Vermilion Energy - Sustainable yield and growth

Vermilion Energy is an international E&P with assets in Europe, North America and Australia. Its defensive qualities include asset and commodity diversification, low financial leverage, high margins and low finding and development (F&D) costs. Management has distributed a consistent and growing dividend yield to shareholders since 2003, while retaining sufficient capital to grow production by 13% CAGR (five years). The company’s 6.6% forecast dividend yield remains one of the highest in the E&P sector. Our valuation stands at C$48.2/share and is based on a number of approaches including P/CF, EV/EBIDAX, Gordon’s growth model and SOTP based on sustainable FCF and drilling inventory NPV10.