Published Thu, 14 Mar 2019 09:28:08 -0400 on Seeking Alpha
Most income-oriented investors include some oil stocks in their portfolios for the generous dividend yields these stocks usually offer. However, Vermilion Energy (VET) passes under the radar of the vast majority of investors. This stock is offering an 8.3% dividend yield, it is paying dividends on a monthly basis, and is growing its production at a double-digit rate. In this article, I will analyze the merits of investing in Vermilion.
Business overview Vermilion is a producer of oil and gas that is based in Canada. The company generates about 60% of its production in Canada, where it focuses primarily on light oil and liquids-rich natural gas resource plays.
In the fourth quarter, the price of Canadian crude oil collapsed and its discount to WTI reached extremely high levels, around $40 per barrel. Consequently, one would expect Vermilion's results to suffer. However, the company posted remarkably strong results, with its fund flows from operations rising 20% in the full year to a record level of $5.89 per share. The strong performance of Vermilion resulted from the resilience of its Alberta condensate and Saskatchewan light, which proved more resilient than the benchmark crude oil of Alberta.
Growth Vermilion has high-quality producing assets, which are characterized by high margins and low decline rates. The natural decline of oil fields is paramount, as it can offset the production growth from new fields to a great extent. For instance, Exxon Mobil (XOM) has spent... Read more