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    Canada’s Vermilion Energy reverses Q3 loss

Summary

But EU windfall tax could take a C$350mn bite.

by: Dale Lunan

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Complimentary, Natural Gas & LNG News, Europe, Security of Supply, Corporate, Financials, Political, Tax Legislation, News By Country, EU, Canada

Canada’s Vermilion Energy reverses Q3 loss

Vermilion Energy, a Canadian producer active in Europe, Australia and North America, said November 9 it had net earnings of C$271.1mn (US$204.4mn) in Q3 2022, reversing a year-ago third-quarter loss of C$147.1mn.

But it expects to take a hit of between C$250mn and C$350mn this year as a result of the temporary windfall tax approved by the EU late in the quarter.

“We do not believe a windfall tax is an appropriate solution as it will not incentivise new domestic supply nor reduce consumption, and it may ultimately result in higher natural gas prices in Europe,” Vermilion said. “We are working with government officials in the countries where we operate to express our concerns and work collaboratively to achieve an equitable implementation under the relevant circumstances.”

Share repurchases under Vermilion’s ongoing normal course issuer bid have been suspended as it measures the impact of the tax on debt targets. Year-end debt, Vermilion said, is expected to exceed its target by about C$1.2bn, due to a combination of the tax impacts and the low Canadian dollar relative to the US dollar.   

Fund flows from operations in Q3 2022 rose 12%, to C$508mn, driven largely by higher European natural gas prices. And while total production was slightly lower, at 84,237 barrels of oil equivalent (boe)/day compared to 84,633 boe/day in Q3 2021, natural gas production increased to 234.1mn ft3/day from 226.7mn ft3/day.

Vermilion realised an average natural gas price of C$24.68/’000 ft3 in the third quarter, up from both Q2 2022 (C$16.50/’000 ft3) and Q3 2021 (C$9.20/’000 ft3).