Q2 FY2026
Filed Jul 29, 2026Vermilion Energy Inc. Reports Q2 2026 Results, Increases Annual Production Guidance and Enhances Return of Capital Framework
Production exceeded the top end of guidance, annual production guidance increased with E&D capital expenditures unchanged, FFO and free cash flow remained substantial, net debt declined, and the return of capital framework was increased.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Salesother | $554,343 | – | – |
| Fund flows from operationsnon-GAAP | $231,222 | – | – |
| Fund flows from operations ($/basic share)non-GAAP | $1.51 | – | – |
| Fund flows from operations ($/diluted share)non-GAAP | $1.48 | – | – |
| Net earnings from continuing operationsother | $134,599 | – | – |
| Net loss from discontinued operationsother | ($361) | – | – |
| Net earnings (loss)other | $134,238 | – | – |
| Net earnings from continuing operations ($/basic share)other | $0.88 | – | – |
| Net earnings (loss) ($/basic share)other | $0.88 | – | – |
| Cash flows from operating activitiesother | $170,751 | – | – |
| Cash flows used in investing activitiesother | $113,523 | – | – |
| Capital expendituresnon-GAAP | $109,576 | – | – |
| Free cash flownon-GAAP | $121,646 | – | – |
| Excess free cash flownon-GAAP | $105,296 | – | – |
| Long-term debtother | $1,308,333 | – | – |
| Net debtother | $1,224,065 | – | – |
| Net debt to four quarter trailing fund flows from operationsnon-GAAP | 1.3 | – | – |
| Total productionother | 125,789 boe/d | – | – |
| Crude oil and condensate productionother | 24,753 bbls/d | – | – |
| NGLs productionother | 11,714 bbls/d | – | – |
| Natural gas productionother | 535.93 mmcf/d | – | – |
| Average realized priceother | $49.23/boe | – | – |
| Average realized natural gas priceother | $5.08/mcf | – | – |
| Average realized crude oil and condensate priceother | $133.97/bbl | – | – |
| Operating netbacknon-GAAP | $26.23/boe | – | – |
| Fund flows from operationsnon-GAAP | $20.55/boe | – | – |
Q3 2026 and full-year 2026 outlook
- NoteQ3 2026 production is expected to average 116,000 to 118,000 boe/d.
- NoteFull-year production guidance: 121,000 to 123,000 boe/d (70% natural gas).
- NoteE&D capital expenditures: $600 to $630 million.
- NoteBoth E&D capital expenditures and operating expenses are weighted toward the second half of the year and are within the stated guidance ranges on a full-year basis.
- Note47% of expected net-of-royalty production is hedged for the remainder of 2026.
- Note58% of European natural gas production, 54% of crude oil production, and 43% of Canadian natural gas volumes have been hedged.
Capital returns
- Returned $26 million to shareholders through dividends and share buybacks, including $21 million in dividends and $5 million of share repurchases.
- Repurchase of shares: $5,465.
- Dividends declared: $20,659.
- Cash dividends: $0.135 per share.
- Declared a quarterly cash dividend of $0.135 per common share, payable on September 29, 2026, to shareholders of record on September 15, 2026.
- Return of capital framework targets 40% to 60% of excess free cash flow to shareholders, up from the previous 40% target.
What drove it
- Production averaged 125,789 boe/d, with 71% natural gas, exceeding the top end of guidance.
- Performance was driven by record production at Mica Montney, continued strong Deep Basin results and the staged restart of production in Australia.
- The 8-35 BC six-well pad delivered IP90 of over 950 boe/d per well, with 49% oil and liquids, at a per well cost of $8.2 million.
- First production from the Wisselshorst discovery was achieved in July 2026.
- Strong European gas and crude oil pricing and gains on derivative instruments drove reported net income.
- The Company recognized a realized loss of $57 million on hedging, more than offset by unrealized mark-to-market gains of $174 million on the hedge portfolio.
Concerns
- Q3 2026 production guidance of 116,000 to 118,000 boe/d reflects planned maintenance in Ireland, Germany and Canada.
- Both E&D capital expenditures and operating expenses are weighted toward the second half of the year.
- Vermilion did not export any oil in Australia during the second quarter.
- Operating netback was $26.23/boe versus $28.60/boe in Q2 2025.
- Fund flows from operations were $231,222 versus $259,678 in Q2 2025.
- Initial production rates are preliminary and not necessarily indicative of long-term well or reservoir performance, ultimate recovery, reserves or future profitability.
What to watch
- Execution of planned maintenance in Ireland, Germany and Canada during Q3 2026.
- Delivery against full-year production guidance of 121,000 to 123,000 boe/d and E&D capital expenditures of $600 to $630 million.
- Production expansion at Wisselshorst through planned infrastructure investments over the next two years and follow-up drilling on the Bommelsen license in early 2027.
- The ramp-up of Wandoo production and the expected Australian oil lifting in Q3 2026.
- Progress toward the $1 billion net debt target.
- Deployment of the revised 40% to 60% excess free cash flow return-of-capital framework.
Balance sheet and cash flow
- Cash flows from operating activities: $170,751.
- Cash flows used in investing activities: $113,523.
- Free cash flow: $121,646.
- Excess free cash flow: $105,296.
- Long-term debt: $1,308,333.
- Net debt: $1,224,065.
- Net debt was reduced by approximately $70 million to $1.22 billion at June 30, 2026.
- Adjusted working capital: $84,472 as at Jun 30, 2026.
- Net debt to four quarter trailing fund flows from operations: 1.3.
Analysis
Vermilion reported a strong second quarter operationally, with production of 125,789 boe/d, including 71% natural gas, above the top end of its guidance range. Total production was 125,618 boe/d in Q1 2026 and 136,002 boe/d in Q2 2025. The company attributed first-half outperformance to record Mica Montney production, Deep Basin drilling results that exceeded budget and acquisition assumptions, and the staged Australian production restart. It raised full-year production guidance to 121,000 to 123,000 boe/d while retaining E&D capital expenditure guidance of $600 to $630 million.
Financial results benefited from higher realized commodity prices and derivative gains. Sales were $554,343, while the average realized price was $49.23/boe, compared with $43.71/boe in Q2 2025. The average realized natural gas price was $5.08/mcf and the crude oil and condensate price was $133.97/bbl. Net earnings were $134,238, or $0.88/basic share, following net losses in both Q1 2026 and Q2 2025. The release specifically cited strong European gas and crude oil pricing and gains on derivative instruments, including unrealized mark-to-market gains of $174 million that more than offset a realized hedging loss of $57 million.
FFO was $231,222 and FCF was $121,646 after $109,576 of capital expenditures. FFO was slightly below $232,277 in Q1 2026 and below $259,678 in Q2 2025, while FCF improved from $97,697 in Q1 2026 but was below $144,189 in Q2 2025. Operating netback improved sequentially to $26.23/boe from $25.49/boe, although it remained below $28.60/boe in Q2 2025. The company noted that both operating expenses and E&D capital expenditures are weighted to the second half of the year.
Balance-sheet progress continued, with net debt of $1,224,065, down from $1,292,567 in Q1 2026 and $1,413,321 in Q2 2025. Net debt to four quarter trailing FFO declined to 1.3 from 1.4 in both comparison periods. Vermilion returned $26 million through dividends and repurchases and increased its return-of-capital framework to target 40% to 60% of EFCF to shareholders. The revised framework follows $840 million of debt reduction over the past five quarters and is tied to progress toward the stated $1 billion net debt target.
Near-term output will be lower than Q2 production, as Q3 guidance calls for 116,000 to 118,000 boe/d because of maintenance in Ireland, Germany and Canada. The operational focus is the execution of this maintenance, the expected Australian oil lifting in Q3, ramping Wandoo production, and developing Wisselshorst. Vermilion also reported that 47% of expected net-of-royalty production is hedged for the remainder of 2026, which provides cash-flow protection while retaining commodity-price exposure.
Not in the filing
stated, not guessed- Gross margin was not reported.
- Operating income was not reported.
- GAAP or IFRS diluted EPS was not reported.
- Segment revenue was not reported.
- Cash and cash equivalents were not reported.
- Full-year operating expense guidance range was not reported.
- Revenue, gross margin and tax rate guidance were not reported.
- Previous-release outlook was not provided, so comparisons with prior guidance are unavailable.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.