Vermilion Energy Inc. Common (Canada)

Good morning, ladies and gentlemen, and welcome to the Vermilion Q1 2026 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 an operator. This call is being recorded on May 6, 2026. I would now like to turn the call over to Dion Hatcher, President and CEO. Please go ahead.

Good morning, ladies and gentlemen. I'm Dion Hatcher, President and CEO of Vermilion Energy. With me today are Lars Glamster, Vice President and CFO, Darcy Kerwin, Vice President, International and HSE, Brandon Kuwait, Vice President, North America, Lara Conrad, Vice President, Business Development, and Travis Thorgerson, Director of Investor Relations and Corporate Planning. Please refer to our advisory and forward-looking statements in our Q1 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. I'd like to begin today with a comment on the macro environment. The first quarter of 2026 was marked by heightened geopolitical uncertainty, with continuing impacts on the global energy markets today. This uncertainty underscores the critical importance of energy security, Vermillion's substantial resource base, with exposure to multiple commodities, including gas production in Europe, and liquid production tied to Brent benchmarks, provides unique exposure to global prices. This diversity of production extends to our gas-weighted assets in Canada. We have strategically positioned ourselves in the oily window on the mountaineer to have numerous liquid-weighted zones in the deep basin. Operationally, we delivered another strong quarter. with production volumes averaging 125,600 BWs per day, exceeding the upper end of our guidance. Canadian operations contributed an average of 99,700 BWs per day. That's a 10% increase over the prior quarter, driven by very strong deep basin performance and new mountainy wells brought online ahead of schedule. International operations averaged 25,900 BWs per day. Now that's reflective of cyclone-related downtime in Australia. and natural declines in European assets, which is prior to the next German gas fall coming online in mid-year. In total, our production mix consisted of approximately 59% Canadian natural gas, 13% European natural gas, and 28% liquids, with those liquids largely priced off of Brent and WTI. Our realized oil price increased by over 20% from the prior quarter while our European gas production achieved an average sales price of approximately $16 per MMBQ. This meant that nearly 80% of our Q1 revenue was driven by European gas and liquids production. This underscores the value of our exposure to global pricing. Market fundamentals for European gas remain very supportive, with Q2 pricing in excess of $20 per MMBQ. That is over 10 times higher than the equal pricing in Q2. The next four quarters are expected to average approximately $20 per MMBTU. Disruptions in the Strait of Hormuz have impacted global LNG flows at a time when European gas inventories are at multi-year lows, with storage levels in Germany at about 25% and the Netherlands at 10%. European countries will need to add approximately 2 PCF of gas to storage by November to meet the mandated 80% capacity levels requiring action in the LNG market. Of note, we continue to see a more positive tone from governments, recognizing Vermillion as a responsible operator with decades of experience, one who has a key role to play in their energy landscape. To further enhance our exposure to premium price gas markets, we recently joined the Rockies LNG Consortium to evaluate delivering a portion of our Montney gas to the Sealism's LNG project. This would complement our existing agreement on the Alliance Pipeline that connects us to the premium price Chicago hub for pricing average approximately $5 premium BTU in Q1. We'll now pass over to Larry to discuss Q1 results in more depth.

Thank you, Dion. In the quarter, Vermillion generated $232 million of funds from operations with $135 million of E&D capital expenditures resulting in $98 million of free cash flows. Net debt was reduced by an additional $50 million to $1.29 billion as of March 31st, bringing our total debt reduction to $770 million over the past year. The timing of lifting in France reduced Q1 FFO as a result of timing. This reduced Q1 FFO by $10 million but will benefit Q2 FFO by $13 million due to the increase in the dated Brent contract. Debt reduction remains a priority. And we now have more visibility to our $1 billion net debt target through our recent deleveraging resulting from strong operational execution and an improving commodity price outlook. This focus on debt reduction has resulted in a 40% reduction in interest costs per BOE versus Q1 of 2025. And our cored-up asset base has driven Q1 G&A per BOE down by over 50% versus 25%. In addition to the $50 million of debt reduction this quarter, we also paid $21 million to shareholders in dividends and repurchased $5 million of shares through our NCIB. With the move higher in oil and European gas prices in March, we recognized a loss on hedges in the quarter. It is important to note that this is largely driven by non-cash losses on hedges in place for future quarters, and that the portion of our production that remains unhedged will stand to benefit from increased pricing going forward. The realized portion of hedge losses in the quarter was $15 million. And for the balance of the unrealized hedge loss to be realized, pricing would have to remain at March 31st, 2026 levels for the duration of our current hedge book. For additional context, we have updated our forecast of 2026 excess free cash flow in our most recent corporate presentation And after incorporating current prices and the current 2026 estimated realized hedge losses, Vermilion will generate double the EFCF when compared to our 2026 budget projections. On the operations front, we maintained a three-rig drilling program in the deep basin, drilling 10 wells, completing 14, and bringing on production 18 liquids-rich gas wells. Several of these wells ranked among the best wells in Alberta throughout the quarter. We have now shifted our deep basin drilling to higher liquids rate wells to capitalize on favorable pricing, which highlights the flexibility of our asset base and depth of inventory. In the Montney, we drilled five, completed six, and brought online six liquids-rich gas wells. These wells were bought on ahead of schedule and with strong initial oil rates. while also coming in at a lower capital cost than we had previously guided to. We achieved another milestone. Our planned per well cost in the Magni is now $8.2 million, down $300,000 from $8.5 million previously. In Europe, we are on track to bring the first VISA horse well online in Germany by mid-2026. planned to spread follow-up wells on the Balmussen license early next year and expect to commence drilling in the Netherlands in the second half of 2026. These activities support regional energy security through reliable, lower emissions gas compared to imported alternatives. In Australia, our operations in the quarter were impacted by two cyclone events, the first consecutive direct hits ever. We are proud to say that we successfully managed all aspects of the safe shut-in of operations and evacuation of personnel, with production resuming subsequent to the quarter following necessary repairs. While production operations were shut-in, we were able to export 300,000 barrels of oil in February. During the quarter, we signed an agreement to acquire producing assets in Germany, adding approximately 1,000 BUE a day of low-decline production. weighted 85% to natural gas, which increases our European TTF-linked gas and Brent-linked oil production, enhances cash flow, and provides strategic infrastructure control. The transaction is expected to close in the second half of 2026. We also announced the award of three new concessions in the North German Basin, doubling our acreage to well over 1 million net acres. Finally, we signed an agreement to divest our remaining 60% interest in the SA7 block in Croatia for net proceeds of approximately 15 million euros or 24 million Canadian. Proceeds from this sale will primarily reduce debt with the transaction expected to close in the second half of the year. These recent steps are aligned with our strategy to reposition our asset base to further enhance long-term profitability. Operational momentum remains strong and we continue to trend toward the upper end of our full year production guidance range without an increase to our capital budget. We will actively manage around lower ACO pricing to prioritize value over volumes and we expect Q2 2026 production to average between 123,000 and 125,000 BOE a day. With our focus on liquids rich production, Liquids weighting is expected to increase from 28% in Q1 to approximately 31% in Q2. I will now pass it back to Dion.