CALGARY, AB - Vermilion Energy Inc . (TSX: TSX:VET) (NYSE: VET), an international energy producer with a market capitalization of $1.3 billion, has unveiled its 2025 budget, which includes a capital expenditure plan of $600 to $625 million aimed at drilling and infrastructure across its business units. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, despite recent market volatility that has pushed the share price down 9% in the past week. The budget is set to support a production guidance of 84,000 to 88,000 barrels of oil equivalent per day (boe/d), a 2% increase from the initial 2024 guidance.
The company also reported strong test results from its second deep gas exploration well in Germany, which demonstrated a flow rate of 21 million cubic feet per day. This success contributes to Vermilion's strategy of European gas exploration and development, with additional drilling planned in the Netherlands and Central and Eastern Europe. The company maintains a strong financial position with a healthy current ratio of 1.25 and an EBITDA of $925 million for the last twelve months.
In North America, Vermilion plans to invest around $380 million in assets such as the BC Montney and Alberta Deep Basin, with a total of 36 wells expected to be drilled in 2025. Infrastructure investments in the region will aim to de-bottleneck facilities and increase gas handling capacity, with further plans to enhance Montney throughput capacity, potentially yielding robust free cash flow for the next two decades.
Internationally, approximately $230 million will be allocated to drilling ten wells across Europe and funding maintenance in France, Ireland, and Australia. The focus will be on gas exploration in Germany and the Netherlands, with additional activities in Croatia and Slovakia.
Vermilion forecasts a fund flow from operations (FFO) of about $1.0 billion and free cash flow (FCF) of $400 million for 2025, based on forward commodity prices. The company has announced an 8% increase in its quarterly cash dividend to $0.13 CDN per share, effective with the first quarter 2025 dividend payable on April 15, 2025. InvestingPro data reveals the company has maintained impressive dividend growth of 13.1% and boasts a substantial free cash flow yield of 27%. For deeper insights into Vermilion's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The company's active commodity hedge program has 30% of its 2025 production hedged, including 52% of European gas and 42% of North American gas, providing some protection against price volatility.
Vermilion has also been active in returning capital to shareholders, having repurchased and retired 16.8 million shares since July 2022, reducing the share count by 4.8%. InvestingPro identifies this as a key strength, with management's aggressive share buybacks being one of several bullish indicators for the stock. Going forward, shareholder returns will continue to be a mix of dividends and share buybacks, with a focus on reducing debt and strengthening the balance sheet. The company maintains a conservative debt-to-equity ratio of 0.36, positioning it well for future growth opportunities.
This article is based on a press release statement from Vermilion Energy (NYSE:VET) Inc.
In other recent news, Vermilion Energy demonstrated strong growth in its Q3 2024 earnings report, with a 7% year-over-year increase in production and a 19% quarter-over-quarter rise in fund flows from operations. These positive results were largely driven by robust European gas prices, and the company's diversified portfolio, notably in Europe. Vermilion's CEO, Dion Hatcher, announced plans for significant production increases, particularly from the Mica Montney project in Canada, and reported a return of $59 million to shareholders in Q3.
The company's production guidance for 2024 is set between 84,000 to 85,000 BOEs per day, reflecting a 4% growth year-over-year. Vermilion also plans to maintain its capital budget for 2024 between $600-$625 million, with a focus on Canadian and German projects.
In terms of future expectations, the company remains optimistic about its European operations and intends to continue exploration and acquisition opportunities in the region. Vermilion's executives have also outlined a hedging strategy, with 50% of production hedged for 2024 and 2025, and 40% for 2026. The company's strategic positioning, particularly in Europe, and its focus on shareholder returns and exploration success, suggest potential for continued growth.
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