Good day, and welcome to the Vermilion Energy Quarter 3 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to President, Curtis Hicks. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us. I'm Curtis Hicks, President of Vermilion Energy. With me today are Dion Hatcher, Vice President, North America and Incoming President as of January 1, 2022; Lars Glemser, Vice President and CFO; Darcy Kerwin, Vice President, International and HSE; and Kyle Preston, Vice President of Investor Relations. We will be referring to a PowerPoint presentation to discuss the Q3 2021 results we announced yesterday afternoon. The presentation can be found on our website under Invest with Us and Events & Presentations. Slide 2 in the presentation refers to our advisory on forward-looking statements. These advisories describe the forward-looking information, non-GAAP measures and oil and gas terms referred to today and outline the risk factors and assumptions relevant to this discussion. Let me start off with a summary of our Q3 results on Slide 3. We delivered strong third-quarter results, production from the quarter averaged 84,633 BOEs a day, which was down slightly from the previous quarter, primarily due to planned maintenance activity. The third quarter is generally a busy period for maintenance activities in Canada but this year, we also had a 3-week turnaround scheduled for the Corrib facility in Ireland. This was a major turnaround at Corrib, which occurs only every 5 years or so, and we're pleased to report that everything went according to plan. The impact from these turnarounds was partially offset by higher production in the Netherlands, Germany, Australia and the United States, including the contribution from a small bolt-on acquisition in the Powder River Basin in Wyoming. We did have a 3-week turnaround plan for Australia in the third quarter as well but this was deferred until Q4 to optimize work schedules. On the financial side, we delivered funds from operation of $263…

[Operator Instructions]. We can now take the first question from Harp Singh from Harp Investments.

What is the debt covenants currently on the hedges with the $1.8 billion still outstanding?

It's debt convenants, I think.

Yes. So your question there was related to covenants?

Yes. I'm just -- because the reason for it is you got a forward hedge of 6 months currently running into 2022, you guys locked in. So I'm just curious what the covenant is there. And let's say, the forward strip going into 2022, I noticed the hedges are pretty much locked into that 6 months. And what is it at 30%? What's the rate there?

Yes. So from a hedging perspective, we are about 20% hedged for 2022. Now we typically target 25% to 50% on a rolling 4-quarter basis and then we do have optionality within the various commodities. So for 2022, we're about 50% hedged on European gas, that will be about 60% for the first quarter and then it drops off from there, and then basically 20% hedged on the oil side. So the impact of those hedges are fully embedded in our free cash flow estimates of $500 million for 2021 and then in excess of $600 million for 2022.

Okay. And paying down the debt, getting it down to the end of the year down to $1.65 billion, what are you guys forecasting if everything basically stays, commodity places start to behave and are in a multi-year bold market. What are we looking at? Like going forward are we looking at trying to get it down by the end of 2022 fourth quarter into the $1 billion mark?

Yes. No, great question, and ignore the multi-year impact on debt reduction. I think if you just look out to 2022, if we go into that year with $1.65 billion of debt, we've got free cash flow generation in excess of $600 million at current strip pricing. That takes us down to $1 billion level. And I think something that we've been quite clear on with investors is we want to make sure that decisions are structurally sound. And when we look at debt to FFO and that target of 1.5x that we've been quoting, when you start to get down to that $1 billion of absolute debt, and if you look at our mid-cycle price deck, which is USD55 WTI, 250 North American gas, $8 Candian-European gas, we see ourselves getting to that structural comfort level in terms of debt to FFO of 1.5x on that absolute debt number. And that has really given us the confidence here to accelerate our messaging around return of capital to shareholders. And messaging that first quarter of 2022, we will be looking to reinstate a fixed dividend. Now we are really trying to make sure that that is structurally sound as well and the 5% to 10% of FFO that we have quoted in our Q3 release here, that's attached to the same mid-cycle price deck that I quoted there in terms of $1 billion of debt. You do the math in terms of what 1.5x implies on FFO, let's call that in that $700 million range. That's not a bad way to think about sort of the quantum of the fixed dividend. And we think that that works quite nicely, with still a debt reduction strategy in 2022. And then it really unlocks further optionality around return of capital to shareholders as we get -- make progress towards that debt target. So that was the messaging we really wanted to get across here in the Q3 report is, this is a first step in our return of capital strategy with shareholders. Because of the quantum of free cash flow in the system, we think that we're able to execute on multiple levels of initiatives in terms of return of capital as well as debt reduction.

Okay. Can I also get a little bit of color on just the impairment and the write-downs there? Just a little bit of color on that, please.

Yes. So 2020 was characterized by write-downs from an impairment perspective. I would say 2021 has been characterized by write-ups of those impairments, just as we've had a strong backdrop from a pricing perspective. So that has been the driver behind the impairment reversals that we've seen through the first 3 quarters here of 2021.

Okay. And how about any currency hedges? Is there any currency hedges impacted because of the international exposure?

No.

[Operator Instructions]. We can now take the next question from Menno Hulshof from TD Securities.

I just have one. What are you seeing in the Powder River Basin that gave you the confidence to do that acquisition? And what are you anticipating for activity levels in the Powder River in 2022? And then I guess longer term, how meaningful do you think that play could become?

Yes. This is Dion Hatcher. We've been there for a few years. We've drilled in excess of 20 wells. So what we like, it's still early days and we think we can optimize the play. So that means things like completion strategies, pumping strategies and as well lane, we'll be able to go for more of a 1-mile to 2-mile length. So that's near-term optimization potential, which, of course, will improve our free cash flows. Longer-term, maybe I can comment on. Like we need -- we're going to drill maybe 5, 6 wells a year to keep that asset flat. So if you look at the well counts and particularly the lengths of those wells, again, we see some upside in being able to grow that asset over time.

This concludes today's Q&A. I'd now like to turn the call back over to your host, Curtis Hicks for any additional or closing remarks.

Thank you, operator, and thanks to all of you again for participating in our Q3 2021 results conference call. If there are any further questions, I would suggest that you reach out to our Investor Relations department and the information to reach out is available on our website. So with that, thank you all again, and have a great day.

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