Vermillion Inc (VRML-Q)

Does not own shares, but likes Canadian energy sector. Believes Vermillion could be a turnaround story. Many good names to own within sector. Expecting higher energy prices going forward. Supply not keeping up with demand in traditional energy sector. 

Recent acquisition in BC, to try to bolster reserve life. Trades at discount to peers because not as much room to run. Lacks the currency to alleviate that. 3x multiple is appropriate. 4% upside, not as much as other names.

Windfall taxes have taken away some upside. Different assets in different geographies. Bigger question is what's the strategy for allocating capital? Best ones should get the lion's share. Needs to refocus.

EPS of $0.35 missed estimates of $0.4134 and revenues of $475.53M missed estimates of $526.25M. Fund flows from operations were $270M, net debt decreased to $1.2B, production hit the top end of its guidance for the quarter, and the company is targeting to return 30% of free cash flows to shareholders in 2023. VET is maintaining its 2023 annual production guidance of 82,000 to 86,000 boe/d. The company is working on reducing its debt and we like that it maintained its guidance. These were decent results, and largely, the name will follow the price of oil. It continues to trade at a cheap valuation of 5.4X forward earnings and 1.2X forward sales. With its debt reduction underway, its balance sheet is quite strong and this name has some positive momentum behind it recently. We feel that if the price of oil stabilizes here or increases, we can expect to see the share price of VET move higher.
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Irish Government windfall profit taxes hard on company. Currently owns shares. Expecting return of 50% of cash flow in 2024. Inventory depth a concern. Better options for investors in sector. 

No buy thesis. Hodge-podge of assets. Second-warmest winter in Europe, plus greedy Irish government imposed 75% windfall tax on them. Paying down debt, returning modest amount of capital to shareholders. Cheap, but quality of assets not good. He'd rather pay a premium for a name that has a catalyst.

Does not own shares in company.
Bearish on natural gas prices.
High windfall taxes in Ireland.
Better names in Canadian heavy oil producers.
Lots of debt being used to pay down debt.

Share price on downward trend with weak natural gas pricing in Europe.
Energy fundamentals strong.  
Wait to buy. 
Does not own shares in the company. 
Fundamentally, better names in the sector.