Second Quarter Earnings Strong for Ve...
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Jonathan Yates
Second Quarter Earnings Strong for Vermilion Energy, Up 10.90% for the Quarter

Vermilion Energy (NYSE: VE), an oil and gas drilling from Canada, just posted its second quarter results.  It has been a good year for Vermilion Energy, up 22% for the last 12 months of market action.  For the last quarter, Vermilion Energy is higher by 10.90%.

Lorenzon Donadeo, the President and CEO of Vermilion Energy, made the following remarks about second quarter earnings:

Earlier, this morning, we announced record operating results driven by consistent operational execution and strong production and drilling results year-to-date. Thus far in 2013 we’ve achieved growth across all four of our operating areas resulting in record consolidated three and six month production volumes of 42,813 and 20,772 Boes per day respectively. Today in view of our strong operational performance we are further increasing our production guidance for 2013 to between 40,500 and 41,000 Boe per day, up from our previously upwardly two revised guidance of 39,500 to 40,500 Boe per day and original guidance of 39,000 to 40,500 Boe per day.

Our strong quarter-over-quarter production growth of 11% was primarily attributable to production additions from our Cardium and Mannville drilling in Canada and high productivity from our two-well sidetrack program in Australia. In Canada we increased Cardium production by 13% to over 9500 Boe per day during the second quarter. Since entering the play in 2009 we’ve drilled 202 gross wells that’s 141 net in the Cardium. Our well performance continues to outpace out of our peers in the area demonstrating the quality of our land position in the West Pembina region. Our lean results reflect our continued efforts to optimize completion technology and well design. We’ve been able to demonstrate consistent production improvement and a significant reduction in per-section costs by drilling long-reach 1.5-mile horizontal wells.

And as a result we are now planning on drilling a higher percentage of 1.5-mile wells and several 2-mile pilot wells over the remainder of 2013. Optimization of frac design and fluids, implementation of multi-well pads and the drilling of longer horizontal wells have enabled us to reduce well costs from more than $5 million per section at the outset of our development in 2009 to approximately $3 million per section today.

In 2013 our pursuit of ongoing well cost reduction and enhanced environmental stewardship as well as to several alternative processes for the recycling of frac flowback water, a project that remains in the evaluation stage. We’ve also initiated a water injection pilot to test the applicability of water-flooding of the reservoir. On the operations front our per unit cost remain less than $6 per Boe from our operated production resulting in very strong operating FX of more than $65 per Boe during the second quarter.

Continued efficiencies and improvements in cost control will remain a key focus of our Cardium team given that our current drilling rate of 40 to 60 wells per year, we anticipate our Cardium drilling inventory will last at least another five to six years. In addition to the Cardium we’ve initiated the development of our significant inventory of Manville condensate-rich natural gas targets in the Drayton Valley area. During 2013, our plans are to drill a total of six gross or 3.2 net Mannville wells targeting the Ellerslie formation.

Vermilion Energy is now trading higher than its 20-day, 50-day, and 200-day moving averages.  It is very close to its 52-week high of $56.74.  Should it dip, there is a dividend yield of well over 4% to pay investors to wait for the recovery.


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