Vermilion Energy(US:VET)2023-11-02 13:39Production and Operations - Production averaged 82,727 boe/d in Q3 2023, at the top end of guidance, with Q4 2023 guidance set at 86,000 to 89,000 boe/d[31]. - North American production averaged 56,758 boe/d in Q3 2023, a 5% increase from the prior quarter, driven by recovery from fire-related downtime[36]. - International production averaged 25,969 boe/d in Q3 2023, an 11% decrease primarily due to a planned turnaround at the Corrib facility[41]. - The company commenced drilling on its first exploration gas well in Germany as part of a two-well program, with site preparation for a gas plant in Croatia underway[33]. - The Mica Montney BC battery construction began in August 2023, with expected operational status by mid-2024, supporting future growth[39]. - Total production in Q3 2023 was 82,727 boe/d, a 2% decrease from 84,237 boe/d in Q3 2022, with crude oil and condensate production down 16%[75]. - The Wandoo facility in Australia resumed production in early September 2023, with forecasts of approximately 4,000 bbls/d in Q4 2023[111]. - The Corrib facility in Ireland is expected to produce approximately 10,000 boe/d in Q4 2023 following a successful turnaround[111]. - Crude oil and condensate production in North America averaged 20,883 bbls/d in Q3 2023, compared to 19,778 bbls/d in Q2 2023, reflecting a 5.6% increase[203]. - International crude oil and condensate production was 10,534 bbls/d in Q3 2023, up from 9,564 bbls/d in Q2 2023, marking a 10.1% increase[202]. Financial Performance - Fund flows from operations (FFO) reached $270 million in Q3 2023, with free cash flow (FCF) of $144 million, an 80% increase from the prior quarter[32]. - Q3 2023 sales reached $475.532 million, a decrease from $964.678 million in Q3 2022, with a sales per barrel of $62.92 compared to $127.39[49]. - Fund flows from operations for Q3 2023 were $270.218 million, down from $507.876 million in Q3 2022, with a fund flow per barrel of $35.76[51]. - Free cash flow for Q3 2023 was $144.579 million, significantly lower than $323.861 million in Q3 2022[50]. - Net earnings for Q3 2023 were $57.309 million, compared to $271.079 million in Q3 2022[49]. - Dividends declared in Q3 2023 totaled $16.367 million, an increase from $13.031 million in Q3 2022, representing 58% of fund flows from operations[55]. - Cash flows from operating activities decreased by $638.3 million to $680.7 million for the nine months ended September 30, 2023, compared to the prior year[88]. - For the nine months ended September 30, 2023, net earnings totaled $565.5 million, a decrease of 38% from $917.7 million in the same period in 2022, attributed to lower FFO and a loss from the sale of southeast Saskatchewan assets[87]. - The return on capital employed (ROCE) for the twelve months ended September 30, 2023, was 26%, down from 32% in the previous year[216]. Debt and Capital Management - Net debt decreased by 6% to $1.2 billion, resulting in a trailing net debt-to-FFO ratio of 1.2 times[32]. - The company is on track to achieve its debt target in Q1 2024 and plans to increase returns of capital to shareholders[35]. - Long-term debt decreased to $1.0 billion as of September 30, 2023, from $1.1 billion at the end of 2022, mainly due to repayments of $113.7 million[95]. - Net debt as of September 30, 2023, was $1.243 billion, a decrease from $1.345 billion at the end of 2022, with a net debt to trailing fund flows from operations ratio of 1.2[59]. - The ratio of net debt to four-quarter trailing fund flows from operations increased to 1.2 as of September 30, 2023, from 0.8 at the end of 2022, due to lower fund flows[95]. - The company revised its 2023 capital expenditure guidance to $590 million, up from the previous $570 million, reflecting accelerated Montney development[70]. - Capital expenditures for Q3 2023 were $125.639 million, down from $184.015 million in Q3 2022[53]. - Year-to-date capital expenditures reached $447.304 million, up 17% from $382.512 million in the same period of 2022[196]. Market Conditions and Pricing - Approximately 20% of the company's commodity exposure is to European gas, with hedges locking in 38% of 2024 European gas production at an average floor price of $33 per mmbtu[34]. - Crude oil prices decreased by 8% for WTI and 12% for Brent in Q3 2023 compared to Q3 2022, with Canadian dollar WTI averaging $110.33/bbl[96][98]. - European natural gas prices linked to NBP and TTF decreased by 67% and 81% respectively on a day-ahead basis year-over-year, reflecting lower demand and high storage levels[99]. - The average total production for Q3 2023 was 82,727 boe/d, compared to 85,450 boe/d in Q4 2022, indicating a decline of 3.0%[202]. - The average natural gas sales price was $6.32 per mcf in Q3/23, a decrease from $7.37 in Q2/23, indicating market volatility[205]. Risk Management and Hedging - Vermilion has outstanding risk management positions with a total of 12,500 bbl of WTI sold for Q4 2023 at a price of $79.00[191]. - The company is actively managing its exposure to market fluctuations through a diversified portfolio of energy derivatives[192]. - The realized hedging gain for the total company in Q3 2023 was $9.74/boe, compared to a loss of $6.91/boe in Q3 2022, indicating a positive shift in hedging performance[188]. - Vermilion's strategy includes a focus on risk management through various derivatives and swaps, ensuring price stability in volatile markets[192]. Acquisitions and Investments - Acquisitions in Q3 2023 amounted to $5.238 million, compared to $6.220 million in Q3 2022[57]. - Vermilion acquired an additional 36.5% interest in the Corrib Natural Gas Project for $192.4 million, increasing its operated interest to 56.5% and making it the largest provider of domestic natural gas in Ireland[146]. - The company reported a total of $3,191 million in acquisitions net of cash acquired for YTD 2023, significantly lower than $506.715 million in YTD 2022[196]. Operational Efficiency and Cost Management - Operating expenses in North America decreased to $63.138 million in Q3 2023 from $73.583 million in Q3 2022, primarily due to lower maintenance and fuel costs[108]. - Operating expenses per boe were $(16.26) in Q3/23, down from $(17.91) in Q2/23, indicating better operational efficiency[205]. - The operating netback for Canada in Q3 2023 was $42.39/boe, down from $45.24/boe in Q3 2022, indicating a decrease of 1.85%[187]. Shareholder Returns - Vermilion purchased 0.6 million common shares under the normal course issuer bid (NCIB) for a total consideration of $11.6 million during Q3 2023[170]. - Vermilion's NCIB allows for the purchase of up to 16.31 million common shares, representing approximately 10% of outstanding shares, from July 12, 2023, to July 11, 2024[169].