Vermilion Energy Inc. press release

Vermilion Energy Inc. Reports Strong Q1 2026 Operational and Financial Results and Continued Debt Reduction

2026-05-06

TSX - Toronto Stock Exchange · Canada

PR Newswire

CALGARY, AB, May 6, 2026/PRNewswire/ - Vermilion Energy Inc. ("Vermilion", "We", "Our", "Us" or the "Company") (TSX: VET) (NYSE: VET) is pleased to report operating and condensed financial results for the three months ended March 31, 2026.

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The unaudited interim financial statements and management discussion and analysis for the three months ended March 31, 2026 will be available on the System for Electronic Document Analysis and Retrieval Plus ("SEDAR+") at www.sedarplus.ca, on EDGAR at www.sec.gov/edgar.shtml, and on Vermilion's website at www.vermilionenergy.com.

Highlights

Q1 2026 Results

Generated $232 million ($1.52/basic share)(2)of fund flows from operations ("FFO")(1)and $98 million of free cash flow ("FCF")(6), fully funding $135 million of exploration and development ("E&D") capital expenditures(3)while strengthening the balance sheet and returning cash to shareholders.

Cost structure of controllable expenses reduced by 25% in Q1 2026 from Q1 2025 reflecting the impact of recent asset repositioning and continued focus on operational excellence.

Reduced net debt(7)by $50 million to $1.29 billion at March 31, 2026, bringing net debt reduction to $770 million over the past 12 months.

Returned $27 million to shareholders through dividends and share buybacks, including $21 million in dividends and the repurchase and cancellation of 0.4 million shares.

Realized an average natural gas sales price of $5.41/mcf, more than double the AECO benchmark, reflecting structural exposure to premium international gas markets and portfolio diversification.

Reported a net loss of $146 million ($0.95/basic share) driven by a $286 million unrealized loss on derivative instruments, which is the result of significant increases in spot and forward oil and European gas prices resulting from geopolitical events in Q1 2026, partially offset by gains on AECO hedges.

Production averaged 125,618 boe/d(9) (72% natural gas), increasing 4% quarter-over-quarter and 22% from Q1 2025, comprised of 99,746 boe/d(9)from Canadian assets and 25,872 boe/d(9)from International assets. With strong operational results in Q1 2026 carrying through to our Q2 2026 outlook, full-year production is trending to the higher end of the annual guidance range.

Several of the Company's Deep Basin wells ranked among the most prolific new wells in Alberta during the quarter, highlighting the depth, consistency and capital efficiency of the Deep Basin asset base and the technical execution of our teams.

In the Montney, Vermilion brought on six (6.0 net) liquids-rich gas wells ahead of schedule, delivering tier 1 performance and lower drill, complete, equip and tie-in ("DCET") costs of $8.2 million per well compared to the prior planned cost of $8.5 million per well.

In Germany, the Company progressed infrastructure development on the Wisselshorst well and expects first production by mid-2026. The Osterheide well has produced at an average of 8 mmcf/d over the first year of production and has generated approximately $30 million of excess free cash flow ("EFCF")(6)to-date.

Announced the signing of a deal to acquire producing assets in Germany, adding approximately 1,000 boe/d (85% natural gas) of low-decline production, increasing exposure to European TTF-linked gas and Brent-linked oil production, enhancing EFCF, and improving control of gathering infrastructure surrounding the Osterheide well.

Added three new land concessions in the North German Basin, adjacent to our existing acreage in Germany, doubling the Company's land base to over 1 million net acres and providing potential upside for our deep gas exploration program.

In March 2026, signed an agreement to divest the remaining 60% interest in the SA-07 block in Croatia for net proceeds of approximately €15MM ($24MM). The proceeds will be primarily used for incremental debt reduction, and the transaction is expected to close in the second half of 2026.

Outlook

Vermilion expects Q2 2026 production to average 123,000 to 125,000 boe/d (69% natural gas)(13), with full-year production trending to the top end of the stated guidance range of 118,000 to 122,000 boe/d (70% natural gas)(13)on E&D capital expenditures of $600 to $630 million.

Declared a quarterly cash dividend of $0.135 per common share, payable on June 30, 2026, to shareholders of record on June 15, 2026.

| ($M except as indicated) | Q1 2026 | Q4 2025 | Q1 2025 | | Financial | | | | | Fund flows from operations (1) | 232,277 | 240,734 | 256,029 | | Fund flows from operations ($/basic share) (2) | 1.52 | 1.57 | 1.66 | | Fund flows from operations ($/diluted share) (2) | 1.49 | 1.55 | 1.65 | | Net (loss) earnings | | | | | Net (loss) earnings from continuing operations | (141,206) | (437,788) | 3,849 | | Net (loss) earnings from discontinued operations | (4,332) | 135 | 11,104 | | Net (loss) earnings | (145,538) | (437,653) | 14,953 | | Net (loss) earnings from continuing operations ($/basic share) | (0.92) | (2.86) | 0.03 | | Net (loss) earnings from discontinued operations ($/basic share) | (0.03) | — | 0.07 | | Net (loss) earnings ($/basic share) | (0.95) | (2.86) | 0.10 | | Cash flows from operating activities | 227,398 | 133,357 | 280,384 | | Cash flows used in investing activities | 188,773 | 109,062 | 1,255,746 | | Capital expenditures(3) | 134,580 | 191,752 | 182,119 | | Acquisitions (4) | 6,035 | 1,646 | 1,120,998 | | Dispositions(5) | — | 41,782 | — | | Repurchase of shares | 4,692 | 6,527 | 16,576 | | Cash dividends ($/share) | 0.135 | 0.130 | 0.130 | | Dividends declared | 20,601 | 19,895 | 20,043 | | Free cash flow (6) | 97,697 | 48,982 | 73,910 | | Long-term debt | 1,254,333 | 1,243,397 | 1,874,033 | | Net debt (7) | 1,292,567 | 1,342,390 | 2,062,805 | | Net debt to four quarter trailing fund flows from operations (8) | 1.4 | 1.4 | 1.7 | | Shares outstanding - basic ('000s) | 152,600 | 152,950 | 154,177 | | Weighted average shares outstanding - diluted ('000s) (9) | 155,510 | 155,183 | 155,609 | | Operational | | | | | Production (10) | | | | | Crude oil and condensate (bbls/d) | 23,692 | 25,401 | 32,386 | | NGLs (bbls/d) | 12,044 | 12,140 | 9,167 | | Natural gas (mmcf/d) | 539.29 | 502.60 | 369.36 | | Total (boe/d) | 125,618 | 121,308 | 103,115 | | Average realized prices | | | | | Crude oil and condensate ($/bbl) | 100.61 | 83.21 | 99.36 | | NGLs ($/bbl) | 23.00 | 21.17 | 31.56 | | Natural gas ($/mcf) | 5.41 | 5.13 | 7.80 | | Average realized price ($/boe) | 44.96 | 40.99 | 61.71 | | Production mix (% of production) | | | | | % priced with reference to AECO | 58 % | 54 % | 42 % | | % priced with reference to TTF and NBP | 13 % | 15 % | 17 % | | % priced with reference to WTI | 22 % | 21 % | 29 % | | % priced with reference to Dated Brent | 7 % | 10 % | 12 % | | Netbacks | | | | | Operating netback ($/boe) (11) | 25.49 | 25.62 | 38.48 | | Fund flows from operations ($/boe) (12) | 20.33 | 21.47 | 27.78 |

| (1) | Fund flows from operations (FFO) is a total of segments and non-GAAP financial measure most directly comparable to net (loss) earnings and is calculated as sales less royalties, transportation expense, operating expense, G&A expense, corporate income tax expense (recovery), PRRT expense, interest expense, equity based compensation settled in cash, realized (gain) loss on derivatives, realized foreign exchange (gain) loss, and realized other (income) expense. The measure is used by management to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations, and make capital investments. FFO does not have a standardized meaning under IFRS® Accounting Standards and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to net earnings (loss), the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. Fund flows from continuing operations and fund flows from discontinued operations are calculated in the same manner as FFO and are most directly comparable to net earnings (loss) from continuing operations and net earnings (loss) discontinued operations, respectively. | | (2) | Fund flows from operations per basic share and diluted share is calculated by dividing fund flows from operations (total of segments and non-GAAP financial measure) by the basic weighted average shares outstanding as defined under IFRS Accounting Standards. Fund flows from operations per diluted share is calculated by dividing fund flows from operations by the sum of basic weighted average shares outstanding and incremental shares issuable under the equity based compensation plans as determined using the treasury stock method. Management assesses fund flows from operations on a per share basis as we believe this provides a measure of our operating performance after taking into account the issuance and potential future issuance of Vermilion common shares. More information and a reconciliation to cash flows used in investing activities, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. Fund flows from continuing operations per basic and diluted share and fund flows from discontinued operations per basic and diluted share are calculated in the same manner as FFO per basic and diluted share. | | (3) | Capital expenditures is a non-GAAP financial measure most directly comparable to cash flows used in investing activities and is calculated as the sum of drilling and development costs and exploration and evaluation costs. Management considers capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures does not have a standardized meaning under IFRS Accounting Standards and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to cash flows used in investing activities, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. Capital expenditures is also referred to as E&D capital expenditures. | | (4) | Acquisitions is a non-GAAP financial measure and is not a standardized financial measure under IFRS Accounting Standards and therefore may not be comparable to similar measures disclosed by other issuers. Acquisitions is calculated as the sum of acquisitions, net of cash acquired, acquisitions of securities and net acquired working capital (deficit). Management believes that including these components provides a useful measure of the economic investment associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. More information and a reconciliation to acquisitions, net of cash acquired and acquisition of securities, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | (5) | Dispositions is a non-GAAP financial measure and is not a standardized financial measure under IFRS Accounting Standards and therefore may not be comparable to similar measures disclosed by other issuers. Dispositions is calculated as the sum of dispositions, and disposition of securities. Management believes that including these components provides a useful measure of the proceeds associated with our disposition activities and is most directly comparable to cash flows used in investing activities. More information and a reconciliation to dispositions and disposition of securities, the most directly comparable primary financial statement measures, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | (6) | Free cash flow (FCF) and excess free cash flow (EFCF) are non-GAAP financial measures most directly comparable to cash flows from operating activities. FCF is calculated as FFO less drilling and development costs and exploration and evaluation costs and EFCF is calculated as FCF less payments on lease obligations and asset retirement obligations settled. FCF is used by management to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. EFCF is used by management to determine the funding available to return to shareholders after costs attributable to normal business operations. FCF and EFCF do not have standardized meanings under IFRS Accounting Standards and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to cash flows from operating activities, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | (7) | Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" that is most directly comparable to long-term debt and is calculated as long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working deficit (capital), a non-GAAP financial measure described in the "Non-GAAP and Other Specified Financial Measures" section of this document. Management considers this a helpful representation of Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations. More information and a reconciliation to long-term debt, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | (8) | Net debt to four quarter trailing fund flows from operations is a non-GAAP ratio and is not a standardized financial measure under IFRS Accounting Standards and therefore may not be comparable to similar measures disclosed by other issuers. Net debt to four quarter FFO is calculated as net debt divided by FFO from the preceding four quarters. Management uses this measure to assess the Company's ability to repay debt. More information can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | | Subsequent to February 26, 2025, net debt to four quarter trailing fund flows from operations is calculated inclusive of Westbrick Energy's pre-acquisition four quarter trailing fund flows from operations, as if the acquisition of Westbrick Energy occurred at the beginning of the four quarter trailing period, and exclusive of the four quarter trailing fund flows from discontinued operations to reflect the Company's ability to repay debt on a pro forma basis. | | (9) | Diluted shares outstanding represents the sum of shares outstanding at the period end plus outstanding awards under the Long-term Incentive Plan, based on current estimates of future performance factors and forfeiture rates. | | (10) | Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. | | (11) | Operating netback is a non-GAAP financial measure that is not standardized under IFRS Accounting Standards and may not be comparable to similar measures disclosed by other issuers. Operating netback is most directly comparable to net (loss) earnings and is calculated as sales less royalties, operating expense, transportation expense, PRRT expense, and realized hedging (gain) loss, and when presented on a per unit basis is a non-GAAP ratio. Management assesses operating netback as a measure of the profitability and efficiency of our field operations. More information and a reconciliation to net (loss) earnings, the most directly comparable primary financial statement measure, can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. | | (12) | Fund flows from operations per boe is a non-GAAP ratio that is not standardized under IFRS Accounting Standards and may not be comparable to similar measures disclosed by other issuers. FFO per boe is calculated as FFO divided by boe production. FFO per boe is used by management to assess the profitability of Vermilion's business units and Vermilion as a whole. More information can be found in the "Non-GAAP and Other Specified Financial Measures" section of this document. Fund flows from continuing operations per boe and fund flows from discontinued operations per boe are calculated in the same manner as FFO per boe. | | (13) | Based on Company estimates as at May 4, 2026. |

Message to Shareholders

The first quarter of 2026 was marked by heightened geopolitical uncertainty, particularly in the Middle East, which intensified through March and continued to impact global energy markets subsequent to quarter-end. These events underscore the importance of energy security and the value of reliable, diversified supply.

Vermilion's large, long-duration resource base and diversified exposure to multiple commodities and pricing benchmarks enhances resilience across a wide range of market conditions. In Q1 2026, production was comprised of approximately 59% Canadian natural gas, 13% European natural gas and 28% liquids, with liquids largely priced off WTI and Brent benchmarks. While production remains weighted toward natural gas, stronger liquids and European gas prices resulted in approximately 77% of Q1 2026 revenue being derived from European gas and liquids production, highlighting the value of Vermilion's diversified portfolio, including exposure to the liquids-rich window of the Deep Basin and the oil window of the Montney.

Against this backdrop, Vermilion delivered strong operational performance, with production of 125,618 boe/d (72% natural gas)(1)exceeding the top end of guidance, driven primarily by exceptional results in the Deep Basin, new Montney oil-window wells brought on ahead of schedule and robust production from the Osterheide well in Germany. Continued focus on efficiencies resulted in a further $300,000 per well reduction in Montney drill, complete, equip and tie-in ("DCET") costs, which reduces future capital requirements by an estimated $60 million and improves full cycle economics.

In Europe, gas production achieved an average sales price of approximately $16/MMBtu, benefitting from elevated day-ahead gas prices in March. Market fundamentals remain supportive of higher prices, with current pricing for the next four quarters averaging over $20/MMBtu(2). Global LNG flows have been impacted by disruptions in the Strait of Hormuz, while European gas inventories remain at multi-year lows, with storage levels in Germany at approximately 25% and the Netherlands at 10%. It is estimated that European countries will be required to add approximately 2 Tcf of gas to storage by November 1, 2026 in order to meet mandated 80% capacity levels. The majority of this gas will have to be secured in a competitive global LNG market. Domestically, Vermilion remains on track to bring the first Wisselshorst well in Germany online by mid-year, plans to spud follow-up wells on the Bommelsen license early next year, and expects to commence drilling activities in the Netherlands in the second half of 2026. These activities support European energy security through locally produced gas with a lower operational (Scope 1) emissions profile than imported alternatives, based on independent studies.

In Canada, Deep Basin and Montney operations continued to outperform budget assumptions. The depth and quality of the inventory within Vermilion's land base provides investors with exposure to the liquids-weighted fairway of these basins, and the Company has shifted the Deep Basin drilling program to higher liquids-rate wells to capitalize on stronger liquids pricing. The recent Montney pad brought on production ahead of schedule is consistent with tier 1 expectations. The Company was able to achieve strong well performance while simultaneously decreasing DCET cost per well, through continued focus on operational excellence. Subsequent to quarter-end, Vermilion joined the Rockies LNG consortium to evaluate additional diversification for Montney gas through the Ksi Lisims LNG project. This potential diversification option would complement the 26 mmcf/d currently shipped on the Alliance pipeline to the premium-priced Chicago hub, further diversifying our Montney gas by increasing exposure to premium global markets.