Q4 2024 Vermilion Energy Inc Earnings Call
Konstantin: Good morning, my name is Constantine, and I will be your conference operator today.
Konstantin: At this time, I would like to welcome everyone to the Vermilion Energy 4th quarter, 2024 conference call.
Konstantin: All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Konstantin: If you would like to ask a question during this time, simply press tar, then the number one on your telephone keypad.
Speaker Change: If you'd like to withdraw your question, please press start, too. Thank you. I will now hand a call over to Mr. Dion Hatcher, President and CEO . You may now begin your conference.
Thank you, Christine.
Speaker Change: Book of morning, ladies and gentlemen, thank you for joining us. I'm Dion Hatcher, President, CEO of Vermilion Energy
with me today, our Lars Glemser, Vice President, CFO Paul,
Speaker Change: Darcy Kerwin, Vice-President International, HSC, Brandon Quaid, Vice-President North America.
Speaker Change: and Kyle Preston, Vice President and 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 under Invest With Us and events and presentations.
Speaker Change: Please refer to advisory and for the statements at the end of the presentation.
Speaker Change: Describes of Forward Looking Information, Nogat Measures, Oil and Gas firms use today and it lines the risk factors and assumptions relevant to this discussion.
Speaker Change: Vermilion delivered a strong operational financial results in 2024. Production average 84,543 views today, which was above the midpoint of our original guides and represents annual production for shared roads at 4%.
Speaker Change: Our international production increased 12% every year, reflecting strong operation of runtimes in Australia, and the mid-year start-up of the gas plant on the SA-10 block in Croatia.
Speaker Change: Production was down 5% year-over-year. This is reflecting the full-year impact from the 5500 U.E. per day investment in Southeast Saskatchewan, that was completed in 2023. Now that was partially offset, but a growth from a mountainy asset following the start-up of the new battery in
Speaker Change: We generated $1.2 billion or $7.63 per share of Fundflow at $580.3 million or $3.69 per share of free cash flow, both representing a 9% increase over 2023 on a per share basis.
Speaker Change: A success for the executive at 623 million E&D capital program within budget, capital program included significant investments in new growth projects in Germany, Croatia, and the BC Montany, which will all contribute strong free cash flow in future years.
Speaker Change: We've returned 216 million or approximately 10% of a market cap to our shareholder's in 2024, that comprised of 75 million dividends and 141 million of share by Vax.
Speaker Change: In December , we announced a 8% increase to our poorly-divided and effective Q1 2025.
Speaker Change: This represents a 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 point E times or the lowest ratio in over a decade.
Speaker Change: 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
Speaker Change: Primary Due to Extensions and Improve Recovery on the Micah Montiasa.
Speaker Change: We added 26 million buoys of PDP reserves, 36 million buoys of 2P reserves, and an average FDNA costs, including future development costs of $22.81 per PDP buoy and $15.77
Speaker Change: for 2PBE. Now this results in a recycle ratio of 1.6 times on a PDP basis and 2.3 times on a 2P basis.
Speaker Change: The after-tax net-prisoned value of our PDP reserves discounted at 10% is 2.8 billion And the after-tax net-prisoned value of our 2P reserves discounted at 10% is 5.2 billion. That is over $27 per share after deducting year-end net debt.
Speaker Change: We generated 263 million of fund polls at $1.70 per share, and 62 million of free cash, of which 36 million was returned to shareholders by the dividend and share buybacks. The ND capital increased in Q4, relative to Q3, as drilling activity picked up in Germany and Canada.
Speaker Change: Net debt increased slightly due to the strawberry U.S. dollar and the full repayment of the Monteney battery lease. This provides immediate lease and interest savings as well as increasing your excess free cash roll that's available for shareholder returns in 2025 and beyond.
Speaker Change: As I mentioned, drilling at Fleesh Activity picked up in Q4. In your primary focus was on the German DECAS exploration program where we progress facility construction and tie-in operations on their roster, Hyde Well, and completed testing operations on the VISO course well.
including testing on a second-zone subsequent to the border.
Speaker Change: We commence drilling in the third deep gas exploration oil in Germany, 5 and more, during Q4. I include drilling it in Q1, I will provide more detail on the successful German exploration program in the following slides.
Speaker Change: We're also very active in North America during the 4th quarter, and Tanner, that we drilled six Montany-Libbucharist gas wells, including five wells on the new 8-4-PADMBC, and one land retention well in Alberta. The team continues to make progress towards achieving our 9th to 9.5 million dollar decent cost turn.
Speaker Change: In the deep basin, we drilled, completed, and brought out production five liquids-rich gas wells. It's a scatter when we drilled and completed six wells and brought out production seven oil wells. In the US, we participated in the drilling completions of five rows or 0.6 net non-out oil wells.
Speaker Change: In addition to executing a very active program in Canada, our team spent the better part of Q4, valuing the Westburg Acquisition, we were successful on and announced on December 23rd.
Speaker Change: We were very, very excited about the results for a 2024 German D-Gas Explorers Program. We had made significant gas discovery on our second gas well.
Liza Moore, Disahorse
Speaker Change: 41 million per day, with flowing wallet pressures of 6200 psi
Speaker Change: We've got an estimated EOR of 68 BCF or 43 BCF net. As we announce in late December , this first test, the first so tested at a restricted rate of 21 million a day of gas with a flowing well had pressure of 6200 psi.
Speaker Change: Substant to your enemy test of the second zone in this well, which flow tested at a restrict grade of 29 a day, but the similar pressure of 6200 psi.
Speaker Change: We expect to bring the first well on production of the first half of 26 and are advancing options to do bottleneck or take away path capacity in the second half of 27, sort of first half of 27, given the very strong deliverability of this well.
Speaker Change: with successful development of these public locations as well as the additional projects we've identified across our land base. We see that potential to double our current European 2PAT 2P gas reserves.
Speaker Change: Substant to year in, we also include drilling operations on the rise and more gas exploration well, which we are 100% working interests, and we discovered multiple hydrocarbon bearing zones. This would mark our third discovery in Germany.
The well is currently in the process to be in tested.
Speaker Change: The first well undergerman program, Oscar Hyde, which is 100% working interest, was drilled in the first half of 24 and tested at a restricted rate of 1790 day of gas, with a flowing wellhead pressure of 4600 psi.
Speaker Change: In aggregate, the Osterhide and Visal Horse Wells tested at a combined rate of 56 million per day. This is equivalent to 50% of her million's current European gas production.
Speaker Change: It is early days in the development of this long-life, high-margin asset that is expected to add meaningful, free cash flow to meet yours ahead.
Speaker Change: Last week, we were very pleased to announce the closing of the West Break acquisition.
Speaker Change: The strategic acquisition represents a significant step forward of Vermilion's North American hydrating initiative to increase operational scale and enhance full cycle margins in the deep basin.
Speaker Change: As a reminder, the acquisition adds 50,000 views a day of production and over 770,000 net acres of introduced land along with valuable infrastructure.
Speaker Change: We have identified over 700 net future drilling locations providing a robust inventory to keep production flat over 15 years while generating significant pre-cashable.
Speaker Change: As shown on the map on this slide, land and infrastructure is very complimentary to promote its legacy deep basin assets, which we expect to provide operational synergies and add further value over time.
Speaker Change: and we operate significant infrastructure in the deep basin, which we will leverage in developing these newly acquired locations. In addition, we were already a partner with Westburg on approximately 140 of these locations, which speaks both to the operational synergies as well as our knowledge on the asset.
Speaker Change: These newly acquired locations are competitive with Vermilion's existing debase and inventory, the path cycle returns ranging from 40% to over 100% based on third-party reserve engineering estimates [inaudible]
Speaker Change: We'll now like the handover to Lars, discuss her balance sheet and the leveraging plans along with her revised 2025 notebook.
Lars: Thank you, Dion. Vermilion has taken a prudent approach in balancing debt reduction, hydrating 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.
Lars: This prudent balance of capital allocation provided us the opportunity to complete the opportunistic acquisition of Westbrick with the balance sheet and minimal share issuance.
Lars: Over the past three years, we have completed over 2.1 billion dollars of acquisitions while continuing to reduce the share count and now have a plan to reduce our debt and leverage.
Lars: Subsequent to the announced acquisition of Westbrook, we issued US $400 million of a senior unsecured notes with a maturity date of April 2033 and an interest rate of 7 and a quarter percent.
Lars: This extends our weighted average maturity of our debt to over five years and results in over $1 billion
Lars: With the Westberg acquisition now closed, Vermilion has net debt of approximately $2.1 million today and anticipates about 200 to $300 million of organic de-leveraging in 2025 based on our current forecast, assuming no divestments.
Lars: This leaves us with ample liquidity of approximately a billion dollars.
Lars: As part of the Westburg Acquisition, we also launched a process to divest non-core assets as another means to accelerate the leveraging while directing 60% of excess free cash flow to the balance sheet.
Lars: As mentioned, our known core asset disposition program has been formally launched for our South East Saskatchewan and Wyoming assets.
The Saskatchewan assets include approximately 10,000 barrels a day.
Lars: 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 Niabra and the Parkman.
Lars: 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. Thank you.
Lars: Going back to 2022, Vermilion has taken a conservative effort to build operational scale where we have a competitive advantage by increasing our ownership in the Irish Corps project, adding a material position in the Micah Monti oil window, and making Vermilion one of the largest operators in the prolific debason. [inaudible]
Lars: This has been complemented with organic investment into our onshore European gas portfolio, most recently in Germany and Croatia.
Lars: 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 decades.
Lars: The benefit of this global exposure is stronger realized prices than any of our peers, even when powering in various marketing and diversification strategies.
Lars: 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.
Lars: 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.
Lars: Annual production is expected to range between 125 to 130,000 B.O.E.'s a day, with E&D capital expenditures of 730 to 760 million.
Lars: The revised capital program includes an additional 13 gross 12.3 net wells to be drilled on the Westburg assets, bringing the total deep basin well count to 28 gross, 24.9 net wells for 2025.
Lars: The forecasted 50% increase in 2025 production coupled with efficient operations from an increased position in the D-base and is seen in our 2025 financial guidance, which includes a substantial reduction in our unit operating and DNA costs.
Lars: We continue to monitor the terror situation between the U.S. and Canada, which includes a 10% and a tariff on Canadian energy exports.
Lars: 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.
Lars: Based on the forward commodity prices, we forecast 2025 FCF of $400 million.
Lars: 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-mongue battery lease obligation in Q4 2024 which had an interest cost well in excess of our most recent dead issuance.
Lars: 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.
Lars: As Deon mentioned, we now start fourth consecutive dividend increase effective for Q-1 2025.
Lars: At 13 cents 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.
Lars: 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.
Lars: The variable component of Shareholder returns will continue to be allocated towards Share Buybacks.
Since initiating the ShareBuyback program in July 2022
Lars: With that, I will now pass it back to Dion. Thank you, Lars.
These are exciting times at Vermilion
Dion Hatcher: North America, we're focused on the integration of Westbrook and operational scale in the deep basin and the continued development of Romaniacid.
Dion Hatcher: We are very pleased to be positioned with a long life, liquid-rich North American gas portfolio.
Dion Hatcher: In addition, the potential U.S. and SaaS events will accelerate for debt reduction while also improving our full cycle margins.
Dion Hatcher: In Europe , we will bring out production the first of our German deep gas exploration wells by planning for future activity, including the development, the large reservoir structure that we successfully discovered. That's our largest discovery in over a decade.
Dion Hatcher: These investments, along with their share of buybacks are expected at meaningful free cash will per share in the upcoming years. That concludes our prepared remarks. With that, we'd like to open it up for questions.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Dion Hatcher: Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process, please press star followed by the number two.
Speaker Change: If you are using a speaker phone, please make sure to lift your handset before pressing any keys.
Speaker Change: Your first question comes from the line of Greg Pardy from RBC Capital Markets. Please go ahead.
Speaker Change: Hi, Justin Hoellon for Greg. Thanks for taking my questions. Just the first one for me on the...
Speaker Change: The German Gas Site. It's a pretty sizable discovery 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 in any timing that you could give around that.
Speaker Change: Oh, thanks for that. So just to clarify, you have timing of the an on production dates. So I'll pass a little bit of Darcy Kerwin. He can walk you through that.
Darcy Kerr: Yeah, thanks, Jeff Darcy here, on the first discovery we made at Asahida.
Darcy Kerr: We are currently progressing construction of the onsite gas plant there in the tie-in to the pipeline system. We do expect first production to be on in Q2 2025.
Darcy Kerr: We will be initially rate restricted there, kind of in the area of three to five million cubic feet just due to some downstream capacity constraints, some 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 other production drops off.
for the second while at Vistalsource. [inaudible]
where we tested two zones.
Darcy Kerr: Together in excess of 40 million standard cubic feet a day.
Darcy Kerr: 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.
Darcy Kerr: here in parallel that will take us in a first stage up to about 17 and a half million cubic fee per day in the second stage up to 35. We would expect that those deboutal lacking activities would incur early 2027.
Darcy Kerr: Thanks Darcy, I mean we're excited the size of the URs, we talked about here.
Dion Hatcher: As you're missing on the call, too, it's the structure itself. We talked with a while. We're trying to 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 with that back to you.
Dion Hatcher: Now that's great, thanks for all the detail there. 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 out in that process? Thanks.
Speaker Change: You bet. Lars touched on it on the script there. I can add a little more color, but you know, the formal process for SAS and US is well advanced. You know, we're in the formal process where teasers went out weeks ago and management presentations are around going.
Speaker Change: excited to see how our potential bidders are going to try to step up to meet those. So, too early to pin a date on it, but we are well advanced in those processes as of today.
Thank you very much. I'll turn it back
Great. Thank you.
Speaker Change: Your next question is from the line of Amir Arif from ATB Capital, please go ahead [inaudible]
Daris: I can get a kickoff here and then all there's a big feel free to add any color and so first of all thanks for the question, you know we've messaged [inaudible]
Daris: No, not only two wells per year. If you think about it last year, we actually drilled three wells as we brought the third well forward and we finished drilling down to Q1. We've got another follow up gas well plant for this year.
Daris: And then our work right now is twofold. You know, the exciting thing is that with this this of course structure being so large, you know, we see, you know, basically development locations there that we're advancing and then in parallel.
Daris: We've also got the other six plus prospects that the teams identified to mature. So, you know, quick answer would be two wells a year. 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? [inaudible]
Daris: Got it. And then just a question on that second successful well be what can you just remind us what was a total capital on that well and just what development wells will cost.
and we're 64% working interest in that particular well.
And that that excludes.
Yeah, we might be able to optimize gatherings [inaudible]
Daris: Okay. Yeah, so these are our expensive wealth, but do you think about it on an F&D basis, given the cost structure and the size of the gas that we're discovering? Do I as reference on the note that, you know, bucked about 50, we would have.
Daris: B-Bats, significantly on the on the visual horse well, but over the program, you know, it's confirming our ability to deliver on that.
Speaker Change: Sounds good. 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 anything. Thank you.
different in terms of going forward on those assets.
Speaker Change: I'll get it kicked off and I can pass over to Randy if you want to have more color Randy, but we did a lot of work on that of course as you would imagine
Randy: You know, the 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 [inaudible]
Randy: I'm saying that our assets are a little more oilier, we have the Cardium Development and some other more oily development in our deep basin so net net when you look at the assets you're in that 650 to 750 range.
Randy: 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 of those are kind of the unit cost that we've seen to date. Brandy, anything to add to that? [inaudible]
Randy: No, Laique said I think, you know, with the large portion of the infrastructure now being interconnected, we'll work towards optimized production in our marketing and ultimately reduce our area operating costs.
Thanks, Renick.
Sounds great, thanks [inaudible]
Thanks for being here.
Speaker Change: Your last question comes from the line of Travis Wood from National Back Financial. Please go ahead.
Speaker Change: Yeah, thanks guys. Have a couple questions. On the Germany just to round that out, have the risk profile? As you think about budgeting, future exploration walls, have you changed that at all? Given the recent success in terms of percentage of success, however you guys want to think about that?
Speaker Change: Thanks, Travis. We're going to pass it back to Darcy again.
Speaker Change: Yeah, thanks, Travis. Yeah, certainly it's a success on these first wells as they increase 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.
Speaker Change: Kent, that's a good color. 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 B.O.E. production.
Speaker Change: 30-oh thanks to Travis, we'll pass it back to Randy for that one.
Randy: Yeah, thanks, Travis. So I think volumes were coming in or out 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 had spoke about in the script earlier, we expect our annualized volumes to remain at that 50,000 barrels a day to in line with where we had our evaluation and expectations.
Speaker Change: Okay, perfect. And then the couple, I mean, it's only a couple of weeks.
Speaker Change: In terms of the delay to closing, was that just kind of crossing tees and dotting eyes, or was there anything kind of last minute on the negotiating table that kind of delayed it a couple weeks?
Speaker Change: 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 the execution and receipt of required approvals adjusted the date by two weeks, so nothing too concerning.
Speaker Change: Proceeds for the asset sales, but do you have a debt number 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: Yeah, no thanks, 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, too, is very minimal share issuance with the acquisition of Westburg. And so
Speaker Change: That's where we got comfortable taking the 50-50 allocation to 40 percent in terms of return to share holders just in terms of, we think we've made really good progress reducing the share count here over the last three years.
Speaker Change: I think at this point we'd like to see how the dispositions shake out.
Speaker Change: As we mentioned in the script, we are going to have retention values on these assets as well, so it's not a fire sale. Let's see how the process unfolds.
Speaker Change: Let's continue to direct 60% of that ESCF to the balance sheet.
Speaker Change: At this point, the dividend is very well covered at that 40% level. We're actively buying back shares still within that 40%.
Speaker Change: So we think that we can make adequate returns shareholders here as we work through some of the the leveraging events that we have here.
Speaker Change: Okay, and sorry if I might have missed it. 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 numbers.
Speaker Change: What's the debt target that you have kind of 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
Return of Capital and debt reduction.
Speaker Change: 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.
Speaker Change: 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% [inaudible]
Speaker Change: Okay. Yeah, that's perfect. Thanks, Lars. That's all for me.
It's travesty. It's travesty.
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: Yes, but thank you all, Arir. 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. First one here is, can you please provide some insight into the longer term development potential and timeline of your Germany deep gas program?
Darcy Kerr: I can get this one kicked off, and then fast-bearer seat to add more color, but...
Darcy Kerr: Woodfield A. Well, and I'll be at a well that can do net toss over 40 BCF for coverable, so we see another six locations on that and so as we make our way down the expiration program, we're to Darcy's point adding developmental locations as we go. Well, let's hope.
Darcy Kerr: Long-waited way at saying, you know, with success, there's upwards of 30 locations and that would provide a very, very, very long runway for drilling.
Darcy Kerr: So for where we are today, we're excited after two wells that we've been able to add meaningful recovery. I mean, we've added 36 Bs for the first two wells on average. And so that's well within our bucket MCF type target. Thank you very much.
Darcy Kerr: And so what all that means is we can, I think, comfortably more than double Germany's production. And I made a call on the common on the script there that we think we can double our 2P reserves that we've got booked in Europe .
Darcy Kerr: as she started to add up the numbers associated with these wells, I think it becomes very meaningful as we drill two to three wells per year or so.
Darcy Kerr: If we can double our production, we can double our reserves in Europe . We're going to be pretty happy with that and it's early days, but the first couple of wells are pointing to a pretty, pretty palm or single look, but there's anything I missed there on the...
Speaker Change: Overview. Yeah, 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 over over three locations that we could drill it at a base that we might do.
Darcy Kerr: and we might adopt as we look forward and maybe remind everyone we got into these prospects by farming into land and Germany and there is other prospective land and Germany will continue to look at that and then look for additional opportunities to add to our...
Darcy Kerr: Deep Gas Portfolio there. Yeah, it's been pulling. We've got 700,000 ad acres of undeveloped land and we're currently focused on the portion of that. Thanks.
Speaker Change: All right, thanks, Diane Darcy. Second question here, what is the potential impact from the US tariffs on Canadian energy? And do your current, does your current hedge book protect you from that?
Speaker Change: Yeah, no, thanks for the question and certainly topical, or maybe just zoom out a little bit before addressing the the terrors specifically, but you know I think are...
Speaker Change: 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
Speaker Change: 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.
Speaker Change: and then you're starting to see an increase in the scale here in Western Canada. You see that in our outlook for 2025.
Speaker Change: in terms of the reduction in our unit costs. As an example, our lifting and transportation costs in our liquid rich gas business is about $1.75 an MCF.
Speaker Change: 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 the risking the business.
kind of 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 of Vermilion and so.
Speaker Change: We're pretty confident around that in terms of the way that the terrorists are freeing right now.
Speaker Change: In terms of hedging, I think once you de-risk the business from an operational perspective through diversification, operational scale
Financial Hedging does play a role as well.
Speaker Change: We're just under 40% hedged for 2025. We think a fairly strong price is here as we go through at the leveraging process here in the next couple quarters.
Speaker Change: 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 other events as well.
Speaker Change: Thank you, Lars. Next question we have here is, your presentation says you are now a global gas company. Why does your stock seem to trade or be so impacted by oil price movements and why do you not have a gas company multiple?
Speaker Change: Thanks, Kyle, I can do fat one. It's personal, it's hard to explain the day-to-day movements in the stock, so I'll move on from that. But yeah, if you look at it's, I think it's really a timing issue, we...
Speaker Change: 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 do bottleneck of those volumes. Thank you very much.
Speaker Change: Mike again, we're over half invested on our infrastructure and we're going 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 a little so I think it's timing you know this this shift to gas weighted company is really hot off the press but if you look at the. [inaudible]
Speaker Change: The runway ahead of us with the Westbrook, the depth and quality of inventory there for 15 plus years to keep that the Micah asset that again were comfortable and increasingly optimizing that asset to get at 28,000 and then Germany. Again, we've talked a lot about it, but we see a long runway.
Speaker Change: And then finally, the nuance about our business is we have direct exposure and Lars 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 at span decade and large volumes.
Speaker Change: So we've got short cycle exposure to 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 so we think the combination of the
Dion Hatcher: All right. Thank you, Dion. So we have no more questions here. So with that, I will pass it back to Dion for your closing remarks. Thanks, Kyle. I was just like I think everyone again for participating in our Q4 results at a conference call. Enjoy the rest of your day.
Speaker Change: This concludes the conference call. Thank you very much for your participation. You may now disconnect.