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- Vermilion Energy Inc. ("Vermilion") is a Calgary, Alberta Canada based international oil and gas producer which was highly praised in a bullish Seeking Alpha article.
- In my article I build a bearish case for not investing in Vermilion.
- With crude oil prices falling, it does not appear that Vermilion is able to cover its dividend with free cash flow. The situation is about to get worse.
A Gem In The Energy Industry: Buying Vermilion Energy For Growth And Income
- Vermilion Energy is a mid cap oil and gas producer with stellar historical returns. From 10 years ago, a $10k investment grew 6.5x to $75k (25% annual growth).
- Vermilion Energy's total return beats all its Mid Core peers in the 1-year, 3-year, 5-year, 10-year, and 15-year periods.
- Between 2013 and 2016, the company plans to grow production by 55% and to grow funds from operations by 60%.
- Analysts estimate a one-year total return of 18% to 21% at Friday's closing price.
- Since 2003, Vermilion Energy has paid a continuous monthly dividend, currently yielding 3.9%. Its decreasing payout ratio since 2003 led to 2014's dividend raise and the potential for future dividend growth.
Vermillion Energy: Relentless Focus On Capital Efficiency Will Drive Stock To $85 By Next Summer
- Vermilion Energy has a remarkable 20-year record of delivering total returns at a 36.6% compound annual growth rate.
- The company has achieved this long-term record by a relentless focus on capital efficiency.
- VET is not resting on its laurels. Growth in production is set to accelerate; funds flow per share will continue growing ~20%.
- The Corrib project comes online in mid-2015, adding an estimated 9,700 boe/day (net) for Vermilion. That's 24% of total 2013 average production.
- As a result of the growth in production and funds flow, VET should top $85 by next summer.
Vermilion Energy Enters Williston Basin By Buying Reserves On The Cheap
- Latest acquisition continues the company's history of value-oriented and accretive deals; cash flow of new assets will self-fund future growth.
- Based on current netbacks, VET paid ~50% below the cash flow value of proved reserves; potential upside for another doubling of the assets' reserves due to unbooked drilling locations.
- Bargain deal buys reserves on the cheap and opens up a new core area for the company in the Williston Basin.
- For $400 million (~5.5% of EV), VET grew proved reserves by 8%. Conservative upside is another 4% growth in proved reserves.
Vermilion Energy: A Compelling Combination Of Capital Appreciation And Yield
- This lightly followed Canadian energy company has a 15-year total return CAGR of 25%.
- Bullish catalysts include the outlook for strong European natural gas prices for years to come and the Corrib natural gas project in Ireland.
- Long-term success is due to a very selective acquisition strategy combined with focused high-return capital investments.
- The current yield is 4.1%.
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Mon, Nov. 10, 6:42 AM| Comment!
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- Vermilion Energy (VET +0.2%) is looking for acquisitions as it is set to be flush with cash from a gas project in Ireland, Bloomberg reports.
- President and COO Anthony Marino expects assets in Alberta and Saskatchewan to be the most probable targets of deals, while still considering possible purchases from Australia to Europe; VET also may boost its dividend, expand investment in existing properties and reduce debt.
- VET expects its 19% stake in Royal Dutch Shell’s (RDS.A, RDS.B) Corrib gas project offshore Ireland will boost annualized free cash flow by C$3/share when it starts in mid-2015; its projected C$8.67/share cash flow in the next 12 months would be the largest after Canadian Natural Resources among Canadian producers worth more than C$2B.
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- Vermillion Energy's (VET +2.4%) $400M purchase of Saskatchewan oil producing assets could set the stage for more acquisitions in the region, TD Securities says as it upgrades shares to Buy from Hold with a new $75 price target, up from $66.
- TD says the new Canadian development area should help drive VET's free cash flow given the ~$60/boe cash flow netback and relatively low sustaining capital requirements.
- The firm views VET as a core oil holding, driven by "a sustainable dividend growth business that generates top-quartile return on common equity and profit margins, compounded by a suite of assets that... provides significant option value to shareholders."
Tue, Mar. 18, 2:06 PM
- Vermillion Energy (VET +3.2%) agrees to acquire light oil producing assets in Saskatchewan from a private producer for $345M in cash and stock plus the assumption of $55M in debt.
- The assets include 57K net acres of land (~80% undeveloped), seven oil batteries and preferential access to 50% or greater capacity at a solution gas facility that is under construction; 2014 production from the assets is projected at ~3,750 boe/day, with more than 90% of the production base to be operated by VET.
- Due to the acquisition, VET raises its 2014 production guidance to 47.5K-48.5K boe/day, assuming eight months of contribution from the new assets.
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