\*\*Strong Canadian Oil & Gas Producer\*\*: This is a solid Canadian oil and gas producer that reported large increases in quarterly production. It is currently trading at only 3.7x EV/EBITDA. The stock is up 58% in six months and far preferable to all of the recent meme bag holders that have been driving stock prices artificially high for those of you who are still holding them.
While Canada is not generally known for creating bellies full of tendies in the E&P space, Vermilion Energy is an outlier with their international gas assets in Europe printing C$48/boe in funds flow versus C$13/boe from North American assets. With geopolitics getting wackier by the minute, I would argue that VET represents a high quality hedged play into European gas prices.
Q4 2025 print came in at 121308 boe/d up 45% y/y primarily due to the acquisition of Westbrick Energy. The reserves problem everyone loved to bash the company with is gone. The bears who ranted and raved about the 36% increase in total 2P reserves to 592 MMboe (14-year reserve life index), the 25% increase in PDP reserves of 210 MMboe have been left holding a thesis that has proven 100% incorrect.
\*\*The numbers that matter:\*\*
\\- Q4 funds flow: C$241M; Another month of soft oil prices, but nice to see the funds come in nonetheless.
\\- EV/EBITDA: 3.7x We continue to view EV/EBITDA, which sits historically low, versus peers as very cheap.
\\- Market cap: \*\*C$2.4B\*\* / EV: \*\*C$3.8B\*\*
\\- 2026 Production Guidance: 118-122 thousand barrels of oil equivalent per day, or 70% natural gas.
\\- CapEx: \~\\\*\\\*C$615M\\\*\\\* for 2026
\\- Dividend: C$0.135 per quarter = 3.4% yield.
\\- Net debt/funds flow: 1.3x. High but we are not in a panicked situation yet.
In Q4, Vermilion recorded a non-cash impairment of C$572M related to Australia, France and Ireland. That sounds bad, but it's just a write-down of book value that reflects very conservative lon͏g-term oil prices that Vermilion clearly doesn't think will prevail for 5-10 years; please, for the good of everyone, go weed your garden until you've calmed down.
\*\*The Bulls are saying\*\* Bulls would argue that the much hated financial leverage that piled on so much pain over the last 2 years is about to work in your favor as energy prices start to recover. The European gas and oil hedging on our Ireland, Germany, Netherlands and Croatia assets is working well with a nice combination of a strong geopolitical tailwind and actual margin gains. Even with a 58% gain for the stock, it is still dirt cheap from a historical perspective.
\*\*My view:\*\* despite the last 6 months of share price gains, net debt as a percentage of market capitalisation remains at a premium to our peers. the 58% rally has already materialised and we would like to see more evidence of value creation. Commodity price risk remains a consideration for these stocks and a deterioration in the general macro environment will have a severe impact on share price performance.
\*\*VET is looking rather risky as oil and gas prices roll over\*\*, and getting smoked is not out of the question. I would not suggest using 1.3x leverage to invest in bonds. Not zero-day-to-expiry risky, but still rather risky..
Note to the simpletons: cheap European gas, proved reserves, and leverage equal $3.7x EBITDA. Too boring for the wife's boyfriend to write about though. We are long.
\*\*My position is B͏uy and I am long $VET.\*\*