Calgary –Vermilion Energy Inc. announced on March 16 that its board of directors has approved a reduction to its 2020 capital budget of $80 to $100 million and a reduction in its monthly dividend from $0.115 CDN per share to $0.02 CDN per share in response to the pronounced decline in global commodity prices. The new dividend amount will be implemented in the April dividend payable in May 2020.
Following the release of Vermilion’s Q4 2019 results on March 6, 2020, the company has witnessed a further decrease in oil prices as a result of the growing COVID-19 outbreak and the ensuing oil price war between OPEC+ members.
In a release, Vermilion said, “While we continue to believe the long-term fundamentals for the oil and gas industry are sound and will lead to higher prices in the future, we cannot predict how long the impact from COVID-19 and the OPEC+ price war will continue. As we stated in our Q4 2019 release, in the event that we experienced an even more pronounced and protracted commodity downturn due to COVID-19 or any other cause, we would be attentive to all forms of cash outlays to protect Vermilion's financial position. As we assessed the status of the global emergency, we determined that it was now appropriate to take these additional actions regarding capital investment and dividends.”
The new capital investment and dividend reductions reduce Vermilion’s annualized cash outlays by an additional $260 to $280 million, providing greater flexibility to manage its business through this period of depressed and uncertain commodity prices. In combination with the dividend reduction the company announced on March 6, its annualized cash outlays will have been reduced by $465 to $485 million. These reductions will substantially contribute to Vermilion's financial strength, and it said it will remain vigilant to make further adjustments based on our assessment of evolving business conditions.
“Vermilion fully intends to exit this period of economic turmoil in a position of enhanced financial strength,” it said in a release.
The company’s revised capital budget of $350 to $370 million is expected to deliver 2020 annual production of 94,000 boepd to 98,000 boepd, reflecting both a reduced capital slate and allowance for potential disruptions to its operations due to COVID-19.
“Thus far, we have had no operational or supply chain impacts from COVID-19,” it said.
March 2020 Dividend Declaration
As discussed in its Q4 2019 release, Vermilion is reaffirming a cash dividend of $0.115 CDN per share payable on April 15, 2020 to all shareholders of record on March 31, 2020. The ex-dividend date for this payment is March 30, 2020. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada). As previously announced, we are phasing out the Dividend Reinvestment Plan (DRIP) over the course of 2020. We will be prorating the available DRIP shares by 25 per cent each quarter starting in Q1 2020, until completely eliminated by Q4 2020.