Calgary-based Vermilion Energy Inc., which operates in eight countries on three continents, said it was lifted by sharp commodity price increases in the first six months of the year as the world began to recover from the Covid-19 pandemic.
Vermilion operates in Canada as well as the Powder River Basin (PRB) of Wyoming. It also works in France, the Netherlands, Germany, Ireland, Croatia and Australia. About one-third of production is outside of North America.
Management reported encouraging progress in the Lower 48, particularly in the PRB’s Wyoming oil patch, by combining cost control and growth using a field efficiency strategy to add production.
“We realized a 20% reduction in our U.S. drilling costs,” said the management team. The gains included executing the drilling program in Wyoming “in the spring — versus winter — and using an experienced drilling crew that worked on our Canadian winter drilling.”
Vermilion in 2014 began acquiring land in the PRB’s Turner Sand play in northeastern Wyoming. It now controls 149,500 net-plus acres in the light oil play.
Canadian production and assets are focused in West Pembina near Alberta’s Drayton Valley, as well as in southeastern Saskatchewan and southwestern Manitoba.
First-half 2021 price gains for oil, condensate, natural gas liquids (NGL) and natural gas were found to more than compensate for production erosion caused by maintenance, an equipment breakdown, and restrained corporate spending.
Oil and condensate fetched a first-half 2021 average price of C$75.21/bbl ($60.17), up from C$47.20 ($37.76) in the same period of last year.
Natural gas prices overall rose on average to C$5.37/Mcf ($4.30) from C$3.39 ($2.70). Canadian gas climbed to C$3.12 ($2.50) from C$2.01 ($1.61). The biggest gas price gains were for European production linked to the National Balancing Pool (NBP) and Title Transfer Facility (TTF). The NBP surged up to C$9.83 ($7.86) from C$3.31 ($2.65). The TTF jumped to C$9.54 ($7.64) from C$3.32 ($2.66).
Vermilion oil, condensate and NGL production receded to 47,163 b/d in the first six months from 53,766 b/d a year earlier. Gas output dipped to 235 MMcf/d from 270 MMcf/d.
While debt reduction and shareholder dividends topped the firm’s agenda, Vermilion said the 2021 corporate budget could grow by up to 17%, to C$350 million ($280 million), if the commodity price gains prove to be durable in the second half of this year.
First-half 2021 earnings were C$238 million ($190.4 million) or C$5.94/share ($4.75). The earnings reversed year-earlier losses of C$1.4 billion ($1.1 billion) or minus C$8.83/share (minus $7.06).
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