Vermillion’s Q2 Earnings Rise Y/Y on Higher Commodity Prices

Vermilion Energy (VET) has reported year-over-year growth in both Q2 revenues and earnings on the back of higher commodity prices. Shares of the Canadian oil and gas producer declined 2.5% on NYSE in early trading hours on Monday.

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Fund flows from operations (FFO) came in at $172.9 million or $1.05 per share, compared to $81.9 million or $0.52 in the year-ago quarter. Also, petroleum and natural gas sales stood at $407.2 million in the second quarter, up from $193 million in the same quarter last year.

Average realized price for crude oil and condensate product more than doubled to $79.06 per barrel, whereas NGLs rose to $25.43 per barrel from $8.94 in the second quarter of 2020. (See Vermilion stock charts on TipRanks)

The company generated $94 million of free cash flow during the quarter and invested about $79 million in exploration and development capital expenditures. Net debt reduced 7.2% to $2 billion.

Notably, Vermillion expects to generate significantly higher FFO during the second half of 2021 and forecasts annual FCF in excess of $400 million or $2.50 per share for full-year 2021.

Last month, Desjardins analyst Chris MacCulloch initiated coverage on the stock with a Buy rating and a price target of $10.39 (upside potential of 46.5%).

MacCulloch is of the opinion that the company’s balance sheet is benefitting from a combination of rising commodity prices and disciplined capital allocation.

Based on 3 Buys and 7 Holds, the stock has a Moderate Buy consensus. The average Vermilion price target of $10.25 implies 44.6% upside potential from current levels.

VET scores a 9 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.