Canada’s Vermilion Energy sets higher 2023 budget
Canadian oil and gas producer Vermilion Energy set a 2023 capital budget of C$570mn (US$417.4mn) on January 6, representing a 3.6% increase from its 2022 capital program and incorporating a 25% increase in its quarterly dividend.
Effective with the Q1 2023 dividend, Vermilion will increase its quarterly dividend by 25%, to C$0.10/share.
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The 2023 capital plan reflects consistent investment levels in North America and increased capital allocation targeted to continental European gas drilling, which is expected to lead to an overall production guidance that is 3% higher in 2023 than in 2022.
For 2023, Vermilion expects production to average 87,000-91,000 barrel of oil equivalent (boe)/day, assuming a March 1 closing of its Corrib acquisition, which received formal Irish government consent in December 2022.
Free cash flow in 2023 is expected to reach C$800mn, based on forward commodity prices and the impact of temporary windfall taxes, with 25% of that to be returned to shareholders in the form of higher dividends and share buybacks.
Vermilion anticipates its windfall tax exposure to be at the lower end of its initial guidance range – about C$250mn in 2022 and C$300mn in 2023. These estimates include the assumption that Ireland will move ahead with its proposed 75% windfall tax in each of 2022 and 2023.
“We remain firmly opposed to the windfall tax and the manner in which it is being implemented, and we continue to explore options to mitigate the impact,” Vermilion said, noting its 25-year history of operations in Europe. “It is our desire to continue working with governments in the region to enhance Europe’s energy security; however, Vermilion and its partners require a stable, predictable and equitable regulatory regime in order to commit capital to long-term investments.”
Investments across Vermilion’s international assets are budgeted at C$230mn, a 7% increase from 2022, with a greater proportion of spending allocated to European gas. In Europe, Vermilion expects to drill eight gross wells (6.3 net), comprised of three (2.3 net) wells in Germany, three net wells in Croatia and two (one net) wells in the Netherlands.
“We continue to have open and constructive dialogue with local and state officials about Vermilion’s ability to contribute to Germany’s energy security and are working towards an accelerated drilling program,” the company said. “Vermilion has a large undeveloped land base in Germany with several large gas prospects.”
Vermilion’s expenditures in North America for 2023 are set at C$340mn, with a focus on its Mannville and Montney liquids-rich gas plays in Alberta and BC and on its light oil plays in Wyoming and southeast Saskatchewan. A total of 52 gross (40.1 net) wells are planned, it said.