VET - Vermilion plans focus on capital returns debt reduction this year

Vermilion Energy ( NYSE: VET ) +2.2% pre-market Friday after unveiling plans to return more capital to its shareholder s in 2023 while focusing on paying down debt with most of its free cash flow.

Vermilion ( VET ) said it expects production of 87K-91K boe/day, which represents a 3% Y/Y increase at the midpoint, assuming a March 31 closing of the Corrib acquisition and optimization of the Montney development.

The company forecasts free cash flow will total ~C$800M ($589M) in 2023 and plans to return up to 25% of it to shareholders this year through a higher base dividend of C$0.10/share starting in Q1, bringing its full-year dividend to C$0.40/share, and the resumption of share buybacks.

The rest of the free cash flow would be allocated to debt reduction, targeting net debt of $1B after expect to exit 2022 with net debt of $1.4B or less.

Vermilion ( VET ) estimates a windfall tax of ~$250M for 2022 and ~$300M for 2023, which it has included in its updated outlook.

The company plans a 2023 capital budget of C$570M, with C$340M earmarked for North American operations and C$230M toward its international assets.

Vermilion Energy ( VET ) trades at a "very attractive valuation even with higher windfall taxes," Bang For The Buck writes in an analysis published recently on Seeking Alpha .

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