Vermilion Energy Inc. Common (Canada)

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vermilion Energy Q3 conference call. Please note that all lines have been placed on mute to prevent any background noise. Mr. Dion Hatcher, you may begin your conference.

Well, thank you, Sylvie. Good morning, ladies and gentlemen. Thank you for joining us. I'm Dion Hatcher, President and CEO of Vermilion Energy. With me today are Lars Glemster, Vice President and CFO of Darcy Kerwin, Vice President International and HSE. Bryce Kremnicka, Vice President North America. Jensen Tan, Vice President Business Development. Kyle Preston, Vice President of Investor Relations. We'll be referencing a PowerPoint presentation to discuss our Q3 23 results. Presentation can be found on our website under invest with us and events and presentations. Please refer to our advisory on forward-looking statements at the end of the presentation. It describes the forward-looking information non-GAAP measures and oil and gas terms used today and outlines the risk factors and assumptions relevant to this discussion. Production during the third quarter averaged 82,727 views per day, which was at the top end of our Q3 guidance range of 80 to 83,000. This is mainly due to the successful restart of the WANDU facility in Australia in early September and an efficient turnaround at the core facility in Ireland, which was completed five days ahead of schedule. In addition, we continue to see strong operational performance across the majority of our assets. We generated $270 million of fund flow, which represents a 9% increase over the prior quarter. We invested $126 million of E&D capital, resulting in $144 million of free cash flow, which represents an 80% increase over the prior quarter. This level of free cash flow was more than sufficient to fund current asset retirement obligations, lease payments, and the base dividend. with the excess free cash flow allocated to debt reduction and share repurchases. During the quarter, we returned $20 million to shareholders through the base dividend and share repurchases, and we have returned $115 million to shareholders year-to-date, representing about 35% of our free cash flow. Given the improving free cash flow profile, we are now targeting 30% return of capital in 2023, compared to the prior range of 25% to 30%, until we achieve our net debt target of $1 billion. Continue to make progress on debt reduction, with net debt decreasing approximately $80 million from the prior quarter to $1.2 billion at the end of the third quarter, representing a trailing net debt to fund flow ratio of 1.2 times. Based on the forward strip pricing, we expect to achieve our $1 billion debt target in Q1 of 24, at which time we plan to increase the amount of capital returned to our shareholders by the base dividend and share repurchases. Moving on to the operational updates for the quarter. Production from our North American operations averaged 56,758 BUEs per day in Q3, an increase of 5% or 2,700 BUEs per day. From the prior quarter, mainly due to strong recovery following fire-related downtime at our deep basin assets and new production from our recently drilled wells in the U.S., In the Deep Basin, we drilled two and completed one man-built liquids-rich gas well. At MICA, we brought on production four Alberta Montanay liquids-rich gas wells, which are producing into constrained Montanay infrastructure capacity of approximately 8,000 meters per day. In Saskatchewan, we drilled 10, completed nine, and brought on production eight oil wells. In the U.S., we brought on production five oil wells in Wyoming, where production increased 21% from the prior quarter. We continue to progress our BC Montanay development. During the third quarter, we completed the site preparation and awarded all major contracts for our 16,000 BOPD battery in BC. We're excited to break ground on the battery in August, and we'll continue to progress this project over the next several months. Shown here is a clear battery site awaiting delivery of the facility modules that are currently in fabrication. The key piece of infrastructure will underpin the future development and growth of our BC Mike and Montney asset. The majority of construction is scheduled to occur in the first half of 2024, but the battery is expected to be operational by mid-2024. With the additional capacity provided by this battery, we are able to move forward with our growth phase of our mica asset. Our upcoming winter program includes 11 wells on our BC lands, offsetting our recent 16-28 BC pad. which is produced at an average per well rate of 1,150 BUs per day over the first six months with an average 36% liquid yields, which is mainly oil. Given these strong rates, we are piloting a dam spacing program to evaluate the potential for drilling more wells in BC.

Production from our international operations average 25,969 BUs per day,