Vermilion Energy(US:VET) Prnewswireยท2024-12-23 12:00Core Viewpoint - The acquisition of Westbrick Energy Ltd. by Vermilion Energy Inc. is a strategic move aimed at enhancing operational scale and improving full-cycle margins in the liquids-rich Deep Basin, with expected production growth and significant free cash flow generation [30][41]. Group 1: Acquisition Details - Vermilion will acquire Westbrick for a total consideration of $1.075 billion, expected to close in Q1 2025 [41]. - The acquisition adds approximately 50,000 boe/d of stable production and around 1.1 million (770,000 net) acres of land, with over 700 identified drilling locations [30][31]. - The acquisition is expected to yield operational and financial synergies, including capital efficiency improvements and infrastructure optimization [31]. Group 2: Production and Financial Outlook - Upon closing, Vermilion's production is anticipated to be in the range of 126,000 to 133,000 boe/d, with over 80% derived from its global gas franchise [42]. - The company forecasts pro forma 2025 FFO of $1.2 billion ($7.80 per share) and FCF of approximately $450 million ($2.90 per share) [44]. - The acquisition is projected to generate more than $110 million of annual free cash flow based on forward commodity prices [32]. Group 3: Reserves and Inventory - Proved developed producing (PDP) reserves are estimated at 92 million boe (75% gas), while proved plus probable (2P) reserves are estimated at 256 million boe (74% gas) [35]. - The acquisition price per boe of PDP reserves is $11.70, indicating a recycle ratio of 1.3 times based on 2025 forecasted operating netbacks [35]. - The acquisition enhances Vermilion's drilling inventory, adding over 700 locations with half-cycle internal rates of return (IRRs) ranging from 40% to over 100% [34]. Group 4: Debt and Capital Management - Vermilion has reduced its debt by over $1 billion since 2020, creating capacity for this strategic acquisition [37]. - The acquisition will be funded through a combination of a $1.35 billion revolving credit facility and new term loans, with expected net debt of $2.0 billion post-acquisition [39]. - The company aims to reduce its net debt to fund flows from operations (FFO) ratio to 1.0 times or less through disciplined capital allocation and non-core asset divestments [39].