VET: Journey to Germany

Research evidence excerpt

VET: Journey to Germany

Vermilion Energy Inc.

Target/Upside/Downside Scenarios Investment summary

We rate Vermilion shares Sector Perform:Vermilion Energy Inc.

30 125 Weeks 26DEC23 - 18MAY26 • Executive Committee Structure. Vermilion reestablished

the use of an executive committee that meets weekly to

25 TARGETTARGET 24.0024.00 determine corporate activity and direction.

20 • Shareholder Returns. Vermilion's shareholder returns

CURRENTCURRENT 17.6217.62 policy will target to return 40% of excess free cash flow on a 15

full-year basis to shareholders, with the balance earmarked

10 for ongoing debt reduction. Excess free cash flow is defined

5 as free cash flow less asset retirement obligations settled

20m and lease payment obligations.

15m

10m 5m • 2026 Budget. Vermilion’s 2026 outlook points toward

2024 2025 2026

D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M production of 118,000–122,000 boe/d in the context of

VET CN Rel. S&P/TSX COMP IDX MA 40 weeks $600–$630 million of capital investment.

Source: Bloomberg and RBC Capital Markets estimates for Target

Risks to rating and price targetValuation

The most significant risk to our price target and rating isOur price target of $24 per share for Vermilion, which

unexpected changes in crude oil and natural gas prices.supports our Sector Perform rating, reflects a 50% weighting

Other risks include the impact of foreign exchange andtoward a multiple of 0.8x our estimated base NAV and

government legislation as it relates to royalties, income taxes,a 50% weighting toward a 2027E mid-cycle, debt-adjusted

and environmental policy.cash flow multiple of 4.5x. The multiples we have chosen

reflect Vermilion’s relatively shallow production decline rate,

rising shareholder returns and deleveraging balance sheet