Vermilion Energy (NYSE:VET) executives told investors the company ended 2025 with record production, a larger and more concentrated asset base, and increased exposure to premium-priced natural gas markets, following a year of acquisitions and divestitures that reshaped the portfolio toward liquids-rich gas in Canada and higher-priced gas in Europe.
On the company’s fourth-quarter 2025 earnings call, President and CEO Dion Hatcher said Vermilion is now positioned as a “global gas producer” with a lower cost structure and what he described as a long-duration asset base capable of generating free cash flow for decades. The company’s strategy over the past year included acquiring “high-quality assets” in its core Deep Basin area, while disposing of non-core assets in Saskatchewan and the United States.
Fourth-quarter production and pricing highlights
Hatcher highlighted realized gas pricing of $5.50 per Mcf, which he said was about double the AECO benchmark, driven by direct European exposure where TTF prices averaged $15 per MMBtu in the quarter. Management also cited Canadian market diversification and hedging as contributors to realized pricing.
Glemser said Vermilion generated $241 million of funds from operations in the quarter and invested $192 million in exploration and development capital expenditures, resulting in $49 million of free cash flow.
Canada: Deep Basin and Montney performance
In Canada, Vermilion ran a three-rig drilling program in the Deep Basin, drilling 16 wells and bringing 17 liquids-rich gas wells on production in the quarter. Glemser said the company intentionally deferred the startup of several “highly productive” wells drilled and completed in the third quarter into mid-Q4 to capture stronger realized gas prices.
During the Q&A session, executives were asked whether Deep Basin well outperformance could continue through 2026. VP of North America Randy McQuaig said strong results were consistent with rates shown at Vermilion’s Investor Day and have continued into the current three-rig program, with additional wells exceeding expectations across a “wide range” of well types and areas—including proof-of-concept wells, not only top-tier locations. Hatcher added that early results were encouraging but said the company would revisit expectations as more data comes in.
On the Montney, Glemser said Vermilion drilled four gross (and net) liquids-rich gas wells scheduled for completion and startup in the second quarter of 2026. Hatcher also reiterated a longer-term plan discussed at Investor Day to build Montney production to 28,000 BOE/d as the company sees higher production and lower capital intensity over time.
Hatcher said improved operational scale has contributed to lower costs, noting Canadian unit operating costs are now “the lowest in over a decade,” and corporate unit costs are the lowest since 2020.
Europe: Germany and the Netherlands development pipeline
International production averaged 30,137 BOE/d in the fourth quarter, consistent with Q3, as new production in the Netherlands and increased output in Germany offset declines in Ireland, Australia, and Croatia, Glemser said.
In Germany, management highlighted two projects. The company brought online the first well of its deep gas exploration program, Osterheide, earlier in 2025. Glemser said the well averaged 10 million cubic feet per day (about 1,600 BOE/d) in the fourth quarter, while Hatcher said Osterheide’s production was 40% higher than the third quarter and generated approximately $8 million of free cash flow in Q4 alone.
Executives also discussed Wisselshorst, described as one of the company’s largest European gas discoveries. Glemser said infrastructure development continued during the quarter and first production is expected by mid-2026. In response to questions about throughput constraints, VP International & HSE Darcy Kerwin said infrastructure constraints appear “not as negative as we assumed initially,” and the company expects recent production rates at Osterheide to continue relatively flat through 2026, with normal day-to-day market variation.
In the Netherlands, Vermilion drilled two wells with multiple prospective zones and brought them on production in Q4. Glemser said two gross (1.2 net) natural gas wells were completed and brought online in the quarter, and the company advanced permitting and technical work to facilitate drilling one gross (0.5 net) well in 2026. Kerwin said Vermilion is “on plan” to drill two additional wells in the Netherlands in 2026 and described a larger set of future European opportunities that are “2.5x to 3x” the size of prior drilling targets, based on the company’s comparison of the last 30 wells drilled versus the next 30 planned.
Hatcher said Vermilion estimates finding and development costs of approximately C$1.50 per Mcf across identified European prospects, describing the inventory as a source of profitable organic growth.
Reserves, balance sheet actions, and hedging approach
Hatcher said total proved plus probable (2P) reserves increased 36% year over year to 592 million BOE, reflecting organic development and the Deep Basin acquisition (closed in February 2025), partially offset by U.S. and Saskatchewan divestments in mid-2025. Vermilion added 86 million BOE of proved developed producing (PDP) reserves and 201 million BOE of 2P reserves in 2025, with average FD&A costs (including future development costs) of $14.91 per BOE for PDP and $7.71 per BOE for 2P. The company reported recycle ratios of 1.8x (PDP) and 3.5x (2P).
Management noted that 2P reserves include approximately 7 million BOE (or 43 Bcf) related to Vermilion’s 64% working interest in the initial Wisselshorst discovery, and said up to six additional drilling locations on the Bommelsen license have no 2P reserves assigned. Hatcher said Vermilion expects to spud the first two of those locations in early 2027, with the wells anticipated to be on production in the second half of 2028.
On the balance sheet, Glemser said the company accelerated debt reduction by selling a portion of its ownership in Coelacanth Energy, resulting in $42 million of incremental debt reduction and a $12 million realized gain. Vermilion continues to hold a 10% ownership stake in Coelacanth.
Executives also discussed hedging and near-term commodity price strength. In response to an investor question, Glemser said Vermilion is about 50% hedged on European gas for 2026, 53% hedged on oil, and 45% hedged on North American gas. He said the company has been active hedging European gas recently to lock in some of the price increases and noted that, historically, Vermilion has taken hedge percentages as high as 70% when it sees an opportunity to lock in revenue.
Australia update and 2026 production outlook
Kerwin provided details on Australia after questions about downtime. He said that during inspection and maintenance on the export system in December, there was a “small leak” on a component, releasing residual crude oil while the system was isolated for maintenance. The company worked with the regulator on spill response and repair plans, including an approved diving campaign completed by mid-January. On February 6, the regulator issued a notice limiting the use of the export system, though the company later received approval to complete a planned loading.
Kerwin said a Category 3 tropical cyclone hit on the weekend of February 7, shutting in production and export systems and delaying a planned export. Vermilion completed an export of over 300,000 barrels on February 27 and is restoring production on the Wandoo B platform. Hatcher said Vermilion’s Q1 outlook assumes minimal volumes from Australia after the early-February shutdown, and he expects operations to be “back to normal” going into Q2.
For the first quarter of 2026, Vermilion provided production guidance of 122,000 to 124,000 BOE/d, which management said factors in Australian downtime. Hatcher said first-half 2026 production is expected to be in line with recent levels, with lower Q3 production reflecting planned maintenance outlined in the company’s budget release.
In other international commentary, management said it does not expect drilling activity in Ireland, citing stronger capital allocation opportunities in Germany. Executives also reiterated that the company is progressing toward exiting Croatia, with business development leaders saying the company has decided to focus elsewhere despite drilling opportunities in the region.
About Vermilion Energy (NYSE:VET)
Vermilion Energy Inc is a Canadian-based international oil and gas producer headquartered in Calgary, Alberta. Established in 1994, the company focuses on the exploration, development and production of crude oil and natural gas reserves through its wholly owned and joint venture assets. Vermilion’s upstream operations target a balance of oil and gas projects across various regions, with an emphasis on high-quality resource plays that can deliver stable cash flow and long-term reserves replacement.
Vermilion’s product portfolio includes light and medium crude oil, heavy oil, natural gas and natural gas liquids (NGLs).
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