Canadian Manufacturing

Vermillion Energy eyeing acquisitions everywhere

Vermilion Energy is looking to go shopping for acquisitions to grow its globe-spanning portfolio, but bargains aren't cropping up just yet



CALGARY—Vermilion Energy is looking to go shopping for acquisitions to grow its globe-spanning portfolio, but bargains aren’t cropping up just yet.

Right now there’s a disconnect between what sellers and buyers consider a fair price but that gap is expected to narrow in the coming months, CEO Lorenzo Donadeo said in an interview.

“We’ve looked at a number of opportunities, but just couldn’t get comfortable with the asking price. But our thoughts are, if prices continue to muddle at these levels, you’ll see more opportunities later this year, early part of next year,” he said.

Though much of Vermilion’s focus has been on Europe recently, Donadeo said he sees buying opportunities in North America.

“We think there’s some distressed companies with high leverage on their balance sheet so we think as time goes by here, over the next six to 12 months, there will be increasing pressure for some of these companies to sell assets.”

Next year, about a third of Vermilion’s production is projected to come from Europe where natural gas prices are about three times higher than in North America _ US$8 to US$9 per thousand cubic feet versus less than US$3 in the United States.

Vermilion is active in Germany, France and the Netherlands. After some regulatory delays, its Corrib natural gas field in Ireland now is expected to start up this fall. It recently acquired more than 930,000 hectares of land in Croatia.

“What we’re trying to do is really position ourselves well for being a dominant intermediate onshore gas producer in Europe and Croatia fits in really nice with what strategy,” said Donadeo.

In February, Vermilion cut its 2015 exploration and development capital program to $415 million from $525 million in response to low oil prices. This week, it announced a $70 increase to $485 million, mostly to drill two wells in Australia.

Donadeo said it made economic sense to drill those wells because it would have had to pay rig penalties if the program were scrapped. As well, contractors are sharpening their pencils and drilling costs are coming down.

“It drove some strong economics, even in the current price environment. So we felt that we would go ahead and proceed with them.”

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