Impairments Push Canada’s Vermilion into Red in 2020
Non-cash impairment charges taken in three of four quarters during 2020 contributed to Vermilion Energy’s C$1.52 (US$1.2)bn net loss on the year compared to earnings of C$32.8mn in 2019, the company said March 8.
No impairment was reported in Q4 2020, Vermilion said, which eased the net loss for that period to C$57.7mn from C$69.9mn in Q3 2020, when a C$35.4mn impairment was registered. Vermilion’s biggest impairment came in Q1 2020, when a ceiling test on its reserves produced a C$1.2bn non-cash charge; in Q2 2020 a non-cash charge of C$53.1mn was taken related to a decline in the company’s market capitalization.
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Vermilion has oil and gas producing assets in North America, Europe and Australia, and in 2020 was impacted by demand destruction caused by economic measures taken against the Covid-19 pandemic.
“As commodity prices collapsed, we took swift and decisive action, making drastic changes to our business in order to protect the balance sheet and preserve financial liquidity,” it said. “We reduced our 2020 capital program in March, suspended our dividend in April and, with other cost saving initiatives, reduced over C$550mn combined of annualised cash outflows.”
Most of Vermilion’s 2020 capital program was executed in Q1, when about 65% of the C$367mn annual budget was invested. That resulted in peak production of more than 100,000 barrels of oil equivalent (boe)/day in Q2, but also to a steady decline to 87,848 boe/day in Q4.
Total production for the year fell by 5%, to 95,190 boe/day from 100,357 boe/day in 2019. Natural gas production averaged 257mn ft3/day, down from 267mn ft3/day the year before, while crude oil and liquids production averaged 52,358 b/d, down from 55,886 b/d in 2019.