Vermilion Energy Inc. (NYSE:VET) Q1 2024 Earnings Call Transcript

Vermilion Energy Inc. (NYSE:VET) Q1 2024 Earnings Call Transcript May 6, 2024

Vermilion Energy Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Robert Michaleski: Good afternoon, ladies and gentlemen. I’d like to begin by welcoming you to Vermilion’s Annual Meeting of Shareholders. We will complete the formal part of this meeting first, and afterwards, Dion Hatcher, the President and Chief Executive Officer of the company, will provide you an overview of the business and the strategy moving forward. So ladies and gentlemen, the meeting will now come to order. My name is Robert Michaleski, and as Chair of the Board of Directors of Vermilion Energy, it is my responsibility and privilege to chair this Annual General Meeting of the Shareholders of Vermilion. Jamie Gagner of Lawson Lundell LLP will act as secretary of the meeting, and Nazim Nathoo of Odyssey Trust Company will act as scrutineer.

In addition to the registered shareholders, I would like to welcome to the meeting all others present here today. At this point, I would like to introduce the other independent directors of Vermilion who are present at the meeting today. James Kleckner, Jr.; Carin Knickel; Stephen Larke; Timothy Marchant; Manjit Sharma; Myron Stadnyk and Judy Steele. William Roby is on the Board, but he is traveling to another meeting today, so unable to be here for this meeting. I would also like to introduce the pencil members of our Executive Committee here today, Dion Hatcher, President and Chief Executive Officer; Lars Glemser, Vice President and Chief Financial Officer; Randy McQuaig, Vice President, North America; and Darcy Kerwin, Vice President, International, Health and Safety and Environment.

The notice calling this Annual Meeting of Shareholders, along with the information circular and form of proxy were mailed on March 28, 2024, to all shareholders as of the record date for this meeting, being the close of business on March 13, 2024. As part of an ongoing stewardship of the environment, as a cost-saving measure, for the sixth consecutive year, beneficial shareholders received a voting instruction form and a notice and access notification, which includes a link to the meeting materials consisting of the proxy statement, information circular and the 2023 annual report. This procedure for the electronic delivery of meeting materials is known as notice and access and, as mentioned, is an environmentally friendly alternative that is now used by a number of companies.

As in past years, registered shareholders and those beneficial shareholders have previously requested to receive paper copies continue to receive a printed copy of the meeting materials and a form of proxy. I would ask that copies of all such documents to be filed with the minutes of this meeting. A quorum for the transaction of business at today’s meeting is at least two people present to hold or represent by proxy at least 25% of our outstanding common shares. I am advised by the scrutineer that there is a quorum present. The scrutineers’ report is available for inspection, and I ask that it be filed with the minutes of this meeting. I hereby declare that this Annual General Meeting of Shareholders of Vermilion Energy Inc. be properly convened and regularly constituted to conduct business.

Now there are very matters to be dealt with today. A description of each matter is provided in the information circular, a copy of which is available on our website under the heading Invest With Us and subheading Annual General Meeting. In the interest of time, I do not propose to make a detailed presentation on each item. For the purpose of moving the meeting along, shareholders who are representatives of Vermilion have been asked to move and second the motions to be brought before the meeting. All of the matters of business to be covered today will be voted on by ballot. Registered shareholders, meaning their shareholders who do not hold their shares through a broker, who have not previously submitted a form of proxy, and duly appointed proxyholders should have received ballots upon registering for the meeting.

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Q&A Session

If you have already voted, whether by telephone, through the Internet or by completing and returning a proxy card mailed to you with the information circular, your shares will be voted in accordance with your instructions and you’re not permitted to vote again by way of ballot. If there is any shareholder or proxyholder who has not received a ballot, please identify yourself to us. The first item of business is fixing the number of directors of Vermilion Energy to be elected at 10. May I have a motion to fix the number of directors to be elected at 10?

Yvonne Jeffery: My name is Yvonne Jeffery, and I’m a representative of Vermilion and a shareholder. I move that the number of Directors of Vermilion Energy Inc. to be elected be fixed at 10.

Robert Michaleski: Thanks, Yvonne. May I have the motion seconded?

Terry Hergott: My name is Terry Hergott. I’m a representative of Vermilion and a shareholder. And I second the motion.

Robert Michaleski: Thanks, Terry. Is there any discussion? Voting on the election of directors will be conducted by way of ballot. The blue ballot is to be used for this matter of business. If you have not yet received one, please raise your hand. If you have already completed but not – if you have not already completed your ballot and deposited it with a scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and the scrutineer will collect the ballots. Thank you. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting’s business while the scrutineer tabulates the results of the ballot voting and advises us as to the final results prior to the termination of this meeting.

The next item of business is the election of the directors of Vermilion for the ensuing year or until their successors are elected or appointed. As we have done in previous years, we will be nominating and approving individual directors and not a slate of directors. The Board of Directors has adopted a policy stipulating that if a director nominee receives a greater number of votes withheld from the election of that director than votes for the election, the nominee will offer to resign. The Governance and Human Resources Committee will then review the matter and recommend to the Board whether to accept the resignation and, the Board’s decision to accept or reject the resignation will be publicly announced within 90 days of the meeting. It is expected that the resignations will be accepted except in situations where exceptional circumstances would warrant that the applicable director continue to serve as a Board member.

The Board of Directors has also adopted Bylaw number two, providing for advanced notice of director nominations. I have been advised that no director nominations were received by the company, and accordingly, the nominees for election as a director are the nominees set forth in the information circular for this meeting. The number of directors to be elected at the meeting has been fixed at 10. Information with respect to each of the nominees was set forth in the information circular for this meeting. May I have a motion to nominate each of the nominees as a director of Vermilion Energy Inc.?

Averyl Schraven: My name is Averyl Schraven, and I’m a representative of Vermilion and a shareholder. I nominate each of the following to act as a director for the ensuing year: Dion Hatcher; Robert Michaleski; James Kleckner, Jr.; Carin Knickel; Steve Larke; Timothy Marchant; William Roby; Manjit Sharma; Myron Stadnyk; and Judy Steele.

Robert Michaleski: Thanks, Averyl. I will now ask to move the resolution electing those individuals nominated as directors of Vermilion Energy to serve as directors until the close of the next Annual Meeting of the Shareholders or until their successors are duly appointed.

Geoff MacDonald: My name is Geoff MacDonald, and I’m a representative of Vermilion and a shareholder. I move that each of the 10 persons nominated be elected as a director of Vermilion Energy Inc. to hold office until the close of the next Annual Meeting of Shareholders or until a successor is duly elected or appointed.

Robert Michaleski: Thanks, Geoff. May I have the motion seconded?

Kyle Preston: My name is Kyle Preston, and I’m a representative of Vermilion and a shareholder. And I second the motion.

Robert Michaleski: Thanks, Kyle. As previously stated, the directors will be elected individually and not as a slate. For a nominee to be elected as a director of Vermilion Energy Inc., the votes cast in favor of the election of the director nominee should represent no less than a majority of the votes cast by shareholders represented in person or by proxy at this meeting. Is there any discussion? Voting on the election of directors will be conducted by way of ballot. The white ballot is to be used for this matter of business. If you have not yet received one, please raise your hand. If you have not already completed your ballot and deposited it with the scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot.

Please raise your hand if you have a ballot to be collected, and the scrutineer will collect the ballots. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of the meeting’s business while the scrutineer tabulates and provides the results of the ballots prior to the termination of the meeting. The next item of business is the appointment of the auditors of Vermilion. Deloitte LLP are Vermilion’s current auditors and have agreed to act upon – act as auditors of Vermilion if appointed. May I have a motion for the appointment of auditors?

Kyle Preston: I move that Deloitte LLP be appointed as the auditors of Vermilion to hold office until the next Annual Meeting of Shareholders.

Robert Michaleski: Thanks, Kyle. May I have the motion – second the motion?

Averyl Schraven: I second the motion.

Robert Michaleski: Thanks, Averyl. Is there any discussion? Voting on the election of the directors will be conducted by way of ballot. The pink ballot will be used for this matter of business. If you have not yet received one, please raise your hand. If you have not already completed your ballot and deposited it with the scrutineer, please complete your ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and the scrutineer will collect the ballots. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting’s business while the scrutineer tabulates and provides the results of the ballot voting prior to the termination of the meeting.

The next item of business is the confirmation approval of Bylaw number two, which, as previously mentioned, requires advance notice of director nominations. Bylaw number two was adopted as part of Vermilion’s commitment to facilitating an orderly and efficient process for shareholders’ meetings as shareholders receive adequate notice and sufficient information regarding director nominees and allowing shareholders to register an informed vote. Further information with respect to Bylaw number two is set forth in the information circular for this meeting. May I have a motion for the confirmation and approval of Bylaw number two?

Geoff MacDonald: I move that the ordinary resolution to confirm and approve Bylaw number two as a bylaw of the company, the full text of which is set out on Page 22 of the information circular accompanying the notice of this meeting, be approved.

Robert Michaleski: Thanks, Geoff. May I have the motion seconded?

Averyl Schraven: I second the motion.

Robert Michaleski: Thanks, Averyl. Is there any discussion? Voting on confirmation and approval of Bylaw number two will be conducted by way of ballot. The green ballot is to be used for this matter of business. If you have not received – yet received one, please raise your hand. If you have not already completed your ballot and deposited it with the scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of this meeting’s business while the scrutineer tabulates and provides the results of the ballot voting prior to termination of the meeting.

The next item of business is the advisory vote on executive compensation. As part of Vermilion’s ongoing commitment to strong corporate governance practices, we continue to hold a nonbinding advisory vote on the approach to executive compensation, commonly referred to as say-on-pay. In 2023, 93.25% of shareholders supported our say-on-pay vote. In respect to this meeting, two leading independent third-party proxy advisory firms, ISS and Glass Lewis, have both recommended that shareholders vote for the approval of the proposed say-on-pay vote at this meeting. May I have a motion for the say-on-pay advisory vote?

Averyl Schraven: I move that on an advisory basis and not to diminish the roles and responsibilities of the Board of Directors that the shareholders accept Vermilion’s approach to executive compensation disclosed in the information circular accompanying the notice of this meeting.

Robert Michaleski: May I have the motion seconded?

Yvonne Jeffery: I second the motion.

Robert Michaleski: Thanks, Yvonne. Is there any discussion? Voting on the say-on-pay advisory vote will be conducted by way of ballot. The yellow ballot is to be used for this matter of business. If you have not yet received them, please raise your hand. If you have not already completed your ballot and deposited it with the scrutineer, please complete the ballot now and sign your name clearly at the bottom of the ballot. Please raise your hand if you have a ballot to be collected, and the scrutineer will collect the ballots. Based on preliminary voting results for this matter, it is expected that this resolution will be carried. We will continue with the remainder of the meeting’s business while the scrutineer tabulates and provides the results of the ballot voting prior to the termination of the meeting.

The next item of business is to table the consolidated audited financial statements of Vermilion for the year ended December 31, 2023, and the report of the auditors thereon. These financial statements were included in Vermilion’s annual report, which is mailed to those shareholders who requested the financial statements, along with the Notice of Meeting and the information circular. For your ease of reference, links to Vermilion’s annual report, which includes the financial statements, are available on our website under the heading Invest With Us, subheadings Reports & Filings. Are there any questions regarding the financial statements? I have the results of the voting on the ballot. On the matter of fixing the number of directors of Vermilion Energy at 10, I’m advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution.

Therefore, I declare that this motion is carried. On the matter of electing directors of Vermilion Energy Inc., I am advised by the scrutineer that for each of the director nominees, greater than a majority of the votes cast have been voted in favor of election of each director. Therefore, I declare that this motion is carried and each of the nominees for election as director has been elected. On the matter of appointing Deloitte LLP as auditors of Vermilion to hold office until the next Annual Meeting of Shareholders, I’m advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of the resolution. Therefore, I declare that this motion is carried. On the matter of approving the confirmation and approval of Bylaw number 2, I’m advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution.

Therefore, I declare that this motion is carried. On the matter of the approval of the say-on-pay advisory vote, I’m advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of this resolution. Therefore, I declare that this motion is carried. Now is there any further business? As there is no further business to be brought before this meeting, the meeting is concluded. I will now turn it over to Dion Hatcher, President and Chief Executive Officer of Vermilion, to provide you with an update on our business and strategy moving forward. If you have any questions at the end of the presentation, a microphone will be made available to you. We would like to also welcome the people who have just joined us by webcast.

Questions can also be addressed from our webcast audience after the presentation is complete. Over to you Dion?

Dion Hatcher: Thanks, Bob. Good afternoon, everyone, on this snowy, feels like winter day. We’ll start with the informal part of the presentation, and we’ll just take a few minutes to talk about our Q1 results and the outlook for 2024 and beyond. Before we do that, just to remind you, we will be referencing a presentation that can be found on our website under Invest With Us and Events & Presentations as well. The disclaimer, the advisory information on forward-looking statements is at the end of the presentation, describes the forward-looking information, non-GAAP measures and oil and gas terms used today, and it outlines the risk factors and assumptions relevant to this discussion. So 2024 is actually a key milestone year for the company.

It was in 1994 that we were a small junior oil and gas company. Through the vision of our founders, Lorenzo, Claudio and [Jeff] that we started this company, they had a differentiated strategy to be an E&P company, one that grew globally through a series of acquisitions. Those acquisitions started in 1997 with France. That was our first international acquisition. After that, we followed up with other acquisitions in Europe, in France as well as – which was key in 1997, but then in Australia as well as the U.S. This global diversification has several strategic advantages. It provides Vermilion with exposure to premium-priced global products, which helps to provide that outsized netback. It provides us opportunity for capital-efficient, often underexploited conventional assets.