Vermilion Energy Inc. Completes Major Acquisition of Westbrick Energy for $1.075 Billion

Vermilion Energy Inc. Makes Strategic Move in the Deep Basin

Vermilion Energy Inc., a prominent player in the energy sector, recently announced a significant step forward in its strategic growth plans. On December 23, 2024, the company revealed its agreement to purchase Westbrick Energy Ltd., a privately owned oil and gas company focused in the Deep Basin region, for a total consideration of $1.075 billion. This arrangement agreement, which is subject to customary conditions and regulatory approvals, marks an important milestone in Vermilion's ongoing efforts to enhance its operational scale and efficiency.

A Strategic Acquisition to Enhance Operations

This acquisition is poised to be transformative for Vermilion, as it seeks to increase its footprint in an area where it has operated successfully for nearly thirty years. With this acquisition, Vermilion aims to solidify its status as a leader in the liquids-rich Deep Basin, significantly augmenting its production capabilities and land base. The total assets include approximately 1.1 million acres of land and four operated gas plants with a capacity of 102 mcf/d.

Dion Hatcher, President and CEO of Vermilion, emphasized the strategic importance of this acquisition, stating, "The strategic acquisition of Westbrick represents a significant step forward in Vermilion's North American high-grading initiative to increase operational scale and enhance full-cycle margins in the liquids-rich Deep Basin." This transaction is expected to close in the first quarter of 2025 and could help Vermilion achieve considerable economic and operational synergies.

Financial Impact and Production Growth

The anticipated growth in production will be remarkable, as Vermilion expects annual production from the acquired assets to be about 50,000 barrels of oil equivalent per day (boe/d) in 2025. This level of production is projected to yield an estimated $110 million in annual free cash flow based on current pricing forecasts and indicates a robust operational future for Vermilion. Hatcher further mentioned that this acquisition would add to their existing production base and significantly bolster their free cash flow capacity.

The assets acquired from Westbrick are expected to generate approximately 5% year-on-year growth while also providing a strong reserve base, with over 700 identified drilling locations expected to sustain production levels for more than 15 years. In terms of reserves, Vermilion anticipates proved developed producing (PDP) reserves of 92 million boe, predominantly natural gas, which indicates a solid foundation for future operations.

Balancing Debt and Operational Goals

Importantly, Vermilion has made considerable strides in reducing its debt levels over the past five years, allowing it to pursue strategic acquisitions more confidently. With the closure of this deal, Vermilion aims to maintain a net debt to fund flows from operations (FFO) ratio that supports its long-term financial health while pursuing operational excellence. Lysse Zleber, the CFO of Vermilion, indicated that the company will continue its disciplined approach to balance sheet management and capital allocation to ensure that debt targets are achieved timely.

After the acquisition, Vermilion will operate as an energy entity with a production of approximately 135,000 boe/d, positioning it as one of the largest gas producers globally. With a determined focus on natural gas production from its global assets, including liquefied natural gas (LNG), Vermilion is set to experience premium realized pricing on its natural gas sales, reflecting its favorable geographical positioning and established market relationships.

Looking Ahead: A Promising Future

As Vermilion Energy Inc. prepares to finalize the acquisition of Westbrick Energy, stakeholders are optimistic about the potential operational synergies and financial returns this strategic move will yield. The planned investor updates are set to provide comprehensive overviews of the company's enhanced production portfolio and financial landscape following the completion of the acquisition.

In summary, the acquisition of Westbrick Energy is a pivotal development for Vermilion Energy as it navigates the ever-evolving energy landscape, bolstering its production capacities and driving long-term shareholder value. With well-planned execution, Vermilion aims to build a more resilient and profitable operation that benefits its diverse asset base and global energy portfolio.