Vermilion Energy has completed the previously announced acquisition of interests in production and exploration assets in Germany from Engie E&P Deutschland, for total consideration of €33 million ($46.2 million), based on the effective date of January 1, 2016. After adjustments for cash flows between the effective date and closing date, Vermilion's cash cost for the Acquisition is projected to be approx. €28.3 million ($39.6 million).
The Acquisition includes operated and non-operated interests in five oil and three gas producing fields, along with an operated interest in one exploration license. Vermilion will assume operatorship of six of the eight producing fields, with the other fields operated by ExxonMobil Production Deutschland (EMPG) and Deutsche Erdoel (DEA).
Production from the Assets has averaged 2,000 boe/d (51% oil) in 2016 through the end of October. Vermilion expects to increase production by approx. 10% in 2017 based on budgeted capital investment of €3.6 million ($5.1 million). Using the current forward strip, we forecast fund flows from operations(1) of approx. €17.6 million ($24.9 million) from the Assets in 2017.
The Acquisition provides Vermilion with its first operated producing properties in Germany, and advances its objective of developing a material business unit in the country. Germany has a long history of oil and natural gas development, and a consistent fiscal framework with low political risk. The Assets are expected to be complementary with Vermilion's existing European portfolio, offering similar subsurface characteristics and development opportunities.