Vermilion Energy Inc. Common (Canada)

Good morning, ladies and gentlemen, and welcome to the Vermilion Q3 2025 conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference call over to Mr. Dion Hatcher, President and CEO. Please go ahead.

Good morning, ladies and gentlemen. I'm Dion Hatcher, President and CEO of Vermillion Energy. With me today are Laris Glemser, Vice President, CFO, Darcy Kerwin, Vice President, International and HSE, Brandon McQuaid, Vice President, North America, Lara Conrad, Vice President, Business Development, and Travis Thurgensen, Director of Investor Relations and Corporate Planning. Please refer to the advisory on forward-looking statements in our Q3 release. 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. Vermillion delivered another strong quarter in Q3, demonstrating both operational excellence and financial discipline. Our production came in at the upper end of our guidance range, and we were able to generate robust fund flows from operations in a challenging commodity price environment. Our performance this quarter reflects improvements in both capital and operating efficiencies, driven by the strategic repositioning of our asset base. These structural improvements enabled us to lower the top end of our 2025 capital guidance by $20 million without impacting our production. This speaks to the growing efficiency of our capital deployment. In addition, we lowered our full-year operating cost guidance by more than $10 million due to the improvements we were realizing in the second half of 2025. This momentum will carry into the 2026 budget guidance, which includes even lower capital and unit operating costs, reflective of our larger, more cord up portfolio. When compared to 2024, the last full year before we launched our asset high grading initiative, our production per share has increased by over 40%, where our unit cost structure is down by 30%. This reflects the strength of our reposition portfolio, where 85% of both production and capital is now concentrated in our global gas business. By focusing on these more efficient, longer-duration assets, we have better position for a million for sustainable, long-term success. Our Q3 results underscore the resilience and the competitive strength of our differentiated asset base. Notably, our realized gas price in the quarter, excluding hedging gains, was $4.36 per MCF. significantly outperforming the ACOL 5A pricing. In Canada, we realized a gas price that was more than double the ACOL benchmark. And when combined with our direct exposure to premium price European gas, our realized pricing is seven times the ACOL benchmark. When you include hedging gains, the realized price increased to $5.62 per MCF, nine times the ACOL benchmark, highlighting the strategic advantage of being a global gas producer. During the quarter, we made a deliberate and strategic choice to temporarily shut in a portion of our deep basin gas production and defer the startup of several wells, resulting in approximately 3,000 VUs per day of production impact in the quarter. We expect to bring these volumes online in Q4, where pricing is more favorable. During the quarter, we made a portion of our volume commitments by purchasing rather than producing our own gas, demonstrating our commitment to profitable development. We continue to make progress towards key milestones with the development of our global gas assets in Germany, the Montney, and the Dee Basin. In Germany in 2026, we will bring our discovery well at Bissehorst online and look to expand take-away capacity over the next two years to maximize the economics of this prolific well. We will also advance our plans to spud the follow-up Bissehorst structure in early 2027 and with a shorter cycle time than our initial exploration wells. plan to bring these wells on production in the second half of 2028. In Canada, we will continue to invest in the Montney asset as we progress towards a significant inflection in free cash flow in 2028. In the Deep Basin, we will run an efficient, consistent three-rig program and generate strong free cash flow by producing volumes into our existing infrastructure. As we look out over the next three years, these projects will significantly improve our free cash flow outlook. Well, now I'll pass it over to Lars to discuss the Q3 results as well as our 2026 budget guidance. Thank you, Dion.

Vermillion generated $254 million in fund flows from operations in Q3 with free cash flow of $108 million after E&D capital expenditures of $146 million. We continue to reduce debt during the quarter and have now reduced our net debt by over $650 million since Q1 2025. bringing net debt to under $1.4 billion as of September 30th. This resulted in a net debt to four-quarter trailing FFO ratio of 1.4 times, reflecting continued progress towards strengthening Vermillion's balance sheet. In addition, Vermillion returned $26 million to shareholders through dividends and share buybacks, comprising $20 million in dividends and $6 million of share buybacks during the quarter. This resulted in the company repurchasing 600,000 shares for a total of 2.5 million shares repurchased year-to-date. In total, we have repurchased approximately 20 million shares since mid-2022. Q3 production averaged 119,062 VOE per day with a 67% gas weighting, which was at the upper end of our guidance range. In North America, Production averaged 88,763 VOE per day, inclusive of the July divestments of our Saskatchewan and U.S. assets, as well as shut-in gas production and deferral of new well startups in Q3 in response to pricing. International operations averaged 30,299 VOE per day, up 2% from the previous quarter due to strong performance across our business units. In the Deep Basin, we ramped up to a three-rig drilling program in Q3, targeting multiple stack zones across our 1.1 million net acre land base. We drilled 13, completed 12, and brought on production three gross, liquids-rich gas wells in the Deep Basin. The drill program results to date are exceeding our expectations, with test rates indicating deliverability well in excess of our tight curves. Internationally, we executed a successful two gross or 1.2 net well drilling program in the Netherlands, discovering commercial gas across two zones, the Rottliegen and Zechstein. Both wells are expected to be completed, tied in and brought on production in Q4 2025. These two wells are the latest successes in our two plus decades of exploration and development in the Netherlands and combined with recent discoveries in Germany, demonstrate Vermilion's broader European gas exploration capabilities to repeatedly add European gas reserves at a cost of $1.50 per MCF into a gas market currently in excess of $15 per MCF. Meanwhile, Osterheide, our first German exploration well, continues to produce at a restricted rate of 1,100 BOE per day, generating nearly 2 million per month of excess free cash flow. And our second well, Vissilhorse, is on track for startup by mid-2026, with preparations underway for follow-up drilling of two gross or 1.3 net wells in the Vissilhorse structure. As a reminder, the first well is expected to recover 68 BCF of gas, and our P50 estimate of gross gas in place for the structure is 380 BCF. We also released our 2026 budget yesterday, featuring an exploration and development capital budget of $600 to $630 million, with approximately 85% allocated to our global gas portfolio. Key investments include drilling and strategic infrastructure in the Montney, a continuous drilling program targeting high-return, liquids-rich gas wells in the Deep Basin, and drilling and infrastructure capital in Germany and the Netherlands. We expect modest production growth from second half 2025 levels on our continuing operations with annual average production between 118 and 122,000 BOE per day, maintaining our commitment to financial discipline and free cash flow generation. Our 2026 budget includes a significant reduction in our overall cost structure with a 30% improvement in capital and operating efficiencies. reflecting the benefits of our repositioned global gas portfolio and our focus on operational excellence. For 2026, we plan to invest approximately $415 million into liquids-rich gas assets in the Maunee and Deep Basin, drilling 49 gross wells, which translates to approximately 45 net wells, reflecting our high working interest in Canada. In the Deep Basin, we plan to run a three-rig program to drill 43 gross wells. Notably, minimal new infrastructure spending is required to support this development, which is a key advantage of our deep basin asset. In the Montney, we plan to drill six and complete and bring on production 10 wells. In addition, we will continue to expand our infrastructure in advance of total Montney throughput growing to 28,000 BOE per day by 2028, which aligns with the build-out of third-party gas infrastructure. Once we achieve target production, infrastructure and drilling capital requirements will decrease, as we expect to drill about eight wells per year to sustain production. The combination of higher production and lower capital will pivot the Monty asset to significant excess free cash flow of approximately $125 million per year for 15 plus years, assuming commodity prices of $3 ECO and $70 WTI. Internationally, we plan to invest around $200 million in 2026, focusing on European gas exploration and development and optimizing base production. This includes drilling one well at a 50% working interest in the Netherlands and preparing for two additional follow-up wells at 64% working interest at the Wissehorst discovery in Germany in early Q1 2027. We will bring the initial Vistal Horse well online mid-2026 and expand the supporting infrastructure to enable significantly higher production over the next two years. We will also invest in economic workovers and optimization projects across our international assets. Higher maintenance spending in 2026 compared to prior years is due to non-reoccurring turnarounds, including a planned 32-day turnaround in Ireland. the scope of which is scheduled to occur every five years. Our priorities on shareholder returns remain unchanged. We will use excess free cash flow to maintain a strong balance sheet, fund a sustainable base dividend and be opportunistic with share buybacks. I'm pleased to announce our intention to increase the quarterly cash dividend by 4% to 13.5 cents Canadian per share, effective with the Q1 2026 dividend. The dividend payout remains at a modest level even during this commodity price period, and we see the potential for higher return of capital as free cash flow increases in the Montney, Germany, and the Basin. I will now pass it back to Dion.