Vermilion Energy Expands Its Footprint with C$1.08 Billion Acquisition of Westbrick Energy

Vermilion Energy Inc., a Calgary-based oil and gas producer, has announced its acquisition of privately held Westbrick Energy Ltd. for C$1.08 billion. This strategic move is aimed at bolstering Vermilion's operational scale in Alberta's Deep Basin, a key natural gas-producing region. The deal is expected to close in the first quarter of 2025, marking a significant milestone for Vermilion as it enhances its production capabilities and resource inventory.

Key Takeaways

• Acquisition Value: C$1.08 billion, primarily in cash.
• Production Increase: Expected addition of 50,000 barrels of oil equivalent per day, with a composition of 75% gas and 25% liquid.
• Land Acquisition: Approximately 770,000 net acres, with over 700 identified drilling locations.
• Financial Impact: Projected annual free cash flow exceeding C$110 million.
• Market Position: Will position Vermilion as the fifth largest producer in the Deep Basin.

The acquisition is seen as a significant step forward for Vermilion, as it aims to enhance the depth and quality of its inventory in the Deep Basin. CEO Dion Hatcher emphasized that this region is the company's largest producing asset, and the addition of Westbrick's resources will further solidify Vermilion's market position.

Financial Overview

The deal is structured primarily in cash, with Vermilion's shares experiencing a slight increase of 1.8% in premarket trading following the announcement. The acquisition is expected to contribute to a 5% year-over-year production growth for Vermilion, showcasing the company's commitment to expanding its operational capabilities.

Strategic Implications

This acquisition comes at a time when competition in the Deep Basin is intensifying. Last year, Tourmaline Oil, a major player in the region, acquired Bonavista Energy for C$1.45 billion, significantly boosting its production capacity. Vermilion's move to acquire Westbrick is a strategic response to maintain competitiveness and enhance its production profile.

Future Outlook

With the acquisition set to close in early 2025, Vermilion is poised to leverage Westbrick's assets to drive growth and profitability. The company has also recently raised its dividend to 13 cents per share, reflecting its strong financial position and commitment to returning value to shareholders. The planned capital spending of C$600 million to C$625 million for 2025 will further support drilling and infrastructure development across its operations.

In conclusion, Vermilion Energy's acquisition of Westbrick Energy represents a significant advancement in its strategy to enhance production and operational scale in Alberta's Deep Basin. As the company prepares for the closing of this deal, stakeholders will be keenly watching how this acquisition impacts Vermilion's market position and financial performance in the coming years.

Sources

• Vermilion Energy announces $1B deal to buy Westbrick, bolstering scale in Deep Basin, Yahoo.
• Vermilion strengthens Canada's Deep Basin position with $745 million Westbrick deal, Yahoo.