Vermilion Energy Inc. (VET.TO) | Investment Case

1. Company Snapshot

1.a. Company Description

Vermilion Energy Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and production of petroleum and natural gas in North America, Europe, and Australia.The company owns 81% working interest in 636,714 net acres of developed land and 85% working interest in 301,026 net acres of undeveloped land in Canada; 130,715 net acres of land in the Powder River basin in the United States; 96% working interest in 248,873 net acres of developed land and 86% working interest in 134,160 net acres of undeveloped land in the Aquitaine and Paris Basins in France; 53% working interest in 901,791 net acres of land in the Netherlands; 54,625 net developed acres and 920,723 net undeveloped acres in Germany; 975,375 net acres land in Croatia; 946,666 net acres land in Hungary; and 48,954 net acres land in Slovakia.It also owns 20% interests in the offshore Corrib natural gas field located to the northwest coast of Ireland; and 100% working interest in the Wandoo offshore oil field and related production facilities that covers 59,553 acres located on Western Australia's northwest shelf.

As of December 31, 2021, the company had 401 net producing conventional natural gas wells and 2,132 net producing light and medium crude oil wells in Canada; 167.6 net producing light and medium crude oil wells in the United States; 297.0 net producing light and medium crude oil wells and 3 net producing conventional natural gas wells in France; and 47 net producing natural gas wells in the Netherlands.Vermilion Energy Inc.was founded in 1994 and is headquartered in Calgary, Canada.

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1.b. Last Insights on VET

Vermilion Energy's recent performance was negatively impacted by a decline in oil prices, which led to a decrease in revenue and earnings. The company's Q1 2025 earnings report showed a revenue beat, but EPS lagged expectations. Additionally, CIBC lowered its price target on Vermilion Energy to C$14 from C$17, citing concerns over the pending supply and demand balance. Furthermore, the company's decision to sell its United States assets for $120 million and its Saskatchewan and Manitoba assets for $415 million may indicate a strategic shift, potentially affecting its future performance.

1.c. Company Highlights

Last Price	15.96
Change Percentage	1.53%
Open	16
Previous Close	15.72
Market Cap ( Millions)	2441
Volume	934015
Year High	20.31
Year Low	8.17
M A 50	16.35
M A 200	12.57

FCF Yield	12.52%
Dividend Yield	3.29%
ROE	-24.89%
Debt / Equity	58.60%
Net Debt / EBIDTA	120.90%
Price To Book	1.1
Price Earnings Ratio	-3.74
Price To FCF	7.99
Price To sales	1.28
EV / EBITDA	3.51

2. Vermilion Energy Surges in Q4 2025: Record Production and Strong Cash Flow

Vermilion Energy delivered a robust Q4 2025, generating $241 million in operating cash flow and $49 million in free cash flow after $192 million in capex. Production topped 121,308 BOEs/day, exceeding guidance, while realized gas prices hit $5.50 per Mcf—double the AECO benchmark. The company posted a negative EPS of ‑$2.86 versus analyst expectations of $0.17, reflecting a sharp decline in profitability. Despite the loss, the firm’s free‑cash‑flow yield remains healthy at 12.71%, and its P/E ratio stands at ‑3.68, underscoring the valuation impact of the current earnings miss.

Publication Date: Apr -19

                                    📋 Highlights
                                    Record Production & Free Cash Flow::
                                                Achieved 121,308 BOEs/day in Q4 2025, generating $49M free cash flow ($241M FFO minus $192M CapEx).
Reserve Growth::
                                                Total 2P reserves surged 36% to 592 million BOEs, enhancing long-term resource base.
European Gas Pricing Advantage::
                                                Realized $5.50/Mcf gas prices (double AECO benchmark) due to direct European exposure.
Cost Efficiency::
                                                2P finding/development costs at $7.71/BOE with recycle ratios of 1.8–3.5x, reflecting disciplined capital allocation.
Future Free Cash Flow Growth::
                                                Anticipates inflection in 2028, with 50% of 2026 European gas production hedged and improved production visibility post-Australian export recovery.

                                

Production Beats Guidance

Q4 production surged to 121,308 BOEs/day, comfortably ahead of the 119,000‑BOE target set by analysts. The uptick was driven by high‑output Deep Basin wells and a rebound in Australian volumes, positioning the company to maintain 122,000‑124,000 BOE/day in Q1 2026.

Gas Price Advantage

Realized gas prices of $5.50 per Mcf outpaced the AECO benchmark, largely due to direct exposure in Europe. Staff highlighted this price edge as a key contributor to the company’s superior cash flow generation and resilience to market volatility.

Free Cash Flow Strength

Operating cash flow of $241 million and free cash flow of $49 million reflect disciplined capital allocation. The free‑cash‑flow yield of 12.71% and P/E of ‑3.68 illustrate the upside potential as the firm’s earnings recover.

Reserves Expansion

Proved plus probable reserves grew 36% to 592 million BOEs, supported by a 1.50 CAD/Mcf finding and development cost in Europe. Average find‑dev‑acq costs were $14.91 per BOE for PDP and $7.71 for 2P, with recycle ratios between 1.8‑3.5×.

European Outlook

Vermilion’s European portfolio offers a long runway, with 2026 hedges covering 50% of gas exposure. Management anticipates a free‑cash‑flow inflection around 2028, and the company is monitoring 2027‑2028 periods for structural price shifts.

Capital Allocation Discipline

The firm invested $192 million in capex, focusing on high‑return wells in Deep Basin and the Netherlands. No drilling is planned in Ireland, while the company divests Croatia to concentrate on German assets.

Hedging and Price Management

Vermilion actively hedges 50% of European gas for 2026, with a keen eye on future commodity price movements. Updated price decks reflect recent volatility, ensuring that earnings remain protected during market swings.

Future Growth and M&A

While no specific deals are announced, the Westbrick acquisition opens new opportunities. The company maintains a focused portfolio strategy, targeting high‑margin assets and anticipating a 1.3% revenue growth next year.

3. NewsRoom

Vermilion Energy Q1 Earnings Show Strength in Core Assets

Apr -14

Source:

Shell's Q1 Update Flags Gas Weakness but Sees Oil Trading Upside

Apr -09

Source:

Is It Too Late To Consider Vermilion Energy (TSX:VET) After Its 1-Year 103% Rally?

Apr -09

Source:

Pembina Pipeline Targets 5-7% Steady Annual Growth Through 2030

Apr -08

Source:

Vermilion Energy Q1 Production Tops Guidance, Signs Germany Asset Deal And Croatia Divestment

Apr -07

Source:

Vermilion Energy Inc. Reports Strong Q1 2026 Production and Advances Portfolio Repositioning with Germany Strategic Acquisition, Award of New Land Concessions and Croatia SA-07 Divestment

Apr -07

Source:

Halliburton Strengthens Global Footprint With Strategic Alliance

Apr -07

Source:

Transocean Secures $1B Backlog From New Offshore Contracts

Apr -06

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.61%)

6. Segments

Crude Oil and Condensate

Expected Growth: 2.5%

Vermilion Energy Inc.'s 2.5% growth in Crude Oil and Condensate is driven by increased production from its Corrib gas field in Ireland, successful drilling campaigns in Canada, and strategic acquisitions in North America. Additionally, improved operational efficiencies, cost savings, and a favorable commodity price environment contribute to the growth.

Natural Gas

Expected Growth: 2.8%

Vermilion Energy Inc.'s 2.8% natural gas growth is driven by increased production from its Corrib gas field in Ireland, successful drilling programs in Canada, and strategic acquisitions. Additionally, improved operational efficiencies, higher commodity prices, and a favorable regulatory environment contribute to the growth.

Royalties

Expected Growth: 2.2%

Vermilion Energy Inc.'s 2.2% royalty growth is driven by increasing oil and gas production, improved pricing, and strategic acquisitions. Rising demand for energy, particularly in Europe, and Vermilion's diversified asset base also contribute to this growth. Additionally, the company's focus on operational efficiency and cost management enables it to capitalize on higher commodity prices.

Purchased Commodities

Expected Growth: 2.9%

Vermilion Energy Inc.'s 2.9% growth in purchased commodities is driven by increasing global demand for energy, improved operational efficiency, and strategic acquisitions. Additionally, favorable commodity prices, particularly in oil and natural gas, have contributed to this growth. Furthermore, Vermilion's diversified asset base and strong financial position have enabled the company to capitalize on opportunities and invest in growth initiatives.

Natural Gas Liquid

Expected Growth: 2.6%

Vermilion Energy Inc.'s 2.6% growth in Natural Gas Liquid (NGL) is driven by increased drilling activities in its core areas, improved well productivity, and strategic acquisitions. Additionally, favorable market conditions, including strong demand and higher prices, contribute to the growth. The company's focus on operational efficiency and cost reduction also supports the upward trend.

7. Detailed Products

Crude Oil

Vermilion Energy Inc. produces high-quality crude oil from its operations in North America, Europe, and Australia.

Natural Gas

Vermilion Energy Inc. extracts natural gas from its operations in North America, Europe, and Australia.

Natural Gas Liquids (NGLs)

Vermilion Energy Inc. produces NGLs, including ethane, propane, and butane, from its operations in North America.

Petroleum Products

Vermilion Energy Inc. refines crude oil into various petroleum products, including gasoline, diesel fuel, and jet fuel.

Drilling and Exploration Services

Vermilion Energy Inc. provides drilling and exploration services to support its own operations and those of other energy companies.

8. Vermilion Energy Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Vermilion Energy Inc. is medium due to the availability of alternative energy sources such as solar and wind power.

Bargaining Power Of Customers

The bargaining power of customers for Vermilion Energy Inc. is low due to the company's diversified customer base and lack of concentration.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Vermilion Energy Inc. is medium due to the presence of several suppliers in the market, but the company's large scale of operations gives it some bargaining power.

Threat Of New Entrants

The threat of new entrants for Vermilion Energy Inc. is low due to the high barriers to entry in the energy industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Vermilion Energy Inc. is high due to the competitive nature of the energy industry, with many established players competing for market share.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	23.57%
Debt Cost	13.22%
Equity Weight	76.43%
Equity Cost	17.48%
WACC	16.48%
Leverage	30.84%

11. Quality Control: Vermilion Energy Inc. passed 3 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Athabasca Oil

A-Score: 6.3/10

Value: 6.6

Growth: 8.0

Quality: 8.1

Yield: 0.0

Momentum: 9.0

Volatility: 6.0

1-Year Total Return ->

Advantage Energy

A-Score: 5.4/10

Value: 5.9

Growth: 5.8

Quality: 5.0

Yield: 0.0

Momentum: 9.0

Volatility: 6.7

1-Year Total Return ->

Kelt Exploration

A-Score: 5.2/10

Value: 6.5

Growth: 5.0

Quality: 5.3

Yield: 0.0

Momentum: 8.5

Volatility: 6.0

1-Year Total Return ->

SilverBow Resources

A-Score: 5.2/10

Value: 9.0

Growth: 7.2

Quality: 6.7

Yield: 0.0

Momentum: 6.0

Volatility: 2.3

1-Year Total Return ->

Vermilion Energy

A-Score: 5.1/10

Value: 8.5

Growth: 2.4

Quality: 4.0

Yield: 6.0

Momentum: 5.0

Volatility: 4.7

1-Year Total Return ->

Pine Cliff Energy

A-Score: 4.2/10

Value: 5.1

Growth: 3.3

Quality: 3.2

Yield: 7.0

Momentum: 2.5

Volatility: 4.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

5.40%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

16.48%

Vermilion Energy Inc. - CA9237251058

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on VET

1.c. Company Highlights

Cheaper

Average Quality

Average Growth

Earnings Miss

Revenues Miss

Lower Growth

Lower Quality

Higher Growth

Stable Momentum

Average Yield

Fairly Valued

Revenues Beats

2. Vermilion Energy Surges in Q4 2025: Record Production and Strong Cash Flow

Production Beats Guidance

Gas Price Advantage

Free Cash Flow Strength

Reserves Expansion

European Outlook

Capital Allocation Discipline

Hedging and Price Management

Future Growth and M&A

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.61%)

6. Segments

Crude Oil and Condensate

Expected Growth: 2.5%

Natural Gas

Expected Growth: 2.8%

Royalties

Expected Growth: 2.2%

Purchased Commodities

Expected Growth: 2.9%

Natural Gas Liquid

Expected Growth: 2.6%

7. Detailed Products

Crude Oil

Natural Gas

Natural Gas Liquids (NGLs)

Petroleum Products

Drilling and Exploration Services

8. Vermilion Energy Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Vermilion Energy Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

15.96$

Current Price

12.e Scoring ^Insights

12.f DCF ^BETA