NYSE:VET Vermilion Energy Q3 2023 Earnings Report $6.42 +0.08 (+1.18%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$6.30 -0.11 (-1.71%) As of 04/25/2025 07:32 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Vermilion Energy EPS ResultsActual EPS$0.25Consensus EPS $0.23Beat/MissBeat by +$0.02One Year Ago EPSN/AVermilion Energy Revenue ResultsActual Revenue$354.50 millionExpected Revenue$420.12 millionBeat/MissMissed by -$65.62 millionYoY Revenue GrowthN/AVermilion Energy Announcement DetailsQuarterQ3 2023Date11/1/2023TimeN/AConference Call DateThursday, November 2, 2023Conference Call Time11:00AM ETUpcoming EarningsVermilion Energy's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Vermilion Energy Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 2, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vermillion Energy Q3 Conference Call. Please note that all lines have been placed on mute to prevent any background noise. Mr. Operator00:00:13Dion Hatcher, you may begin your conference. Speaker 100:00:16Well, thank you, Sylvie. Good morning, ladies and gentlemen. Thank you for joining us. I'm Dion Hatcher, President and CEO of Vermillion Energy. With me today are Lars Glebster, Vice President and CFO Darcy Kerwin, Vice President, International and HSE Bryce Kremnica, Vice President, North America Justin Tan, Vice President, Business Development Kyle Preston, Vice President of Investor Relations. Speaker 100:00:40We will be referencing a PowerPoint presentation to discuss Our Q3 'twenty three results presentation can be found on our website under Invest With Us and Events and Presentations. Please refer to our advisory on forward looking statements at the end of the presentation. It describes the forward looking information, non GAAP measures and oil and gas terms used today and outlines the risk factors and assumptions relevant to this discussion. Production during the Q3 averaged 82,000 727 views per day, which was at the top end of our Q3 guidance range of 80,000 to 83,000. This is mainly due to the successful restart of the Wandu facility in Australia in early September and an efficient turnaround at the core facility in Ireland, which was completed 5 days ahead of schedule. Speaker 100:01:28In addition, we continue to see strong operational performance across the majority of our assets. We generated $270,000,000 of fund flow, which represents a 9% increase over the prior quarter. We invested $126,000,000 of E and D capital, Resulting in $144,000,000 of free cash flow, which represents an 80% increase over the prior quarter. This level of free cash flow was more than sufficient to fund current asset retirement obligations, lease payments and the base dividend With the excess free cash flow allocated to debt reduction and share repurchases. During the quarter, we returned $20,000,000 to shareholders through the base dividend And we have returned $115,000,000 to shareholders year to date, representing about 35% of our free cash flow. Speaker 100:02:16Given the improving free cash flow profile, we are now targeting 30% return on capital in 2023 compared to the prior range of 25% to 30% Until we achieve our net debt target of $1,000,000,000 We continue to make progress on debt reduction with net debt decreasing approximately $80,000,000 from the prior quarter $1,200,000,000 at the end of the third quarter, representing a trailing net debt to fund flow ratio of 1.2 times. Based on the forward strip pricing, we expect to achieve our $1,000,000,000 debt target in Q1 of 'twenty four, at which time we plan to increase Capital returned to our shareholders via the base dividend and share repurchases. Moving on to the operational updates for the quarter. Production from our North American operations averaged 56,758 BOEs per day in Q3, an increase of 5% 2,700 BOEs per day from the prior quarter mainly due to strong recovery following fire related downtime at our Deep Basin assets And new production from our recently drilled wells in the U. S. Speaker 100:03:20In the Deep Basin, we drilled 2 and completed 1 manhole liquids rich gas well. At Mica, we brought up production In Saskatchewan, we drilled 10, completed 9 and brought on production 8 oil wells. In the U. S, we brought on production 5 oil wells in Wyoming where production increased 21% from the prior quarter. We continue to progress our BC Montney development. Speaker 100:03:50During the Q3, we completed the site And awarded all major contracts for our 16,000 BOPD battery in BC. We're excited to break ground on the battery in August and we'll continue to progress this project over the next several months. Shown here is a cleared battery site Awaiting delivery of the facility modules that are currently in fabrication. The key piece of infrastructure will underpin the future development and growth of our BC Mike and Montney Asset. The majority of construction is scheduled to occur in the first half of twenty twenty four, but the battery expects to be operational by mid-twenty 24. Speaker 100:04:27Additional capacity provided by this battery, we're able to move forward with our growth phase of our Mica asset. Our upcoming winter program includes 11 wells And our BC lands offsetting our recent 16 to 28 BC pad, which is produced at an average per well rate of 11.50 BOEs per day over the 1st 6 months with an average 36% liquid yields, which is mainly oil. Given the strong rates, we are piloting a down spacing program to evaluate the potential for drilling more wells in BC. Production from our international operations averaged 25,969 Beauties Per Day, A decrease of 11% from the prior quarter, mainly due to planned turnaround in the core facility in Ireland and natural declines, Partially offset by the resumption of production in Australia following the restart of the Wandu facility. In Australia, we successfully completed the remaining inspection and repair work on our Wandu And restarted production in early September. Speaker 100:05:28The wells continue to produce at strong rates with Oskaterulia expected to contribute approximately 4,000 barrels per day into Q4 and through 2024. This is resulting in a $150,000,000 positive swing in free cash flow relative to 2023. In Ireland, we successfully completed the major turnaround at CORB 5 days ahead of schedule in August. CORB is forecast to produce approximately 10,000 Bs per day net to Vermillion of premium price European gas in Q4. We're excited about the future European gas Growth potential in both Germany and Croatia and we'll speak more about those projects on the following slides. Speaker 100:06:08On the left of this slide, we have a picture of the drilling rig on our first of 2 exploration targets in Germany. By the picture on the right is a map of German and Netherlands land illustrate the proximity, we see our development plans in Germany as a natural extension of the successful drilling campaigns we've executed Over the past 2 decades in neighboring Netherlands, we have approximately 700,000 net acres of undeveloped land in Germany, Located approximately 300 kilometers east of our producing fields in Northern Netherlands or similar distances between Calgary and Edmonton. Our gas exploration targets are on trend to the Netherlands place where we have drilled 29 gas wells over the past 2 decades with an average success rate of over 70%. The Germany exploration targets are deeper and higher risk, but have a much larger resource potential than the Netherlands. In addition, we have access to existing infrastructure network, regulatory support for permits and a track record of execution in Germany. Speaker 100:07:06With the success of our Germany exploration drilling program, we believe our land base can support a multiyear drilling campaign providing Vermillion with years of organic production growth of high value European gas. In Croatia, we started site preparation for the gas plant, which Scheduled for startup in mid-twenty 24 and will facilitate production from the SA-ten Block where we had previous gas discoveries. This gas is currently behind pipe awaiting startup of the gas plant and we see additional prospects in our acreage for future development. At current strip pricing and a mid year startup, we would expect approximately $40,000,000 of fund flows in 2024. I will now pass it over to Lars to discuss our guidance financial outlook. Speaker 200:07:49Thank you, Dion. Our 2023 production guidance remains unchanged with Australia back online and the planned turnaround at Core facility in Ireland is complete. We remain positioned to deliver annual production of 82,000 to 86,000 BOE per day In Q4 production of 86,000 to 89,000 BOE per day, our operations teams have done a great job offsetting the forest fires in Alberta and Extended downtime in Australia, resulting in strong performance across our asset base. We increased our 2023 capital expenditure guidance by $20,000,000 to $590,000,000 to accommodate accelerated BC Montney drilling into Q4. This ensures we secure a high performing rig and drill some of the wells before winter, which helps reduce costs. Speaker 200:08:37In addition, it also gives us production behind pipe To be ready for potential early startup of the new BC battery should construction go better than planned. We plan to release our 2024 budget and guidance Shares are expected to increase by about 5% over 2023 levels due to infrastructure spending required to advance our BC MicaMonte development, And we anticipate corporate production will be consistent with 2023 annual levels. Given the expected increase in FFO and Free cash flow generated by the business, driven by the full year impact of the Corb acquisition and Australia, we are able to advance long term organic growth projects that will I'll just reference is the key takeaway of this slide as well as the significant improvement in our financial position over the past several years. By the end of 2023, we will have nearly cut our debt in half as shown in the red bars, while also funding over $1,000,000,000 of strategic Acquisitions. We have also significantly increased our FFO from pre COVID levels as shown in the blue bars. Speaker 200:09:59This progress is reinforced with an estimated 2024 debt to FFO leverage of 0.6 times. Although we have not finalized our 2024 budget, we are currently forecasting FFO to increase to 1,400,000,000 Assuming a flat production profile at current strip pricing. With this, we expect to achieve our net debt target of CAD1 1,000,000,000 during the Q1 of 2024, which will be the trigger for increasing our return of capital to shareholders from the current target of 30%. On this slide, we show free cash flow based on recent pricing and the breakdown of how free cash flow was allocated. The majority of FCF was allocated to debt reduction and acquisitions for the period of 2021 to 2023. Speaker 200:10:47We expect to generate significantly higher year over year SCF in 2024 due to the full year impact of the Correv acquisition, Heading Australia back online for a full year and first gas from our SA-ten project in Croatia. These three items alone contribute an expected $270,000,000 year over year increase to FCS, which is further underpinned with robust and well hedged European gas prices. This will position us well to invest in our assets and increase our percentage and absolute level of free cash flow return to shareholders in 2024. With that, I will pass it back to Dion. Speaker 100:11:27Thanks, Lars. I'd like to take this opportunity to provide some background on European gas as we head into the winter heating season for European consumption typically increases 30 Bcf to 40 Bcf per day compared to the summer. Last year Europe lost approximately 12 Bcf a day of Russia supply, This has resulted in an even greater dependence on LNG imports. Last winter, Europe demand was down about 10 Bcf per day compared to the prior winters Due to it being the 2nd warmest winter on record and government policy focused on gas conservation. Even with this, gas averaged over CAD30 during the winter. Speaker 100:12:07Combination of a very warm winter and government policy to mandate full storage during the summer has resulted in European storage being effectively full Reality is that Europe will continue to depend heavily on LNG imports to meet winter demand. It may be more challenging this year due Higher Chinese demand post COVID-nineteen policy and potentially a return to a more normal winter. Any potential Supply disruptions or increased demand from Asia will put upward pressure on Euro gas prices. You can see the impact from this tight Supply in the forward curve on this slide as European gas prices continue to hold at or above CAD20 per MMBtu. We sell directly into the European gas markets, not via LNG, so we realize these high prices. Speaker 100:12:54For the upcoming periods in European Gas, in Canadian dollar terms, we have 45% hedged for Q4 'twenty three at an average floor of $34 38% hedged for $0.24 at an average floor of $33 20 percent hedged for $0.25 hedged at an average floor of $22 These hedge prices are 13, 11 and 6 times higher than equivalent periods of Canadian April gas prices. We will continue to be opportunistic during periods of volatility to increase our hedge position. Including all of our products, we have approximately 30% of our corporate production hedges for 2024, which provides greater certainty on achieving our debt targets and supports our return of capital to shareholders. In closing, it's an exciting time for Vermillion and its shareholders. We're gaining operational momentum with Australia now back online, The Mica B. Speaker 100:13:49C. Battery and Croatia Gas Plant construction underway and the first well of our German gas exploration program being drilled. 2nd, we have direct exposure to premium price European gas, which remains in extremely tight supply And we are progressing projects to increase our European gas production. We are pleased with our current hedge levels and we'll continue to be opportunistic during periods of volatility to add more hedges. 3rd, we are seeing the benefits of the strategic asset high grade and focus on debt reduction with a significant increase in 2024 free cash flow. Speaker 100:14:22With that, we are on track to achieve our debt target in Q1 'twenty four and intend to increase our return of capital to shareholders. That concludes my prepared remarks. And with that, I'd like to open it up for questions. Operator00:14:35Thank you, sir. The first question will be from Travis Wood Agnett Bank Financial, please Speaker 100:15:06go ahead. Speaker 300:15:08Yes, good morning. Thanks for taking my question. I wanted to Yes, that's of 2024, in terms of volumes and a bit of cadence. I know you've provided some Indicative commentary in terms of the average rates, but with a strong Q4 this year and then Some interesting projects and facilities and kind of a drill to fill program in Canada for the Montney. How should we be thinking about volumes through the beginning of next year and into Later next year as you kind of start to fill those facilities. Speaker 300:15:48And then if you could, maybe some kind of Year over year comparison on CapEx would be helpful as well. Thank you. Speaker 100:15:57Thanks, Travis. I can take this one. It's Dion. We'll be providing more details when we release our budget in the upcoming weeks as noted on the call. But I think how you should be thinking about it is as noted flat Volumes and capital 4% to 5% higher really driven by the increased investment in infrastructure in the Montney. Speaker 100:16:18From a cadence point of view, again, we'll provide more details later, but the two significant drivers of that would be the Montney battery, that 16,000 BVD battery would be mid year. We'll have a pad behind pipe ready for that startup. Until then, we're capacity constrained. As well as the SA-ten plant that we talked about, it's about 15,000,000 a day of gas, but again mid year. So Again, we'll provide more details, but really there will be a ramp up in the second half of the year is how we're thinking about it. Speaker 300:16:52Okay. That's perfect. Thank you very much for that. Speaker 100:16:55Thanks, Travis. Operator00:16:57Thank you. And your next question And will be from Dennis Wong at CIBC. Please go ahead. Speaker 400:17:09Hi, good morning and thanks for taking my questions. I guess my first one here Obviously, with the upcoming potential completion of the infrastructure there in Croatia, can you outline a little bit more of the Opportunity set that exists there, and what that could mean kind of going forward, especially given its European gas Revenue line? Thanks. Speaker 100:17:33Thanks, Dennis. I'll pass it over to Darcy to provide some detail on ratio. Speaker 500:17:38Yes. Thanks, Dennis. Darcy here. Yes, we're currently in the process of building that Croatian gas plant. Dion mentioned earlier, that's kind of we've got a nominal Sales capacity of about 15,000,000 cubic feet a day. Speaker 500:17:52I think in Europe, you need to think of those numbers, Not necessarily in terms of just in terms of volume, but in terms of the much higher netback that we get in Europe versus here in North America. So If we think of Croatia at a CAD20 in MCF, those 2 wells going through that plant in SA-ten forecast to generate $10,000,000 of revenue per month and with netbacks that are kind of 7 or 8 times what they are in Canada going forward. In terms of future potential on that block, we do see some prospects there and the intent there would be to over time continue To drill that block to keep that plant full over time. And then outside of the block of SA-ten, of course, we have SA-seven, which is a Pretty perspective block that we're quite excited about with intent to drill 4 wells on that block in early 2024. Thanks, Darcy. Speaker 400:18:52Great. Appreciate that color there. My second question just Lars, thank you for providing that update around the financials and the driving down of obviously net debt. Can you talk towards a little bit more around, a, Where maybe the next net debt target looks like and how you think about capital structure as well as how the company and the Board will think about Free cash flow allocation once you kind of get towards that level? Thanks. Speaker 200:19:23Great. Thanks for the question, Dennis. Yes. So as we referenced that next debt target will be $1,000,000,000 line of sight to hitting that in the Q1 of 2024 And looking forward to providing what that next step is going to look like with the budget release here in the coming weeks. I think the best way to think about it is we do have a Clear plan in place in terms of getting to that debt target. Speaker 200:19:46I think the big thing that we're trying to emphasize as well is if you look at the free cash flow for 2024, Not only is there going to be an increase in the percentage of free cash flow that is allocated to return of capital for shareholders, But the absolute amount of free cash flow as well is increasing quite significantly in 2024 to 2023, kind of that 60% or $300,000,000 year over year. In terms of debt targets beyond that, we're quite comfortable with that $500,000,000 to $1,000,000,000 range. The lower end of that target will represent the amount of debt that we have turned out to 2,030. And so we think that that's a good way to think about longer term debt levels for Vermillion. Speaker 100:20:28Thanks, Lars. Great. I appreciate that. I'll turn it back. Okay. Speaker 100:20:33Thanks, Dennis. Operator00:20:35Thank you. And at this time, gentlemen, it appears we have no other questions registered. Please proceed with any additional comments. Speaker 100:20:44Well, with that, I'd like to thank you again for participating in our Q3 conference call. Operator00:20:51Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for calling. And at this time, we ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallVermilion Energy Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Vermilion Energy Earnings HeadlinesVermilion Energy price target lowered to C$17 from C$19 at National BankApril 26 at 10:39 AM | markets.businessinsider.comJ.P. Morgan Keeps Their Sell Rating on Vermilion Energy (VET)April 26 at 10:39 AM | markets.businessinsider.comHere’s How to Claim Your Stake in Elon’s Private Company, xAIElon Musk has done it again. He’s developed a powerful new AI model that’s already turning heads — and turning the industry upside down. Some say it could threaten Google’s search engine dominance. Others believe it could mark the beginning of the end for ChatGPT.April 26, 2025 | Brownstone Research (Ad)Vermilion Energy Inc. (TSE:VET) surges 5.9%; retail investors who own 50% shares profited along with institutionsApril 23 at 8:20 AM | finance.yahoo.comVermilion Energy price target lowered to C$13 from C$17 at ScotiabankApril 11, 2025 | markets.businessinsider.comVermilion Energy price target lowered to C$14 from C$17 at CIBCApril 10, 2025 | markets.businessinsider.comSee More Vermilion Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Vermilion Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Vermilion Energy and other key companies, straight to your email. Email Address About Vermilion EnergyVermilion Energy (NYSE:VET), together with its subsidiaries, engages in the acquisition, exploration, development, and production of petroleum and natural gas. The company has properties in West Central Alberta, southeast Saskatchewan, Manitoba, and West Pembina in Canada; Wyoming in the United States; southwest Bordeaux and Paris Basin in France; the Netherlands; Germany; Ireland; Croatia; Slovakia; and Australia. The company was founded in 1994 and is headquartered in Calgary, Canada.View Vermilion Energy ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vermillion Energy Q3 Conference Call. Please note that all lines have been placed on mute to prevent any background noise. Mr. Operator00:00:13Dion Hatcher, you may begin your conference. Speaker 100:00:16Well, thank you, Sylvie. Good morning, ladies and gentlemen. Thank you for joining us. I'm Dion Hatcher, President and CEO of Vermillion Energy. With me today are Lars Glebster, Vice President and CFO Darcy Kerwin, Vice President, International and HSE Bryce Kremnica, Vice President, North America Justin Tan, Vice President, Business Development Kyle Preston, Vice President of Investor Relations. Speaker 100:00:40We will be referencing a PowerPoint presentation to discuss Our Q3 'twenty three results presentation can be found on our website under Invest With Us and Events and Presentations. Please refer to our advisory on forward looking statements at the end of the presentation. It describes the forward looking information, non GAAP measures and oil and gas terms used today and outlines the risk factors and assumptions relevant to this discussion. Production during the Q3 averaged 82,000 727 views per day, which was at the top end of our Q3 guidance range of 80,000 to 83,000. This is mainly due to the successful restart of the Wandu facility in Australia in early September and an efficient turnaround at the core facility in Ireland, which was completed 5 days ahead of schedule. Speaker 100:01:28In addition, we continue to see strong operational performance across the majority of our assets. We generated $270,000,000 of fund flow, which represents a 9% increase over the prior quarter. We invested $126,000,000 of E and D capital, Resulting in $144,000,000 of free cash flow, which represents an 80% increase over the prior quarter. This level of free cash flow was more than sufficient to fund current asset retirement obligations, lease payments and the base dividend With the excess free cash flow allocated to debt reduction and share repurchases. During the quarter, we returned $20,000,000 to shareholders through the base dividend And we have returned $115,000,000 to shareholders year to date, representing about 35% of our free cash flow. Speaker 100:02:16Given the improving free cash flow profile, we are now targeting 30% return on capital in 2023 compared to the prior range of 25% to 30% Until we achieve our net debt target of $1,000,000,000 We continue to make progress on debt reduction with net debt decreasing approximately $80,000,000 from the prior quarter $1,200,000,000 at the end of the third quarter, representing a trailing net debt to fund flow ratio of 1.2 times. Based on the forward strip pricing, we expect to achieve our $1,000,000,000 debt target in Q1 of 'twenty four, at which time we plan to increase Capital returned to our shareholders via the base dividend and share repurchases. Moving on to the operational updates for the quarter. Production from our North American operations averaged 56,758 BOEs per day in Q3, an increase of 5% 2,700 BOEs per day from the prior quarter mainly due to strong recovery following fire related downtime at our Deep Basin assets And new production from our recently drilled wells in the U. S. Speaker 100:03:20In the Deep Basin, we drilled 2 and completed 1 manhole liquids rich gas well. At Mica, we brought up production In Saskatchewan, we drilled 10, completed 9 and brought on production 8 oil wells. In the U. S, we brought on production 5 oil wells in Wyoming where production increased 21% from the prior quarter. We continue to progress our BC Montney development. Speaker 100:03:50During the Q3, we completed the site And awarded all major contracts for our 16,000 BOPD battery in BC. We're excited to break ground on the battery in August and we'll continue to progress this project over the next several months. Shown here is a cleared battery site Awaiting delivery of the facility modules that are currently in fabrication. The key piece of infrastructure will underpin the future development and growth of our BC Mike and Montney Asset. The majority of construction is scheduled to occur in the first half of twenty twenty four, but the battery expects to be operational by mid-twenty 24. Speaker 100:04:27Additional capacity provided by this battery, we're able to move forward with our growth phase of our Mica asset. Our upcoming winter program includes 11 wells And our BC lands offsetting our recent 16 to 28 BC pad, which is produced at an average per well rate of 11.50 BOEs per day over the 1st 6 months with an average 36% liquid yields, which is mainly oil. Given the strong rates, we are piloting a down spacing program to evaluate the potential for drilling more wells in BC. Production from our international operations averaged 25,969 Beauties Per Day, A decrease of 11% from the prior quarter, mainly due to planned turnaround in the core facility in Ireland and natural declines, Partially offset by the resumption of production in Australia following the restart of the Wandu facility. In Australia, we successfully completed the remaining inspection and repair work on our Wandu And restarted production in early September. Speaker 100:05:28The wells continue to produce at strong rates with Oskaterulia expected to contribute approximately 4,000 barrels per day into Q4 and through 2024. This is resulting in a $150,000,000 positive swing in free cash flow relative to 2023. In Ireland, we successfully completed the major turnaround at CORB 5 days ahead of schedule in August. CORB is forecast to produce approximately 10,000 Bs per day net to Vermillion of premium price European gas in Q4. We're excited about the future European gas Growth potential in both Germany and Croatia and we'll speak more about those projects on the following slides. Speaker 100:06:08On the left of this slide, we have a picture of the drilling rig on our first of 2 exploration targets in Germany. By the picture on the right is a map of German and Netherlands land illustrate the proximity, we see our development plans in Germany as a natural extension of the successful drilling campaigns we've executed Over the past 2 decades in neighboring Netherlands, we have approximately 700,000 net acres of undeveloped land in Germany, Located approximately 300 kilometers east of our producing fields in Northern Netherlands or similar distances between Calgary and Edmonton. Our gas exploration targets are on trend to the Netherlands place where we have drilled 29 gas wells over the past 2 decades with an average success rate of over 70%. The Germany exploration targets are deeper and higher risk, but have a much larger resource potential than the Netherlands. In addition, we have access to existing infrastructure network, regulatory support for permits and a track record of execution in Germany. Speaker 100:07:06With the success of our Germany exploration drilling program, we believe our land base can support a multiyear drilling campaign providing Vermillion with years of organic production growth of high value European gas. In Croatia, we started site preparation for the gas plant, which Scheduled for startup in mid-twenty 24 and will facilitate production from the SA-ten Block where we had previous gas discoveries. This gas is currently behind pipe awaiting startup of the gas plant and we see additional prospects in our acreage for future development. At current strip pricing and a mid year startup, we would expect approximately $40,000,000 of fund flows in 2024. I will now pass it over to Lars to discuss our guidance financial outlook. Speaker 200:07:49Thank you, Dion. Our 2023 production guidance remains unchanged with Australia back online and the planned turnaround at Core facility in Ireland is complete. We remain positioned to deliver annual production of 82,000 to 86,000 BOE per day In Q4 production of 86,000 to 89,000 BOE per day, our operations teams have done a great job offsetting the forest fires in Alberta and Extended downtime in Australia, resulting in strong performance across our asset base. We increased our 2023 capital expenditure guidance by $20,000,000 to $590,000,000 to accommodate accelerated BC Montney drilling into Q4. This ensures we secure a high performing rig and drill some of the wells before winter, which helps reduce costs. Speaker 200:08:37In addition, it also gives us production behind pipe To be ready for potential early startup of the new BC battery should construction go better than planned. We plan to release our 2024 budget and guidance Shares are expected to increase by about 5% over 2023 levels due to infrastructure spending required to advance our BC MicaMonte development, And we anticipate corporate production will be consistent with 2023 annual levels. Given the expected increase in FFO and Free cash flow generated by the business, driven by the full year impact of the Corb acquisition and Australia, we are able to advance long term organic growth projects that will I'll just reference is the key takeaway of this slide as well as the significant improvement in our financial position over the past several years. By the end of 2023, we will have nearly cut our debt in half as shown in the red bars, while also funding over $1,000,000,000 of strategic Acquisitions. We have also significantly increased our FFO from pre COVID levels as shown in the blue bars. Speaker 200:09:59This progress is reinforced with an estimated 2024 debt to FFO leverage of 0.6 times. Although we have not finalized our 2024 budget, we are currently forecasting FFO to increase to 1,400,000,000 Assuming a flat production profile at current strip pricing. With this, we expect to achieve our net debt target of CAD1 1,000,000,000 during the Q1 of 2024, which will be the trigger for increasing our return of capital to shareholders from the current target of 30%. On this slide, we show free cash flow based on recent pricing and the breakdown of how free cash flow was allocated. The majority of FCF was allocated to debt reduction and acquisitions for the period of 2021 to 2023. Speaker 200:10:47We expect to generate significantly higher year over year SCF in 2024 due to the full year impact of the Correv acquisition, Heading Australia back online for a full year and first gas from our SA-ten project in Croatia. These three items alone contribute an expected $270,000,000 year over year increase to FCS, which is further underpinned with robust and well hedged European gas prices. This will position us well to invest in our assets and increase our percentage and absolute level of free cash flow return to shareholders in 2024. With that, I will pass it back to Dion. Speaker 100:11:27Thanks, Lars. I'd like to take this opportunity to provide some background on European gas as we head into the winter heating season for European consumption typically increases 30 Bcf to 40 Bcf per day compared to the summer. Last year Europe lost approximately 12 Bcf a day of Russia supply, This has resulted in an even greater dependence on LNG imports. Last winter, Europe demand was down about 10 Bcf per day compared to the prior winters Due to it being the 2nd warmest winter on record and government policy focused on gas conservation. Even with this, gas averaged over CAD30 during the winter. Speaker 100:12:07Combination of a very warm winter and government policy to mandate full storage during the summer has resulted in European storage being effectively full Reality is that Europe will continue to depend heavily on LNG imports to meet winter demand. It may be more challenging this year due Higher Chinese demand post COVID-nineteen policy and potentially a return to a more normal winter. Any potential Supply disruptions or increased demand from Asia will put upward pressure on Euro gas prices. You can see the impact from this tight Supply in the forward curve on this slide as European gas prices continue to hold at or above CAD20 per MMBtu. We sell directly into the European gas markets, not via LNG, so we realize these high prices. Speaker 100:12:54For the upcoming periods in European Gas, in Canadian dollar terms, we have 45% hedged for Q4 'twenty three at an average floor of $34 38% hedged for $0.24 at an average floor of $33 20 percent hedged for $0.25 hedged at an average floor of $22 These hedge prices are 13, 11 and 6 times higher than equivalent periods of Canadian April gas prices. We will continue to be opportunistic during periods of volatility to increase our hedge position. Including all of our products, we have approximately 30% of our corporate production hedges for 2024, which provides greater certainty on achieving our debt targets and supports our return of capital to shareholders. In closing, it's an exciting time for Vermillion and its shareholders. We're gaining operational momentum with Australia now back online, The Mica B. Speaker 100:13:49C. Battery and Croatia Gas Plant construction underway and the first well of our German gas exploration program being drilled. 2nd, we have direct exposure to premium price European gas, which remains in extremely tight supply And we are progressing projects to increase our European gas production. We are pleased with our current hedge levels and we'll continue to be opportunistic during periods of volatility to add more hedges. 3rd, we are seeing the benefits of the strategic asset high grade and focus on debt reduction with a significant increase in 2024 free cash flow. Speaker 100:14:22With that, we are on track to achieve our debt target in Q1 'twenty four and intend to increase our return of capital to shareholders. That concludes my prepared remarks. And with that, I'd like to open it up for questions. Operator00:14:35Thank you, sir. The first question will be from Travis Wood Agnett Bank Financial, please Speaker 100:15:06go ahead. Speaker 300:15:08Yes, good morning. Thanks for taking my question. I wanted to Yes, that's of 2024, in terms of volumes and a bit of cadence. I know you've provided some Indicative commentary in terms of the average rates, but with a strong Q4 this year and then Some interesting projects and facilities and kind of a drill to fill program in Canada for the Montney. How should we be thinking about volumes through the beginning of next year and into Later next year as you kind of start to fill those facilities. Speaker 300:15:48And then if you could, maybe some kind of Year over year comparison on CapEx would be helpful as well. Thank you. Speaker 100:15:57Thanks, Travis. I can take this one. It's Dion. We'll be providing more details when we release our budget in the upcoming weeks as noted on the call. But I think how you should be thinking about it is as noted flat Volumes and capital 4% to 5% higher really driven by the increased investment in infrastructure in the Montney. Speaker 100:16:18From a cadence point of view, again, we'll provide more details later, but the two significant drivers of that would be the Montney battery, that 16,000 BVD battery would be mid year. We'll have a pad behind pipe ready for that startup. Until then, we're capacity constrained. As well as the SA-ten plant that we talked about, it's about 15,000,000 a day of gas, but again mid year. So Again, we'll provide more details, but really there will be a ramp up in the second half of the year is how we're thinking about it. Speaker 300:16:52Okay. That's perfect. Thank you very much for that. Speaker 100:16:55Thanks, Travis. Operator00:16:57Thank you. And your next question And will be from Dennis Wong at CIBC. Please go ahead. Speaker 400:17:09Hi, good morning and thanks for taking my questions. I guess my first one here Obviously, with the upcoming potential completion of the infrastructure there in Croatia, can you outline a little bit more of the Opportunity set that exists there, and what that could mean kind of going forward, especially given its European gas Revenue line? Thanks. Speaker 100:17:33Thanks, Dennis. I'll pass it over to Darcy to provide some detail on ratio. Speaker 500:17:38Yes. Thanks, Dennis. Darcy here. Yes, we're currently in the process of building that Croatian gas plant. Dion mentioned earlier, that's kind of we've got a nominal Sales capacity of about 15,000,000 cubic feet a day. Speaker 500:17:52I think in Europe, you need to think of those numbers, Not necessarily in terms of just in terms of volume, but in terms of the much higher netback that we get in Europe versus here in North America. So If we think of Croatia at a CAD20 in MCF, those 2 wells going through that plant in SA-ten forecast to generate $10,000,000 of revenue per month and with netbacks that are kind of 7 or 8 times what they are in Canada going forward. In terms of future potential on that block, we do see some prospects there and the intent there would be to over time continue To drill that block to keep that plant full over time. And then outside of the block of SA-ten, of course, we have SA-seven, which is a Pretty perspective block that we're quite excited about with intent to drill 4 wells on that block in early 2024. Thanks, Darcy. Speaker 400:18:52Great. Appreciate that color there. My second question just Lars, thank you for providing that update around the financials and the driving down of obviously net debt. Can you talk towards a little bit more around, a, Where maybe the next net debt target looks like and how you think about capital structure as well as how the company and the Board will think about Free cash flow allocation once you kind of get towards that level? Thanks. Speaker 200:19:23Great. Thanks for the question, Dennis. Yes. So as we referenced that next debt target will be $1,000,000,000 line of sight to hitting that in the Q1 of 2024 And looking forward to providing what that next step is going to look like with the budget release here in the coming weeks. I think the best way to think about it is we do have a Clear plan in place in terms of getting to that debt target. Speaker 200:19:46I think the big thing that we're trying to emphasize as well is if you look at the free cash flow for 2024, Not only is there going to be an increase in the percentage of free cash flow that is allocated to return of capital for shareholders, But the absolute amount of free cash flow as well is increasing quite significantly in 2024 to 2023, kind of that 60% or $300,000,000 year over year. In terms of debt targets beyond that, we're quite comfortable with that $500,000,000 to $1,000,000,000 range. The lower end of that target will represent the amount of debt that we have turned out to 2,030. And so we think that that's a good way to think about longer term debt levels for Vermillion. Speaker 100:20:28Thanks, Lars. Great. I appreciate that. I'll turn it back. Okay. Speaker 100:20:33Thanks, Dennis. Operator00:20:35Thank you. And at this time, gentlemen, it appears we have no other questions registered. Please proceed with any additional comments. Speaker 100:20:44Well, with that, I'd like to thank you again for participating in our Q3 conference call. Operator00:20:51Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for calling. And at this time, we ask that you please disconnect your lines.Read morePowered by