Good morning. My name is Samara, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vermilion Energy Q2 Conference Call. [Operator Instructions] Thank you. Mr. Dion Hatcher, you may begin your conference.

Thank you, Samara. Well, good morning, ladies and gentlemen. Thank you for joining us. I'm Dion Hatcher, President of Vermilion Energy. With me today are Lars Glemser, Vice President and CFO; Darcy Kerwin, Vice President International and HSE; Bryce Kremnica, Vice President North America; Jenson Tan, Vice President of Business Development; and Kyle Preston. Vice President of Investor Relations. We'll be referencing a PowerPoint presentation to discuss our Q2 2022 results and our return of capital framework we announced this morning. Presentation can be found on our website under Invest with Us and Events and Presentations. Please refer to our advisory and forwar-looking statements at the end of the presentation, it describes forward looking information, non-GAAP measures, and oil and gas terms used today. And it outlines the risk factors and assumptions relevant to this discussion. As shown on Slide 2, we delivered another quarter with record fund flows of $453 million and record free cash flow of $340 million, which is over $2 a share, that's up 16% and 12% respectively from the previous quarter. The increase was mainly driven by strong commodity prices as global oil prices and North American gas prices were strengthened during the quarter. European gas prices remained strong in Q2 and relatively consistent with the prior quarter with TTT -- TTF in excess of CAD38 per mmbtu. Over the past several months, European gas forward prices have nearly doubled, which will build well for Vermilion. I will review the fundamental drivers for this later in my presentation. Production during Q2 averaged 84,868 boe/d, which is down slightly from the previous quarter, mainly due to planned and unplanned downtime. Key notable event during the quarter was the closing of the Leucrotta acquisition on May 31. We have successfully integrated the Leucrotta assets and assembled the…

[Operator Instructions] And we'll take our first question from Menno Hulshof with TD Securities, please go ahead.

Yeah. Thanks. Thanks, and good morning, everyone. I'll start with a question on Corrib. If we assume that it does close, what is your best guess in terms of the purchase price net of accrued free cash flow? We've run some numbers on this end and in our estimate is very low, but any thoughts here would be would be helpful.

Thanks, Menno I'm going to pass it over to Lars to address that one.

Yeah, good morning, Menno. I think you're thinking about it the right way in terms of cash to close at December 31st of this year from a modeling perspective. And then obviously full access to the cash flows in 2023. I think the number that is good to use for yearend this year would be a purchase price of CAD100 million to CAD150 million Canadian, if it were to close at the end of 2022. And that would be inclusive of the contingent payment that is in the money for 2023, which was $25 million. So I think that's the best way to model it and a good way in terms of how you're thinking about it.

Terrific. Yeah. Thanks Lars. And then on acquisitions, in the past you've talked about smaller Euro gas packages potentially becoming available, and I know there's -- there are limits to what you can say here, but like at a high level, what are the boxes that need to be checked to pull the trigger on -- in other Euro package? And do you see these opportunities being able to compete with buybacks at the current share price?

Well, thanks Menno. I’ll pass it back to Lars to address what we're thinking about that relative to our return of capital framework.

Yeah. Thanks Dion. And maybe I'll just rewind a little bit Menno with the return of capital grid. What we really wanted to do was shift focus back to the $11 per share of free cash flow that we're generating. Dion mentioned $1.8 billion of free cash flow in 2022, that's on a pro forma basis. That's probably not a bad proxy to think about free cash flow for 2023. And then what the return of capital grid is going to do is create discipline in terms of where we are allocating capital. There's flexibility in there in terms of how we return capital? At this point in time, we'll be doing it through share buybacks. And as importantly, in terms of acquisitions, when it comes to North America, nothing big. We think that we have done the heavy lifting in terms of hydrating the inventories here in North America. It'll be more tuck-in bolt-ons in terms of our existing position within North America. And then Europe, I think we've had good success, a good track record there of making acquisitions. Now that those acquisitions will continue to compete with returning capital to shareholders, we will be looking for I'd call it, deep value type opportunities in Europe as we move forward here. Some acquisition -- sorry, some announcements have been made in the past in terms of potential opportunities in jurisdictions like Netherlands, but again, its going have to be competitive in terms of where we return capital.

I'll take our next question from Greg Pardy with RBC Capital Markets.

Thanks for the rundown, Dion and Lorenzo, just all the very best in your -- I guess it's your second shot at your retirement. Couple -- maybe just one maybe modeling question is, what kind of book tax rates should we sort of think about on a consolidated basis? And Lars, I want to ask that -- just that tax question. Is it still, I don't know, 11%, 12% or so pre-tax?

Yeah, so I think for 2022, and I'll sort of correlate these tax rates to the pro forma numbers. So we're referencing $2.4 billion of cash flow for 2022. In the context of that, 10% to 11% is still a good way to think about it, Greg. For 2023, I would say that rate has gone up in the context of current strip pricing. I would sort of peg it at 13% to 15% for full-year 2023.

What about book, sort of like 30% odd or so just as a book tax rate?

Sorry, could you repeat that, Greg?

Yeah, just your book tax rate. What would you sort of be thinking? I know you're giving me the cash taxes, but just as a book tax rate?

Yeah. So I think a good way to think about it is in the 30% range.

And maybe just sort of related to Menno's question. With Europe now kind of thinking very differently about gas as a transition fuel as you mentioned, are there -- are policymakers or governments now starting to come to you as one of the longstanding developers in Europe in terms of just encouraging domestic supply growth as opposed to just relying upon imports?

Thanks, Greg, I'll take this one. I think what's happening when you look over the last several quarters with crisis, I believe it is an energy crisis in Europe, the policy makers have triaged their approach with -- starting with LNG, which is material albeit at longer timelines. Next, there's been discussions around offshore, and that leads us to your question around onshore. And so yes, we are having continued engagement in both Netherlands and Germany in particular, questions that would be framed around what could Vermilion as an operator of some of those jurisdictions for decades be able to offer with increased activity. What we've done? We always focus on what we can control. So we've added staff in both Netherlands and Germany, technical staff to be able to prepare for higher levels of activity. I would caution that timelines are longer in Europe. And so the time from a conversation to action and drills, it's longer, but I would say it's encouraging and somewhat logical that you would see some increased activity associated with the current situation and need for more domestic supply from responsible producers like Vermilion.

And we'll take our next question from Patrick O’Rourke with ATB Capital. Patrick O’Rourke : Congratulations to Lorenzo. Obviously a long and well story career here at Vermillion, so appreciative all of your work. Guys, maybe just to build on Greg's question there, you talked about sort of the regulatory regime and timelines in Europe. As we get into the 2023 budgeting cycle and as you look at the portfolio, sort of what are the other hurdles to bringing on production in Europe? Where could you allocate capital to sort of capture this windfall gas price that we're seeing over there in sort of the quickest manner? Is it in the Netherlands? Is it in the CEE? What are sort of the infrastructure constraints? I don't think that you would have any in the Netherlands there.

Well, thanks, Patrick. I think, first of all, the acquisition with Corrib to bring on that 7,700 Boe/d is probably the most impactful thing that in hindsight was very well timed and are excited to close that at the end this year. So again that's 7,700 Boe/d there. From an organic point of view, we're focused on every boe to look for opportunities. I think in Germany, we do have a deep inventory of drilling prospects. That, again, we've added resources back to look at some of the more, I would say larger targets, but a little more-higher risk. So that's something we're reviewing. CEE is an area once we get these permits in place like SA-10, we're able to follow through and drill wells in shorter timelines. And then Netherlands, we used to drill 4 to 6 Wells in Netherlands. We're drilling two in the second half of this year or so. Our view would be less work back to those higher levels of activities. So I would say all jurisdictions. Netherlands does have the potential to increase activity as well as Germany. We drilled three wells earlier this year, and we're looking at on the gas side what we might be able to do in late 2023 and into 2024. So quite excited to be having those conversations. And again, our near-term focus is getting more staff in those to be used to be able to react once it aligns with the regulatory framework to be able to put more capital into those business units. Patrick O’Rourke : Okay. And then maybe shifting over to the return of capital framework here, and in particular the dividend. You guys referred to ratable dividend increases, the pro forma math that we have on today's dividend increase with sort of the sub 4% of 2023 pre cash flow. So I wonder in terms of -- maybe you can provide some goal posts around what you mean with respect to ratable and also sort of the cadence or review period like, how frequently you plan to review the dividend going forward here?

I'll pass that one to Lars to talk about our thoughts on the base dividend.

Yes, thanks Patrick. The way we have framed the base dividend component is not -- look to not exceed 10% of our cash flows at mid cycle pricing. And I think that's some discipline that we want to continue to have in the business to ensure that that base dividend is resilient. Based on our current numbers with the increase today, we're about $50 million to fund the increased dividend that we did announce today. So that is where there is ample room to continue increasing that and still be in line with our -- not to exceed 10%. Now in terms of the cadence or how we will do that. I would say at this point, we're looking for ratable type increases over time. We think that also with the return of capital framework that we announced today, there is flexibility in terms of how we return that capital. The base dividend will be one mechanism that we use or one medium that we use, it will not be the majority of capital that will be returned through that. So that's where we have flexibility in terms of share buybacks, variable dividend, special dividends. We will err towards buybacks at this point in time, just based on the data points that we're reviewing, where we think capital is best allocated. So hopefully that provides a little bit of clarity in terms of the fixed based dividend will be one component of a return to capital, but we truly want to make sure that that base dividend is fixed and resilient in prices that are much lower than what we're seeing today.

[Operator Instructions] We'll take our next question from Josef Schachter with Schachter Energy Research. Please go ahead.

Good morning, everyone. And thanks so much for taking my question. In Europe we're seeing a lot of demand management, UK talking about preparing for blackouts, Germany telling certain industries you may get cut back certain percentages of gas, assuming the Russians are aggressive in terms of cutting back. Is there anything going on the supply management side where they're asking you to hold back and put into storage near consuming areas gas to bring on later? Or if you have new wells coming on, bring them on close to the winter. Is there any supply management stuff going on that would impact Vermilion in Q3, Q4 and into Q1 of next year?

Hi, Josef. I'll take that one. Quick answer is no, we're selling all the gas that we're producing and there's no discussions around us storing or restricting our production.

With that, I think that we have no more questions. So I guess Samara, we would like to thank everyone again for participating in our Q2 conference call and look forward to future updates.

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