Vermilion Energy Inc. Reports Strong Q3 2025 Results, Lowers 2025 Cost Guidance, Releases 2026 Budget and Announces Planned 4% Dividend Increase

Executive Summary

• Vermilion Energy reported Q3 2025 financial results, generating $254 million in Fund Flows from Operations (FFO) and $108 million in Free Cash Flow (FCF), while reducing net debt by over $650 million since Q1 2025.
• The company lowered its 2025 E&D capital expenditure guidance by $20 million (to $640 million upper end) and reduced annual operating cost guidance by over $10 million, citing successful asset repositioning and Deep Basin synergies.
• Vermilion announced a 4% increase in its quarterly cash dividend to $0.135 CAD per share (effective Q1 2026) and released its 2026 budget, which includes an E&D capital budget of $600–$630 million and expected production of 118,000–122,000 boe/d.

Key Details

• Q3 2025 Financial Performance:
  • Fund Flows from Operations (FFO): $253.8 million ($1.65/basic share).
  • Free Cash Flow (FCF): $108.2 million.
  • Net Earnings: $2.6 million ($0.02/basic share); Net Loss from Continuing Operations: $(4.8) million.
  • Net Debt: $1.38 billion as of September 30, 2025 (down from $1.41 billion in Q2 2025).
  • Net Debt to Four-Quarter Trailing FFO Ratio: 1.4x.
• 2025 Guidance Updates:
  • E&D Capital Expenditures: Reduced upper end from $660 million to $640 million.
  • Operating Costs: Reduced by over $10 million.
  • Full-Year 2025 Production: Approximately 119,500 boe/d (65% natural gas).
  • Full-Year 2025 E&D Capital: $630–$640 million.
• 2026 Budget and Guidance:
  • E&D Capital Budget: $600–$630 million.
  • Expected Annual Average Production: 118,000–122,000 boe/d (70% natural gas).
  • Operating Cost Guidance: $12.25–$13.25/boe.
  • G&A Guidance: $1.65–$2.15/boe.
  • Transportation Guidance: $3.00–$3.50/boe.
  • Royalty Rate: 7–9% of sales.
  • Asset Retirement Obligations Settled: $55 million.
  • Payments on Lease Obligations: $10 million.
• Capital Allocation and Shareholder Returns:
  • Dividend Increase: Planned 4% increase to $0.135 CAD per share, payable March 31, 2026 (subject to Board approval).
  • Q3 2025 Shareholder Returns: $26 million total ($20 million dividends, $6 million share buybacks).
  • Share Buybacks: Repurchased and cancelled 0.6 million shares in Q3; 2.5 million shares year-to-date.
• Operational Highlights (Q3 2025):
  • Production: Averaged 119,062 boe/d (67% natural gas, 33% crude oil and liquids).
    • North American Assets: 88,763 boe/d.
    • International Assets: 30,299 boe/d.
  • Deep Basin (Canada): Drilled 13 wells (12.4 net); executed a three-rig drilling program.
  • Netherlands: Drilled two wells (1.2 net), discovering commercial gas in Rotliegend and Zechstein formations; expected to come online in Q4 2025.
  • Germany: Osterheide well producing at ~1,100 boe/d; Wisselshorst discovery on track for mid-2026 start-up.
  • Pricing: Average realized natural gas price was $4.36/mcf (pre-hedge) and $5.62/mcf (post-hedge).
  • Production Impact: Shut-in of ~3,000 boe/d to optimize margins; production expected to resume in Q4 2025.
• 2026 Capital Plan Details:
  • Canada ($415 million):
    • Deep Basin: 43 wells (38.8 net) on a three-rig program.
    • Montney: 6 wells (6.0 net) drilled; 10 wells (10.0 net) completed and brought on production.
  • International ($200 million):
    • Germany: Infrastructure build-out and two follow-up wells at Wisselshorst (early 2027).
    • Netherlands: One well (0.5 net) and economic workovers.
    • Ireland: Planned 32-day turnaround.
• Board Changes:
  • Appointed Mr. Paul Myers to the Board of Directors, effective September 2, 2025.

Notable Quotes

• "Vermilion delivered a strong third quarter, both operationally and financially, with production at the upper end of our guidance range and robust fund flows from operations."
• "Our ability to deliver strong Q3 2025 results despite pricing volatility underscores the strength of our differentiated portfolio... This outperformance was driven by our exposure to premium-priced European gas, supplemented by a robust hedging program, and highlights the benefit of being a global gas producer."
• "We believe this better positions Vermilion for long-term success... Compared to 2024 – the most recent year prior to our asset high-grading – our 2026 operational guidance reflects an over 40% increase in production per share, as well as a 30% structural improvement in capital efficiency and operating costs."