Vermilion Energy Inc. (VET) Q4 2024 Earnings Report, Transcript and Summary

Good morning. My name is Constantine and I will be your conference operator today. At this time, I would like to welcome everyone to The Vermilion Energy Fourth Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now hand the call over to Mr. Dion Hatcher, President and CEO. You may now begin your conference.

Thank you, Constantine. Well, good morning, ladies and gentlemen. Thank you for joining us. I'm Dion Hatcher, President and CEO of Vermilion Energy. With me today are Lars Glemser, Vice President and CFO; Darcy Kerwin, Vice President, International and HSE; Randy McQuaig, Vice President, North America; and Kyle Preston, Vice President, Investor Relations. We'll be referencing a PowerPoint presentation to discuss our 2024 full year and Q4 results. This presentation can be found on our website under Invest with Us and Events & Presentations. Please refer to our advisory and forward-looking statements at the end of the presentation, describes forward-looking information, non-GAAP measures, and oil and gas terms used today, and outlines the risk factors and assumptions relevant to this discussion. Vermilion delivered a strong operational and financial results in 2024. Production averaged 84,543 BOEs per day, which was above the midpoint of our original guidance and represents annual production per share growth of 4%. Our international production increased 12% year-over-year, reflecting strong operational run times in Australia and the midyear startup of the gas plant on the SA-10 block in Croatia. Our North American production was down 5% year-over-year. This is reflecting the full year impact from the 5,500 BOE per day divestment in Southeast Saskatchewan that was completed in 2023. Now, that was partially offset by the growth from our Montney asset following the start-up of the new battery in Q2. We generated $1.2 billion or $7.63 per share of fund flow and $583 million or $3.69 per share of free cash flow, both representing a 9% increase over 2023 on a per share basis. We successfully executed a $623 million E&D capital program within budget. Capital program included significant investments in new growth projects in Germany, Croatia, and the BC Montney, which will all contribute strong free cash flow in future years. We returned $216 million or approximately 10% of our market cap to our shareholders in 2024, that comprised of $75 million in dividends and $141 million of share buybacks. In December, we announced an 8% increase to our quarterly dividend effective Q1 2025. This represents our fourth consecutive increase since reinstating the dividend. Net debt decreased by 10% in 2024 to $967 million at the end of the year, representing a net debt to trailing funds flow ratio of 0.8 times or the lowest ratio in over a decade. Included in our year-end release was an updated reserve estimate for 2024. Total proved plus probable reserves increased by 1% from the prior year to 435 million BOEs, primarily due to extensions and improved recovery on the Mica Montney asset. We added 26 million BOEs of PDP reserves, 36 million BOEs of 2P reserves at an average FD&A cost, including future development costs of $22.81 per PDP BOE and $15.77 per 2P BOE. Now, this results in a recycle ratio of 1.6 times on a PDP basis and 2.3 times on a 2P basis. The 2024 FD&A figures include significant upfront capital costs associated with the early-stage growth projects such as the Montney infrastructure as well as Germany and Croatia exploration from which limited reserves compared to our internal estimates have been recognized to-date. Our PDP and 2P reserve life index as of December 31st, 2024, was 5.4 and 14.1 years, respectively. Both of these are consistent with the long-term average. The after-tax net present value of our PDP reserves discounted at 10% is $2.8 billion and the after-tax net present value of our 2P reserves discounted at 10% is $5.2 billion. That is over $27 per share after deducting year-end net debt. Production for the fourth quarter averaged 83,536 BOEs per day, which includes the impact from planned third-party turnaround activity and partial shut-in of some Canadian gas in response to weak AECO prices. We generated $263 million of fund flows, that's $1.70 per share and $62 million of free cash flow, of which $36 million was returned to shareholders via the dividend and share buybacks. E&D capital increased in Q4 relative to Q3 as drilling activity picked up in Germany and Canada. Germany activity included the completion and testing of the successful second well and the commencement of drilling on a third exploration well that was originally scheduled for 2025. Net debt increased slightly due to the stronger U.S. dollar and the full repayment of the Montney battery lease. This provides immediate lease and interest savings as well as increasing our excess free cash flow that's available for shareholder returns in 2025 and beyond. As I mentioned, drilling and [Indiscernible] activity picked up in Q4. In Europe, our primary focus was on the German deep gas exploration program, where we progressed facility construction and tie-in operations on the Osterheide well and completed testing operations on the Wisselshorst well, including testing on a second zone subsequent to the quarter. We commenced drilling on the third deep gas exploration well in Germany, Weissenmoor during Q4 and completed drilling it in Q1. I will provide more detail on the successful German exploration program in the following slides. We're also very active in North America during the fourth quarter. In Canada, we drilled six Montney liquids-rich gas wells, including five wells on the new 8-4 pad in BC and one land retention well in Alberta. The team continues to make progress towards achieving our $9 million to $9.5 million decent cost target. In the Deep Basin, we drilled, completed, and brought on production five liquids-rich gas wells. In Saskatchewan, we drilled and completed six wells and brought on production seven oil wells. In the U.S., we participated in the drilling and completions of five gross or 0.6 net non-op oil wells. In addition to executing a very active program in Canada, our team spent the better part of Q4 evaluating the Westberg acquisition, we were successful on and announced on December 23rd. We are very, very excited about the results from our 2024 German deep gas exploration program. We have made significant gas discovery on our second gas well. Wisselshorst. Wisselshorst, which were 64% working interest, we tested two zones within this well at a combined restricted rate of 41 million per day with flowing wellhead pressures of 6,200 psi. We've got an estimated EOR of 68 BCF or 43 BCF net. As we announced in late December, this first test -- the first zone tested at a restricted rate of 21 million a day of gas with a flowing wellhead pressure of 6,200 psi. Subsequent to year-end, we tested the second zone in this well, which flow tested at a restricted rate of 20 million a day with a similar pressure of 6,200 psi. Based on our assessment, we believe the Wisselshorst structure is large enough to support an additional four to six follow-up locations. We expect to bring the first well on production in the first half of 2026 and are advancing options to debottleneck our takeaway pad capacity in the second half of 2027 -- sorry, first half of 2027, given the very strong deliverability of this well. With successful development of these follow-up locations as well as the additional prospects we've identified across our land base, we see the potential to double our current European 2P gas reserves. Subsequent to year-end, we also completed drilling operations on the Weissenmoor gas exploration well, which we were 100% working interest, and we discovered multiple hydrocarbon bearing zones. This would mark our third discovery in Germany. The well is currently in the process of being tested. The first well in the drilling program, Osterheide, which is 100% working interest was drilled in the first half of 2024 and tested at a restricted rate of 17 million a day of gas with a flowing wellhead pressure of 4,600 psi. The wellsite gas facility is nearing completion, first gas expected in Q2. In aggregate, the Osterheide and Wisselshorst wells tested at a combined rate of 56 million per day. This is equivalent to 50% of Vermilion's current European gas production. The success of our deep gas exploration program to-date validates the technical models and our ability to achieve F&D cost of approximately $1 to $1.50 per MMBtu with the potential to more than double our German production. It is early days in the development of this long-life, high-margin asset that is expected to add meaningful free cash flow in the years ahead. Last week, we were very pleased to announce the closing of the Westbrick acquisition. The strategic acquisition represents a significant step forward in Vermilion's North American high-grading initiative to increase operational scale and enhance full cycle margins in the Deep Basin. As a reminder, the acquisition adds 50,000 BOEs a day of production and over 770,000 net acres of contiguous land along with valuable infrastructure. We have identified over 700 net future drilling locations, providing a robust inventory to keep production flat for over 15 years, while generating significant free cash flow. As shown on the map on this slide, the land and infrastructure is very complementary to Vermilion's legacy Deep Basin assets, which we expect will provide operational synergies and add further value over time. Since our first Spirit River, Ellerslie, and Cardium wells going back as far as 2009, Vermilion has drilled nearly 300 wells spanning -- we operate significant infrastructure in the Deep Basin, which we will leverage in developing these newly acquired locations. In addition, we were already a partner with Westbrick on approximately 140 of these locations, which speaks both to the operational synergies as well as our knowledge on the asset. These newly acquired locations are competitive with Vermilion's existing Deep Basin inventory with half-cycle returns ranging from 40% to over 100% based on third-party reserve engineering estimates. I'd now like to hand it over to Lars to discuss our balance sheet and deleveraging plans, along with our revised 2025 outlook.

Thank you, Dion. Vermilion has taken a prudent approach in balancing debt reduction, high-grading our asset base, and returning capital to shareholders. We have reduced net debt by over $1 billion from 2020, while also reducing the share count over this time period. This prudent balance of capital allocation provided us the opportunity to complete the opportunistic acquisition of Westbrick with the balance sheet and minimal share issuance. Over the past three years, we have completed over $2.1 billion of acquisitions while continuing to reduce the share count and now have a plan to reduce our debt and leverage. Subsequent to the announced acquisition of Westbrick, we issued $400 million of senior unsecured notes with a maturity date of April 2033 and an interest rate of 7.25%. This extends our weighted average maturity of our debt to over five years and results in over $1 billion of liquidity. With the Westbrick acquisition now closed, Vermilion has net debt of approximately $2.1 billion today and anticipates about $200 million to $300 million of organic deleveraging in 2025 based on our current forecast, assuming no divestments. This leaves us with ample liquidity of approximately $1 billion. As part of the Westbrick acquisition, we also launched a process to divest non-core assets as another means to accelerate deleveraging, while directing 60% of excess free cash flow to the balance sheet. As mentioned, our non-core asset disposition program has been formally launched for our Southeast Saskatchewan and Wyoming assets. The Saskatchewan assets include approximately 10,000 barrels a day of production, 85% liquids with moderate declines and multilateral development upside. Our Wyoming assets include 5,000 barrels a day, 80% liquids of production with multi-zone development potential, including the Niobrara and the Parkman. The interest to-date on these packages has been very strong. These are high-quality assets with strong retention values that will be incorporated into the decision-making process on how to best maximize shareholder value. The potential sale of these assets would help accelerate Vermilion's deleveraging efforts as we remain committed to reducing our net debt to FFO ratio to a target range of 1 times or less. Going back to 2022, Vermilion has taken a concerted effort to build operational scale where we have a competitive advantage by increasing our ownership in the Irish Corrib project, adding a material position in the Mica Montney oil window and making Vermilion one of the largest operators in the prolific Deep Basin. This has been complemented with organic investment into our onshore European gas portfolio, most recently in Germany and Croatia. The results of these efforts is increased operational scale with 80% of our production and 70% of our capital investment into our global gas portfolio and a reweight of our portfolio towards gas, where we see strong demand dynamics across the coming decades. The benefit of this global exposure is stronger realized prices than any of our peers, even when factoring in various marketing and diversification strategies. We have access to LNG-driven prices without the cost and risk exposure of liquefying and transporting gas across oceans. With elevated prices in Europe and multiple successes from our recent exploration program in Germany, including follow-up development, we expect to maintain our pricing advantage over the coming years. We also expect strong tailwinds for demand and pricing in Western Canada, where we now have a much larger production and project inventory base to take advantage of this positive trend. Within our Q4 2024 release, we provided updated 2025 capital budget and production guidance to incorporate the closing of the Westbrick acquisition on February 26th, 2025. Annual production is expected to range between 125,000 to 130,000 BOEs a day with E&D capital expenditures of $730 million to $760 million. The revised capital program includes an additional 13 gross 12.3 net wells to be drilled on the Westbrick assets, bringing the total Deep Basin well count to 28 gross, 24.9 net wells for 2025. The forecasted 50% increase in 2025 production, coupled with efficient operations from an increased position in the Deep Basin is seen in our 2025 financial guidance, which includes a substantial reduction in our unit, operating, and G&A costs. We continue to monitor the tariff situation between the U.S. and Canada, which includes a 10% tariff on Canadian energy exports. Over half of Vermilion's revenue is derived from assets located outside of Canada and the vast majority of our Canadian gas production is sold within Canada. As such, we do not expect the tariffs in place today to have a material impact. Based on forward commodity prices, we forecast 2025 FCF of $400 million. The unhedged FFO per share is forecast to increase from $5.61 in 2024 to approximately $7.50 in 2025, an increase of over 30%. As you will note in our financial guidance table on the prior slide, our lease obligations are substantially lower in 2025 due to the fact we repaid the full Montney battery lease obligation in Q4 2024, which had an interest cost well in excess of our most recent debt issuance. Our return of capital framework has continued to evolve and we believe it provides the appropriate flexibility to effectively manage our business while providing shareholders with meaningful returns. As Dion mentioned, we announced our fourth consecutive dividend increase effective for Q1 2025. At $0.13 per share per quarter, our annual dividend obligations amount to approximately $80 million or 7% of our forecast FFO, providing capacity to manage the dividend through various commodity cycles. For 2025, we will continue to target shareholder returns at 40% of EFCF, inclusive of the quarterly base dividend with 60% of EFCF going towards debt reduction. The variable component of shareholder returns will continue to be allocated towards share buybacks. Since initiating the share buyback program in July 2022, Vermilion has repurchased and retired 17.8 million shares and reduced our outstanding share count to approximately 154 million shares, inclusive of the 1.1 million share issuance associated with the closing of the Westbrick acquisition. With that, I will now pass it back to Dion.

Thanks Lars. These are exciting times at Vermilion. In North America, we are focused on the integration of Westbrick to add operational scale in the Deep Basin and the continued development of our Montney asset. We are very pleased to be positioned with a long-life liquids-rich North American gas portfolio. In addition, the potential U.S. and Sas events, we'll accelerate our debt reduction, while also improving our full cycle margins. In Europe, we will bring on production the first of our German deep gas exploration wells by planning for future activity, including the development of the large Wisselshorst structure that we successfully discovered. That's our largest discovery in over a decade. These investments, along with our share buybacks are expected to add meaningful free cash flow per share in the upcoming years. That concludes our prepared remarks. And with that, we'd like to open it up for questions.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Greg Pardy from RBC Capital Markets. Please go ahead.

Hi, it's Justin Ho on for Greg. Thanks for taking my question. Just first one for me on the German gas side. So, pretty sizable discoveries there on the exploration program, so congratulations on that. But as we look ahead, we're wondering if you can remind us what types of unrestricted flow rates we can expect and any timing that you could give around that?

Thanks for that. So, just to clarify, yes, timing of the on production dates. So, I'll pass it over to Darcy Kerwin and he can walk you through that.

Yes. Thanks Justin, Darcy here. On the first discovery we made at Osterheide, we are currently progressing construction of the on-site gas plant there and the tie-in to the pipeline system. We do expect first production to be on in Q2 2025. We will be initially rate restricted there kind of in the area of 3 million to 5 million cubic feet just due to some downstream capacity constraints, some seasonality constraints. And we do expect that kind of throughout 2025 and into 2026, we'll start to see more and more capacity in that area as other production drops off. For the second well at Wisselshorst, where we tested two zones together in excess of 40 million standard cubic feet a day. Our initial tie-in point is kind of the closest tie-in point to that well. We would expect to have that tied-in in early 2026. Again, we'll be rate-limited at that initial tie-in point to that 3 million to 5 million cubic feet a day, but we have a number of debottlenecking options that we are pursuing here in parallel that will take us in the first stage up to about 17.5 million cubic feet per day and the second stage up to 35 million. We would expect that those debottlenecking activities would incur early 2027.

Thanks Darcy. Yes, I mean, we're excited. The size of the EURs that we've talked about here, the opportunity to increase these rates over time, you can start to visualize the free cash flow stream that's associated with these wells given that the capital is largely invested as we finished up the year here. So, thanks for the question. And again, we're excited about the impact this is going to have on the business. As we mentioned on the call, too, it's the structure itself. We talk about the well. We're trying to also talk about the size of the structure where we see multiple drilling locations upwards of six locations to follow-up just on this second prospect alone. With that, back to you.

That's great. Thanks for all the detail there. If I can quickly shift gears here. On the sales process for the Saskatchewan, Wyoming assets, could you just update us on where you're at in that process? Thanks.

You bet. Lars touched on it on the script there. I can add a little more color, but the formal process for Sas in the U.S. is well-advanced. We're in the formal process where teasers went out weeks ago and management presentations are ongoing. And as you heard on the call, these are good quality assets. They are assets that are high liquids, high netbacks, reasonable declines, drilling opportunities. So, we've got a strong retention value for these assets and we're excited to see how our potential bidders are going to try to step up to meet those. So, too early to pin a date on it, but we are well advanced in those processes as of today.

Thank you very much. I'll turn it back.

Great. Thank you.

Your next question is from the line of Amir Arif from ATB Capital. Please go ahead.

Thanks. Good morning guys. Just a follow-up on the Germany exploration success over there. Can you give us a sense of your next exploration wells that you're planning to drill?

I can get it kicked off here, and then I'll let Darcy feel free to add any color. And so first of all, thanks for the question. We've messaged not only two wells per year. If you think about last year, we actually drilled three wells as we brought the third well forward, and we finished drilling that in Q1. We've got another follow-up gas well planned for this year. And then our work right now is twofold. The exciting thing is that with this Wisselshorst structure being so large, we see basically development locations there that we're advancing. And then in parallel, we've also got the other six-plus prospects that the teams identified to mature. So, quick answer would be two wells a year. And with that, I think we'll be, as a management team, reviewing annually, do we allocate more capital to Germany given the success that we've had.

Got it. And then just a question on that second successful well. Can you just remind us what was the total capital on that well and just what development wells will cost?

Yes. So, Amir, Darcy here. The total capital on that Wisselshorst well, the second well we drilled, if I include kind of all the drilling completion costs as well as the tie-in and the wellsite gas plant that will be required, we're kind of at CAD40 million gross for that. So, we're 64% working interest in that particular well.

And that’s excludes--

Sorry, say that again.

Sorry, I was just going to say that assuming the development wells will be significantly less than that in terms of the follow-up wells you need?

Yes, we might be able to optimize gathering kind of concepts there as well as the location gas plant and drive those costs downwards, you're right.

Okay.

Yes. So, these are expensive wells, but you think about it on an F&D basis, given the cost structure and the size of the gas that we're discovering, as referenced on the note that $1 to $1.50, we would have beat that significantly on the Wisselshorst well, but over the program, it's confirming our ability to deliver on that.

Yes, sounds good. And then just a question on the Westbrick acquisition. Pleasantly surprised in terms of your operating cost guidance on the corporate basis. Just relative to your own Deep Basin cost structure, how would you compare the Westbrick assets? And are you planning on doing anything different in terms of going forward on those assets?

I'll get it kicked off, and I can pass it over to Randy, if you want to add more color, Randy. But we did a lot of work on that, of course, as you would imagine. The good news is we've been in that area for almost three decades. And so we operate a lot of the same infrastructure and well types. As noted, the Westbrick assets would have been in that $650 a BOE range. Our assets are in that $750 a BOE range on unit OpEx. And saying that, our assets are a little more oilier. We have the Cardium development and some other more oily development in our Deep Basin. So, net-net, when you look at the assets in that $650 million to $750 million range. What we're excited about, as you can see on the map and the infrastructure map as well as we start to combine these businesses and look for opportunities to drill longer wells to look for synergies across infrastructure. We think there's some upside there as we start to work through that. But high level, those are kind of the unit costs that we've seen to-date. Randy, anything to add to that?

No. As I said, I think with the large portion of the infrastructure now being interconnected, we'll work towards optimized production, our marketing and ultimately, reduce our area operating costs.

Thanks Randy.

That’s great. Thanks.

Thanks Amir.

Your last question comes from the line of Travis Wood from National Bank Financial. Please go ahead.

Yes, thanks guys. I have a couple of questions. On the Germany, just to round that out, has the risk profile as you think about budgeting future exploration wells, have you changed that at all given the recent success in terms of percentage of success, however, you guys want to think about that?

Yes. Thanks Travis. I'm going to pass it back to Darcy again.

Yes. Thanks Travis. Yes, certainly, the success on these first wells has increased our confidence about this entire exploration program. However, we do risk each prospect independently, and we'll continue to do that. We'll calculate independent chances of success for each of those prospects. I think what's really changed is we've now gone from a pure exploration program to a program that has a combination of exploration and now development wells. So, that in itself will reduce the risk of the entire program.

Okay. That's good color. And then for the Westbrick assets at closing, where would volumes have been kind of at -- on the closing date or at least close to in terms of current BOE production?

Thanks Travis. I'll pass it back to Randy for that one.

Yes. Thanks Travis. So, I think volumes were coming in right around that 50,000 barrels a day, which is where we expected it to be. And then when we bring on some of the development that we had spoke about in the script earlier, we expect our annualized volumes to remain at that 50,000 barrels a day. So, in line with where we had our evaluation and expectations.

Okay, perfect. And then the couple -- I mean, it's only a couple of weeks in terms of the delay to closing. Was that just kind of crossing Ts and dotting Is? Or was there anything kind of last minute on the negotiating table that kind of delayed it a couple of weeks?

Yes, I just -- yes, our initial estimate was mid-February. And I would say just with signing the deal immediately prior to the holiday period, just the execution and receipt of required approvals adjusted the date by two weeks. So, nothing too concerning.

Okay, perfect. That makes great sense. And then lastly, probably for Lars here, you kind of walked through the return of capital mandate and kind of the 40-60 split, and we can make an assumptions on some proceeds for the asset sales. But do you have a debt number in mind on when you could see that 40% on the return of capital start to shift higher and the debt allocation compress?

Yes. No, thanks, Travis. And before sort of diving into that, I think the other thing that we tried to point out in the script, too, is very minimal share issuance with the acquisition of Westbrick. And so that's where we got comfortable taking the 50-50 allocation to 40% in terms of return to shareholders, just in terms of -- we think we've made really good progress reducing the share count here over the last three years. I think at this point, we'd like to see how the dispositions shake out. As we mentioned in the script, we are going to have retention values on these assets as well. And so it's not a fire sale. Let's see how the process unfolds. Let's continue to direct 60% of that EFCF to the balance sheet. And then you're most likely reassessing in the second half of this year in terms of how those things shake out. At this point, the dividend is very well-covered at that 40% level. We're actively buying back shares still within that 40%. So, we think that we can make adequate returns to shareholders here as we work through some of the deleveraging events that we have here.

Okay. And sorry, I might have missed it. Do you think for that 40% to head higher, you're kind of budgeting around $1.8 billion at the end of the year just through organic free cash if that number is -- like where could you -- what's the debt target that you have kind of longer term with the organic cash flow and some of your fun with numbers on proceeds on some of the asset sales where that could kind of do a 180 in terms of 60-40 on return of capital and debt reduction?

Yes, I think, Travis, yes, if you look at where we were pre the Westbrick acquisition, we were sort of around 1 times, a little bit sub-1 times leverage. We were comfortable with the 50-50 while at that leverage level. I don't think that's a bad data point or benchmark to think about in terms of where we would look to increase from the 40%.

Okay. Yes, that’s perfect. Thanks Lars. That’s all from me.

Thanks Travis.

There are no further questions over the phone lines at this time. We will now move over to Mr. Kyle Preston with additional questions.

Yes. Thank you, operator. So, we had a number of questions come through our Investor Relations' inbox here. I'll sort of try to categorize them into a few. First one here is, can you please provide some insight into the longer term development potential and timeline of your Germany deep gas program?

I can get this one kicked off and then ask Darcy to add more color. But -- we've talked before about the number of prospects, let's call it the number of structures that we see, and that's nine that the team has identified so far. And the exciting thing about these structures we drill, they're often multi-well structures, and we see that with Wisselshorst, where we drilled a well and albeit a well that can do net to us over 40 BCF recoverable. So, we see another six locations on that. And so as we make our way down the exploration program, we're to Darcy's point, adding development locations as we go. So, long-winded way of saying, with success, there's upwards of 30 locations, and that would provide a very, very, very long runway for drilling. So, where we are today, we're excited after two wells that we've been able to add meaningful recovery. I mean we've added 36 Bs for the first two wells on average. And so that's well within our $1 an Mcf type target. And so what all that means is we can, I think, comfortably more than double Germany's production. And I made a call on the -- comment on the script there that we think we can double our 2P reserves that we've got booked in Europe. As you start to add up the numbers associated with these wells, I think it becomes very meaningful as we drill two to three wells per year. So, if we can double our production, we can double our reserves in Europe, we're going to be pretty happy with that. And it's early days, but the first couple of wells are pointing to a pretty promising outlook. But Darcy, anything I missed there on the overview?

Yes, I don't think so. You talked about the number of prospects we have initially and then what that translates into in a success case of over 30 locations that we could drill at a pace that we might adapt as we look forward. And maybe remind everyone we got into these prospects by farming into land in Germany and there is other prospective land in Germany, we'll continue to look at that and look for additional opportunities to add to our deep gas portfolio there.

Yes, it's a good point. We've got 700,000 net acres of undeveloped land and we're currently focused on that portion of that. Thanks.

All right. Thanks, Dion, Darcy. Second question here, what is the potential impact from the U.S. tariffs on Canadian energy? And do your -- does your current hedge book protect you from that?

Yes. No, thanks for the question and certainly topical. I'll maybe just zoom out a little bit before addressing the tariff specifically. But I think our industry is defined by cycles, some of them driven by commodity prices, some of them driven by political events. So, I think over the 31 years that we've been operating, we placed a lot of value on diversification and operational scale. From a diversification perspective, over half of our revenues for 2025 are coming from outside North America or outside Canada and so that becomes an insulating factor. And then operational scale, I think you're starting to see a shift there. We've got a very material position onshore Europe. That provides the majority of that international revenue stream that I referenced. And then you're starting to see an increase in the scale here in Western Canada. You see that in our outlook for 2025 in terms of the reduction in our unit costs. As an example, our lifting and transportation costs in our liquids-rich gas business is about $1.75 an Mcf and generates a lot of liquids in addition to the gas. And so we're focused on those items first and foremost, in terms of derisking the business. Kind of what that means when you sort of look at it through the lens of tariffs is we're just not talking about a material impact to the cash flows of Vermilion. And so we're pretty confident around that in terms of the way that the tariffs are framed right now. In terms of hedging, I think once you derisk the business from an operational perspective through diversification, operational scale, financial hedging does play a role as well. We're just under 40% hedged for 2025. We think at fairly strong prices here as we go through a deleveraging process here in the next couple of quarters, we're in around 20% hedged for 2026. And so expect us to be in that 25% to 50% range, and that does help absorb some of the noise out there that's been driven by tariffs and other events as well.

Thank you, Lars. Next question we have here is, your presentation says you are now a global gas company. Why does your stock seem to trade or be so impacted by oil price movements? And why does -- why do you -- why do you not have a gas company multiple?

So, I can take that one. It's -- first of all, it's hard to explain the day-to-day movements in the stock, so I'll move on from that. But yes, if you look at -- I think it's really a timing issue. We just closed the Westbrick acquisition here a couple of weeks ago. We're talking on the call today about the success in Germany, about our first well coming on here very quickly, that our ability to debottleneck those volumes. Mica, again, we're over half invested on our infrastructure, and we're getting to a point where we're going to build up to that target rate and that asset is going to be generating a ton of free cash flow. So, I think it's timing. This shift to a gas-weighted company is really hot off the press. But if you look at the runway ahead of us with the Westbrick, the depth and quality of inventory there for 15-plus years to keep that, the Mica asset that, again, we're comfortable in increasingly optimizing that asset to get to 28,000. And then Germany, again, we've talked a lot about it, but we see a long runway. And then finally, the nuance about our business is we have direct exposure, and Lars talked about this on the call, but we have direct exposure to these premium prices without the need to have the risk associated with these long-term contracts that span decades and large volumes. So, we've got short-cycle exposure to a commodity in Europe that's extremely valuable and we're able to benefit from that today with gas prices in Europe about 10 times higher. So, we think the combination of the top realized gas price with our structural low declines with flexibility of capital allocation. And the new part as we've high-graded the portfolio is the long runway that we've got ahead of us with Westbrick, Deep Basin, with the Montney and with Germany. We think it's a good setup and we think with time, hopefully, that will be recognized in the valuation of the company.

All right. Thank you, Dion. So, we have no more questions here. So, with that, I will pass it back to Dion for your closing remarks.

Thanks Kyle. I would just like to thank everyone again for participating in our Q4 results conference call. Enjoy the rest of your day.

This concludes today's conference call. Thank you very much for your participation. You may now disconnect.