Vermilion Energy

CN: VET

CA$5137.3m market cap

CA$33.6 last close

Vermilion Energy is an international E&P with assets in Europe, North America and Australia. Management expects FY19 production to average 101–106kboed after the integration of the Spartan assets.

Investment summary

Vermilion Energy offers a geographically diverse production base, the ability to fund an 8.1% dividend yield and a forecast FY19 c C$530m capital programme, all achievable even at realised commodity prices c 3% below our base case (WTI US$56.1/bbl, Brent US$62.8/bbl). We adjust our FY19 and FY20 forecasts to reflect lower short-term commodity price expectations (based on the latest EIA forecasts of 12 March 2019). EIA’s FY19 WTI moves from US$64.9/bbl to US$56.1/bbl (-14%), driving down our forecast FY19 FFO from C$1,200m to C$982m (-18%), comfortably above the $954m we estimate is required to cover dividend, maintenance and growth capex. Our valuation falls from C$54.5/share to C$47.5/share, based on a blend of P/CF, EV/EBIDAX, DDM, and FCF (plus growth) multiples. The valuation remains highly sensitive to commodity price assumptions. We provide a sensitivity to these key inputs in this note.

Y/E Dec
Revenue (C$m)
EBITDA (C$m)
PBT (C$m)
EPS (c)
P/E (x)
P/CF (x)
2017A 1024.0 673.0 124.0 86.0 39.1 6.8
2018A 1526.0 1037.0 355.0 226.3 14.8 5.8
2019E 1730.0 1045.0 211.0 123.9 27.1 5.4
2020E 1803.0 1114.0 284.0 166.0 20.2 5.1
Last updated on 22/03/2019
Industry outlook

Vermilion’s operations are in OECD countries and predominantly onshore; political, operational and subsurface risk is well spread. Vermilion benefits from realisations based on a number of regional commodity prices including Brent, WTI crude and Henry Hub, TTF, NBP and AECO gas.

Last updated on 22/03/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (C$m) 1802
Forecast gearing ratio (%) 68
Price performance
%
1m
3m
12m
Actual 1.8 18.3 (17.6)
Relative* 1.3 2.4 (21.1)
52-week high/low C$48.9/C$27.0
*% relative to local index
Key management
Kyle Preston IR Director
Tony Marino President and CEO

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