Vermilion Energy (VET – Free Report) , a Canada-based oil and gas producer, has announced the acquisition of a privately held oil and gas firm, Westbrick Energy Limited, which operates out of Alberta’s Deep Basin. The total consideration for the deal is approximately $1.075 billion. The acquisition of Westbrick Energy complements Vermilion’s overall strategy to expand its presence in the Deep Basin, where the company has been operating for almost 30 years. The deal is anticipated to be closed in the first quarter of 2025.
Strategic Fit With Vermilion’s Deep Basin Assets
The acquisition adds approximately 770,000 net acres to Vermilion’s asset base, from which the company has identified more than 700 drilling locations alongside 50,000 barrels of oil equivalent per day (boe/d) in stable production. The acquisition should also enable the company to maintain a robust inventory supporting a stable production for over 15 years. This shall allow VET to generate increased free cash flows, thereby supporting an increase in shareholder returns.
The acquisition of Westbrick Energy’s assets aligns with Vermilion’s high-grading initiatives in North America. The deal shall enhance its operational scale in the liquids-rich Deep Basin and provide increased full-cycle returns for these assets. The newly acquired assets should complement Vermilion’s high-growth Montney asset and strengthen its Deep Basin inventory. Vermilion Energy benefits from a premium on realized natural gas prices by combining the production from its liquids-rich gas assets in Canada with over 100 million cubic feet per day (mmcf/d) of Europe’s low-decline, high-return natural gas production.
Additionally, the acquisition adds approximately 92 million boe of proved developed producing reserves (PDP) (comprising 75% gas) and nearly 256 million boe of proved plus probable (2P) reserves (comprising 74% gas) to Vermilion’s reserves.
New Gas Plants and Operational Synergies
Alongside the net acreage, the deal includes four operated gas plants with a combined capacity of 102 mmcf/d in VET’s portfolio. The acquired assets lie in proximity to Vermilion’s legacy Deep Basin assets, which should allow the company to realize significant operational and financial synergies over time. The acquisition, however, does not include the undeveloped Duvernay rights on approximately 290,000 net acres of land. These rights shall be reserved for Westbrick’s shareholders.
Projections for Vermilion’s 2025 Production
According to Vermilion’s development plans for 2025, the company projects stable production of 50,000 boe/d, comprising 75% gas and 25% liquids. This indicates 5% year-over-year growth in production. The company also plans to actively hedge its production to minimize financial risk and exposure to commodity price fluctuations.
Vermilion’s Financing Strategy
Vermilion stated that it shall finance this acquisition using the undrawn $1.35 billion in its revolving credit facility. Further, the company has signed two new arrangements for funding the acquisition. Vermilion has secured a fully underwritten $250 million term loan from TD Securities and a fully underwritten $300 million bridge facility from the Royal Bank of Canada and TD Securities. The term loan shall mature in May 2028, per Vermilion’s statement.
Impact on Production
Following the deal’s close, Vermilion’s total production will increase to approximately 135,000 boe/d, with more than 80% of the production coming from its global gas operations. This includes around 550 million cubic feet equivalent per day (mmcfe/d) of liquids-rich gas in Alberta and British Columbia, and approximately 100 mmcf/d of European natural gas. Additionally, the European gas is directly tied to LNG pricing, allowing the company to benefit from premium gas prices.
VET’s Zacks Rank and Key Picks
VET currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energy sector areTechnipFMC plc (FTI – Free Report) , Oceaneering International (OII – Free Report) and Nine Energy Service (NINE – Free Report) . TechnipFMC plc currently sports a Zacks Rank #1 (Strong Buy), while Oceaneering InternationalandNine Energy Service carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a high of $14.7 million in the third quarter of 2024, indicating an 11.1% increase from the previous year’s level. This growing backlog ensures strong revenue growth for FTI.
Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. The company is a leading offshore equipment and technology solutions provider to the energy industry. Its proven ability to deliver innovative, integrated solutions supports ongoing client retention and new business opportunities, ensuring steady revenue growth.
Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.
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