As we are all too aware now, COVID-19 had devastating effects on the global economy and commodity prices in 2020. As commodity prices collapsed last year, we took swift and decisive action, making drastic changes to our business in order to protect the balance sheet and preserve financial liquidity, while focusing on the health and safety of our people and communities. We reduced our 2020 capital program, suspended our dividend and, with other cost saving initiatives, reduced over $550 million combined of annualized cash outflows. In the months following, we made several changes to our executive leadership team and undertook a global organizational review to improve profitability and long-term sustainability. While these collective decisions were difficult to make, we can look back now with confidence and know that they were in the best interests of the Company. Not only did Vermilion successfully navigate this downturn, we have made several structural changes to our business that will improve our long-term sustainability and add value for our shareholders over the coming years.
In particular, we updated our business model and production targets in 2020 to realign with Vermilion’s long-standing core business principles, which are:
These principles were implemented when Vermilion started paying a distribution as an energy trust in 2003, and will shepherd us to providing long-term value creation for our shareholders moving forward.
Because these principled place greater emphasis on balance sheet strength and capital discipline to generate strong returns, these changes have led to an increased focus on free cash flow generation and debt reduction, while supporting our key stakeholders: investors, staff, governments, communities and suppliers.
In keeping with this approach, our 2021 capital budget is set at $300 MM with production guidance of between 83,000 and 85,000 boe/d, which reflects a more level-loaded capital program compared to the prior year.
One of the themes emerging from the COVID-19 pandemic is an increased global awareness and focus on environmental, social and governance ("ESG") matters and the energy transition. Vermilion has been focused on ESG for well over a decade and we take great pride in our ESG leadership within the mid-cap energy space. Sustainability is fundamental to our business, which is reflected in our consistently strong results and rankings from external ESG agencies, including Vermilion's inclusion in The Sustainability Yearbook 2021 based on the S&P Global Corporate Sustainability Assessment. We maintained our disciplined focus on ESG through 2020 despite the challenges caused by COVID-19, and we are committed to progressing our ESG initiatives in the future as we see Vermilion being a key contributor to the energy transition. As such, we have developed a comprehensive, long-term ESG strategy that will be fully integrated into our business with clear objectives, including targets for emissions reductions. This new ESG strategy and associated targets can be found here (insert link).
More detailed updates on our operational and financial progress can be found in the Reports & Filings and News areas of our company website.
|Net Revenue||$514 MM|
|Net Revenue||$65 MM|
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|Net Revenue||$58 MM|
|Net Revenue||$2 MM|
Note: net revenues = sales less royalties | staff = employees + contractors | reserves = proved + probable