Vermilion has reported Q418 FFO of C$222.3m, 6.7% ahead of consensus C$208.3m and in line with our estimate of C$222.2m. At 101.6kboed, production was 2.7% ahead of our forecasts, with FFO/share 1.1% ahead at C$1.46/share. Guidance for 2019 production of 101–106kboed (with the mid-point implying 19% y-o-y growth) and the capex budget of C$530m remain unchanged. ROCE in 2018 was 9% compared to a five-year average of 4%. Our last published valuation was C$54.5/share, based on a blend of FY19 P/CF, EV/EBIDAX and multiple of FCF plus five-year NAV growth.
Written by
Vermilion Energy |
Q418 FFO 6.7% ahead of consensus |
FY18 results |
Oil & gas |
28 February 2019 |
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Vermilion EnergyVermilion Energy is a research client of Edison Investment Research Limited |
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Vermilion has reported Q418 FFO of C$222.3m, 6.7% ahead of consensus C$208.3m and in line with our estimate of C$222.2m. At 101.6kboed, production was 2.7% ahead of our forecasts, with FFO/share 1.1% ahead at C$1.46/share. Guidance for 2019 production of 101–106kboed (with the mid-point implying 19% y-o-y growth) and the capex budget of C$530m remain unchanged. ROCE in 2018 was 9% compared to a five-year average of 4%. Our last published valuation was C$54.5/share, based on a blend of FY19 P/CF, EV/EBIDAX and multiple of FCF plus five-year NAV growth.
Year end |
Revenue (C$m) |
EBITDA* |
Operating cash flow (C$m) |
Net (debt)/ |
Capex ex |
Yield |
12/16 |
828.5 |
361.7 |
509.5 |
(1298.9) |
242.4 |
4.5 |
12/17 |
1024.4 |
673.5 |
593.9 |
(1223.8) |
320.4 |
5.7 |
12/18 |
1526.0 |
835.5 |
816.0 |
(1769.2) |
503.8 |
8.2 |
12/19e |
1856.6 |
1169.9 |
1076.0 |
(1593.8) |
527.6 |
8.3 |
Note: *Reported EBITDA includes hedging and FX gains/losses. **Net debt = long-term debt, plus short-term debt minus cash and equivalents.
2018 reserves update reflects inorganic additions
2P reserves increased y-o-y to 488.1mmboe (+63%), largely acquisition led. 2P F&D costs was C$7.8/boe resulting in an organic 2P operating recycle ratio of 4.1x relative to 2.7x in 2017. Best-estimate, development-pending contingent resources grew 36% to 240mmboe and prospective resource was up 5% to 161mmboe.
Strong Q4 production performance
Vermilion saw a material q-o-q production increase in Q418 from a number of European geographies including Netherlands (+17%), Germany (+7%), Central and Eastern Europe (+145% including a full quarter of Hungary production). Canadian production grew 6% q-o-q backed by strong performance from southeast Saskatchewan and Alberta and the US grew 19% q-o-q on inclusion of a full quarter of the PRB acquisition. The only material decrease was seen in Australia, where production fell 11% q-o-q due to a planned maintenance shutdown. We forecast FY19 production of 101kboed, within the company 101–106kboed guidance range. Vermilion retained its CDP climate leadership level of A-, ranking it in the top 5% of oil and gas companies globally on this metric.
Valuation: Blended C$54.5/share, 8.3% dividend yield
We will be updating forecasts on the back of today’s results announcement and marking to market for year-to-date commodity prices. Our last published valuation of C$54.5/share includes sensitivities to key commodity prices. We estimate that maintenance capex, growth capex and dividend are covered at current commodity prices.
Results versus Edison and company consensus
Exhibit 1: Q418 and FY18 results vs Edison forecasts and consensus
Metric |
Unit |
Edison |
Consensus |
Reported |
vs Edison |
vs consensus |
Q418 |
|
|||||
Production |
kboed |
98.9 |
100.4 |
101.6 |
2.7% |
1.2% |
FFO |
C$m |
222.2 |
208.3 |
222.3 |
0.0% |
6.7% |
FFO/share (dil) |
C$/share |
1.44 |
1.35 |
1.46 |
1.1% |
7.9% |
2018 |
|
|||||
Production |
kboed |
86.5 |
86.9 |
87.3 |
0.9% |
0.4% |
FFO |
C$m |
833.4 |
818.8 |
838.6 |
0.6% |
2.4% |
FFO/share (dil) |
C$/share |
5.81 |
5.77 |
5.96 |
2.5% |
3.4% |
Net debt |
C$m |
2045.0* |
1948.4 |
1929.5 |
|
|
Source: Edison Investment Research, Vermilion Energy. Note: *Vermilion net debt reported as LT debt plus current liabilities minus current assets.
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