Return on capital employed (ROCE): A non-GAAP ratio, ROCE is a measure that we use to analyze our profitability and the efficiency of our capital allocation process; the comparable primary financial statement measure is earnings before income taxes. ROCE is calculated by dividing net earnings (loss) before interest and taxes ("EBIT") by average capital employed over the preceding twelve months. Capital employed is calculated as total assets less current liabilities while average capital employed is calculated using the balance sheets at the beginning and end of the twelve-month period.
Twelve Months Ended
($M) Sep 30, 2024 Sep 30, 2023
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Net (loss) earnings (831,559) 960,957
Taxes (4,597) 537,895
Interest expense 83,550 84,809
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EBIT (752,606) 1,583,661
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Average capital employed 5,995,108 6,024,614
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Return on capital employed (13) % 26 %
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Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used by management to calculate net debt, a capital management measure disclosed below.
As at
($M) Sep 30, 2024 Dec 31, 2023
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Current assets 651,197 823,514
Current derivative asset (92,537) (313,792)
Current liabilities (521,669) (696,074)
Current lease liability 23,545 21,068
Current derivative liability 9,487 732
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Adjusted working capital 70,023 (164,552)
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Acquisitions: The sum of acquisitions, net of cash acquired and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions line items in the Consolidated Statements of Cash Flows can be found below.
($M) Q3 2024 Q3 2023 Q3 2024 Q3 2023 ----------------------------------- ------- ------- ------- ------- Acquisitions, net of cash acquired 1,642 3,191 7,471 139,612 Acquisition of securities -- 2,047 9,373 4,155 Acquired working capital -- -- -- 103,527 ----------------------------------- ------- ------- ------- ------- Acquisitions 1,642 5,238 16,844 247,294 ----------------------------------- ------- ------- ------- -------
Capital Management Measure
Net debt: Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" that is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations.
As at
($M) Sep 30, 2024 Dec 31, 2023
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Long-term debt 903,354 914,015
Adjusted working capital (70,023) 164,552
Net debt 833,331 1,078,567
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Ratio of net debt to four quarter trailing fund
flows from operations 0.6 0.9
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Supplementary Financial Measures
Diluted shares outstanding: The sum of shares outstanding at the period end plus outstanding awards under the Long-term Incentive Plan ("LTIP"), based on current estimates of future performance factors and forfeiture rates.
('000s of shares) Q3 2024 Q3 2023
----------------------------------------------- ------- -------
Shares outstanding 155,348 163,666
Potential shares issuable pursuant to the LTIP 3,564 4,238
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Diluted shares outstanding 158,912 167,904
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Fund flows from operations per basic and diluted share: Management assesses fund flows from operations on a per share basis as we believe this provides a measure of our operating performance after taking into account the issuance and potential future issuance of Vermilion common shares. Fund flows from operations per basic share is calculated by dividing fund flows from operations (total of segments measure) by the basic weighted average shares outstanding as defined under IFRS. Fund flows from operations per diluted share is calculated by dividing fund flows from operations by the sum of basic weighted average shares outstanding and incremental shares issuable under the equity based compensation plans as determined using the treasury stock method.
Operating netback: Most directly comparable to net earnings (loss), operating netback is calculated as sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the profitability and efficiency of our field operations.
Fund flows from operations per boe: Management uses fund flows from operations per boe to assess the profitability of our business units and Vermilion as a whole. Fund flows from operations per boe is calculated by dividing fund flows from operations (total of segments measure) by boe production.
Net debt to four quarter trailing fund flows from operations: Management uses net debt to four quarter trailing fund flows from operations to assess the Company's ability to repay debt. Net debt to four quarter trailing fund flows from operations is calculated as net debt (capital management measure) divided by fund flows from operations (total of segments measure) from the preceding four quarters.
Management's Discussion and Analysis and Consolidated Financial Statements
To view Vermilion's Management's Discussion and Analysis and Interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2024 and 2023, please refer to SEDAR+ (www.sedarplus.ca) or Vermilion's website at www.vermilionenergy.com.
About Vermilion
Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets in North America, Europe and Australia. Our business model emphasizes free cash flow generation and returning capital to investors when economically warranted, augmented by value-adding acquisitions. Vermilion's operations are focused on the exploitation of light oil and liquids-rich natural gas conventional and unconventional resource plays in North America and the exploration and development of conventional natural gas and oil opportunities in Europe and Australia.
Vermilion's priorities are health and safety, the environment, and profitability, in that order. Nothing is more important to us than the safety of the public and those who work with us, and the protection of our natural surroundings. We have been recognized by leading ESG rating agencies for our transparency on and management of key environmental, social and governance issues. In addition, we emphasize strategic community investment in each of our operating areas.
Vermilion trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbol VET.
Disclaimer
Certain statements included or incorporated by reference in this document may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this document may include, but are not limited to: capital expenditures, including Vermilion's 2024 guidance, and Vermilion's ability to fund such expenditures; the flexibility of Vermilion's capital program and operations; business strategies and objectives; operational and financial performance; wells expected to be drilled and the timing thereof; exploration and development plans and the timing thereof; future drilling prospects; the ability of our asset base to deliver modest production growth; the evaluation of international acquisition opportunities; statements regarding the return of capital; our asset petroleum and natural gas sales; future production levels and the timing
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