Vermilion Energy has entered into a definitive purchase and sale agreement whereby Vermilion, through its wholly owned subsidiary, will acquire interests in several production and exploration assets in Germany from Engie E&P Deutschland, for total consideration of €33 million ($47.9 million). The Acquisition has an effective date of January 1, 2016 and is anticipated to close in late Q4 2016, subject to customary closing adjustments. Vermilion will fund the Acquisition through existing credit facilities.

The Acquisition includes operated and non-operated interests in five oil and three gas producing fields, along with an operated interest in one exploration license. The Assets are located within the prolific North German Basin in northwest Germany and are forecasted to produce approx. 2,000 boe/d in 2016 (50% oil). Proved plus probable reserves are estimated at 9.2 million boe (74% proved developed producing) based on an independent evaluation by GLJ Petroleum Consultants with an effective date of December 31, 2015 . The transaction metrics are estimated at approx. $24,000 per boe per day, $5.86 per boe of proved plus probable reserves including future development capital (generating a 2P recycle ratio of 3.5 times based on projected 2016 netbacks), and 3.1 times estimated 2016 operating cash flow(2) using the current forward commodity strip. The Acquisition is expected to be accretive for all pertinent per share metrics including production, fund flows from operations, reserves and net asset value.

Vermilion will assume operatorship of six of the eight producing fields, with the other fields operated by ExxonMobil Production Deutschland ('EMPG') and Deutsche Erdoel ('DEA'). The Acquisition also includes a 50% operated interest in a 190 km oil pipeline network and a 66.7% operated interest in the Bedekaspel exploration license located in the Permian Rotliegend gas fairway, adding to Vermilion's existing 16.7% interest. 

The Acquisition adds a low decline (approx. 10%) production base to our portfolio, and provides Vermilion with its first operated producing properties in Germany, further strengthening its presence in the country. The Assets are expected to be complementary with the Company's existing European portfolio, offering similar subsurface characteristics and development opportunities. Vermilion has identified a number of low-risk optimization and workover opportunities on the acquired assets, from which it expects to maintain a flat-to-moderately growing production profile while generating free cash flow(2) to further support its growth-and-income capital markets model. In addition, Vermilion has identified development and exploration drilling opportunities that are not included in its current reserves estimate.

Vermilion entered Germany in early 2014 through the acquisition of a 25% non-operating interest in a four-partner consortium. In July 2015, the Company executed a significant exploratory farm-in agreement that provides it with participating interest in over 850,000 net acres of undeveloped land, as well as access to key technical data in the North German Basin. This Acquisition substantially advances Vermilion's objective of developing a material business unit in Germany, a country with a long history of oil and natural gas development, a consistent fiscal framework and low political risk.