Q4 2024 Vermilion Energy Inc Earnings Call

Konstantin: Good morning, my name is Konstantin, and I will be your conference operator today.

Good morning, My name is constant scene and I will be your conference operator today.

Konstantin: At this time, I would like to welcome everyone to the Vermilion Energy fourth quarter 2024 conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: At this time I would like to welcome everyone says, even deliver Vermilion energy fourth quarter 2024 conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Konstantin: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press stars and the number one on your telephone keypad. If you'd like to withdraw your question, please press star 2. Thank you.

Speaker Change: I would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question. Please press star two thank you.

Konstantin: I will now hand the call over to Mr. Dion Hatcher, President and CEO. You may now begin your conference. Thank you, Faustine.

Speaker Change: I'll now hand, the call over to Mr. Don Hatcher fresh at end and CEO you May now begin your conference.

Speaker Change: Thank you Steve.

Dion Hatcher: Well, good morning, ladies and gentlemen, thank you for joining us. I'm Deon Hatcher, President and CEO of Vermilion Energy.

Unhitch: Good morning, ladies and gentlemen, thank you for joining us and you Unhitch your president and CEO of Vermilion Energy with me today are Larry Spencer, Vice President and CFO Darcy Kermit Vice President International Agency granted Quaid Vice President North America called Preston Vice President of Investor Relations will be referencing a powerpoint presentation to discuss.

Dion Hatcher: With me today are Lars Glemser, Vice President, CFO, Darcy Kerwin, Vice President, International HSE, Brandon McQuaid, Vice President, North America, and Kyle Preston, Vice President of Investor Relations. We'll be referencing a PowerPoint presentation to discuss our 2024 full year and Q4 results. This presentation can be found on our website with Hunter and Bess with us and events and presentations. Please refer to our advisory and forward-looking statements at the end of the presentation. describes the forward-looking information, non-GAAP measures, and oil and gas firms used today, and outlines the risk factors and assumptions relevant to this discussion.

Unhitch: 2020 for full year and Q4 results presentation can be found on our website under invest with us and events and presentations page.

Unhitch: Her to our advisory on forward looking statements at the end of the presentation.

Unhitch: Describe the forward looking information non-GAAP measures and oil and gas terms yesterday and it was the risk factors and assumptions relevant to this discussion.

Dion Hatcher: Vermilion delivered a strong operational financial results in 2024. Production averaged 84,543 views today, which was above the midpoint of our original guidance and represents annual production per share growth of 4%. Our international production increased 12% year-over-year, reflecting strong operational run times in Australia and the mid-year start-up of the gas plant on the SA10 block in Croatia. for North America production was down 5% year over year. This is reflecting the full year impact from the 5500 Bu each per day divestment in Southeast Saskatchewan that was completed in 2023. Now that was partially offset by the growth from Vermont the asset following the startup of the new battery in Q2.

Unhitch: But really delivered a strong operational financial results 2024 production averaged 84543 reviews, a day, which was above the midpoint of our original guidance represents annual production per share growth 4%.

Unhitch: Our international production increased 12% year over year, reflecting strong operational run types in Australia, and the midyear startup of the gas plant on the SA 10 block in Croatia.

Unhitch: No.

Unhitch: It was down 5% year over year. This is reflecting the full year impact from the 5500 Boe's per day divestments in southeast Saskatchewan that was completed in 2023 and that was partially offset by the growth of our Montney asset following the startup of the new battery in Q2.

Dion Hatcher: We generated $1.2 billion, or $7.63 per share of FundFlow, and $583 million, or $3.69 per share of free cash flow, both representing a 9% increase over 2023 on a per share basis. We successfully executed a $623 million E&D capital program within budget. Capital program included significant investments in new growth projects in Germany, Croatia and the BC Monteney, which will all contribute strong free cash flow in future years. returned $216 million or approximately 10% of our market cap to our shareholders in 2024. That comprised of $75 million in dividends and $141 million of share buyback. In December, we announced an 8% increase to our quarterly dividend, effective Q1 2025.

Unhitch: We generated $1 2 billion or $7 63.

Unhitch: Her share of funds flow at 583 million or $3.69 per share of free cash flow, both representing a 9% increase over 2023.

Unhitch: Our share basis be.

Unhitch: We successfully executed a 623 million capital program within budget.

Unhitch: Capital program includes significant investments in new growth projects in Germany, Croatia, and the BC, Montney, which will all contribute to strong free cash flow in future years.

Unhitch: We returned $216 million or approximately 10% of our market cap to our shareholders in 2024 that comprised of 75 million dividends.

Unhitch: The 41 million of share buybacks.

Unhitch: In December we announced an 8% increase to our quarterly dividend effective Q1 2025.

Dion Hatcher: This represents our fourth consecutive increase since reinstating the dividend. Net debt decreased by 10% in 2024 to $967 million at the end of the year, representing a net debt to trailing fund flow ratio of 0.8 times, or the lowest ratio in over a decade.

Unhitch: This represents our fourth consecutive increase since reinstating the dividend net debt decreased by 10% in 2000 $24 million to $967 million at the end of the year, representing a net debt to trailing funds flow ratio of one eight times or the lowest ratio in over a decade.

Unhitch: Okay.

Dion Hatcher: Included in our year-end release was an updated reserve estimate for 2024. Total approved plus probable reserves increased by 1% from the prior year, 435 million BOE. Primary due to extensions and improved recovery on the mica montani acid. We added 26 million BUEs of PDP reserves, 36 million BUEs of 2P reserves at an average FDNA cost, including future development costs of $22.81 per PDP BUE and $15.77 per 2P-BUE. Now this results in a recycle ratio of 1.6 times on a PDP basis and 2.3 times on a 2P basis. The 2024 FD&A figures include significant upfront capital costs associated with the early stage growth projects, such as the mounting infrastructure, as well as Germany and Croatia exploration, from which limited reserves compared to our internal estimates have been recognized .

Unhitch: Included in our year end release was an updated reserve estimate for 2024 total proved plus probable reserves increased by 1% from the prior year 435 million Boe's primary due to extensions and improved recovery on the bike Montney asset we have.

Unhitch: Added 26 million Boe's, a PDP reserves 36, Boe's two key reserves at an average F DNA costs, including future development costs of $22.81 per PDP Boe.

Unhitch: $15 77.

Unhitch: For two P. Buoy all this results in a recycle ratio of one six times on a PDP basis at two three times on a two P basis.

Unhitch: 2024. After you any figures include significant upfront capital costs associated with the early stage growth projects, such as the Montney infrastructure as well as Germany, and Croatia exploration, which limited reserves compared to our internal estimates have been recognized to date.

Dion Hatcher: Our PDP and 2P Reserve Life Index as of December 31st, 2024 was 5.4 and 14.1 years respectively. Both of these are consistent with a long-term average. The after-tax net present value of our PDP reserves, discounted at 10%, is $2.8 billion. And the after-tax net present value of our 2P reserves, discounted at 10%, is $5.2 billion. That is over $27 per share after deducting year-end net present value.

Unhitch: Our PDP into part two P Reserve life Index as of December 31, 2024. It was five four and four key 0.1 years, respectively. Over these are consistent with our long term average.

Unhitch: The after tax net present value of our PDP reserves discounted at 10%, it's $2 8 billion.

Unhitch: After tax net present value of our two P reserves discounted at 10% is $5 2 billion that is over $27 per share after deducting year end net debt.

Unhitch: Okay.

Dion Hatcher: Production for the fourth quarter averaged 83,536 views per day, which includes the impact from planned third-party turnaround activity and partial shut-in of some Canadian gas in response to weak April prices. We generated $263 million of fundfolds, that's $1.70 per share, and $62 million of free cash flow, of which $36 million was returned to shareholders by the dividend and share buyback. Indy capital increase in Q4 relative to Q3 as drilling activity picked up in Germany and The Germany activity included the completion and testing of the successful second well and the commencement of drilling on the third exploration well that was originally scheduled for 2025.

Unhitch: Production for the fourth quarter averaged 83536 views per day, which includes the impact from planned third party turnaround activity at parcels shut in of soap meeting gas in response to weak equal prices reached.

Unhitch: We generated 263 million, let's talk polls at $1 70 per share at $62 million of free cash flow of which 36 million was returned to shareholders via the dividend and share buybacks.

Unhitch: Capital increase in Q4 relative to Q3 as drilling activity picked up in Germany, and Canada did.

Unhitch: Did you have any activity included the completion and testing of the successful second well and the commencement of drilling other third exploration well that was originally scheduled for 2025.

Dion Hatcher: Net debt increased slightly due to the stronger US dollar and the full repayment of the Monteney battery lease. This provides immediate lease and interest savings, as well as increasing our excess free cash flow that's available for shareholder returns in 2025 and beyond. As I mentioned, drilling and fleece activity picked up In Europe, our primary focus was on the German deep gas exploration program, where we progressed facility construction and tie-in operations on their Osterheide well and completed testing operations on the Bissell horse including testing on a second zone subsequent to the border. commenced drilling in the third deep gas exploration well in Germany, Weisenmoor, during Q4, and completed drilling it in Q1.

Unhitch: Net debt increased slightly due to the stronger U S dollar and a full repayment montney battery lease this provides immediate lease and interest savings as well as increasing our excess free cash flow that's available for shareholder returns through 2025 and beyond.

Unhitch: As I mentioned drilling and completion activity picked up in Q4 in Europe. Our primary focus was on the German deep gas exploration program, where we progressed facility construction Italian operations on their author hide well and completed testing operations on the vessel horse well, including testing upon a second zone subsequent to the quarter.

Unhitch: We commenced drilling in the third deep gas exploration well in Germany Bazemore during Q4.

<unk> drilling it in Q1 I'll provide more detail on the successful German exploration program in the following slides.

Dion Hatcher: I will provide more detail on the successful German exploration program in the following slides.

Dion Hatcher: We're also very active in North America during the fourth quarter. In Canada, we drilled six Monteney liquids rich gas wells, including five wells in the new Adaport pad in BC and one land retention well in Alberta. The team continues to make progress towards achieving our $9 to $9.5 million decent cost target. In the Deep Basin, we drilled, completed, and brought on production five liquids-rich gas wells. In Saskatchewan, we drilled and completed six wells and brought on production seven oil wells.

Unhitch: We're also very active in North America during the fourth quarter in Canada that would be drilled six montney liquids rich gas wells with five wells on the new eight <unk>, one land retention well Alberta.

Unhitch: <unk> continued to make progress towards achieving our $99 $5 billion, you said Carlos target.

Unhitch: In the deep basin, we drilled completed and brought up production by liquids rich gas wells in Saskatchewan, we drilled and completed six wells and brought on production seven oil wells in the U S. We participated in the drilling and completions of five gross or six net non op oil wells.

Dion Hatcher: U.S. we participated in the drilling completions of five gross or 0.6 net non-op oil wells. In addition to executing a very active program in Canada, our team spent the better part of Q4 evaluating the Westbrook acquisition.

Unhitch: In addition to executing a very active program in Canada. Our team has spent the better part of Q4 evaluating the Westbury acquisition, where we're successful at it.

Dion Hatcher: We were successful and announced on December 22nd. We're very, very excited about the results for 2024 German Deep Gas Exploration Program. We have made significant gas discovery on our second gas well. Visselhorst. Visselhorst, which are a 64% working interest. We tested two zones within this well at a combined restricted rate of 41 million per day with flowing wellhead pressures of 6,200 PSI. We've got an estimated EOR of 68 BCF or 43 BCF net. As we announced in late December, this first test, the first zone tested at a restricted rate of 21 million a day of gas with a flowing wellhead pressure of 6,200 PSI.

Unhitch: On December 23rd.

Unhitch: We're very very excited about the results for 2024 German deep gas exploration program, we have made significant gas discovery on our second gas well.

Zohar: Zohar This'll horse visceral horse, which are 64% working interest we tested two zones within this well at a combined restricted rate of 41 million per day with flowing wellhead pressures was 6200 Psi.

Zohar: Got an estimated your 68 Bcf or <unk> 43 Bcf net as we announced in late December. This first tests. The first cell tested at a restricted rate of 21 million a day of gas for the flowing wellhead pressure at 6200 Psi.

Dion Hatcher: Substantive to year-end, we tested the second zone in this well, which flow tested at a restricted rate of 20 million a day with a similar pressure of 6,200 PSI. Based on our assessment, we believe the vessel core structure is large enough to support an additional four to six follow-up locations. We expect to bring the first well on production in the first half of 2026 and are advancing options to de-bottleneck or take away capacity in the second half of 2027, sorry, first half of 2027, given the very strong deliverability of this well. Successful development of these follow-up locations, as well as the additional prospects we've identified across our land base, we see the potential to double our current European 2P gas reserve.

Zohar: Subsequent to year end, we tested the second zone in this well which flow tested at a restricted rate at 29 today, but a similar pressure of 6200 BSI base.

Zohar: Based on our assessment, we believe that our structure is large enough to support an additional four to six follow up locations.

Zohar: We expect to bring the first well on production in the first half of 2006 and are advancing options to debottleneck, our takeaway capacity in the <unk>.

Zohar: Second half of 2007, sorry, first half of 2007, given the very strong deliverability of as well.

Zohar: Successful development of these pollo applications as well as the additional prospects we've identified across our land base, we see the potential to double our current European two pad two P gas reserves.

Dion Hatcher: So since the year end, we also include drilling operations, the Vizemore gas exploration well, which we're 100% working interest, and we discovered multiple hydrocarbon bearing zones. This would mark our third discovery. as well as currently in the process of being tested. The first well in the German program, Osterheide, which is 100% working interest, was drilled in the first half of 2004 and tested at a restricted rate of 17 million a day of gas with a flowing wellhead pressure of 4,600 psi. The well-site gas facility is nearing completion. First gas expected in 2021. In aggregate, the Osterheide and Bissell horse wells tested at a combined rate of 56 million per day.

Subsequent to year end, we also completed drilling operations on advisor more gas exploration, well, which we're 100% working interests that we discovered multiple hydrocarbon bearing zones. This would mark our third discovery in Germany.

Zohar: The wells currently in the process of being tested.

Zohar: First of all undergraduate program offer high which is 100% working interest was drilled in the first half of 'twenty four and tested at a restricted rate of 17 million a day of gas with a flowing wellhead pressure of 4600 Psi.

Zohar: What I'll say gas facility is nearing completion first gas expected in Q2.

Zohar: In aggregate the Oster high vis a horse wells tested at a combined rate of $56 million per day. This is equivalent to 50% of Vermilions current European gas production.

Dion Hatcher: This is equivalent to 50% of Vermilion's current European gas production. The success of our deep gas exploration program to date validates some technical models and our ability to achieve F&D costs of approximately $1 to $1.50 per MBtu with the potential to more than double our German production. It is early days in the development of this long life, high margin asset that is expected to add meaningful free cash flow in the years ahead.

Zohar: SaaS of our deep gas exploration partner to date, validate and technical models and our ability to achieve F&D costs of approximately a buck to about 50 per image btu with the potential to more than double our German production.

It is early days in the development of this long life high margin asset that is expected to add meaningful free cash flow in the years ahead.

Dion Hatcher: Last week, we were very pleased to announce the closing of the Westbrook acquisition. Strategic Acquisition represents a significant step forward in Vermilion's North American hybriding initiative to increase operational scale and enhance full cycle margins in the deep basin. As a reminder, the acquisition adds 50,000 views a day of production and over 770,000 net acres of contiguous land along with valuable infrastructure. We have identified over 700 net future drilling locations, providing a robust inventory to keep production flat for over 15 years, while generating significant free cash flow. As shown on the map on this slide, land and infrastructure is very complementary to Vermilion's legacy deep basin assets, which we expect to provide operational synergies and add further value over time.

Zohar: Last week, we were very pleased to announce the closing of the Westbury acquisition.

Zohar: Strategic acquisition represents a significant step forward in Vermilions, North American high grading initiatives increased operational scale and enhanced full cycle margins in the deep basin.

Zohar: As a reminder, the acquisition adds 50000 will be used at a a production and over 770000 net acres of contiguous land along with valuable infrastructure.

Zohar: We have identified over 700 future drilling locations, providing robust inventory to keep production flat or 15 years, while generating significant free cash flow.

Zohar: On the map on this slide land and infrastructure is very complementary to everybody. Its legacy deep basin assets, which we expect to provide operational synergies and add further value overtime.

Dion Hatcher: Since our first Spirit River, Allergy, and Cartesian Wells going back as far as 2009, Vermilion has drilled nearly 300 wells spanning And we operate significant infrastructure in the Deep Basin, which we will leverage in developing these newly acquired locations. In addition, we are already a partner with Westbrook on approximately 140 of these locations. speaks both to the operational synergies as well as our knowledge on the asset. These newly acquired locations are competitive with Vermilion's existing deep basin inventory with half-cycle returns ranging from 40% to over 100% based on third-party reserve engineering estimates.

Zohar: Since our first spirit River allergy and Cardium wells going back as far as 2009, <unk> drilled nearly 300 wells spanning.

Zohar: And we offer a significant infrastructure in the deep basin, which we will leverage and developing these newly acquired locations. In addition, we were already a partner with Westbury on approximately 140 of these locations, which speaks to the operational synergies as well as our knowledge of the asset.

Zohar: These newly acquired locations are competitive relative to existing b based on inventory.

Zohar: Yes returns ranging from $40 or 100% based on third Party reserve engineering estimates.

Lars Glemser: We'll now like to hand over to Lars to discuss our balance sheet and deleveraging plans along with our revised 2025 notes. Thank you, Dion. Vermilion has taken a prudent approach in balancing debt reduction, high grading our asset base and returning capital to shareholders. We have reduced net debt by over $1 billion from 2020, while also reducing the share count over this time period. This prudent balance of capital allocation provided us the opportunity to complete the opportunistic acquisition of Westbrook with the balance sheet and minimal share issuance. Over the past three years, we have completed over $2.1 billion of acquisitions while continuing to reduce the share count and now have a plan to reduce our debt and leverage.

Zohar: Well now like to hand over to Lars to discuss our balance sheet deleveraging plans, along with our revised 2025 cookbook.

Lars: Thank you Dion.

Speaker Change: Vermilions has taken a prudent approach and balancing debt reduction high grading, our asset base and returning capital to shareholders. We.

Speaker Change: We have reduced net debt by over $1 billion from 2020, while also reducing the share count over this time period.

Speaker Change: This prudent balance of capital allocation provided us the opportunity to complete the opportunistic acquisition of Westbrook with the balance sheet and minimal share issuance.

Speaker Change: Over the past three years, we have completed over $2 1 billion of acquisitions, while continuing to reduce the share count and now have a plan to reduce our debt and leverage.

Lars Glemser: Subsequent to the announced acquisition of Westbrook, we issued US $400 million of senior unsecured notes with a maturity date of April 2033 and an interest rate of 7.25%. This extends our weighted average maturity of our debt to over five years and results in over $1 billion of liquidity. With the Westbrook acquisition now closed, Vermilion has net debt of approximately $2.1 billion today and anticipates about $200 to $300 million of organic deleveraging in 2025 based on our current forecast, assuming no divestment. This leaves us with ample liquidity of approximately a billion dollars. As part of the Westbrook acquisition, we also launched a process to divest non-core assets as another means to accelerate deleveraging while directing 60% of excess free cash flow to the balance sheet.

Speaker Change: Subsequent to the announced acquisition of Westbrook, we issued U S $400 million of our senior unsecured notes with a maturity date of April 2033, and an interest rate of 7.25%.

Speaker Change: This extends our weighted average maturity of our debt to over five years and resulted in over $1 billion of liquidity.

Speaker Change: With the Westbury acquisition now closed Vermilion has net debt of approximately $2 $1 billion today, and anticipates about $200 million to $300 million of organic deleveraging in 2025 based on our current forecast assuming no divestments.

Speaker Change: This leaves us with ample liquidity of approximately $1 billion as.

Speaker Change: As part of the Westbrook acquisition, we also launched a process to divest non core assets as another means to accelerate deleveraging, while directing 60% of excess free cash flow to the balance sheet.

Lars Glemser: As mentioned, our non-core asset disposition program has been formally launched for our southeast Saskatchewan and Wyoming assets. The Saskatchewan assets include approximately 10,000 barrels a day. of production, 85% liquids with moderate declines and multilateral development upside. Our Wyoming assets include 5,000 barrels a day, 80% liquids of production with multi-zone development potential, including the Niobrara and the Parkway. The interest to date on these packages has been very strong. These are high quality assets with strong retention values that will be incorporated into the decision making process on how to best maximize shareholder value. The potential sale of these assets would help accelerate Vermilion's deleveraging efforts as we remain committed to reducing our net debt to FFO ratio to a target range of one times or less.

Speaker Change: As mentioned, our noncore asset disposition program has been formally launched for our southeast Saskatchewan and Wyoming assets.

Speaker Change: The Saskatchewan assets include approximately 10000 barrels a day.

Speaker Change: Of production, 85% liquids with moderate declines and multilateral development upside.

Speaker Change: Our Wyoming assets include 5000 barrels a day, 80% liquids production with multi zone development potential, including the Niobrara and the Parkman.

Speaker Change: The interest to date on these packages has been very strong. These are high quality assets with strong retention values that will be incorporated into the decision making process on how to best maximize shareholder value.

Speaker Change: The potential sale of these assets would help accelerate vermilions deleveraging efforts as we remain committed to reducing our net debt to <unk> ratio to a target range of one times or less.

Lars Glemser: Going back to 2022, Vermilion has taken a concerted effort to build operational scale where we have a competitive advantage by increasing our ownership in the Irish core project, adding a material position in the Mica Mondi oil window and making Vermilion one of the largest operators in the prolific D Basin. This has been complemented with organic investment into our onshore European gas portfolio, most recently in Germany and Croatia. The results of these efforts is increased operational scale with 80% of our production and 70% of our capital investment into our global gas portfolio and a reweight of our portfolio towards gas, where we see strong demand dynamics across the coming decade.

Speaker Change: Going back to 2022, Vermilion has taken a concerted effort to build operational scale, where we have a competitive advantage by increasing our ownership in the Irish core project.

Speaker Change: Adding a material position in the micro montney oil window, and making Vermilion one of the largest operators in the prolific deep basin.

Speaker Change: This has been complete complemented with organic investment into our onshore European gas portfolio, most recently in Germany and Croatia.

Speaker Change: The results of these efforts is increased operational scale with 80% of our production and 70% of our capital investment into our global gas portfolio and a re weight of our portfolio towards gas, where we see strong demand dynamics across the coming decades.

Lars Glemser: The benefit of this global exposure is stronger realized prices than any of our peers, even when factoring in various marketing and diversification strategies. We have access to LNG-driven prices without the cost and risk exposure of liquefying and transporting gas across oceans. With elevated prices in Europe and multiple successes from our recent exploration program in Germany, including follow-up development, we expect to maintain our pricing advantage over the coming years. We also expect strong tailwinds for demand and pricing in Western Canada, where we now have a much larger production and project inventory base to take advantage of this positive trend.

Speaker Change: The benefit of this global exposure is stronger realized prices than any of our peers, even when even when factoring in various marketing and diversification strategies.

Speaker Change: We have access to LNG, driven prices without the cost and risk exposure of liquefy and transporting gas cross oceans.

Speaker Change: With elevated prices in Europe, and multiple successes from our recent exploration program in Germany, including follow up development, we expect to maintain our pricing advantage over the coming years.

Speaker Change: We also expect strong tailwind for demand and pricing in Western Canada, where we now have a much larger production and project inventory base to take advantage of this positive trend.

Lars Glemser: Within our Q4 2024 release, we provided updated 2025 capital budget and production guidance to incorporate the closing of the Westbrook acquisition on February 26, 2025. Annual production is expected to range between 125 to 130,000 BOEs a day with E&D capital expenditures of $730 to $760 million. The revised capital program includes an additional 13 gross 12.3 net wells to be drilled on the Westbrook assets, bringing the total deep basin well count to 28 gross 24.9 net wells for 2025. The forecasted 50% increase in 2025 production coupled with efficient operations from an increased position in the Deep Basin is seen in our 2025 financial guidance, which includes a substantial reduction in our unit operating and G&A costs.

Speaker Change: Within our Q4 2024 release, we provided updated 2025 capital budget and production guidance to incorporate the closing of the Westbrook acquisition on February 26 2025.

Speaker Change: Annual production is expected to range between 125 to 130000 Boe's a day.

Speaker Change: <unk> <unk> capital expenditures of $730 million to $760 million.

The revised capital program includes an additional 13 gross $12 three net wells to be drilled on the Westbrook assets, bringing the total deep basin well count the 28 gross $24 nine net wells for 2025.

The forecasted 50% increase in 2025 production coupled with efficient operations from an increased position in the deep basin is seen in our 2025 financial guidance, which includes a substantial reduction in our unit operating and G&A costs.

Lars Glemser: We continue to monitor the tariff situation between the US and Canada, which includes a 10% tariff on Canadian energy exports. Over half of Vermilion's revenue is derived from assets located outside of Canada and the vast majority of our Canadian gas production is sold within Canada. As such, we do not expect the tariffs in place today to have a material impact. Based on forward commodity prices, we forecast 2025 FCF of $400 million. The unhedged FFO per share is forecast to increase from $5.61 in 2024 to approximately $7.50 in 2025, an increase of over 30%. As you will note in our financial guidance table on the prior slide, our lease obligations are substantially lower in 2025 due to the fact we repaid the full Monty Battery lease obligation in Q4 2024, which had an interest cost well in excess of our most recent debt issuance.

Speaker Change: We continue to monitor the tariff situation between the U S and Canada, which includes a 10% tariff on Canadian energy exports.

Over half of Vermilions revenue is derived from assets located outside of Canada, and the vast majority of our Canadian gas production is sold within Canada as.

Speaker Change: As such we do not expect the tariffs in place today to have a material impact.

Speaker Change: Based on forward commodity prices, we forecast 2025, FCS a $400 million.

Speaker Change: The unhedged <unk> per share is forecast to increase from $5 61, and 2024 to approximately $7 50 in 2025, an increase of over 30%.

Speaker Change: As you will note in our financial guidance table on the prior slide our lease obligations are substantially lower in 2025 due to the fact, we repaid the full Monty battery lease obligation in Q4 of 2024, which had an interest costs well in excess of our most recent debt issuance.

Lars Glemser: Our return to capital framework has continued to evolve and we believe it provides the appropriate flexibility to effectively manage our business while providing shareholders with meaningful returns. As Dion mentioned, we announced our fourth consecutive dividend increase effective for Q1 2025. At $0.13 per share per quarter, our annual dividend obligations amount to approximately $80 million, or 7% of our forecast FFO, providing capacity to manage the dividend through various commodity cycles. For 2025, we will continue to target shareholder returns at 40% of EFCF, inclusive of the quarterly base dividend, with 60% of EFCF going towards debt reduction.

Speaker Change: Our return of capital framework has continued to evolve and we believe it provides the appropriate flexibility to effectively manage our business, while providing shareholders with meaningful returns.

Speaker Change: As Dion mentioned, we announced our fourth consecutive dividend increase effective for Q1 2025.

Speaker Change: At 13 cents per share per quarter or annual dividend obligations amount to approximately $80 million or 7% of our forecast <unk>, providing capacity to manage the dividend through various commodity cycles.

Speaker Change: For 2025, we will continue to target shareholder returns at 40% of FCS inclusive of the quarterly base dividend with 60% of VF CF going towards debt reduction.

Lars Glemser: The variable component of shareholder returns will continue to be allocated towards share buyback. Since initiating the share buyback program in July 2022, Vermilion has repurchased and retired 17.8 million shares and reduced our outstanding share count to approximately 154 million shares inclusive of the 1.1 million share issuance associated with the closing of the Westbrook acquisition.

The variable component of shareholder returns, we will continue to be allocated towards share buybacks.

Speaker Change: Since initiating the share buyback program in July 2020 to Vermilion has repurchased and retired $17 8 million shares and reduced our outstanding share count to approximately 154 million shares inclusive of the $1 1 million share issuance associated with associated with the closing of the Westbrook App.

Speaker Change: Acquisition.

Dion Hatcher: With that, I will now pass it back to Dion. Thanks, Lars.

Speaker Change: With that I will now pass it back to D on thanks.

D: Thanks, Larry.

Dion Hatcher: These are exciting times that. North America, we're focused on the integration of Westbrook and operational scale and deep base. and the continued development of Vermont Miasma. We are very pleased to be positioned with a long-life, liquids-rich, North American gas portfolio. In addition, the potential U.S. and SAS events will accelerate our debt reduction, while also improving our full-sector margin.

D: These are exciting times at Vermilion North America, we're focused on the integration of Westbrook and operational scale the deep basin.

D: And the continued development of our Montney asset.

D: Very pleased to be positioned with a long life liquids rich North American gas portfolio.

D: In addition, the potential U S SaaS diverse while salary or debt reduction also including a full cycle margins.

Dion Hatcher: In Europe, we will bring on production of the first of our German deep gas exploration wells by planning for future activity, including the development of the large fissile ore structure that we successfully discovered. That's our largest discovery in over a decade. These investments, along with our share buybacks, are expected to add meaningful free cash flow per share in the upcoming years.

D: Europe will bring up production the first of our German deep gas exploration wells by planning for future activity, including the develop the large.

D: The horse structure that we successfully discovered that certain largest discovery in over a decade.

D: These investments along with our share buybacks are expected at meaningful free cash flow per share in the upcoming years.

Dion Hatcher: That concludes our prepared remarks.

That concludes our prepared remarks with that I would like to open it up for questions.

Konstantin: With that, we'd like to open it up for questions. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2.

D: Yeah.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Should you have a question. Please press star followed by the number one on your Touchtone phone you will hear a prompt that your hand is being raised.

Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number too.

Konstantin: If you are using a speakerphone, please make sure to lift your handset before pressing any key.

Speaker Change: If you are using a speaker phone please make sure to lift your handset before pressing any keys.

Greg Pardy: Your first question comes from the line of Greg Pardy from RBC Capital Markets. Please go ahead.

Speaker Change: Your first question comes from the line of Greg Pardy from RBC capital markets. Please go ahead.

Justin Ho: Hi, it's Justin Ho for Greg. Thanks for taking my questions. Just the first one for me on the German gas side. So pretty sizable discoveries there on the exploration program, so congratulations on that. But as we look ahead, we're wondering if you could remind us what types of unrestricted flow rates we can expect and any timing that you could give around that. Oh, thanks for that.

Speaker Change: Hi, it's Justin how on for Greg. Thanks for taking my questions. Just the first one for me on that.

Speaker Change: The German gas, that's a pretty sizable discoveries there on the exploration program. So congratulations on that but as we look ahead. We're wondering if you can remind us what types of unrestricted flow rates, we can expect and any timing that you could give around that.

Speaker Change: Alright, thanks for that so just to clarify your timing of the <unk>.

Darcy Kerwin: So just to clarify, yeah, timing of the on production dates.

Darcy Kerwin: So I'll pass it over to Darcy Kerwin, he can walk you through that. Yeah, thanks, Geoff. Darcy here. On the on the first discovery we made at Austa Ida, we are currently progressing construction of the onsite gas plant there and the tie in to the pipeline system. We do expect first production to be on in Q2 2025. We will be initially rate restricted there kind of in the in the area of three to 5 million cubic feet just due to some downstream capacity constraints and seasonality constraints. And we do expect that kind of throughout 2025 and into 2026, we'll start to see more and more capacity in that area as as other production drops off.

Speaker Change: <unk> production dates so I'll pass it over deaths occur when he can walk you through that.

Speaker Change: Thanks, Jeff Darcy here on the on the first discovery, we made at our side. We are currently progressing construction of the onsite gas plant there and the tie in to the pipeline system. We do expect first production to be on in Q2 2025.

Speaker Change: Will be initially rate restricted theyre kind of in the in the.

Speaker Change: The area of three to 5 million cubic feet just due to some <unk>.

Speaker Change: Downstream capacity constraints, some seasonality constraints and we do expect that Kenneth throughout 2025, and enter 2026, we will start to see more and more capacity in that area as well as other production drops off.

Darcy Kerwin: For the second well at at Visselsource, where we tested two zones together in excess of 40 million standard cubic feet a day. Our initial tie-in point is kind of the closest tie-in point to that well. We would expect to have that tied in in early 2026. Again, we'll be rate limited at that initial tie-in point to that 3 to 5 million cubic feet a day, but we have a number of de-bottlenecking options that we are pursuing here in parallel that will take us in a first stage up to about 17.5 million cubic feet per day and in the second stage up to 35.

Speaker Change: For the second well at vessel source.

Speaker Change: Where we tested two zones together in excess of 40 million standard cubic feet a day.

Speaker Change: Our initial tie end point is kind of the closest I would point to that well, we would expect to have that tied in and.

Speaker Change: Clearly 2026 again will be rate limited at that initial tie end points to that three to 5 million cubic feet a day, but we have a number of debottlenecking options that we're pursuing here in parallel that will take us in a first stage up to about $17 5 million cubic feet per day in.

Speaker Change: Second stage up to 35.

Darcy Kerwin: We would expect that those de-bottlenecking activities would incur early 2027.

Speaker Change: Would expect that those debottlenecking activities would incur early 2027.

Dion Hatcher: Thanks, Darcy. I mean, we're excited the size of the EORs that we've talked about here, the opportunity to increase these rates over time, you can start to visualize the free cash flow stream that's associated with these wells, given that the capital is largely invested as we finished up the year here. So, you know, thanks for the question. And again, we're excited about the impact this is going to have on the business. As you mentioned on the call too, it's, you know, the structure itself, we talked about the well, we're trying to, you know, also talk about the size of the structure where we see multiple drilling locations, upwards of six locations to follow up just on this second prospect alone.

Darcy: Thanks Darcy.

Darcy: We're excited the size of the <unk> that we've talked about here.

Darcy: The opportunity to increase these rates per time, you can start to visualize the free cash flow stream. That's associated with these wells given that the capital is largely invested as we finished up the year here. So.

Darcy: Thanks for the question and again, we're excited about the impact this is going to have the business.

Darcy: On the call too it's the structure itself, we talked with a well we're trying to also talk about the size of the structure, where we see multiple drilling locations.

Darcy: <unk> of six locations to follow up just on this second prospect.

Justin Ho: With that, back to you. Now that's great. Thanks for all the detail there.

Darcy: With that back to you.

Darcy: No that's great. Thanks for all the detail there if I can quickly shift gears here on the on the sales process for the Saskatchewan in Wyoming assets could you just update us on where you're at in that process.

Justin Ho: If I can quickly shift gears here. On the sales process for the Saskatchewan-Wyoming assets, could you just update us on where you're at on that process? You bet.

Darcy: You bet, Larry touched on it on the script there I can add a little more color, but the formal process for SaaS and U S is well advanced we are in the formal process, where teasers went out weeks ago and management presentations are going.

Dion Hatcher: Lars touched on it on the script there. I can add a little more color, but the formal process for SAS and US is well-advanced. We're in the formal process where teasers went out weeks ago and management presentations are ongoing. And as you heard on the call, these are good quality assets. Their assets are high liquids, high netbacks, reasonable declines, drilling opportunities. We've got a strong retention value for these assets and we're excited to see how our potential bidders are going to try to step up to meet those. It's too early to pin a date on it, but we are well-advanced in those processes as of today.

Darcy: And as you heard on the call that these are good quality assets, they're high liquids high net backs reasonable declines drilling opportunities. So we've got a strong retention value for these assets and we're excited to see our potential bid.

Darcy: Bidders are going to try to step up to meet those so.

Darcy: Too early dependent data on it but we are well advanced in those processes as of today.

Justin Ho: Thank you very much.

Darcy: Thank you very much I'll turn it back.

Justin Ho: I'll turn it back. Great, thank you.

Darcy: Great. Thank you.

Amir Arif: Your next question is from the line of Amir Arif from ATB Capital. Please go ahead. Thanks. Good morning, guys.

Speaker Change: Your next question is from the line of Amir <unk> from <unk> capital. Please go ahead.

Amir: Thanks, Good morning, guys, just a follow up on the Germany exploration success over there can you give us a sense of your next exploration wells that you're planning to drill.

Amir Arif: Just to follow up on the Germany exploration success over there, can you give us a sense of your next exploration routes that you're planning to drill?

Dion Hatcher: I can get it kicked off here and then I'll let Darcy feel free to add any color. And so, first of all, thanks for the question. You know, we've managed, you know, not only two wells per year. If you think about last year, we actually drilled three wells as we brought the third well forward and we finished drilling that in Q1. We've got another follow up gas well planned for this year. And then our work right now is twofold. You know, the exciting thing is that with this abyssal horse structure being so large, you know, we see, you know, basically development locations there that we're advancing.

Speaker Change: I can get it kicked off here at all but <unk> feel free to add any color and so first of all thanks for the question we've message.

Amir: The only two wells per year.

Amir: If you think about last year, we actually drilled three wells as we brought the third well forward. We finished drilling that in Q1, we've got another follow up gas well planned for this year.

Amir: And then our work right now is two fold the exciting thing is that with this vis a horse structure being so large we see basically developed locations. There that we're advancing in parallel. We've also got the other six plus prospects of the teams identified to mature so quick answer would be two wells a year.

Dion Hatcher: And then in parallel, we've also got the other six plus prospects that the team's identified to mature. So, you know, quick answer would be two wells a year.

Dion Hatcher: And with that, I think we'll be as a management team reviewing annually, you know, do we allocate more capital to Germany given the success that we've had?

Amir: And with that I think will be as a management team reviewing annually do we allocate more capital to Germany, given the success that we've had.

Darcy Kerwin: And then just a question on that second successful well, can you just remind us what was the total capital on that well and just what development wells will come out of it? Yeah, so Amir, Darcy here, the total capital on that Vissal Source well, the second well we drilled, if I include kind of all the drilling completion costs, as well as the tie-in and the well site gas plant that will be required, we're kind of at 40 million Canadian gross for that. So we're 64% working interest in that particular well. and that that is about Sorry, go say that again.

Speaker Change: Got it and then just a question on that second successful well be could you just remind us what was the total capital on that well and just what development wells will cost.

Speaker Change: Yes, so amir Darcy here that total capital on that business.

Speaker Change: <unk> the second well we drilled.

Speaker Change: I include kind of all the drilling completion costs as well as the tie in in the.

Speaker Change: Well say gas plant that will be required.

Speaker Change: About $40 million Canadian grows for that so we're 64% working interest in that particular well.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And then that exclusion.

Speaker Change: Okay.

Speaker Change: Sorry say that again.

Darcy Kerwin: Sorry, I was just gonna say that. So I'm assuming the development wells will be significantly less than in terms of the follow up wells. Yeah, we might be able to optimize gathering. gathering kind of concepts there as well as the location gas plant and drive those cars. Yeah, so these are expensive wells, but you think about it on an F&D basis, given the, you know, the cost structure and the size of the gas that we're discovering, you know, as referenced on the note that, you know, buck to buck 50, we would have beat that significantly on the on the business horse well, but over the program, you know, it's confirming our ability to deliver on that.

Speaker Change: Sorry, I was just going to.

Speaker Change: Assuming the development wells will be significantly less in terms of the follow up obsolete.

Speaker Change: Yes, we might be able to optimize gatherings gathering kind of concepts there as well.

Speaker Change: Location gas plant in.

Speaker Change: And drive those cost average you're right.

Speaker Change: Okay, Yes.

These are expensive wells, what do you think about it on an F&B basis, given the cost structure and the size of the gas that we're discovering as reference on the note that booked about 50% we would've.

Speaker Change: Beat that significantly on the on the visitor horse well, but over the program.

Speaker Change: Our ability to deliver on that.

Amir Arif: Sounds good.

Speaker Change: Yes sounds good and then just a question on the Westbrook acquisition.

Amir Arif: And then just a question on the Westbrook acquisition. Pleasantly surprised in terms of your operating cost guidance on the corporate basis. Just relative to your own deep basin cost structure, how would you compare the Westbrook assets and are you planning on doing any different in terms of going forward.

Speaker Change: We're pleasantly surprised in terms of your operating cost guidance.

Speaker Change: On the corporate basis, just relative to your.

Speaker Change: One key basin cost structure, how would you compare the westbrook assets and are you planning on doing anything.

Speaker Change: Different in terms of going forward on those assets.

Dion Hatcher: I'll get it kicked off and I can pass it over to Randy if you want to add more color, Randy. But we did a lot of work on that, of course, as you would imagine. You know, the good news is we've been in that area for for almost three decades. And so we operate a lot of the same infrastructure and well types. As noted, you know, the Westbrook assets would have been in that, you know, 650 ABUE range. Our assets are in that 750 ABUE range on unit opex. Now saying that our assets are a development and some other more oily development in our deep basin.

I'll get it kicked off and I can pass it over to Randy if you want to add more color Randy but we did a lot of work on that of course as you would imagine.

Randy: Good news is we've been in that area for almost three decades, and so we operate a lot of the same infrastructure and well types.

Randy: As noted the Westbrook assets would have been in that $6 50 of Boe range.

Randy: Our assets are in that 750 of BOE range on unit Opex, saying that our assets are a little more oily or we had occurred in the development and some other more oily development at our deep basin. So net net when you look at the assets that are in that $6 50 to 750 range. What were excited about as you can see on the map in the infrastructure.

Randy: So net net, when you look at the assets, you're in that 650 to 750 range. What we're excited about, as you can see on the map and the infrastructure map as well, as we start to combine these businesses and look for opportunities to drill longer wells, to look for synergies across infrastructure. You know, we think there's some upside there as we start to work through that. But, you know, high level, those are kind of the unit costs that we've seen to date.

Randy: <unk> as well as we started to combine these businesses and look for opportunities to drill longer wells.

Randy: Look for synergies across infrastructure.

Randy: I think there's some upside there as we start to work through that but high level. Those are kind of the unit cost that we've seen to date Bryan anything to add to that no like I said I think it's the large portion of the infrastructure now being interconnected we will work towards optimize production, our marketing and ultimately reduce our operating costs.

Randy: Randy, anything to add to that? No, like I said, I think, you know, with the large portion of the infrastructure now being interconnected, we'll work towards optimized production, our marketing and ultimately reduce our area operating costs.

Amir Arif: Thanks. Sounds great, thanks.

Bryan: Thanks Randy.

Randy: Sounds great. Thanks.

Randy: Thanks Samir.

Travis Wood: Your last question comes from the line of Travis Wood from National Bank Financial. Please go ahead. Thanks, guys. I have a couple of questions.

Randy: Your last question comes from the line of Travis Wood from National Bank Financial. Please go ahead.

Travis Wood: Yeah. Thanks, guys have a couple of questions on the Germany just to round that out has the risk profile as you think about budgeting future exploration wells.

Travis Wood: On the Germany, just to round that out, has the risk profile, as you think about budgeting future exploration wells, have you changed that at all, given the recent success, in terms of percentage of success, however you guys want to think about that? Yeah, thanks, Travis.

Randy: Change that at all.

Randy: Given the recent success in terms of percentage of of success. However, you guys want to think about that.

Speaker Change: Yes, thanks, Travis they're going to pass it back to Derek again.

Darcy Kerwin: I'm going to pass it back to Darcy again. Yeah, thanks, Travis. Um, yeah, certainly, success on these first wells has increased our confidence about this entire exploration program. You know, however, we do risk each prospect independently, and we'll continue to do that. We'll calculate independent chances of success for each of those prospects.

Speaker Change: Thanks Travis.

Speaker Change: Certainly it <unk> success on these first wells is increase our confidence about this entire.

Speaker Change: Exploration program. However, we do risk each prospect independently and we will continue to do that.

Speaker Change: <unk> calculated independent chances of success for each of those prospects I think what's really changed is we've now gone from a pure exploration program.

Travis Wood: I think what's really changed is we've now gone from a pure exploration program to a program that has a combination of exploration and now development wells, so that in itself will reduce the risk of the entire Okay, that's a good color.

Speaker Change: Program that has a combination of exploration and now development well so that in itself will reduce the risk of the entire program.

Speaker Change: Okay.

Speaker Change: Good color and then.

Randy: And then for the Westbrook assets at closing, where would volumes have been kind of at on the closing date, or at least close to in terms of current current BOE production? Thanks Travis, I'll pass it back to Randy for that one. Yeah, thanks, Travis. So I think volumes volumes were coming in right around that 50,000 barrels a day, which is where we expected it to be. And then when we bring on some of the development that we'd spoke about in the script earlier, we expect our annualized volumes to remain at that 50,000 barrels a day.

Speaker Change: For the west brick assets at closing, where wood volumes have been kind of on the closing date or at least close to in terms of current current Boe production.

Speaker Change: Alright, Thanks, Travis I'll pass it back Randy for that one.

Yeah. Thanks, Joe So I think volumes volumes were coming in or out right around that 50000 barrels a day, which is where we expected it to be and then when we bring on some of the development.

Speaker Change: We had spoke about in the script earlier, we expect our annualized volumes to remain at that 50000 barrels a day. So in line with where we had our evaluation and expectations.

Randy: So in line with where we had our evaluation and expectations.

Travis Wood: Okay, perfect. And then the couple, I mean, it's only a couple weeks. In terms of the delay to closing, was that just kind of crossing T's and dotting I's? Or was there anything kind of last minute on the negotiating table that that kind of delayed it a couple weeks? Yeah, I just Yeah, our initial estimate was mid February. And I you know, I would say, you know, just with signing the deal immediately prior to the holiday period, it's just execution and receipt of required approvals adjusted the date by two weeks, so nothing too concerning. Okay, perfect.

Speaker Change: Okay, perfect and then.

Couple of I mean, it's only a couple of weeks.

Speaker Change: In terms of the delay to closing or was that just kind of.

Speaker Change: Crossing T's and dotting I's or was there anything kind of last minute on the negotiating table that that kind of delayed a couple of weeks.

Speaker Change: Yeah I just yeah. Our initial estimate was mid February I would say.

Speaker Change: Signing the deal immediately prior to the holiday period, it's just execution and receipt of required approvals adjusted the date by two weeks so nothing too concerning.

Travis Wood: That makes great sense.

Speaker Change: Okay, perfect that makes great sense.

Travis Wood: And then lastly, probably for Lars here, you kind of walk through the return of capital mandate and kind of the 40-60 split. You know, and we can make an assumptions on some proceeds for the asset sales. But do you have a debt number in in mind on when you could see that 40% on the return of capital start to shift higher and the debt allocation compress?

Speaker Change: Then lastly, probably for Lars here, you kind of walk through return of capital.

Speaker Change: Mandate in kind of a 40 60 split.

Speaker Change: We can make some assumptions on some.

Speaker Change: Proceeds for the asset sales, but do you have a debt number and in mind on when you could see that 40% on the return of capital start to shift higher in the debt allocation compress.

Lars Glemser: Yeah, no, thanks, Travis. And, you know, before sort of diving into that, I think the other thing that we tried to point out in the script to is very minimal share issuance with the acquisition of Westbrook. And so that's where we got comfortable taking the 50-50 allocation to 40% in terms of return to shareholders, just in terms of, you know, we think we've made really good progress reducing the share count here over the last three years. I think at this point, we'd like to see how the dispositions shake out. As we've mentioned in the script, we are going to have retention values on these assets as well.

Speaker Change: Yes, no. Thanks.

Travis Wood: Travis and.

Speaker Change: Before diving into that I think the other thing that we've tried to point out in the script too is very minimal share issuance with the acquisition of Westbrook and so that's where we got comfortable taking the 50 50 allocation to 40% is in terms of return to shareholders.

Travis Wood: In terms of.

Travis Wood: We think we've made really good progress reducing the share count here over the last three years.

Travis Wood: I think at this point, we'd like to see how the dispositions shake out.

Travis Wood: As we've mentioned in the script, we are going to have retention values on these assets as well.

Lars Glemser: And so it's not a fire sale. Let's see how the process unfolds. Let's continue to direct 60% of that EFCF to the balance sheet. And then you're most likely reassessing in the second half of this year, in terms of how those things shake out. At this point, you know, the dividend is very well covered at that 40% level. We're actively buying back shares still within that 40%. So we think that we can make adequate returns to shareholders here as we work through some of the deleveraging events that we have here.

Travis Wood: It's not a fire sale, let's see how the process unfolds, let's continue to direct 60% of that ESC up to the balance sheet and then youre most likely reassessing in the second half of this year.

Travis Wood: Terms of how those things shake out at this point.

Travis Wood: Dividend is very well covered at that 40% level, we're actively buying back shares still within that 40%.

Travis Wood: So we think that we can make adequate returns to shareholders here as we work through some of that deleveraging.

Travis Wood: Events that we have here.

Travis Wood: Okay, and sorry, I might have missed it. Do you do you think for that 40% to head higher? You know, you're kind of budgeting around 1.8 billion at the end of the year, just through organic free cash, if that number is Unknown Speaker Like where could you what's the debt target that you have kind of longer term with the organic cash flow and some of your fund with numbers on on proceeds on some of the asset sales where that could kind of do a 180 in terms of 60 40 on Return of Capital and Debt Reduction.

Travis Wood: Okay, and sorry, if I might've missed it do you think for that 40% to head higher.

Travis Wood: You kind of budgeting around $1 8 billion at the end of the year.

Travis Wood: Through organic free cash of that numbers.

Travis Wood: Like where could you whats the debt target that you have kind of a longer term with the organic cash flow and some of your fun with numbers on proceeds on some of the asset sales where that could kind of do a 180 in terms of 60 40 on.

Travis Wood: Return of capital and debt reduction.

Lars Glemser: Yeah, I think Travis, if you look, yeah, if you look at where we were pre the Westbrook acquisition, we were sort of around one times a little bit sub one times leverage. We were comfortable with the 50 50. While at that leverage level, I don't think that's a bad data point or benchmark to think about in terms of where we would look to increase from the 40% Okay. Okay.

Travis Wood: I think Travis if you look yes, if you look at where we were pre the Westbrook acquisition, we were sort of around one times, a little bit sub one times leverage.

We were comfortable with the 50 50.

Travis Wood: That leverage level I don't think Thats, a bad data point or benchmark to think about in terms of where we would look to increase from the 40%.

Travis Wood: Yeah, that's perfect. Thanks, Lars. That's all. That's all for me. Thanks, Travis.

Travis Wood: Okay. Okay.

Speaker Change: Yeah, that's perfect. Thanks, Lars that's all that's all from me.

Travis Wood: Service.

Konstantin: There are no further questions over the phone lines at this time.

Speaker Change: There are no further questions over the phone lines at this time, we will now move over to Mr. Kyle Preston with additional questions.

Kyle Preston: We will now move over to Mr. Kyle Preston with additional questions. Yes, thank you, operator. So we had a number of questions come through our investor relations inbox here. I'll sort of try to categorize them into a few.

Kyle Preston: Yes. Thank you operator, so we had a number of questions comps for our Investor Relations Inbox here, all sort of trying to categorize them into a few.

Kyle Preston: First one here is, can you please provide some insight into the longer term development potential and timeline of your Germany deep gas program? I can get this one kicked off and then ask Darcy to add more color, but... We've talked before about the number of prospects, that's called the number of structures that we see, and that's 9 that the team's identified so far. The exciting thing about these structures we drill, they're often multi-mill structures, and we see that with Bissell Forest, where we drilled a well, an albeit a well that can do net toss over 40 BCF recoverable.

Kyle Preston: First one here is can you. Please provide some insight into the longer term development potential and timeline of your Germany deep gas program.

Kyle Preston: I can get this all kicked off the.

Kyle Preston: <unk> to add more color, but.

Kyle Preston: Okay.

Kyle Preston: We've talked before about the number of prospects has caused the number of structures that we see and that's that's nine but the teams identified so far and the exciting thing about these structures can we drill are often multiple structures and we see that with vis a horse, where we drilled a well and albeit a well that can do net to us over 40 Bcf.

Kyle Preston: Jeff recoverable.

Dion Hatcher: We see another 6 locations on that. As we make our way down the exploration program, or to Darcy's point, adding development locations as we go. Long-winded way of saying, with success, there's upwards of 30 locations, and that would provide a very, very, very long runway for drilling. Where we are today, we're excited after 2 wells that we've been able to add meaningful recovery. We've added 36Bs for the first 2 wells on average. That's well within our bucket MCF type target. What all that means is we can comfortably more than double Germany's production. I made a comment on the script there that we think we can double our 2P reserves that we've got booked in Europe.

Kyle Preston: We see another six locations on that and so as we make our way down the exploration program were to <unk> point, adding development locations as we go so long winded way of saying with success. There is upwards of 30 locations.

Kyle Preston: That would provide a very very very long runway for drilling.

Kyle Preston: Where we are today, we're excited after two wells that we've been able to add meaningful cut.

Kyle Preston: <unk> I mean, we've added 36 bps for the first two wells on average and so that's well within our bucket Mcf type target.

Kyle Preston: So what all that means is we can I think comfortably more than double Germany's production and I made a call in the coming out in the script. There that we think we can double our <unk> reserves that we've got booked in Europe as you start to add up the numbers associated with these wells I think it becomes very meaningful as we drilled two to three wells per year. So if we can double our production that we can double our reserves in euro.

Darcy Kerwin: As you start to add up the numbers associated with these wells, I think it becomes very meaningful as we drill 2-3 wells per year. If we can double our production and double our reserves in Europe, we're going to be pretty happy with that. It's early days, but the first couple of wells are pointing to a pretty promising outlook. Darcy, anything I missed there on the overview? I don't think so. You talked about the number of prospects we have initially, and then what that translates into in a success case of over 30 locations that we could drill at a pace that we might adopt as we look forward.

Speaker Change: However, it would be pretty pretty happy with that and it's early days, but the first couple of wells are pointing to a pretty pretty polymers being able to look but three darcy anything I missed there on the overview I don't think so as that you talked about the number of prospects. We have initially and then what that translates into in our success cases.

Kyle Preston: We're 30 locations that we could drill it.

Speaker Change: At a pace that we might do.

Speaker Change: So we might adopt as we look forward and maybe remind everyone. We got into these prospects by farming into land in Germany, and there is other CRISPR.

Darcy Kerwin: Maybe remind everyone we got into these prospects by farming into land in Germany, and there is other prospective land in Germany. We'll continue to look at that and look for additional.

Speaker Change: <unk> land in Germany, we will continue to look at that and look for additional opportunities to add here.

Dion Hatcher: Deep Gas Portfolio Thanks, Dion Darcy.

Speaker Change: Deep gas portfolio there at some point, we've got 700000 net acres of undeveloped land and we're currently focused on a portion of that alright.

Speaker Change: Alright, Thanks, Dion Darcy second question here, what is the potential impact from the U S tariffs on Canadian energy and and do your current does your current hedge book protects you from that.

Lars Glemser: Second question here, what is the potential impact from the US tariffs on Canadian energy? And do you and do your current does your current hedge book protect you from? Yeah, no, thanks for the question.

Speaker Change: No. Thanks for the question and certainly topical or maybe just zoom out a little bit before addressing the tariff specifically, but I think our industry is defined by cycles some of them driven by commodity prices some of them driven by political events. So I think over the 31 years that we've been operating we placed a lot of.

Lars Glemser: And certainly topical, maybe just zoom out a little bit before addressing the terrace specifically. But you know, I think our industry is defined by cycles, some of them driven by commodity prices, some of them driven by political events. So like over the 31 years that we've been operating, we placed a lot of value on diversification and operational scale. From a diversification perspective, you know, over half of our revenues for 2025 are coming from outside North America or outside Canada. And so that that becomes an insulating factor. And then operational scale, I think you're starting to see a shift there, we've got a very material position onshore Europe, that provides the majority of that international revenue stream that I referenced.

<unk> diversification and operational scale from a diversification perspective.

Speaker Change: Over half of our revenues for 2025 are coming from outside North America or outside Canada, and so that becomes an insulating factor and then operational scale I think youre starting to see a shift there we've got a very material position onshore Europe that provides the majority of that international revenue stream that.

Lars Glemser: And then you're starting to see an increase in the scale here in western Canada, you see that in our outlook for 2025. In terms of the reduction in our unit costs. As an example, our lifting and transportation costs in our liquids rich gas business is about a buck 75 in MCF, and generates a lot of liquids in addition to the gas. And so we're focused on those items, first and foremost, in terms of de-risking the business, kind of what that means when you sort of look at it through the lens of tariffs is, we're just not talking about a material impact to the cash flows of a million.

Speaker Change: I referenced and then Youre starting to see an increase in the scale here in Western Canada, you see that in our outlook for 2025 in terms of the reduction in our unit cost.

Speaker Change: As an example, our lifting and transportation costs in our liquids rich gas business is about a buck 75, an mcf and generates a lot of liquids. In addition to the gas and so we're focused on those items first and foremost in terms of de risking the business.

Speaker Change: What that means when you.

Speaker Change: Sort of look at it through the lens of tariffs is we're just not talking about a material impact to the cash flows of Vermillion and so we're pretty confident around that in terms of the way that the tariffs are framed right now in terms of hedging I think once you derisk the business from an operational perspective through diversification operational scale.

Lars Glemser: And so we're pretty confident around that in terms of the way that the tariffs are framed right now. In terms of hedging, you know, I think once you de-risk the business from an operational perspective, through diversification, operational scale, financial hedging does play a role as well. We're just under 40% hedged for 2025. We think fairly strong prices here as we go through a deleveraging process here in the next couple quarters, we're in around 20% hedged for 2026. And so expect us to be in that 25 to 50% range. And that does help absorb some of the noise out there that's been driven by tariffs and in other events as well.

Speaker Change: Financial hedging does play a role as well.

Speaker Change: We're just under 40% hedged for 2025, we think fairly strong prices here as we go through a deleveraging process here in the next.

Speaker Change: A couple of quarters.

Speaker Change: We're in or around 20% hedged for 2026, and so expect us to be in that 25% to 50% range and that does help absorb some of the noise out there thats been driven by tariffs and other events as well.

Lars Glemser: Thank you, Lars.

Speaker Change: Thank you Larry next question, we have here.

Dion Hatcher: Next question we have here is, your presentation says you are now a global gas company. Why do you, why does your stock seem to trade or be so impacted by oil price movements? And why does, why do, why do you have a, why do you not have a gas company? I can take that one. First of all, it's hard to explain the day-to-day movements in the stock, so I'll move on from that. I think it's really a timing issue. We just closed the Westbrook acquisition here a couple of weeks ago. We're talking on the call today about the success in Germany, about our first well coming on here very quickly, better ability to bottleneck those volumes.

Speaker Change: Your presentation says you are now a global gas company why do you why does your stock seem to trade or be so impacted by oil price movements and why it is why did why do you have a slightly you not have a gas company multiple.

Thanks.

Speaker Change: You bet.

Speaker Change: First of all sorry to explaining the day to day movements in the stock. So I will move on from that but yes. If you look at it I think it's really a timing issue. We just close the Westbrook acquisition here a couple of weeks ago.

We're talking to on the call today about the success in Germany, but our first well coming on here very quickly that our ability to debottleneck of those volumes.

Dion Hatcher: MICA, again, we're over half invested on our infrastructure, and we're getting to a point where we're going to build up to that target rate, and that asset's going to be generating a ton of free cash flow. I think it's timing. This shift to gas-weighted company is really hot off the press, but if you look at the runway ahead of us with Westbrook, the depth and quality of inventory there for 15 plus years to keep that, the MICA asset that, again, we're comfortable in increasingly optimising that asset to get at $28,000, and then Germany. Again, we've got a long runway.

Speaker Change: Mike again, we're over half invested on our infrastructure and we're getting to a point, where we're going to build up to that target rate and that assets can be generating a ton of free cash flow. So I think it's timing this shift to gas weighted company is really hot off the press, but if you look at the the runway ahead of us with west Brexit the depth and quality of inventory.

Speaker Change: Tory there 15, plus years to keep that Mike asset that again were comfortable and increasingly optimizing that asset to get at 28000 and that Germany again, we've talked a lot about it but we see a long runway.

Dion Hatcher: And then finally, the nuance about our business is we have direct exposure and Lars talked about this on the call, but we have direct exposure to these premium prices without the need to have the risk associated with these long term contracts that span decades and large volumes. We've got short cycle exposure to a commodity in Europe that's extremely valuable, and we're able to benefit from that today with gas prices in Europe about 10 times higher. We think the combination of the top realized gas price with our structural low declines, with flexibility capital allocation, and the new part as we've hydrated the portfolio is the long runway that we've got ahead of us with Westbrook, the Basin, with the Monteney, and with Germany.

Speaker Change: And then finally, the nuance about our business is we have direct exposure and <unk> talked with us on the call, but we have direct exposure to these premium prices without the need to have the risk associated with these long term contracts that span decades, and large volumes and so we've got short cycle exposure to a commodity in Europe. That's.

Speaker Change: Really valuable and were able to benefit from that today with gas prices in Europe, Although 10 times higher so do we think the combination of the.

Speaker Change: Top realized gas price with our structural low declines with flexibility capital location and the new part as we've high graded the portfolio is the long runway that we've got ahead of us with west break the basin with the Montney and with Germany. We think it's a good setup and we think the time hopefully that'll be recognized in the valuation of the company.

Dion Hatcher: We think it's a good setup, and we think with time, hopefully, that'll be recognized in the evaluation of the company.

Kyle Preston: Thank you, Dionne. So we have no more questions here.

Speaker Change: Alright, Thank you Dion.

Speaker Change: We have no more questions here, so with that I will pass it back to the answer for your closing remarks. Thanks, Karl I was just like to thank everyone again for participating in our Q4 results conference call joined the rest of your day.

Dion Hatcher: So with that, I will pass it back to Dionne for your closing remarks. Thanks, Kyle. I would just like to thank everyone again for participating in our Q4 results and a conference call.

Konstantin: Enjoy the rest of your day.

Konstantin: This concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.