Vermilion Energy Inc. has entered into an agreement to acquire Westbrick Energy Ltd., a privately owned oil and gas company operating in Alberta's Deep Basin, for a total consideration of $1.075 billion. The deal, expected to close in Q1 2025, will significantly expand Vermilion's footprint in the region, enhancing its operational scale and boosting full-cycle margins in the liquids-rich Deep Basin. According to Vermilion’s CEO Dion Hatcher, this acquisition supports the company’s high-grading initiative in North America and adds substantial value to its long-term operations.

The acquisition includes approximately 1.1 million acres of land and four operated gas plants with a total capacity of 102 mmcf/d. This new acreage, located in the southeastern portion of the Deep Basin, complements Vermilion’s existing assets and is expected to generate substantial operational and financial synergies. These synergies, which could include improvements in capital efficiency, infrastructure optimization, and gas marketing, are not yet factored into the evaluation but are anticipated to materialize over time. Notably, the deal excludes certain undeveloped Duvernay rights on approximately 300,000 acres, which will remain with Westbrick’s shareholders.

Vermilion’s acquisition of Westbrick adds 50,000 boe/d of stable production, with a projected 2025 production split of 75% gas and 25% liquids. This acquisition is expected to generate over $110 million in annual free cash flow, based on current commodity prices. The new assets will contribute roughly 50% of revenue from liquids and 50% from gas, and Vermilion plans to hedge gas production to manage financial risks.

The acquisition also enhances Vermilion’s inventory with more than 700 identified drilling locations, offering robust production potential for over 15 years. Reserves are estimated at 92 million boe for proved developed producing (PDP) and 256 million boe for proved plus probable (2P), with significant upside from probable reserves and unbooked drilling locations. The acquisition price per boe of PDP reserves is $11.70, translating to an implied recycle ratio of 1.3 times based on 2025 forecasted netbacks.

Vermilion plans to fund the acquisition through its undrawn revolving credit facility, along with a $250 million term loan and a US$300 million bridge facility. The transaction is expected to increase Vermilion's net debt to $2.0 billion, with a target net debt to fund flows from operations ratio of 1.5 times by the end of 2025. To manage debt, Vermilion will focus on non-core asset sales and further high-grading of its portfolio.

Upon closing, Vermilion will become a dominant global gas producer, with total production exceeding 135,000 boe/d, more than 80% of which will come from its gas assets in Alberta, British Columbia, and Europe. The company expects the acquisition to generate strong free cash flow, improve capital returns, and enhance its shareholder value over the long term.