEC. As a reminder, we have over 700,000 net acres of land in Germany. We're targeting these deep gas exploration projects, and these prospects that we see, they're on trend with the Netherlands. We've been in the Netherlands for almost two decades.
Speaker Change: Australia, we continue to see strong performance from that unit as well as strong pricing and on do we generate the highest netback of our asset base with a $65 netback.
Speaker Change: As a reminder, we have over 700000 net acres of land in Germany.
Speaker Change: Targeting these deep gas exploration projects.
Speaker Change: These prospects that we see they are on trend with Netherlands, we've been in the Netherlands for almost two decades, we've drilled wells during that period and we have an ex success rate of 70%. So we're quite excited to apply those skills as we work on Germany.
Anthony Hatcher: We've drilled wells during that period, and we have a success rate of about 70%. So we're quite excited to apply those skills as we work in Germany. The first well, as noted, was successful, Osterheide, and that well was targeting an existing gas field. The well was drilled to a total depth of 5,000 meters, where we discovered gas in the targeted zone. This is the deepest well that we've ever drilled in Germany and in Europe, for that fact, and it shows the strong operational team that we have in Europe.
Speaker Change: First of all as noted was successful oster hide and with targeting that well was targeting the existing gas field that well was drilled to a total depth of 5000 meters, where we discovered gas in the targeted zone. This is the deepest well that we've ever drilled in Germany and in Europe for that fact, and it shows the strong operational team that we have in Europe.
Anthony Hatcher: We're very pleased with these initial results, and we plan to test the well in the second quarter as we're preparing for tie-in operations and getting that well on in early 2025. We'll now start planning and drilling the second well, which is Bissell Horse. This well is a higher risk as we're targeting a large prospect that we see on seismic. It's going to take three to four months to drill, and we have a 60% working interest in the second well to help to manage the risk and capital associated with exploration drilling. We are in the early innings in Germany.
Speaker Change: We're very pleased with these initial results we plan to test the well in the second quarter as we're preparing for tie in operations and getting that well on an early 'twenty five.
Speaker Change: I'll now start planning and drilling the second well, which is bissell horse.
Speaker Change: As well as a higher risk as we're targeting a large prospect that we see on seismic it's going to take three to four months to drill and we have a 60% working interest in the second well to help them manage the risks the capital associated with exploration drilling.
Speaker Change: We are in the early innings in Germany, where we're quite excited about the outlook and the opportunity we have in front of US we have identified at least nine individual prospects in many of these prospects are large enough to have multiple follow up drilling.
Anthony Hatcher: We were quite excited about the outlook and the opportunity we have in front of us. We have identified at least nine individual prospects, and many of these prospects are large enough to have multiple follow-up drilling associated with them. So with success, we see the ability to more than double our German business unit over time. In Croatia, construction of the gas plant on the SA10 block is nearing completion. The team is currently testing that facility and conducting the pre-commissioning start-up activities in preparation for a mid-year start-up. At start-up, this unit will add 2,000 BOEs a day of European gas, which is again exposed to premium pricing in Europe.
Speaker Change: Associated with them so with success, we see the ability to more than double our Germany business unit over time.
Speaker Change: In Croatia construction of the gas plant on the SA 10 block is nearing completion and all the team is currently testing that facility and conducting the pre commissioning and startup activities in preparation for a mid year startup on.
Speaker Change: On startup this unit will add 2000, Boe's a day of <unk>.
Speaker Change: European gas, which again is exposed to premium pricing in Europe.
Anthony Hatcher: They are expected to have a net back of over $50 per BOE. Initial production, as a reminder, is from the two successful exploration wells we drilled before. These wells were tested at 15 and 17 million cubic feet per day previously. So we're very excited to be nearing the point where we can get these wells on production. Also in Croatia, we drilled two wells in our four-well program in Q1, and subsequent to the quarter, we drilled our third well.
Speaker Change: <unk> to have a net back over $50 per Boe.
Speaker Change: Initial production as a reminder, as from the two successful exploration, we drilled wells, we drilled before these wells were tested at 15% and 17 million cubic feet per day previously.
Speaker Change: So we're very excited to be nearing the point, where we can get these wells on production also increased so we drilled two of our four well program in Q1 and subsequent to the quarter, we drilled our third well.
Anthony Hatcher: From all three of these wells, indiscreet structures have discovered hydrocarbons in multiple zones. We've had both oil and gas shows in the zones, and it looks very promising given the thickness of some of these zones. We don't know the full extent of the development.
Speaker Change: All three of these wells in discrete structures have discovered hydrocarbons in multiple zones, we've had both oil and gas shows in the zones and it looks very promising given the thickness of some of these zones.
Speaker Change: We don't know the full extent of the development and we're still early days as we will be testing. These wells in the next quarter, but having consecutive exploratory success is very exciting on this block and are waiting the test results will be <unk> as we move into the second quarter.
Anthony Hatcher: We're still early days as we'll be testing these wells in the next quarter, but having consecutive exploratory success is very exciting on this block, and we're awaiting the test results of these wells as we move into the second quarter. Production from our North American operations averaged 52,959 barrels per day today in Q1. Most of that capital was allocated to the Montigny development.
Speaker Change: Production from our North American operations averaged 52959 be used today in Q1, most of that capital was allocated to the Montney development.
Anthony Hatcher: We've drilled 13 and completed 13 wells, and we brought 9 wells on production. As well, in the U.S., even though we didn't have any operated wells this quarter, we did participate in some non-operated wells in a formation called the Parkman. That's an oil zone. Those wells came online in the quarter and helped to grow production in our U.S. business unit quarter over quarter. Construction of the B.C. Montney Battery is progressing as per plan, as well as we have tied in the six wells on the first pad in our Montney position.
Speaker Change: We've drilled 13 and completed 13 wells and we brought nine wells on production.
Speaker Change: As well in the U S. Even though we didn't have operated wells. This quarter. We did participate in some non operated wells and a formation called the Parkman, that's an oil zone.
Speaker Change: Those wells came online in the quarter and help to grow production in our U S business unit quarter over quarter.
Anthony Hatcher: The picture on slide 20 shows this battery. It's a 16,000 BVD battery that we're currently constructing. It is nearing completion, and we're expected to start this unit up in late Q2. This battery will more than double our infrastructure capacity in Montany, and we look to fill that capacity in the upcoming year. Further expansions will be required as we debottleneck this facility by adding compression.
Speaker Change: Construction of the BC Montney battery is progressing as per plan as well as we tied in the six wells on the first pad in our Montney position.
Speaker Change: The slide on.
Speaker Change: Slide picture on Slide 20 shows as battery, it's a 16000 be really battery that we're currently constructing it is nearing the completion and we're expected to start that unit up in late Q2.
Speaker Change: This battery will more than double our infrastructure capacity in the Montney and we look to fill that capacity in the upcoming years further expansions will be required as we debottleneck this facility by adding compression.
Anthony Hatcher: Ultimately, we are targeting a production rate of 28,000 BU's per day on our money asset. We recently tied in the first six wells, as noted, and we're flowing those wells through our existing bottleneck infrastructure. But the early results of the wells are quite encouraging, in line with the strong wells that we drilled in 2023, which you can see the results on this slide. We'll be able to produce those wells at higher rates once we're able to get our battery up and running.
Speaker Change: Ultimately, we are targeting a production rate of 28000 views per day on our Montney asset.
Speaker Change: We recently tied in the first six wells as noted and we're flowing the wells through our existing bottleneck infrastructure.
Speaker Change: But the early results of the wells are quite encouraging in line with the strong wells that we drilled in 2023, which you can see the results on this slide.
Speaker Change: We will be able to produce those wells at higher rates. Once we were able to get their battery up and running.
Anthony Hatcher: In summary, these results are very positive, and we continue to validate the quality of our BC acreage in the Monty. We've also drilled the next five wells. Our program will look to frack those wells, complete them in the next quarter, and bring them online in Q3. On the cost side, we continue to optimize our drilling and completion activities, which has resulted in cost savings per well of 15%. This is compared to our 23 program. Our 24 program used 17% less water, which reduced costs, but it also reduced the environmental impact.
Speaker Change: In summary, these results are very positive and we could do to validate the quality of our BC acreage in the Montney. We've also drilled the next five wells are program I'll look to Frac those complete them in the next quarter and bring them online in Q3.
Speaker Change: On the cost side, we continue to optimize our drilling and completion activities, which should result in cost savings per well of 50%. This is compared to our 23 program. Our 24 program used 17% law with less water, which reduces cost, but it also reviews reduces the environmental impact.
Anthony Hatcher: As well, we're further optimizing our well design and our completion activities. In addition to this, we are piloting different completion strategies, and we're also piloting tighter well spacing. We think the combination of these learnings will allow us to improve the efficiency in which we operate and develop this asset for decades to come. In summary, it's a very key year for us in Montanee as we get the infrastructure in place to start up this next pad, and we're quite excited about the cash flow that this asset will generate for us for decades to come.
Speaker Change: As well we are further optimizing our well design and our completion activities.
Speaker Change: In addition to this we are piloting different completion strategies and we're also piloting tighter well spacing. We think the combination of these learnings will allow us to improve the efficiency in which we operate and develop this asset for decades to come.
Speaker Change: In summary, it's a very key year for us in the Montney as we get the infrastructure in place to start up. This next pad and we're quite excited about the cash flow that this asset will generate for us for decades to come.
Anthony Hatcher: On the outlook side, we expect to see continued operational momentum as we go into Q2. And we'll remain focused on these key growth projects that we've talked about earlier. That includes the completion and start-up of the BC Monty Battery, completion and commissioning of the SA10 gas plant in Croatia, as well as testing the successful wells that we drilled in Germany and Croatia. Oil gardens may range intact for production, and we expect Q2 production to be in the $83,000 to $85,000 BWD range.
Speaker Change: On the outlook side, we expect to see continued operational momentum as we go into Q2, we'll marine focused on these key growth projects that we've talked about earlier, that's completion and startup of the BC Montney battery completion and commissioning of the SA 10 gas plant in Croatia, as well as testing the successful wells that we drilled in.
Speaker Change: Many and Croatia.
Speaker Change: All yogurt guidance may rains in Tac for production and we expect Q2 production to be in the 83 to 85000 BOE a day range.
Anthony Hatcher: Commodity prices as well continue to be supportive, and our financial outlook remains very strong. Looking at the financial forecast for 2024, we're currently forecasting approximately $1.3 billion of fund flow and free cash flow of approximately $700 million. We've also included our preliminary 25 outlook, which anticipates modest production growth and with fund flows based on back gradation and strip pricing, as well as adjusting for lower hedge gains relative to 24, we're forecasting about $1.1 billion of fund flows for 2025.
Speaker Change: <unk> prices as well continue to be supportive.
Speaker Change: And our financial outlook remains very strong.
Speaker Change: Looking at the financial forecast for 2024, we're currently forecasting approximately $1 3 billion of fund flow and free cash flow of approximately $700 million.
Speaker Change: We've also included our preliminary 25 outlook, which anticipates modest production growth and with fund flows based on backwardation of the strip pricing as well as adjusting for lower hedge gains relative to 'twenty four we're forecasting about $1 1 billion of funds flow for 2025.
Anthony Hatcher: As you can see, those red bars will continue to reduce debt and continue to strengthen the balance sheet through 2024 and 2025 as we continue to reduce debt and return 50% of our capital to our investors. With that accelerated return of capital pay target at 50% of our excess free cash flow, we would expect to have a robust insured buyback program for the balance of the year. Based on the current forecast, we're projecting to return approximately 10% of our market cap to shareholders, and that'll be through a combination of a fixed base dividend and share buybacks, which we're currently undertaking. Well, we've made a lot of progress over the past few years.
Speaker Change: So as you can see as well those red bars, we will continue to reduce debt and continue to strengthen the balance sheet through 'twenty four and 'twenty five as we continued to reduce.
Speaker Change: Reduce debt and returned 50% of our capital to our investors.
Speaker Change: With that accelerated return of capital payout target of 50% of our excess free cash flow.
Speaker Change: We would expect to have a robust share buyback program for the balance of the year based on the current forecast we are projecting the return of approximately 10% of our market cap to.
Speaker Change: <unk> shareholders and that'll be through a combination of fixed base dividend and the share buybacks, which were currently undertaking.
Anthony Hatcher: I'm actually very excited about looking at the company as we go forward. We've got a very strong balance sheet now. We've got the lowest debt to cash flow in over a decade.
Speaker Change: Well, we've made a lot of progress over the past few years I'm actually very excited but they were looking at a company as we go forward. We've got a very strong balance sheet now we've got the lowest debt to cash flow in over a decade, we continue to build operational momentum with another strong quarter. In Q1, we've got strong run times on our legacy assets and we've talked about the Australia unit.
Anthony Hatcher: We continue to build operational momentum with another strong quarter in Q1, we've got strong run times in our legacy assets, and we've talked about the Australia unit, which is back online and performing quite well, and we continue to progress our key growth projects in Montigny, in Croatia, and in Germany. Our near-term return on capital framework provides investors with a growing base dividend and meaningful share buybacks, which we look to augment with modest production growth and opportunistic international acquisitions.
Speaker Change: Which is back online performing quite well and we continue to progress our key growth projects in the Montney.
Speaker Change: In Croatia and in Germany.
Speaker Change: Our near term return on capital framework provides investors with a growing base dividend and meaningful share buybacks, which we look to augment with modest production growth and opportunistic international acquisitions.
Anthony Hatcher: We will continue to focus on... and Operational Excellence in executing our 24 plan while maintaining financial discipline. We believe this will set the future for profitable growth as we position the company for the next 30 years. We look forward to providing updates on these key growth projects in the months ahead. So, in closing, I would like to thank our shareholders for your continued confidence in Vermilion. Thank you to our Board of Directors, thank you to our employees, our contractors, and our server providers for helping us execute our strategy and for your contribution. Well, that concludes the prepared remarks, and with that, I'd like to open it up for questions. Questions in the back. Yeah, I think I'll just come over here, sir, if you wouldn't mind.
Speaker Change: We will continue to focus.
Speaker Change: On operational excellence and executing our 24 plan, while maintaining financial discipline.
Speaker Change: We believe this will set the future for profitable growth as we position the company for the next three years.
Speaker Change: We look forward to providing updates on these key growth projects in the months ahead. So in closing I would like to thank our shareholders for your continued confidence in Vermillion.
Speaker Change: Thank you to our board of directors. Thank you to our employees, our contractors and our service providers for helping us execute our strategy and for your contributions.
Speaker Change: Well that concludes the prepared remarks, and with that I'd like to open it up for questions.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Question in the back.
Speaker Change: Yes, I think just over here, Sir if you wouldn't mind.
Speaker Change: Okay.
Levi Early: My name is Levi Early; I'm a shareholder in Vermilion.
Speaker Change: Early on with the shareholder.
Speaker Change: Right.
Speaker Change:
unknown: That's just a general question....the political environment can be a little tricky in Europe, thoughts on that? especially in Germany. So I'd appreciate some feedback on that. Also, what do you think is going to be the catalyst to improve sentiment for Vermilion? I'll get out there right now.
Speaker Change: And just a general question.
Speaker Change: As you see things going forward.
Speaker Change: Political environment can be a little tricky in Europe.
Speaker Change: What are your thoughts on that.
Speaker Change: Especially in Germany at this point not predictable.
Speaker Change: Okay.
Speaker Change: So I'd appreciate some feedback on that.
Speaker Change: Also.
Speaker Change: What do you think.
Speaker Change: Can it be the catalyst to improve sentiment for vermilion because.
Speaker Change: Hi, good out there right now yeah.
unknown: Yeah. Transcribed by https://otter.ai, There's a tremendous amount of sentiment that's in the way of... The facts would say that it should be a much better... Transcribed by https://otter.ai, Those are the two things I've said.
Speaker Change: Hi, good at all actually.
Speaker Change: A tremendous amount of sentiment in the way of.
Speaker Change: Actually the facts would say that it should be a much better.
Speaker Change: Forming company it's not.
Speaker Change: So.
Speaker Change: Those are the two things that certain comments.
Anthony Hatcher: Well, thank you for the questions. Let's start with the first question about Europe. I think we've been in Europe for most of our 30 years in business, and so it's an area that we know quite well. We continue to execute programs there in all the jurisdictions, and Germany is a really interesting one. Germany was the epicenter of the crisis when 40% of European gas was shut off.
Speaker Change: Well, thank you for the questions.
Speaker Change: Let's start with the first question about Europe, and I think we would we'd been in Europe for most of our 30 years in business and so it's an area that we know quite well.
Speaker Change: We continue to execute programs there in all the jurisdictions in Germany is a really interesting one I mean, Germany was the epicenter of the crisis when the 40% of the European gas was shut off so what we've seen and anything youre seeing this with our capital execution as Germany has been.
Anthony Hatcher: So what we've seen, and I think you're seeing this with our capital execution, is Germany has been open to working with us to, within the regulatory framework, help us to accelerate permits and get these wells drilled. And so we're quite excited about having this first well drilled. These are more material targets.
Speaker Change: Open to working with us to within the regulatory framework.
Speaker Change: Help us to accelerate permits and get these wells drilled and so we're quite excited with having this first of all drilled on these are more material targets and we'll move to the second well and we've got some runway here for multiple years for that.
Anthony Hatcher: We'll move to the second well, and we've got some runway here for multiple years for that. So, interesting enough, I think Germany is quite pragmatic about its energy sources. 30% of their energy is still coal and lignite, by the way, and they're choosing not to continue to invest in nuclear energy and shut down the last of that nuclear plant. So that's an economy that, for quite a while, has been used to consuming gas and, I think, a little pragmatic around the need for gas.
Speaker Change: Interesting enough I think Germany is quite a.
Speaker Change: Pragmatic around their energy sources, 30% of their energy is still coal and lignite by the way in.
Speaker Change: They're choosing not to continue to invest in nuclear and shut down the loss of that nuclear plants. So thats an economy that for.
Speaker Change: Quite a while has been used to consuming gas and I think a little pragmatic around the need for gas. So we're quite excited with you look in Germany on the second question around stock performance and I think you acknowledged in the slide earlier that showed the let's call.
Anthony Hatcher: So we're quite excited with the outlook in Germany. On the second question about stock performance, and I think you acknowledged that in the slide earlier that showed the, let's call it, the fundamentals of the business, how we've been able to reduce debt by $1.2 billion over the last three years. We've been able to upgrade our asset base and increase our fund flows and our free cash flow accordingly. So we're quite excited about that.
Speaker Change: Called the fundamentals of the business, how we've been able to reduce debt by $1 2 billion over the last three years.
Speaker Change: We've been able to high grade our asset base and increase our fund flows and our free cash flow. Accordingly. So we're quite excited about that I mean, the business is fundamentally stronger and I think performing better than it has in recent years.
Anthony Hatcher: I mean, the business is fundamentally stronger and I think it is performing better than it has in recent years. I believe that will translate into stock performance, but I do know the thing that I need to focus on the most is the business itself. So there have been some headwinds. I think the overhang on the windfall tax in Europe is one of them. That came out retroactively late in 23, that's very late in 22, and that was definitely an overhang in 23.
Speaker Change: I believe that will translate into stock performance, but I do know the thing that I need to focus on the most is the.
Speaker Change: As the business itself. So there's been some headwinds I think the overhang on the windfall tax in Europe is one of them.
Speaker Change: That came out retroactively late in 'twenty three that's really in 'twenty, two and that was definitely an overhang in 'twenty three.
Anthony Hatcher: That is now behind us. We're done with the windfall tax. And so hopefully, you know, future investor meetings, that's not a topic of discussion, but clearly, that did negatively impact the settlement on the stock, irregardless of the cash flows we were actually generating during those periods. One would be the Australia unit.
Speaker Change: That is now behind US we are done with the windfall tax.
Speaker Change: So hopefully we can future investor meetings, and that's not a topic of discussion, but clearly that did negatively impact the sentiment on the stock irregardless of the cash flows we were actually generating during those periods.
Anthony Hatcher: I mean, that unit was down last year for about three quarters. That's never a good thing. We are proud to say that the unit in Wondoo is back up and running. It's been running quite smoothly for the last three quarters. It's the highest net return in the company, and it'll generate in the order of 80 to 100 million a year free cash flow. And so we're quite excited about that. And I think those, what were headwinds, are now behind us, and both of those are successfully looking forward.
Speaker Change: <unk> would be the Australia unit I mean that unit was down last year for about three quarters. That's never a good thing we are proud to say that that unit and want to do is back up and running has been running quite smoothly for the last three quarters. It's the highest netback in the company. It will generate in the order of 80 to 100 million a year of free cash flow.
Speaker Change: So we're quite excited with that and I think those were headwinds are now behind us and both of those are successful we look forward.
Speaker Change: The return of capital is still fairly new we bumped it up twice here recently, I think returning 10% of our market cap.
Anthony Hatcher: Return of capital is still via share buybacks; a million shares a month is quite attractive, and I think we'll see benefits of that over time. So there have been some headwinds, and I fully admit that the business, to your point, has improved significantly, and we have nominally 300 meetings a year with investors, and we'll look to champion and tell the story of how the business has gotten stronger, and we would look to see that translate into the stock price at the appropriate time. But again, thank you for your question.
Speaker Change: The share buybacks a million shares a month is quite attractive and I think we will see benefits of that over time. So.
Speaker Change: There has been some headwinds and fully acknowledge I think the business to your point has improved significantly and we have.
Speaker Change: Nominally 300 meetings, a year with investors and build up too.
Speaker Change: Tampion and tell the story of that business has gotten stronger and we would look to see that translate into the stock price at the appropriate time, but again. Thank you for your question.
Dion Hatcher: Okay.
Anthony Hatcher: Yeah, I think you're talking about the reserves. Yeah, yes, I can kick that off, and there's more detail Lars can comment on.
Speaker Change: Hum, Yes, I think youre talking about the reserves, yes, yes, I can I can kick that off and there's more detail alerts can comment, but just quickly there is.
Anthony Hatcher: But just quickly, you know, with the asset's high grade that we've talked about, we're now allocating more capital to the Montaney asset. And we're quite excited as we talk today about how strong those walls are off the 16 to 20 pad. Like these walls come on at 1600, 800 barrels of oil.
Operator: With the asset high agree that we've talked about we're now allocating more capital to the Montney asset and were quite excited as we talk today is how strong those wells are off that 16 to 20 <unk> pad like these wells come on at 600 800 barrels of oil.
Anthony Hatcher: As we got the permits and the clarity on infrastructure, it was really last year, you know, we got more certainty on the capital allocation to that asset. The good news then, or the bad news, I guess, depending on the reserve point of view, is there's other parts of our business that won't attract capital and that those particular units were in Alberta and Saskatchewan. So as we choose to invest more in mica, more in Germany as well, we'll be investing less in Saskatchewan, in particular. We still own those lands, we still have those drilling prospects on our lands, but they get recognized separately. And then as a result of how that gets recognized, there's an impact on the business.
Speaker Change: As we got the permits and the clarity on infrastructure, it's really last year, we get more certainty on the capital allocation to that asset. The good news that is or bad news I guess, depending on from a reserve point of view is theres other parts of our business that won't attract capital and that those particular units were in Alberta, and Saskatchewan. So as we chose to invest more on the mic.
Speaker Change: And Germany as well, we will be investing less in Saskatchewan in particular.
Operator: We still own those lands, we still had those drilling prospects on our lands, but we get recognize separately and then as a result of all of that gets recognized there's an impact on the business. So.
Anthony Hatcher: So that's the backstory, you probably know that, but for sure, we're focused on investing in the Montaney as well as Germany, where those two assets are very much underbooked and given their early days. Thank you. Any other questions?
Anthony Hatcher: That's the back story, you probably know that but for sure. We're focused on investing in the Montney as well, Germany, where those two assets are very much under booked and given the early days.
Speaker Change: Any other questions.
Operator: We do have a few questions on the webcast here.
Speaker Change: Yes, sorry.
Speaker Change: Yes, we do have a few questions on the webcast here first one on the windfall tax just wondering.
Operator: on the windfall tax, just wondering. You know, a little bit more color on that and how we can be certain that...
Speaker Change: A little bit more color on that and how we can be certain that this windfall tax doesn't return at some point in the future.
Operator: be certain that this windfall tax doesn't return at some point in the future.
Anthony Hatcher: Yeah, the history of the windfall tax, and it's, I think, helpful to think about why the windfall tax existed at the time. Gas prices in Europe, the gas prices went exponential, and in Canada, you know, we're used to paying two to three dollars an MCF for our energy costs. As a result of the tragic events in Ukraine and the restriction of gas, that market, the gas price literally went exponential. And so gas went all the way to $100 Canadian. So when you think about that, it's 50 times higher than what we've ever seen in North America.
Operator: Yes.
Anthony Hatcher: The history of the windfall tax and it's I think.
Speaker Change: Helpful to think about why the windfall tax existed at the time.
Anthony Hatcher: Prices in Europe, the gas prices went exponential and in Canada. We are used to paying two to $3 an mcf for our energy costs.
Speaker Change: As a result of the tragic events in Ukraine, and the restriction of gas that market. The gas price literally went exponential and so gas went all the way to $100. Canadian So when you think about that I guess 50 times higher than what we've ever seen and in North America.
Anthony Hatcher: Governments, you know, had to respond to that, and, you know, their response was taxes. As you follow through, of course, again, the sad events in Ukraine are still ongoing, but I think the market there has normalized. Gas prices in Europe today are between $12 and $13, and are forecast to be around $14 next year.
Speaker Change: Governments had to respond to that and their response was tax.
As you follow through of course again, the sad events in Ukraine are still ongoing but I think the market. There has normalized gas prices in Europe today are 12% to $13 are forecast to be around $14 next year still very robust six to seven times higher than what we see in Canada, and so that's an attractive place for us to play capital.
Anthony Hatcher: Still very robust, you know, 6 to 7 times higher than what we see in Canada, and so that's an attractive place for us to invest capital. The European Union came out late last year, and they did their follow-up analysis to respond to these extraordinary measures that were used to implement this type of retroactive tax, and the outcome of that study was, say, they do not see the need for this policy to go forward, and so it's since expired.
Anthony Hatcher: European Union came out last late last year and they did their follow up analysis to respond to these extraordinary measures that were used to implement this type of retroactive tax and the outcome of that study was saying that you do not see the need for this policy go forward and so it has since expired.
Anthony Hatcher: It's worth noting that France actually did not implement it in 23, even though they had the option to. So at this point, you know, the windfall tax from the European Union is behind us. What would bring it back would be the next question.
Levi Early: Note that France actually did not implemented in 'twenty, three even though they had the option to.
Anthony Hatcher: So at this point you know the windfall tax from the European Union is behind US what would bring it back what would be the next question I think it would be exponential prices right and we view that as right way risk and we do not want to see and he tragic events anywhere in the world, but if prices were to go Super high that would be the risk and where that would be introduced to our business to remind <unk>.
Anthony Hatcher: I think it would be existential prices, right, and we view that as a right-way risk. We do not want to see any tragic events anywhere in the world, but if prices were to go super high, that would be the risk and where that would be introduced to our business. To remind investors, it was basically 30% of the gas was the incremental tax, and so we still were able to produce that gas and sell that gas. We're in around, you know, $20-plus, which again, you compare that back to Canada, where it's $2 to $3.
Anthony Hatcher: <unk> was basically at 30% of the gas was the incremental tax and so.
Anthony Hatcher: We still were able to produce that gas and fill that gas or in around 20, plus dollars, which again you compare that back to Canada, where it's two to three bucks. So it's done and what would bring it back with extraordinary pricing, which we don't see.
Anthony Hatcher: So it's done, and what would bring it back was extraordinary pricing, which we don't see. Okay, the next question we have relates to our Germany business unit. A number of years ago, we signed a farming agreement with Exxon. Do we still own that land, or have we given it up? We still own that land, yes. As noted, we've got 700,000 acres of land in Germany, a lot of seismic activity over that, and existing infrastructure in place. We're quite excited about the potential development in the German units.
Anthony Hatcher: Okay. The next question, we have relates to our Germany business unit, a number of years ago, We signed a farm in agreement with Exxon do we still own Atlanta or have we relinquished it don't we still own the Atlanta, Yes, yes, yes, and as noted we've got 700000 net acres Atlanta in Germany.
Anthony Hatcher: <unk> seismic over that existing infrastructure in place. So we're quite excited about the potential development in the German unit.
Anthony Hatcher: Okay, and the next question, I'll lump these together. We've got a few...
Anthony Hatcher: Okay and the next question I'll have lumpy is together we've had a few of these around the dividend. Okay. Do we expect to increase the dividend this year and why don't we pay a higher dividend as opposed to buying back shares.
Operator: around the dividend. Do we expect to increase the dividend this year? And why don't we pay a higher dividend as opposed to buying it back? Do you want to take this one, or do you want me to?
Operator: Eric do you want to take this one or you want me to I mean, you can have an opportunity here.
Operator: Yes.
Operator: Okay.
Operator: Yeah.
Operator: You can have an opportunity here. Yeah, thanks for the question on the webcast there. So, as a reminder, we did increase the dividend by 20% for 2024 over the 2023 level. And our view is that we want to maintain resilience and financial flexibility within the system. And so our approach is going to be to limit that fixed dividend, ensure that it is sustainable and continually tested against a mid-price stack, which would be $60 oil, $2.50 North American gas, and then $10, $12.50 European gas.
Speaker Change: Yes. Thanks for the question over the webcast there. So as a reminder, we did increase the dividend by 20%.
Operator: For 2024 over the 2023 level and kind of our view is we want to maintain resilience financial flexibility within the system and so our approach is going to be to limit that fixed dividend ensure that it is sustainable and continually tested against a mid price deck, which would be $60 oil $2 50 north.
Operator: <unk> gas.
Operator: And then $10 $12 50 European gas and so we want to make sure that that fixed dividend sustainable under that price environment.
Operator: And so we want to make sure that that fixed dividend is sustainable under that price environment. What we are committed to is targeting a 50% return of excess free cash flow to shareholders here in 2024. I think that shareholders within this industry have gotten a lot more comfortable with the variable mechanisms in terms of returning capital.
Operator: What we are committed to is targeting the 50% return of excess free cash flow to shareholders. Here in 2024, I think that shareholders within this industry have gotten a lot more comfortable with the variable mechanisms in terms of returning capital and our preference in terms of how to do that is through the share buybacks, we do still think that there.
Operator: And our preference in terms of how to do that is through share buybacks. We do still think that there is room for increases in the dividend as we go forward. So what we would like to see is rateable increases to the base dividend that are sustainable in a price environment much lower than we are at today, and then couple that with that variable return of capital to top up to that target of 50%.
Operator: There's room for increases in the dividend as we go forward. So what we would like to pair is ratable increases to the base dividend that are sustainable in a price environment much lower than we are at today and then couple that with that variable return of capital to top up to that target of 50%. So that's the approach that we're taking we think.
Operator: So that's the approach that we're taking. We think it's a nice, nice mix of providing a 3% yield today, reducing the share account by, you know, a pretty significant amount, and being able to target that 10% of the market cap in terms of what we're returning. All right, we have one last question here related to our Canadian operations. Can you explain why Canadian production was down quarter over quarter and year over year?
Operator: Nikes nice mix up providing a 3% yield today.
Speaker Change: Reducing the share count by a.
Operator: A pretty significant amount and being able to target that 10% of the market cap in terms of what we're returning.
Operator: Yes.
Speaker Change: Alright, we have one last question here related to our Canadian operations can you explain why the Canadian production was down quarter over quarter and year over year.
Anthony Hatcher: Yeah, that's just timing of capital. We've talked about Montigny in particular, which is the bulk of the capital that we're investing in Canada. As noted, the battery itself will be coming on late in Q2, and so there's a period here where we're drilling well, spending quite a bit of capital, but we'll see the benefits of that production in the second half of this year.
Speaker Change: Yes, that's just timing of capital we've talked about the Montney in particular, which is the bulk of the capital that we're investing in Canada as noted.
Anthony Hatcher: The battery itself will be coming on late Q2, and so there's a period here, where we're drilling wells spending quite a bit of capital, but we'll see the benefits of that production in second half of this year. So timing of capital and then you've got your natural declines that are that are kicking in or waiting to bring those new wells on which it will be very soon.
Anthony Hatcher: So timing of capital, and then you've got your natural declines that are kicking in while we're waiting to bring those new wells on, which will be very soon. We did have one more question come through, and again, related to the dividend, would we consider a special dividend to top up the... The answer is yes.
Speaker Change: Alright, we did have one more question come through and again related to the dividend would we consider a special dividend top up the base dividend.
Anthony Hatcher: At this point, when we think about capital allocation as a management team, that's what we're paid to do and keep everyone safe as we run our operations. And so when we look at the valuation of the business today, and we talked about debt being lower, cash flows being higher, and the running room we have with these key growth projects, we're quite excited with the outlook. We compare that with the valuation of the company in the marketplace, and so we think it's a great allocation of capital to reduce those shares.
Anthony Hatcher: The answer is yes.
Anthony Hatcher: But we at this point I mean, when you think about capital allocation as a management team. That's that's what we're paid to do and keep everyone safe as we run our operations and so when we look at the valuation of the business today, and we talked about of that slower casuals are higher and the running room. We have with these key growth projects, we're quite excited with the outlook, we compare that with the value.
Anthony Hatcher: Based on the company in the marketplace and so we think it's a great allocation of capital to reduce those shares and.
Anthony Hatcher: And so that right now is the clear priority. If we found ourselves in a period of time down the road, the price of the stock would be more aligned with what we see as the intrinsic value of the company. Well then, I think that would, as other management teams have done, provide the option to look at other means of capital return. At this point, we don't see that as an option on the table, but in the future, it would be a good problem to have. Okay, thanks, Dion. That's all the questions.
Anthony Hatcher: And so that that you know right now is the clear priority. If we found ourself in a period of time down the road where the.
Anthony Hatcher: Price of the stock was more aligned with what we see the intrinsic value of the company will then I think that would as other management teams have done provide the option to look at other means of capital return at this point, we don't see that as a as an option on the table, but in the future would be a good problem to have.
Speaker Change: Okay. Thanks beyond that is all the questions. We have from the webcast I'll open it back up to the audience, if there's any more questions.
Operator: Any questions we have from the webcast, I'll open it back up to the audience if there are any more.
Operator: Look up to the audience if there are any more questions.
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: Yeah.
Operator: Okay.
unknown: [inaudible] I covered all of the things stated. I was wondering if there was something else that was going on then, other than the task.
Operator: Okay.
unknown: Yeah.
unknown: Yeah.
unknown: Sure.
unknown: Okay.
unknown: Ill.
unknown: Yes.
unknown: Okay.
unknown: Yeah, maybe Lars, you can come up, and I can kick it off here. And so just quickly on the windfall tax, the total expenditure of the windfall tax over two years was $300 million. We referenced earlier our cash flow generation in those years: $1.6 billion and $1.2 billion, and that was after tax. So those years were very, very, I guess, strong record years, frankly, for cash flow generation and free cash flow generation for the company. I think your question then is how to relate those cash flows to earnings, just to clarify, so maybe I'll pass it over to Lars. Yeah. Yeah.
unknown: Yes, maybe Larry you can come up and I can kick it off here and so just quickly on the windfall tax the total expenditure of the windfall tax over two years with $300 million.
Lars: You referenced earlier, our cash flow generation in those years.
Lars: 1.6 billion and $1 2 billion and that was after the tax so those years were very very.
Lars: Strong record years, frankly for cash flow generation and free cash flow generation.
Lars: For the company I think your question then is how relating those cash flows to earnings just to clarify so maybe ill Passover alert.
unknown: Yes.
Lars William Glemser: Yeah, just to summarize sort of the two-year period that you're referencing, sir. So 2022, you know, FFO was kind of in that $1.6 billion range. As prices tempered in 2023, we're at the 1.1 level. The angle you're referencing, too, is we did have some non-cash impairment charges go through the income statement in 2023. That did push us into a net loss position for the
Lars: Yeah, and just to summarize sort of a two year period that you're referencing Sir so 2022.
Lars William Glemser: <unk> was kind of in that $1 $6 billion range as prices tempered in 2023 were at the $1. One level angle you are referencing too is we did have some noncash impairment charges go through the income statement in 2023 that did push us into a net loss position for the year Don touched on it earlier, but what we did in 2010.
Lars William Glemser: Dion touched on it earlier, but what we did in 2023 is we acknowledged the fact that now that we have sort of a runway on the BC side of our monty asset, we acknowledged within our reserve bookings, but that is where a large amount of our capital is going to go over the next five years. The way our reserve book works is you really have to have line of sight to capital in the next five years to be able to book reserves.
Lars William Glemser: Three as we acknowledged the fact that now that we have sort of a runway on the PC side of our Montney asset we acknowledged within our reserve bookings, but that is where a large amount of our capital is going to go over the next five years.
Lars William Glemser: The way our reserve book works is you really have to have line of sight to capital in the next five years to be able to book reserves and so what we did is we wanted to acknowledge kind of our per annum spend level here of call it $6 million to $700 million and so we de recognized reserves primarily in the U S business unit and.
Lars William Glemser: And so what we did is we wanted to acknowledge kind of our per annum spend level here, call it six to $700 million. And so we de-recognized reserves primarily in the US business unit and the Saskatchewan cash generating unit. And so what that resulted in was less reserves, less book value from a reserve perspective, and triggered the write-downs.
Lars William Glemser: The Saskatchewan cash generating unit and so what that resulted in is less reserves.
Lars William Glemser: Book value from a reserve perspective and triggered the write downs.
Lars William Glemser: The other thing to keep in mind is a good chunk of those reserves and those two cash-generating units were put on in 2018, a bit of a different backdrop than what we have here today. And so a good chunk of those assets were recognized when we issued equity to do the Spartan acquisition with shares kind of in that $43 range. So kind of what you had there was a recognition of capital for a number of years coming off the books, kind of all within that single year of 2023. So that was the primary driver of being in a lost position.
Lars William Glemser: Other thing to keep in mind is a good chunk of those reserves and those two cash generating units. They were put on in 2018, a bit of a different backdrop than what we have here today and so a good chunk of those assets were recognized when we issued equity to do the Spartan acquisition.
Lars William Glemser: With shares kind of in that $43 range. So kind of what you had there was.
Lars William Glemser: A recognition of capital for a number of years coming off the books kind of all within that single year of 2023. So that that was the primary driver of being in a loss position.
Lars William Glemser: Hello.
Lars William Glemser: Okay.
Lars William Glemser: Yeah.
Lars William Glemser: I appreciate the comments and the feedback, and I think that's something that we'll take away just to make sure that we're providing the appropriate level of transparency in terms of the driver. So I do appreciate that, and we will take that away. Thank you. Thanks, Lars. Just to check, I guess, Kyle. Oh, one over here. Gentleman. [inaudible] Yes, thank you. Sue, you're right.
Speaker Change: I appreciate the comments the feedback and I think that's something that will take away just to make sure that we're providing the appropriate level of transparency in terms of the driver. So getting to appreciate that we will take that away. Thank you.
Speaker Change: Thanks, Lars just to check I guess, Kyle here gentlemen.
Lars William Glemser: Okay.
Lars William Glemser: Yes.
Anthony Hatcher: The Corb unit, which we did that acquisition just a little while ago, a very attractive acquisition in excess of 40% to increase our exposure to that asset, which we've operated since late 2015. Sorry, 2018. So it is a declining asset that declines 12 to 14% per year and generates a lot of free cash flow for us. Without getting too technical, we do look at ways to reduce the pressure under which that reservoir produces. And so we've just finished a project in which we're... We implemented a refrigerant plant which helps to reduce pressure, and then we've got some other additional compression projects which help to reduce pressure.
Lars William Glemser: Thank you so you're right the <unk>.
Anthony Hatcher: For unit, which we did that acquisition just a little while ago very attractive acquisition in excess of 40% to increase our.
Anthony Hatcher: <unk> exposure to that asset, which we've operated since late 2015.
Anthony Hatcher: 2018.
Anthony Hatcher: So it is a declining asset declines 12% to 14% per year generates a lot of free cash flow for us.
Anthony Hatcher: Without getting too technical we do look at ways to reduce the pressure in which that reservoir produces and so we've just finished a project in which we're.
Anthony Hatcher: Implemented a refrigerant plant, which helps to reduce pressure and then we've got some other additional compression projects, which helps to reduce the pressure.
Anthony Hatcher: We see the ability of that reservoir to produce out to the mid 2030s, and we'll continue to look for ways to extend that. There are options to drill in that reservoir, but it is an offshore asset, so the cost to drill those wells is expensive, so we do contrast that, and that's the strength of Vermilion.
Anthony Hatcher: We see the ability that reservoir to produce out to mid 2000, <unk> and we will continue to look for ways to extend that.
Anthony Hatcher: There are options to drill in that reservoir, but it is an offshore asset so the cost to drill those wells are expensive. So we do contrast that and that's the strength of Vermilion. We have these different business units to say are we better to drill another well in corp. Our drill an onshore well in Germany that we believe is quite attractive, but we do have opportunities at.
Anthony Hatcher: We have these different business units to say, "Is it better to drill another well in Corb or drill an onshore well in Germany that we believe is quite attractive, but we do have opportunities, at this point, we're focusing on our onshore operations to drill in Germany and the Netherlands that we think are more attractive." So that's our focus there, and as that free cash flow comes out of that Irish unit again, we'll look to redeploy a portion of that to our business to be able to grow our free cash flow for years to come.
Anthony Hatcher: At this point, we're focusing on their onshore operations to drill in Germany, and Netherlands that we think are more attractive.
Anthony Hatcher: So that's our focus there and as that free cash flow comes out of.
Anthony Hatcher: That Iris unit again, we will look to redeploy a portion of that to our business to be able to grow our free cash flow for years to come it might not be core, but if the business were in as a management team is to redeploy and then the other 50% of excess gets returned to our investors. So that does that help address the question yeah, great. Thank you.
Anthony Hatcher: It might not be Corb, but the business we're in as a management team is to redeploy and, Great. Thank you. Other questions? Okay, well, I think the refreshments are open in the back, so I encourage you to have a refreshment. I just again want to thank everyone for attending. We do appreciate your support and confidence in the management team, and we will continue to work very hard to better position the business. I look forward to updating you again next year. So, again, thank you.
Anthony Hatcher: Q.
Anthony Hatcher: Other questions.
Anthony Hatcher: Okay, well I think the.
Anthony Hatcher: Refreshments are opened in the back so I encourage you to.
Anthony Hatcher: I have a refreshment and I just again want to thank everyone for attending we do appreciate your support and confidence in the management team and we will continue to work very hard to better position the business and look forward to updating you again next year. So again thank you.
Anthony Hatcher: Okay.
Anthony Hatcher: [noise] [music].
Anthony Hatcher: Yes.
Anthony Hatcher: Right.
Anthony Hatcher: Okay.
Anthony Hatcher: Yes.