Vermilion Energy Inc. acquires, explores, develops, and produces crude oil and natural gas in North America, Europe, and Australia. As of December 31, 2015, it owned 71% interest in 326,500 net acres of developed land and 88% interest in 537,000 net acres of undeveloped land, as well as 464 net producing natural gas wells and 453 net producing oil wells in Canada; and 96% interest in 208,900 net acres of developed land and 100% interest in 374,600 net acres of undeveloped land in the Aquitaine and Paris Basins, as well as 337 net producing oil wells in France. The company also owned 55% interest in 814,600 net acres of land, as well as 35 net producing gas wells in the Netherlands; 7,800 net acres of developed and 153,400 net acres of undeveloped land, and 4 net producing gas wells in Germany; and 90,700 net acres of land and 4 net producing oil wells in the United States. In addition, it holds 18.5% interest in the offshore Corrib gas field situated in Ireland; and 100% interest in the Wandoo block, which consists of 59,600 acres located in Australia. Further, the company has 71,163 barrels of oil equivalent (Mboe) of total proved reserves and 121,717 Mboe of proved plus probable reserves located in Canada; 42,027 Mboe of total proved reserves and 63,612 Mboe of proved plus probable reserves situated in France; 8,122 Mboe of total proved reserves and 16,320 Mboe of proved plus probable reserves located in the Netherlands; 5,250 Mboe of total proved reserves and 8,250 Mboe of proved plus probable reserves situated in Germany; 17,637 Mboe of total proved reserves and 25,538 Mboe of proved plus probable reserves located in Ireland; 13,765 Mboe of total proved reserves and 17,465 Mboe of proved plus probable reserves located in Australia; and 2,742 Mboe of total proved reserves and 7,988 Mboe of proved plus probable reserves located in the United States. The company was founded in 1994 and is headquartered in Calgary, Canada.
FINANCIAL RATIOS of Vermilion Energy (VET)
|Price to Sales||0|
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|Sales Growth Rate||-100%|
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|LT Debt to Equity||0%|
|Total Debt to Equity||0%|
|Return On Assets||0%|
|Ret/ On Assets - 3 Yr. Avg.||0%|
|Return On Total Capital||0%|
|Ret/ On T. Cap. - 3 Yr. Avg.||0%|
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|Return On Equity - 3 Yr. Avg.||0%|
|Gross Margin - 3 Yr. Avg.||0%|
|EBITDA Margin - 3 Yr. Avg.||0%|
|Oper. Margin - 3 Yr. Avg.||0%|
|Pre-Tax Margin - 3 Yr. Avg.||0%|
|Net Profit Margin||0%|
|Net Profit Margin - 3 Yr. Avg.||0%|
|Effective Tax Rate||0%|
|Eff/ Tax Rate - 3 Yr. Avg.||0%|
VET stock valuation input parameters
Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VET stock intrinsic value calculation we used $ million for the last fiscal year's total revenue generated by Vermilion Energy. The default revenue input number comes from income statement of Vermilion Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.
Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
We use three input parameters to forecast the revenue growth rate in our VET stock valuation model: a) initial revenue growth rate of 0% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.
Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
The initial discount rate of 0%, whose default value for VET is calculated based on our internal credit rating of Vermilion Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Vermilion Energy.
By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.
Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VET stock the variable cost ratio is equal to 0%.
Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $ million in the base year in the intrinsic value calculation for VET stock. These expenses increase with the level of inflation in subsequent years.
Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 0% for Vermilion Energy.
Corporate tax rate of 27% is the nominal tax rate for Vermilion Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.
Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VET stock is equal to 0%.
Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VET are equal to 0%.
Life of production assets of years is the average useful life of capital assets used in Vermilion Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.
Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VET is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.
Book value of equity - $ million for Vermilion Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.
Shares outstanding of 115.414 million for Vermilion Energy is needed to calculate the intrinsic value of one share.
Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Vermilion Energy at the current share price and the inputted number of shares is $3.6 billion.