Vermilion Energy Inc. Announces Results for the Three and Nine Months Ended September 30, 2016

Irish production averaged 59 mmcf/d (9,879 boe/d) net to Vermilion during Q3 2016, representing an increase of 25% versus the prior quarter.  Production results continued to benefit from better than expected well deliverability and minimal downtime.  Following the conclusion of a successful offshore work campaign that included laying a flowline to the P2 well, all six wells are now available for production.   

*******************

CALGARY, Oct. 31, 2016 /CNW/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX, NYSE: VET) is pleased to report operating and unaudited financial results for the three and nine months ended September 30, 2016. 

The unaudited financial statements and management discussion and analysis for the three and nine months ended September 30, 2016, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml, and on Vermilion's website at www.vermilionenergy.com.

HIGHLIGHTS

• Average production of 63,596 boe/d during Q3 2016 decreased by 1% compared to 64,285 boe/d in the prior quarter as lower production in Canada, France and the Netherlands was largely offset by higher production volumes in Ireland and Australia. During the third quarter, we restricted gas-weighted production in Canada and oil production in Australia in an effort to optimize pricing and manage to overall corporate production targets. Vermilion expects to achieve full year production at approximately the top-end of its 2016 guidance range of 62,500 to 63,500 boe/d, representing year-over-year production growth of approximately 16% (10% on a per share basis). Q3 2016 production increased 13% from 56,280 boe/d in Q3 2015, primarily due to production from Ireland, which was not on line in the year-earlier period.
   
• Fund flows from operations ("FFO") for Q3 2016 was $141.0 million ($1.21/basic share⁽¹⁾), an increase of 11% quarter-over-quarter. This increase in FFO was primarily attributable to higher sales volumes in Australia, France and Ireland, and stronger AECO natural gas prices in Canada. Year-over-year, FFO increased by 9% compared to Q3 2015 as revenue from Ireland, coupled with lower operating expenses, taxes and royalties, more than offset lower commodity prices.
   
• Irish production averaged 59 mmcf/d (9,879 boe/d) net to Vermilion during Q3 2016, representing an increase of 25% versus the prior quarter. Production results continued to benefit from better-than-expected well deliverability and minimal downtime. Following the conclusion of a successful offshore work campaign that included laying a flowline to the P2 well, all six wells are now available for production.
   
• The two sidetrack wells drilled in Australia during Q2 2016 continued to demonstrate strong productive capability with combined production rates exceeding 4,500 bbls/d when utilized. Vermilion intends to produce these wells intermittently to meet corporate production targets while seeking to optimize ultimate recoveries and oil pricing. Following our successful 2015 and 2016 drilling campaigns, we do not expect to drill any additional wells in Australia until 2019.
   
• We completed our two-well drilling campaign in the Netherlands during the quarter. Langezwaag-3 encountered 17 meters of net pay in the Zechstein-2 carbonate formation. This well is being completed and is expected to be placed on production in November, at which time an in-line production test will be conducted. Andel-6ST encountered a large gas column of inadequate reservoir quality to justify completion. Potential remains to sidetrack this well to an updip location where higher quality gas zones may be encountered. The well has been suspended to allow us to reprocess seismic data to determine the viability of the potential updip target.
   
• Profitability Enhancement Plan ("PEP") initiatives continue to deliver cost savings across our business units. We estimate that full-year PEP savings related to capital, operating and administrative expenditures will exceed $60 million in 2016. Per-unit operating and G&A expenses are forecasted to decrease by 15% and 13% respectively year-over-year. As announced with our Q2 2016 results, identified cost savings allowed us to expand our 2016 capital program with only a modest change in our capital budget.
   
• We began proration of the Premium Dividend^TM component of our Dividend Reinvestment Plan by 25% beginning with our October dividend payment. Eligible shareholders who have elected to participate in the Premium Dividend^TM component are now receiving the 1.5% premium on 75% of their participating shares and the regular cash dividend on the remaining 25% of their shares. We expect to increase the proration factor by a further 25% beginning with the January 2017 dividend payment. Subject to unexpected changes in the commodity price outlook, we will continue to increase the proration during 2017, by the end of which there would be no further equity issuance under the Premium Dividend^TM component of our Dividend Reinvestment Plan.
   
• We also intend to reduce the discount associated with our traditional Dividend Reinvestment Plan from 3% to 2%, beginning with the January 2017 dividend payment.
   
• Following the preliminary 2017/2018 exploration and development ("E&D") capital investment and production targets we disclosed in the prior quarter, our Board of Directors has formally approved an E&D capital budget of $295 million for 2017. We continue to target production of between 69,000 to 70,000 boe/d in 2017. The preliminary 2018 targets we announced last quarter remain unchanged at $335 million in E&D capital with corresponding production of 75,000 to 76,000 boe/d. Production at the top end of these ranges for 2017 and 2018 would deliver per share growth of approximately 6% for each year.
   
• We recently announced that Vermilion was one of only five oil and gas companies in the world, and the only oil and gas company in North America, to be awarded a position on CDP's Climate "A" List. CDP (formerly Carbon Disclosure Project) is a London-based not-for-profit organization that administers a global environmental disclosure system that assists in the measurement and management of corporate environmental impacts. To achieve Climate "A" List recognition, a company must receive consistently high scores across all of CDP's scoring dimensions. Only 193 companies globally achieved Climate "A" List recognition in 2016 and only three Canadian companies were awarded a position on this year's list.