Vermilion Energy (VET) Q2 2024 earnings summary

Executive summary

• Q2 2024 production averaged 84,974 boe/d, at the upper end of guidance, driven by early BC Montney battery startup and new Mica Montney wells, with year-over-year production up 2% (6% per share).

• Major operational milestones included the commissioning of the Mica Montney battery in BC and the SA-10 gas plant in Croatia, both on time and on budget.

• Shareholder returns totaled $66 million in Q2 2024 via $19 million in dividends and $47 million in share buybacks, representing 62% of excess free cash flow.

• Net debt reduced by $38 million to $907 million, achieving a net debt to trailing FFO ratio of 0.7x, the lowest in over a decade.

• Achieved 100% success rate in Croatia’s 2024 drilling program, with four new discoveries on the SA-7 block.

Financial highlights

• Q2 2024 fund flows from operations (FFO) were $236.7 million ($1.48 per share), and free cash flow (FCF) was $126.1 million, both down from Q1 2024 due to lower realized commodity hedge gains.

• Net loss of $82.4 million in Q2 2024, mainly due to unrealized derivative losses.

• Capital expenditures were $110.6 million in Q2 2024, down from $190.4 million in Q1 2024.

• Returned $66 million (62% of excess FCF) to shareholders in Q2 2024; $121 million (36% of excess FCF) year-to-date.

• Operating netback was $40.32/boe in Q2 2024.

Outlook and guidance

• Annual production guidance increased to 83,000–86,000 boe/d, with capital budget maintained at $600–$625 million.

• Q3 2024 production expected at 83,000–85,000 boe/d, factoring in planned maintenance, weather-related impacts, and Alberta gas curtailments.

• Q3 capital program includes bringing five new Montney wells online, a two-rig program in Alberta/Saskatchewan, and continued deep gas exploration in Germany.

• Approximately 39% of expected net-of-royalty production hedged for the remainder of 2024; 44% of European gas, 43% of crude oil, and 31% of North American gas volumes hedged.

• Anticipates new production growth in Mica and Croatia to offset planned downtime.