Good morning, ladies and gentlemen, and welcome to the Vermilion Energy Q4 Conference Call. At this time, all lines are in a lesson only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, March 7, 2024. I would now like to turn the conference over to Mr. Dion Hatcher. Thank you. Please go ahead.

Thank you. 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; Brandon McCue, Vice President, North America; Jenson Tan, Vice President, Business Development; and Kyle Preston, Vice President of Investor Relations. We'll be referencing a PowerPoint presentation to discuss our 2023 Q4 and year-end results. Presentation can be found on our website under Invest with Us and Events & Presentations. Please refer to our advisory on forward-looking statements at the end of the presentation. It describes forward-looking information, non-GAAP measures and oil and gas terms used today and outline risk factors and assumptions relevant to this discussion. Production during the fourth quarter averaged 87,597 boes per day, which was at the midpoint of our Q4 guidance range of 86,000 to 89,000. This represents a 6% increase over the prior quarter, primarily driven by the Wandoo platform in Australia and Corrib Gas in Ireland, which were online for the full quarter, while the maintenance downtime in the prior quarter. Wandoo and Corrib are high-margin assets and both continue to perform quite well in Q1. We generated $372 million of fund flow and $225 million of free cash flow in Q4, which represents a 38% and 59% increase over the prior quarter, respectively. With this amount of free cash flow, we were able to reduce net debt by $164 million and returned $45 million to shareholders during the quarter comprised of $16 million in dividends and $29 million in share buybacks. Looking at the full year results on Slide 3, we achieved the midpoint of our annual production guidance of 84,000. We achieved it despite wildfire related downtime in Western Canada and on planned maintenance…

Thank you, Dion. We released our 2024 budget in early December and the execution of our capital program to date is progressing as planned. Our 2024 full year guidance remains unchanged and we are also providing Q1 production guidance of 83,000 to 85,000 boe a day. As a result of progress made on debt reduction, we are pleased to announce an acceleration of our return on capital. As you recall, we previously planned to increase our return of capital target to 50% of excess free cash flow starting April 1, but we will now apply that 50% target against full year excess FCF. To date this year, we have purchased 1.4 million shares and we plan to increase the pace of buybacks going forward to align with this increased ROC target. We continue to believe share buybacks represent a very compelling return of capital option, which will result in the majority of our return of capital for this year going towards share buybacks. We have updated our internal forecast with the latest strip pricing and are forecasting annual FFO of approximately $1.25 billion, with resulting free cash flow of approximately $650 million. Under current strip pricing and applying our new ROC allocation target, we would expect to return approximately $250 million to shareholders through our base dividend and share buybacks, representing approximately 10% of our market cap, while continuing to reduce debt, which is also an indirect form of returning capital to shareholders. We believe this is an appropriate allocation of capital as further debt reduction will make us an even stronger and more resilient company. Looking back on our FCF allocation over the past three years, we will have reduced debt by over $1.2 billion by the end of 2024 over the time period shown here. This is value that accrues directly to our equity shareholders. At the same time, we have increased our return of capital to shareholders each year over this time frame. We believe a 50% return of capital target is appropriate for our business as it will allow us to provide ratable, annual dividend increases and buyback shares, while also creating excess capacity on our balance sheet to be opportunistic. With that, I will pass it back to Dion.

Thanks, Lars. Our disciplined focus on strengthening the balance sheet and high-grading asset base along with a diligent capital allocation has made Vermilion a much stronger and a much more resilient company. We ended '23 with a strong balance sheet and continued our operational momentum from the fourth quarter into 2024. Our '24 capital program is well underway, and we're very pleased with how things are progressing on our three growth initiatives in Canada, Germany and Croatia. The development of our gas prospects in Germany and Croatia will increase our exposure to premium priced European gas, but the expansion of our Montney infrastructure in Canada will set the stage for a long-term development and growth of this asset. We're excited with Vermilion's outlook and believe that we have a robust portfolio capable of generating strong compounded returns to our shareholders through a combination of modest annual production growth, a resilient and growing base dividend and share buybacks. Well that concludes my prepared remarks. And with that, we'd like to open it up for questions.

[Operator Instructions] Your first question comes from the line of Greg Pardy from RBC Capital Markets.

Thank Dion, Lars for the rundown. A couple of questions for you, but maybe the first one is just on the net.

May I have Mr. Greg Pardy to press star one again.

A couple of questions. First one, maybe just on net debt thresholds in terms of opening up return of capital. So I know $1 billion was the first trigger. Have you thought about what net debt floor you'd like to achieve for the business and then what the implications might be? Is it possible that you could see yourselves going to 100% payout? That would be question one. And then I've got a follow-up.

I'll pass it over to Lars to discuss our debt levels and return of capital.

And we're quite excited to get to this point here where we will be targeting that 50% for 2024. I would say at this point, we're comfortable not putting out guidance in terms of the next net debt level that would trigger a higher return of capital. I think what you're going to see here in 2024 is that 50% target still allows us to return potentially up to 10% of our market cap through the dividend but primarily through the share buyback. The way we think about absolute debt levels is that $500 million to $1 billion range, we're quite comfortable in. As you get closer to the $500 million level that represents the amount of debt that we have termed out to 2030. And so if we started to approach that, that may be a catalyst to rethink the 50% EFCF at this point. But I think we're very comfortable with the 50% now.

I mean basic question, how fussed are you with the reserve revisions? And then maybe just related to that given the shift in capital allocation that you're looking at to areas like the U.S. or even portions of your ops in Saskatchewan become non-core or could those areas become noncore? I'm just curious as to maybe what the medium- to longer-term planning might be with those areas?

I can take this one, Greg. I mean, as you know, over the last couple of years, we put a lot of focus on debt reduction, asset high-grading with Corrib and Mica, in particular and actually selling some assets in the U.S. sorry, in U.S. and Saskatchewan most recently. And what we're excited about is we're able to advance these growth opportunities in Germany, in Croatia and as well Mica, where we see a lot of running room. So at this point, we're happy with our portfolio. As we look out to the running room, being able to deploy capital in those key growth areas. As to the actual reserves themselves, as noted, 40% of that is capital allocation as we work through our permitting process, our budgeting process and know our reserves process. And in Saskatchewan, we still have a rig going there. We've got a lot of inventory still on the book that we quite like and the inventory that moved out of reserves has the potential to come back, should we find ourselves changing our capital allocation in the future. So we like the option like the exposure to oil in Saskatchewan. In the U.S., what excites us about the U.S. is that oil stack there's four oily zones. We continue to look at all four zones, in particular, the Nile where there's been a lot of industry activity, and it's material. This year, we did hit the pause button on drilling in the U.S., so we can really work through those four zones. We received competitor activity in all four zones to determine how best to develop that asset. So at this point, no changes to our portfolio with respect to the U.S. and Saskatchewan and we've made these technical revisions, partially due to capital allocation and then partially due to performance. And you're right of the performance issues were in the U.S. and Saskatchewan, we've made those changes.

[Operator Instructions] And your next question comes from the line of Travis Wood from National Bank Financial.

One question but it's the same question for both Germany and Croatia. Dion in your opening remarks, you talked about kind of 70% risk profile as you look at drilling these exploration wells. What -- as you think about the size of the prize and the impact from wells, how should we think about that potential production impact on success? What's the -- can you remind us on the cost to drill and tie in these big wells? And then are there any kind of analog wells in proximity that you guys are using to kind of derisk that whether it's tests from yourselves or other operators in the area?

So definitely, we can get excited to talk about Germany upside potential. When we look at that land base and the teams working it for five, six years, we see a Tcf of gas on our land base. We've got 700,000 net undeveloped acres. We've got 3D seismic across that land base. And we've got two decades of drilling similar formations, just 300 kilometers away in the Netherlands. So we like the size of the prize. We also like the jurisdiction in which Germany is working with us to develop these wells as well as still are very much needing gas to replace about 1/3 of their energy, which comes from coal and lignite. As to the targets themselves, what we see are targets that are in that 30 to 40 boes typically, and costs that are in similar $35 million to $40 million wells to drill. And so if you zoom out how I think about it, it's $1 an Mcf. If we can drill these wells and get exposure per $1 an Mcf and then sell that gas still at 5x to 6x ACL at $10 to $12 in Germany. We like that trade-off on a risk reward. Of course, the dry hole cost, if you're not successful are much lower than the total $35 million to $40 million to drill. So what we see right now, and we see two wells per year. We see a multi-year program on that. With success, we can more than double the German production and we're quite excited to get these first couple of wells drilled and to be able to come back to -- and provide an update later this year. If there is an element of exploration here, we want to make sure that we talk about that with our success rate in Netherlands, it's been about 70%, and we think that's a reasonable number to use for a German program. As to analog wells, I mean, we're drilling in pools where we're offsetting wells within those pools that have done 30, 40 boes. And so we're surrounded by producing wells or producing plays that are very similar and have wells in the structure. And so that gives us more confidence to be able to put this capital to work and assess that upside. So we're excited, but we do recognize that it's -- we're going to have to look at this as a program versus individual wells, and we look forward to providing more updates in the next couple of months here.

And would that be similar commentary as you think about derisking and exploring Croatia?

Shifting to Croatia, Croatia's interesting. We've got two blocks. So SA-10 is the area where we've drilled and tested and we've got gas behind pipe. And with the gas plant that you can see the pictures the unit is built, we're just finalizing the pipeline tie-ins gas billing pipe and this will be basically dry gas that will produce into that unit. That's the SA-10 block. The SA-7 block is an area where we're surrounded by known producing fields, oil and gas. And we did the partnership with INA, who has a lot of that infrastructure and off-setting production. So we're in the first of four wells that we drilled there. First well looks encouraging. We've seen hydrocarbons multiple zones. We'll drill the next three wells and then progress after that. As per size of the prize, it's really early days in SA-7. So I would say too early to comment, but we can come back once we get these four wells in the ground. SA-10, it will be a couple of thousand boes a day of high netback gas that we'll produce through that compressor.

There are no further questions at this time. Mr. Hatcher, please proceed.

Well, again, we want to thank you for participating in our year-end results conference call. Enjoy the rest of your day.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.