2023
A N N UA L R E P O R T
EXCELLENCE. TRUST. RESPECT. RESPONSIBILITY.INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSED Table of Contents
Message to Shareholders
Management’s Discussion and Analysis
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Corporate Information
Annual General Meeting
May 1, 2024
3:00 PM MT
McMurray Room
Calgary Petroleum Club
319 5th Avenue S.W.
Calgary, Alberta
8
15
68
78
103
Details of the meeting will be included in the Information Circular, which will be available in March 2024, and will be posted on our website at
https://www.vermilionenergy.com/invest-with-us/annual-general-meeting when available.
Vermilion Energy Inc. ■ Page 1 ■ 2023 Annual Report
Disclaimer
Certain statements included or incorporated by reference in this document may constitute forward-looking statements or information under applicable
securities legislation. Such forward-looking statements or information typically contain statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward looking
statements or information in this document may include, but are not limited to: capital expenditures and Vermilion’s ability to fund such expenditures;
Vermilion’s additional debt capacity providing it with additional working capital; statements regarding the return of capital, the flexibility of Vermilion’s
capital program and operations; business strategies and objectives; operational and financial performance; estimated volumes of reserves and
resources; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion’s 2024 guidance, and rates of
average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange and inflation rates; significant
declines in production or sales volumes due to unforeseen circumstances; the effect of possible changes in critical accounting estimates; statements
regarding the growth and size of Vermilion’s future project inventory wells expected to be drilled in 2024; exploration and development plans and the
timing thereof; Vermilion’s ability to reduce its debt; statements regarding Vermilion’s hedging program, its plans to add to its hedging positions, and
the anticipated impact of Vermilion’s hedging program on project economics and free cash flows; the potential financial impact of climate-related
risks; acquisition and disposition plans and the timing thereof; operating and other expenses, including the payment and amount of future dividends;
royalty and income tax rates and Vermilion’s expectations regarding future taxes and taxability; and the timing of regulatory proceedings and
approvals.
Such forward-looking statements or information are based on a number of assumptions, all or any of which may prove to be incorrect. In addition to
any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of Vermilion to obtain
equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally; the ability of Vermilion to market crude
oil, natural gas liquids, and natural gas successfully to current and new customers; the timing and costs of pipeline and storage facility construction
and expansion and the ability to secure adequate product transportation; the timely receipt of required regulatory approvals; the ability of Vermilion to
obtain financing on acceptable terms; foreign currency exchange rates and interest rates; future crude oil, natural gas liquids, and natural gas prices;
and management’s expectations relating to the timing and results of exploration and development activities.
Although Vermilion believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should
not be placed on forward-looking statements because Vermilion can give no assurance that such expectations will prove to be correct. Financial
outlooks are provided for the purpose of understanding Vermilion’s financial position and business objectives, and the information may not be
appropriate for other purposes. Forward-looking statements or information are based on current expectations, estimates, and projections that involve
a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Vermilion and described in the
forward-looking statements or information. These risks and uncertainties include, but are not limited to: the ability of management to execute its
business plan; the risks of the oil and gas industry, both domestically and internationally, such as operational risks in exploring for, developing and
producing crude oil, natural gas liquids, and natural gas; risks and uncertainties involving geology of crude oil, natural gas liquids, and natural gas
deposits; risks inherent in Vermilion's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life and
estimates of resources and associated expenditures; the uncertainty of estimates and projections relating to production and associated expenditures;
potential delays or changes in plans with respect to exploration or development projects; Vermilion's ability to enter into or renew leases on
acceptable terms; fluctuations in crude oil, natural gas liquids, and natural gas prices, foreign currency exchange rates, interest rates, and inflation
rates; health, safety, and environmental risks; uncertainties as to the availability and cost of financing; the ability of Vermilion to add production and
reserves through exploration and development activities; the possibility that government policies or laws may change or governmental approvals
may be delayed or withheld; uncertainty in amounts and timing of royalty payments; risks associated with existing and potential future law suits and
regulatory actions against or involving Vermilion; and other risks and uncertainties described elsewhere in this document or in Vermilion's other
filings with Canadian securities regulatory authorities.
The forward-looking statements or information contained in this document are made as of the date hereof and Vermilion undertakes no obligation to
update publicly or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise, unless
required by applicable securities laws.
This document contains references to sustainability/ESG data and performance that reflect metrics and concepts that are commonly used in such
frameworks as the Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures, and the Sustainability Accounting Standards
Board. Vermilion has used best efforts to align with the most commonly accepted methodologies for ESG reporting, including with respect to climate
data and information on potential future risks and opportunities, in order to provide a fuller context for our current and future operations. However,
these methodologies are not yet standardized, are frequently based on calculation factors that change over time, and continue to evolve rapidly.
Readers are particularly cautioned to evaluate the underlying definitions and measures used by other companies, as these may not be comparable
to Vermilion’s. While Vermilion will continue to monitor and adapt its reporting accordingly, the Company is not under any duty to update or revise the
related sustainability/ESG data or statements except as required by applicable securities laws.
Vermilion Energy Inc. ■ Page 2 ■ 2023 Annual Report
All crude oil and natural gas reserve and resource information contained in this document has been prepared and presented in accordance with
National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. Reserves
estimates have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the
likely availability of funding required for such development. The actual crude oil and natural gas reserves and future production will be greater than or
less than the estimates provided in this document.
Natural gas volumes have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil
equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on
an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Financial data contained within this document are reported in Canadian dollars unless otherwise stated.
Vermilion Energy Inc. ■ Page 3 ■ 2023 Annual Report
Abbreviations
$M
$MM
AECO
bbl(s)
bbls/d
boe
boe/d
GJ
LSB
mbbls
mcf
mmcf/d
NBP
NCIB
NGLs
PRRT
tCO2e
THE
TTF
WTI
thousand dollars
million dollars
the daily average benchmark price for natural gas at the AECO ‘C’ hub in Alberta
barrel(s)
barrels per day
barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of
one boe for six mcf of natural gas)
barrel of oil equivalent per day
gigajoules
light sour blend crude oil reference price
thousand barrels
thousand cubic feet
million cubic feet per day
the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point
normal-course issuer bid
natural gas liquids, which includes butane, propane, and ethane
Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia
tonnes of carbon dioxide equivalent
the price for natural gas in Germany, quoted in megawatt hours of natural gas, at the Trading Hub Europe
the price for natural gas in the Netherlands, quoted in megawatt hours of natural gas, at the Title Transfer Facility Virtual
Trading Point
West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma
Vermilion Energy Inc. ■ Page 4 ■ 2023 Annual Report
Highlights
Q4 2023 Results
•
•
•
•
Q4 2023 fund flows from operations (“FFO”)(1) was $372 million ($2.27/basic share)(2) and exploration and development (“E&D”) capital
expenditures(3) were $143 million, resulting in free cash flow (“FCF”)(4) of $229 million ($1.40/basic share)(5).
Net debt(6) decreased by $164 million in Q4 2023 to $1.1 billion, the lowest level in a decade and a 50% reduction from the peak in 2020. In
addition, Vermilion returned $45 million to shareholders comprised of $16 million of dividends and $29 million of share buybacks.
Production during the fourth quarter of 2023 averaged 87,597 boe/d(8), comprised of 54,216 boe/d(8) from our North American assets and
33,381 boe/d(8) from our International assets.
Q4 2023 production benefited from a full quarter of production from Australia and Ireland following maintenance downtime in the prior quarter,
as well as increased production in the Netherlands due to new production from our 2023 drilling program.
Year End 2023 Results
•
•
•
•
•
•
2023 FFO(1) was $1,143 million ($6.98/basic share)(2) and E&D capital expenditures(3) were $590 million, resulting in FCF(4) of $552 million
($3.37/basic share)(5).
Net debt(6) decreased by $266 million in 2023 to $1.1 billion, representing a trailing net debt-to-FFO ratio(7) of under 1.0 times. In addition,
Vermilion returned $160 million to shareholders, comprised of $65 million in dividends and $95 million of share buybacks.
Reported a 2023 net loss of $238 million ($1.45/basic share) driven by non-cash impairment charges and dispositions, partially offset by strong
price realization and acquisition activity. Excluding non-cash impairments, net earnings were $536 million ($3.27/basic share).
Production during 2023 averaged 83,994 boe/d(8), which was at the mid-point of our 2023 guidance range. Strong performance across many of
our business units served to offset wildfire-related downtime in Canada and maintenance downtime in Australia.
Year-end 2023 proved developed producing ("PDP") reserves were 173 mmboe(9) and total proved plus probable ("2P") reserves were 430
mmboe(9), reflecting a reserve life index of 5.6 years and 14.0 years, respectively.
The after-tax net present value of PDP reserves, discounted at 10%, is $3.2 billion(9) and the after-tax net present value of 2P reserves,
discounted at 10%, is $5.7 billion(9), or $28.72 per basic share(9) after deducting year-end net debt.
Outlook
•
•
•
In conjunction with our Q4 2023 release, we announced a quarterly cash dividend of $0.12 per share, payable on April 15, 2024 to shareholders
of record on March 28, 2024. This quarterly cash dividend represents a 20% increase over the prior quarterly dividend.
Given our strong financial position and continued operational momentum, we are increasing our capital return target to 50% of excess FCF and
will manage to this target on a full-year basis versus our previous effective date of April 1, 2024. Year-to-date, we have repurchased and retired
1.4 million shares and plan to increase the pace of share buybacks starting immediately.
Construction of the 16,000 boe/d Mica Montney battery is progressing as planned and remains on schedule for a mid-year start-up. With the
additional capacity provided by this battery, we are able to move forward with the growth phase of our Mica Montney asset, and have drilled six
wells on our 16-28 BC pad that will be completed and ready for tie-in during Q2 2024.
• We continued to advance our deep gas exploration and development plans in Germany, with drilling operations nearly complete on the first well
of our program. We expect to reach total depth in the coming weeks and will then move the rig to the next location, where the second well of our
program will be drilled during Q2 2024.
•
In Croatia, we drilled the first exploration well on the SA-7 block in Q1 2024 and reached total measured depth of 2,371 metres, where we
discovered hydrocarbons in multiple zones. We plan to evaluate and test these zones during the second quarter while commencing drilling on
the second of four wells planned on the SA-7 block this year. Construction of the gas plant on the SA-10 block is progressing as planned and
remains on schedule for a mid-year start-up.
Vermilion Energy Inc. ■ Page 5 ■ 2023 Annual Report
($M except as indicated)
Financial
Petroleum and natural gas sales
Cash flows from operating activities
Fund flows from operations (1)
Fund flows from operations ($/basic share) (2)
Fund flows from operations ($/diluted share) (2)
Net (loss) earnings
Net (loss) earnings ($/basic share)
Cash flows used in investing activities
Capital expenditures (3)
Acquisitions (10)
Dispositions
Asset retirement obligations settled
Repurchase of shares
Cash dividends ($/share)
Dividends declared
% of fund flows from operations (11)
Payout (12)
% of fund flows from operations (12)
Free cash flow (4)
Long-term debt
Net debt (6)
Net debt to four quarter trailing fund flows from operations (7)
Operational
Production (8)
Crude oil and condensate (bbls/d)
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
Average realized prices
Crude oil and condensate ($/bbl)
NGLs ($/bbl)
Natural gas ($/mcf)
Production mix (% of production)
% priced with reference to WTI
% priced with reference to Dated Brent
% priced with reference to AECO
% priced with reference to TTF and NBP
Netbacks ($/boe)
Operating netback (13)
Fund flows from operations ($/boe) (14)
Operating expenses
General and administration expenses
Average reference prices
WTI (US $/bbl)
Dated Brent (US $/bbl)
AECO ($/mcf)
TTF ($/mcf)
Share information ('000s)
Shares outstanding - basic
Shares outstanding - diluted (15)
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted (15)
Q4 2023
Q3 2023
Q4 2022
2023
2022
522,969
343,831
372,117
2.27
2.27
(803,136)
(4.91)
132,932
142,887
25,724
14,855
28,937
28,736
0.10
16,227
475,532
118,436
270,218
1.65
1.62
57,309
0.35
170,404
125,639
5,238
—
13,582
11,645
0.10
16,367
842,693
495,195
284,220
1.74
1.70
395,408
2.42
168,053
169,305
4,558
—
16,508
—
0.08
13,058
2,022,555
1,024,528
1,142,611
6.98
6.98
(237,587)
(1.45)
576,435
590,191
273,018
197,007
56,966
94,838
0.40
65,248
3,476,394
1,814,220
1,634,865
10.00
9.71
1,313,062
8.03
1,059,292
551,817
539,713
—
37,514
71,659
0.28
45,769
4 %
6 %
5 %
6 %
3 %
188,051
155,588
198,871
712,405
635,100
51 %
58 %
70 %
62 %
39 %
229,230
914,015
1,078,567
0.9
144,575
966,505
1,242,522
1.2
114,915
1,081,351
1,344,586
0.8
552,420
914,015
1,078,567
0.9
1,083,048
1,081,351
1,344,586
0.8
32,866
7,412
283.91
87,597
107.91
33.38
8.48
29 %
17 %
31 %
23 %
57.48
48.83
15.35
2.60
78.32
84.05
2.30
17.45
162,271
166,456
163,335
163,335
31,417
7,344
263.80
82,727
106.94
27.77
6.32
34 %
13 %
34 %
19 %
49.30
35.76
16.26
2.77
82.26
86.76
2.61
14.11
163,666
167,904
163,946
166,392
38,915
7,497
234.23
85,450
115.02
39.93
17.43
38 %
18 %
30 %
14 %
70.00
35.08
16.81
1.65
82.65
88.71
4.64
38.36
163,227
168,616
163,105
167,397
31,727
7,296
269.83
83,994
102.43
31.54
8.17
33 %
13 %
33 %
21 %
49.22
37.90
17.03
2.68
77.63
82.62
2.64
17.40
162,271
166,456
163,719
163,719
37,530
7,961
238.18
85,187
123.89
45.95
18.99
38 %
16 %
30 %
16 %
70.15
52.65
15.75
1.86
94.23
101.19
5.25
48.35
163,227
168,616
163,489
168,426
Vermilion Energy Inc. ■ Page 6 ■ 2023 Annual Report
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Fund flows from operations (FFO) is a total of segments measure comparable to net (loss) earnings that is comprised of sales less royalties, transportation,
operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized gain (loss) on derivatives, realized foreign exchange gain (loss), and
realized other income (expense). The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to
pay dividends, repay debt, fund asset retirement obligations, and make capital investments. FFO does not have a standardized meaning under IFRS and
therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to primary financial statement measures
can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
Fund flows from operations per share (basic and diluted) are supplementary financial measures and are not standardized financial measures under IFRS, and
therefore may not be comparable to similar measures disclosed by other issuers. They are calculated using FFO (a total of segments measure) and basic/
diluted shares outstanding. The measure is used to assess the contribution per share of each business unit. More information and a reconciliation to primary
financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
Capital expenditures is a non-GAAP financial measure that is the sum of drilling and development costs and exploration and evaluation costs from the
Consolidated Statements of Cash Flows. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and
Other Specified Financial Measures” section of this document.
Free cash flow (FCF) and excess free cash flow (EFCF) are non-GAAP financial measures comparable to cash flows from operating activities. FCF is
comprised of FFO less drilling and development and exploration and evaluation expenditures and EFCF is FCF less payments on lease obligations and asset
retirement obligations settled. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other
Specified Financial Measures” section of this document.
Free cash flow per basic share is a non-GAAP supplementary financial measure and is not a standardized financial measure under IFRS and may not be
comparable to similar measures disclosed by other issuers. It is calculated using FCF and basic shares outstanding.
Net debt is a capital management measure comparable to long-term debt and is comprised of long-term debt (excluding unrealized foreign exchange on
swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease
liabilities). More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial
Measures” section of this document.
Net debt to trailing FFO is a supplementary financial measure and is not a standardized financial measure under IFRS. It may not be comparable to similar
measures disclosed by other issuers and is calculated using net debt (capital management measure) and FFO (total of segment measure). The measure is
used to assess the ability to repay debt. Information in this document is included by reference; refer to the "Non-GAAP and Other Specified Financial Measures"
section of this document.
Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type.
Estimated gross proved, developed and producing, total proved, and total proved plus probable reserves as evaluated by McDaniel & Associates Consultants
Ltd. (“McDaniel”) in a report dated March 5, 2024 with an effective date of December 31, 2023 (the “2023 McDaniel Reserves Report”). See Vermilion’s annual
information form for the year ended December 31, 2023 for additional information, including reserve pricing assumptions. Per share metrics calculated using
basic shares outstanding at December 31, 2023.
(10) Acquisitions is a non-GAAP financial measure that is calculated as the sum of acquisitions and acquisitions of securities from the Consolidated Statements of
Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-
term debt assumed, and net acquired working capital deficit or surplus. More information and a reconciliation to primary financial statement measures can be
found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(11) Dividends % of FFO is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by
other issuers, calculated as dividends divided by FFO. The ratio is used by management as a metric to assess the cash distributed to shareholders.
Reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document.
(12) Payout and payout % of FFO are a non-GAAP financial measure and a non-GAAP ratio, respectively, that are not standardized under IFRS and may not be
comparable to similar measures disclosed by other issuers. Payout is comparable to dividends declared and is comprised of dividends declared plus drilling and
development costs, exploration and evaluation costs, and asset retirement obligations settled, while the ratio is calculated as payout divided by FFO. More
information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of
this document.
(13) Operating netback is a non-GAAP financial measure comparable to net earnings and is comprised of sales less royalties, operating expense, transportation
costs, PRRT, and realized hedging gains and losses. More information and a reconciliation to primary financial statement measures can be found in the “Non-
GAAP and Other Specified Financial Measures” section of this document.
(14)
Fund flows from operations per boe is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures
disclosed by other issuers, calculated as FFO by boe production. Fund flows from operations per boe is used by management to assess the profitability of our
business units and Vermilion as a whole. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and
Other Specified Financial Measures” section of this document.
(15) Diluted shares outstanding represent the sum of shares outstanding at the period end plus outstanding awards under the Long-term Incentive Plan (“LTIP”),
based on current estimates of future performance factors and forfeiture rates.
Vermilion Energy Inc. ■ Page 7 ■ 2023 Annual Report
Message to Shareholders
We made significant progress in 2023 towards our debt reduction and asset high-grading initiatives, while also advancing key growth projects in
Canada, Germany, and Croatia. We closed the Corrib acquisition in Ireland and completed the disposition of select non-core assets in southeast
Saskatchewan early in the year. These transactions further strengthened our asset base by adding more low emission, premium-priced European
natural gas to our portfolio while divesting less efficient, higher cost assets in Canada. With this high-graded asset base, we were able to deliver on
the midpoint of our annual production guidance of 84,000 boe/d despite wildfire-related downtime in Western Canada and unplanned downtime in
Australia. Our ability to meet annual production guidance highlights the advantages of operating a diversified portfolio as we were able to reallocate
capital to offset the production impacts in Canada and Australia. With strong operational performance in the fourth quarter, we achieved average
production of 87,597 boe/d in Q4 2023, representing a 6% increase over the prior quarter.
Vermilion generated $1.1 billion of fund flows from operations (“FFO”) in 2023, representing the second strongest year in the history of the company.
After accounting for E&D capital expenditures, we generated $552 million of free cash flow (“FCF”), of which 29%, or $160 million ($0.98 per share),
was returned directly to shareholders through an increased dividend and share buybacks, and an additional $266 million ($1.62/share) was returned
indirectly through debt reduction. Q4 2023 FFO and FCF was $372 million and $229 million, respectively, representing a 38% and 59% increase over
the prior quarter, primarily due to higher production from our high-margin Australia and Ireland business units and tax adjustments. Net debt
decreased by $266 million in 2023 to end the year at $1.1 billion, which is the lowest level in a decade and represents 0.9 times our annual FFO.
This is a key milestone for the company as it aligns with our internal leverage target of one times net debt to FFO or less, and positions us for
increasing shareholder returns, including a 20% increase to our quarterly dividend effective Q1 2024, previously announced with our 2024 budget.
As a result of the progress achieved on debt reduction, we are now able to accelerate our return of capital. The return of capital framework outlined
with our 2024 budget release in December contemplated a capital return target of 30% of excess FCF ("EFCF") in Q1 2024, increasing to 50% of
EFCF effective April 1, 2024. Given our strong financial position and continued operational momentum, we now plan to increase our capital return
target to 50% of EFCF on a full-year basis for 2024 with a corresponding increase in share buybacks starting immediately, as we continue to believe
share buybacks represent a competitive use of capital.
Our disciplined focus on strengthening the balance sheet and high-grading the asset base, along with diligent capital allocation, has made the
company much stronger and much more resilient today. We ended 2023 with a strong balance sheet and have continued our operational momentum
from the fourth quarter into 2024. Our 2024 capital program is well underway and we are very pleased with how things are progressing on our three
key growth initiatives in Canada, Germany and Croatia. The development of our gas prospects in Germany and Croatia will increase our exposure to
premium-priced European gas, while the expansion of our Montney infrastructure in Canada will set the stage for long-term development and growth
of this asset. We are excited about Vermilion’s outlook and believe we have a robust portfolio capable of generating strong compounded returns for
our shareholders through a combination of modest annual production growth, a resilient and growing base dividend and share buybacks.
We would like to thank all our stakeholders for their ongoing support and contributions, and we look forward to providing further updates on our 2024
operational and financial results as the year progresses.
Q4 2023 Operations Review
North America
Production from our North American operations averaged 54,216 boe/d(1) in Q4 2023, a decrease of 4% from the previous quarter due to natural
declines in both Canada and the United States.
In the Deep Basin, we drilled five (5.0 net), completed five (5.0 net), and brought on production four (4.0 net) Mannville liquids-rich conventional
natural gas wells. At Mica we drilled the initial four (4.0 net) Montney liquids-rich shale gas wells on our BC lands as part of our winter drilling
program in advance of the expected start-up of our 8-33 BC battery in mid-2024. In Saskatchewan, we completed and brought on production one
(1.0 net) light and medium crude oil well, while in the United States, we participated in the drilling of six (2.0 net) non-operated light and medium
crude oil wells in Wyoming.
Construction of the 16,000 boe/d Mica Montney battery is progressing as planned and remains on schedule for a mid-year start-up. Once
operational, this battery will more than double our Montney infrastructure capacity to approximately 20,000 boe/d. With this additional capacity, we
are able to move forward with the growth phase of our Mica Montney asset, and to date have drilled eight of the 11 planned wells on or offsetting our
recent 16-28 BC pad. The two wells that were previously drilled on this pad and brought on production in March 2023 have produced nearly 700,000
boe combined to the end of February 2024, including over 215,000 barrels of liquids (83% light crude oil). Six of the new wells are expected to be
completed and ready for tie-in during Q2 2024 to align with the start-up of the new battery.
Vermilion Energy Inc. ■ Page 8 ■ 2023 Annual Report
International
Production from our International operations averaged 33,381 boe/d(1) in Q4 2023, an increase of 29% over the previous quarter primarily due to a
full quarter of production at our Australia and Ireland operations following maintenance downtime in the prior quarter, as well as increased production
in the Netherlands due to new production from our 2023 drilling program.
We continued to advance our deep gas exploration and development plans in Germany, with drilling operations nearly complete on our first well of
our program. We expect to reach total depth in the coming weeks and will then move the rig to the next location, where the second well of our
program will be drilled during Q2 2024.
In Croatia, construction of the gas plant on the SA-10 block is progressing as planned and remains on schedule for start-up mid-year. This gas plant
will facilitate production from the SA-10 block where we have previous gas discoveries. Subsequent to year-end, we commenced drilling on the first
exploration well on the SA-7 block and reached total measured depth of 2,371 metres, where we discovered hydrocarbons in multiple zones. We
plan to evaluate and test these zones during the second quarter while commencing drilling on the second of four wells planned on the SA-7 block
this year. In addition, we recently signed a farmout agreement with the INA Group to jointly develop the SA-7 block. INA is the largest integrated oil
and gas company in Croatia and brings local expertise and access to existing infrastructure that will play a critical role in developing this asset.
2023 Reserves Update
Our 2023 proved developed producing (“PDP”) reserves decreased by 8% from the prior year to 172.7 mmboe(2) while our total proved plus probable
(“2P”) reserves decreased by 18% from the prior year to 429.8 mmboe(2), primarily due to dispositions, production, and technical revisions, including
technical revisions resulting from capital allocation decisions. Early in the year, we divested a non-core asset in southeast Saskatchewan which
accounted for 11.6 mmboe of the PDP reduction and 32.4 mmboe of the 2P reduction. During the second half of the year we divested non-core
assets in the USA, contributing 0.7 mmboe to the PDP reduction and 13.9 mmboe of the 2P reduction. The closing of the Corrib acquisition in Ireland
in Q1 2023 added 12.5 mmboe of premium priced European gas to our PDP reserves and 17.2 mmboe to our 2P reserves.
Over the past couple years, we have placed a great deal of focus on asset high-grading and advancing several key growth projects within our
portfolio to increase FCF per share. As a result, some of our near-term capital allocation priorities have shifted, with a greater emphasis on funding
our Mica Montney development and Germany exploration program. With this in mind, we have updated future capital allocation estimates to align
with our long-term capital priorities, including our return of capital framework. As a result, we have removed or divested reserves associated with
undeveloped locations that are not prioritized for investment under our current plans. The assets most impacted by these capital allocation decisions
are located in the USA and Saskatchewan. Approximately 40% of the 2P technical revisions relate to capital allocation decisions and therefore,
some of these formerly assigned reserves could be recognized at a future date if they align with our capital allocation parameters at that time. In
addition, we expect to recognize additional reserves over time from our Mica Montney and Germany exploration program as we develop these
assets.
The PDP and 2P reserve life index at December 31, 2023 is 5.6 years and 14.0 years, respectively, both of which are in line with our long-term
average and appropriately reflect the conventional composition of our asset base. The after-tax net present value of PDP reserves, discounted at
10%, is $3.2 billion(2) and the after-tax net present value of 2P reserves, discounted at 10%, is $5.7 billion(2), or $28.72 per basic share(3) after
deducting year-end net debt.
The following table provides a summary of company interest reserves by reserve category and region on an oil equivalent basis. Please refer to
Vermilion's 2023 Annual Information Form for the year ending December 31, 2023 ("2023 Annual Information Form") for detailed information by
country and product type.
BOE (mboe)
North America
International
Vermilion
Proved Developed
Producing
112,204
60,502
172,706
Proved Developed
Non-Producing
5,450
6,892
12,342
Proved
Undeveloped
78,031
5,305
83,336
Proved
195,685
72,700
268,385
Probable
120,355
41,098
161,453
Proved Plus
Probable
316,040
113,798
429,838
Vermilion Energy Inc. ■ Page 9 ■ 2023 Annual Report
The following table provides a reconciliation of changes in company interest reserves by reserve category and region. Please refer to Vermilion's
2023 Annual Information Form for detailed information by country and product type and for an explanation concerning the reserve change
categories. The following tables may not total due to rounding.
PDP (mboe)
December 31, 2022
Discoveries
Extensions & Improved Recovery
Technical Revisions
Acquisitions
Dispositions
Economic Factors
Production
December 31, 2023
1P (mboe)
December 31, 2022
Discoveries
Extensions & Improved Recovery
Technical Revisions
Acquisitions
Dispositions
Economic Factors
Production
December 31, 2023
2P (mboe)
December 31, 2022
Discoveries
Extensions & Improved Recovery
Technical Revisions
Acquisitions
Dispositions
Economic Factors
Production
December 31, 2023
North America
International
133,879
—
5,399
2,931
2,791
(12,456)
194
(20,534)
112,204
54,738
—
293
2,706
12,548
—
339
(10,122)
60,502
North America
International
244,670
—
23,735
(28,211)
2,812
(27,361)
575
(20,534)
195,685
68,461
—
692
729
12,548
—
395
(10,122)
72,699
North America
International
412,044
—
27,280
(59,548)
3,613
(47,310)
495
(20,534)
316,040
110,744
—
25
(2,951)
17,209
—
(1,107)
(10,122)
113,799
Vermilion
188,617
—
5,692
5,637
15,339
(12,456)
533
(30,656)
172,706
Vermilion
313,129
—
24,428
(27,483)
15,360
(27,361)
969
(30,657)
268,385
Vermilion
522,790
—
27,305
(62,500)
20,823
(47,310)
(612)
(30,657)
429,838
Additional information about our 2023 McDaniel Reserves Report can be found in our 2023 Annual Information Form on our website at
www.vermilionenergy.com and on SEDAR+ at www.sedarplus.ca.
Outlook and Guidance Update
Our Q1 2024 capital program is progressing as planned with a primary focus on Montney drilling and battery construction, Germany exploration
drilling and Croatia gas plant construction. Most of the production from the Q1 2024 activity will not be on stream until mid-year or later, and as a
result we expect Q1 2024 production to be in the range of 83,000 to 85,000 boe/d.
Organizational Update
Mr. Bryce Kremnica has stepped down as Vice President of North America. We would like to thank Mr. Kremnica for his many contributions to
Vermilion over the past 18 years. Mr. Randy McQuaig has been promoted to Vice President, North America and will become a member of
Vermilion’s Executive Committee. Mr. McQuaig has been with Vermilion since 2013 and most recently held the position of Director of Canada
Business Unit Assets, a position he has held since 2021. Mr. McQuaig has 30 years of operations and executive management experience, and has a
Bachelor of Science degree in Petroleum Engineering from the University of Alberta.
Vermilion Energy Inc. ■ Page 10 ■ 2023 Annual Report
Commodity Hedging
Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, as of March 6, 2024, we have
33% of our expected net-of-royalty production hedged for 2024. With respect to individual commodity products, we have hedged 46% of our
European natural gas production, 28% of our crude oil production, and 29% of our North American natural gas volumes for 2024, respectively.
Please refer to the Hedging section of our website under Invest With Us for further details using the following link:
https://www.vermilionenergy.com/invest-with-us/hedging.
(Signed “Dion Hatcher”)
Dion Hatcher
President & Chief Executive Officer
March 6, 2024
(1)
(2)
(3)
Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type.
Estimated gross proved, developed and producing, total proved, and total proved plus probable reserves as evaluated by McDaniel & Associates Consultants
Ltd. (“McDaniel”) in a report dated March 5, 2024 with an effective date of December 31, 2023 (the “2023 McDaniel Reserves Report”). Net present value of
discounted cash flows as provided in the 2023 McDaniel Reserves Report. See Vermilion’s annual information form for the year ended December 31, 2023 for
additional information, including reserve pricing assumptions.
Per share metrics calculated using basic shares outstanding at December 31, 2023, refer to Highlights table for additional information.
Vermilion Energy Inc. ■ Page 11 ■ 2023 Annual Report
Non-GAAP and Other Specified Financial Measures
This report and other materials released by Vermilion includes financial measures that are not standardized, specified, defined, or determined under
IFRS and are therefore considered non-GAAP or other specified financial measures and may not be comparable to similar measures presented by
other issuers. These financial measures include:
Total of Segments Measures
Fund flows from operations (FFO): Most directly comparable to net (loss) earnings, FFO is comprised of sales less royalties, transportation,
operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized gain (loss) on derivatives, realized foreign exchange gain
(loss), and realized other income (expense). The measure is used to assess the contribution of each business unit to Vermilion's ability to generate
income necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments.
Sales
Royalties
Transportation
Operating
General and administration
Corporate income tax expense
Windfall taxes
PRRT
Interest expense
Realized gain (loss) on derivatives
Realized foreign exchange gain (loss)
Realized other (expense) income
Fund flows from operations
Equity based compensation
Unrealized (loss) gain on derivative instruments (1)
Unrealized foreign exchange (loss) gain (1)
Accretion
Depletion and depreciation
Deferred tax recovery (expense)
Gain on business combination
Loss on disposition
Impairment (expense) reversal
Unrealized other expense
Net (loss) earnings
(1)
$/boe
111.95
(9.85)
(2.54)
(15.75)
(1.86)
(6.70)
(7.18)
(0.59)
(2.67)
(13.07)
0.49
0.42
52.65
$/boe
68.64
(5.93)
(2.95)
(15.35)
(2.60)
(2.54)
(0.03)
2.74
(3.01)
10.33
(0.73)
0.26
48.83
Q4 2023
$M
522,969
(45,148)
(22,441)
(116,937)
(19,810)
(19,374)
(249)
20,860
(22,909)
78,737
(5,529)
1,948
372,117
(7,871)
141,126
4,834
(19,469)
(259,012)
110,758
(5,607)
(125,539)
(1,016,094)
1,621
(803,136)
Q4 2022
$M
842,693
(68,303)
(21,976)
(136,247)
(13,344)
(41,958)
(222,859)
(5,045)
(22,506)
(43,940)
18,845
(1,140)
284,220
(5,377)
549,693
(47,405)
(16,501)
(171,926)
(196,733)
—
—
—
(563)
395,408
2023
$M
$/boe
103.99 2,022,555
(8.43) (191,694)
(2.71)
(88,856)
(16.81) (513,381)
(80,716)
(1.65)
(91,932)
(5.18)
(78,426)
(27.50)
20,860
(0.62)
(2.78)
(85,212)
(5.42) 234,365
(4,532)
2.33
(0.14)
(420)
35.08 1,142,611
(42,756)
179,707
12,438
(78,187)
(712,619)
190,193
439,487
(352,367)
(1,016,094)
—
(237,587)
2022
$M
$/boe
67.10 3,476,394
(6.36) (306,017)
(2.95)
(78,896)
(17.03) (489,034)
(2.68)
(57,677)
(3.05) (208,153)
(2.60) (222,859)
(18,318)
0.69
(2.83)
(82,858)
7.77 (405,894)
15,195
(0.15)
(0.01)
12,982
37.90 1,634,865
(44,390)
540,801
(84,464)
(58,170)
(577,134)
(288,707)
—
—
192,094
(1,833)
1,313,062
Unrealized gain on derivative instruments, Unrealized foreign exchange gain (loss), and Unrealized other expense are line items from the respective
Consolidated Statements of Cash Flows.
Non-GAAP Financial Measures and Non-GAAP Ratios
Free cash flow (FCF) and excess free cash flow (EFCF): Most directly comparable to cash flows from operating activities, FCF is comprised of
fund flows from operations less drilling and development costs and exploration and evaluation cost and EFCF is comprised of FCF less payments on
lease obligations and asset retirement obligations settled. The measure is used to determine the funding available for investing and financing
activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures.
EFCF is used to determine the funding available to return to shareholders after costs attributable to normal business operations.
Vermilion Energy Inc. ■ Page 12 ■ 2023 Annual Report
($M)
Cash flows from operating activities
Changes in non-cash operating working capital
Asset retirement obligations settled
Fund flows from operations
Drilling and development
Exploration and evaluation
Free cash flow
Payments on lease obligations
Asset retirement obligations settled
Excess free cash flow
Q4 2023
343,831
(651)
28,937
372,117
(132,308)
(10,579)
229,230
(3,977)
(28,937)
196,316
Q4 2022
495,195
(227,483)
16,508
284,220
(157,849)
(11,456)
114,915
(8,019)
(16,508)
90,388
2023
1,024,528
61,117
56,966
1,142,611
(569,110)
(21,081)
552,420
(17,094)
(56,966)
478,360
2022
1,814,220
(216,869)
37,514
1,634,865
(528,056)
(23,761)
1,083,048
(21,168)
(37,514)
1,024,366
Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure
is used to calculate net debt, a capital measure disclosed above.
($M)
Current assets
Current derivative asset
Current liabilities
Current lease liability
Current derivative liability
Adjusted working capital
As at
Dec 31, 2023
823,514
(313,792)
(696,074)
21,068
732
(164,552)
Dec 31, 2022
714,446
(162,843)
(892,045)
19,486
55,845
(265,111)
Capital expenditures: Calculated as the sum of drilling and development costs and exploration and evaluation costs from the Consolidated
Statements of Cash Flows and most directly comparable to cash flows used in investing activities. We consider capital expenditures to be a useful
measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital.
($M)
Drilling and development
Exploration and evaluation
Capital expenditures
Q4 2023
132,308
10,579
142,887
Q4 2022
157,849
11,456
169,305
2023
569,110
21,081
590,191
2022
528,056
23,761
551,817
Operating netback: Most directly comparable to net (loss) earnings and is calculated as sales less royalties, operating expense, transportation
costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the
profitability and efficiency of our field operations.
Payout and payout % of FFO: A non-GAAP financial measure and non-GAAP ratio respectively most directly comparable to dividends declared.
Payout is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations
settled. The measure is used to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining
production and organic growth. The reconciliation of the measure to primary financial statement measure can be found below. Management uses
payout and payout as a percentage of FFO (also referred to as the payout or sustainability ratio).
($M)
Dividends Declared
Drilling and development
Exploration and evaluation
Asset retirement obligations settled
Payout
% of fund flows from operations
Q4 2023
16,227
132,308
10,579
28,937
188,051
Q4 2022
13,058
157,849
11,456
16,508
198,871
2023
2022
65,248
569,110
21,081
56,966
712,405
45,769
528,056
23,761
37,514
635,100
51 %
70 %
62 %
39 %
Acquisitions: The sum of acquisitions and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares
issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net
Vermilion Energy Inc. ■ Page 13 ■ 2023 Annual Report
acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment
associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions
line items in the Consolidated Statements of Cash Flows can be found below.
($M)
Acquisitions, net of cash acquired
Acquisition of securities
Acquired working capital deficit
Acquisitions
Capital Management Measure
Q4 2023
Q4 2022
2,669
17,448
5,607
25,724
3,594
964
—
4,558
2023
142,281
21,603
109,134
273,018
2022
510,309
23,282
6,122
539,713
Net debt: Is in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is
comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital and represents
Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations.
($M)
Long-term debt
Adjusted working capital
Unrealized FX on swapped USD borrowings
Net debt
As at
Dec 31, 2023
914,015
164,552
—
1,078,567
Dec 31, 2022
1,081,351
265,111
(1,876)
1,344,586
Ratio of net debt to four quarter trailing fund flows from operations
0.9
0.8
Supplementary Financial Measures
Net debt to four quarter trailing fund flows from operations: Calculated as net debt (capital management measure) over the FFO (total of
segments measure) from the preceding four quarters. The measure is used to assess the ability to repay debt.
Dividends % of FFO: Calculated as dividends declared divided by FFO (total of segments measure). The measure is used by management as a
metric to assess the cash distributed to shareholders.
Fund flows from operations per boe: Calculated as FFO (total of segments measure) by boe production. Fund flows from operations per boe is
used by management to assess the profitability of our business units and Vermilion as a whole.
Vermilion Energy Inc. ■ Page 14 ■ 2023 Annual Report
Management's Discussion and Analysis
The following is Management’s Discussion and Analysis (“MD&A”), dated March 6, 2024, of Vermilion Energy Inc.’s (“Vermilion”, “we”, “our”, “us” or
the “Company”) operating and financial results as at and for the three months and year ended December 31, 2023 compared with the corresponding
periods in the prior year.
This discussion should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 and 2022,
together with the accompanying notes. Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR+
at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.
The audited consolidated financial statements for the year ended December 31, 2023 and comparative information have been prepared in Canadian
dollars and in accordance with International Financial Reporting Standards (“IFRS” or, alternatively, “GAAP”) as issued by the International
Accounting Standards Board ("IASB").
This MD&A includes references to certain financial measures which are not specified, defined, or determined under IFRS and are therefore
considered non-GAAP and other specified financial measures. These financial measures are unlikely to be comparable to similar financial measures
presented by other issuers. For a full description of these non-GAAP and other specified financial measures and a reconciliation of these measures
to their most directly comparable GAAP measures, please refer to “Non-GAAP and Other Specified Financial Measures”.
Product Type Disclosure
Under National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities", disclosure of production volumes should include
segmentation by product type as defined in the instrument. In this report, references to "crude oil" and "light and medium crude oil" mean "light crude
oil and medium crude oil" and references to "natural gas" mean "conventional natural gas".
In addition, in Supplemental Table 4 "Production", Vermilion provides a reconciliation from total production volumes to product type and also a
reconciliation of "crude oil and condensate" and "NGLs" to the product types "light crude oil and medium crude oil" and "natural gas liquids".
Production volumes reported are based on quantities as measured at the first point of sale.
Vermilion Energy Inc. ■ Page 15 ■ 2023 Annual Report
Guidance
On January 6, 2023, we released our 2023 capital budget and associated production guidance, which incorporated the March 31, 2023 close date of
the acquisition of an incremental 36.5% interest in the Corrib Natural Gas Project (“Corrib”) in Ireland. On March 8, 2023, we decreased annual
production guidance to 82,000 to 86,000 boe/d to reflect the southeast Saskatchewan asset sale and unplanned downtime in Australia, and
decreased operating expense guidance to reflect the southeast Saskatchewan asset sale and lower European gas prices. On May 3, 2023, we
updated royalty rate guidance to include Netherlands windfall royalties, which were previously included in windfall tax guidance, and provided
revisions to 2023 guidance items to reflect the assumptions used in management's most recent forecast. On November 1, 2023, we increased
capital expenditure guidance by $20 million primarily due to the acceleration of some Montney development as a result of the timely receipt of
permits, and revised other 2023 guidance items to reflect the assumptions used in management's most recent forecast.
The Company’s guidance and results for 2023 are as follows:
Category
Production (boe/d)
E&D capital expenditures ($MM)
Royalty rate, including windfall royalties (% of sales) (2)
Operating ($/boe)
Transportation ($/boe)
General and administration ($/boe)
Cash taxes (% of pre-tax FFO)
Windfall tax, excluding windfall royalties (% of pre-tax FFO) (3)
2023 Guidance (1)
82,000 - 86,000
590
10 - 12%
$16.50 - 17.50
$2.75 - 3.25
$2.00 - 2.50
6 - 8%
8 - 10%
2023 Actual (1)
83,994
590
9.5%
$17.03
$2.95
$2.68
5.5%
6.0%
On December 12, 2023, we released our 2024 capital budget and associated production guidance, which assumes a mid-year startup of the new BC
Montney battery and Croatia gas plant. The Company’s guidance for 2024 is as follows:
Category
Production (boe/d)
E&D capital expenditures ($MM)
Royalty rate (% of sales)
Operating ($/boe)
Transportation ($/boe)
General and administration ($/boe)
Cash taxes (% of pre-tax FFO)
Asset retirement obligations settled ($MM)
Payments on lease obligations ($MM) (4)
2024 Guidance (1)
82,000 - 86,000
$600 - 625
7 - 9%
$17.00 - 18.00
$3.00 - 3.50
$2.50 - 3.00
5 - 7%
$60
$30 - 60
(1)
(2)
Final 2023 guidance reflects foreign exchange assumptions of CAD/USD 1.35, CAD/EUR 1.46, and CAD/AUD 0.89. Actual 2023 results reflects foreign
exchange rates of CAD/USD 1.35, CAD/EUR 1.46, and CAD/AUD 0.90. Current 2024 guidance reflects foreign exchange assumptions of CAD/USD 1.35,
CAD/EUR 1.47, and CAD/AUD 0.89.
Royalty rate guidance includes the temporary windfall royalty that was enacted by the Netherlands in the fourth quarter of 2022. This royalty applies to 2023 and
2024 and, for natural gas sales, is calculated as 65% of the excess of the realized price for a subject year versus the threshold price of €0.50/Nm3 (€13.40/mcf).
This royalty is deductible against current income taxes.
(3) Windfall tax guidance incorporates windfall taxes as legislated in EU member states in which Vermilion does business. Windfall royalties in the Netherlands are
(4)
excluded from windfall tax guidance, and have been included in royalty rate guidance, above.
Payments on lease obligations includes contractual amounts owing on leases, as well as up to $30 million to account for accelerated principal payments that
may be made in 2024.
Vermilion Energy Inc. ■ Page 16 ■ 2023 Annual Report
Vermilion's Business
Vermilion is a Calgary, Alberta-based international oil and gas producer focused on the acquisition, exploration, development, and optimization of
producing properties in North America, Europe, and Australia. We manage our business through our Calgary head office and our international
business unit offices.
Vermilion Energy Inc. ■ Page 17 ■ 2023 Annual Report
2023 production of 83,994 boe/dNorth America: 67%International: 33%2023 capital expenditures of $590.2MMNorth America: 64%International: 36%2023 fund flows from operations of $1,142.6MMNorth America: 47%International: 53% Consolidated Results Overview
Production (1)
Crude oil and condensate (bbls/d)
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
Build (draw) in inventory (mbbls)
Financial metrics
Fund flows from operations ($M) (2)
Per share ($/basic share)
Net (loss) earnings ($M)
Per share ($/basic share)
Cash flows from operating activities ($M)
Free cash flow ($M) (3)
Long-term debt ($M)
Net debt ($M) (4)
Activity
Capital expenditures ($M) (5)
Acquisitions ($M) (6)
Dispositions ($M)
Q4 2023
Q4 2022
Q4/23 vs.
Q4/22
2023
2022
2023 vs.
2022
32,866
7,412
283.91
87,597
442
38,915
7,497
234.23
85,450
(242)
372,117
284,220
1.74
2.27
395,408
(803,136)
2.42
(4.91)
495,195
343,831
229,230
114,915
914,015 1,081,351
1,078,567 1,344,586
142,887
25,724
14,855
169,305
4,558
—
(16)%
(1)%
21%
3%
31%
31%
N/A
N/A
(31)%
100%
(16)%
(20)%
(16)%
31,727
7,296
269.83
83,994
513
37,530
7,961
238.18
85,187
39
6.98
(1.45)
1,142,611 1,634,865
10.00
(237,587) 1,313,062
8.03
1,024,528 1,814,220
552,420 1,083,048
914,015 1,081,351
1,078,567 1,344,586
590,191
273,018
197,007
551,817
539,713
—
(16)%
(8)%
13%
(1)%
(30)%
(30)%
N/A
N/A
(44)%
(49)%
(16)%
(20)%
7%
(1)
(2)
(3)
(4)
(5)
(6)
Please refer to Supplemental Table 4 "Production" for disclosure by product type.
Fund flows from operations (FFO) and FFO per share are a total of segments measure and supplementary financial measure respectively most directly
comparable to net (loss) earnings and net (loss) earnings per share, respectively. The measures do not have a standardized meaning under IFRS and therefore
may not be comparable to similar measures presented by other issuers. FFO is comprised of sales less royalties, transportation, operating, G&A, corporate
income tax, PRRT, windfall taxes, interest expense, and realized loss (gain) on derivatives, plus realized gain (loss) on foreign exchange and realized other
income (expense). The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends,
repay debt, fund asset retirement obligations and make capital investments. A reconciliation to the primary financial statement measures can be found within the
"Non-GAAP and Other Specified Financial Measures" section of this MD&A.
Free cash flow (FCF) is a non-GAAP financial measure most directly comparable to cash flows from operating activities; it does not have a standardized
meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. FCF is comprised of fund flows from operations less
drilling and development costs and exploration and evaluation costs. The measure is used to determine the funding available for investing and financing
activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. A
reconciliation to primary financial statement measures can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A.
Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt.
Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current
assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after adjusting for
the timing of working capital fluctuations. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. A reconciliation to the
primary financial statement measures can be found within the "Financial Position Review" section of this MD&A.
Capital expenditures is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. The measure is calculated as the sum of drilling and development costs and exploration and evaluation costs from the
Consolidated Statements of Cash Flows. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital
expenditures are also referred to as E&D capital. A reconciliation to the primary financial statement measures can be found within the "Non-GAAP and Other
Specified Financial Measures" section of this MD&A.
Acquisitions is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. The measure is calculated as the sum of acquisitions, net of cash and acquisitions of securities from the Consolidated
Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's
outstanding long-term debt assumed, and net acquired working capital deficit or surplus. We believe that including these components provides a useful
measure of the economic investment associated with our acquisition activity. A reconciliation to the acquisitions line item in the Consolidated Statements of
Cash Flows can be found in "Supplemental Table 3: Capital Expenditures and Acquisitions" section of this MD&A.
Vermilion Energy Inc. ■ Page 18 ■ 2023 Annual Report
Financial performance review
Q4 2023 vs. Q4 2022
• We recorded net loss of $803.1 million ($(4.91)/basic share) for Q4 2023 compared to $395.4 million ($2.42/basic share) in Q4 2022. The
increase in net loss was primarily due to impairment charges of $1.0 billion and decreases in unrealized derivative gains of $408.6 million due to
changes in our mark-to-market position. The increase to net loss was partially offset by higher fund flows from operations primarily driven by a
reduction in windfall tax expense in the quarter due to timing of recognition at the end of 2022 compared to throughout 2023.
Vermilion Energy Inc. ■ Page 19 ■ 2023 Annual Report
"Other" contains equity based compensation, accretion, unrealized other, and gain on business combination$MMNet loss of $803.1MM in Q4 2023 compared to net earnings of $395.4MM in Q4 2022$395.4$307.5$87.9$(1,016.1)$(356.3)$(125.5)$(87.1)$(8.9)$(803.1)Q4 2022Deferred taxFund flows from operationsImpairmentUnrealized derivatives, foreign exchangeLoss on dispositionDepletion and depreciationOtherQ4 2023-1,000-5000500 • We generated cash flows from operating activities of $343.8 million in Q4 2023 compared to $495.2 million in Q4 2022 and fund flows from
operations of $372.1 million in Q4 2023 compared to $284.2 million in Q4 2022. The increase in fund flows from operations was primarily driven
by timing of windfall taxes, and partially offset by lower commodity prices. The variance between cash flows from operating activities and fund
flows from operations is primarily due to non-cash working capital impacts of the full year windfall taxes payable recorded on higher pricing in
the last quarter of 2022.
2023 vs. 2022
Vermilion Energy Inc. ■ Page 20 ■ 2023 Annual Report
"Pricing net of derivatives" contains pricing variance on sales volumes (WTI, AECO, Dated Brent & TTF and NBP) and realized derivatives. "Sales volume" is the sum of sales volume variance in all regions. "Other" contains transportation, operating expense, general and administration, interest, realized foreign exchange, and other realized income.$MMIncreased FFO driven by lower windfall taxes. Decreased cash flows from operating activities driven by working capital timing. $284.2$222.6$48.5$23.2$(150.4)$(46.6)$(9.4)$372.1$495.2$343.8Cash flows from operating activitiesQ4 2022 - FFOWindfall taxesTaxesRoyaltiesPricing net of derivativesSales volumeOtherQ4 2023 - FFO200300400500600"Other" contains equity based compensation, depletion and depreciation, and unrealized other$MMNet loss of $237.6MM in 2023 compared to $1,313.1MM in 2022$1,313.1$478.9$439.5$(1,208.2)$(492.3)$(352.4)$(264.2)$(152.0)$(237.6)2022Deferred taxGain on business combinationsImpairmentFund flows from operationsLoss on sale of assetsUnrealized derivatives, foreign exchangeOther2023-50005001,0001,5002,000 •
For the year ended December 31, 2023, we recorded net loss of $237.6 million compared to net earnings of $1,313.1 million for the comparable
period in 2022. The net loss was primarily due to impairment charges of $1.0 billion compared to impairment reversal of $192.1 million, a
decrease in FFO driven by lower commodity prices and lower production, and the loss recognized on the sale of assets. This was partially offset
by the gain recognized on the Corrib acquisition.
•
For the year ended December 31, 2023 as compared to 2022, cash flows from operating activities decreased by $789.7 million to $1,024.5
million and fund flows from operations decreased by $492.3 million to $1,142.6 million. The decrease in fund flows from operations was
primarily driven by a 40% decrease in our consolidated realized price from $111.95/boe to $67.10/boe, and a decrease in sales volumes
primarily driven by the Australian Wandoo platform shutdown for the first three quarters of the year. This was partially offset by decreases in tax
expense, windfall tax expense and royalties due to the pricing and sales volume changes. Variances between cash flows from operating
activities and funds flow from operations are primarily driven by working capital timing differences.
Production review
Q4 2023 vs. Q4 2022
•
Consolidated average production of 87,597 boe/d in Q4 2023 increased compared to Q4 2022 production of 85,450 boe/d. Production
increased primarily due to the acquired 36.5% interest in the Corrib Natural Gas Project in 2023 and new production from our Mica Montney
development, partially offset by the sale of non-core assets in southeast Saskatchewan and natural declines.
2023 vs. 2022
•
Consolidated average production of 83,994 boe/d in the year ended December 31, 2023 decreased compared to the prior year comparative
period production of 85,187 boe/d. Production decreased primarily due to unplanned downtime in Australia partially offset by increased
production in Ireland due to the acquisition of an additional 36.5% interest in the Corrib Natural Gas Project. Production in Canada was
relatively flat as growth in the Mica Montney assets offset unplanned downtime due to wildfires in the Deep Basin and the sale of non-core
assets in southeast Saskatchewan.
Vermilion Energy Inc. ■ Page 21 ■ 2023 Annual Report
"Pricing net of derivatives" contains pricing variance on sales volumes (WTI, AECO, Dated Brent & TTF and NBP) and realized derivatives. "Sales volume" is the sum of sales volume variance in all regions. "Other" contains general and administration, interest, realized foreign exchange, and other realized income.$MMCash flows from operating activities and funds flow from operations decreased on lower commodity prices$1,634.9$155.4$144.4$80.0$(633.2)$(180.4)$(58.5)$1,142.6$1,814.2$1,024.5Cash flows from operating activities2022 - FFOTaxesWindfall taxesRoyalties, transportation, operating expensePricing net of derivativesSales volumeOther2023 - FFO1,0001,2001,4001,6001,8002,000 Activity review
•
•
•
For the three months ended December 31, 2023, capital expenditures were $142.9 million.
In our North America core region, we invested capital expenditures of $58.7 million. In Canada, capital expenditures totaled $53.8 million as we
drilled five (5.0 net), completed five (5.0 net), and brought on production four (4.0 net) Mannville liquids rich conventional natural gas wells in the
Deep Basin. At Mica we drilled the initial four (4.0 net) Montney liquids-rich shale gas wells on our BC lands as part of our winter drilling
program in advance of the expected start-up of our 8-33 BC battery in mid-2024. In Saskatchewan, we completed and brought on production
one (1.0 net) light and medium crude oil well. In the United States, $4.9 million was incurred as we participated in the drilling of six (2.0 net) non-
operated light and medium crude oil wells in Wyoming.
In our International core region, capital expenditures of $84.2 million were invested during Q4 2023. In the Netherlands and France, we invested
$10.8 million and $11.2 million, respectively, primarily on facilities and subsurface maintenance activities. In Germany, we invested $33.0 million
as we advanced our deep gas exploration and development plans and commenced drilling activities. In Ireland, $11.9 million was invested on
our Corrib plant refrigeration project. In Australia, $9.3 million was invested as we preformed routine maintenance and workover activities. In
Central and Eastern Europe, $8.0 million was invested on construction for the gas plant on the SA-10 block and site preparation for the
upcoming drilling program on the SA-7 block.
Financial sustainability review
Free cash flow
•
Free cash flow of $552.4 million decreased by $530.6 million for the year ended December 31, 2023 compared to the prior year period primarily
driven by decreased fund flows from operations on lower pricing, lower production and sales volumes, and higher expenditures on drilling and
development activities.
Long-term debt and net debt
•
Long-term debt decreased to $0.9 billion as at December 31, 2023 from $1.1 billion as at December 31, 2022 primarily as a result of revolving
credit facility repayments of $146.3 million.
As at December 31, 2023, net debt decreased to $1.1 billion (December 31, 2022 - $1.3 billion), primarily as a result of revolving credit facility
net repayments of $146.3 million, funded by the disposition of our southeast Saskatchewan assets for $182.2 million, and $552.4 million of free
cash flow generated during the year, and offset by spend on acquisition activities primarily due to the purchase of an additional 36.5% working
interest in our operated Corrib project for $192.4 million (net of cash and working capital deficit acquired).
The ratio of net debt to four quarter trailing fund flows from operations(1) increased to 0.9 as at December 31, 2023 (December 31, 2022 - 0.8)
primarily due to lower four quarter trailing fund flows from operations on lower prices and lower production.
•
•
(1)
Net debt to four quarter trailing fund flows from operations is a supplementary financial measure that does not have a standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by other issuers. It is calculated as net debt (capital measure) over the FFO from the preceding
four quarters (total of segments measure). The measure is used to assess our ability to repay debt.
Vermilion Energy Inc. ■ Page 22 ■ 2023 Annual Report
Benchmark Commodity Prices
Crude oil
WTI ($/bbl)
WTI (US $/bbl)
Edmonton Sweet index ($/bbl)
Edmonton Sweet index (US $/bbl)
Saskatchewan LSB index ($/bbl)
Saskatchewan LSB index (US $/bbl)
Canadian C5+ Condensate index ($/bbl)
Canadian C5+ Condensate index (US $/bbl)
Dated Brent ($/bbl)
Dated Brent (US $/bbl)
Natural gas
North America
AECO 5A ($/mcf)
Henry Hub ($/mcf)
Henry Hub (US $/mcf)
Europe(1)
NBP Day Ahead ($/mmbtu)
NBP Month Ahead ($/mmbtu)
NBP Day Ahead (€/mmbtu)
NBP Month Ahead (€/mmbtu)
TTF Day Ahead ($/mmbtu)
TTF Month Ahead ($/mmbtu)
TTF Day Ahead (€/mmbtu)
TTF Month Ahead (€/mmbtu)
Average exchange rates
CDN $/US $
CDN $/Euro
Realized prices
Crude oil and condensate ($/bbl)
NGLs ($/bbl)
Natural gas ($/mcf)
Total ($/boe)
(1)
Q4 2023
Q4 2022
Q4/23 vs.
Q4/22
2023
2022
2023 vs.
2022
106.67
78.32
99.60
73.13
97.12
71.31
103.83
76.24
114.46
84.05
2.30
3.92
2.88
16.69
18.32
11.38
12.50
17.45
18.51
11.90
12.63
1.36
1.47
112.24
82.65
109.85
80.89
106.05
78.09
113.19
83.35
120.47
88.71
4.64
8.50
6.26
26.09
43.51
18.82
31.38
38.36
49.98
27.67
36.05
1.36
1.39
107.91
33.38
8.48
68.64
115.02
39.93
17.43
103.99
(5)%
(5)%
(9)%
(10)%
(8)%
(9)%
(8)%
(9)%
(5)%
(5)%
(50)%
(54)%
(54)%
(36)%
(58)%
(40)%
(60)%
(55)%
(63)%
(57)%
(65)%
—%
6%
(6)%
(16)%
(51)%
(34)%
104.77
77.63
100.37
74.36
97.97
72.59
103.38
76.60
111.51
82.62
2.64
4.00
2.74
16.63
19.85
11.39
13.60
17.40
20.52
11.92
14.06
1.35
1.46
122.62
94.23
120.25
92.41
118.22
90.85
121.96
93.72
131.68
101.19
5.25
8.67
6.66
31.78
41.44
23.21
30.26
48.35
52.59
35.30
38.40
1.30
1.37
102.43
31.54
8.17
67.10
123.89
45.95
18.99
111.95
(15)%
(18)%
(17)%
(20)%
(17)%
(20)%
(15)%
(18)%
(15)%
(18)%
(50)%
(54)%
(59)%
(48)%
(52)%
(51)%
(55)%
(64)%
(61)%
(66)%
(63)%
4%
7%
(17)%
(31)%
(57)%
(40)%
NBP and TTF pricing can occur on a day-ahead ("DA") or month-ahead ("MA") basis. DA prices in a period reflect the average current day settled price on the
next days' delivery and MA prices in a period represent daily one month futures contract prices which are determined at the end of each month. In a rising price
environment, the DA price will tend to be greater than the MA price and vice versa. Natural gas in the Netherlands and Germany is benchmarked to the TTF
and production is generally equally split between DA and MA contracts. Natural gas in Ireland is benchmarked to the NBP and is sold on DA contracts.
As an internationally diversified producer, we are exposed to a range of commodity prices. In our North America core region, our crude oil is sold at
benchmarks linked to WTI (including the Edmonton Sweet index, the Saskatchewan LSB index, and the Canadian C5+ index) and our natural gas is
sold at benchmarks linked to the AECO index (in Canada) or the Henry Hub ("HH") index (in the United States). In our International core region, our
crude oil is sold with reference to Dated Brent and our natural gas is sold with reference to NBP, TTF, or indices highly correlated to TTF.
Vermilion Energy Inc. ■ Page 23 ■ 2023 Annual Report
•
•
•
•
•
•
Crude oil prices decreased in Q4 2023 relative to Q4 2022 after US production rose above expectations, which offset price support from
improved demand growth and heightened geopolitical risks. Canadian dollar WTI and Brent prices both decreased by 5% in Q4 2023
relative to Q4 2022.
In Canadian dollar terms, year-over-year, the Edmonton Sweet differential widened by $4.68/bbl to a discount of $7.07/bbl against WTI,
and the Saskatchewan LSB differential widened by $3.36/bbl to a discount of $9.55/bbl against WTI.
Approximately 34% of Vermilion’s Q4 2023 crude oil and condensate production was priced at the Dated Brent index, which averaged a
premium to WTI of US$5.73/bbl, while the remainder of our crude oil and condensate production was priced at the Saskatchewan LSB,
Canadian C5+, Edmonton Sweet, and WTI indices.
In Canadian dollar terms, year-over-year, prices for European natural gas linked to NBP and TTF decreased by 36% and 55% respectively
on a day-ahead basis. On a month ahead basis, NBP and TTF decreased by 58% and 63% respectively. Prices declined in response to
low seasonal and industrial demand in Europe, strong LNG import volumes and historically high storage levels. While prices are off their
Q3 2022 highs, they remained elevated compared to historical levels due to lost Russian pipeline supply, global LNG imports
competitiveness, and weather related risk premiums.
Year-over-year natural gas prices in Canadian dollar terms at NYMEX HH, and AECO decreased by 54% and 50% respectively. Both
NYMEX HH and AECO prices declined due to strong production growth, weak seasonal demand and historically high storage levels.
For Q4 2023, average European natural gas prices represented a $15.44/mcf premium to AECO. Approximately 41% of our natural gas
production in Q4 2023 benefited from this premium European pricing.
Vermilion Energy Inc. ■ Page 24 ■ 2023 Annual Report
$/bblQ4 2023 realized crude oil and condensate price was a $8.31/bbl premium to Edmonton Sweet IndexDated Brent (34% of Q4 2023 sales volumes)WTI (11% of Q4 2023 sales volumes)Canadian C5+ (14% of Q4 2023 sales volumes)Crude oil and condensate realized priceSaskatchewan LSB (30% of Q4 2023 sales volumes)Edmonton Sweet index (11% of Q4 2023 sales volumes)Q4 2022Q4 2022Q1 2023Q2 2023Q4 202390.00100.00110.00120.00130.00$/mcfQ4 2023 realized natural gas price was a $6.18/mcf premium to AECONBP DA (23% of Q4 2023 sales volumes)TTF DA (18% of Q4 2023 sales volumes)Natural gas realized priceHenry Hub (3% of Q4 2023 sales volumes)AECO (5A) (56% of Q4 2023 sales volumes)Q4 2022Q4 2022Q1 2023Q2 2023Q4 20230.0010.0020.0030.0040.00 North America
Production (1)
Crude oil and condensate (bbls/d)
NGLs (bbls/d)
Natural gas (mmcf/d)
Total production volume (boe/d)
(1)
Q4 2023
Q4 2022
2023
2022
18,862
7,412
167.65
54,216
25,291
7,497
154.26
58,499
20,925
7,296
168.22
56,257
24,393
7,961
151.30
57,571
Please refer to Supplemental Table 4 "Production" for disclosure by product type.
Sales
Royalties
Transportation
Operating
General and administration (1)
Corporate income tax expense (1)
Fund flows from operations
Drilling and development
Free cash flow
(1)
Includes amounts from Corporate segment.
Q4 2023
$M
236,969
(36,186)
(12,151)
(57,368)
4,338
1,164
136,766
(58,704)
78,062
$/boe
47.51
(7.25)
(2.44)
(11.50)
0.87
0.23
27.42
Q4 2022
$M
360,295
(50,945)
(13,014)
(72,694)
513
(712)
223,443
(113,892)
109,551
2023
$M
$/boe
66.95 1,012,549
(144,998)
(9.47)
(43,914)
(2.42)
(256,841)
(13.51)
(4,267)
0.10
(20)
(0.13)
562,509
41.52
(380,200)
182,309
2022
$M
$/boe
49.31 1,510,517
(240,432)
(7.06)
(2.14)
(45,467)
(268,271)
(12.51)
(20,651)
(0.21)
(1,011)
—
934,685
27.39
(338,556)
596,129
$/boe
71.88
(11.44)
(2.16)
(12.77)
(0.98)
(0.05)
44.48
Production from our North American operations averaged 54,216 boe/d in Q4 2023, a decrease of 4% from the previous quarter due to natural
declines in both Canada and the United States.
In the Deep Basin, we drilled five (5.0 net), completed five (5.0 net), and brought on production four (4.0 net) Mannville liquids rich conventional
natural gas wells. At Mica we drilled the initial four (4.0 net) Montney liquids-rich shale gas wells on our BC lands as part of our winter drilling
program in advance of the expected start-up of our 8-33 BC battery in mid-2024. In Saskatchewan, we completed and brought on production one
(1.0 net) light and medium crude oil well, while in the United States, we participated in the drilling of six (2.0 net) non-operated light and medium
crude oil wells in Wyoming.
Sales
Canada
United States
North America
Q4 2023
$M
200,102
36,867
236,969
$/boe
44.73
71.65
47.51
Q4 2022
$M
315,897
44,398
360,295
2023
$M
$/boe
861,391
65.13
151,158
83.51
66.95 1,012,549
2022
$M
$/boe
46.73 1,344,284
166,233
71.97
49.31 1,510,517
$/boe
70.33
87.46
71.88
Sales in North America decreased for the three months and year ended December 31, 2023 versus the comparable prior year periods due to lower
realized prices and a decrease in production.
Vermilion Energy Inc. ■ Page 25 ■ 2023 Annual Report
Royalties
Canada
United States
North America
Q4 2023
$M
(25,759)
(10,427)
(36,186)
$/boe
(5.76)
(20.27)
(7.25)
Q4 2022
$M
(38,747)
(12,198)
(50,945)
$/boe
(7.99)
(22.94)
(9.47)
2023
$M
(103,511)
(41,487)
(144,998)
$/boe
(5.62)
(19.75)
(7.06)
2022
$M
(196,005)
(44,427)
(240,432)
$/boe
(10.26)
(23.38)
(11.44)
Royalties in North America decreased on a dollar and per unit basis for the three months and year ended December 31, 2023 versus the comparable
prior year periods primarily due to decreased sliding scale royalties on lower commodity prices and lower production. Royalties as a percentage of
sales for the three months and year ended December 31, 2023 were 15.3% and 14.3% respectively, compared to the prior year comparative period
of 14.1%. and 15.9% respectively.
Transportation
Canada
United States
North America
Q4 2023
$M
(11,701)
(450)
(12,151)
$/boe
(2.62)
(0.87)
(2.44)
Q4 2022
$M
(12,919)
(95)
(13,014)
$/boe
(2.66)
(0.18)
(2.42)
2023
$M
(43,163)
(751)
(43,914)
$/boe
(2.34)
(0.36)
(2.14)
2022
$M
(44,849)
(618)
(45,467)
$/boe
(2.35)
(0.33)
(2.16)
Transportation expense in North America remained relatively flat on a dollar and per boe basis for the three months and year ended December 31,
2023 versus the comparable prior periods.
Operating expense
Canada
United States
North America
Q4 2023
$M
(51,129)
(6,239)
(57,368)
$/boe
(11.43)
(12.13)
(11.50)
Q4 2022
$M
(63,305)
(9,389)
(72,694)
$/boe
(13.05)
(17.66)
(13.51)
2023
$M
(233,417)
(23,424)
(256,841)
$/boe
(12.66)
(11.15)
(12.51)
2022
$M
(240,899)
(27,372)
(268,271)
$/boe
(12.60)
(14.40)
(12.77)
Operating expenses in North America decreased on a dollar and per boe basis for the three months and year ended December 31, 2023 compared
to the prior year period primarily the disposition of the properties in southeast Saskatchewan in Q1 2023 combined with lower routine maintenance
costs in the United States and lower fuel and electricity costs in Canada.
Vermilion Energy Inc. ■ Page 26 ■ 2023 Annual Report
International
Production (1)
Crude oil and condensate (bbls/d)
Natural gas (mmcf/d)
Total production volume (boe/d)
Total sales volume (boe/d)
(1)
Q4 2023
Q4 2022
2023
2022
14,004
116.27
33,381
28,598
13,624
79.97
26,953
29,585
10,802
101.61
27,737
26,330
13,135
86.88
27,616
27,506
Please refer to Supplemental Table 4 "Production" for disclosure by product type.
Sales
Royalties
Transportation
Operating
General and administration
Corporate income tax expense
PRRT
Fund flows from operations
Drilling and development
Exploration and evaluation
Free cash flow
$/boe
108.70
(3.41)
(3.91)
(22.64)
(9.18)
(7.81)
7.93
69.68
Q4 2023
$M
286,000
(8,962)
(10,290)
(59,569)
(24,148)
(20,538)
20,860
183,353
(73,604)
(10,579)
99,170
Q4 2022
$M
$/boe
2023
$M
482,398
(17,358)
(8,962)
(63,553)
(13,857)
(41,246)
(5,045)
332,377
(43,957)
(11,456)
276,964
(6.38)
(3.29)
(23.35)
(5.09)
(15.15)
(1.85)
122.12
177.23 1,010,006
(46,696)
(44,942)
(256,540)
(76,449)
(91,912)
20,860
514,327
(188,910)
(21,081)
304,336
2022
$M
$/boe
105.09 1,965,877
(65,585)
(4.86)
(33,429)
(4.68)
(220,763)
(26.69)
(37,026)
(7.95)
(207,142)
(9.56)
2.17
(18,318)
53.52 1,383,614
(189,500)
(23,761)
1,170,353
$/boe
195.81
(6.53)
(3.33)
(21.99)
(3.69)
(20.63)
(1.82)
137.82
Production from our International operations averaged 33,381 boe/d in Q4 2023, an increase of 29% over the previous quarter primarily due to a full
quarter of production at our Australia and Ireland operations following maintenance downtime in the prior quarter, as well as increased production in
the Netherlands due to new production from our 2023 drilling program.
We continued to advance our deep gas exploration and development plans in Germany, with drilling operations nearly complete on our first well of
our program. We expect to reach total depth in the coming weeks and will then move the rig to the next location, where the second well of our
program will be drilled during Q2 2024.
Sales
Australia
France
Netherlands
Germany
Ireland
Central and Eastern Europe
International
Q4 2023
$M
36,381
52,472
51,661
44,150
100,430
906
286,000
$/boe
143.69
116.92
102.80
101.18
102.28
109.42
108.70
Q4 2022
$M
95,420
77,910
119,668
121,011
64,753
3,636
482,398
$/boe
139.95
119.68
281.75
218.13
162.16
356.05
177.23
2023
$M
36,381
285,626
186,854
195,481
302,404
3,260
1,010,006
$/boe
143.69
109.47
107.38
104.26
97.24
141.77
105.09
2022
$M
221,187
365,431
562,857
481,260
324,345
10,797
1,965,877
$/boe
148.15
132.90
279.87
231.34
194.05
313.02
195.81
As a result of changes in inventory levels, our sales volumes for crude oil in Australia, France, and Germany may differ from our production volumes
in those business units. The following table provides the crude oil sales volumes (consisting entirely of "light crude oil and medium crude oil") for
those jurisdictions.
Crude oil sales volumes (bbls/d)
Australia
France
Germany
International
Q4 2023
2,752
4,878
1,472
9,102
Q4 2022
7,411
7,076
1,721
16,208
2023
694
7,149
1,481
9,324
2022
4,090
7,533
1,337
12,960
Vermilion Energy Inc. ■ Page 27 ■ 2023 Annual Report
Sales decreased on a dollar and per unit basis for the three months and year ended December 31, 2023 versus the prior year comparable periods
due to lower realized prices across all business units combined with lower sales volumes primarily due to downtime in Australia. For the three
months ended December 31, 2023, France sales decreased versus the prior year comparable period due to timing of scheduled vessels.
Royalties
France
Netherlands
Germany
Central and Eastern Europe
International
Q4 2023
$M
(7,150)
(692)
(736)
(384)
(8,962)
$/boe
(15.93)
(1.38)
(1.69)
(46.38)
(3.41)
Q4 2022
$M
(9,294)
(512)
(6,403)
(1,149)
(17,358)
$/boe
(14.28)
(1.21)
(11.54)
(112.51)
(6.38)
2023
$M
(37,425)
(1,567)
(5,993)
(1,711)
(46,696)
$/boe
(14.34)
(0.90)
(3.20)
(74.41)
(4.86)
2022
$M
(40,353)
(512)
(21,232)
(3,488)
(65,585)
$/boe
(14.68)
(0.25)
(10.21)
(101.12)
(6.53)
Royalties in our International core region are primarily incurred in France, Germany and the Netherlands, where royalties include charges based on a
percentage of sales and fixed per boe charges. Our production in Australia and Ireland is not subject to royalties.
Royalties decreased on a dollar and per unit basis for the three months and year ended December 31, 2023 versus the comparable prior period
primarily due to lower pricing, lower sales volumes, and adjustments for prior period royalties in Germany.
Transportation
France
Germany
Ireland
International
Q4 2023
$M
(5,745)
(3,486)
(1,059)
(10,290)
$/boe
(12.80)
(7.99)
(1.08)
(3.91)
Q4 2022
$M
(4,589)
(3,621)
(752)
(8,962)
$/boe
(7.05)
(6.53)
(1.88)
(3.29)
2023
$M
(24,511)
(13,333)
(7,098)
(44,942)
$/boe
(9.39)
(7.11)
(2.28)
(4.68)
2022
$M
(20,100)
(9,751)
(3,578)
(33,429)
$/boe
(7.31)
(4.69)
(2.14)
(3.33)
Transportation expense increased on a dollar and per unit basis for the three months and year ended December 31, 2023 versus the comparable
prior periods primarily due to increased volumes in Ireland on acquisition production, and higher vessel costs in France. In addition to the above, for
the year ended December 31, 2023, transportation expenses increased due to tariff adjustments in Germany.
Our production in Australia, Netherlands and Central and Eastern Europe is not subject to transportation expense.
Vermilion Energy Inc. ■ Page 28 ■ 2023 Annual Report
Operating expense
Australia
France
Netherlands
Germany
Ireland
Central and Eastern Europe
International
Q4 2023
$M
(10,677)
(17,021)
(9,143)
(8,233)
(13,948)
(547)
(59,569)
$/boe
(42.17)
(37.93)
(18.19)
(18.87)
(14.20)
(66.06)
(22.64)
Q4 2022
$M
(21,291)
(12,638)
(11,229)
(13,292)
(4,687)
(416)
(63,553)
$/boe
(31.23)
(19.41)
(26.44)
(23.96)
(11.74)
(40.74)
(23.35)
2023
$M
(52,360)
(80,134)
(39,157)
(43,857)
(39,464)
(1,568)
(256,540)
$/boe
(206.80)
(30.71)
(22.50)
(23.39)
(12.69)
(68.19)
(26.69)
2022
$M
(57,478)
(57,588)
(45,903)
(41,523)
(16,580)
(1,691)
(220,763)
$/boe
(38.50)
(20.94)
(22.82)
(19.96)
(9.92)
(49.03)
(21.99)
Operating expenses decreased for the three months ended December 31, 2023 primarily due to reduced volume driven costs on lower sales in
Australia due to downtime and fuel and electricity savings in Germany, partially offset by increased working interest acquired in Ireland, and higher
electricity costs in France.
Operating expenses increased for the year ended December 31, 2023 versus the prior comparable periods. On a dollar basis, increases were
primarily due to the increased working interest acquired in Ireland, higher electricity costs in France, and increased processing fees in Germany and
the Netherlands, partially offset by fuel and electricity savings in Germany and the Netherlands. On a per unit basis, the increase was primarily
attributable to the shut-in of our Wandoo platform in Australia for maintenance, resulting in limited production as the platform resumed operations in
early September and increased electricity rates in France.
Vermilion Energy Inc. ■ Page 29 ■ 2023 Annual Report
Consolidated Financial Performance Review
($M except per share)
Total assets
Long-term debt
Petroleum and natural gas sales
Net (loss) earnings
Net (loss) earnings per share
Basic
Diluted
Cash dividends ($/share)
Financial performance
Dec 31, 2023
Dec 31, 2022
6,235,821
914,015
2,022,555
(237,587)
6,991,058
1,081,351
3,476,394
1,313,062
Dec 31, 2021
5,905,323
1,651,569
2,079,761
1,148,696
(1.45)
(1.45)
0.40
8.03
7.80
0.28
7.13
6.97
—
Sales
Royalties
Transportation
Operating
General and administration
Corporate income tax expense
Windfall taxes
PRRT
Interest expense
Realized gain (loss) on derivatives
Realized foreign exchange (loss) gain
Realized other income (expense)
Fund flows from operations
Equity based compensation
Unrealized gain on derivative instruments (1)
Unrealized foreign exchange gain (loss) (1)
Accretion
Depletion and depreciation
Deferred tax recovery (expense)
Gain on business combination
Loss on disposition
Impairment (expense) reversal
Unrealized other income (expense) (1)
Net (loss) earnings
(1)
$/boe
111.95
(9.85)
(2.54)
(15.75)
(1.86)
(6.70)
(7.18)
(0.59)
(2.67)
(13.07)
0.49
0.42
52.65
$/boe
68.64
(5.93)
(2.95)
(15.35)
(2.60)
(2.54)
(0.03)
2.74
(3.01)
10.33
(0.73)
0.26
48.83
Q4 2023
$M
522,969
(45,148)
(22,441)
(116,937)
(19,810)
(19,374)
(249)
20,860
(22,909)
78,737
(5,529)
1,948
372,117
(7,871)
141,126
4,834
(19,469)
(259,012)
110,758
(5,607)
(125,539)
(1,016,094)
1,621
(803,136)
Q4 2022
$M
842,693
(68,303)
(21,976)
(136,247)
(13,344)
(41,958)
(222,859)
(5,045)
(22,506)
(43,940)
18,845
(1,140)
284,220
(5,377)
549,693
(47,405)
(16,501)
(171,926)
(196,733)
—
—
—
(563)
395,408
2023
$M
$/boe
103.99 2,022,555
(191,694)
(8.43)
(88,856)
(2.71)
(513,381)
(16.81)
(80,716)
(1.65)
(91,932)
(5.18)
(78,426)
(27.50)
20,860
(0.62)
(85,212)
(2.78)
234,365
(5.42)
(4,532)
2.33
(0.14)
(420)
35.08 1,142,611
(42,756)
179,707
12,438
(78,187)
(712,619)
190,193
439,487
(352,367)
(1,016,094)
—
(237,587)
2022
$M
$/boe
67.10 3,476,394
(306,017)
(6.36)
(2.95)
(78,896)
(489,034)
(17.03)
(57,677)
(2.68)
(208,153)
(3.05)
(222,859)
(2.60)
(18,318)
0.69
(82,858)
(2.83)
(405,894)
7.77
15,195
(0.15)
(0.01)
12,982
37.90 1,634,865
(44,390)
540,801
(84,464)
(58,170)
(577,134)
(288,707)
—
—
192,094
(1,833)
1,313,062
Unrealized gain on derivative instruments, Unrealized foreign exchange gain (loss), and Unrealized other expense are line items from the respective
Consolidated Statements of Cash Flows.
Fluctuations in fund flows from operations may occur as a result of changes in production levels, commodity prices, and costs to produce petroleum
and natural gas. In addition, fund flows from operations may be affected by the timing of crude oil shipments in Australia and France. When crude oil
inventory is built up, the related operating expense, royalties, and depletion expense are deferred and carried as inventory on the consolidated
balance sheet. When the crude oil inventory is subsequently drawn down, the related expenses are recognized within profit or loss.
General and administration
•
General and administration expense increased for the three months and year ended December 31, 2023 versus the prior year comparable
periods primarily due to increased activity and expected cash settlement of previously share-based settled expenses.
Vermilion Energy Inc. ■ Page 30 ■ 2023 Annual Report
PRRT and corporate income taxes
•
•
PRRT for the three months and year ended December 31, 2023 decreased versus the comparable prior periods due to downtime in
Australia resulting in PRRT recoveries from lower taxable income.
Corporate income taxes for the three months and year ended December 31, 2023 decreased versus the comparable prior periods primarily
due to lower taxable income as a result of decreased commodity prices in 2023.
Windfall taxes
• Windfall taxes are the temporary taxes levied pursuant to the European Union’s temporary solidarity contribution. The contribution set out
minimum amounts to be calculated on taxable profits starting in 2022 and/or 2023, which are above a 20% increase of the average yearly
taxable profits for 2018 to 2021. For the two-year period of this policy Vermilion incurred $301 million of incremental taxes.
Interest expense
•
•
Interest expense was consistent for the three months ended December 31, 2023 versus the comparable prior period.
Interest expense increased for the year ended December 31, 2023 versus the comparable prior period primarily due to an increase in the
percentage of our debt with fixed interest rates following the issuance of the 2030 senior unsecured notes, combined with the impact of a
weaker Canadian Dollar on US Dollar interest payments.
Realized gain or loss on derivatives
•
•
For the three months and year ended December 31, 2023, we recorded realized gains on our natural gas hedges due to lower commodity
pricing compared to the strike prices.
A listing of derivative positions as at December 31, 2023 is included in “Supplemental Table 2” of this MD&A.
Realized other income or expense
•
In the 2022 periods, realized other income related to amounts for the funding under the Saskatchewan Accelerated Site Closure program.
In the 2023 periods, realized other expense included insurance proceeds received related to insurance claims, offset by miscellaneous
transaction costs and other provisional charges.
Net (loss) earnings
Fluctuations in net (loss) earnings from period-to-period are caused by changes in both cash and non-cash based income and charges. Cash based
items are reflected in fund flows from operations. Non-cash items include: equity based compensation expense, unrealized gains and losses on
derivative instruments, unrealized foreign exchange gains and losses, accretion, depletion and depreciation expense, and deferred taxes. In
addition, non-cash items may also include gains resulting from business combinations or charges resulting from impairment or impairment reversals.
Equity based compensation
Equity based compensation expense relates primarily to non-cash compensation expense attributable to long-term incentives granted to directors,
officers, and employees under security-based arrangements. Equity based compensation expense decreased for the year ended December 31,
2023 versus the comparable prior period primarily due to the lower value of LTIP awards outstanding in the current period and lower bonuses under
the employee bonus plan in the current period.
Unrealized gain or loss on derivative instruments
Unrealized gain or loss on derivative instruments arises as a result of changes in forecasts for future prices and rates. As Vermilion uses derivative
instruments to manage the commodity price exposure of our future crude oil and natural gas production, we will normally recognize unrealized gains
on derivative instruments when future commodity price forecasts decline and vice-versa. As derivative instruments are settled, the unrealized gain or
loss previously recognized is reversed, and the settlement results in a realized gain or loss on derivative instruments.
For the three months ended December 31, 2023, we recognized a net unrealized gain on derivative instruments of $141.1 million. This consists of
unrealized gains of $73.4 million on our European natural gas commodity derivative instruments, $52.8 million on our North American crude oil
derivative instruments, $25.9 million on our North American gas commodity derivative instruments and $3.6 million on our USD-to-CAD foreign
exchange swaps, partially offset by losses of $14.6 million on our equity swaps.
For the year ended December 31, 2023, we recognized a net unrealized gain on derivative instruments of $179.7 million. This consists of unrealized
gains of $154.0 million on our European natural gas commodity derivative instruments, $29.2 million on our North American crude oil derivative
instruments, $24.7 million on our North American natural gas commodity derivative instruments and $1.7 million on our USD-to-CAD foreign
exchange swaps, partially offset by losses of $29.9 million on our equity swaps.
Vermilion Energy Inc. ■ Page 31 ■ 2023 Annual Report
Unrealized foreign exchange gains or losses
As a result of Vermilion’s international operations, Vermilion has monetary assets and liabilities denominated in currencies other than the Canadian
dollar. These monetary assets and liabilities include cash, receivables, payables, long-term debt, derivative instruments and intercompany loans.
Unrealized foreign exchange gains and losses result from translating these monetary assets and liabilities from their underlying currency to the
Canadian dollar.
In 2023, unrealized foreign exchange gains and losses primarily resulted from:
•
The translation of Euro denominated intercompany loans from our international subsidiaries to Vermilion Energy Inc. An appreciation in the Euro
against the Canadian dollar will result in an unrealized foreign exchange loss (and vice-versa). Under IFRS, the offsetting foreign exchange loss
or gain is recorded as a currency translation adjustment within other comprehensive income. As a result, consolidated comprehensive income
reflects the offsetting of these translation adjustments while net (loss) earnings reflects only the parent company's side of the translation.
The translation of our USD denominated 2025 senior unsecured notes and USD denominated 2030 senior unsecured notes.
•
For the three months ended December 31, 2023, we recognized a net unrealized foreign exchange gain of $4.8 million, primarily driven by the
effects of the US dollar weakening 2% against the Canadian dollar on our USD senior notes partially offset by the Euro strengthening 2% against the
Canadian dollar in Q4 2023 on our intercompany loans. For the year ended December 31, 2023, we recognized a net unrealized foreign exchange
gain of $12.4 million, primarily driven by an unrealized gain on our USD senior notes.
Accretion
Accretion expense is recognized to update the present value of the asset retirement obligation balance. For the three months and year ended
December 31, 2023, accretion expense increased versus the comparable prior periods primarily due to the impact of a higher asset retirement
obligation balance at December 31, 2023 and the strengthening of the Euro against the Canadian dollar.
Depletion and depreciation
Depletion and depreciation expense is recognized to allocate the cost of capital assets over the useful life of the respective assets. Depletion and
depreciation expense per unit of production is determined for each depletion unit (which are groups of assets within a specific production area that
have similar economic lives) by dividing the sum of the net book value of capital assets and future development costs by total proved plus probable
reserves.
Fluctuations in depletion and depreciation expense are primarily the result of changes in produced crude oil and natural gas volumes, and changes
in depletion and depreciation per unit. Fluctuations in depletion and depreciation per unit are the result of changes in reserves, depletable base (net
book value of capital assets and future development costs), and relative production mix.
Depletion and depreciation on a per boe basis for the three months ended December 31, 2023 of $34.00 increased from $21.22 in the comparable
prior period primarily due to higher future development costs increasing the depletable base, lower reserve estimates, and the strengthening of the
Euro against the Canadian dollar, partially offset by the southeast Saskatchewan disposition completed at the end of Q1 2023 decreasing the
depletable base.
Depletion and depreciation on a per boe basis for the year ended December 31, 2023 of $23.64 increased from $18.59 in the comparable prior
period primarily due to higher future development costs increasing the depletable base, lower reserve estimates, acquisition activity, and
strengthening of the Euro against the Canadian dollar.
Deferred tax
Deferred tax assets arise when the tax basis of an asset exceeds its accounting basis (known as a deductible temporary difference). Conversely,
deferred tax liabilities arise when the tax basis of an asset is less than its accounting basis (known as a taxable temporary difference). Deferred tax
assets are recognized only to the extent that it is probable that there are future taxable profits against which the deductible temporary difference can
be utilized. Deferred tax assets and liabilities are measured at the enacted or substantively enacted tax rate that is expected to apply when the asset
is realized, or the liability is settled.
As such, fluctuations in deferred tax expenses and recoveries primarily arise as a result of: changes in the accounting basis of an asset or liability
without a corresponding tax basis change (e.g. when derivative assets and liabilities are marked-to-market or when accounting depletion differs from
tax depletion), changes in available tax losses (e.g. if they are utilized to offset taxable income), changes in estimated future taxable profits resulting
in a derecognition or recognition of deferred tax assets, and changes in enacted or substantively enacted tax rates.
For the year ended December 31, 2023, the Company recorded a deferred tax recovery of $190.2 million compared to a deferred tax expense of
$288.7 million in the prior year period. The recovery recorded in the current year is primarily attributable to the Q1 2023 disposition of assets in
southeast Saskatchewan and the impairment charges recorded in Saskatchewan, France, and United States cash generating units (“CGUs”).
Vermilion Energy Inc. ■ Page 32 ■ 2023 Annual Report
Gain on business combination
On March 31, 2023, Vermilion purchased Equinor Energy Ireland Limited ("EEIL") from Equinor ASA. The acquisition adds an incremental 36.5%
interest in the Corrib Natural Gas Project, increasing Vermilion's operated interest to 56.5%. The acquisition makes Vermilion the largest provider of
domestic natural gas in Ireland.
The gain on the business combination primarily resulted from increases in working capital and the fair value of capital assets from when the
purchase and sale agreement was entered into in November 2021 and when the acquisition closed in March 2023.
Loss on dispositions
In March 2023, Vermilion sold non-core assets in southeast Saskatchewan for net proceeds of $182.2 million. The book value of the net assets
disposed of was $409.0 million resulting in a loss on disposition of $226.8 million.
In December 2023, Vermilion sold non-core assets in Wyoming for net proceeds of $16.3 million and resulted in a loss on disposition of $125.5
million. The book value of the net assets disposed of was $141.8 million and consisted of $142.5 million of capital assets and $0.7 million of asset
retirement obligations.
Impairment
In the fourth quarter of 2023, indicators of impairment were present in our France CGU due to changes in forecasted cost assumptions and in our
Saskatchewan and United States CGUs due to negative technical revisions. As a result of the indicators of impairment, the Company performed
impairment calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered
future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 13.0% for Saskatchewan and 15.0% for France and
United States. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $1.0 billion. Inputs
used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.
Vermilion Energy Inc. ■ Page 33 ■ 2023 Annual Report
Taxes
Current income tax rates
Vermilion typically pays corporate income taxes in France, Netherlands, Australia and Germany. In addition, Vermilion pays PRRT in Australia which
is a profit based tax applied at a rate of 40% on sales less operating expenses, capital expenditures, and other eligible expenditures. PRRT is
deductible in the calculation of taxable income in Australia.
For 2023 and 2022, taxable income was subject to corporate income tax at the following statutory rates:
Jurisdiction
Canada
United States
France
Netherlands (1)
Germany
Ireland
Australia
(1)
Jurisdiction
France (1)
Netherlands (2)
Germany
Ireland
(1)
2023
24.4 %
21.0 %
25.8 %
50.0 %
31.2 %
25.0 %
30.0 %
2022
24.6 %
21.0 %
25.8 %
50.0 %
31.3 %
25.0 %
30.0 %
2023
N/A
N/A
33.0 %
75.0 %
2022
33.0 %
33.0 %
33.0 %
75.0 %
In the Netherlands, an additional 10% uplift deduction is allowed against taxable income that is applied to operating expenses, eligible general and
administration expenses, and tax deductions for depletion and abandonment retirement obligations.
Windfall Taxes
On October 6, 2022 the Council of the European Union adopted a regulation that implemented a temporary windfall tax on the profits of oil and gas
producers resident in the European Union. This windfall tax was referred to as a temporary solidarity contribution and was calculated on the amount
by which the taxable profits for the elected years exceeded the greater of zero and 120% of the average taxable profits for the 2018 to 2021 period.
The regulation required Member States to implement the temporary solidarity contribution at a minimum rate of 33% while providing Member States
with the option to apply the temporary solidarity contribution to fiscal years beginning on or after January 1, 2022, January 1, 2023, or both. The
windfall tax does not apply to 2024 or later years.
The following table summarizes the manner of implementation of the temporary solidarity contribution by the Member States in which Vermilion
operates:
(2)
For 2022, France implemented a windfall tax; however, did not extend for 2023.
For 2023 and 2024, Netherlands has implemented a windfall royalty which, for natural gas sales, is calculated as 65% of the excess of the realized price for a
subject year versus the threshold price of €0.50/Nm3 (€13.40/mcf). This royalty is deductible against current income taxes.
Tax legislation changes
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) issued model rules for a new global minimum tax
framework (“Pillar Two”). The objective of Pillar Two is to ensure that large multinational enterprises are subjected to a minimum 15% effective tax
rate in each jurisdiction in which they operate.
Most of the countries where Vermilion operates are in the process of enacting, or have enacted, tax legislation to comply with Pillar Two with effect
from January 1, 2024. The Company expects that Pillar Two will not have a material impact on income tax expense.
In May 2023, the IASB issued amendments to IAS 12, “Income Taxes” (“IAS 12”) to address the impacts and additional disclosure requirements
related to Pillar Two. Vermilion has applied the mandatory exception required by IAS 12 and accordingly has not accounted for any related deferred
income tax assets or liabilities.
Vermilion Energy Inc. ■ Page 34 ■ 2023 Annual Report
Tax pools
As at December 31, 2023, we had the following tax pools:
(1)
($M)
Canada
United States
France
Netherlands
Germany
Ireland
Australia
Total
(1) Deduction calculated using various declining balance rates.
(2) Deduction calculated using a combination of straight-line over the assets life and unit of production method.
(3) Deduction calculated using a unit of production method.
(4)
Tax Losses
1,385,458
154,400
2,461
—
—
1,512,603
133,480
3,188,402
Oil & Gas
Assets
1,511,948
335,395
255,272
52,905
242,588
—
157,455
2,555,563
(4)
(1)
(5)
(3)
(6)
(4)
(4)
(3)
(2)
(2)
Other
28,433
72,309
—
—
17,045
—
—
117,787
Total
2,925,839
562,104
257,733
52,905
259,633
1,512,603
290,935
5,861,752
(5)
(6)
Tax losses can be carried forward and applied at 100% against taxable income.
Tax losses can be carried forward and are available to offset the first €1 million of taxable income and 50% of taxable profits in excess each
taxation year.
Tax losses of $49 million created prior to January 1, 2018 are carried forward and applied at 100% against taxable income, tax losses of $105
million created after January 1, 2018 are carried forward and applied to 80% of taxable income in each taxation year.
Vermilion Energy Inc. ■ Page 35 ■ 2023 Annual Report
Financial Position Review
Balance sheet strategy
We regularly review whether our forecast of fund flows from operations is sufficient to finance planned capital expenditures, dividends, share buy-
backs, and abandonment and reclamation expenditures. To the extent that fund flows from operations forecasts are not expected to be sufficient to
fulfill such expenditures, we will evaluate our ability to finance any shortfall by reducing some or all categories of expenditures, with issuances of
equity, and/or with debt (including borrowing using the unutilized capacity of our existing revolving credit facility). We have a long-term goal of
maintaining a ratio of net debt to four quarter trailing fund flows from operations of approximately 1.0.
As at December 31, 2023, we have a ratio of net debt to four quarter trailing fund flows from operations of 0.9. We will continue to monitor for
changes in forecasted fund flows from operations and, as appropriate, will adjust our exploration, development capital plans (and associated
production targets), and return of capital plans to target optimal debt levels.
Maintaining a strong balance sheet is a core principle of Vermilion and will remain a focus going forward. As debt reduction continues, we will plan to
increase the amount of free cash flow that is available for the return of capital, while taking into account other capital requirements.
Net debt
Net debt is reconciled to long-term debt, as follows:
($M)
Long-term debt
Adjusted working capital deficit (1)
Unrealized FX on swapped USD borrowings
Net debt
As at
Dec 31, 2023
914,015
164,552
—
1,078,567
Dec 31, 2022
1,081,351
265,111
(1,876)
1,344,586
0.9
0.8
Ratio of net debt to four quarter trailing fund flows from operations
(1)
Adjusted working capital is a non-GAAP financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by
other issuers. It is defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate
net debt, a capital measure disclosed above. Reconciliation to the primary financial statement measures can be found in the “Non-GAAP and Other Specified
Financial Measures” section of this document.
As at December 31, 2023, net debt decreased to $1.1 billion (December 31, 2022 - $1.3 billion), due to debt repayments of $146.3 million funded by
the disposition of our southeast Saskatchewan assets for $182.2 million and $552.4 million of free cash flow generated during the year offset by the
acquisition of an additional 36.5% working interest in our operated Corrib project for $198.0 million (net of cash and working capital deficit acquired).
The ratio of net debt to four quarter trailing fund flows from operations as at December 31, 2023 increased to 0.9 (December 31, 2022 - 0.8) due to
lower four quarter trailing fund flows from operations, driven primarily by decreased commodity prices.
Long-term debt
The balances recognized on our balance sheet are as follows:
Revolving credit facility
2025 senior unsecured notes
2030 senior unsecured notes
Long-term debt
As at
Dec 31, 2023
—
395,839
518,176
914,015
Dec 31, 2022
147,666
404,463
529,222
1,081,351
Vermilion Energy Inc. ■ Page 36 ■ 2023 Annual Report
Revolving Credit Facility
As at December 31, 2023, Vermilion had in place a bank revolving credit facility maturing May 29, 2027 with terms and outstanding positions as
follows:
($M)
Total facility amount
Amount drawn
Letters of credit outstanding
Unutilized capacity
As at
Dec 31, 2023
1,600,000
—
(18,116)
1,581,884
Dec 31, 2022
1,600,000
(147,666)
(13,527)
1,438,807
During the year, the maturity date of the facility was extended to May 28, 2027 (previously May 29, 2026) and the total facility amount of $1.6 billion
was unchanged. As at December 31, 2023, there was no draw on the facility.
As at December 31, 2023, the revolving credit facility was subject to the following financial covenants:
Financial covenant
Consolidated total debt to consolidated EBITDA
Consolidated total senior debt to consolidated EBITDA
Consolidated EBITDA to consolidated interest expense
Limit
Dec 31, 2023
As at
Less than 4.0
Less than 3.5
Greater than 2.5
0.65
—
17.33
Dec 31, 2022
0.51
0.07
27.10
total debt:
Includes all amounts classified as “Long-term debt”, “Current portion of
Our financial covenants include financial measures defined within our revolving credit facility agreement that are not defined under IFRS. These
financial measures are defined by our revolving credit facility agreement as follows:
•
Consolidated
long-term debt”, and “Lease
obligations” (including the current portion included within "Accounts payable and accrued liabilities" but excluding operating leases as defined
under IAS 17) on our consolidated balance sheet.
Consolidated total senior debt: Consolidated total debt excluding unsecured and subordinated debt.
Consolidated EBITDA: Consolidated net (loss) earnings before interest, income taxes, depreciation, accretion and certain other non-cash items,
adjusted for the impact of the acquisition of a material subsidiary.
Total interest expense: Includes all amounts classified as "Interest expense", but excludes interest on operating leases as defined under IAS 17.
•
•
•
In addition, our revolving credit facility has provisions relating to our liability management ratings in Alberta and Saskatchewan whereby if our
security adjusted liability management ratings fall below specified limits in a province, a portion of the asset retirement obligations are included in the
definitions of consolidated total debt and consolidated total senior debt. An event of default occurs if our security adjusted liability management
ratings breach additional lower limits for a period greater than 90 days. As of December 31, 2023, Vermilion's liability management ratings were
higher than the specified levels, and as such, no amounts relating to asset retirement obligations were included in the calculation of consolidated
total debt and consolidated total senior debt.
As at December 31, 2023 and December 31, 2022, Vermilion was in compliance with the above covenants.
2025 senior unsecured notes
On March 13, 2017, Vermilion issued US $300.0 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum,
paid semi-annually on March 15 and September 15, and mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes
rank equally in right of payment with existing and future senior indebtedness of the Company.
The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.
Subsequent to March 15, 2023, Vermilion may redeem some or all of the senior unsecured notes at a 100.000% redemption price plus any accrued
and unpaid interest.
Vermilion Energy Inc. ■ Page 37 ■ 2023 Annual Report
2030 senior unsecured notes
On April 26, 2022, Vermilion closed a private offering of US $400.0 million 8-year senior unsecured notes. The notes were priced at 99.241% of par,
mature on May 1, 2030, and bear interest at a rate of 6.875% per annum. Interest is paid semi-annually on May 1 and November 1, commencing on
November 1, 2022. The notes are senior unsecured obligations of Vermilion and rank equally with existing and future senior unsecured
indebtedness.
The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.
Vermilion may, at its option, redeem the notes prior to maturity as follows:
•
•
•
On or after May 1, 2025, Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth below,
together with accrued and unpaid interest.
Prior to May 1, 2025, Vermilion may redeem up to 35% of the original principal amount of the notes with an amount of cash not greater
than the net cash proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the notes, together with
accrued and unpaid interest.
Prior to May 1, 2025, Vermilion may also redeem some or all of the notes at a price equal to 100% of the principal amount of the notes,
plus a “make-whole premium,” together with applicable premium, accrued and unpaid interest.
Year
2025
2026
2027
2028 and thereafter
Shareholders' capital
The following table outlines our dividend payment history:
Date
January 2003 to December 2007
January 2008 to December 2012
January 2013 to December 2013
January 2014 to March 2018
April 2018 to February 2020
March 2020
April 2022 to July 2022
August 2022 to March 2023
April 2023 onwards
Redemption price
103.438 %
102.292 %
101.146 %
100.000 %
Frequency
Monthly
Monthly
Monthly
Monthly
Monthly
Monthly
Quarterly
Quarterly
Quarterly
Dividend per unit or share
$0.170
$0.190
$0.200
$0.215
$0.230
$0.115
$0.060
$0.080
$0.100
In December 2023, we announced our plan to increase the quarterly dividend by 20% to $0.12 per share effective for the planned Q1 2024
distribution.
The following table reconciles the change in shareholders’ capital:
Shareholders’ Capital
Balance at January 1
Vesting of equity based awards
Shares issued for equity based compensation
Share-settled dividends on vested equity based awards
Repurchase of shares
Balance at December 31
Shares ('000s)
163,227
3,657
655
64
(5,332)
162,271
Amount
4,243,794
23,575
11,242
1,179
(137,224)
4,142,566
As at December 31, 2023, there were approximately 4.5 million equity based compensation awards outstanding. As at March 6, 2024, there were
approximately 160.8 million common shares issued and outstanding.
On July 10, 2023, the Toronto Stock Exchange approved our notice of intention to renew our normal course issuer bid ("the NCIB"). The NCIB
renewal allows Vermilion to purchase up to 16,308,587 common shares (representing approximately 10% of outstanding common shares) beginning
July 12, 2023 and ending July 11, 2024. Common shares purchased under the NCIB will be cancelled.
Vermilion Energy Inc. ■ Page 38 ■ 2023 Annual Report
In the fourth quarter of 2023, Vermilion purchased 1.7 million common shares under the NCIB for total consideration of $29.0 million. The common
shares purchased under the NCIB were cancelled.
Contractual Obligations and Commitments
As at December 31, 2023, we had the following contractual obligations and commitments:
($M)
Long-term debt (1)
Lease obligations (2)
Processing and transportation agreements
Purchase obligations
Drilling and service agreements
Total contractual obligations and commitments
(1)
Less than 1 year
1 - 3 years
3 - 5 years
After 5 years
58,690
58,034
42,127
32,087
18,572
209,510
480,682
80,281
54,205
13,519
49,784
678,471
72,743
53,839
27,493
2,374
—
156,449
583,597
43,907
151,777
105
—
779,386
Total
1,195,712
236,061
275,602
48,085
68,356
1,823,816
(2)
(3)
Includes interest on senior unsecured notes.
Includes undiscounted IFRS 16 - Leases obligations of $59.7 million recognized in the financial statements as at December 31, 2023, future undiscounted IFRS
16 - Leases due to commence in 2024 of $117.5 million, and surface lease rental commitments of $56.5 million and other of $2.4 million that are not considered
leases under IFRS 16 and are not represented on the balance sheet.
Commitments denominated in foreign currencies have been translated using the related spot rates on December 31, 2023.
Asset Retirement Obligations
As at December 31, 2023, asset retirement obligations were $1,159.1 million compared to $1,087.8 million as at December 31, 2022. The increase
in asset retirement obligations is primarily attributable to the Company's lower credit spread at December 31, 2023 compared to December 31, 2022
and the acquisition of an additional 36.5% working interest in our Corrib project, partially offset by the disposition of our southeast Saskatchewan
assets. The credit spread decreased to 3.6% at December 31, 2023 compared to 4.5% at December 31, 2022 due to a lower expected cost of
borrowing.
The present value of the obligation is calculated using a credit-adjusted risk-free rate, calculated using a credit spread added to risk-free rates based
on long-term, risk-free government bonds. Vermilion's credit spread is determined using the Company's expected cost of borrowing at the end of the
reporting period.
The risk-free rates and credit spread used as inputs to discount the obligations were as follows:
Credit spread added to below noted risk-free rates
Country specific risk-free rate
Canada
United States
France
Netherlands
Germany
Ireland
Australia
12/31/2023
3.6 %
12/31/2022
4.5 %
Change
(0.9) %
3.0 %
4.2 %
3.0 %
2.1 %
2.3 %
2.7 %
4.0 %
3.3 %
4.1 %
3.4 %
2.7 %
2.5 %
3.2 %
4.2 %
(0.3) %
0.1 %
(0.4) %
(0.6) %
(0.2) %
(0.5) %
(0.2) %
Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.3% and 5.5% (as at December 31, 2022
- between 1.6% and 4.2%).
Vermilion Energy Inc. ■ Page 39 ■ 2023 Annual Report
Risks and Uncertainties
Crude oil and natural gas exploration, production, acquisition and marketing operations involve a number of risks and uncertainties that have
affected the financial statements and are reasonably likely to affect them in the future. These risks and uncertainties are discussed further below.
Commodity prices
Crude oil and natural gas prices have fluctuated significantly in recent years due to supply and demand factors. Changes in crude oil and natural gas
prices affect the level of revenue we generate, the amount of proceeds we receive and payments we make on our commodity derivative instruments,
and the level of taxes that we pay. In addition, lower crude oil and natural gas prices would reduce the recoverable amount of our capital assets and
could result in impairments or impairment reversals.
Exchange rates
Exchange rate changes impact the Canadian dollar equivalent revenue and costs that we recognize. The majority of our crude oil and condensate
revenue stream is priced in US dollars and as such an increase in the strength of the Canadian dollar relative to the US dollar would result in the
receipt of fewer Canadian dollars for our revenue. We also incur expenses and capital costs in US dollars, Euros and Australian dollars and thus a
decrease in strength of the Canadian dollar relative to those currencies may result in the payment of more Canadian dollars for our expenditures.
In addition, exchange rate changes impact the Canadian equivalent carrying balances for our assets and liabilities. For foreign currency
denominated monetary assets (such as cash and cash equivalents, long-term debt, and intercompany loans), the impact of changes in exchange
rates is recorded in net (loss) earnings as a foreign exchange gain or loss.
Production and sales volumes
Our production and sales volumes affect the level of revenue we generate and correspondingly the royalties and taxes that we pay. In addition,
significant declines in production or sales volumes due to unforeseen circumstances may also result in an indicator of impairment and potential
impairment charges.
Interest rates
Changes in interest rates impact the amount of interest expense we pay on our variable rate debt and also our ability to obtain fixed rate financing in
the future.
Tax and royalty rates
Changes in tax and royalty rates in the jurisdictions that we operate in would impact the amount of current taxes and royalties that we pay. In
addition, changes to substantively enacted tax rates would impact the carrying balance of deferred tax assets and liabilities, potentially resulting in a
deferred tax recovery or incremental deferred tax expense.
Windfall taxes and royalties
Vermilion is exposed to increased taxation and royalties due to windfall taxes on profits. Windfall taxes have been substantively enacted within the
European Union for oil and gas companies for 2022 and/or 2023 at a minimum rate of 33% calculated on taxable profits above a 20% increase in the
average yearly taxable profits as compared to 2018 to 2021. There is risk that windfall taxes or similar mechanisms will be re-enacted or similar
legislation could be enacted in other jurisdictions that Vermilion operates in periods of extraordinary commodity prices.
Ukraine war / Middle East conflict
During 2022, Russian military forces invaded Ukraine resulting in a war between the two countries. The ongoing conflict between countries has
impacted the supply of oil and gas from the region and has resulted in countries throughout the world imposing financial and trade sanctions against
Russia which have had macroeconomic effects. The risks disclosed in our Annual Information Form for the year ended December 31, 2023 may be
exacerbated as a result of the Ukraine war, including: market risks including volatility of oil and gas prices, volatility of foreign exchange rates,
volatility of market price of common shares, hedging arrangements; regulatory and political risks including tax, royalty, and other government
legislation; financing risks including additional financing, debt service, variations in interest rates and foreign exchange rates; acquisition and
expansion risks including international operations and future geographical/industry expansion, acquisition assumptions, failure to realize anticipated
benefits of prior acquisitions.
In addition to the Ukraine war, hostilities in the Middle East could adversely affect the global economy and impact oil and gas prices.
In addition to the above, we are exposed to risk factors that impact our company and business. For further information on these risk factors, please
refer to our Annual Information Form, available on SEDAR+ at www.sedarplus.ca or on our website at www.vermilionenergy.com.
Vermilion Energy Inc. ■ Page 40 ■ 2023 Annual Report
There has been no change in Vermilion’s internal control over financial reporting during the period covered by this MD&A that materially affected, or
is reasonably likely to materially affect, its internal control over financial reporting.
Financial Risk Management
To mitigate the risks affecting our business whenever possible, we seek to hire personnel with experience in specific areas. In addition, we provide
continued training and development to staff to further develop their skills. When appropriate, we use third party consultants with relevant experience
to augment our internal capabilities with respect to certain risks.
We consider our commodity price risk management program as a form of insurance that protects our cash flow and rate of return. The primary
objective of the risk management program is to support our return of capital and internal capital development programs. The level of commodity price
risk management that occurs is dependent on the amount of debt that is carried. When debt levels are higher, we will be more active in protecting
our cash flow stream through our commodity price risk management strategy.
When executing our commodity price risk management programs, we use derivative financial instruments encompassing over-the-counter financial
structures as well as fixed and collar structures to economically hedge a part of our physical crude oil and natural gas production. We have strict
controls and guidelines in relation to these activities and contract principally with counterparties that have investment grade credit ratings.
Critical Accounting Estimates
The preparation of financial statements in accordance with IFRS requires us to make estimates. Critical accounting estimates are those accounting
estimates that require us to make assumptions about matters that are highly uncertain at the time the estimate is made and a different estimate
could have been made in the current period or the estimate could change period-to-period.
The carrying amount of asset retirement obligations
The carrying amount of asset retirement obligations ($1,159.1 million as at December 31, 2023) is the present value of estimated future costs,
discounted from the estimated abandonment date using a credit-adjusted risk-free rate. Estimated future costs are based on our assessment of
regulatory requirements and the present condition of our assets. The estimated abandonment date is based on the reserve life of the associated
assets. The credit-adjusted risk-free rate is based on prevailing interest rates for the appropriate term, risk-free government bonds adjusted for our
estimated credit spread (determined by reference to the trading prices for debt issued by similarly rated independent oil and gas producers, including
our own senior unsecured notes). Changes in these estimates would result in a change in the carrying amount of asset retirement obligations and
capital assets and, to a significantly lesser degree, future accretion and depletion expense.
The estimated abandonment date may change from period to period as the estimated abandonment date changes in response to new information,
such as changes in reserve life assumptions or regulations. A one year increase or decrease in the estimated abandonment date would decrease or
increase asset retirement obligations (with an offsetting increase to capital assets) by approximately $34.0 million.
The estimated credit-adjusted risk-free rate may change from period to period in response to market conditions in Canada and the international
jurisdictions that we operate in. A 0.5% increase or decrease in the credit-adjusted risk-free rate would decrease or increase asset retirement
obligations by approximately $70.1 million.
The fair value of capital assets acquired in business combinations
In preparing the purchase price allocation for the business combinations completed in 2023, we estimate the fair value of assets acquired. Assets
acquired in an acquisition primarily relates to the crude oil and natural gas reserves. The estimated fair value of the crude oil and natural gas
reserves acquired is based on the present value of proved plus probable reserves and forecast commodity prices. Changes in these assumptions,
including the discount rate used, would change the amount of capital assets recognized and as a result may cause rise to goodwill or gains
recognized on the acquisition and future depletion and depreciation expense.
The recognition of deferred tax assets
The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on estimated future
commodity prices and estimates of reserves. As at December 31, 2023, the deferred tax asset balance of $182.1 million relates to Ireland and
Canada for $105.3 million and $76.8 million, respectively.
In Ireland, we have $237.1 million of non-expiring tax loss pools where $59.3 million of deferred tax assets has not been recognized as there is
uncertainty on our ability to fully use these losses based on estimated future taxable profits. Estimated future taxable profits are calculated using
proved and probable reserves and forecast pricing.
Vermilion Energy Inc. ■ Page 41 ■ 2023 Annual Report
In Canada, we have $136.9 million of non-expiring oil and gas tax pools where $33.4 million of deferred tax assets has not been recognized as there
is uncertainty on our ability to fully use these pools based on estimated future taxable profits. Estimated future taxable profits are calculated using
proved and probable reserves and forecast pricing.
Depletion and depreciation
Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives.
Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and
depreciation.
The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to
the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production.
Key judgments that are made to reserve estimates such as revisions in reserves, changes in forecast commodity prices, foreign exchange rates,
capital or operating costs would impact the amount of depletion and depreciation recorded in a period.
The estimated recoverable amount of cash generating units
Each reporting period, we assess our CGUs for indicators of impairment or impairment reversal. If an indicator of impairment or impairment reversal
is identified, we estimate the recoverable amount of the CGU. Judgment is required when determining whether indicators of impairment or
impairment reversal exist, as well as judgments made when determining the recoverable amount of a CGU. Changes in any of the key judgments,
such as a revision in reserves, changes in forecast commodity prices, foreign exchange rates, capital or operating costs would impact the estimated
recoverable amount.
In the fourth quarter of 2023, indicators of impairment were present in our France CGU due to changes in forecasted cost assumptions and in our
Saskatchewan and United States CGUs due to negative technical revisions. As a result of the indicators of impairment, the Company performed
impairment calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered
future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 13.0% for Saskatchewan and 15.0% for France and
United States. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $1.0 billion. Inputs
used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy. A 1% increase
in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in a higher impairment of $80.1
million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated
recoverable amount of assets tested and result in higher impairment of $187.8 million.
Off Balance Sheet Arrangements
We have not entered into any guarantee or off balance sheet arrangements that would materially impact our financial position or results of
operations.
Cybersecurity
Vermilion has an information security training and compliance program that is completed at least annually. We have not experienced a cybersecurity
breach in the last three years.
Recently Adopted Accounting Pronouncements
Vermilion did not adopt any new accounting pronouncements as at December 31, 2023.
Regulatory Pronouncements Not Yet Adopted
Issuance of IFRS Sustainability Standards - IFRS S1 "General Requirements for Disclosure of Sustainability-related Financial
Information" and IFRS S2 "Climate-related Disclosures"
In June 2023 the International Sustainability Standards Board (ISSB) issued its inaugural standards - IFRS S1 and IFRS S2. The ISSB was formed
as a new standard-setting board within the IFRS Foundation to issue standards that deliver a comprehensive global baseline of sustainability-related
financial disclosures, operating alongside the International Accounting Standards Board.
IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, as long as
both standards are applied. IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the
sustainability-related risks and opportunities, while IFRS S2 sets out specific climate-related disclosures and is designed to be used in conjunction
Vermilion Energy Inc. ■ Page 42 ■ 2023 Annual Report
with IFRS S1. Canadian regulators have not yet mandated these standards; however, Vermilion is currently reviewing the impact of the standards on
its financial reporting.
Health, Safety and Environment
We are committed to ensuring we conduct our activities in a manner that protects the health and safety of our employees, our contractors and the
public. Our HSE Vision is to consistently apply our core values of Excellence, Trust, Respect and Responsibility. Our goal is to create a workplace
free of incidents by ensuring our proactive culture and behaviours create a high-reliability organization where HSE is fully integrated into our
business – it is our way of life. Our mantra is HSE: Everyone. Everywhere. Everyday.
Vermilion seeks to maintain health, safety and environmental practices and procedures that comply with or exceed regulatory requirements and
industry standards. All of our personnel are expected to work safely and in accordance with established regulations and procedures, and we seek to
reduce impacts to land, water and air. During 2023 we:
•
•
•
Maintained clear priorities around 5 key focus areas of HSE Culture, Communication and Knowledge Management, Management Systems,
Environmental & Operational Stewardship, and Health;
Completed ongoing HSE performance monitoring through key performance indicator development, analysis and reporting;
Continued comprehensive investigations of our incidents and near misses to ensure root causes were identified and corrective actions
effectively implemented;
• Worked towards fulfilling our updated 2030 HSE Strategy;
•
•
•
•
Developed a 2023 Top Quartile HSE Performance Plan;
Completed Business Unit implementation plans as part of our Process Safety Management System implementation;
Continued reinforcement of the “Vermilion High 5”, an individual safety awareness initiative aimed at keeping front-line workers safe;
Advanced our Energy Safety Canada and International Oil and Gas Producers Life-Saving Rules implementation and competency
development;
Submitted our CDP Climate and Water reports;
Managed our waste products by reducing, recycling and recovering;
Reduced long-term environmental liabilities through decommissioning, abandoning and reclaiming well leases and facilities;
Continued the development of a robust hazard identification and risk mitigation program specific to environmentally sensitive areas;
Performed auditing, management inspections and workforce observations to measure compliance and identify potential hazards and apply
risk reduction measures; and
Assessed the effectiveness of our performance management standards across multiple business units.
•
•
•
•
•
•
We are a member of several organizations concerned with environment, health and safety, including numerous regional co-operatives and synergy
groups. In the area of stakeholder relations, we work to build long-term relationships with environmental stakeholders and communities.
Task Force on Climate-related Financial Disclosure (TCFD)
Environmental, Social and Governance (ESG)
As an international company, Vermilion responsibly produces essential energy while delivering long-term value to our stakeholders. We believe that
integrating sustainability principles into our business increases shareholder returns, enhances development opportunities, reduces long-term risks,
and supports the well-being of key stakeholders including the communities in which we operate.
Vermilion has established a leadership position in sustainability performance and disclosure, launching our first CDP Climate submission and
Sustainability Report in 2014, with data to 2012, aligned with the Global Reporting Initiative (GRI). We have since adopted recommendations from
the Task Force on Climate-related Financial Disclosure (TCFD), the Sustainability Accounting Standards Board (SASB), and the International
Sustainability Standards Board (ISSB).
In particular, we have applied the TCFD framework in the management of climate- and other sustainability-related risks and opportunities. This
recognizes the importance of climate-specific disclosure while reflecting its intersection with other environment-related risks and opportunities, social
factors such as safety and community engagement, and governance issues. Our Index follows:
•
•
•
•
•
Governance
Strategy
Risk Management
Metrics and Targets
Consolidated Climate (TCFD) Report www.vermilionenergy.com/sustainability/reports/
Information Circular
Annual Report MD&A
Annual Report MD&A
Annual Report MD&A
Vermilion Energy Inc. ■ Page 43 ■ 2023 Annual Report
Sustainability and Climate-Related Strategy
Vermilion understands our stakeholders’ expectations that we deliver strong financial results in a responsible and ethical way. As a result, we align
our strategic priorities in the following order:
•
•
•
the safety and health of our staff and those involved directly or indirectly in our operations;
our responsibility to protect the environment. We follow the Precautionary Principle introduced in 1992 by the United Nations "Rio
Declaration on Environment and Development" by using environmental risk as part of our development decision criteria, and by continually
seeking improved environmental performance in our operations; and
economic success through a focus on operational excellence across our business, which includes technical and process excellence,
efficiency, expertise, stakeholder relations, and respectful and fair treatment of staff, contractors, partners and suppliers.
Reflecting these priorities, we have positioned Vermilion purposefully within the energy transition. Our scenario analysis has consistently
demonstrated that Vermilion can best contribute by focusing on producing energy responsibly: safely, reliably and cost-effectively. Our Sustainability
Report provides further details at: www.vermilionenergy.com/sustainability.
Description of Sustainability- and Climate-related Risks and Opportunities, and Impacts
Given the intersection of environmental and social issues, and their impact over varying timeframes, we have identified climate-related risks and
opportunities within short-term (0-3 years), medium-term (3-6 years) and long-term (6-50 years) horizons. We describe these below, along with their
potential company and financial impact (assessed using processes such as scenario analysis, cost projections and our Emissions Long-Range
Planning tool), and our resulting management approach, including operations such as equipment upgrade, and capital allocation. Our annual CDP
Climate Change and Water Security submissions provide additional information, including where in the value chain these risks and opportunities
occur: see www.vermilionenergy.com/sustainability/reports/.
Category /
Issue
Policy and Legal:
Increased Pricing
of GHG Emissions
e.g. Carbon Tax
Description of Impacts
Potential Financial Impact
Management Approach
Short-term Transition Risks (0-3 Years)
Short-term impact is primarily in Canada and Ireland.
Canadian Federal Greenhouse Gas Pollution Pricing
Act has set carbon tax rates at $65 per tCO2e in
2023, rising to $170 by 2030, with provincial
responses to keep pace with the federal system. Our
Ireland operations are subject to the EU ETS and
Ireland Carbon Tax systems. Longer-term impact
rests on carbon pricing’s vulnerability to changes in
government policy.
With our recent northeast British Columbia
acquisition, our Canadian carbon tax liability is
forecast at approximately $1.6MM in the near term.
Our Ireland EU ETS liability is forecast at
approximately $2.6MM in 2025 and $3.5MM in 2030.
The Ireland Carbon Tax liability is expected to be an
additional approximately $0.1MM/year over this
period. All estimates are net Vermilion.
Our exposure is mitigated by provincial responses to
the Act, including Alberta's Technology Innovation
and Emissions Reduction (TIER) regulation and
Output-Based Pricing Systems (OBPS) in
Saskatchewan and forthcoming in British Columbia.
Our ongoing efforts to reduce the energy and
emissions intensity of our operations are integral to
managing this risk, including our emission reduction
targets. Vermilion continues to monitor and comply
with taxation requirements.
Policy and Legal:
Enhanced
Emissions &
Other ESG
Reporting
Obligations
Climate and other ESG reporting obligations are
evolving rapidly, with Vermilion potentially subject to
the IFRS Sustainability Standards (2025) and
European Sustainability Reporting Standards (2028),
U.S. Securities and Exchange Commission and
Canadian Securities Administrators Climate-Related
Disclosure Rules, and Canada's Modern Slavery
Act. Although Vermilion's existing sustainability-
related disclosure provides a sound foundation for
compliance, there are costs to implement these,
particularly potential requirements for increased
levels of audit. The impact to Vermilion would be a
decreased netback per BOE, due to increased
expenses for staff time and system development and
implementation.
The financial impact is an increase in operational
cost associated with the management and
quantification of emissions to meet new reporting
requirements, and the administrative costs
associated with reporting and audit obligations. This
is estimated at $0.8MM annually.
Regulations in all of our business units are
monitored on an ongoing basis, and assumptions/
scenario planning is used annually to assess risk. In
Canada, we implemented an external emission data
gathering software in 2021 to support the evolving
regulatory landscape. Vermilion also engages
stakeholders relating to emissions reporting
obligations. Management of this risk is built into
Vermilion's operations and our ERM. In addition, we
expect to automate our emissions data gathering,
aggregation and calculation processes in 2024, while
ensuring audit-ready processes for all ESG data
points to align with proposed regulatory
requirements.
Vermilion Energy Inc. ■ Page 44 ■ 2023 Annual Report
Vermilion is closely monitoring regulatory and market
changes to ensure its approach to resilience under
evolving conditions remains appropriate. We provide
feedback to governments on proposed regulations,
as per our lobbying disclosures, and allocate
resources, including staff and capital, to ensure that
required operational changes can be effectively
actioned. In the short term, tying in vented
equipment to flaring infrastructure in Canada is an
example of projects to address this risk; in
Netherlands we have used NOx scrubbers and
purchased NOx certificates to comply with new
regulations.
Our ongoing efforts to proactively reduce the energy
and emissions intensity of our operations are integral
to managing this risk, including our announcement of
two emission reduction targets in 2021, and our work
in 2023 to establish a net zero transition plan and
2030 emissions reduction target, which we expect to
release in 2024. We are also working with external
partners to further implement and develop emission
reduction technologies that are economic to the
Company, in part due to the potential generation of
carbon credits.
Based on stakeholder engagement, Vermilion
believes that independent assessments of our
operations by third parties are an important tool to
demonstrate our responsible approach to production
of essential energy. As a result, we have sought and
achieved Equitable Origin responsible gas producer
certification for 4 of our Canadian sites, the AFNOR
CSR Committed label in France, and the Business
Working Responsibly mark in Ireland.
In addition to our net zero transition plan
development, we have set public targets to reduce
ARO liabilities and internal targets to maintain
freshwater intensity performance via water
management plans where higher-intensity
freshwater use is, or could become, an issue. We
are also prioritizing compliance with incoming
sustainability reporting requirements, which are
largely investor- and financial institution-driven, and
are actively engaging with investors to understand
and respond to their concerns.
We implemented our Non-technical Risk
Management Policy and framework in 2023,
providing guidelines for community/social impact
assessments, along with our well-established
strategic community investment program, Ways of
Caring. We also implemented our Lobbying policy in
2023, guiding our engagement with governments,
including on specific issues such as windfall tax.
Description of Impacts
Potential Financial Impact
Management Approach
Category /
Issue
Policy and Legal:
Changes in
Mandates/
Regulations re
Products -
Existing
Production or
Acquisition
Impaired by
Regulatory or
Political Changes
Operational changes to comply with existing
methane reduction regulations are expected at
approx. $1.5MM in the short term, with those
associated with eliminating routine flaring in France
subject to continuing review in 2024.
The cost of compliance with proposed regulations,
such as Canada's proposed regulatory framework
for reducing oil and gas methane emissions to
achieve a 75% reduction by 2030 is not yet
established, and will depend on the final version of
the framework.
Vermilion's operations are subject to regional
regulatory changes that result in changes to
equipment requirements such as engineering and
equipment modifications to reduce carbon emissions
and / or emissions of criteria air contaminants. The
most likely short-term impact is regulations in
Canada to reduce methane emissions, in France to
reduce flaring and in Netherlands to reduce NOx.
From a macro perspective, geopolitical impacts (e.g.
war in Ukraine) have escalated diverging
government and consumer viewpoints on the need
for energy security vs energy transition. We expect
demand for oil and natural gas to remain strong in
the short term, while safety and environmental
regulations governing its production will increase.
We have identified these risks as interconnected and
existing in the short-term; however, they should be
seen as medium- to long-term risks as well.
Reputation:
Shareholder
Divestment
Investors are raising concerns regarding risks
related to emissions, environmental and biodiversity
protection, water stewardship, and abandonment
and reclamation liabilities.
Impact of divestment is estimated to be equal to
0.25X of 2023E FFO reducing market capitalization
by $286MM. This estimate covers all significant
sustainability risk scenarios including but not limited
to water stewardship, biodiversity, modern slavery,
and community relations.
Reputation:
Changes in
Customer
Behaviour and
Legal Challenges
Government and community relationships are
strongly linked to both social and regulatory licenses
to operate. Communities where we operate also
bear potential impacts, including noise, dust, lights,
traffic, etc. Legal challenges against oil and gas
industry are increasing, while adoption of EVs and
opposition to fossil fuels reflects customer sentiment
in some areas. Windfall tax/solidarity contributions
are possible during times of particularly high
commodity prices.
The impact of delays or shutdowns would be
measured in terms of production per day, impacting
revenues. The impact of the 2022-2023 EU windfall
tax is already decreasing, to $78MM in 2023 under
lower commodity pricing, with the EU signalling that
it will not be extended.
Medium-term Transition Risks (3-6 Years)
Technology
Our emission reduction projects and net zero
transition plan rely on technologies that are rapidly
evolving, but in many cases unproven at larger
scales and uneconomic for dispersed assets that are
not, for example, near an electrical grid or pipeline
gathering system. Assumptions by those outside the
industry that broad generalizations on methane
reduction are economical for all assets may be
proven false. Some technology projects will fail;
others will prove uneconomic.
Based on the capital and/or operating spend
required to reduce our near-term carbon tax liability
through emission reduction projects, this will be
calculated as part of the net zero transition plan.
We are mitigating this risk through a careful and
deliberate approach to new technology adoption. We
have established sustainability project criteria that
need to be met in order to move into the Vermilion
Opportunity Development Process, providing various
stage gates and off-ramps.
Vermilion Energy Inc. ■ Page 45 ■ 2023 Annual Report
Category /
Issue
Market: Increased
costs related to
capital and
financing
Description of Impacts
Potential Financial Impact
Management Approach
Pressure from stakeholders to limit access to, or
increase the cost of, debt, capital or insurance
without the use of sustainability-linked financing
arrangements
A 100 bps increase to total debt would represent
$10MM
We have established 2 emission reduction targets
and 1 ARO target, and are developing our net zero
transition plan and 2030 emission reduction target,
which establish the foundation for sustainability-
linked financing should it be required.
Vermilion maintains insurance as a mitigative
measure to reduce the financial impact associated
with damage to our assets due to severe weather
events. We also have a robust asset integrity
program that maintains our offshore facilities to their
original design specifications of CAT 5 hurricane
force. We also have protocols for monitoring and
preparing for cyclones, and have invested in our
emergency response capabilities in the event of
damage to our assets due to severe weather.
Based on our scenario analysis, we identified the
need to explore new and evolving technologies and
processes to identify synergistic fits for our business
in both traditional and renewable energy production.
We are pursuing this via our established track record
in geothermal energy from produced water, for which
our internal expertise in engineering, geoscience and
drilling is particularly well suited. We are also
investing in early R&D in other areas, such as biogas
and the conversion of traditional oil and gas assets
to geothermal and hydrogen production, to better
understand the long-term potential.
Each of our assets is assessed for potential risks
and hazards, including those associated with
weather events, from lightning to flooding to wild
fires. These risks are reviewed at least annually on a
case-by-case basis as part of our Enterprise Risk
Management system. Mitigation approaches such as
clearance of vegetation around facilities, and
physical barriers to flooding, are implemented as per
our HSE Management System, to protect the health
and safety of our workers, contractors and the
public, and to protect the environment.
Medium-term Physical Risks (3-6 Years)
Acute:
Increased
Severity of
Extreme Weather
Events such as
Cyclones and
Floods
Vermilion's Wandoo field off northwestern Australia,
Corrib project off the Irish coast and oil fields in the
coastal area of SW France can be impacted by
extreme weather events such as cyclones, resulting
in down time or damage to infrastructure. Such
events can also impact the downstream handling
capacity of our partners, resulting in a limitation to
the distribution and sale of our products.
Based on the value of the Wandoo Platform and a 1-
in-10,000-year cyclonic event, the financial
implications associated with damage due to a severe
weather event is estimated at $274MM (total impact
before insurance). The third-party costs associated
with potential damages from extreme weather events
are not tracked.
Long-term Transition Risks (6-50 Years)
Technology:
Substitution of
existing products
and services with
lower emissions
options, including
market supply
and demand
Although we see demand for oil and natural gas
remaining robust in the short- to mid-term, it is likely
that demand for oil and, to a lesser degree, natural
gas will eventually fall as the energy transition
evolves and various alternatives for renewable
energy options become technologically and
economically available. This could impact the need
for our products in the longer term, post 2030 for oil
and even further out for natural gas. As the past
several years have demonstrated, it will be critical to
maintain adequate supplies of both oil and natural
gas during the energy transition, to provide both
accessibility and affordability.
Given the uncertain timeline and progression of the
energy transition, and supply-demand dynamics, we
are not using a financial forecast for impact. We are,
however, using our scenario analysis to identify
potential opportunities that would mitigate the risk to
our products.
Long-term Physical Risks (6-50 Years)
The financial implications of a single time event (i.e.
wildfire) have been assessed on a case-specific
basis. Vermilion maintains insurance to mitigate the
potential impact of precipitation-related extreme
events (i.e. Wild fire, Flooding)
Chronic:
Changes in
Temperature
Extremes,
Including Rising
Mean
Temperatures;
Changes In
Precipitation
Patterns and
Extreme
Variability in
Weather Patterns
Chronic Physical: Based on RCP4.5, which limits
warming to 3C (overshooting 1.5-2C), our assets
and operations could experience climate changes
between 2041 and 2070 such as: North America:
2-3C increase, 12-14% increased precipitation, 7-8%
increased aridity, >10 fewer frost days and <25%
decrease in number of dry spells. Europe: 1-2C
increase, 0-5% increased precipitation, 4-12%
increased aridity, generally decreased frost days,
with several areas seeing <25% increase in number
of dry spells. Australia: 1C increase; 8% increased
precipitation (SMHI, Climate Information, https://
climateinformation.org/, last accessed: 9 July 2023).
Overall warming temperatures, greater precipitation
and generally drier conditions (due to increased
evaporation) may increase capital costs for drilling,
completion and workover operations due to
increased timelines, equipment breakdown and
restricted access in North America (fewer frost
days). They may also impact the health and safety of
workers, and create variability and potentially more
severe weather events such as flooding, drought and
wild fires. Flooding could result in limited access to
locations; droughts could impact the availability of
surface and / or groundwater required for drilling and
completion. This could negatively impact growth by
increasing timelines and capital costs to bring on
new production.
Chronic:
Rising Sea Levels
Chronic Physical: Potential rising sea levels could
impact our Netherlands assets and operations due to
issues such as flooding, transportation difficulties,
supply chain interruptions and salinization of
groundwater.
We have estimated that a rise in sea level could
have a financial impact of $571MM before insurance
at our main gas processing facility Garijp (GTC) in
the Netherlands, caused by an extreme 1-in-10000-
years tide/extreme wind event.
Physical measures such as conventional berms may
not provide complete protection. Based on
Vermilion's assessment of less than 0.05%
probability over the next 5 years we have accepted
this level of risk, reviewing it annually.
Vermilion Energy Inc. ■ Page 46 ■ 2023 Annual Report
Category /
Issue
Products and
Services, and
Resilience:
Development of
New Products and
Services through
R&D and
Innovation;
participation in
renewable energy
programs
Products and
Services:
Access to New
Markets
Products and
Services:
Ability to Diversify
Business
Activities; Shift in
Consumer
Preferences
Description of Impacts
Potential Financial Impact
Management Approach
Short-term Opportunities (0-3 Years)
Directly related to the long-term transitional risk
associated with the substitution of low-carbon
products, we have the opportunity to participate in
the development of those products. This has the
potential to reuse our current infrastructure to
provide alternative products, such as biogas or
hydrogen, or to develop new products such as
geothermal energy, creating new revenue streams.
As this opportunity is in the early stage of
assessment, it is difficult to quantify the financial
impact, but it is estimated at up to $2.0MM per year
in revenue and returns on investment. Potential also
exists for significant cost adjustments, as assets
slated for abandonment would be repurposed to
enable them to continue to generate energy.
More stringent global measures to reduce emissions
from individual ships by 30% by 2030, established
through amendments to MARPOL Annex VI, came
into force on Jan 1 2020, limiting the sulphur content
of bunker fuel to a maximum of 0.5%. Vermilion’s
Australian Wandoo facility produces 4500 bbl/d of
low sulphur crude oil that meets the needs of
refineries in the short term to meet IMO regulations.
Vermilion conservatively foresees achieving a
premium of $10/bbl for its Wandoo production over
the next three years for cumulative incremental
revenue of $49.3MM.
Medium-term Opportunities (3-6 Years)
We are leveraging our technical experts and
partnerships to provide input into alternative and
renewable energy projects as they are identified. An
example of the development of low emission goods/
services is our France-based industry partnership
with Avenia to expand the use of geothermal energy
production in oil production, and a geothermal
association in Germany. We have also developed
criteria for approving the move of these ideas into
our Vermilion Opportunity Development Process,
which provides clear gates and criteria for
considering and implementing such projects.
Vermilion continues to access local markets for our
low sulphur production, while exploring regions to
expand our operations. Our Marketing group
ensures that Vermilion meets its contractual
obligation with our buyers in terms of volumes,
delivery dates and crude quality.
Vermilion maintains a diverse, stable global portfolio
of oil and gas assets. Our strong record of safe and
socially conscious development of energy resources
has provided opportunities to access and develop
these resources. We see our commitment to
sustainability as core to our business, which has
provided important organizational focus on
emissions quantification and management. As
consumers become more aware of and involved in
the selection of their energy sources and associated
carbon intensity, we believe that Vermilion will
continue to be a top quartile choice, providing us
with opportunities not available to peer
organizations.
The financial impact of changing consumer
preferences in difficult to quantify. We foresee
revenue opportunities in two distinct areas. (1) In
consumers selecting premium energy products, with
these products demanding a higher price than other
energy sources on the market; commodity pricing
volatility now makes this difficult to estimate (2)
Access to more stringent markets, supported by our
environmental and sustainability performance.
Vermilion has entered into German, Hungarian,
Croatian and Slovak oil and gas operations, which
our sustainability performance has supported.
Based on stakeholder engagement, Vermilion
believes that independent assessments of our
operations by third parties are an important tool to
demonstrate our responsible approach to production
of essential energy, and generate premium. As a
result, we have sought and achieved Equitable
Origin responsible gas producer certification for 4 of
our Canadian sites, the AFNOR CSR Committed
label in France, and the Business Working
Responsibly Mark in Ireland. We are currently
assessing the potential to expand these
certifications.
Long-term Opportunities (6-50 Years)
Products and
Services:
Shift in Consumer
Preferences
Under the Canadian Environmental Protection Act
and based on commitments made by the Canadian
and Alberta governments and energy utilities relating
to COP21, there is a commitment to reduce
emissions for coal-fired power generation. Based on
this and with a number of power generating facilities
in Alberta nearing the end of their service life, the
demand for natural gas is likely to increase due to
increased use of combined cycle gas turbine
(CCGT) power generation.
The short term impact of this regulatory change on
gas pricing is anticipated to be low and increase to
medium in the mid- to long-term. As a natural gas
and oil producer, Vermilion would benefit from an
increase in marketable prices for natural gas in our
Canadian operations.
Energy Source:
Shift Toward
Decentralized
Energy
Generation
The carbon intensity of energy used around the
world has a direct relationship to where the energy
product was generated. Vermilion’s business unit
structure supports production and distribution of
energy products into local markets. This strategy
results in the significant reduction of the carbon
footprint of our energy when compared to non-local
sources.
The long-term financial impact of decentralized
energy generation will depend on the speed of the
energy transition balanced against the need for
energy security. As such, we believe it is not
possible to predict the financial impact at this time.
As we move further into the energy transition, we
foresee natural gas playing an impactful role as a
less carbon intense fuel than other options (i.e. coal).
Vermilion continues to focus on the identification of
resources and assets where we have the opportunity
to apply our industry leading expertise to optimize
production while reducing emissions. An example of
our strategy to realize this opportunity is our asset
base in Alberta, which currently includes a large
liquids rich gas play, and our entry into the Montney
in northeast British Columbia. Vermilion's marketing
team is also actively pursuing options for our natural
gas production that will enable Vermilion to achieve
the best netbacks on production.
Vermilion continues to assess where we can access
local markets for our production, while exploring
regions to expand our operations. The actions taken
in the past several years to realize this opportunity
include alterations to our structure, our strategic
objectives and our operational development plans to
support Vermilion as a distributed energy provider,
and exploration and development programs in
regions with relatively low energy production as
compared to consumption.
Resilience of the Company’s Strategy
Countries in all of our operating regions are implementing policies to create a low-carbon future for the world’s economy, consistent with a 1.5-2C or
lower scenario. As a global energy producer, we contribute to the supply of safe, reliable and affordable energy during this transition. The Board of
Directors and senior leadership therefore responded to our risk and opportunity identification using a robust scenario analysis.
Vermilion Energy Inc. ■ Page 47 ■ 2023 Annual Report
Vermilion initially examined two energy transition scenarios from the World Economic Forum. These compared a Gradual versus Rapid low-carbon
transition based on inputs that included the International Energy Agency’s New Policies Scenario (Gradual) and Sustainable Development Scenario
(Rapid), which meets the Paris Agreement’s goal to limit global temperature increases to 1.5 to 2ºC. Vermilion examined key factors impacting the
speed of the transition – including the influence of new energy technologies; potential speed of their adoption; anticipated changes in policy and
regulation; and emerging market pathways such as India – and resulting factors that could impact the company, including economics (demand,
supply, consumer behaviour, and costs of energy); technological advancement; capital availability; government policy; and Company reputation.
Among these, government policy was seen as most influential in the near to mid-term.
We applied these findings to Vermilion’s strategy to 2050 and beyond, described below. In particular, the scenario analysis led us to develop two
emission-related targets that were announced in 2021: an aspirational commitment to net zero emissions in our own operations, including Scope 1
and Scope 2 emissions, by 2050, and a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a
baseline year of 2019. See Metrics and Targets, below, for more information.
In 2023, we augmented this work with a new analysis of both climate-related transition risks and physical risks. It should be noted that these
scenarios are neither predictions nor forecasts; while they rely on the work of credible third-party organizations, they are constructions based on
circumstances and assumptions that are highly vulnerable to macroeconomic and geopolitical changes. We have used them to inform our
discussions on short, mid- and long-term business strategy, along with risk identification and management.
In our scenario analysis, our Executive Committee and Board of Directors reviewed an internally developed comparison of a diverse range of
climate-related transition scenarios. We focused on changes in demand for oil and for natural gas based on a Reference (business as usual) case
and a Climate Policy (government support for reduced greenhouse gas emissions) case for Global, Advanced Economy and Emerging Economy
scenarios. Specific scenarios included the International Energy Agency (Stated Policy, Announced Pledges and Net Zero), Equinor (Walls, Bridges),
and BP (New Momentum, Accelerated), with reference cases from Exxon, OPEC and the Energy Information Administration. The analysis showed
the potential for energy demand declines over a 5- to 15-year horizon, but also showed greater impacts on specific assets based on government
policies, location and logistics (landlocked vs waterborne), and proximity to petrochemical or carbon capture and sequestration capacities.
For example, our analysis for the Reference case in advanced economies points to strong policy uptake in Europe and Industrialized Asia, as well as
energy efficiency improvements in the residential and commercial sectors. Oil demand declines as energy transition policy momentum pushes road
transport towards electrification, which is further displaced by biofuels after 2030. Efficiency gains reduce consumption, while demographic trends
work against oil demand. Climate Policy scenarios see advanced economies driving a rapid uptake of renewables to a near full phase-out of
combustible natural gas use, leading to a finale in the role of natural gas as a transition fuel. Natural gas use in 2050 is mostly consumed by the
petrochemical sector and for hydrogen production. Both scenarios rely on assumptions such as a continued improvement in advanced technology
development for renewables (for example, battery improvement); and the addressing of supply chain human rights and environmental issues for
critical minerals.
We also assessed the physical climate-related risks in each of our major operating regions using the International Panel on Climate Change’s
Representative Concentration Pathway (RCP) 4.5 scenario. We selected RCP 4.5 because it reflects the physical risks our operations would face if
CO2 emissions do not start declining until approximately 2045, reaching approximately half of 2050 levels by the end of the century. This is more
likely than not to result in rising global temperatures above 2C; specific geographic scenarios are summarized above in the Risks table.
While we have set emission reduction targets that are significantly more ambitious than this, using RCP 4.5 enabled us to identify impacts to
operations such as rising temperatures, aridity and dry spells in many areas, rising precipitation in some areas, and rising sea levels. Since climate
volatility would also increase, RCP 4.5 highlights the need to consider adaptation and mitigation tactics including changing work schedules for daily
heat cycles, along with greater wind, storm and wildfire protection for our assets. We note that RCP 2.6 (which requires CO2 emissions to have
started declining by 2020) relies not only on reducing emissions, but also on removing significant amounts of greenhouse gases from the
atmosphere, and reflects similar physical risks as 4.5 in the next 10-15 years, with lesser effects in the period 2050-2100.
We incorporated the results of the discussions around these scenarios into our business strategy work in 2023, including working on our net zero
transition plan (see Targets and Metric section) and our Risk identification and management process.
Vermilion Energy Inc. ■ Page 48 ■ 2023 Annual Report
Overall, our strategy to ensure our resilience under various scenarios continues to rest on three strategic activities:
•
Focusing on efficient and responsible production of oil and natural gas, viewing emissions as potential energy sources:
◦
◦
◦
Lower carbon fuels. Since 2012, we have shifted our production mix towards natural gas as a cleaner burning fuel than other
fossil fuels. We also sell our fuels within the country of production wherever possible, reducing the carbon footprint associated
with transportation of the fuel to consumers while increasing national energy security.
Socially responsible fuels. We are committed to ensuring that our products are produced in an environmentally and socially
responsible manner, respecting worker rights and community engagement. We operate in regions noted for their stable, well-
developed fiscal and regulatory policies related to oil and gas exploration and development, and for their robust health, safety,
environmental and human rights legislation.
Transparency and reporting. We have established a strong record of reporting on greenhouse gas emissions, energy usage and
other key environmental metrics, which has supported our emission reduction targets.
•
•
Implementing technically and economically feasible options for emission reduction, covering combustion, flaring, venting and
fugitive emissions:
◦
◦
Greater energy efficiency. Many energy and operational efficiency initiatives go hand-in-hand, which in turn helps us minimize
our carbon footprint and reduce greenhouse gas emissions.
Lower greenhouse gas emission intensity. We are committed to reducing the greenhouse gas emissions associated with our
production, with particular focus on methane.
Exploring new and evolving technologies and processes to identify synergistic fits for our business in both traditional and renewable
energy production:
◦
Alternative energy. We are continuing to develop our knowledge and use of alternative energy sources, including geothermal
energy, for which our internal expertise in engineering, geoscience and drilling is particularly well suited. This work has begun
with the geothermal potential of our produced water, supporting a circular economy model that conserves, reuses and recycles
resources to better protect our environment. It is also expanding into areas such as biogas and the conversion of traditional oil
and gas assets to geothermal and hydrogen production.
In addition, we identified two further pillars of our sustainability strategy that are integral to managing sustainability- and climate-related issues:
Conservation
We are committed to reducing the impact our operations have, beginning with regulatory compliance across all business units. Our conservation
efforts are further focused in three areas:
• Water: We recognize water as a basic human right, and as a vital resource that is shared among many stakeholders in our communities.
We are therefore committed to protecting both the supply and the quality of water sources in our areas of operation by:
◦
◦
◦
Proactively preventing harm and supporting healthy surface and groundwater bodies
Reducing potable and freshwater usage to the lowest level practical, and
Taking a lifecycle and circular economy approach to water, exploring opportunities to reuse and recycle products such as
produced water
•
•
Asset Retirement Obligations: We are adapting our long-term Asset Retirement Obligation management to include revitalizing or reusing
assets to benefit our environment and our communities.
Biodiversity: We are focusing on protecting the species and habitats around us by proactively identifying biodiversity risks and
opportunities, and implementing associated plans.
Community
Our communities comprise a wide diversity of people and organizations, but they have one key thing in common: they care deeply about the safety,
environmental stewardship and corporate citizenship that we bring to our local operations. In addition, our people care deeply about their
communities - whether we work there or live there, these are the places we call home. We therefore steward our operations and relationships to
demonstrate our commitment to being a responsible producer and a valued and trusted neighbor and business partner, including:
•
•
•
Transparency with respect to safe and environmentally responsible operations, including our potential impacts on local communities
Maintaining strong, genuine relationships with our communities, with engagement based on respect, listening and openness, and
Creating a shared value focused on local economic and social development
Vermilion Energy Inc. ■ Page 49 ■ 2023 Annual Report
Sustainability and Climate-Related Risk Management
Process for Identifying, Assessing and Managing Sustainability- and Climate-related Risks, and
Integration into the Company’s Enterprise Risk Management (ERM) System
Sustainability-related risks and opportunities, including those related to climate, are integrated into multi-disciplinary Company-wide risk identification,
assessment, and management processes as part of our ERM system, based on the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) framework. This provides an integrated approach to managing risk as it impacts strategy and performance, and includes
Operational, Market & Financial, Credit, Organizational, Political, Regulatory Compliance, Strategic and Reputational, and Sustainability categories.
Risk management is the responsibility of the Board and the Executive Committee based on a Top-Down, Bottom-Up approach to engage all staff.
Top-Down begins with our Board and its committees with clear terms of reference, including oversight for identification and management of specific
allocations of risk type. This is translated into action by our Executive Committee, which reviews and manages the ERM process through
implementation of associated policies and procedures. Within our Executive Committee, the Vice President International and HSE and the Vice
President North America have risk management responsibility on an operational level, while the Chief Financial Officer is responsible for overseeing
risk management performance. Our staff help develop systems, standards and procedures. Bottom-Up is how staff implement, maintain and improve
risk management processes, applying the hazard-risk-mitigation process in every part of our business.
Risks are identified by key staff across our Company, including our Operations, Finance, Health, Safety and Environment, Economics, Government
and Public Relations, and Sustainability teams at corporate, business unit and asset levels. These employees have significant experience, and use a
wide array of inputs, including operational and facility assessments, technical and research reports, external stakeholder organizations, government
policy and regulation changes, industry initiatives, communities and landowners, and non-governmental entities.
The results are incorporated into our Corporate Risk Register, which provides a consistent framework to ensure the effective tracking and
communication of our material risks. Using our Risk Matrix as a prioritization tool, teams assess severity, likelihood, speed of onset, and vulnerability
using scales from 1 to 5 for each factor, described in terms of human, environment, financial, social license and cybersecurity impacts. In addition,
risks such as commodity pricing, production and carbon taxes are stress-tested to identify the impact of changes over time. Our sustainability
materiality analysis, which assesses issues with impact for both the Company and our key stakeholders, is integrated into our ERM system using the
Corporate Risk Register through a collaboration between Finance, HSE, Operations and Sustainability teams. Every risk case includes whether
climate-related risk is a contributing factor.
The results are reviewed annually at minimum by the responsible teams, and provided to the Executive Committee and the Board and its
Committees as appropriate, who further review and assess the risks including interdependencies based on the company’s risk tolerance.
Our risk management approach focuses on reducing the risk to a level as low as reasonably practicable, accepting the risk, and/or controlling it (such
as insuring it). For example, if direct mitigation is not possible (e.g. changes in temperature extremes), we would adapt our business processes to
reduce the potential impact (e.g. changing work hours to avoid extreme mid-day heat). In other situations (e.g. increasing risk of flood), we may take
measures to protect against the risk (e.g. flood controls) while also insuring our operations. Financial impact is deemed substantive if it could cause a
business loss of more than $10 million CAD (unrisked and before mitigation/recovery instruments).
To support climate risk identification and management, we use our internally developed Emissions Long-Range Planning Tool. This is based on our
long-range planning tool for production, and allows us to forecast emissions, carbon taxes and the impact of various emission reduction projects.
This supports our decision-making on production, capital allocation, budgeting, target setting, and merger, acquisition and divestment decisions.
Sustainability and Climate-Related Metrics and Targets
Metrics Used to Assess Sustainability- and Climate-Related Risks and Opportunities
Our sustainability reporting (www.vermilionenergy.com/sustainability) describes significant economic, environmental, social and governance
measures, which are reported with reference to TCFD, SASB and GRI. These include but are not limited to:
•
•
•
•
Climate: energy consumption and intensity; investment in and generation of renewable energy; greenhouse gas emission and intensity,
including flaring and venting, and avoided emissions; and water withdrawal, including from areas of high baseline water stress, and
discharge.
Environment: Waste generation and management; Asset integrity and spills; and Environmental investment
Social: Health and Safety; People; and Community investment
Governance: Ethics
Vermilion Energy Inc. ■ Page 50 ■ 2023 Annual Report
These metrics contribute to a sustainability contribution of 10% of the Corporate Performance Scorecard for our Long-term Incentive Plan, comprised
of progress towards our 2025 emission intensity reduction target (5%) and 2027 ARO liability reduction target (3%), along with select ESG rating
agency scores (2%).
We also track carbon pricing, and have identified actual and likely pricing scenarios for all of our operations based on current government policies
and published research relating to the Paris Agreement. For example, in Canada, the 2023 carbon tax was $65 per tCO2e, and in Ireland, carbon
pricing was 56.00€ per tCO2e. Further information is available in our CDP Climate submission, available at vermilionenergy.com/sustainability/
reports/.
In addition, we benchmark our performance via third-party ESG rating agencies, including:
•
•
•
•
CDP Climate Change and Water Security: Note that while we continue to submit these questionnaires, as of 2023 we no longer
participate in the scoring process. In 2022, we received a Climate Score of A- and Water score of “B”.
ISS ESG QualityScore: Decile rating of “1” for Environmental and "2" for Social practices as of March 2024.
MSCI ESG Rating: AAA in 2023.
S&P Global Corporate Sustainability Assessment: Top of our peer group in 2023.
Scope 1, 2 and 3 GHG Emissions Disclosure
We report Scopes 1, 2 and 3 emissions, which are externally verified under ISO 14064-3. Historical, corporate and business unit data can be found
in the Energy and Emissions Performance Metric document available at www.vermilionenergy.com/sustainability/, summarized in the charts below.
The 2018 increase in emissions was associated with the acquisition of southeast Saskatchewan assets. Our Scope 1 and 2 emissions intensity and
methane emissions intensity decreased in 2019 and 2020, primarily related to our first full year of operatorship for the Corrib gas asset in Ireland,
and our focus on reducing post-acquisition emissions over time through superior operations, as we did in 2014 to 2017 following the acquisition of
previous Saskatchewan assets. This has been achieved through a variety of gas conservation and recovery initiatives including construction of new
infrastructure, operational changes and increased infrastructure runtimes. Additional decreases have been achieved through improved measurement
and methodologies, projects such as replacing diesel or propane with compressed natural gas for boilers and water heating for the drilling program in
Alberta, converting pneumatic devices from high- to low-bleed, installing solar-powered chemical injection pumps, and the purchase of renewable
energy certificates for electricity use in Netherlands and Ireland. Emissions intensity flattened and methane intensity increased in 2022 as a result of
lower production; however, our Scope 1 emissions intensity continued to decrease in 2022, to 0.017 t/CO2e, reflecting a 10% decrease from our
2019 baseline of 0.019 t/CO2e and on track to our 2025 target (see below).
Related Targets and Performance
Vermilion has set two emission-related targets:
•
•
Net zero emissions in our own operations, including Scope 1 and Scope 2 emissions, by 2050. We are transparent that this is an
aspirational goal, and that we will build the plan to achieve this target over time.
As a first step, we set a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a
baseline year of 2019. We intend to set new targets every five years at minimum, building on this foundation while exploring broader
options, including the potential to reduce Scope 3 emissions.
We developed, and the Board approved, these targets following our climate scenario analysis and extensive internal assessment. There are
significant inherent uncertainties in how the energy transition will accelerate over the next three decades. Our intention is to manage these by
focusing on responsible production of essential oil and natural gas for as long as these forms of energy are needed, while developing opportunities in
other areas that are an economic and synergistic fit for our business.
Vermilion Energy Inc. ■ Page 51 ■ 2023 Annual Report
tCO2e per BOEEmissions Intensity Scope 1&2 tCO2e per BOE2014201520162017201820192020202120220.0150.0200.0250.0300.035tCO2e per BOEMethane Intensity tCO2e per BOE2014201520162017201820192020202120220.0000.0020.0040.0060.0080.0100.012
Committing to an aspirational net zero target was important, but setting a company-wide nearer term target as the first step in creating a clear
pathway was even more so. We looked at our own operations – from how we manage emissions data to options for emission reduction – and at how
our peers and the majors are approaching this. From this, we identified emissions intensities and opportunities for reduction within our business
units, and set our 2025 target.
This is being achieved, starting with our business units with higher emissions intensities, with an initial focus on efficiency, including process
changes, venting reductions, instrumentation upgrades from gas to air and power efficiency options, along with improved metering and field
measurements.
All of these factors are also being considered as we worked on our Net Zero Transition Plan through 2023. Based on our scenario analyses, we have
identified four key pillars to support both a Net Zero by 2050 target for Scope 1 and 2 emissions, and the establishment of our mid-term 2030 Scope
and 2 emission intensity reduction target:
•
•
•
•
Reduce emissions, with methane a priority, by reducing flaring, venting and fugitive emissions; driving operational and energy efficiencies;
electrifying operations where grids are low-intensity; and assessing new technologies as they become viable.
Convert higher emitting elements of our portfolio to lower intensity production, considering both divestment and end-of-life fields.
Adapt our portfolio to new energy, considering carbon capture and storage, renewable energy associated with our core operations such as
biogas, hydrogen and geothermal production, and other new technologies.
Offset as a solution for the emissions that cannot be eliminated.
We anticipate that our plan will be complete in 2024, and that it will constitute a living document - one that will be updated as economic, technological
and regulatory landscapes evolve.
For more information on our sustainability- and climate-related performance, please see our 2023 Proxy Statement and Information Circular, online
sustainability reporting, particularly the Index and Performance Metrics sections, and 2022 CDP Responses.
Corporate Governance
We are committed to a high standard of corporate governance practices, a dedication that begins at the Board level and extends throughout the
Company. We believe good corporate governance is in the best interest of our shareholders, and that successful companies are those that deliver
growth and a competitive return along with a commitment to the environment, to the communities where they operate, and to their employees.
We comply with the objectives and guidelines relating to corporate governance adopted by the Canadian Securities Administrators and the Toronto
Stock Exchange ("TSX"). In addition, the Board monitors and considers the implementation of corporate governance standards proposed by various
regulatory and non-regulatory authorities in Canada. A discussion of corporate governance policies is included each year in our proxy materials for
our annual general meeting of shareholders, copies of which are available on SEDAR+ (www.sedarplus.ca).
As a Canadian reporting issuer with securities listed on the TSX and the New York Stock Exchange (“NYSE”), Vermilion is required to comply with all
applicable Canadian requirements adopted by the Canadian Securities Administrators and the TSX, and applicable rules for foreign private issuers
adopted by the U.S. Securities and Exchange Commission that give effect to the provisions of the Sarbanes-Oxley Act of 2002.
Our corporate governance practices also incorporate many “best practices” derived from those required to be followed by US domestic companies
under the NYSE listing standards. We are required by Section 303A.11 of the NYSE Listed Company Manual to identify any significant ways in which
our corporate governance practices differ from those required to be followed by US domestic companies under NYSE listing standards. We believe
that there are no such significant differences in our corporate governance practices, except as follows:
•
Shareholder Approval of Equity Compensation Plans. Section 303A.8 of the NYSE Listed Company Manual requires shareholder approval of all
“equity compensation plans” and material revisions to those plans. The definition of “equity compensation plans” covers plans that provide for
the delivery of newly issued securities, and also plans which rely on securities reacquired on the market by the issuing company for the purpose
of redistribution to employees and directors. The TSX rules provide that equity compensation plans and material amendments thereto require
shareholder approval only if they involve newly issued securities and the amendments are not otherwise addressed in the plan’s amendment
procedures. In addition, the TSX rules require that every three years after institution, all unallocated options, rights or other entitlements under
equity compensation plans which do not have a fixed maximum aggregate of securities issuable must be approved by shareholders. Vermilion
follows the TSX rules with respect to equity compensation plan shareholder approval requirements.
Vermilion Energy Inc. ■ Page 52 ■ 2023 Annual Report
Disclosure Controls and Procedures
Our officers have established and maintained disclosure controls and procedures and evaluated the effectiveness of these controls in conjunction
with our filings.
As of December 31, 2023, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded and certified that our disclosure controls and procedures are
effective.
Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on
the financial statements.
The Chief Executive Officer and the Chief Financial Officer of Vermilion have assessed the effectiveness of Vermilion’s internal control over financial
reporting as defined in Rule 13a-15 under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109,
Certification of Disclosure in Issuers’ Annual and Interim Filings. The assessment was based on the framework in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Chief Executive Officer and the Chief
Financial Officer of Vermilion have concluded that Vermilion’s internal control over financial reporting was effective as of December 31, 2023. The
effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2023 has been audited by Deloitte LLP, as reflected in their
report included in the 2023 audited annual financial statements filed with the US Securities and Exchange Commission. No changes were made to
Vermilion’s internal control over financial reporting during the year ended December 31, 2023, that have materially affected, or are reasonably likely
to materially affect, the internal controls over financial reporting.
Vermilion has limited the scope of design controls and procedures ("DC&P") and internal controls over financial reporting to exclude controls, policies
and procedures of Equinor Energy Ireland Limited, which was acquired on March 31, 2023. The scope limitation is in accordance with section
3.3(1)(b) of NI 52-109 which allows an issuer to limit the design of DC&P and ICFR to exclude controls, policies, and procedures of a business that
the issuer acquired not more than 365 days before the end of the fiscal period.
The tables below present the summary financial information of Equinor Energy Ireland Limited included in Vermilion's financial statements as at and
for the year ended December 31, 2023:
($M)
Non-current assets
Non-current liabilities
Net assets
($M)
Revenue net of royalties
Net earnings
As at Dec 31, 2023
705,276
91,954
552,688
Year Ended Dec 31, 2023
161,663
43,581
Vermilion Energy Inc. ■ Page 53 ■ 2023 Annual Report
Supplemental Table 1: Netbacks
The following table includes financial statement information on a per unit basis by business unit. Liquids includes crude oil, condensate, and NGLs.
Natural gas sales volumes have been converted on a basis of six thousand cubic feet of natural gas to one barrel of oil equivalent.
Canada
Sales
Royalties
Transportation
Operating
Operating netback
General and administration
Fund flows from operations ($/boe)
United States
Sales
Royalties
Transportation
Operating
Operating netback
General and administration
Fund flows from operations ($/boe)
France
Sales
Royalties
Transportation
Operating
Operating netback
General and administration
Current income taxes
Fund flows from operations ($/boe)
Netherlands
Sales
Royalties
Transportation
Operating
Operating netback
General and administration
Current income taxes
Fund flows from operations ($/boe)
Germany
Sales
Royalties
Transportation
Operating
Operating netback
General and administration
Current income taxes
Fund flows from operations ($/boe)
Liquids
$/bbl
79.86
(12.93)
(4.28)
(20.41)
42.24
88.71
(25.00)
(1.13)
(15.01)
47.57
116.92
(15.93)
(12.80)
(37.93)
50.26
106.81
—
—
(18.90)
87.91
110.62
3.33
(14.56)
(20.63)
78.76
Q4 2023
Natural Gas
$/mcf
2.65
0.02
(0.21)
(0.68)
1.78
2.04
(0.63)
—
(0.35)
1.06
—
—
—
—
—
17.12
(0.23)
—
(3.03)
13.86
16.16
(0.66)
(0.84)
(3.01)
11.65
Total
$/boe
44.73
(5.76)
(2.62)
(11.43)
24.92
(5.65)
19.27
71.65
(20.27)
(0.87)
(12.13)
38.38
(5.26)
33.12
116.92
(15.93)
(12.80)
(37.93)
50.26
(13.91)
(13.12)
23.23
102.80
(1.38)
—
(18.19)
83.23
(1.15)
(37.33)
44.75
101.18
(1.69)
(7.99)
(18.87)
72.63
(9.16)
5.78
69.25
Liquids
$/bbl
79.92
(12.06)
(3.57)
(21.66)
42.63
87.49
(23.80)
(0.45)
(13.56)
49.68
109.47
(14.34)
(9.39)
(30.71)
55.03
83.23
—
—
(17.44)
65.79
106.03
(2.34)
(14.39)
(23.79)
65.51
2023
Natural Gas
$/mcf
2.91
0.01
(0.21)
(0.79)
1.92
2.31
(0.77)
—
(0.36)
1.18
—
—
—
—
—
17.96
(0.15)
—
(3.76)
14.05
17.26
(0.59)
(0.69)
(3.87)
12.11
Total
$/boe
46.73
(5.62)
(2.34)
(12.66)
26.11
(5.22)
20.89
71.97
(19.75)
(0.36)
(11.15)
40.71
(4.63)
36.08
109.47
(14.34)
(9.39)
(30.71)
55.03
(7.91)
(5.49)
41.63
107.38
(0.90)
—
(22.50)
83.98
(4.78)
(27.78)
51.42
104.26
(3.20)
(7.11)
(23.39)
70.56
(6.99)
(15.22)
48.35
Q4 2022
Total
$/boe
2022
Total
$/boe
65.13
(7.99)
(2.66)
(13.05)
41.43
(1.37)
40.06
83.51
(22.94)
(0.18)
(17.66)
42.73
(4.28)
38.45
70.33
(10.26)
(2.35)
(12.60)
45.12
(1.50)
43.62
87.46
(23.38)
(0.33)
(14.40)
49.35
(3.08)
46.27
119.68
132.90
(14.28)
(7.05)
(19.41)
78.94
(7.73)
(7.69)
63.52
281.75
(1.21)
—
(26.44)
254.10
(4.75)
(86.02)
163.33
218.13
(11.54)
(6.53)
(23.96)
176.10
(5.36)
(3.53)
167.21
(14.68)
(7.31)
(20.94)
89.97
(5.98)
(10.87)
73.12
279.87
(0.25)
—
(22.82)
256.80
(2.12)
(74.91)
179.77
231.34
(10.21)
(4.69)
(19.96)
196.48
(3.34)
(15.15)
177.99
Vermilion Energy Inc. ■ Page 54 ■ 2023 Annual Report
Ireland
Sales
Transportation
Operating
Operating netback
General and administration
Current income taxes
Fund flows from operations ($/boe)
Australia
Sales
Operating
PRRT (2)
Operating netback
General and administration
Current income taxes
Fund flows from operations ($/boe)
Total Company
Sales
Realized hedging gain (loss)
Royalties
Transportation
Operating
PRRT (2)
Operating netback
General and administration
Interest expense
Realized foreign exchange gain (loss)
Other (expense) income
Corporate income taxes
Windfall taxes
Fund flows from operations ($/boe)
Liquids
$/bbl
—
—
—
—
143.69
(42.17)
82.39
183.91
92.51
0.78
(13.08)
(5.16)
(20.69)
6.39
60.75
Q4 2023
Natural Gas
$/mcf
17.05
(0.18)
(2.37)
14.50
—
—
—
—
8.46
2.92
(0.09)
(0.21)
(1.89)
—
9.19
Total
$/boe
102.28
(1.08)
(14.20)
87.00
(9.25)
(0.33)
77.42
143.69
(42.17)
82.39
183.91
(9.91)
7.60
181.60
68.64
10.33
(5.93)
(2.95)
(15.35)
2.74
57.48
(2.60)
(3.01)
(0.73)
0.26
(2.54)
(0.03)
48.83
Liquids
$/bbl
—
—
—
—
2023
Natural Gas
$/mcf
16.21
(0.38)
(2.11)
13.72
143.69
(206.80)
82.39
19.28
—
—
—
—
88.62
0.48
(13.28)
(4.66)
(22.49)
1.52
50.19
8.18
2.31
(0.09)
(0.25)
(2.08)
—
8.07
Total
$/boe
97.24
(2.28)
(12.69)
82.27
(6.13)
(0.23)
75.91
143.69
(206.80)
82.39
19.28
(32.32)
0.05
(12.99)
67.10
7.77
(6.36)
(2.95)
(17.03)
0.69
49.22
(2.68)
(2.83)
(0.15)
(0.01)
(3.05)
(2.60)
37.90
Q4 2022
Total
$/boe
2022
Total
$/boe
162.16
194.05
(1.88)
(11.74)
(2.14)
(9.92)
148.54
181.99
(0.78)
—
0.07
—
147.76
182.06
139.95
(31.23)
(7.40)
101.32
(2.93)
3.47
101.86
103.99
(5.42)
(8.43)
(2.71)
(16.81)
(0.62)
70.00
(1.65)
(2.78)
2.33
(0.14)
(5.18)
(27.50)
35.08
148.15
(38.50)
(12.27)
97.38
(3.32)
3.36
97.42
111.95
(13.07)
(9.85)
(2.54)
(15.75)
(0.59)
70.15
(1.86)
(2.67)
0.49
0.42
(6.70)
(7.18)
52.65
(1)
Vermilion considers Australian PRRT to be an operating item and, accordingly, has included PRRT in the calculation of operating netbacks. Current income
taxes presented above excludes PRRT.
Vermilion Energy Inc. ■ Page 55 ■ 2023 Annual Report
Supplemental Table 2: Hedges
The prices in these tables may represent the weighted averages for several contracts with foreign currency amounts translated to the disclosure
currency using forward rates as at the month-end date. The weighted average price for the portfolio of options listed below may not have the same
payoff profile as the individual contracts. As such, the presentation of the weighted average prices is purely for indicative purposes.
The following tables outline Vermilion’s outstanding risk management positions as at December 31, 2023:
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Daily
Bought
Swap
Volume
Weighted
Average
Bought
Swap Price
Unit Currency
bbl
bbl
bbl
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
USD
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
—
—
—
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
20,000
20,000
20,000
20,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
—
—
—
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
—
—
—
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
20,000
20,000
20,000
20,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
—
—
—
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.45
4.45
4.45
4.45
4.49
4.49
4.49
4.49
4.49
4.49
4.49
4.49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,500
9,500
9,500
4,739
19,904
19,904
9,849
23,695
23,695
23,695
23,695
23,695
23,695
23,695
23,695
4,000
4,000
4,000
4,000
—
—
—
—
—
—
—
—
79.00
80.11
80.11
3.69
3.14
3.14
3.31
3.89
3.89
3.89
3.89
3.89
3.89
3.89
3.89
3.51
3.51
3.51
3.51
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
WTI
Q1 2024
Q2 2024
Q3 2024
AECO
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Q4 2026
NYMEX Henry Hub
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Q4 2026
Vermilion Energy Inc. ■ Page 56 ■ 2023 Annual Report
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Daily
Bought
Swap
Volume
Weighted
Average
Bought
Swap Price
Unit Currency
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
mcf
EUR
mcf
mcf
mcf
mcf
EUR
EUR
EUR
EUR
4,913
41.03
4,913
84.26
—
—
35,623
7,278
7,278
4,913
4,913
—
—
—
—
—
—
—
—
—
—
—
—
—
37.85
25.96
25.96
13.19
13.19
—
—
—
—
—
—
—
—
—
—
—
—
—
35,623
7,278
7,278
4,913
4,913
—
—
—
—
—
—
—
—
—
—
—
—
—
71.90
45.76
45.76
18.32
18.32
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,457
2,457
7,370
30,709
30,709
34,394
34,394
17,197
17,197
12,284
12,284
9,827
9,827
—
14.65
14.65
41.19
14.08
14.08
15.13
15.13
14.40
14.40
13.51
13.51
9.67
9.67
—
22,111
(0.26)
—
—
—
—
2,457
2,457
2,457
2,457
14.95
14.95
14.95
14.95
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Jan 2020 - Apr 2025
Jan 2020 - Jul 2025
Initial Share Price
Share Volume
20.9788 CAD
22.4587 CAD
2,250,000
1,500,000
NBP
Q1 2024
Q2 2024
Q3 2024
TTF
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Buy TTF, Sell NBP Basis
Q1 2024
THE
Q4 2024
Q1 2025
Q2 2025
Q3 2025
VET Equity Swaps
Swap
Swap
Foreign
Exchange
Collar
Forward
Monthly Bought Put
Amount
Weighted Average
Bought Put Price
Monthly Sold Call
Amount
Weighted Average
Sold Call Price
Monthly Sold Swap
Amount
Weighted Average
Sold Swap Price
Jan 2024 - Dec 2024
4,000,000 USD
1.3600
4,000,000 USD
1.3963
—
Jan 2024 - Dec 2024
—
—
—
—
4,000,000 USD
—
1.3531
The following sold option instruments allow the counterparties, at the specified date, to enter into a derivative instrument contract with Vermilion at
the detailed terms:
Period if Option Exercised
Unit Currency
WTI
Option Expiration
Date
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Oct 2024 - Sep 2025
bbl
USD
29-Mar-2024
—
—
—
—
—
—
1,000
80.00
Vermilion Energy Inc. ■ Page 57 ■ 2023 Annual Report
Supplemental Table 3: Capital Expenditures and Acquisitions
By classification ($M)
Drilling and development
Exploration and evaluation
Capital expenditures
Acquisitions, net of cash acquired
Acquisition of securities
Acquired working capital deficit
Acquisitions
Dispositions ($M)
Canada
United States
Total dispositions
By category ($M)
Drilling, completion, new well equip and tie-in, workovers and recompletions
Production equipment and facilities
Seismic, studies, land and other
Capital expenditures
Acquisitions
Total capital expenditures and acquisitions
Capital expenditures by country ($M)
Canada
United States
France
Netherlands
Germany
Ireland
Australia
Central and Eastern Europe
Total capital expenditures
Acquisitions by country ($M)
Canada
United States
Netherlands
Germany
Ireland
Acquisitions
Q4 2023
132,308
10,579
142,887
Q4 2022
157,849
11,456
169,305
2023
569,110
21,081
590,191
2022
528,056
23,761
551,817
2,669
17,448
5,607
25,724
3,594
964
—
4,558
142,281
21,603
109,134
273,018
510,309
23,282
6,122
539,713
Q4 2023
Q4 2022
—
14,855
14,855
Q4 2023
68,285
76,937
(2,335)
142,887
25,724
168,611
Q4 2023
53,791
4,913
11,217
10,787
33,046
11,850
9,331
7,952
142,887
—
—
Q4 2022
112,755
49,286
7,264
169,305
4,558
173,863
Q4 2022
111,483
2,409
15,704
14,232
10,089
1,323
5,753
8,312
169,305
Q4 2023
Q4 2022
20,117
—
—
—
5,607
25,724
1,985
—
—
(11)
2,584
4,558
2023
182,152
14,855
197,007
2022
—
—
2022
2023
418,284
373,304
105,722
198,331
27,811
18,556
551,817
590,191
273,018
539,713
863,209 1,091,530
2023
288,223
91,977
48,297
44,147
59,711
20,283
26,005
11,548
590,191
2023
71,185
3,808
—
—
198,025
273,018
2022
275,203
63,353
44,252
21,652
26,157
3,030
95,173
22,997
551,817
2022
531,348
1,075
707
3,857
2,726
539,713
Vermilion Energy Inc. ■ Page 58 ■ 2023 Annual Report
Supplemental Table 4: Production
Canada
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
United States
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
France
Light and medium crude oil (bbls/d)
Total (boe/d)
Netherlands
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Germany
Light and medium crude oil (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Ireland
Conventional natural gas (mmcf/d)
Total (boe/d)
Australia
Central and Eastern Europe
Conventional natural gas (mmcf/d)
Total (boe/d)
Consolidated
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
11,614
12,054
12,901
16,674
17,448
16,835
17,042
15,980
16,388
16,809
16,868
17,767
4,034
6,281
10,315
160.16
48,623
4,410
6,219
10,629
163.94
50,007
3,506
5,513
9,019
159.26
48,464
4,719
6,875
11,594
160.34
54,991
4,525
6,279
10,804
146.81
52,720
4,204
6,870
4,873
7,155
4,892
7,286
4,785
7,073
4,426
6,862
5,558
7,767
4,556
7,016
11,074
12,028
12,178
11,858
11,288
13,325
11,572
145.04
143.94
140.55
128.85
138.42
146.55
138.41
52,080
53,060
51,584
49,720
51,168
54,618
52,407
3,187
4,404
3,349
2,824
3,282
2,824
2,846
2,675
2,647
3,520
1,888
2,322
27
1,131
1,158
7.49
5,593
7,395
7,395
—
119
119
32.06
5,462
1,775
19.62
5,046
15
1,124
1,139
7.25
6,751
7,578
7,578
—
39
39
24.32
4,091
1,713
20.29
5,095
22
1,025
1,047
7.23
5,601
7,788
7,788
—
61
61
27.28
4,607
1,715
22.05
5,391
64.04
10,673
47.96
7,993
67.51
11,251
—
—
0.30
50
0.54
90
0.05
8
20
1,020
1,040
7.14
5,055
7,578
7,578
—
66
66
29.07
4,910
1,410
25.85
5,717
24.58
4,096
—
—
0.64
107
36
1,218
1,254
7.45
5,779
7,247
7,247
—
49
49
27.41
4,617
1,481
25.86
5,791
26.04
4,340
4,847
4,847
0.67
111
35
1,031
1,066
7.03
40
958
998
6.74
24
26
2
1,056
1,388
1,206
1,080
1,414
1,208
7.56
9.09
6.75
2
928
930
5.51
—
1,058
1,058
5.95
5,062
4,967
5,014
5,575
5,854
3,736
4,373
6,818
8,126
8,389
8,453
8,677
9,013
9,062
6,818
8,126
8,389
8,453
8,677
9,013
9,062
—
74
74
1
60
60
1
83
83
—
97
97
6
104
104
1
95
95
6
92
92
29.15
35.22
39.03
51.98
42.48
37.59
41.45
4,933
5,930
6,589
8,761
7,190
6,362
7,006
1,764
1,331
1,158
1,127
1,043
1,093
911
26.54
25.36
26.95
18.00
16.19
15.60
13.40
6,187
5,558
5,650
4,127
3,741
3,694
3,144
25.74
27.93
30.26
30.12
22.67
30.19
34.14
4,290
4,655
5,043
5,020
3,778
5,031
5,690
4,763
2,465
3,888
2,742
4,190
3,835
4,489
4,763
2,465
3,888
2,742
4,190
3,835
4,489
0.63
104
0.64
106
0.34
57
0.12
20
0.22
36
0.28
46
0.63
104
28,685
26,952
25,753
28,485
34,305
33,003
31,811
32,091
31,356
34,245
32,698
34,556
4,180
7,412
11,592
283.92
87,597
4,463
7,344
11,807
263.80
82,727
3,589
6,538
10,127
283.63
83,152
4,805
7,896
12,701
247.61
82,455
4,610
7,497
12,107
234.23
85,450
4,312
4,973
4,999
4,908
4,532
5,656
4,648
7,901
8,113
8,342
8,461
8,068
8,695
8,074
12,213
13,086
13,341
13,369
12,600
14,351
12,722
234.12
239.83
244.69
238.16
226.73
235.72
233.98
84,237
84,868
86,213
84,417
84,633
86,335
86,276
Vermilion Energy Inc. ■ Page 59 ■ 2023 Annual Report
Light and medium crude oil (bbls/d)
Total (boe/d)
4,715
4,715
1,204
1,204
Canada
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
United States
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
France
Light and medium crude oil (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Netherlands
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Germany
Light and medium crude oil (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
Ireland
Conventional natural gas (mmcf/d)
Total (boe/d)
Australia
Light and medium crude oil (bbls/d)
Total (boe/d)
Central and Eastern Europe
Conventional natural gas (mmcf/d)
Total (boe/d)
Consolidated
Light and medium crude oil (bbls/d)
Condensate (1) (bbls/d)
Other NGLs (1) (bbls/d)
NGLs (bbls/d)
Conventional natural gas (mmcf/d)
Total (boe/d)
2023
2022
2021
2020
2019
2018
13,293
16,830
16,954
21,106
23,971
17,400
4,166
6,220
10,386
160.94
50,503
4,621
6,895
11,516
144.10
52,364
4,831
7,179
12,010
138.03
51,968
4,886
7,719
12,605
151.38
58,942
4,295
6,988
11,283
148.35
59,979
3,754
5,914
9,668
129.37
48,630
3,445
2,908
2,597
3,046
2,514
1,069
21
1,076
1,097
7.28
5,754
34
1,066
1,100
7.20
5,207
8
1,146
1,154
6.84
4,890
5
1,218
1,223
7.47
5,514
18
996
1,014
6.89
4,675
8
452
460
2.78
1,992
7,584
7,639
8,799
8,903
10,435
11,362
—
—
—
—
0.19
0.21
7,584
7,639
8,799
8,903
10,467
11,396
—
71
71
28.18
4,768
1,654
21.93
5,310
51.12
8,520
1,492
1,492
0.38
63
—
66
66
32.66
5,510
1,435
26.18
5,798
27.48
4,579
3,995
3,995
0.57
95
3
97
97
43.40
7,334
1,044
15.81
3,679
29.25
4,875
3,810
3,810
0.31
51
1
88
88
46.16
7,782
968
12.65
3,076
37.44
6,240
4,416
4,416
1.90
317
3
88
88
49.10
8,274
917
15.31
3,468
46.57
7,762
5,662
5,662
0.42
70
—
90
90
46.13
7,779
1,004
15.66
3,614
55.17
9,195
4,494
4,494
1.02
169
27,469
32,809
33,208
38,441
43,502
35,329
4,258
7,296
11,554
269.84
83,994
4,721
7,961
12,682
238.18
85,187
4,936
8,325
13,261
233.64
85,408
4,980
8,937
13,917
256.99
4,400
7,984
12,384
266.82
95,190
100,357
3,853
6,366
10,219
250.33
87,270
(1)
Under National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities", disclosure of production volumes should include segmentation by
product type as defined in the instrument. This table provides a reconciliation from "crude oil and condensate", "NGLs" and "natural gas" to the product types. In
this report, references to "crude oil" and "light and medium crude oil" mean "light crude oil and medium crude oil" and references to "natural gas" mean
"conventional natural gas". Production volumes reported are based on quantities as measured at the first point of sale.
Vermilion Energy Inc. ■ Page 60 ■ 2023 Annual Report
Supplemental Table 5: Segmented Financial Results
Three Months Ended December 31, 2023
($M)
Drilling and development
Exploration and evaluation
Canada
53,791
—
USA
4,913
—
11,217
10,788
—
(1)
France Netherlands
Germany
Australia
Corporate
Crude oil and condensate sales
142,924
30,892
52,472
NGL sales
Natural gas sales
Sales of purchased commodities
Royalties
18,196
38,982
—
4,567
1,408
—
—
—
—
(25,759)
(10,427)
(7,150)
1,073
—
50,588
—
(692)
Transportation
Operating
General and administration
PRRT
Corporate income taxes
Windfall taxes
Interest expense
Realized gain on derivative instruments
Realized foreign exchange loss
Realized other income
(11,701)
(51,129)
(25,259)
—
(53)
—
—
—
—
—
—
—
(450)
(5,745)
(6,239)
(2,706)
—
—
—
—
—
—
—
(17,021)
(9,143)
(6,245)
—
(578)
—
(5,888)
(18,758)
—
—
—
—
—
—
—
—
—
—
30,018
3,028
15,028
—
Ireland
11,850
—
42
—
29,122
100,388
—
(736)
—
—
9,331
—
36,381
—
—
—
—
400
7,552
—
—
906
38,458
Total
132,308
10,579
278,812
22,763
221,394
38,458
(384)
(45,148)
—
(3,486)
(8,233)
(3,999)
—
2,523
—
(1,059)
—
—
(38,458)
(38,458)
—
(22,441)
(13,948)
(10,677)
(547)
(116,937)
(9,085)
(2,508)
30,570
—
(325)
20,860
1,925
—
1,202
(19,810)
20,860
(19,374)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(249)
(249)
(22,909)
(22,909)
78,737
(5,529)
1,948
83,745
78,737
(5,529)
1,948
372,117
Revenue from external customers
174,343
26,440
45,322
50,969
43,414
100,430
36,381
38,980
516,279
Purchased commodities
—
—
—
Fund flows from operations
86,201
17,045
10,423
22,490
30,219
76,013
45,981
($M)
Total assets
Drilling and development
Exploration and evaluation
Crude oil and condensate sales
NGL sales
Natural gas sales
Sales of purchased commodities
Canada
1,805,049
288,223
—
621,985
68,753
170,653
254,884
91,977
—
587,824
48,297
—
129,775
285,626
15,240
6,143
—
—
—
—
USA
France Netherlands
Germany
Ireland
Australia
Corporate
Total
Year Ended December 31, 2023
425,532
1,137,648
280,532
1,507,026
6,235,821
237,326
44,147
—
2,306
—
48,463
11,248
57,464
—
184,548
138,017
302,330
—
—
20,283
26,005
—
74
—
—
—
—
36,381
—
—
—
—
1,715
9,833
569,110
21,081
—
—
3,260
177,000
1,133,611
83,993
804,951
177,000
(1,711)
(191,694)
Royalties
(103,511)
(41,487)
(37,425)
(1,567)
(5,993)
Revenue from external customers
757,880
109,671
248,201
185,287
189,488
302,404
36,381
178,549
2,007,861
Purchased commodities
Transportation
Operating
—
—
(43,163)
(751)
(24,511)
—
—
—
—
(13,333)
(7,098)
—
—
(177,000)
(177,000)
—
(88,856)
(233,417)
(23,424)
(80,134)
(39,157)
(43,857)
(39,464)
(52,360)
(1,568)
(513,381)
General and administration
(96,296)
(9,734)
(20,642)
(8,317)
(13,104)
(19,054)
(8,182)
94,613
PRRT
Corporate income taxes
Windfall taxes
Interest expense
Realized gain on derivative instruments
Realized foreign exchange loss
Realized other expense
—
(53)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,860
(14,313)
(48,349)
(28,533)
(715)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13
—
—
—
—
—
(80,716)
20,860
(91,932)
—
18
(78,426)
(78,426)
(85,212)
(85,212)
234,365
234,365
(4,532)
(420)
(4,532)
(420)
Fund flows from operations
384,951
75,762
108,601
89,464
90,661
236,073
(3,288)
160,387
1,142,611
Vermilion Energy Inc. ■ Page 61 ■ 2023 Annual Report
Supplemental Table 6: Operational and Financial Data by Core Region
Production volumes (1)
North America
Crude oil and condensate (bbls/d)
18,862
20,883
19,778
24,237
25,291
23,898
24,801
23,571
23,846
24,757
24,316
24,645
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
International
7,412
7,344
6,538
7,895
7,497
7,901
8,113
8,342
8,461
8,068
8,695
8,074
167.65
171.19
166.49
167.48
154.26
152.07
150.68
148.11
137.93
145.18
152.06
144.36
54,216
56,758
54,065
60,046
58,499
57,142
58,027
56,598
55,295
57,022
58,354
56,780
Crude oil and condensate (bbls/d)
14,004
10,534
9,564
9,054
13,624
13,419
11,983
13,519
12,419
14,020
14,037
14,560
Natural gas (mmcf/d)
Total (boe/d)
Consolidated
116.27
92.61
117.14
80.13
79.97
82.05
89.15
96.58
100.22
81.55
83.66
89.62
33,381
25,969
29,087
22,408
26,953
27,095
26,840
29,616
29,123
27,612
27,981
29,495
Crude oil and condensate (bbls/d)
32,866
31,416
29,341
33,290
38,915
37,315
36,784
37,090
36,264
38,777
38,354
39,204
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
7,412
7,344
6,538
7,896
7,497
7,901
8,113
8,342
8,461
8,068
8,695
8,074
283.92
263.80
283.63
247.61
234.23
234.12
239.83
244.69
238.16
226.73
235.72
233.98
87,597
82,727
83,152
82,455
85,450
84,237
84,868
86,213
84,417
84,633
86,335
86,276
(1)
Please refer to Supplemental Table 4 "Production" for disclosure by product type.
Sales volumes
North America
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
Crude oil and condensate (bbls/d)
18,862
20,883
19,778
24,237
25,291
23,897
24,801
23,571
23,845
24,757
24,316
24,645
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
International
7,412
7,344
6,538
7,895
7,497
7,901
8,113
8,342
8,461
8,068
8,695
8,074
167.65
171.19
166.49
167.48
154.26
152.07
150.68
148.11
137.93
145.18
152.06
144.36
54,216
56,758
54,065
60,046
58,499
57,142
58,027
56,598
55,295
57,022
58,354
56,780
Crude oil and condensate (bbls/d)
9,221
9,950
10,302
8,087
16,257
11,493
11,720
12,615
13,985
15,227
13,859
11,421
Natural gas (mmcf/d)
Total (boe/d)
Consolidated
116.27
92.61
117.14
80.13
79.97
82.05
89.15
96.58
100.22
81.55
83.66
89.62
28,598
25,386
29,824
21,442
29,585
25,169
26,578
28,712
30,689
28,820
27,802
26,357
Crude oil and condensate (bbls/d)
28,083
30,833
30,080
32,324
41,547
35,391
36,522
36,186
37,830
39,985
38,174
36,066
NGLs (bbls/d)
Natural gas (mmcf/d)
Total (boe/d)
7,412
7,344
6,538
7,896
7,497
7,901
8,113
8,342
8,461
8,068
8,695
8,074
283.92
263.80
283.63
247.61
234.23
234.12
239.83
244.69
238.16
226.73
235.72
233.98
82,814
82,144
83,889
81,489
88,083
82,312
84,607
85,310
85,984
85,841
86,156
83,138
Vermilion Energy Inc. ■ Page 62 ■ 2023 Annual Report
Financial results
North America
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
Crude oil and condensate sales ($/bbl)
100.16
103.46
NGL sales ($/bbl)
Natural gas sales ($/mcf)
Sales ($/boe)
Royalties ($/boe)
Transportation ($/boe)
Operating ($/boe)
33.38
2.62
47.51
27.77
2.52
49.26
94.78
28.11
2.29
45.12
95.63
106.66
114.82
134.72
111.42
36.24
4.11
54.84
39.93
5.96
66.95
44.64
6.41
71.24
51.86
7.13
83.34
46.94
4.80
65.88
92.99
47.26
5.07
59.97
82.23
35.55
3.80
50.40
75.43
25.43
2.72
42.30
(7.25)
(2.44)
(7.75)
(2.08)
(5.45)
(1.57)
(7.68)
(2.44)
(9.47)
(12.58)
(12.51)
(11.24)
(2.42)
(2.16)
(2.15)
(1.91)
(9.26)
(1.86)
(7.14)
(1.92)
(5.98)
(1.90)
66.31
29.39
3.98
43.08
(5.49)
(2.05)
(11.50)
(12.09)
(12.22)
(14.10)
(13.51)
(14.00)
(11.58)
(11.95)
(11.68)
(11.02)
(10.89)
(11.21)
General and administration ($/boe)
Corporate income taxes ($/boe)
0.87
0.23
(0.72)
(0.01)
0.10
(0.10)
(0.99)
(0.12)
0.10
(0.13)
(1.27)
(0.03)
(1.52)
—
(1.26)
(0.02)
Fund flows from operations ($/boe)
27.42
26.61
25.88
29.51
41.52
41.20
55.58
39.50
(2.01)
0.42
35.58
(1.14)
(0.05)
(0.91)
(0.04)
29.13
22.58
(1.34)
(0.04)
22.95
Fund flows from operations
Drilling and development
Free cash flow
International
136,766
138,958
127,346
159,435
223,443
216,579
293,470
201,193
180,979
152,764
119,916
117,227
(58,704)
(69,703) (135,723) (116,070) (113,892) (112,238)
(54,913)
(57,513)
(89,643)
(35,179)
(38,847)
(59,113)
78,062
69,255
(8,377) 43,365
109,551
104,341
238,557
143,680
91,336
117,585
81,069
58,114
Crude oil and condensate sales ($/bbl)
123.77
114.26
100.23
107.57
128.02
140.09
146.67
136.69
103.53
16.92
108.70
(3.41)
(3.91)
13.34
93.46
3.55
14.58
24.69
39.54
58.55
32.33
36.75
35.54
91.89
132.84
177.23
254.86
173.14
183.66
163.23
103.39
94.91
18.82
85.41
9.83
72.16
(7.43)
(13.39)
(4.53)
(5.23)
(5.11)
(6.38)
(3.29)
(7.21)
(3.51)
(7.23)
(3.64)
(5.43)
(2.91)
(4.13)
(3.40)
(4.52)
(3.47)
(3.83)
(4.64)
(22.64)
(25.58)
(28.24)
(31.41)
(23.35)
(22.63)
(22.11)
(19.86)
(18.86)
(17.55)
(16.56)
(16.42)
Natural gas sales ($/mcf)
Sales ($/boe)
Royalties ($/boe)
Transportation ($/boe)
Operating ($/boe)
General and administration ($/boe)
(9.18)
(7.37)
(7.58)
(7.52)
(5.09)
(3.34)
(3.16)
(3.02)
(2.53)
(2.40)
Corporate income taxes ($/boe)
(7.81)
(13.42)
(6.79)
(11.20)
(15.15)
(21.97)
(28.73)
(17.63)
(12.17)
0.64
PRRT ($/boe)
Fund flows from operations ($/boe)
7.93
69.68
—
—
—
(1.85)
(1.96)
(0.83)
(2.60)
(1.96)
(2.74)
46.12
36.62
64.21
122.12
194.24
107.44
132.21
120.18
73.35
43.75
(2.61)
(0.19)
(0.58)
81.40
7.98
62.39
(3.53)
(2.76)
(2.06)
0.66
(0.60)
37.68
Fund flows from operations
Drilling and development
Exploration and evaluation
Free cash flow
Consolidated
183,353
107,704
99,377
123,893
332,377
449,771
259,840
341,626
339,286
194,505
110,654
89,403
(73,604)
(49,701)
(28,347)
(37,258)
(43,957)
(65,640)
(54,575)
(25,328)
(29,359)
(27,994)
(38,856)
(20,399)
(10,579)
(6,235)
(2,775)
(1,492)
(11,456)
(6,137)
(3,665)
(2,503)
(26,805)
(3,277)
(1,473)
(3,851)
99,170
51,768
68,255
85,143
276,964
377,994
201,600
313,795
283,122
163,234
70,325
65,153
Q4/23
Q3/23
Q2/23
Q1/23
Q4/22
Q3/22
Q2/22
Q1/22
Q4/21
Q3/21
Q2/21
Q1/21
Crude oil and condensate sales ($/bbl)
107.91
106.94
NGL sales ($/bbl)
Natural gas sales ($/mcf)
Sales ($/boe)
Royalties ($/boe)
Transportation ($/boe)
Operating ($/boe)
General and administration ($/boe)
Corporate income taxes ($/boe)
Windfall taxes ($/boe)
PRRT ($/boe)
Interest ($/boe)
33.38
8.48
68.64
27.77
6.32
62.92
96.64
28.11
7.37
61.74
98.62
115.02
123.02
138.55
120.23
36.23
10.77
39.93
17.43
44.64
24.68
51.86
16.50
46.94
17.41
75.36
103.99
127.39
111.55
105.52
96.88
47.26
17.89
96.82
87.05
35.55
9.20
68.19
79.06
25.43
5.24
51.93
(5.93)
(2.95)
(4.26)
(2.84)
(6.16)
(2.87)
(9.18)
(3.14)
(8.43)
(10.94)
(10.85)
(2.71)
(2.57)
(2.62)
(9.29)
(2.25)
(7.43)
(2.41)
(6.26)
(2.44)
(5.29)
(2.78)
71.09
29.39
5.51
49.20
(4.87)
(2.27)
(15.35)
(16.26)
(17.91)
(18.66)
(16.81)
(16.64)
(14.89)
(14.61)
(14.24)
(13.21)
(12.72)
(12.86)
(2.60)
(2.54)
(0.03)
2.74
(2.77)
(4.15)
(2.90)
—
(2.63)
(2.48)
(4.56)
—
(3.01)
(2.68)
(2.65)
(2.98)
(2.71)
(3.04)
(1.65)
(5.18)
(1.90)
(6.74)
(2.92)
(27.50)
—
—
(0.62)
(2.78)
(0.60)
(3.23)
(2.04)
(9.03)
—
(0.26)
(2.74)
(1.85)
(5.95)
—
(0.87)
(1.93)
(2.20)
(4.07)
—
(0.70)
(2.06)
1.95
(5.42)
(18.22)
(10.36)
(18.78)
(23.97)
(1.56)
0.18
—
(0.92)
(2.37)
(9.19)
(0.65)
2.33
(0.28)
(0.30)
0.49
34.52
(0.14)
35.08
0.80
67.07
0.36
58.82
0.10
0.70
50.79
(0.30)
1.29
40.73
0.37
0.48
33.27
(1.46)
(0.09)
—
(0.19)
(2.41)
(5.05)
(0.25)
0.35
22.04
(1.57)
0.18
—
(0.19)
(2.57)
(3.43)
(0.69)
0.73
21.66
Realized derivatives ($/boe)
Realized foreign exchange ($/boe)
Realized other ($/boe)
Fund flows from operations ($/boe)
10.33
(0.73)
0.26
48.83
9.74
0.28
(1.32)
8.86
0.48
0.53
35.74
32.35
Fund flows from operations
Drilling and development
Exploration and evaluation
Free cash flow
372,117
270,214
247,109
253,167
284,220
507,876
452,901
389,868
322,173
262,696
172,942
162,051
(132,308) (119,404) (164,070) (153,328) (157,849) (177,878) (109,488)
(82,841) (119,002)
(63,173)
(77,703)
(79,512)
(10,579)
(6,235)
(2,775)
(1,492)
(11,456)
(6,137)
(3,665)
(2,503)
(26,805)
(3,277)
(1,473)
(3,851)
229,230
144,575
80,264
98,347
114,915
323,861
339,748
304,524
176,366
196,246
93,766
78,688
Vermilion Energy Inc. ■ Page 63 ■ 2023 Annual Report
Non-GAAP and Other Specified Financial Measures
This MD&A includes references to certain financial measures which do not have standardized meanings and may not be comparable to similar
measures presented by other issuers. These financial measures include fund flows from operations, a total of segments measure of profit or loss in
accordance with IFRS 8 “Operating Segments” (please see Segmented Information in the Notes to the condensed Consolidated Financial
Statements) and net debt, a capital management measure in accordance with IAS 1 “Presentation of Financial Statements” (please see Capital
Disclosures in the Notes to the condensed Consolidated Financial Statements).
In addition, this MD&A includes financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-
GAAP financial measures and may not be comparable to similar measures presented by other issuers. These non-GAAP financial measures include:
Total of Segments Measure
Fund flows from operations (FFO): Most directly comparable to net (loss) earnings, FFO is comprised of sales less royalties, transportation,
operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized loss on derivatives, realized foreign exchange gain (loss),
and realized other income. The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary
to pay dividends, repay debt, fund asset retirement obligations and make capital investments. Reconciliation to the primary financial statement
measures can be found below.
Sales
Royalties
Transportation
Operating
General and administration
Corporate income tax expense
Windfall taxes
PRRT
Interest expense
Realized gain (loss) on derivatives
Realized foreign exchange gain (loss)
Realized other (expense) income
Fund flows from operations
Equity based compensation
Unrealized gain on derivative instruments (1)
Unrealized foreign exchange gain (loss) (1)
Accretion
Depletion and depreciation
Deferred tax recovery (expense)
Gain on business combination
Loss on disposition
Impairment (expense) reversal
Unrealized other income (expense) (1)
Net (loss) earnings
(1)
Q4 2023
$M
522,969
(45,148)
(22,441)
(116,937)
(19,810)
(19,374)
(249)
20,860
(22,909)
78,737
(5,529)
1,948
372,117
(7,871)
$/boe
68.64
(5.93)
(2.95)
(15.35)
(2.60)
(2.54)
(0.03)
2.74
(3.01)
10.33
(0.73)
0.26
48.83
141,126
4,834
(19,469)
(259,012)
110,758
(5,607)
(125,539)
(1,016,094)
1,621
(803,136)
Q4 2022
$M
842,693
(68,303)
(21,976)
(136,247)
(13,344)
(41,958)
(222,859)
(5,045)
(22,506)
(43,940)
18,845
(1,140)
284,220
(5,377)
549,693
(47,405)
(16,501)
(171,926)
(196,733)
—
—
—
(563)
395,408
2023
$M
$/boe
103.99 2,022,555
(191,694)
(8.43)
(88,856)
(2.71)
(513,381)
(16.81)
(80,716)
(1.65)
(91,932)
(5.18)
(78,426)
(27.50)
20,860
(0.62)
(85,212)
(2.78)
234,365
(5.42)
(4,532)
2.33
(0.14)
(420)
35.08 1,142,611
(42,756)
2022
$M
$/boe
67.10 3,476,394
(306,017)
(6.36)
(2.95)
(78,896)
(489,034)
(17.03)
(2.68)
(57,677)
(208,153)
(3.05)
(222,859)
(2.60)
(18,318)
0.69
(82,858)
(2.83)
(405,894)
7.77
15,195
(0.15)
(0.01)
12,982
37.90 1,634,865
(44,390)
$/boe
111.95
(9.85)
(2.54)
(15.75)
(1.86)
(6.70)
(7.18)
(0.59)
(2.67)
(13.07)
0.49
0.42
52.65
179,707
12,438
(78,187)
(712,619)
190,193
439,487
(352,367)
(1,016,094)
—
(237,587)
540,801
(84,464)
(58,170)
(577,134)
(288,707)
—
—
192,094
(1,833)
1,313,062
Unrealized gain on derivative instruments, Unrealized foreign exchange gain (loss), and Unrealized other expense are line items from the respective
Consolidated Statements of Cash Flows.
Non-GAAP Financial Measures and Non-GAAP Ratios
Free cash flow: Most directly comparable to cash flows from operating activities and is comprised of fund flows from operations less drilling and
development costs and exploration and evaluation costs. The measure is used to determine the funding available for investing and financing
activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures.
Reconciliation to the primary financial statement measures can be found in the following table.
Vermilion Energy Inc. ■ Page 64 ■ 2023 Annual Report
($M)
Cash flows from operating activities
Changes in non-cash operating working capital
Asset retirement obligations settled
Fund flows from operations
Drilling and development
Exploration and evaluation
Free cash flow
Q4 2023
343,831
(651)
28,937
372,117
(132,308)
(10,579)
229,230
Q4 2022
495,195
(227,483)
16,508
284,220
(157,849)
(11,456)
114,915
2023
1,024,528
61,117
56,966
1,142,611
(569,110)
(21,081)
552,420
2022
1,814,220
(216,869)
37,514
1,634,865
(528,056)
(23,761)
1,083,048
Capital expenditures: Calculated as the sum of drilling and development costs and exploration and evaluation costs from the Consolidated
Statements of Cash Flows that is most directly comparable to cash flows used in investing activities. We consider capital expenditures to be a useful
measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital. Reconciliation to the primary financial
statement measures can be found below.
($M)
Drilling and development
Exploration and evaluation
Capital expenditures
Q4 2023
132,308
10,579
142,887
Q4 2022
157,849
11,456
169,305
2023
569,110
21,081
590,191
2022
528,056
23,761
551,817
Payout and payout % of FFO: A non-GAAP financial measure and non-GAAP ratio respectively, most directly comparable to dividends declared.
Payout is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations
settled, and payout % of FFO is calculated as payout over FFO (total of segments measure). The measure is used to assess the amount of cash
distributed back to shareholders and reinvested in the business for maintaining production and organic growth. The reconciliation of the measure to
the primary financial statement measure can be found below.
($M)
Dividends declared
Drilling and development
Exploration and evaluation
Asset retirement obligations settled
Payout
% of fund flows from operations
Q4 2023
16,227
132,308
10,579
28,937
188,051
Q4 2022
13,058
157,849
11,456
16,508
198,871
2023
2022
65,248
569,110
21,081
56,966
712,405
45,769
528,056
23,761
37,514
635,100
51 %
70 %
62 %
39 %
Return on capital employed (ROCE): A non-GAAP ratio, ROCE is a measure that we use to analyze our profitability and the efficiency of our
capital allocation process; the comparable primary financial statement measure is earnings before income taxes. ROCE is calculated by dividing net
(loss) earnings before interest and taxes ("EBIT") by average capital employed over the preceding twelve months. Capital employed is calculated as
total assets less current liabilities while average capital employed is calculated using the balance sheets at the beginning and end of the twelve-
month period.
($M)
Net (loss) earnings
Taxes
Interest expense
EBIT
Average capital employed
Return on capital employed
Twelve Months Ended
Dec 31, 2023
(237,587)
(40,695)
85,212
(193,070)
5,819,380
(3) %
Dec 31, 2022
1,313,062
738,037
82,858
2,133,957
5,628,762
38 %
Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure
is used to calculate net debt, a capital management measure disclosed below.
Vermilion Energy Inc. ■ Page 65 ■ 2023 Annual Report
($M)
Current assets
Current derivative asset
Current liabilities
Current lease liability
Current derivative liability
Adjusted working capital
As at
Dec 31, 2023
823,514
(313,792)
(696,074)
21,068
732
(164,552)
Dec 31, 2022
714,446
(162,843)
(892,045)
19,486
55,845
(265,111)
Acquisitions: The sum of acquisitions and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares
issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net
acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment
associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions
line items in the Consolidated Statements of Cash Flows can be found below.
($M)
Acquisitions, net of cash acquired
Acquisition of securities
Acquired working capital deficit
Acquisitions
Capital Management Measure
Q4 2023
Q4 2022
2,669
17,448
5,607
25,724
3,594
964
—
4,558
Q4 2023
142,281
21,603
109,134
273,018
Q4 2022
510,309
23,282
6,122
539,713
Net debt: Is in accordance with IAS 1 "Presentation of Financial Statements" that is most directly comparable to long-term debt. Net debt is
comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current
assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after
adjusting for the timing of working capital fluctuations. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset.
($M)
Long-term debt
Adjusted working capital
Unrealized FX on swapped USD borrowings
Net debt
As at
Dec 31, 2023
914,015
164,552
—
1,078,567
Dec 31, 2022
1,081,351
265,111
(1,876)
1,344,586
Ratio of net debt to four quarter trailing fund flows from operations
0.9
0.8
Supplementary Financial Measures
Diluted shares outstanding: The sum of shares outstanding at the period end plus outstanding awards under the LTIP, based on current estimates
of future performance factors and forfeiture rates.
('000s of shares)
Shares outstanding
Potential shares issuable pursuant to the LTIP
Diluted shares outstanding
Q4 2023
162,271
4,185
166,456
Q4 2022
163,227
5,389
168,616
Vermilion Energy Inc. ■ Page 66 ■ 2023 Annual Report
Fund flows from operations per basic and diluted share: Management assesses fund flows from operations on a per share basis as we believe
this provides a measure of our operating performance after taking into account the issuance and potential future issuance of Vermilion common
shares. Fund flows from operations per basic share is calculated by dividing fund flows from operations (total of segments measure) by the basic
weighted average shares outstanding as defined under IFRS. Fund flows from operations per diluted share is calculated by dividing fund flows from
operations by the sum of basic weighted average shares outstanding and incremental shares issuable under the equity based compensation plans
as determined using the treasury stock method.
Operating netback: Most directly comparable to net (loss) earnings that is calculated as sales less royalties, operating expense, transportation
costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the
profitability and efficiency of our field operations.
Fund flows from operations per boe: Calculated as FFO (total of segments measure) by boe production. Fund flows from operations netback is
used by management to assess the profitability of our business units and Vermilion as a whole.
Net debt to four quarter trailing fund flows from operations: Calculated as net debt (capital management measure) over the FFO (total of
segments measure) from the preceding four quarters. The measure is used to assess the ability to repay debt.
Cash dividends per share: Represents cash dividends declared per share that is a useful measure of the dividends a common shareholder was
entitled to during the period.
Covenants: The financial covenants on our revolving credit facility contain non-GAAP measures. The definitions for these financial covenants are
included in Financial Position Review.
Vermilion Energy Inc. ■ Page 67 ■ 2023 Annual Report
Management's Report to Shareholders
Management's Responsibility for Financial Statements
The accompanying consolidated financial statements of Vermilion Energy Inc. are the responsibility of management and have been approved by the
Board of Directors of Vermilion Energy Inc. The consolidated financial statements have been prepared in accordance with the accounting policies
detailed in the notes to the consolidated financial statements and are prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board. Where necessary, management has made informed judgments and estimates of
transactions that were not yet completed at the balance sheet date. Financial information throughout the Annual Report is consistent with the
consolidated financial statements.
Management ensures the integrity of the consolidated financial statements by maintaining high-quality systems of internal control. Procedures and
policies are designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded, and that the financial
records are reliable for preparation of the consolidated financial statements. Deloitte LLP, Vermilion’s Independent Registered Public Accounting
Firm, have conducted an audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and have provided their report.
The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control. The Board
carries out this responsibility principally through the Audit Committee, which is appointed by the Board and is comprised entirely of independent
Directors. The Committee meets periodically with management and Deloitte LLP to satisfy itself that each party is properly discharging its
responsibilities and to review the consolidated financial statements, Management’s Discussion and Analysis and the Report of the Independent
Registered Public Accounting Firm before they are presented to the Board of Directors.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management, under the
supervision and with the participation of the principal executive officer and principle financial officer, conducted an evaluation of the effectiveness of
the system of internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework (2013)” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has assessed the effectiveness of
Vermilion’s internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934 and as
defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. Management concluded that
Vermilion’s internal control over financial reporting was effective as of December 31, 2023. Vermilion has limited the scope of design controls and
procedures ("DC&P") and internal controls over financial reporting to exclude controls, policies and procedures of Equinor Energy Ireland Limited,
which was acquired on March 31, 2023. The scope limitation is in accordance with section 3.3(1)(b) of NI 52-109 which allows an issuer to limit the
design of DC&P and ICFR to exclude controls, policies, and procedures of a business that the issuer acquired not more than 365 days before the
end of the fiscal period. Total assets and revenues excluded from management's assessment of internal control over financial reporting represents
12% and 8%, respectively, of the related Consolidated Financial Statement amounts as at and for the year ended December 31, 2023.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even those systems determined
to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.
The effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2023 has been audited by Deloitte LLP, the Company’s
Independent Registered Public Accounting Firm, who also audited the Company’s consolidated financial statements for the year ended
December 31, 2023.
(“Dion Hatcher”)
(“Lars Glemser”)
Dion Hatcher
President & Chief Executive Officer
March 6, 2024
Lars Glemser
Vice President & Chief Financial Officer
Vermilion Energy Inc. ■ Page 68 ■ 2023 Annual Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Vermilion Energy Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Vermilion Energy Inc. and subsidiaries (the “Company") as of December 31, 2023,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated March 6, 2024, expressed
an unqualified opinion on those financial statements.
As described in Management’s Report to Shareholders, management excluded from its assessment the internal control over financial reporting at
Equinor Energy Ireland Limited (“EEIL”), which was acquired on March 31, 2023, and whose financial statements constitute 12% of total assets and
8% of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2023. Accordingly, our audit did not
include the internal control over financial reporting at EEIL.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report to Shareholders. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Canada
March 6, 2024
Vermilion Energy Inc. ■ Page 69 ■ 2023 Annual Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Vermilion Energy Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Vermilion Energy Inc. and subsidiaries (the "Company") as of December 31, 2023
and 2022, the related consolidated statements of net (loss) earnings and comprehensive (loss) income, consolidated statements of cash flows and
consolidated statements of changes in shareholders' equity for each of the two years in the period ended December 31, 2023, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2023 and 2022, and its financial performance and its cash flows for each of the two years in the period
ended December 31, 2023, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6 2024, expressed an
unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of capital assets acquired from Equinor Energy Ireland Limited. - Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
The Company completed the acquisition of Equinor Energy Ireland Limited (“EEIL”) on March 31, 2023. The Company accounted for the acquisition
as a business combination using the acquisition method. The purchase price was allocated to assets acquired, including capital assets and liabilities
assumed based on their respective fair value at the date of acquisition. As a result of the fair value of the net assets acquired exceeding the
consideration paid, a gain on business combination of $439 million was also recognized. The fair value of capital assets is estimated based on the
future after-tax cash flows of the underlying proved and probable natural gas reserves. The Company engaged an independent reserve engineer to
estimate these reserves using estimates, assumptions, and engineering data. The development of the Company’s reserves and their future after-tax
cash flows required management to make significant estimates and assumptions related to future natural gas prices, discount rate, reserves, and
future operating and development costs.
Given the significant judgments made by management related to future natural gas prices, discount rate, reserves, and future operating and
development costs, these estimates and assumptions are subject to a high degree of estimation uncertainty. This required a high degree of auditor
judgment and resulted in an increased extent of audit effort, including the involvement of fair value specialists.
Vermilion Energy Inc. ■ Page 70 ■ 2023 Annual Report
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to future natural gas prices, discount rate, reserves, and future operating and development costs used to determine the
fair value of capital assets included the following, among others:
•
•
•
•
Evaluated the effectiveness of the relevant controls, including those over the determination of the future natural gas prices, discount rate,
reserves, and future operating and development costs.
Evaluated the Company’s independent reserve engineer by:
◦
◦
Examining reports and assessing their scope of work and findings; and
Assessing the competence, capability, and objectivity by evaluating their relevant professional qualifications and experience.
Evaluated the reasonableness of reserves by testing the source financial information underlying the reserves and comparing the reserve
volumes to historical production volumes.
Evaluated the reasonableness of future operating and development costs by testing the source financial information underlying the
estimate as of December 31, 2022, and conducting roll forward procedures up to March 31, 2023, to assesses any significant changes in
assumptions, comparing future operating and development costs to historical results, and evaluating whether they are consistent with
evidence obtained in other areas of the audit.
• With the assistance of fair value specialists:
◦
◦
Evaluated the future natural gas prices by independently developing a reasonable range of forecasts based on reputable third-
party forecasts and market data and comparing those to the future prices selected by management; and
Evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount
rate and developing a range of independent estimates and comparing those to the discount rate determined by management.
Impairment of Capital Assets – Refer to Note 2 and 6 to the financial statements
Critical Audit Matter Description
The Company reviews all Cash Generating Units (“CGUs”) for indicators of potential impairment or reversal of impairment at each reporting date. As
a result of allocating future capital spending to align with the Company’s long-term capital priorities, indicators of impairment were identified for
Saskatchewan, France and US CGUs as of December 31, 2023. An impairment loss is recognized if the carrying amount of the CGU exceeds its
recoverable amount. The recoverable amount is determined based on the higher of fair value less cost of disposal and value-in-use, using future
after-tax cash flows of the underlying proved and probable oil and natural gas reserves. The Company engages an independent reserve engineer to
estimate oil and natural gas reserves using estimates, assumptions, and engineering data. The development of the Company’s reserves and their
future after-tax cash flows requires management to make significant estimates and assumptions related to future oil, natural gas liquids and natural
gas prices (“future commodity prices”), discount rates, reserves, and future operating and development costs. As at December 31, 2023, the carrying
amount of the CGUs exceeded the recoverable amount, which resulted in an impairment charge.
Given the significant judgments made by management related to future commodity prices, discount rates, reserves, and future operating and
development costs, these estimates and assumptions are subject to a high degree of estimation uncertainty. This required a high degree of auditor
judgment and an increased extent of audit effort, including the involvement of fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to future commodity prices, discount rates, reserves, and future operating and development costs used to determine
the recoverable amount of the CGUs included the following, among others:
•
•
•
•
Evaluated the effectiveness of the relevant controls, including those over the determination of the future commodity prices, discount rates,
reserves, and future operating and development costs.
Evaluated the Company’s independent reservoir engineer by:
◦
◦
Examining reports and assessing their scope of work and findings; and
Assessing the competence, capability, and objectivity by evaluating their relevant professional qualifications and experience.
Evaluated the reasonableness of reserves by testing the source financial information underlying the reserves and comparing the reserve
volumes to historical production volumes.
Evaluated the reasonableness of future operating and development costs by testing the source financial information underlying the
estimate, comparing future operating and development costs to historical results, and evaluating whether they are consistent with evidence
obtained in other areas of the audit.
• With the assistance of fair value specialists:
◦
◦
Evaluated the future commodity prices by independently developing a reasonable range of forecasts based on reputable third-
party forecasts and market data and comparing those to the future prices selected by management; and
Evaluated the reasonableness of the discount rates by testing the source information underlying the determination of the
discount rates and developing a range of independent estimates and comparing those to discount rates determined by
management.
Vermilion Energy Inc. ■ Page 71 ■ 2023 Annual Report
Valuation of deferred tax asset - Refer to Notes 2 and 11 to the financial statements
Critical Audit Matter Description
The Company recognizes deferred income taxes for differences between the financial statement and tax basis of assets and liabilities at
substantively enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax assets are
reduced to the amounts expected to be realized based on forecasts of future taxable income, specifically forecasts of future revenue (commodity
price forecasts and forecasted reserves). The Company recorded a deferred income tax asset for Canada and Ireland primarily arising from past
taxable losses in these jurisdictions.
To determine whether it is probable that the deferred income tax assets in these jurisdictions will be realized, management makes assumptions
related to the forecasts of future taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves).
Auditing the probability of the deferred income tax assets being realized and management’s commodity price forecasts and forecasted reserves
involved a high degree of auditor judgement as the estimations made by management contain significant measurement uncertainty. This resulted in
an increased extent of audit effort, which included the need to involve income tax specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to assessing the probability of the deferred income tax assets being realized and management’s forecasts of taxable
income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves) to evaluate the deferred income tax assets in
Canada and Ireland included the following, among others:
•
•
•
Evaluated the effectiveness of relevant controls, including those over the determination of the forecasts of future revenue, specifically
commodity price forecasts and forecasted reserves.
Evaluated management’s ability to accurately forecast future taxable income by comparing management’s assumptions to historical data
and available market trends.
Evaluated the reasonableness of management’s forecasts of future revenue by:
◦
◦
Comparing the forecasts prepared by management’s expert to third party forecasts; and,
Evaluating whether management’s estimates of commodity price forecasts and estimated reserves were consistent with the
requirements of IAS 12 – Income taxes relating to the probability of forecasted future revenue and the length of the forecast
period.
/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Canada
March 6, 2024
We have served as the Company's auditor since 2000.
Vermilion Energy Inc. ■ Page 72 ■ 2023 Annual Report
Consolidated Financial Statements
Consolidated Balance Sheet
thousands of Canadian dollars
Note
December 31, 2023
December 31, 2022
Assets
Current
Cash and cash equivalents
Accounts receivable
Crude oil inventory
Derivative instruments
Prepaid expenses
Total current assets
Derivative instruments
Investment in securities
Deferred taxes
Exploration and evaluation assets
Capital assets
Total assets
Liabilities
Current
Accounts payable and accrued liabilities
Dividends payable
Derivative instruments
Income taxes payable
Total current liabilities
Derivative instruments
Long-term debt
Lease obligations
Asset retirement obligations
Deferred taxes
Total liabilities
Shareholders' Equity
Shareholders' capital
Contributed surplus
Accumulated other comprehensive income
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
Approved by the Board
(Signed “Manjit Sharma”)
Manjit Sharma, Director
19
19
19
9
19
9
5
11
7
4, 6
19
13
9
19
9
12
10
8
11
13
141,456
242,926
57,333
313,792
68,007
823,514
76,107
73,261
182,051
198,379
4,882,509
6,235,821
380,370
16,227
732
298,745
696,074
21,050
914,015
33,001
1,159,063
380,970
3,204,173
4,142,566
43,348
109,302
(1,263,568)
3,031,648
6,235,821
13,836
373,651
19,657
162,843
144,459
714,446
132,598
56,366
125,533
270,593
5,691,522
6,991,058
481,444
13,058
55,845
341,698
892,045
—
1,081,351
51,507
1,087,757
477,340
3,590,000
4,243,794
35,409
123,505
(1,001,650)
3,401,058
6,991,058
(Signed “Dion Hatcher”)
Dion Hatcher, Director
Vermilion Energy Inc. ■ Page 73 ■ 2023 Annual Report
Consolidated Statements of Net (Loss) Earnings and Comprehensive (Loss) Income
thousands of Canadian dollars, except share and per share amounts
Revenue
Petroleum and natural gas sales
Royalties
Sales of purchased commodities
Petroleum and natural gas revenue
Expenses
Purchased commodities
Operating
Transportation
Equity based compensation
Gain on derivative instruments
Interest expense
General and administration
Foreign exchange (gain) loss
Other expense (income)
Accretion
Depletion and depreciation
Impairment expense (reversal)
Gain on business combination
Loss on disposition
(Loss) earnings before income taxes
Income tax (recovery) expense
Deferred
Current
Windfall taxes
Net (loss) earnings
Other comprehensive (loss) income
Currency translation adjustments
Hedge accounting reserve, net of tax
Fair value adjustment on investment in securities, net of tax
Comprehensive (loss) income
Net (loss) earnings per share
Basic
Diluted
Weighted average shares outstanding ('000s)
Basic
Diluted
Year Ended
Note
Dec 31, 2023
Dec 31, 2022
2,022,555
(191,694)
177,000
2,007,861
3,476,394
(306,017)
244,834
3,415,211
177,000
513,381
88,856
42,756
(414,072)
85,212
80,716
(7,906)
420
78,187
712,619
1,016,094
(439,487)
352,367
2,286,143
(278,282)
244,834
489,034
78,896
44,390
(134,907)
82,858
57,677
69,269
(11,149)
58,170
577,134
(192,094)
—
—
1,364,112
2,051,099
(190,193)
71,072
78,426
(40,695)
288,707
226,471
222,859
738,037
(237,587)
1,313,062
(16,468)
6,357
(4,092)
(251,790)
60,543
5,599
28,896
1,408,100
(1.45)
(1.45)
8.03
7.80
163,719
163,719
163,489
168,426
19
15
9
19
8
6, 7
6
4
6
11
11
5
16
16
Vermilion Energy Inc. ■ Page 74 ■ 2023 Annual Report
Consolidated Statements of Cash Flows
thousands of Canadian dollars
Operating
Net (loss) earnings
Adjustments:
Accretion
Depletion and depreciation
Impairment expense (reversal)
Gain on business combination
Loss on disposition
Unrealized gain on derivative instruments
Equity based compensation
Unrealized foreign exchange (gain) loss
Unrealized other expense
Deferred tax (recovery) expense
Asset retirement obligations settled
Changes in non-cash operating working capital
Cash flows from operating activities
Investing
Drilling and development
Exploration and evaluation
Acquisitions, net of cash acquired
Acquisition of securities
Dispositions
Changes in non-cash investing working capital
Cash flows used in investing activities
Financing
Net borrowings (repayments) on the revolving credit facility
Issuance of senior unsecured notes
Payments on lease obligations
Repurchase of shares
Cash dividends
Cash flows used in financing activities
Foreign exchange (loss) gain on cash held in foreign currencies
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplementary information for cash flows from operating activities
Interest paid
Income taxes paid
Note
Dec 31, 2023
Dec 31, 2022
Year Ended
(237,587)
1,313,062
8
6, 7
6
4
6
9
15
11
8
19
6
7
6
5
6
19
12
12
10
13
13
19
78,187
712,619
1,016,094
(439,487)
352,367
(179,707)
42,756
(12,438)
—
(190,193)
(56,966)
(61,117)
1,024,528
(569,110)
(21,081)
(142,281)
(21,603)
197,007
(19,367)
(576,435)
(146,324)
—
(17,094)
(94,838)
(62,080)
(320,336)
(137)
127,620
13,836
141,456
84,471
306,911
58,170
577,134
(192,094)
—
—
(540,801)
44,390
84,464
1,833
288,707
(37,514)
216,869
1,814,220
(528,056)
(23,761)
(510,309)
(23,282)
—
26,116
(1,059,292)
(1,121,868)
499,037
(21,168)
(71,659)
(32,711)
(748,369)
1,249
7,808
6,028
13,836
75,042
144,814
Vermilion Energy Inc. ■ Page 75 ■ 2023 Annual Report
Consolidated Statements of Changes in Shareholders' Equity
thousands of Canadian dollars
Shareholders' capital
Balance, beginning of year
Vesting of equity based awards
Equity based compensation
Share-settled dividends on vested equity based awards
Repurchase of shares
Balance, end of year
Contributed surplus
Balance, beginning of year
Equity based compensation
Vesting of equity based awards
Balance, end of year
Accumulated other comprehensive income
Balance, beginning of year
Currency translation adjustments
Hedge accounting reserve, net of tax
Fair value adjustment on investment in securities, net of tax
Balance, end of year
Deficit
Balance, beginning of year
Net (loss) earnings
Dividends declared
Share-settled dividends on vested equity based awards
Repurchase of shares
Balance, end of year
Year Ended
December 31, 2023
December 31, 2022
Note
13
4,243,794
23,575
11,242
1,179
(137,224)
4,142,566
35,409
31,514
(23,575)
43,348
123,505
(16,468)
6,357
(4,092)
109,302
(1,001,650)
(237,587)
(65,248)
(1,179)
42,096
(1,263,568)
4,241,773
44,811
13,699
4,377
(60,866)
4,243,794
49,529
30,691
(44,811)
35,409
28,467
60,543
5,599
28,896
123,505
(2,253,624)
1,313,062
(45,769)
(4,377)
(10,942)
(1,001,650)
13
5
13
Total shareholders' equity
3,031,648
3,401,058
Vermilion Energy Inc. ■ Page 76 ■ 2023 Annual Report
Description of equity reserves
Shareholders’ capital
Represents the recognized amount for common shares issued (net of equity issuance costs and deferred taxes) less the weighted-average carrying
value of shares repurchased. The price paid to repurchase common shares is compared to the carrying value of the shares and the difference is
recorded against deficit.
Contributed surplus
Represents the recognized value of unvested equity based awards that will be settled in shares. Once vested, the value of the awards are
transferred to shareholders’ capital.
Accumulated other comprehensive income
Represents currency translation adjustments, hedge accounting reserve and fair value adjustments on investments.
Currency translation adjustments result from translating the balance sheets of subsidiaries with a foreign functional currency to Canadian dollars at
period-end rates. These amounts may be reclassified to net (loss) earnings if there is a disposal or partial disposal of a subsidiary.
The hedge accounting reserve represents the effective portion of the change in fair value related to cash flow and net investment hedges recognized
in other comprehensive income, net of tax and reclassified to the consolidated statement of net (loss) earnings in the same period in which the
transaction associated with the hedged item occurs.
Fair value adjustment on investment in securities, net of tax, are a result of changes in the fair value of investments that have been elected to be
subsequently measured at fair value through other comprehensive income.
Deficit
Represents the cumulative net (loss) earnings less distributed earnings and surplus of the price paid to repurchase common shares of Vermilion
Energy Inc. over the weighted-average carrying value of the shares repurchased.
Vermilion Energy Inc. ■ Page 77 ■ 2023 Annual Report
Notes to the Consolidated Financial Statements for the year ended December 31, 2023
and 2022
tabular amounts in thousands of Canadian dollars, except share and per share amounts
1. Basis of presentation
Vermilion Energy Inc. and its subsidiaries (the “Company” or “Vermilion”) are engaged in the business of petroleum and natural gas exploration,
development, acquisition, and production.
Vermilion was incorporated in Canada and the Company’s registered office and principal place of business is located at 3500, 520, 3rd Avenue SW,
Calgary, Alberta, Canada.
These consolidated financial statements were approved and authorized for issuance by Vermilion’s Board of Directors on March 6, 2024.
2. Material accounting policies
Accounting framework
The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
Principles of consolidation
The consolidated financial statements include the accounts of Vermilion Energy Inc. and its subsidiaries. Vermilion’s subsidiaries include entities in
each of the jurisdictions that Vermilion operates as described in Note 3 (Segmented information) including: Canada, France, Netherlands, Germany,
Ireland, Australia, the United States, and Central and Eastern Europe (Hungary, Slovakia, and Croatia). Vermilion Energy Inc. directly or indirectly
through holding companies owns all of the voting securities of each material subsidiary. Transactions between Vermilion Energy Inc. and its
subsidiaries have been eliminated.
Vermilion accounts for joint operations by recognizing the Company’s share of assets, liabilities, income, and expenses.
Exploration and evaluation assets
Vermilion classifies costs as exploration and evaluation (“E&E”) assets when they relate to exploring and evaluating an area for which the Company
has the license or right to explore and extract resources. E&E costs may include: geological and geophysical costs; land and license acquisition
costs; and costs for the drilling, completion, and testing of exploration wells.
E&E costs are reclassified to capital assets if the technical feasibility and commercial viability of the area can be determined. E&E assets are
assessed for impairment prior to any reclassification. The technical feasibility and commercial viability of extracting the reserves is considered to be
determinable when proved and probable reserves are identified.
Costs incurred prior to the acquisition of the legal rights to explore an area are expensed as incurred. If reserves are not found within the license area
or the area is abandoned, the related E&E costs are depreciated over a period not greater than five years. If an exploration license expires prior to
the commencement of exploration activities, the cost of the exploration license is written off through depreciation in the year of expiration.
Capital assets
Vermilion recognizes capital assets at cost less accumulated depletion, depreciation, and impairment losses. Costs include directly attributable costs
incurred for the drilling, completion, and tie-in of wells and the construction of production and processing facilities.
When components of capital assets are replaced, disposed of, or no longer in use, they are derecognized. Gains and losses on disposal of capital
assets are determined by comparing the proceeds of disposal compared to the carrying amount.
Depletion and depreciation
Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives.
Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and
depreciation.
The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to
the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production.
Vermilion Energy Inc. ■ Page 78 ■ 2023 Annual Report
For the purposes of the depletion calculations, oil and gas reserves are converted to a common unit of measure on the basis of their relative energy
content based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent.
Impairment of capital assets and exploration and evaluation assets
Depletion units are aggregated into cash generating units (“CGUs”) for impairment testing. CGUs are the lowest level for which there are identifiable
cash inflows that are largely independent of cash inflows of other groups of assets. CGUs are reviewed for indicators of potential impairment at each
reporting date.
E&E assets are tested for impairment when reclassified to capital assets or when indicators of potential impairment are identified. E&E assets are
reviewed for indicators of potential impairment at each reporting date. If indicators of potential impairment are identified, E&E assets are tested for
impairment as part of the CGU attributable to the jurisdiction in which the exploration area resides.
If an indicator of potential impairment exists, the CGU’s carrying value is compared to its recoverable amount. A CGU’s recoverable amount is the
higher of its fair value less costs of disposal and its value-in-use. If the carrying amount of a CGU exceeds its recoverable amount, an impairment
loss is recognized to reduce the carrying value of the CGU to its recoverable amount.
If an impairment loss has been recognized in a prior period, an assessment is performed at each reporting date to determine if there are indicators
that the circumstances which led to the impairment loss have reversed. If the change in circumstances results in the recoverable amount being
higher than the carrying value after the impairment loss, then the impairment loss (net of depletion that would otherwise have been recorded) is
reversed.
Lease obligations and right-of-use assets
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. At the lease commencement date, a lease obligation is recognized at the present value of future lease payments, typically using the
applicable incremental borrowing rate. A corresponding right-of-use asset is recognized at the amount of the lease obligation, adjusted for lease
incentives received and initial direct costs. Vermilion does not recognize leases for short-term leases with a lease term of 12 months or less, or
leases for low-value assets.
Payments are applied against the lease obligation and interest expense is recognized on the lease obligations using the effective interest rate
method. Depreciation is recognized on the right-of-use asset over the lease term.
Cash and cash equivalents
Cash and cash equivalents include cash on deposit with financial institutions and guaranteed investment certificates.
Crude oil inventory
Crude oil inventory is valued at the lower of cost or net realizable value. The cost of crude oil inventory produced includes related operating expense,
royalties, and depletion determined on a weighted-average basis.
Asset retirement obligations
Vermilion recognizes a provision for asset retirement obligations when an event occurs giving rise to an obligation of uncertain timing or amount.
Asset retirement obligations are recognized on the consolidated balance sheet as a long-term liability with a corresponding increase to E&E or
capital assets.
Asset retirement obligations reflect the present value of estimated future settlement costs. The discount rate used to calculate the present value is
specific to the jurisdiction the obligation relates to and is reflective of current market assessment of the time value of money and risks specific to the
liabilities that have not been reflected in the cash flow estimates.
Asset retirement obligations are remeasured at each reporting period to reflect changes in market rates and estimated future settlement costs. Asset
retirement obligations are increased each reporting period to reflect the passage of time with a corresponding charge to accretion expense.
Revenue recognition
Revenue associated with the sale of crude oil and condensate, natural gas, and natural gas liquids is measured based on the consideration specified
in contracts with customers.
Revenue from contracts with customers is recognized when or as Vermilion satisfies a performance obligation by transferring control of crude oil and
condensate, natural gas, or natural gas liquids to a customer at contractually specified transfer points. This transfer coincides with title passing to the
customer and the customer taking physical possession of the commodity. Vermilion principally satisfies its performance obligations at a point in time
and the amounts of revenue recognized relating to performance obligations satisfied over time are not significant.
Vermilion Energy Inc. ■ Page 79 ■ 2023 Annual Report
Vermilion invoices customers for delivered products monthly and payment occurs shortly thereafter. Vermilion does not have any contracts where the
period between the transfer of control of the commodity to the customer and payment by the customer exceeds one year. As a result, Vermilion does
not adjust its revenue transactions to reflect significant financing components.
Financial instruments
On initial recognition, financial instruments are measured at fair value. Measurement in subsequent periods depends on the classification of the
financial instrument as described below:
•
•
•
Fair value through profit or loss ("FVTPL"): Financial instruments under this classification include cash and cash equivalents and derivative
assets and liabilities. Transaction costs under this classification are expensed as incurred.
Fair value through other comprehensive income ("FVTOCI"): Financial instruments under this classification include derivative assets,
investment in securities, and liabilities where hedge accounting is applied. Transaction costs under this classification are expensed as
incurred.
Amortized cost: Financial instruments under this classification include accounts receivable, accounts payable and accrued liabilities,
dividends payable, lease obligations, and long-term debt. Transaction costs under this classification are included in the measurement of
the financial instrument.
Accounts receivable are measured net of a loss allowance equal to the lifetime expected credit loss.
Equity based compensation
Equity based compensation expense results from equity-settled awards issued under Vermilion’s long-term share-based compensation plans as well
as the grant date fair value of Vermilion common shares issued under the Company’s bonus and employee share savings plans.
Vermilion's long-term share-based compensation plans consist of the Long-term Incentive Plan (“LTIP”) and the Deferred Share Unit Plan ("DSU").
Equity-settled awards issued under the LTIP vest over a period of one to three years and awards issued under the DSU vest immediately upon
granting.
Equity based compensation expense for equity-settled plans is recognized over the vesting period with a corresponding adjustment to contributed
surplus. The expense recognized is based on the grant date fair value of the awards, an estimate of the performance factor that will be achieved (if
applicable), and an estimate of forfeiture rates based on historical vesting data. Dividends notionally accrue to the LTIP and are excluded in the
determination of grant date fair values. When the awards are converted to Vermilion common shares, the amount recognized in contributed surplus
is reclassified to shareholders’ capital.
The grant date fair value of awards or Vermilion common shares issued is determined as the closing price of Vermilion’s common shares on the
Toronto Stock Exchange on the grant date.
Per share amounts
Basic net (loss) earnings per share is calculated by dividing net (loss) earnings by the weighted-average number of shares outstanding during the
period.
Diluted net (loss) earnings per share is calculated by dividing net (loss) earnings by the diluted weighted-average number of shares outstanding
during the period. The diluted weighted-average number of shares outstanding is the sum of the basic weighted-average number of shares
outstanding and (to the extent inclusion reduces diluted net (loss) earnings per share) the number of shares issuable for equity-settled awards
determined using the treasury stock method. The treasury stock method assumes that the unrecognized equity based compensation expense are
deemed proceeds used to repurchase Vermilion common shares at the average market price during the period.
Vermilion Energy Inc. ■ Page 80 ■ 2023 Annual Report
Foreign currency translation
Vermilion Energy Inc.’s functional and presentation currency is the Canadian dollar. Vermilion has subsidiaries that transact and operate in countries
other than Canada and have functional currencies other than the Canadian dollar.
Foreign currency translation includes the translation of foreign currency transactions and the translation of foreign operations.
Foreign currency transaction translation occurs when translating transactions and balances in foreign currencies to the applicable functional currency
of Vermilion Energy Inc. and its subsidiaries. Gains and losses from foreign currency transactions are recorded as foreign exchange gains or losses
in the statement of Net (loss) earnings. Foreign currency transaction translation occurs as follows:
•
•
•
Income and expenses are translated at the prevailing rates on the date of the transaction.
Non-monetary assets or liabilities are carried at the prevailing rates on the date of the transaction.
Monetary items, including intercompany loans that are not deemed to represent net investments in a foreign subsidiary, are translated at
the prevailing rates at the balance sheet date.
Foreign operation translation occurs when translating the financial statements of non-Canadian functional currency subsidiaries to the Canadian
dollar and when translating intercompany loans that are deemed to represent net investments in a foreign subsidiary. Gains and losses from foreign
operation translations are recorded as currency translation adjustments in the statement of comprehensive income. Foreign operation translation
occurs as follows:
•
•
Income and expenses are translated at the average exchange rates for the period.
Assets and liabilities are translated at the prevailing rates on the balance sheet date.
Income taxes
Deferred tax assets and liabilities are calculated using the balance sheet method. Deferred tax assets and liabilities are recognized for the estimated
effect of any temporary differences between the amounts recognized on Vermilion’s consolidated balance sheet and the respective tax basis. This
calculation uses enacted or substantively enacted tax rates that are expected to be in effect when the temporary differences are expected to reverse.
The effect of a change in tax rates on deferred taxes is recognized in the period the related legislation is substantively enacted.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary
differences can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that the
related tax benefit will be realized.
Business combinations
Acquisitions of corporations or groups of assets are accounted for as business combinations using the acquisition method if the acquired assets
constitute a business. Under the acquisition method, assets acquired and liabilities assumed in a business combination (with the exception of
deferred tax assets and liabilities) are measured at their fair values. Deferred tax assets or liabilities arising from the assets acquired and liabilities
assumed are measured in accordance with the policies described in "Income taxes" above.
If applicable, the excess or deficiency of the fair value of net assets acquired compared to consideration paid is recognized as a gain on business
combination or as goodwill on the consolidated balance sheet. Acquisition-related costs incurred to effect a business combination are expensed in
the period incurred.
As part of the assessment to determine if the acquisition constitutes a business, Vermilion may elect to apply the concentration test on a transaction
by transaction basis. The test is met if substantially all of the fair value related to the gross assets acquired is concentrated in a single identifiable
asset (or group of similar assets) resulting in the acquisition not being deemed a business and recorded as an asset acquisition.
Vermilion Energy Inc. ■ Page 81 ■ 2023 Annual Report
Segmented information
Vermilion has a decentralized business unit structure designed to manage assets in each country the Company operates. Each of Vermilion's
operating segments derives its revenues solely from the production and sale of petroleum and natural gas.
Vermilion’s Corporate segment aggregates costs incurred at the Company’s Corporate head office located in Calgary, Alberta, Canada as well as
costs incurred relating to Vermilion’s exploration and production activities in Hungary, Slovakia, and Croatia (Central and Eastern Europe). These
operating segments have similar economic characteristics as they do not currently generate material revenue.
Vermilion’s chief operating decision maker regularly reviews fund flows from operations generated by each of Vermilion’s operating segments. Fund
flows from operations is a measure of profit or loss that provides the chief operating decision maker with the ability to assess the profitability of each
operating segment and, correspondingly, the ability of each operating segment to fund its share of dividends, asset retirement obligations, and
capital investments.
Management judgments and estimation uncertainty
The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and
assumptions that affect the reported amount of assets, liabilities, income, and expenses. Actual results could differ significantly from these estimates.
Key areas where management has made judgments, estimates, and assumptions are described below.
The determination of whether indicators of impairment or impairment reversals:
•
Determining whether there are indicators of impairment or impairment reversals are based on management's assessments of the changes
in estimates for future commodity prices, costs, discount rates, or reserves. Changes in these estimates and assumptions can directly
impact the calculated fair value of capital assets and therefore could be indicators of impairment or impairment reversals. In addition,
change in the Vermilion's market capitalization relative to its book value could be an indicator of impairment.
The measurement of the fair value of capital assets acquired in a business combination and the determination of the recoverable amount of cash
generating units ("CGU"):
•
•
Calculating the fair value of capital assets acquired in a business combination and the recoverable amount of CGUs (in the assessment of
impairments or reversals of previous impairments if indicators of impairment or impairment reversal are identified) are based on estimated
future commodity prices, discount rates and estimated reserves. Reserve estimates are based on: engineering data, estimated future
commodity prices, expected future rates of production, and assumptions regarding the timing and amount of future expenditures. Changes
in these estimates and assumptions can directly impact the calculated fair value of capital assets acquired (and thus the resulting goodwill
or gain on business combination) and the recoverable amount of a CGU (and thus the resulting impairment loss or recovery).
In addition, the recoverable amount of a CGU is impacted by the composition of CGUs, which are subject to management’s judgment of
the lowest level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets. The
factors used by Vermilion to determine CGUs vary by jurisdiction due to their unique operating and geographic conditions. In general,
Vermilion will assess the following factors: geographic proximity of the assets within a group to one another, geographic proximity of the
group of assets to other groups of assets, homogeneity of the production from the group of assets and the sharing of infrastructure used to
process and/or transport production. Changes in these judgments can directly impact the calculated recoverable amount of a CGU (and
thus the resulting impairment loss or recovery).
The measurement of the carrying value of asset retirement obligations on the balance sheet, including the fair value and subsequent carrying value
of asset retirement obligations assumed in a business combination:
•
Asset retirement obligations are based on judgments regarding regulatory requirements, estimates of future costs, assumptions on the
expected timing of expenditures, and estimates of the underlying risk inherent to the obligation. The carrying balance of asset retirement
obligations and accretion expense may differ due to changes in: laws and regulations, technology, the expected timing of expenditures,
and market conditions affecting the discount rate applied.
The recognition and measurement of deferred tax assets and liabilities:
•
•
Tax interpretations, regulations, and legislation in the various jurisdictions in which Vermilion and its subsidiaries operate are subject to
change and interpretation. Changes in laws and interpretations can affect the timing of the reversal of temporary tax differences, the tax
rates in effect when such differences reverse and Vermilion’s ability to use tax losses and other tax pools in the future. The Company’s
income tax filings are subject to audit by taxation authorities in numerous jurisdictions and the results of such audits may increase or
decrease the tax liability. The determination of tax amounts recognized in the consolidated financial statements are based on
management’s assessment of the tax positions, which includes consideration of their technical merits, communications with tax authorities
and management’s view of the most likely outcome.
The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on
estimated future commodity prices and estimates of reserves. Judgments, estimates, and assumptions inherent in reserve estimates are
described above.
Vermilion Energy Inc. ■ Page 82 ■ 2023 Annual Report
The measurement of lease obligations and corresponding right-of-use assets:
•
The measurement of lease obligations are subject to management's judgments of the applicable incremental borrowing rate and the
expected lease term. The carrying balance of the right-of-use assets, lease obligations, and the resulting interest and depletion and
depreciation expense, may differ due to changes in the market conditions and expected lease terms. Applicable incremental borrowing
rates are based on judgments of the economic environment, term, currency, and the underlying risk inherent to the asset. Lease terms are
based on assumptions regarding cancellation and extension terms that allow for operational flexibility based on future market conditions.
Vermilion Energy Inc. ■ Page 83 ■ 2023 Annual Report
3. Segmented information
Total assets
Drilling and development
Exploration and evaluation
Crude oil and condensate sales
NGL sales
Natural gas sales
Sales of purchased commodities
Canada
1,805,049
288,223
—
621,985
68,753
170,653
USA
France Netherlands
Germany
Ireland
Australia
Corporate
Total
Year Ended December 31, 2023
425,532
1,137,648
280,532
1,507,026
6,235,821
254,884
91,977
—
587,824
48,297
—
129,775
285,626
15,240
6,143
—
—
—
—
237,326
44,147
—
2,306
—
48,463
11,248
57,464
—
184,548
138,017
302,330
—
—
20,283
26,005
—
74
—
—
—
—
36,381
—
—
—
—
1,715
9,833
569,110
21,081
—
—
3,260
177,000
1,133,611
83,993
804,951
177,000
(1,711)
(191,694)
Royalties
(103,511)
(41,487)
(37,425)
(1,567)
(5,993)
Revenue from external customers
757,880
109,671
248,201
185,287
189,488
302,404
36,381
178,549
2,007,861
Purchased commodities
Transportation
Operating
—
—
(43,163)
(751)
(24,511)
—
—
—
—
(13,333)
(7,098)
—
—
(177,000)
(177,000)
—
(88,856)
(233,417)
(23,424)
(80,134)
(39,157)
(43,857)
(39,464)
(52,360)
(1,568)
(513,381)
General and administration
(96,296)
(9,734)
(20,642)
(8,317)
(13,104)
(19,054)
(8,182)
94,613
PRRT
Corporate income taxes
Windfall taxes
Interest expense
Realized gain on derivative instruments
Realized foreign exchange loss
Realized other expense
—
(53)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,860
(14,313)
(48,349)
(28,533)
(715)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13
—
—
—
—
—
—
18
(78,426)
(85,212)
(80,716)
20,860
(91,932)
(78,426)
(85,212)
234,365
234,365
(4,532)
(420)
(4,532)
(420)
Fund flows from operations
384,951
75,762
108,601
89,464
90,661
236,073
(3,288)
160,387
1,142,611
Total assets
Drilling and development
Exploration and evaluation
Crude oil and condensate sales
NGL sales
Natural gas sales
Sales of purchased commodities
Canada
3,612,487
275,203
—
910,863
114,128
319,293
—
USA
France Netherlands
Germany
Ireland
Australia
Corporate
Total
Year Ended December 31, 2022
618,116
63,353
—
823,544
44,250
2
130,150
365,431
19,385
16,698
—
—
—
—
240,276
21,629
23
2,119
—
398,612
465,643
25,087
1,070
62,464
—
3,030
—
15
—
560,738
418,796
324,330
—
—
—
—
249,253
95,173
—
221,187
—
—
—
—
583,127
6,991,058
331
22,666
528,056
23,761
—
—
1,692,229
133,513
10,797
1,650,652
244,834
244,834
(3,488)
(306,017)
Royalties
(196,005)
(44,427)
(40,353)
(512)
(21,232)
Revenue from external customers
1,148,279
121,806
325,078
562,345
460,028
324,345
221,187
252,143
3,415,211
Purchased commodities
—
—
—
(44,849)
(618)
(20,100)
—
—
—
—
(9,751)
(3,578)
—
—
(244,834)
(244,834)
—
(78,896)
(240,899)
(27,372)
(57,588)
(45,903)
(41,523)
(16,580)
(57,478)
(1,691)
(489,034)
Transportation
Operating
General and administration
(28,643)
(5,863)
(16,444)
(4,255)
(6,949)
122
PRRT
Corporate income taxes
Windfall tax
Interest expense
Realized loss on derivative instruments
Realized foreign exchange gain
Realized other income
—
(10)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(29,889)
(150,647)
(31,513)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,964)
(18,318)
9,319
—
(57,677)
(18,318)
5,016
(1,110)
(208,153)
—
—
—
—
—
(222,859)
(222,859)
(82,858)
(82,858)
(405,894)
(405,894)
15,195
12,982
15,195
12,982
Fund flows from operations
833,878
87,953
201,057
361,540
370,292
304,309
145,443
(669,607)
1,634,865
Vermilion Energy Inc. ■ Page 84 ■ 2023 Annual Report
Reconciliation of fund flows from operations to net (loss) earnings:
Fund flows from operations
Equity based compensation
Unrealized gain on derivative instruments
Unrealized foreign exchange gain (loss)
Accretion
Depletion and depreciation
Deferred tax recovery (expense)
Gain on business combination
Loss on disposition
Impairment (expense) reversal
Unrealized other expense
Net (loss) earnings
4. Business combination
Equinor Energy Ireland Limited
Year Ended
Dec 31, 2023
1,142,611
(42,756)
179,707
12,438
(78,187)
(712,619)
190,193
439,487
(352,367)
(1,016,094)
—
(237,587)
Dec 31, 2022
1,634,865
(44,390)
540,801
(84,464)
(58,170)
(577,134)
(288,707)
—
—
192,094
(1,833)
1,313,062
On March 31, 2023, Vermilion purchased 100% of the shares outstanding of Equinor Energy Ireland Limited ("EEIL") from Equinor ASA. The
acquisition adds an incremental 36.5% interest in the Corrib Natural Gas Project, increasing Vermilion's operated interest to 56.5%.
The total consideration paid and the fair value of the assets acquired and liabilities assumed at the date of acquisition are detailed in the table below.
Cash consideration paid
Cash acquired
Capital assets
Acquired working capital deficit
Asset retirement obligations
Derivative liability
Deferred tax liability
Net assets acquired
Gain on business combination
Total net assets acquired, net of gain on business combination
Consideration
488,893
Allocation of consideration
400,002
768,026
(109,134)
(42,277)
(51,789)
(36,448)
928,380
(439,487)
488,893
The gain on the business combination primarily resulted from increases in working capital and the fair value of capital assets from when the
purchase and sale agreement was entered into in November 2021 and when the acquisition closed in March 2023 due to significant increases in
European natural gas prices throughout 2022 and Q1 2023.
The results of operations from the assets acquired and liabilities assumed have been included in Vermilion's consolidated financial statements
beginning March 31, 2023 and have contributed revenues net of royalties of $161.7 million and net earnings of $43.6 million. Had the acquisition
occurred on January 1, 2023, consolidated petroleum and natural gas revenue would have been $2,098.2 million and consolidated net loss would
have been 182.6 million for the year ended December 31, 2023.
Vermilion Energy Inc. ■ Page 85 ■ 2023 Annual Report
5. Investment in securities
The total consideration paid and the fair value of the investments acquired are detailed in the table below:
Balance at January 1
Acquisition of securities
Fair value adjustment (1)
Balance at December 31
(1) The investment is classified as a level 1 instrument on the fair value hierarchy and therefore uses observable inputs when making fair value adjustments.
2023
56,366
21,603
(4,708)
73,261
2022
—
23,282
33,084
56,366
6. Capital assets
The following table reconciles the change in Vermilion's capital assets:
Balance at January 1
Acquisitions
Dispositions
Additions
Increase in right-of-use assets
Transfers from exploration and evaluation assets
Impairment (expense) reversal
Depletion and depreciation
Changes in asset retirement obligations
Foreign exchange
Balance at December 31
Cost
Accumulated depletion, depreciation, and impairment
Balance at December 31
Impairment
2023
5,691,522
836,295
(676,471)
569,110
3,103
40,521
(1,016,094)
(699,343)
138,239
(4,373)
4,882,509
12,966,256
(8,083,747)
4,882,509
2022
4,824,195
572,535
—
528,056
13,871
1,223
192,094
(546,381)
65,462
40,467
5,691,522
12,058,520
(6,366,998)
5,691,522
In the fourth quarter of 2023, indicators of impairment were present in our France CGU due to changes in forecasted cost assumptions and in our
Saskatchewan and United States CGUs due to negative technical revisions. As a result of the indicators of impairment, the Company performed
impairment calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered
future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 13% for Saskatchewan and 15.0% for France and
United States. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $1.0 billion. Inputs
used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.
The following benchmark price forecasts were used to calculate the recoverable amounts:
Brent Crude ($ US/bbl) (1)
WTI Crude ($ US/bbl) (1)
Light Sour Crude ($/bbl) (1)
SK Plant Gate Gas - Spot Gas ($/MMbtu) (1)
Henry Hub Gas ($ US/MMbtu) (1)
2026
2025
2029
2024
2027
2033 (2)
2028
92.10
78.00 79.18 80.36 81.79 83.41 85.09 86.79 88.52 90.29
73.67 74.98 76.14 77.66 79.22 80.80 82.42 84.06 85.75
87.46
93.35 95.50 96.53 98.46 100.43 102.44 104.49 106.58 108.71 110.88
4.43
4.62
3.15
3.64
4.25
4.44
1.98
2.75
4.08
4.27
3.91
4.10
3.99
4.18
3.83
4.02
4.16
4.35
4.34
4.53
2031
2030
2032
(1)
(2)
The forecast benchmark prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the
Company’s operations when determining recoverable amounts.
In 2033 and beyond, commodity price forecasts are inflated at a rate of 2.0% per annum.
Vermilion Energy Inc. ■ Page 86 ■ 2023 Annual Report
The following are the results of tests completed, recoverable amounts, and sensitivity impacts which would increase the impairments taken:
Operating Segment
Canada
France
United States
Total
(1)
CGU
Saskatchewan
France (1)
United States
Impairment
542,937
226,858
246,299
1,016,094
Recoverable Amount
704,636
523,303
239,179
1,467,118
1% increase in
discount rate
42,657
24,653
12,819
80,129
5% decrease in
pricing
79,452
70,035
38,290
187,777
During 2023, Vermilion finalized an evaluation of the management and organization of Vermilion’s assets in France resulting in a combination of its Neocomian,
Chaunoy, Champotran, and Aquitaine Basin CGUs into the France CGU. If these CGUs were not combined, impairment recognized would have increased by
$23.2 million.
Southeast Saskatchewan disposition
In March 2023, Vermilion sold non-core assets in southeast Saskatchewan for net proceeds of $182.2 million and resulted in a loss on disposition of
$226.8 million. The book value of the net assets disposed of was $409.0 million and consisted of $534.0 million of capital assets, $25.9 million of
exploration and evaluation assets, and $150.9 million of asset retirement obligations.
United States disposition
In December 2023, Vermilion sold non-core assets in Wyoming for net proceeds of $16.3 million and resulted in a loss on disposition of $125.5
million.
Minor acquisition
In March 2023, Vermilion completed a minor acquisition of Alberta assets for total consideration of $19.0 million where $33.9 million of capital assets
and $14.9 million of asset retirement obligations were recognized.
Right-of-use assets
The following table discloses the carrying balance and depreciation charge relating to right-of-use assets by class of underlying asset as at and for
the year ended December 31, 2023:
($M)
Office space
Gas processing facilities
Oil storage facilities
Vehicles and equipment
Total
As at Dec 31, 2023
As at Dec 31, 2022
Depreciation
Balance
Depreciation
8,115
7,691
2,667
5,433
23,906
25,893
6,326
7,037
9,760
49,016
8,328
7,691
2,429
4,716
23,164
Balance
31,199
13,415
8,970
13,944
67,528
Vermilion Energy Inc. ■ Page 87 ■ 2023 Annual Report
7. Exploration and evaluation assets
The following table reconciles the change in Vermilion's exploration and evaluation assets:
Balance at January 1
Acquisitions
Additions
Dispositions
Changes in asset retirement obligations
Transfers to capital assets
Depreciation
Foreign exchange
Balance at December 31
Cost
Accumulated depreciation
Carrying amount at December 31
8. Asset retirement obligations
The following table reconciles the change in Vermilion’s asset retirement obligations:
Balance at January 1
Additional obligations recognized
Dispositions
Changes in estimated abandonment timing and costs
Obligations settled
Accretion
Changes in rates
Foreign exchange
Balance at December 31
2023
270,593
—
21,081
(25,862)
(980)
(40,521)
(27,386)
1,454
198,379
432,345
(233,966)
198,379
2023
1,087,757
60,012
(151,566)
1,159
(56,966)
78,187
133,575
6,905
1,159,063
2022
233,290
43,227
23,761
—
646
(1,223)
(30,503)
1,395
270,593
476,571
(205,978)
270,593
2022
1,000,554
5,184
—
207,919
(37,514)
58,170
(145,555)
(1,001)
1,087,757
Vermilion calculated the present value of the obligations using a credit-adjusted risk-free rate, calculated using a credit spread of 3.6% as at
December 31, 2023 (December 31, 2022 - 4.5%) added to risk-free rates based on long-term, risk-free government bonds. Vermilion's credit spread
is determined using the Company's expected cost of borrowing at the end of the reporting period.
The country-specific risk-free rates used as inputs to discount the obligations were as follows:
Canada
United States
France
Netherlands
Germany
Ireland
Australia
Dec 31, 2023
3.0 %
4.2 %
3.0 %
2.1 %
2.3 %
2.7 %
4.0 %
Dec 31, 2022
3.3 %
4.1 %
3.4 %
2.7 %
2.5 %
3.2 %
4.2 %
Vermilion has estimated the asset retirement obligations based on current cost estimates of $2.2 billion (2022 - $2.3 billion). Current cost estimates
are inflated to the estimated time of abandonment using inflation rates of between 1.3% and 5.5% (2022 - between 1.6% and 4.2%), resulting in
inflated cost estimates of $3.4 billion (2022 - $3.7 billion). These payments are expected to be made over the next 60 years, with the majority of the
costs incurred in the first 40 years.
Vermilion Energy Inc. ■ Page 88 ■ 2023 Annual Report
A 0.5% increase/decrease in the discount rate applied to asset retirement obligations would decrease/increase asset retirement obligations by
approximately $70.1 million. A one-year increase/decrease in the expected timing of abandonment spend would decrease/increase asset retirement
obligations by approximately $34.0 million.
9. Derivative instruments
The following table reconciles the change in the fair value of Vermilion’s derivative instruments:
Fair value of contracts, beginning of year
Reversal of opening contracts settled during the year
Assumed in acquisitions
Realized gain (loss) on contracts settled during the year
Unrealized gain during the year on contracts outstanding at the end of the year
Unwinding of contracts assumed in acquisitions
Net receipt from counterparties on contract settlements during the year
Fair value of contracts, end of year
Comprised of:
Current derivative asset
Current derivative liability
Non-current derivative asset
Non-current derivative liability
Fair value of contracts, end of year
The gain on derivative instruments for 2023 and 2022 were comprised of the following:
Realized (gain) loss on contracts settled during the year
Reversal of opening contracts settled during the year
Unwinding of contracts assumed in acquisitions
Unrealized gain on contracts outstanding at the end of the year
Gain on derivative instruments
Year Ended
Dec 31, 2023
239,596
(43,267)
51,866
234,365
171,448
(51,526)
(234,365)
368,117
313,792
(732)
76,107
(21,050)
368,117
Dec 31, 2022
(300,865)
164,208
(339)
(405,894)
376,593
—
405,893
239,596
162,843
(55,845)
132,598
—
239,596
Year Ended
Dec 31, 2023
(234,365)
43,267
(51,526)
(171,448)
(414,072)
Dec 31, 2022
405,894
(164,208)
—
(376,593)
(134,907)
Vermilion executes derivative instruments where there is an underlying exposure to offset the position. Consistent with our accounting policy we do
not match unrealized gains / losses on these contracts with the underlying exposure. Please refer to Note 19 (Supplemental information) for a listing
of Vermilion's outstanding derivative instruments as at December 31, 2023.
Vermilion Energy Inc. ■ Page 89 ■ 2023 Annual Report
10. Leases
Vermilion had the following future commitments associated with its lease obligations:
($M)
Less than 1 year
1 - 3 years
3 - 5 years
After 5 years
Total lease payments
Amounts representing interest
Present value of net lease payments
Current portion of lease obligations
Non-current portion of lease obligations
Total cash outflow
Interest on lease liabilities
As at
Dec 31, 2023
24,029
31,077
4,591
2
59,699
(5,630)
54,069
(21,068)
33,001
21,002
3,908
Dec 31, 2022
23,588
40,374
16,246
177
80,385
(9,392)
70,993
(19,486)
51,507
25,422
4,254
Vermilion Energy Inc. ■ Page 90 ■ 2023 Annual Report
11. Taxes
The following table reconciles Vermilion’s deferred tax asset and liability:
Deferred tax assets:
Non-capital losses
Derivative contracts
Other
Stock based compensation
Asset retirement obligations
Capital assets
Unrealized foreign exchange
Deferred tax assets
Deferred tax liabilities:
Derivative contracts
Asset retirement obligations
Capital assets
Stock based compensation
Other
Unrealized foreign exchange
Non-capital losses
Deferred tax liabilities
As at
Dec 31, 2023
Dec 31, 2022
632,870
(89,619)
(437)
6,757
77,292
(447,463)
2,651
182,051
—
105,147
279,889
—
6,275
—
(10,341)
380,970
200,781
—
39
—
5,818
(81,105)
—
125,533
58,941
100,670
734,146
(5,805)
(16,322)
(4,282)
(390,008)
477,340
Income tax expense differs from the amount that would have been expected if the reported earnings had been subject only to the statutory Canadian
income tax rate as follows:
(Loss) earnings before income taxes
Canadian corporate tax rate
Expected tax (recovery) expense
(Decrease) increase in taxes resulting from:
Petroleum resource rent tax rate (PRRT) differential (1)
Foreign tax rate differentials (2) (3)
Equity based compensation expense
Amended returns and changes to estimated tax pools and tax positions
Statutory rate changes and the estimated reversal rates on temporary differences (3)
Derecognition (recognition) of deferred tax assets
Non-taxable amounts related to business combinations
Windfall taxes (3)
Other non-deductible items
Provision for income taxes
(1)
Year Ended
Dec 31, 2023
(278,282)
24.35 %
(67,762)
Dec 31, 2022
2,051,099
24.60 %
504,570
(14,177)
33,404
(1,914)
(7,664)
(17,474)
202,216
(172,692)
78,426
(73,058)
(40,695)
13,729
101,701
(11,610)
(5,691)
14,274
(118,304)
—
222,859
16,509
738,037
(2)
(3)
In Australia, current taxes include both corporate income tax rates and PRRT. For both 2023 and 2022, corporate income tax rates were applied at a rate of
30% and PRRT was applied at a rate of 40%.
The applicable tax rates for 2023 were: 25.8% in France, 50.0% in the Netherlands, 31.2% in Germany, 25.0% in Ireland, and 21.0% in the United States (2022:
25.8% in France, 50.0% in the Netherlands, 31.3% in Germany, 25.0% in Ireland, and 21.0% in the United States).
On October 6, 2022 the Council of the European Union adopted a regulation that implemented a temporary windfall tax on the profits of oil and gas producers
resident in the European Union. This windfall tax was referred to as a temporary solidarity contribution and was calculated on the amount by which the taxable
profits for the elected years exceeded the greater of zero and 120% of the average taxable profits for the 2018 to 2021 period. The regulation required Member
States to implement the temporary solidarity contribution at a minimum rate of 33% while providing Member States with the option to apply the temporary
solidarity contribution to fiscal years beginning on or after January 1, 2022, January 1, 2023, or both. The temporary solidarity contribution does not apply to
2024 or later years and is considered a tax pursuant to IAS 12 “Income Taxes”.
Vermilion Energy Inc. ■ Page 91 ■ 2023 Annual Report
The following table summarizes the manner of implementation of the temporary solidarity contribution by the Member States in which Vermilion
operates:
Jurisdiction
France
Netherlands (1)
Germany
Ireland
(1)
2024
N/A
N/A
33.0 %
75.0 %
2023
33.0 %
33.0 %
33.0 %
75.0 %
For 2023 and 2024, Netherlands has implemented a windfall royalty which, for natural gas sales, is calculated as 65% of the excess of the realized price for a
subject year versus the threshold price of €0.50/Nm3 (€13.40/mcf). This royalty is deductible against current income taxes.
At December 31, 2023, Vermilion had $3.2 billion (2022 - $2.4 billion) of unused tax losses of which $1.4 billion (2022 - $1.4 billion) relates to
Vermilion's Canada segment and expire between 2030 and 2042. The majority of the remaining unused tax losses relate to Vermilion's Ireland
segment and do not expire.
At December 31, 2023, Vermilion derecognized $202.2 million (2022 - recognized $118.3 million) of deferred income tax assets relating to the
Canada, USA, Ireland and Australia segments as there is uncertainty as to the Company's ability to fully utilize such losses based on the forecasted
commodity prices in effect as at December 31, 2023.
The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities have not been
recognized as at December 31, 2023 is approximately $1.0 billion (2022 – approximately $0.7 billion).
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) issued model rules for a new global minimum tax
framework (“Pillar Two”). The objective of Pillar Two is to ensure that large multinational enterprises are subjected to a minimum 15% effective tax
rate in each jurisdiction in which they operate.
Most of the countries where Vermilion operates are in the process of enacting, or have enacted, tax legislation to comply with Pillar Two with effect
from January 1, 2024. The Company expects that Pillar Two will not have a material impact on income tax expense.
In May 2023, the IASB issued amendments to IAS 12, “Income Taxes” (“IAS 12”) to address the impacts and additional disclosure requirements
related to Pillar Two. Vermilion has applied the mandatory exception required by IAS 12 and accordingly has not accounted for any related deferred
income tax assets or liabilities.
12. Long-term debt
The following table summarizes Vermilion’s outstanding long-term debt:
Revolving credit facility
2025 senior unsecured notes
2030 senior unsecured notes
Long-term debt
As at
Dec 31, 2023
—
395,839
518,176
914,015
Dec 31, 2022
147,666
404,463
529,222
1,081,351
The fair value of the revolving credit facility is equal to its carrying value due to the use of short-term borrowing instruments at market rates of
interest. The fair value of the 2025 senior unsecured notes as at December 31, 2023 was $392.7 million (December 31, 2022 - $391.3 million). The
fair value of the 2030 senior unsecured notes as at December 31, 2023 was $511.7 million (December 31, 2022 - $496.8 million).
Vermilion Energy Inc. ■ Page 92 ■ 2023 Annual Report
The following table reconciles the change in Vermilion’s long-term debt:
Balance at January 1
Net repayments on the revolving credit facility
Issuance of 2030 senior unsecured notes
Amortization of transaction costs
Foreign exchange
Balance at December 31
Revolving credit facility
2023
1,081,351
(146,324)
—
2,182
(23,194)
914,015
2022
1,651,569
(1,121,868)
499,037
1,833
50,780
1,081,351
As at December 31, 2023, Vermilion had in place a bank revolving credit facility maturing May 29, 2027 with the following terms:
Total facility amount
Amount drawn
Letters of credit outstanding
Unutilized capacity
As at
Dec 31, 2023
1,600,000
—
(18,116)
1,581,884
Dec 31, 2022
1,600,000
(147,666)
(13,527)
1,438,807
The facility can be extended from time to time at the option of the lenders and upon notice from Vermilion. If no extension is granted by the lenders,
the amounts owing pursuant to the facility are due at the maturity date. The facility is secured by various fixed and floating charges against the
subsidiaries of Vermilion.
On May 19, 2023, the maturity date of the facility was extended to May 28, 2027 (previously May 29, 2026) and the total facility amount of $1.6 billion
was unchanged. As at December 31, 2023, the revolving credit facility was undrawn.
The facility bears interest at a rate applicable to demand loans plus applicable margins.
As at December 31, 2023, the revolving credit facility was subject to the following financial covenants:
Financial covenant
Consolidated total debt to consolidated EBITDA
Consolidated total senior debt to consolidated EBITDA
Consolidated EBITDA to consolidated interest expense
Limit
Dec 31, 2023
As at
Less than 4.0
Less than 3.5
Greater than 2.5
0.65
—
17.33
Dec 31, 2022
0.51
0.07
27.10
The financial covenants include financial measures defined within the revolving credit facility agreement that are not defined under IFRS. These
financial measures are defined by the revolving credit facility agreement as follows:
•
•
•
•
Consolidated total debt: Includes all amounts classified as “Long-term debt” and “Lease obligations” (including the current portion included
within "Accounts payable and accrued liabilities" but excluding operating leases as defined under IAS 17) on the consolidated balance sheet.
Consolidated total senior debt: Consolidated total debt excluding unsecured and subordinated debt.
Consolidated EBITDA: Consolidated net (loss) earnings before interest, income taxes, depreciation, accretion and certain other non-cash items,
adjusted for the impact of the acquisition of a material subsidiary.
Consolidated total interest expense: Includes all amounts classified as "Interest expense", but excludes interest on operating leases as defined
under IAS 17.
In addition, our revolving credit facility has provisions relating to our liability management ratings in Alberta and Saskatchewan whereby if our
security adjusted liability management ratings fall below specified limits in a province, a portion of the asset retirement obligations are included in the
definitions of consolidated total debt and consolidated total senior debt. An event of default occurs if our security adjusted liability management
ratings breach additional lower limits for a period greater than 90 days. As of December 31, 2023, Vermilion's liability management ratings were
higher than the specified levels, and as such, no amounts relating to asset retirement obligations were included in the calculation of consolidated
total debt and consolidated total senior debt.
As at December 31, 2023 and December 31, 2022, Vermilion was in compliance with the above covenants.
Vermilion Energy Inc. ■ Page 93 ■ 2023 Annual Report
2025 senior unsecured notes
On March 13, 2017, Vermilion issued US $300.0 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum, to
be paid semi-annually on March 15 and September 15. The notes mature on March 15, 2025. As direct senior unsecured obligations of Vermilion,
the notes rank equally with existing and future senior unsecured indebtedness of the Company.
The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.
Subsequent to March 15, 2023, Vermilion may redeem some or all of the senior unsecured notes at a 100.000% redemption price plus any accrued
and unpaid interest.
2030 senior unsecured notes
On April 26, 2022, Vermilion closed a private offering of US $400.0 million 8-year senior unsecured notes. The notes were priced at 99.241% of par,
mature on May 1, 2030, and bear interest at a rate of 6.875% per annum. Interest is paid semi-annually on May 1 and November 1, commencing on
November 1, 2022. The notes are senior unsecured obligations of Vermilion and rank equally with existing and future senior unsecured
indebtedness.
The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.
Vermilion may, at its option, redeem the notes prior to maturity as follows:
•
•
•
On or after May 1, 2025, Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth below,
together with accrued and unpaid interest.
Prior to May 1, 2025, Vermilion may redeem up to 35% of the original principal amount of the notes with an amount of cash not greater
than the net cash proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the notes, together with
accrued and unpaid interest.
Prior to May 1, 2025, Vermilion may also redeem some or all of the notes at a price equal to 100% of the principal amount of the notes,
plus a “make-whole premium,” together with applicable premium, accrued and unpaid interest.
Year
2025
2026
2027
2028 and thereafter
Redemption price
103.438 %
102.292 %
101.146 %
100.000 %
13. Shareholders' capital
The following table reconciles the change in Vermilion’s shareholders’ capital:
Shareholders' capital
Balance at January 1
Vesting of equity based awards
Shares issued for equity based compensation
Share-settled dividends on vested equity based awards
Repurchase of shares
Balance at December 31
2023
2022
Shares ('000s)
Amount ($M)
Shares ('000s)
163,227
3,657
655
64
(5,332)
162,271
4,243,794
23,575
11,242
1,179
(137,224)
4,142,566
162,261
2,578
549
178
(2,339)
163,227
Amount ($M)
4,241,773
44,811
13,699
4,377
(60,866)
4,243,794
Vermilion is authorized to issue an unlimited number of common shares with no par value.
Dividends declared to shareholders for the year ended December 31, 2023 were $65.2 million or $0.40 per common share (2022 - $45.8 million or
$0.28 per share).
On July 10, 2023, the Toronto Stock Exchange approved our notice of intention to commence a normal course issuer bid ("the NCIB"). The NCIB
allows Vermilion to purchase up to 16,308,587 common shares representing approximately 10% of its public float as at July 12, 2023 beginning
July 12, 2023 and ending July 11, 2024. Common shares purchased under the NCIB will be cancelled.
Vermilion Energy Inc. ■ Page 94 ■ 2023 Annual Report
In 2023, Vermilion purchased and cancelled 5.33 million common shares under the NCIB for total consideration of $94.8 million (2022 - 2.34 million
common shares for total consideration of $71.7 million). The surplus between the total consideration and the carrying value of the shares
repurchased was recorded as an increase to deficit.
Subsequent to December 31, 2023 Vermilion purchased and cancelled 1.44 million common shares under the NCIB for total consideration of $21.4
million.
Vermilion Energy Inc. ■ Page 95 ■ 2023 Annual Report
14. Capital disclosures
Vermilion defines capital as net debt (long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working
capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities)) and shareholders’ capital. In
managing capital, Vermilion reviews whether fund flows from operations is sufficient to fund capital expenditures, dividends, and asset retirement
obligations.
Vermilion monitors the ratio of net debt to fund flows from operations. As at December 31, 2023, our ratio of net debt to trailing fund flows from
operations is 0.9 (2022 - 0.8). Vermilion manages the ratio of net debt to fund flows from operations (refer to Note 3 - Segmented information) by
monitoring capital expenditures, dividends, and asset retirement obligations with expected fund flows from operations. Vermilion intends for the ratio
of net debt to fund flows from operations to trend towards 1.0 over time.
The following table calculates Vermilion’s ratio of net debt to fund flows from operations:
Year Ended
Dec 31, 2023
914,015
164,552
—
1,078,567
Dec 31, 2022
1,081,351
265,111
(1,876)
1,344,586
0.9
0.8
Long-term debt
Adjusted working capital (1)
Unrealized FX on swapped USD borrowings
Net debt
Ratio of net debt to four quarter trailing fund flows from operations
(1)
Adjusted working capital is defined as current assets (excluding current derivatives), less current liabilities (excluding current derivatives and current lease
liabilities).
15. Equity based compensation
The following table summarizes the number of awards outstanding under the LTIP:
Number of LTIP Awards ('000s)
Opening balance
Granted
Vested
Forfeited
Closing balance
2023
5,503
1,694
(2,476)
(243)
4,478
2022
6,405
1,108
(1,733)
(277)
5,503
For the year ended December 31, 2023, the awards had a weighted average grant date fair value of $18.19 (2022 - $25.60). Equity based
compensation expense for the awards is calculated based on the number of awards outstanding multiplied by the estimated performance factor that
will be realized upon vesting (2023 - 1.0; 2022 - 1.0) adjusted by an estimated annual forfeiture rate (2023 - 5.3%; 2022 - 3.8%). Equity based
compensation expense of $29.2 million was recorded during the year ended December 31, 2023 (2022 - $29.2 million) relating to the awards.
As at December 31, 2023, there were 470,952 DSUs outstanding with a weighted average grant date fair value of $14.26. In 2023, there were
106,644 DSUs granted with a weighted average grant date fair value of $21.85. Equity based compensation expense of $2.3 million was recorded
during the year ended December 31, 2023 (2022 - $1.5 million) relating to the DSUs.
Vermilion Energy Inc. ■ Page 96 ■ 2023 Annual Report
16. Per share amounts
Basic and diluted net (loss) earnings per share have been determined based on the following:
Net (loss) earnings
Basic weighted average shares outstanding ('000s)
Dilutive impact of equity based compensation ('000s)
Diluted weighted average shares outstanding ('000s)
Basic (loss) earnings per share
Diluted (loss) earnings per share
17. Financial instruments
Classification of financial instruments
Year Ended
Dec 31, 2023
(237,587)
Dec 31, 2022
1,313,062
163,719
—
163,719
(1.45)
(1.45)
163,489
4,937
168,426
8.03
7.80
The following table summarizes the carrying value relating to Vermilion’s financial instruments:
($M)
As at Dec 31, 2023
FVTPL
FVTOCI
Amortized
Cost
As at Dec 31, 2022
Total
FVTPL
FVTOCI
Amortized
Cost
Total
Cash and cash equivalents
Derivative assets
Investment in securities
Derivative liabilities
Accounts receivable
Accounts payable and accrued liabilities
Dividends payable
Lease obligations
Long-term debt (1)
141,456
389,899
—
(21,782)
—
—
—
—
—
—
—
73,261
—
—
—
—
—
—
—
—
—
—
242,926
(380,370)
(16,227)
(33,001)
(914,015)
141,456
389,899
73,261
(21,782)
242,926
(380,370)
(16,227)
(33,001)
(914,015)
13,836
295,441
—
(55,845)
—
—
—
—
—
13,836
—
295,441
—
56,366
56,366
(55,845)
—
373,651
—
(481,444)
—
(13,058)
—
—
(51,507)
— (1,081,351) (1,081,351)
—
—
—
—
373,651
(481,444)
(13,058)
(51,507)
(1)
The carrying value of the above equals fair value except for long-term debt. The fair value of long-term debt was $904,418 (2022 - $1,035,671).
The carrying value of accounts receivable, accounts payable and accrued liabilities, dividends payable and lease obligations are a reasonable
approximation of their fair value due to the short maturity of these financial instruments. The carrying value of long-term debt outstanding on the
revolving credit facility approximates its fair value due to the use of short-term borrowing instruments at market rates of interest.
Fair value measurements are categorized into a fair value hierarchy based on the lowest level input that is significant to the fair value measurement:
•
•
•
Level 1 inputs are determined by reference to unadjusted quoted prices in active markets for identical assets or liabilities. Inputs used in
fair value measurement of cash and cash equivalents, investment in securities, the revolving credit facility, and the senior unsecured notes
are categorized as Level 1.
Level 2 inputs are determined based on inputs other than unadjusted quoted prices that are observable, either directly or indirectly. The fair
value of Vermilion’s derivative assets and liabilities are determined using pricing models that incorporate future price forecasts (supported
by prices from observable market transactions) and credit risk adjustments.
Level 3 inputs are not based on observable market data. Vermilion does not have any financial instruments classified as Level 3.
There were no transfers between levels in the hierarchy in the years ended December 31, 2023 and 2022.
Nature and extent of risks associated with financial instruments
Vermilion is exposed to financial risks from its financial instruments. These financial risks include: market risk (includes commodity price risk, interest
rate risk, and currency risk), credit risk, and liquidity risk.
Vermilion Energy Inc. ■ Page 97 ■ 2023 Annual Report
Commodity price risk
Vermilion is exposed to commodity price risk on its derivative assets and liabilities which are used as part of the Company’s risk management
program to mitigate the effects of changes in commodity prices on future cash flows. While transactions of this nature relate to future petroleum and
natural gas production, Vermilion does not designate these derivative assets and liabilities as accounting hedges. As such, changes in commodity
prices impact the fair value of derivative instruments and the corresponding gains or losses recognized on derivative instruments.
Currency risk
Vermilion is exposed to currency risk on its financial instruments denominated in foreign currencies. These financial instruments include cash and
cash equivalents, accounts receivables, accounts payables, lease obligations, long-term debt, derivative assets and derivative liabilities. These
financial instruments are primarily denominated in the US dollar and the Euro. Vermilion monitors its exposure to currency risk and reviews whether
the use of derivative financial instruments is appropriate to manage potential fluctuations in foreign exchange rates.
Interest rate risk
Vermilion is exposed to interest rate risk on its revolving credit facility, which consists of short-term borrowing instruments that bear interest at market
rates. Thus, changes in interest rates could result in an increase or decrease in the amount paid by Vermilion to service this debt.
The following table summarizes the increase (positive values) or decrease (negative values) to net (loss) earnings before tax due to a change in the
value of Vermilion’s financial instruments as a result of a change in the relevant market risk variable. This analysis does not attempt to reflect any
interdependencies between the relevant risk variables.
($M)
Currency risk - Euro to Canadian dollar
$0.01 increase in strength of the Canadian dollar against the Euro
$0.01 decrease in strength of the Canadian dollar against the Euro
Currency risk - US dollar to Canadian dollar
$0.01 increase in strength of the Canadian dollar against the US $
$0.01 decrease in strength of the Canadian dollar against the US $
Commodity price risk - Crude oil
US $5.00/bbl increase in crude oil price used to determine the fair value of derivatives
US $5.00/bbl decrease in crude oil price used to determine the fair value of derivatives
Commodity price risk - European natural gas
€ 5.0/GJ increase in European natural gas price used to determine the fair value of derivatives
€ 5.0/GJ decrease in European natural gas price used to determine the fair value of derivatives
Share price risk - Equity swaps
$1.00 increase from initial share price of the equity swap
$1.00 decrease from initial share price of the equity swap
Dec 31, 2023
Dec 31, 2022
5,855
(5,855)
6,816
(6,816)
(27,573)
27,573
(256,731)
262,862
3,750
(3,750)
5,640
(5,640)
5,441
(5,441)
—
—
(88,524)
91,828
3,750
(3,750)
Credit risk
Vermilion is exposed to credit risk on accounts receivable and derivative assets in the event that customers, joint operation partners, or
counterparties fail to discharge their contractual obligations. As at December 31, 2023, Vermilion’s maximum exposure to receivable credit risk was
$632.8 million (December 31, 2022 - $669.1 million) which is the value of accounts receivable and derivative assets on the balance sheet.
Vermilion’s accounts receivable primarily relates to customers and joint operations partners in the petroleum and natural gas industry. These
amounts are subject to normal industry payment terms and credit risks. Vermilion manages these risks by monitoring the creditworthiness of
customers and joint operations partners and, where appropriate, obtaining assurances such as parental guarantees and letters of credit. Vermilion
determines the lifetime expected credit losses recognized on accounts receivable using a provision matrix. In preparing the provision matrix, the
Company takes into account historical credit loss experience based on the aging of accounts receivable, adjusted as necessary for current and
future petroleum and natural gas prices to the extent that changes in pricing may negatively impact the Company's customers and joint operations
partners. The lifetime expected credit losses on accounts receivable as at December 31, 2023 and 2022 is not material. As at the balance sheet
date, approximately 3.7% (2022 - 0.5%) of the accounts receivable balance was outstanding for more than 90 days. Vermilion considers the balance
of accounts receivable to be collectible.
Vermilion Energy Inc. ■ Page 98 ■ 2023 Annual Report
Vermilion’s derivative assets primarily relates to the fair value of financial instruments used as part of the Company’s risk management program to
mitigate the effects of changes in commodity prices on future cash flows. Vermilion manages this risk by monitoring the creditworthiness of
counterparties, transacting primarily with counterparties that have investment grade third party credit ratings, and by limiting the concentration of
financial exposure to individual counterparties. As a result, Vermilion has not obtained collateral or other security to support its financial derivatives.
Vermilion’s cash deposited in financial institutions and guaranteed investment certificates are also subject to counterparty credit risk. Vermilion
mitigates this risk by transacting with financial institutions with high third party credit ratings.
Liquidity risk
Liquidity risk is the risk that Vermilion will encounter difficulty in meeting obligations associated with its financial liabilities. Vermilion does not
consider this to be a significant risk as its financial position and available committed borrowing facility provide significant financial flexibility and allow
Vermilion to meet its obligations as they come due.
The following table summarizes Vermilion’s undiscounted non-derivative financial liabilities and their contractual maturities:
3 months to
1 year
26,820
23,412
($M)
December 31, 2023
December 31, 2022
1 month
134,381
192,572
1 month to
3 months
235,396
278,520
1 year to
5 years
430,993
607,796
18. Related party disclosures
The compensation of directors and management is reviewed annually by the independent Governance and Human Resources Committee against
industry practices for oil and gas companies of similar size and scope.
The following table summarizes the compensation of directors and other members of key management personnel during the years ended
December 31, 2023 and 2022:
Short-term benefits
Equity based compensation
Number of individuals included in the above amounts
Year Ended
Dec 31, 2023
5,451
8,015
13,466
15
Dec 31, 2022
5,124
8,951
14,075
16
Vermilion Energy Inc. ■ Page 99 ■ 2023 Annual Report
19. Supplemental information
Changes in non-cash working capital was comprised of the following:
Changes in:
Accounts receivable
Crude oil inventory
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
Dividends payable
Working capital assumed in acquisitions
Foreign exchange
Changes in non-cash working capital
Changes in non-cash operating working capital
Changes in non-cash investing working capital
Changes in non-cash working capital
Cash and cash equivalents was comprised of the following:
Cash on deposit with financial institutions
Guaranteed investment certificates
Cash and cash equivalents
Wages and benefits included in operating expenses and general and administration expenses were:
Operating expense
General and administration expense
Wages and benefits
As at December 31, 2023, we had the following contractual obligations and commitments:
Year Ended
Dec 31, 2023
Dec 31, 2022
130,725
(37,676)
76,452
(101,074)
(42,953)
3,169
(109,134)
7
(80,484)
(61,117)
(19,367)
(80,484)
(45,067)
413
(45,617)
40,786
304,516
—
—
(12,046)
242,985
216,869
26,116
242,985
As at
Dec 31, 2023
140,795
661
141,456
Dec 31, 2022
13,701
135
13,836
Year Ended
Dec 31, 2023
87,418
61,550
148,968
Dec 31, 2022
75,165
45,525
120,690
($M)
Long-term debt (1)
Lease obligations (2)
Processing and transportation agreements
Purchase obligations
Drilling and service agreements
Total contractual obligations and commitments
(1)
Less than 1 year
1 - 3 years
3 - 5 years
After 5 years
58,690
58,034
42,127
32,087
18,572
209,510
480,682
80,281
54,205
13,519
49,784
678,471
72,743
53,839
27,493
2,374
—
156,449
583,597
43,907
151,777
105
—
779,386
Total
1,195,712
236,061
275,602
48,085
68,356
1,823,816
(2)
(3)
Includes interest on senior unsecured notes.
Includes undiscounted IFRS 16 - Leases obligations of $59.7 million recognized in the financial statements as at December 31, 2023, future undiscounted IFRS
16 - leases due to commence in 2024 of $117.5 million, and surface lease rental commitments of $56.5 million and other of $2.4 million that are not considered
leases under IFRS 16 and are not represented on the balance sheet.
Commitments denominated in foreign currencies have been translated using the related spot rates on December 31, 2023.
Vermilion Energy Inc. ■ Page 100 ■ 2023 Annual Report
The following tables summarize Vermilion's outstanding risk management positions as at December 31, 2023:
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Daily
Bought
Swap
Volume
Weighted
Average
Bought
Swap Price
Unit Currency
bbl
bbl
bbl
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
USD
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
—
—
—
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
20,000
20,000
20,000
20,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
—
—
—
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.17
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
—
—
—
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
4,739
20,000
20,000
20,000
20,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
—
—
—
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.22
4.45
4.45
4.45
4.45
4.49
4.49
4.49
4.49
4.49
4.49
4.49
4.49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,500
9,500
9,500
4,739
19,904
19,904
9,849
23,695
23,695
23,695
23,695
23,695
23,695
23,695
23,695
4,000
4,000
4,000
4,000
—
—
—
—
—
—
—
—
79.00
80.11
80.11
3.69
3.14
3.14
3.31
3.89
3.89
3.89
3.89
3.89
3.89
3.89
3.89
3.51
3.51
3.51
3.51
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
WTI
Q1 2024
Q2 2024
Q3 2024
AECO
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Q4 2026
NYMEX Henry Hub
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Q4 2026
Vermilion Energy Inc. ■ Page 101 ■ 2023 Annual Report
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Daily
Bought
Swap
Volume
Weighted
Average
Bought
Swap Price
Unit Currency
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
mcf
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
mcf
EUR
mcf
mcf
mcf
mcf
EUR
EUR
EUR
EUR
4,913
41.03
4,913
84.26
—
—
35,623
7,278
7,278
4,913
4,913
—
—
—
—
—
—
—
—
—
—
—
—
—
37.85
25.96
25.96
13.19
13.19
—
—
—
—
—
—
—
—
—
—
—
—
—
35,623
7,278
7,278
4,913
4,913
—
—
—
—
—
—
—
—
—
—
—
—
—
71.90
45.76
45.76
18.32
18.32
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,457
2,457
7,370
30,709
30,709
34,394
34,394
17,197
17,197
12,284
12,284
9,827
9,827
—
14.65
14.65
41.19
14.08
14.08
15.13
15.13
14.40
14.40
13.51
13.51
9.67
9.67
—
22,111
(0.26)
—
—
—
—
2,457
2,457
2,457
2,457
14.95
14.95
14.95
14.95
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Jan 2020 - Apr 2025
Jan 2020 - Jul 2025
Initial Share Price
Share Volume
20.9788 CAD
22.4587 CAD
2,250,000
1,500,000
NBP
Q1 2024
Q2 2024
Q3 2024
TTF
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
Buy TTF, Sell NBP Basis
Q1 2024
THE
Q4 2024
Q1 2025
Q2 2025
Q3 2025
VET Equity Swaps
Swap
Swap
Foreign
Exchange
Collar
Forward
Monthly Bought Put
Amount
Weighted Average
Bought Put Price
Monthly Sold Call
Amount
Weighted Average
Sold Call Price
Monthly Sold Swap
Amount
Weighted Average
Sold Swap Price
Jan 2024 - Dec 2024
4,000,000 USD
1.3600
4,000,000 USD
1.3963
—
Jan 2024 - Dec 2024
—
—
—
—
4,000,000 USD
—
1.3531
The following sold option instruments allow the counterparties, at the specified date, to enter into a derivative instrument contract with Vermilion at
the detailed terms:
Period if Option Exercised
Unit Currency
WTI
Option Expiration
Date
Daily
Bought Put
Volume
Weighted
Average
Bought Put
Price
Daily Sold
Call
Volume
Weighted
Average
Sold Call
Price
Daily Sold
Put
Volume
Weighted
Average
Sold Put
Price
Daily Sold
Swap
Volume
Weighted
Average
Sold Swap
Price
Oct 2024 - Sep 2025
bbl
USD
29-Mar-2024
—
—
—
—
—
—
1,000
80.00
Vermilion Energy Inc. ■ Page 102 ■ 2023 Annual Report
DIRECTORS
Robert Michaleski 1,3,5
Calgary, Alberta
Dion Hatcher
Calgary, Alberta
James J. Kleckner Jr. 7,9
Edwards, Colorado
Carin Knickel 4,7,11
Golden, Colorado
Stephen P. Larke 3,5,10
Calgary, Alberta
Timothy R. Marchant 6,9,11
Calgary, Alberta
William Roby 7,8,11
Katy, Texas
Manjit Sharma 2,5
Toronto, Ontario
Myron Stadnyk 7,9
Calgary, Alberta
Judy Steele 3,5,11
Halifax, Nova Scotia
1 Chairman (Independent)
2 Audit Committee Chair (Independent)
3 Audit Committee Member (Independent)
4 Governance and Human Resources Committee Chair
__(Independent)
5 Governance and Human Resources Committee Member
__(Independent)
6 Health, Safety and Environment Committee Chair
__(Independent)
7 Health, Safety and Environment Committee Member
__(Independent)
8 Technical Committee Chair (Independent)
9 Technical Committee Member
__(Independent)
10 Sustainability Committee Chair (Independent)
11 Sustainability Committee Member (Independent)
OFFICERS / CORPORATE SECRETARY
Dion Hatcher *
President & Chief Executive Officer
Lars Glemser *
Vice President & Chief Financial Officer
AUDITORS
Deloitte LLP
Calgary, Alberta
BANKERS
Tamar Epstein
General Counsel
Terry Hergott
Vice President Marketing
Yvonne Jeffery
Vice President Sustainability
Darcy Kerwin *
Vice President International & HSE
Geoff MacDonald
Vice President Geosciences
Randy McQuaig *
Vice President North America
Kyle Preston
Vice President Investor Relations
Averyl Schraven
Vice President People & Culture
Gerard Schut
Vice President European Operations
Jenson Tan *
Vice President Business Development
Jamie Gagner
Corporate Secretary
* Principal Executive Committee Member
The Toronto-Dominion Bank
Alberta Treasury Branches
Bank of America N.A., Canada Branch
Canadian Imperial Bank of Commerce
Export Development Canada
National Bank of Canada
Royal Bank of Canada
The Bank of Nova Scotia
Wells Fargo Bank N.A., Canadian Branch
La Caisse Centrale Desjardins du Québec
Citibank N.A., Canadian Branch - Citibank Canada
Canadian Western Bank
JPMorgan Chase Bank, N.A., Toronto Branch
Goldman Sachs Lending Partners LLC
EVALUATION ENGINEERS
McDaniel & Associates
Calgary, Alberta
LEGAL COUNSEL
Norton Rose Fulbright Canada LLP
Calgary, Alberta
TRANSFER AGENT
Odyssey Trust Company
STOCK EXCHANGE LISTINGS
The Toronto Stock Exchange (“VET”)
The New York Stock Exchange (“VET”)
INVESTOR RELATIONS
Kyle Preston
Vice President Investor Relations
403-476-8431 TEL
403-476-8100 FAX
1-866-895-8101 IR TOLL FREE
investor_relations@vermilionenergy.com
Vermilion Energy Inc. ■ Page 103 ■ 2023 Annual Report