Written by SmallCapPower.com
Vermilion Energy Inc. (VET), based in Calgary, Alberta, is an international oil and gas producer with superior operational and financial metrics. At the current (July 26) market price of $33.39 (US), the stock has an attractive dividend yield of ~6.0% and if oil prices move up, there should also be decent capital appreciation. The Company’s reserves and production continues to grow via organic efforts and selective M&A. As, and when, crude prices start their next sustained up move, the operating and financials metrics of Vermilion Energy would improve significantly.
Vermilion shares have been trending lower over the past few months in sync with the falling oil prices:
WTI and Vermilion Energy share prices
Robust operating model
Vermilion Energy is an international E&P company that holds conventional/semi-conventional assets with high rates of return, low decline rates and strong capital efficiencies. The Company holds a diversified project inventory and currently has 10 major drilling projects across the U.S., Canada, and Europe with a net drilling inventory of nearly 1,200 as outlined below:
Key drilling projects of Vermilion
Operational efficiencies have been improving steadily over the past few years which, to an extent, was necessary for its survival in the 2014 oil price collapse. OPEX witnessed a 27% reduction over 2012-2016 while 2P F&D costs (capex) declined 84% over the period 2011-2016, reaching $5/BOE in 2016. Vermilion Energy boasts one of the best netbacks in the industry and ranks behind Raging River Exploration Inc. (TSX: RRX)(RRENF) ($40/BOE) with a $34/BOE.
Continued improvement in operational and capital efficiencies
Strong FFO and FCF aid regular dividend payouts
Owing to its operational efficiency and strong production growth, Vermilion Energy generates consistently high funds from operations (FFO) and free cash flows (FCF) that have aided it in rewarding shareholders with regular dividends. In 2016, Vermilion Energy generated more than $500 million (Canadian dollars) in FFO and nearly $300 million (Canadian dollars) in FCF.
