Vermilion Energy — Macroeconomic headwinds dictate dividend cuts

Vermilion Energy — Macroeconomic headwinds dictate dividend cuts

Vermilion Energy has recently reported record annual production of 100.3kboed and fund flows from operations (FFO) of C$908m for FY19. Key drivers to increased production include a full-year contribution from the Spartan assets acquired in May 2018. However, following recent macroeconomic headwinds such as the impact of the coronavirus and the Russia/Saudi Arabia price war, Vermilion updated its capex guidance and production estimates for the year. These significantly affect results; hence management additionally announced a dividend cut to C$0.02/share per month. In light of these recent events, in addition to short-term commodity prices expectations, our updated valuation decreases to C$9.7/share from C$38.3/share (down 75%).

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Vermilion Energy

Macroeconomic headwinds dictate dividend cuts

FY19 results

Oil & gas

18 March 2020

Price

C$3.73

Market cap

C$583m

C$1.32/US$

Net debt (C$m) at 31 December 2019

1,896

Shares in issue

156.3m

Free float

97%

Code

VET

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(82.5)

(84.1)

(90.1)

Rel (local)

(75.4)

(78.6)

(87.4)

52-week high/low

C$36.66

C$3.28

Business description

Vermilion Energy is an international E&P with assets in Europe, North America and Australia. Management expects FY20 production to average 94–98kboed. Commodity price exposure is spread across global oil and gas benchmarks including Brent, WTI, Henry Hub, TTF and NBP.

Next events

Q120 results

Q220

Analysts

Carlos Gomes

+44 (0)20 3077 5700

Elaine Reynolds

+44 (0)20 3077 5713

Vermilion Energy is a research client of Edison Investment Research Limited

Vermilion Energy has recently reported record annual production of 100.3kboed and fund flows from operations (FFO) of C$908m for FY19. Key drivers to increased production include a full-year contribution from the Spartan assets acquired in May 2018. However, following recent macroeconomic headwinds such as the impact of the coronavirus and the Russia/Saudi Arabia price war, Vermilion updated its capex guidance and production estimates for the year. These significantly affect results; hence management additionally announced a dividend cut to C$0.02/share per month. In light of these recent events, in addition to short-term commodity prices expectations, our updated valuation decreases to C$9.7/share from C$38.3/share (down 75%).

Year-end

Revenue (C$m)

EBITDA*
(C$m)

Operating cash flow (C$m)

Net debt**
(C$m)

Capex***
(C$m)

Dividend

yield (%)

12/18

1,526

1,037

816

1,769

518

73

12/19

1,747

898

823

1,896

523

74

12/20e

1,162

574

475

1,992

360

20

12/21e

1,286

712

612

1,861

421

11

Note: *Reported EBITDA includes hedging and FX gains/losses. **Net debt = long-term debt, plus short-term debt minus cash and equivalents. ***Excluding acquisitions

Record production in FY19

In FY19 Vermilion achieved a consolidated average production of 100.3kboed, representing a c 15% increase from FY18. This was achieved due to growth in Canada, the US, Australia and the Netherlands. In Canada and the US, production increased as a result of acquisitions and continued organic growth. Despite achieving record production, in the current environment management was forced to cut its dividend twice within one of the worst weeks for the oil and gas industry.

Current oil supply and demand volatility

2020 is proving to be a challenging year for the oil and gas industry. In January, geopolitical events around Iran resulted in market instability, later followed by the coronavirus outbreak and the Russia/Saudi Arabia oil price war. These disruptions to the supply/demand balance are already having an impact on results in Q120, with the EIA estimating oil demand in Q120 to be 0.9mmbod lower than in Q119. As a consequence, management decreased the estimated capex for the year to c C$360m versus previous estimates of C$450m, and updated FY20 production guidance from 100–103kboed to 94–98kboed.

Valuation: Blended valuation at C$9.7/share

Oil and gas equities, and Canadian E&Ps in particular, have experienced a continuous decline in value since early 2019, and more accentuated since January 2020. Vermilion’s fundamentals remain strong; however, as a reflection of the current market situation, the company currently trades at 1.2x FY20e P/CF vs Canadian large E&Ps on 1.5x. Our blended valuation (P/CF, EV/EBIDAX, DDM and FCF plus growth) is C$9.7/share, down from C$38.3/share previously.

Estimate changes

In 2019, Vermilion achieved record annual production of c 100.3kboed, an increase of 15% compared to 2018. Production in Canada reached record levels of an annual average of c 60kboed following a full-year contribution from the Spartan assets acquired in May 2018. Production also achieved record annual average levels in the Netherlands and in the United States. Vermilion’s FY19 full year results were broadly in line with our expectations. However, following recent macroeconomic headwinds such as the impact of the coronavirus (Covid-19) on global energy needs and the Russia/Saudi Arabia price war, we have reviewed our forecasts for FY20. Key changes include:

1.

Lower short-term commodity price forecasts. These include a reduction in FY20 Brent to US$43.3/bbl (-28%) and WTI to US$38.19/bbl (-32%). Our FY20 and FY21 commodity price forecasts are based on EIA estimates as at 11 March 2020.

2.

We decrease our production forecasts by c 6% for FY20 to 96.3kboed, following the company’s recently updated guidance range of 94–98kboed. Initial guidance for the year stood at 100–103kboed; however, the recent decrease in oil demand and global oil prices led to a revision of capital allocation for the year and consequent production.

3.

We update 2020 capex to C$360m versus C$450m from our previous note, also following new management guidance of c C$350–370m for the year.

4.

And lastly, we account for a monthly dividend reduction by 50% to C$0.115 per share effective for the March dividend payable on 15 April 2020 and to C$0.02 per share per month for the remainder of the year.

The net impact of these changes on FFO is largely driven by commodity price forecasts (Brent 28%) and decreased production estimates (-6%), with our forecast FFO for FY20 falling 44% to C$504m and FY21 to C$641m.

Exhibit 1: Edison changes to forecasts

Actuals

Edison new

Edison old

Change

2019

2020e

2021e

2019e

2020e

2019e

2020e

Production (kboed)

100.3

96.3

93.5

100.8

102.4

-1%

-6%

Revenues (C$m)

1,747.5

1,162.1

1,285.9

1,746.8

1,570.7

0%

-26%

Adj EBITDA (C$m)

961.6

605.6

743.0

1,037.9

1,002.8

-7%

-40%

EBIDAX (C$m)

914.1

588.2

741.9

924.0

942.3

-1%

-38%

FFO (C$m)

908.1

504.2

641.5

946.5

900.9

-4%

-44%

CF/share (C$/share)

5.2

3.0

3.9

5.4

5.7

-4%

-47%

Capex ex acquisitions (C$m)

523.2

360.0

420.7

518.6

449.8

1%

-20%

Brent (US$/bbl)

64.36

43.30

55.36

63.4

59.9

2%

-28%

Source: Vermilion Energy, Edison Investment Research

Our production forecasts by country and commodity are provided below. For FY20, we forecast output of 96.3kboed, within management’s guidance range of 94–98kboed and 6% below our previous note.

Exhibit 2: Edison production forecasts by country

Exhibit 3: Edison production by commodity type

Source: Vermilion Energy, Edison Investment Research

Source: Vermilion Energy, Edison Investment Research

Exhibit 2: Edison production forecasts by country

Source: Vermilion Energy, Edison Investment Research

Exhibit 3: Edison production by commodity type

Source: Vermilion Energy, Edison Investment Research

Coronavirus and price war impact

Since the beginning of the year, the market caps of Vermilion and its peers have decreased by an average of c 65%. Concerns about lower global demand for oil and gas have had an impact on global commodity pricing. Lower demand is already being observed in Q120, especially in China, with oil liquids consumption decreasing from 15.2mmbod in December 2019 to 13.1mmbod in February 2020. In addition to the coronavirus outbreak, an oil price war between Saudi Arabia and Russia broke out on 9 March 2020. The OPEC+ ramp-up in production will come just as demand has significantly reduced as a result of the coronavirus. According to press reports, as OPEC members gathered last week, Saudi Arabia was signalling it would cut production to maintain oil prices. However, when Russia decided it was unwilling to accept its proposed share cut of 0.2–0.3mmbod, Saudi Arabia cut its selling prices, triggering the oil price crash. With falling demand, and increased hydrocarbons supply, realised prices have decreased, affected producing companies’ results. The key question now is how long the lower global oil demand will persist and how quickly the global economy will recover.

Valuation: Blended C$9.7/share

We use a blended approach when valuing Vermilion. This includes a combination of FY20e P/CF, EV/EBIDAX, dividend discount model (DDM) and free cash flow (FCF) (plus growth projects). We arrive at a valuation range of C$6.9/share to C$12.4/share resulting in an average blended valuation of C$9.7/share (down 75%). This reflects the effects of the coronavirus in global oil and gas demand and the impact of the Russia and Saudi Arabia price war, which resulted in oversupply, and lower commodity prices. The current low oil price environment led management to adjust its capital expenditure for FY20 to C$360m from initial guidance of C$450m and the monthly dividend to C$0.02 per share from C$0.23 per share. As a consequence of lower market caps across oil and gas companies (down 27%), we have reduced our FY20e P/CF range limits, as can be seen in Exhibit 5.

Exhibit 4: Edison valuation with new assumptions

Source: Edison Investment Research

Exhibit 4 shows the differentials in the valuation metrics when we compare the market-based valuation (the first two bars of the exhibit) and the fundamentals-based valuation (the last two bars of the exhibit). Exhibit 5 below shows the changes in metrics since our November 2019 valuation of C$38.3/share.

Exhibit 5: Edison forecast of Vermilion metrics versus last note

Outlook

November 2019

New

FY19e

FY20e

FY19a

FY20e

Production (kboed)

100.8

102.4

100.3

96.3

Revenues (C$m)

1,747

1,571

1,747

1,162

Adjusted EBITDA (C$m)

1,038

1,003

962

606

EBIDAX (C$m)

924

942

914

588

FFO (C$m)

947

901

908

504

Capex ex acquisitions (C$m)

519

450

523

360

FCF (C$m)

616

736

607

324

Number of diluted shares used in valuation (m)

-

159.3

-

156.1

Valuation (C$/share)

-

38.3

-

9.7

Brent (US$/bbl)

63.37

59.93

64.36

43.3

P/CF higher limit

P/CF lower limit

-

-

6x

4x

-

-

4x

2x

EV/EBIDAX higher limit

EV/EBIDAX lower limit

-

-

6x

4x

-

-

6x

4x

Source: Edison Investment Research

Commodity price sensitive cash flows

An important sensitivity to our forecasts and valuation lies in the prices of key commodities. Oil prices observed a drastic decrease on 9 March 2020 (down 48% from January 2020) as can be observed in Exhibit 6. We have updated our short-term base case oil price forecasts for FY20 and FY21 as per EIA 11 March 2020 guidance.

Exhibit 6: Vermilion share price performance vs S&P oil & gas peers and Brent since January 2019

Source: Edison Investment Research, Bloomberg as at 17 March 2020

We provide below in Exhibit 7 sensitivities to commodities prices to reflect the current scenarios. If, for example, we were to assume all key commodities (WTI, Brent, NBP, AECO and TTF) were 10% below our base case forecasts, FFO would fall by c 13% post-hedge (after inclusion of the impact of realised hedges to FY20).

Exhibit 7: FY20e FFO sensitivity to commodity prices

Brent /(US$/bbl)

30.3

34.6

39.0

43.3*

47.6

52.0

56.3

WTI /(US$/bbl)

26.7

30.6

34.4

38.2

42.0

45.8

49.6

NBP (C$/mmbtu)

3.5

4.0

4.5

5.0

5.5

6.0

6.5

AECO (C$/GJ)

1.1

1.3

1.4

1.6

1.7

1.9

2.1

TTF (C$/GJ)

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Realisation vs base (%)

-30%

-20%

-10%

0%

10%

20%

30%

FY20e FFO (C$m)

302.5

370.0

437.1

504.2

571.5

638.7

705.9

Valuation (C$/share)

2.8

5.1

7.4

9.7

12.0

14.3

16.6

Source: Edison Investment Research. Note: *Column represents Edison base case forecasts for FY20.

Vermilion hedges to manage commodity price exposures and increase the stability of cash flows, providing additional certainty with regard to the execution of its dividend and capital programmes.

P/CF for FY20 in line with Canadian peers in current market

We provide below in Exhibit 8 a peer group valuation table as at 17 March 2020 and it reflects the impact of the macroeconomic headwinds the oil and gas industry is currently facing. For a comparison to November’s peer group valuation we refer to our outlook note, which would be more representative of metrics at stable commodity prices.

Exhibits 8 shows that Vermilion’s FY20e P/CF and EV/EBITDA multiples currently are at 1.2x and 4.6x respectively, in line with Canadian peers. We note that before the drop in commodities, Vermilion was trading in line with our ‘rest of the world’ group average, currently trading at 2.8x FY20e P/CF and 2.8x FY20e EV/EBITDA.

Exhibit 8: Peer group valuation table

Company

Market cap ($m)

EV ($m)

EV/EBITDA FY19

EV/EBITDA FY20e

FCF yield FY19

FCF Yield FY20e

P/CF FY19

P/CF FY20e

Net debt/ EBITDA FY19

Net debt/ EBITDA FY20e

Div yield FY20e

Prod FY20e

Prod growth FY20e

EV/kboed FY20e

Vermilion - Edison forecast

416

1,966

2.88

4.60

52.0%

19.8%

0.70

1.22

2.22

3.59

20.2%

96.3

-4.0%

20.8

Canada

763

2,062

2.99

3.11

12.7%

6.7%

1.10

1.27

1.94

2.10

9.4%

118.1

9.9%

35.8

Junior E&P <30kboed

66

190

2.45

2.87

24.4%

14.1%

1.06

1.12

1.25

1.82

11.9%

17.5

30.6%

29.3

Altura Energy Inc

13

17

1.47

2.42

5.4%

-27.0%

1.33

1.70

0.15

0.25

0.0%

1.9

9.0%

24.3

Bonterra Energy Corp

25

235

2.80

4.80

80.0%

49.8%

0.42

0.58

2.49

4.26

5.9%

12.1

-1.8%

53.3

Cardinal Energy Ltd

41

225

2.36

4.93

93.5%

24.9%

0.48

0.98

1.93

4.03

31.6%

20.5

0.9%

30.0

PetroTal Corp

72

52

1.64

0.31

-59.5%

34.9%

2.14

1.07

-0.83

-0.16

6.5%

11.5

185.8%

12.4

Storm Resources Ltd

86

182

3.92

3.55

-23.5%

-8.5%

1.76

1.96

2.00

1.80

0.0%

24.4

21.0%

20.4

Tamarack Valley Energy Ltd

102

260

2.73

1.95

18.4%

6.0%

0.70

0.79

1.61

1.15

0.0%

24.0

-0.4%

29.7

TORC Oil & Gas Ltd

120

360

2.21

2.11

56.6%

18.7%

0.58

0.78

1.43

1.36

39.5%

28.2

-0.5%

35.0

Intermediate E&P>30kboed

294

996

3.28

3.19

3.2%

-0.6%

1.08

1.26

2.39

2.30

8.9%

69.3

2.8%

37.5

Advantage Oil & Gas Ltd

141

362

2.97

2.88

-8.9%

-15.4%

1.27

1.39

1.75

1.70

0.0%

46.2

4.2%

21.5

Athabasca Oil Corp

56

311

2.03

2.91

-135.6%

-83.4%

0.84

3.26

1.64

2.35

0.0%

36.7

1.5%

23.2

Baytex Energy Corp

164

1,583

2.89

3.10

121.2%

16.4%

0.27

0.45

2.57

2.75

0.0%

94.2

-3.6%

46.0

Bonavista Energy Corp

32

656

7.79

5.13

-80.5%

37.2%

0.27

0.32

7.40

4.87

0.0%

63.2

-0.3%

28.5

Canacol Energy Ltd

415

746

4.24

2.92

4.1%

11.7%

3.93

2.46

1.63

1.12

7.0%

36.2

42.2%

56.6

Enerplus Corp

387

779

1.55

2.35

11.6%

0.6%

0.82

1.22

0.75

1.14

4.9%

96.7

-4.3%

22.1

Frontera Energy Corp

288

422

0.82

0.88

43.2%

10.7%

0.54

0.78

0.14

0.15

20.1%

62.5

-11.8%

18.5

MEG Energy Corp

403

2,868

4.00

6.24

76.5%

56.3%

0.90

1.37

3.39

5.30

0.0%

95.0

2.0%

82.7

NuVista Energy Ltd

66

561

2.51

2.58

-63.2%

-41.0%

0.35

0.37

2.19

2.26

0.0%

57.2

12.5%

26.9

Paramount Resources Ltd

114

621

4.40

2.93

-92.9%

-98.0%

0.61

0.67

3.54

2.36

0.0%

77.0

-6.5%

22.1

Parex Resources Inc

1,184

789

1.23

1.49

9.4%

11.9%

3.32

2.93

-0.62

-0.75

0.0%

55.2

4.7%

39.1

Peyto Exploration & Development Corp

129

994

3.55

4.59

60.9%

9.4%

0.57

0.69

3.06

3.95

20.2%

80.3

-0.6%

33.9

Vermilion Energy Inc

416

1,966

2.79

3.51

44.9%

41.3%

0.70

0.93

2.17

2.72

40.9%

99.4

-0.9%

54.2

Whitecap Resources Inc

315

1,284

5.12

3.13

53.7%

33.6%

0.69

0.86

3.79

2.32

31.9%

71.0

-0.1%

49.6

Large E&P>100kboed

3,056

7,671

2.93

3.24

23.2%

16.8%

1.24

1.50

1.67

1.96

7.4%

395.5

1.1%

40.4

ARC Resources Ltd

735

1,440

4.26

3.17

-4.3%

14.8%

1.61

1.67

2.01

1.49

15.8%

153.2

10.1%

25.7

Canadian Natural Resources Ltd

12,159

29,235

3.54

4.31

30.6%

16.9%

1.95

2.83

2.00

2.43

11.5%

1,180.5

7.4%

67.8

Crescent Point Energy Corp

404

2,738

1.87

3.33

74.3%

30.3%

0.34

0.52

1.57

2.81

3.7%

138.0

-14.9%

54.4

Seven Generations Energy Ltd

394

1,956

1.82

2.09

20.9%

11.3%

0.43

0.53

1.43

1.64

0.0%

194.0

-4.4%

27.6

Tourmaline Oil Corp

1,590

2,985

3.15

3.32

-5.4%

10.7%

1.90

1.94

1.33

1.40

5.8%

311.8

7.2%

26.2

US

3,422

8,536

4.87

3.77

-30.1%

4.2%

1.16

1.30

3.48

2.62

4.3%

338.8

11.8%

67.2

Intermediate/Large E&P >30kboed

3,422

8,536

4.87

3.77

-30.1%

4.2%

1.16

1.30

3.48

2.62

4.3%

338.8

11.8%

67.2

RoW

11,883

12,787

2.12

2.76

2.7%

1.3%

2.80

2.83

0.98

0.84

10.7%

519.9

14.6%

71.9

Intermediate/Large E&P >30kboed

11,883

12,787

2.12

2.76

2.7%

1.3%

2.80

2.83

0.98

0.84

10.7%

519.9

14.6%

71.9

Grand averages

3,238

6,463

3.87

3.44

-9.8%

5.1%

1.30

1.44

2.64

2.27

7.1%

271.5

11.2%

55.4

Source: Edison Investment Research, Bloomberg, Refinitiv estimates. Note: Prices as at 17 March 2020.

Financials

Vermilion recently reduced its monthly dividend by 50% to C$0.115 per share for the month of March, on 6 March 2020, as an initial response to weakness in commodity prices and reduced global economic prospects following the outbreak of the coronavirus. However, following the Russia/Saudi Arabia oil price war and the prospects of lower global demand for oil for FY20, the company proceeded to further reduce its monthly dividend to C$0.02 per share on 16 March 2020. This results in a cash dividend of c C$137m for the year. For 2020 we forecast operating cash flow of C$475m and funds from operations (FFO) of C$504m (which excludes changes in working capital and asset retirement obligations), sufficient to cover the combined cash outflows for capex and cash dividends of C$497m and with other small outflows we expect year end net debt of c C$2.0bn.

In Exhibit 9 below its possible to observe that at a 10% discount to our current commodity price assumption, growth and maintenance capex is still covered by FFO. However, if cash dividends were not to be fully covered, management would have to take further measures.

Exhibit 9: Vermilion FY20e dividend sustainability

Source: Edison Investment Research. Note: *Discount/premium on commodity prices.

Measures could include taking on more debt, although Vermilion needs to maintain gearing below current covenant limits (consolidated total debt to consolidated EBITDA covenant limit of 4.0x). We have stress tested our low case of a commodity price at a 10% discount to the base case and observe that, in this scenario, Vermilion would need to raise c C$60m cash to cover current maintenance and growth capex and dividends. This would result in a net debt to EBITDA ratio in FY20 of 4.2x. The average net debt/EBITDA for Canadian E&Ps in FY19 was 2.3x.

In Exhibit 10 we model the stress test for Vermilion at a 10% discount to our base case commodity price scenario. This analysis shows that, even after the recent capex and dividend reduction, Vermilion’s balance sheet is highly sensitive to the cash its assets generate, and at low commodity prices its balance sheet might be at risk, with gearing multiples exceeding the total debt to EBITDA covenant.

Exhibit 10: Base case CFO coverage of dividend (before and after growth capex)

Source: Edison Investment Research. Note: *Impact of incremental net debt required in low case scenario (10% commodity prices) preserving existing dividend.

Exhibit 11: Financial summary

 

C$m

2017

2018

2019

2020e

2021e

Year-end: 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

Revenue

1,024

1,526

1,747

1,162

1,286

Cost of Sales

(286)

(409)

(513)

(496)

(482)

Gross Profit

739

1,117

1,235

666

804

EBITDA

673

1,037

898

574

712

Operating Profit (before amort. and except.)

182

427

223

(91)

71

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Other

41

46

(81)

0

0

Operating Profit

223

474

141

(91)

71

Net Interest

(57)

(73)

(81)

(84)

(82)

Profit Before Tax (norm)

124

355

141

(175)

(11)

Profit Before Tax (FRS 3)

166

401

60

(175)

(11)

Tax

(62)

(83)

(108)

17

1

Profit After Tax (norm)

104

318

(48)

(157)

(9)

Profit After Tax (FRS 3)

104

318

(48)

(157)

(9)

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

121

141

154

156

156

EPS - normalised (c)

86

226

(31)

(101)

(6)

Dividend per share (C$/share)

2.6

2.7

2.8

0.8

0.4

 

 

 

 

 

 

Gross Margin (%)

72

73

71

57

62

EBITDA Margin (%)

66

68

51

49

55

Operating Margin (before GW and except.) (%)

18

28

13

(8)

6

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

Fixed Assets

3,713

5,841

5,518

5,213

4,994

Intangible Assets

293

303

286

297

308

Tangible Assets

3,338

5,317

5,016

4,699

4,469

Investments

82

221

217

217

217

Current Assets

262

430

348

251

382

Stocks

17

28

29

29

29

Debtors

166

260

211

211

211

Cash

47

27

29

(67)

64

Other

32

115

78

78

78

Current Liabilities

(363)

(563)

(416)

(416)

(416)

Creditors

(258)

(487)

(318)

(318)

(318)

Other short term liabilities

(105)

(76)

(98)

(98)

(98)

Long Term Liabilities

(2,069)

(2,890)

(2,997)

(2,940)

(2,898)

Long term borrowings

(1,270)

(1,796)

(1,925)

(1,925)

(1,925)

Other long term liabilities

(798)

(1,094)

(1,072)

(1,015)

(973)

Net Assets

1,543

2,817

2,453

2,108

2,062

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

Operating Cash Flow

594

816

823

475

612

Capex

(320)

(518)

(523)

(360)

(421)

Acquisitions/disposals

(28)

(276)

(38)

0

0

Financing

(4)

37

(83)

(23)

(23)

Dividends

(200)

(330)

(392)

(137)

(37)

Net Cash Flow

41

(272)

(213)

(46)

131

Opening net debt/(cash)

1,299

1,224

1,769

1,896

1,992

HP finance leases initiated

0

0

0

0

0

Other

34

(273)

87

(51)

0

Closing net debt/(cash)

1,224

1,769

1,896

1,992

1,861

Source: Vermilion Energy accounts, Edison Investment Research


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This report has been commissioned by Vermilion Energy and prepared and issued by Edison, in consideration of a fee payable by Vermilion Energy. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Vermilion Energy and prepared and issued by Edison, in consideration of a fee payable by Vermilion Energy. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

Claranova — COVID-19 update

Claranova has issued an update clarifying that, to date, COVID-19 is not having a material effect on customer demand or its supply chain. The company is implementing measures to ensure that staff can work safely and highlights that it had cash totalling €90m at the end of CY19. The company will provide further detail when it reports H120 results on 31 March.

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