Vermilion Energy has announced its 2025 budget.

Highlights

• 2025 capital expenditure budget of $600 – $625 million includes drilling and infrastructure capital allocated across all major business units, including ongoing drilling and debottlenecking on the BC Montney asset and drilling capital allocated to European gas exploration and development in Germany, the Netherlands, and Central and Eastern Europe.
• 2025 production guidance of 84,000 – 88,000 boe/d represents 2% growth at the mid-point compared to original 2024 production guidance.
• 2025 fund flows from operations ("FFO") and free cash flow ("FCF") forecasted to be approximately $1.0 billion and $400 million, respectively, based on forward commodity prices.
• Quarterly cash dividend increased by 8% to $0.13 CDN per share, effective with the Q1 2025 dividend payable on April 15, 2025.
• Variable component of shareholder returns will continue to be allocated to share buybacks. To date, Vermilion has repurchased and retired 16.8 million shares since initiating the share buyback program in July 2022, including 9.1 million shares year-to-date in 2024, which has reduced the share count by 4.8% to 154.5 million.
• Vermilion continues to provide investors with market and commodity diversification, with over 100 mmcf/d of European natural gas production driving its peer leading netbacks. Based on forward strip pricing, Vermilion's corporate operating netback for 2025 is forecasted at $40 per boe, or over 10% higher than the forecasted operating netback for 2024.
• Vermilion continues to employ an active commodity hedge program with 30% of 2025 production (net of royalties) currently hedged. This is comprised of 52% of European gas hedged at an average floor of $17/mmbtu, 42% of North American gas at an average floor of $3/mcf and 8% of crude oil hedged at an average floor of US$73/bbl.
• Vermilion successfully tested its second deep gas exploration well (0.64 net) in Germany, which flow tested at a restricted rate of 21 mmcf/d of natural gas with a wellhead pressure of 6,150 psi.

2025 Budget

Vermilion's Board of Directors has approved an E&D capital budget of $600 – $625 million for 2025. The budget includes drilling and infrastructure capital allocated to all major business units, including ongoing drilling and debottlenecking on the BC Montney asset and European gas exploration and development in Germany, Netherlands, and Central and Eastern Europe. This level of capital investment is expected to deliver annual average production of 84,000 to 88,000 boe/d, which represents 2% growth at the mid-point compared to the original 2024 production guidance.

North America

In North America, Vermilion plans to invest approximately $380 million of E&D capital, which will be deployed across the liquids-rich gas assets in the BC Montney and Alberta Deep Basin and light and medium crude oil assets in southeast Saskatchewan and the USA. In 2025, the Company plans to drill a total of 36 (32.9 net) wells in North America, including six (6.0 net) Montney wells in BC, fifteen (12.6 net) Deep Basin wells in Alberta, eleven (10.3 net) wells in southeast Saskatchewan, and four (4.0 net) wells in the United States. Vermilion will continue to invest in infrastructure to de-bottleneck its Montney facilities by adding compression to the 8-33 battery, which will increase gas handling capacity by approximately 5,000 boe/d. Future expansion and optimization plans will increase total Montney throughput capacity to 28,000 boe/d within the next few years, facilitating strong free cash flow for two decades from existing Mica Montney drilling inventory.

Vermilion is resuming operated drilling in the United States in 2025, with four (4.0 net) two-mile wells targeting the Turner and Parkman formations. The 2025 United States drilling program follows a year of participating in non-operated drilling across numerous formations, providing valuable insight into the deliverability of these zones on Vermilion's acreage.

International

Vermilion plans to invest approximately $230 million across its international assets, with an emphasis on European natural gas exploration and development. With this capital investment, the Company plans to drill ten (8.2 net) wells, comprised of five (5.0 net) wells in Germany, two (1.2 net) wells in the Netherlands, one (1.0 net) well in Croatia, and two (1.0 net) wells in Slovakia, while also funding maintenance capital requirements in France, Ireland, and Australia.

In Germany, Vermilion will further its deep gas exploration program by completing drilling operations on the Weissenmoor Sud well (1.0 net), which began ahead of schedule in October 2024. Additionally, production from the initial discovery well (1.0 net) at Osterheide is expected to commence during the first half of 2025. We expect to finish drilling operations on the Weissenmoor Sud well in early 2025. Following the positive test results on the second deep gas exploration well (0.64 net) at Wisselshorst in December 2024, the Company will conduct further testing operations and proceed with tie-in operations, expected online in the first half of 2026. The Company also plans to drill one shallow gas well (1.0 net) and three (3.0 net) infill oil wells in 2025.

In Central and Eastern Europe, Vermilion plans to drill one (1.0 net) well on the SA-10 block in Croatia to keep the gas plant fully utilized, while also drilling two (1.0 net) exploration wells in Slovakia. The Company will continue to evaluate the successful discoveries on the SA-7 block in Croatia to determine the ultimate development potential.

In the Netherlands, Vermilion plans to resume drilling with two (1.2 net) wells targeting Rotliegend prospects. In addition, capital will be allocated to a high-return infrastructure optimization project which is expected to drive operating cost savings while reducing production downtime and extending production capacity in the region.

Financial Outlook and Return of Capital

Based on forward commodity prices, Vermilion forecasts 2025 FFO of $1.0 billion and FCF(3) of $400 million, with EFCF of approximately $320 million after accounting for asset retirement obligations settled and payments on lease obligations.

The Company is pleased to announce its Board of Directors has approved an 8% increase to the quarterly cash dividend to $0.13 CDN per share, effective with the Q1 2025 dividend payable on April 15, 2025. The base dividend will amount to approximately $80 million on an annual basis, representing approximately 8% of 2025 FFO.

The Company will continue to target shareholder returns at 50% of EFCF, inclusive of the increased base dividend, with the balance going towards debt reduction. EFCF includes a deduction for asset retirement obligations settled and payments on lease obligations, which are ongoing costs associated with running the business, and more accurately reflects the free cash available to return to shareholders. In late 2024, Vermilion elected to repay the entire lease obligation associated with the Montney Battery constructed in 2024. This repayment resulted in an immediate interest cost savings and also increases the amount of EFCF available for shareholder returns in 2025 and beyond. As a result, 2025 payments on lease obligations are expected to be approximately $20 million, which is lower than the $110 million of forecasted 2024 payments.

The variable component of shareholder returns will continue to be allocated towards share buybacks. Since initiating the share buyback program in July 2022, Vermilion has repurchased and retired 16.8 million shares, including 9.1 million shares year-to-date 2024, which has reduced the share count by 4.8% to 154.5 million. Vermilion's return of capital framework provides meaningful returns to shareholders while continuing to reduce absolute debt and strengthening the Company's financial position. A strong balance sheet is vital to Vermilion's business model, as it provides the necessary liquidity to be opportunistic with acquisitions and organic growth opportunities, while also reducing risk and volatility.

Risk Management

Vermilion continues to employ an active commodity hedge program with 30% of its 2025 production (net of royalties) currently hedged. This is comprised of 52% of European gas hedged at an average floor of $17 per mmbtu, 42% of North American gas hedged at an average floor of $3 per mcf and 8% of crude oil hedged at an average floor of US$73 per barrel.

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