CALGARY, AB - Vermilion Energy Inc . (TSX: TSX:VET) (NYSE: VET), currently trading near its 52-week low at $8.87 and identified as undervalued by InvestingPro analysis, has announced an agreement to acquire Westbrick Energy Ltd. for $1.075 billion, a significant move that will increase the company’s operational scale and enhance its full-cycle margins in the Deep Basin. The transaction is expected to close in the first quarter of 2025.
The acquisition will add 50,000 barrels of oil equivalent per day (boe/d) of stable production and approximately 1.1 million acres of land in the Deep Basin, with over 700 identified drilling locations. This acquisition is a strategic step in Vermilion’s initiative to optimize its North American assets and is expected to maintain production levels for over 15 years while generating substantial free cash flow.
Vermilion will fund the acquisition through its $1.35 billion revolving credit facility and a new $250 million term loan, along with a US$300 million bridge facility. Post-acquisition, Vermilion’s net debt is expected to be $2.0 billion, with a pro forma year-end 2025 net debt to fund flows from operations ratio of 1.5 times. The company maintains a healthy current ratio of 1.25 and operates with an attractive EV/EBITDA multiple of 2.2x, according to InvestingPro data.
The deal will also bring four operated gas plants with a total capacity of 102 million cubic feet per day, enhancing Vermilion’s footprint in the southeast portion of the Deep Basin trend in Alberta. The company anticipates additional operational and financial synergies, although these have not been included in the economic evaluation.
Vermilion’s President and CEO, Dion Hatcher, emphasized the acquisition’s alignment with the company’s long-term strategy to grow its international assets and enhance shareholder value. The company also plans to continue its disciplined approach to asset management, including non-core asset divestments, to further improve its financial position.
Upon completion, Vermilion will become a global gas producer with an anticipated 135,000 boe/d production, over 80% of which will be derived from its global gas franchise. The acquisition is expected to be immediately accretive to the company’s fund flows from operations (FFO) and excess free cash flow (EFCF) per share.
The transaction, which has already received approval from over 90% of Westbrick shareholders, is subject to customary closing conditions, including court and regulatory approvals.
This news is based on a press release statement from Vermilion Energy (NYSE:VET) Inc.
In other recent news, Vermilion Energy Inc . has announced its 2025 budget and an 8% increase in its quarterly cash dividend. The budget includes a capital expenditure plan of $600 to $625 million aimed at drilling and infrastructure across its business units, supporting a production guidance of 84,000 to 88,000 barrels of oil equivalent per day. Vermilion also reported strong results from its second deep gas exploration well in Germany and plans to invest $380 million in North American assets and approximately $230 million across Europe.
These recent developments follow a robust Q3 2024 earnings report showing a 7% year-over-year increase in production and a 19% quarter-over-quarter rise in fund flows from operations, largely driven by robust European gas prices. Vermilion’s CEO, Dion Hatcher, announced plans for significant production increases, particularly from the Mica Montney project in Canada. The company’s production guidance for 2024 is set between 84,000 to 85,000 BOEs per day, reflecting a 4% growth year-over-year.
Vermilion has a strong financial position, with a healthy current ratio of 1.25 and an EBITDA of $925 million for the last twelve months. The company forecasts a fund flow from operations of about $1.0 billion and free cash flow of $400 million for 2025. Vermilion’s executives have outlined a hedging strategy, with 50% of production hedged for 2024 and 2025, and 40% for 2026.
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