Vermilion Energy Inc. Announces 2021 Budget


Vermilion Energy Inc. announced Monday its 2021 exploration and development (“E&D”) capital budget and associated production guidance. The Company is reducing its budget by 17% from 2020 (to a $300 million budget), looking to preserve liquidity and reduce debt.

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Vermilion Energy Inc. announced Monday it is releasing its 2021 exploration and development capital budget and associated production guidance. For 2021, the Company will work through a $300 million budget, representing a 17% reduction from 2020.

In this sense, the Company’s primary focus for this year is to preserve liquidity and reduce debt while positioning itself for long-term sustainability. Vermilion expects to generate $200 million of free cash flow with a payout ratio of less than 65%.

As a result, the new capital budget is expected to maximize returns and free cash flow while retaining the flexibility to adjust investment levels depending on commodity prices. Capital’s allocation in 2021 will be more level-loaded compared to recent years, the Company stated.

“While the transition to a more level-loaded capital program will result in lower annual average production for 2021, it is expected to deliver better overall capital efficiencies and lead to a more manageable production base going forward,” Vermilion declared in a press release.  

Approximately 31% of the 2021 capital budget will be invested during Q1. Through a $300 million capital, the Company aims to deliver annual average production of 83,000 to 85,000 boe/d.

Vermilion had a positive result in return profiles at its condensate-rich natural gas projects in Alberta and the Netherlands. For this reason, most of 2021’s first half drilling program will be allocated to these projects.   

Projects for this year

In comparison, Vermilion’s light oil projects in southeast Saskatchewan, Wyoming, and France are being downsized in 2021.  In this regard, the Company noted that with the recent strengthening of global oil prices, it would consider during Q2 if market conditions remain supportive.  

Besides, following a review of the Company’s global asset base, Vermilion will reorganize the business and reporting lines into two core regions, North America and International.   

In North America, the Company plans to invest approximately $165 million of capital, representing a reduction of 37% compared to 2020. This program includes the drilling of ten (9.6 net) Mannville condensate-rich natural gas wells in Alberta, 25 (22.1 net) light oil wells in southeast Saskatchewan, and four (3.9 net) light oil wells in Wyoming.

The Company will also bring on production five (5.0 net) Mannville condensate-rich natural gas wells drilled in Q4 2020.

Vermilion also plans to invest approximately $135 million across its international assets, representing an increase of 35% compared to 2020. The 2021 drilling program includes two (1.5 net) natural gas wells in the Netherlands, one (1.0 net) natural gas well in Croatia, and one (1.0 net) oil well in Hungary.

Furthermore, the previously drilled Burgmoor Z5 well (46% working interest) in Germany is expected to be brought on production in 2021.

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