Vermilion Energy Inc. ($VET)

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Vermilion Energy's Virtual 2026 Annual General Meeting. Following the formal portion of the meeting, a presentation will be given by Dion Hatcher, Vermilion's President and Chief Executive Officer. As a reminder, this event is being broadcast live on the Internet and is being recorded. The archived event will be posted on Vermilion's website under the heading, Invest with Us and subheading Events & Presentation. [Operator Instructions] I would now like to turn the conference over to Myron Stadnyk, Vermilion's Chair of the Board. Please go ahead.

Thank you. Good afternoon, and welcome to the 2026 Annual General Meeting of the Shareholders of Vermilion Energy Inc. My name is Myron Stadnyk, and as Chair of the Board of Directors of Vermilion, it is my responsibility and privilege to act as the Chair of this meeting. I welcome our registered shareholders, proxy holders and all guests that are joining this meeting through our virtual meeting platform. We are excited to have your participation in the meeting, and thank you for your interest in the affairs of Vermilion. Before we begin, I would like to offer a land acknowledgment. We respect the histories, languages and cultures of the indigenous peoples where we operate and their continuing connection to the lands, waters and community, and we pay our respects to elders past and present. I would now like to introduce the other independent directors of Vermilion here with us today. James Kleckner, Corey Bieber, Stephen Larke, Paul Myers, Manjit Sharma and Judy Steele. I would also like to introduce Dion Hatcher, our President and CEO and Director; and Lars Glemser, our Vice President and CFO. In addition, present on this call are members of our Executive Committee. In terms of our agenda today, I will deal first with the formal business of the meeting as described in the circular. Immediately following the formal business, Dion Hatcher will provide you with an overview of our business and strategy. A question period will then follow. As this meeting is being held virtually via live webcast, I will ask now Tamar Epstein, our General Counsel and Corporate Secretary, to go over the procedures for the orderly conduct of the meeting.

Thank you, Mr. Chair. The following are the procedures. Only registered shareholders and proxy holders who have properly logged in with their control numbers or username will be available to vote on the motions being brought forth. Questions in respect of a motion can be submitted by any registered shareholder or proxy holder using the instant messaging service of the virtual interface. Questions will be forwarded to me shortly after they are submitted, but will only be addressed if they relate to procedural matters or to the motions before the meeting. Questions which do not relate to procedural matters or to the motions before the meeting will be addressed during the question period at the end of the meeting. Questions which were already answered or that are redundant or repetitive will not be addressed, and all matters will be conducted by electronic ballot. The polls have been opened by our scrutineers and registered shareholders and proxy holders who have not already voted or who wish to change their votes are able to do so on each business item until polls are closed following the formal business presentation. If we encounter any technical difficulties with the webcast, please remain logged on, and we will resume as soon as possible.

Thank you, Tamar. The meeting will now come to order. I will ask Tamar Epstein to act as Secretary and representatives of Odyssey Trust Company to act as scrutineers. To ensure that this meeting covers all the business for which it was convened within a reasonable amount of time, we have arranged for Vermilion representatives who are also shareholders to move and second certain motions. As mentioned, the polls are now open. And at this time, all registered shareholders and proxy holders who have properly logged in with their control numbers or username and wish to vote will be able to see on the screen all motions being brought forth at this meeting. Please register your votes by selecting the For or Withhold, Against button next to each item to be voted on. If a registered shareholder or proxy holder has already voted on all matters, there is no need to vote again unless you wish to change your vote on a matter. To my knowledge, the decision of the meeting will be in favor of each resolution to be considered. The scrutineer will compile a report regarding the voting results once all votes have been conducted and the polls have closed. I have received confirmation from Odyssey Trust Company that all materials in respect of the meeting were delivered to shareholders in compliance with applicable securities requirements. I direct that the affidavit, together with copies of the documents delivered to the shareholders, be filed with the minutes. I've been advised by the scrutineers that there is a quorum present at this meeting. Accordingly, I declare that this meeting is regularly called and properly constituted for the transaction of business. I direct that the scrutineer's report be filed with the minutes. The first item of business is to table the consolidated audited financial statements of Vermilion for the year-ended December 31, 2025, and the report of the auditors thereon. A copy of these materials has been mailed to each registered shareholder who elected to receive such. Any questions related to the financial statements can be raised later during the question period. The next item of business is to fix the number of directors of the company to be elected at 8. May I have a motion, please?

Mr. Chair, my name is Travis Thorgeirson, and I am a representative of Vermilion and a shareholder. I move that the number of directors of the company to be elected be fixed at 8.

Mr. Chair, my name is Brittany Jensen, and I'm a representative of Vermilion and a shareholder. I second the motion.

Thank you. Any discussion? I will ask registered shareholders and proxy holders who have not already done so to cast their votes through the online portal. The next item of business is the election of the company's directors. As noted in the circular, the Board has adopted an advanced notice bylaw, which provides a procedure to be followed for the nomination of directors at shareholder meetings. There were no other nominations received within the requirements of the advanced notice bylaw. Therefore, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the circular as directed by the Board. I will ask Mr. Thorgeirson, our Director of IR and a shareholder, to read the nominees.

Thank you, Mr. Chair. The following people are hereby nominated to act as directors of Vermilion, Myron M. Stadnyk; Corey B. Bieber; Dion Hatcher; James J. Kleckner, Jr.; Paul B. Myers; Stephen P. Larke; Manjit K. Sharma and Judy A. Steele.

May I have a motion to elect Vermilion's Director nominees as directors of the company?

Mr. Chair, I move that Vermilion's Director nominees be elected directors of the company until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Mr. Chair, I second the motion.

Thank you. Any discussion? I will ask registered shareholders and proxy holders who have not already done so to cast their votes through the online portal. In accordance with the company's majority voting policy, we will conduct the election on an individual basis for each director. The next item of business is the appointment of the company's auditors. May I have a motion, please?

Mr. Chair, I move that Deloitte LLP be appointed auditors of the company until the next Annual General Meeting of Shareholders or until their successors are appointed and that the directors of the company be authorized to fix their remuneration as such.

Mr. Chair, I second the motion.

Thank you. Any discussion? I will ask registered shareholders and proxy holders who have not already done so to cast their votes through the online portal. The final item of business is the approval on an advisory nonbinding basis of the company's approach to executive compensation. May I please have a motion?

Mr. Chair, I move that the related resolution as set out in the circular be approved.

Mr. Chair, I second the motion.

Thank you. Any discussion? I will ask registered shareholders and proxy holders who have not already done so to cast their votes through the online portal. We will provide registered shareholders and proxy holders a few more moments to complete the electronic ballots before we close the polls. Once the electronic balloting closes, the voting page will disappear and your votes will automatically be submitted. [Voting]

Odyssey, please close the polls. I ask the scrutineer to compile the report regarding the voting results. I have been advised by the scrutineers that greater than a majority of the votes cast at this meeting have been voted in favor of the resolutions. Accordingly, I declare all motions carried. I direct that the results of the poll be included with the minutes and the results of the voting will be announced in a press release in accordance with the policies of the Toronto Stock Exchange and filed on SEDAR. As there is no further business to come before the meeting, I declare the formal part of this meeting concluded. Before turning it over to Dion Hatcher, our President and Chief Executive Officer, I would like to extend my thanks to our management team and employees around the world for their dedication to Vermilion. Dion Hatcher will now provide an update on our business and strategy and looks forward to your questions.

Thank you, Myron. Hello, ladies and gentlemen. I'm Dion Hatcher, President and CEO of Vermilion Energy. Thank you for joining our Annual General Meeting today. I remind our attendees to please refer to our advisory on forward-looking statements in our Q1 release. It describes the forward-looking information, non-GAAP measures and oil and gas terms used today and outlines the risk factors and assumptions relevant to this discussion. Over the past 3 years, we've committed to repositioning Vermilion as a more resilient and profitable company. 2025 was a very impactful year as we delivered on our strategy and transition to a global gas producer. The outcome of that execution is a structurally more efficient business, as shown by the numbers. Production per share has increased by approximately 45%. Unit costs when combined with G&A are down more than 30% and capital intensity has improved by over 30%. Before I move on, I want to pause and thank our people. The improvements you see here, higher production per share, materially lower costs and better capital efficiency don't happen without the hard work of our teams. They reflect disciplined execution across our operations, technical, subsurface, commercial and corporate functions. I also want to recognize our focus on health, safety and environment. During this busy year, we implemented multiple new safety initiatives that combined with our strong HSE culture will further enhance our performance. I sincerely want to thank our employees and contractors for their efforts in 2025. The Deep Basin, Montney and Germany are our 3 core development assets, and they underpin our long-term growth plan. These assets provide decades of inventory and multiple capital allocation levers to generate strong returns with visibility to both near-term and longer-term excess free cash flow growth. In the Deep Basin, that opportunity is today, supported by existing infrastructure and strong well results. In the Montney, the asset transitions to meaningful excess free cash flow in 2028 as infrastructure is completed and capital intensity declines. In Germany, growth accelerates as both our discovered gas and new wells are brought online over the next several years. Although these are our growth assets moving forward, there are plenty of great things happening across our company. In Ireland and the Netherlands, our teams are focused on supplying natural gas to our customers, which is critical given the need for energy in Europe. In France and Australia, we provide premium liquids, again, critical given the demand for crude across the globe. Turning to reserves. Vermilion's proved plus probable reserves increased by 36% year-over-year to 592 million barrels of oil equivalent. Importantly, this growth was achieved with a 2P recycle ratio of 3.5x, reflecting the quality and the capital efficiency of our portfolio. This increase was driven by a combination of organic development and our Deep Basin acquisition, partially offset by the divestment of our United States and Saskatchewan assets. Our internal estimates indicate approximately 1,700 drilling locations across our significant land position in the Deep Basin and Montney with only about 23% of those locations reflected in our year-end reserves. Similarly, internal estimates of gas initially in place associated with our European exploration and development prospects are only minimally included in our book reserves. This reflects our conservative approach in Canada, together with our track record of replacing and growing reserves in Europe. As a result, we believe the duration of our business extends well beyond our current book reserve life. Turning to the Deep Basin. Vermilion is a top 5 producer by both volume and land position with approximately 1.2 million net acres of continuous land and significant infrastructure already in place. This supports our development plans, meaning our per well half cycle returns are effectively full cycle with minimal incremental capital required to bring new wells on stream. We also benefit from higher liquids weightings than many of our peers, which drives profitability and provides flexibility to optimize capital allocation through the commodity cycle. Our continuous acreage allows us to drill longer wells, further enhancing returns. The map on the right highlights some of the strong wells from our recent drilling program. These results are not concentrated in any single zone or restricted to one formation. Rather, they are distributed across our land base, demonstrating both the depth and the consistency of our inventory. Turning to the Montney at Mica. This long-duration asset has required significant upfront investment in order to position it to generate robust excess free cash flow for the next 2-plus decades. Since 2022, production has increased from 4,000 to current 16,000 BOEs per day. Over that same period, we've materially improved both capital and operating efficiencies. The reduction in per well cost has reduced future capital requirements by over $250 million. In addition, operating costs have come down and the majority of the required infrastructure investment is now behind us. At this stage, Mica is approaching an inflection in free cash flow in 2028 as production reaches approximately 28,000 BOEs per day. Importantly, this outlook does not assume an accelerated Alberta Montney development program. We are actively drilling on the Alberta portion of our land base today, which represents additional upside beyond the base development plan. In Germany, our deep gas exploration program is delivering results. The Osterheide well has been on production for over a year and the Wisselshorst well, which represents our largest discovery to date in Europe is expected to come on stream by midyear. Wisselshorst is located on the Bommelsen license where we have identified up to 6 additional drilling locations, highlighting the scale and the materiality of this opportunity. We remain on track to drill the next 2 wells on this license in early 2027, and we'll apply learnings from our initial wells to improve cycle times and capital efficiencies. In addition, we are excited to test additional structures the team has identified on our large land position. With the depth of inventory in Germany, we are well positioned for meaningful free cash flow growth through 2030 and beyond. Importantly, this growth is organic and not depending on acquisitions. That said, our recent acquisition in Germany strengthens the outlook by adding low decline production and by increasing our control over gathering infrastructure surrounding the Osterheide area. Following the largest cash acquisition in Vermilion's history in 2025, our debt levels increased, and we had a clear plan to reduce debt as we recognize the importance of a strong balance sheet. Over the past year, we've reduced net debt by approximately $0.75 billion through a combination of organic deleveraging driven by excess free cash flow and inorganic reduction through strategic asset sales. As a result, we have now increased visibility to our net debt $1 billion target, and we will continue to prioritize our excess free cash flow to the balance sheet and accelerate the pace of deleveraging. Vermilion is focused on disciplined capital allocation with a clear emphasis on profitability and long-term compounding. Our approach is to allocate excess free cash flow to strengthen the balance sheet, invest in high-return projects, grow the base dividend and reduce our share count. We have a long track record of returning capital to shareholders, and we aim to continue to grow the base dividend as well as repurchase shares when our market valuation does not reflect our business fundamentals. We target a nominal return of 10% to 15% year-over-year by a combination of moderate production growth, dividend yield, debt reduction and share repurchases. With a relatively low share count, our capital allocation decisions have a greater impact on per share outcomes. This amplifies the benefits of our investment and is a key advantage. Our disciplined approach to investments gives us confidence in our 5-year operational plan by investing in the Montney infrastructure, advancing our German deep gas program and expanding our position in the Deep Basin, we are laying the foundation for sustained profitable growth. Under the plan we outlined in our December Investor Day, we expect production to increase from approximately 120,000 to 130,000 BOEs per day. When combined with ongoing share repurchases, production per share is projected to increase by approximately 40% by 2030. Our annual exploration and development capital over the next 5 years is expected to average between $600 million and $630 million. The upper end of the average range includes 1 year of higher investment due to the planned offshore Australia drills currently targeted for next year. Based on our Investor Day pricing assumptions of $70 WTI, $13 per MMBtu European gas and $3.50 per GJ AECO, we expect to generate approximately $1.7 billion of excess free cash flow over the next 5 years. Today, prices for both WTI and TTF are much higher, which highlights the ability of our portfolio to generate even more robust excess free cash flow that, in my view, is not yet reflected in our current valuation. In closing, I want to thank our employees for the focus and the commitment you brought to 2025. It was a demanding year, and your execution has positioned Vermilion exceptionally well for the future. Over the past 3 years, we've executed a strategy to reposition our portfolio to add operational scale and long-duration assets to strengthen the balance sheet and sharpen our focus on profitability. We're seeing the results of that execution today, and we remain committed to disciplined capital allocation and operational excellence as we move forward. On behalf of the Board and management team, I want to thank our shareholders for your continued support. With that, we'll check the line for questions. Okay. It looks like we don't have any questions at that time. And so with that, again, I want to thank everyone for attending today, and we'll close the meeting. Enjoy the rest of your day.

Thank you. And this concludes today's meeting. You may now disconnect.