Vermilion Energy Inc. press release

Vermilion Energy Inc. Reports Q2 2026 Results, Increases Annual Production Guidance and Enhances Return of Capital Framework

2026-07-29

TSX - Toronto Stock Exchange · Canada · Corporate Finance

Canada NewsWire

CALGARY, AB, July 29, 2026/CNW/ -- 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 and six months ended June 30, 2026.

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The unaudited interim financial statements and management discussion and analysis for the three and six months ended June 30, 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

Q2 2026 Results

Production averaged 125,789 boe/d(9) (71% natural gas), exceeding the top end of guidance and reflecting continued outperformance across Vermilion's asset base. Year-to-date, production per share has grown by 6% compared to 2025. Production in the first half of 2026 exceeded expectations, resulting in an increase to full-year production guidance to 121,000 to 123,000 boe/d (70% natural gas)(12), while E&D capital expenditures remain unchanged at $600 to $630 million. Generated $231 million ($1.51/basic share)(2)of fund flows from operations ("FFO")(1)and $122 million of free cash flow ("FCF")(5), fully funding $110 million of exploration and development ("E&D") capital expenditures(3). Reduced net debt(6)by approximately $70 million to $1.22 billion at June 30, 2026, bringing net debt reduction to $840 million over the past 15 months. Continued debt reduction has resulted in a structural improvement in unit interest expense, down approximately 35% from the prior year. Driven by accelerated debt reduction and operational performance, updated return of capital framework to target 40% to 60% of excess free cash flow to shareholders, up from the previous 40% target. Returned $26 million to shareholders through dividends and share buybacks, including $21 million in dividends and $5 million of share repurchases. Realized an average natural gas sales price of $5.08/mcf, more than triple the AECO benchmark, reflecting structural exposure to premium international gas markets and portfolio diversification. Month ahead TTF averaged $22.68/MMBtu in the quarter and current prices for key European gas markets are over $25/MMBtu. Reported net income of $134 million ($0.88/basic share), driven by strong European gas and crude oil pricing and gains on derivative instruments. Deep Basin drilling results continue to outperform budget and acquisition assumptions, driving corporate production outperformance year-to-date. In the Montney, the 8-35 BC six-well pad delivered Tier 1 performance of over 950 boe/d IP90 per well (49% oil and liquids)(13)at a new low per well cost of $8.2 million. In Germany, achieved first production from the Wisselshorst discovery, Vermilion's largest discovery in Europe, in July 2026. Vermilion is on track to increase production through planned infrastructure expansion over the next two years to produce the 67 Bcf (43 Bcf net) of gas reserves assigned to the discovery well. In addition, the Company continues to advance plans to spud the next two wells on the Bommelsen license in early 2027. Closed the acquisition of producing assets in Germany subsequent to the quarter, adding approximately 1,000 boe/d (85% natural gas) of low-decline production and increasing control of infrastructure surrounding the Osterheide area.

Outlook

Q3 2026 production is expected to average 116,000 to 118,000 boe/d, reflecting planned maintenance in Ireland, Germany and Canada. Declared a quarterly cash dividend of $0.135 per common share, payable on September 29, 2026, to shareholders of record on September 15, 2026.

| ($M except as indicated) | Q2 2026 | Q1 2026 | Q2 2025 | YTD 2026 | YTD 2025 | | Financial | | | | | | | Fund flows from operations (1) | 231,222 | 232,277 | 259,678 | 463,499 | 515,707 | | Fund flows from operations ($/basic share) (2) | 1.51 | 1.52 | 1.68 | 3.04 | 3.35 | | Fund flows from operations ($/diluted share) (2) | 1.48 | 1.49 | 1.67 | 2.99 | 3.35 | | Net earnings (loss) | | | | | | | Net earnings (loss) from continuing operations | 134,599 | (141,206) | 74,797 | (6,607) | 78,646 | | Net loss from discontinued operations | (361) | (4,332) | (308,255) | (4,693) | (297,151) | | Net earnings (loss) | 134,238 | (145,538) | (233,458) | (11,300) | (218,505) | | Net earnings (loss) from continuing operations ($/basic share) | 0.88 | (0.92) | 0.49 | (0.04) | 0.51 | | Net loss from discontinued operations ($/basic share) | — | (0.03) | (2.00) | (0.03) | (1.93) | | Net earnings (loss) ($/basic share) | 0.88 | (0.95) | (1.51) | (0.07) | (1.42) | | Cash flows from operating activities | 170,751 | 227,398 | 140,467 | 398,149 | 420,851 | | Cash flows used in investing activities | 113,523 | 188,773 | 198,989 | 302,296 | 1,454,735 | | Capital expenditures(3) | 109,576 | 134,580 | 115,489 | 244,156 | 297,608 | | Acquisitions (4) | 338 | 6,035 | 1,591 | 6,373 | 1,122,589 | | Repurchase of shares | 5,465 | 4,692 | 6,323 | 10,157 | 22,899 | | Cash dividends ($/share) | 0.135 | 0.135 | 0.130 | 0.27 | 0.26 | | Dividends declared | 20,659 | 20,601 | 20,022 | 41,260 | 40,065 | | Free cash flow (5) | 121,646 | 97,697 | 144,189 | 219,343 | 218,099 | | Long-term debt | 1,308,333 | 1,254,333 | 1,951,250 | 1,308,333 | 1,951,250 | | Net debt (6) | 1,224,065 | 1,292,567 | 1,413,321 | 1,224,065 | 1,413,321 | | Net debt to four quarter trailing fund flows from operations (7) | 1.3 | 1.4 | 1.4 | 1.3 | 1.4 | | Shares outstanding - basic ('000s) | 152,948 | 152,600 | 154,019 | 152,948 | 154,019 | | Weighted average shares outstanding - diluted ('000s) (8) | 155,940 | 155,510 | 155,778 | 155,431 | 154,258 | | Operational | | | | | | | Production (9) | | | | | | | Crude oil and condensate (bbls/d) | 24,753 | 23,692 | 37,449 | 24,225 | 34,933 | | NGLs (bbls/d) | 11,714 | 12,044 | 12,656 | 11,878 | 10,921 | | Natural gas (mmcf/d) | 535.93 | 539.29 | 515.38 | 537.60 | 442.78 | | Total (boe/d) | 125,789 | 125,618 | 136,002 | 125,704 | 119,649 | | Average realized prices | | | | | | | Crude oil and condensate ($/bbl) | 133.97 | 100.61 | 85.07 | 116.60 | 91.75 | | NGLs ($/bbl) | 27.70 | 23.00 | 24.68 | 25.33 | 27.55 | | Natural gas ($/mcf) | 5.08 | 5.41 | 4.88 | 5.25 | 6.09 | | Average realized price ($/boe) | 49.23 | 44.96 | 43.71 | 47.08 | 51.45 | | Production mix (% of production) | | | | | | | % priced with reference to AECO | 58 % | 58 % | 50 % | 58 % | 46 % | | % priced with reference to TTF and NBP | 13 % | 13 % | 13 % | 13 % | 15 % | | % priced with reference to WTI | 21 % | 22 % | 28 % | 21 % | 29 % | | % priced with reference to Dated Brent | 8 % | 7 % | 9 % | 8 % | 10 % | | Netbacks | | | | | | | Operating netback ($/boe) (10) | 26.23 | 25.49 | 28.60 | 25.86 | 32.85 | | Fund flows from operations ($/boe) (11) | 20.55 | 20.33 | 21.25 | 20.45 | 24.03 | | Weighted average shares outstanding - diluted ('000s) (8) | 155,940 | 155,510,000 | 155,778 | 155,431 | 154,258 |

| (1) | Fund flows from operations (FFO) is a total of segments and non-GAAP financial measure most directly comparable to net earnings (loss) 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) | 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. | | | | | (6) | 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. | | | | | (7) | 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. | | | | | (8) | 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. | | | | | (9) | Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. | | | | | (10) | 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 earnings (loss) 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 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. | | | | | (11) | 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. | | | | | (12) | Based on Company estimates as at July 20, 2026. | | | | | (13) | Initial 90-day production ("IP90") for the Company's most recent six (6.0 net) wells drilled on our British Columbia lands averaged 965 boe/d per well. IP90 consisted of 43% light and medium crude oil, 6% NGLs, and 51% shale gas, using a conversion of six mcf of gas to one barrel of oil, based on field level estimates for the first 90 full days of production following the tie-in of the well. Production rates presented are for a limited timeframe only and may not be indicative of future performance or the ultimate recovery for a given well or pad. Readers are cautioned not to place reliance on such rates. |

Message to Shareholders

Operational performance in the first half of 2026 continues to exceed the expectations outlined in Vermilion's five-year plan presented at Investor Day in December 2025. Strong second quarter results, including production above the top end of guidance, have supported an increase to annual production guidance to 121,000 to 123,000 boe/d, approximately 2% above prior guidance with no changes to the Company's capital budget. The current production guidance represents a 50% increase in production per share compared to 2024, the last full year before Vermilion's strategic portfolio repositioning. Consistent with prior guidance, Vermilion continues to expect approximately 70% of full-year production to be weighted towards natural gas. The Company also achieved another key milestone in its European gas strategy with first production from Wisselshorst, Vermilion's largest discovery in Europe to date. Accelerating debt reduction and improving profitability provides Vermilion with increased flexibility to provide returns to shareholders, should business conditions present opportunity.

Performance was driven by record production at Mica Montney, continued strong Deep Basin results and the staged restart of production in Australia following the necessary repair work caused by back-to-back cyclones. At Mica, the most recent six-well pad (the 8-35 BC pad) delivered Tier 1 performance, supported by strong liquids production, which reinforces the quality and repeatability of the Company's Montney inventory and its capacity to generate attractive returns across commodity price cycles. In Germany, Vermilion achieved a significant milestone in its deep gas exploration program, as the first Wisselshorst well was brought on production in July 2026, at initially restricted rates. This marks the first production from Vermilion's largest discovery in Europe to date while the first well, Osterheide, continues to produce at rates consistent with prior quarters. Production is expected to expand over the next two years through planned infrastructure investments and follow-up drilling beginning in early 2027. Subsequent to quarter-end, Vermilion closed the previously announced acquisition in Germany, adding approximately 1,000 boe/d of production (85% natural gas) and ownership of key gathering infrastructure around the Osterheide well.

Vermilion's capital allocation priorities remain focused on disciplined investment and balance sheet strength to deliver shareholder returns. Following $840 million of debt reduction over the past five quarters, Vermilion has accelerated progress toward its $1 billion net debt target, the next milestone in the Company's capital allocation framework. Reflecting the strength of its balance sheet, improved visibility to future free cash flow and confidence in the business, Vermilion is increasing its return of capital framework to target 40% to 60% of excess free cash flow ("EFCF")(3)to shareholders, up from the previous 40% target. Vermilion's return of capital program is supported by a sustainable base dividend, which has grown for five consecutive years, combined with an ongoing share buyback program.