First production is not a plateau. It is a choke
Vermilion (TSX: VET, NYSE: VET) reported second-quarter 2026 results on July 29. Production averaged 125,789 boe/d, 71 percent gas, above the top of guidance. Canada was 99,605 boe/d. International was 26,182 boe/d. Fund flows from operations were $231 million, or $1.51 a basic share. Free cash flow was $122 million after $110 million of E&D capital. Net debt fell about $70 million to $1.22 billion. Net income was $134 million. Realized gas was $5.08 per Mcf, which the company says is more than triple AECO. Month-ahead TTF averaged $22.68 per MMBtu in the quarter. Thirteen percent of volumes priced off TTF and NBP. Fifty-eight percent still priced off AECO.
The European line is Wisselshorst. The first well came on in July 2026 at restricted rates. Vermilion calls it its largest European discovery. It says planned infrastructure over the next two years is meant to produce 67 Bcf gross, 43 Bcf net, assigned to that discovery well. Follow-up wells on the Bommelsen license are aimed at early 2027. Osterheide is still producing at rates consistent with prior quarters. After quarter-end Vermilion closed a German bolt-on of about 1,000 boe/d, 85 percent gas, plus gathering around Osterheide. The company did not put a sales rate on Wisselshorst. Do not invent one.
Canada paid the quarter. Europe paid the price
Mica Montney set a record. The 8-35 BC six-well pad did more than 950 boe/d IP90 per well, 49 percent liquids, at $8.2 million a well. Deep Basin results beat budget. Australia restarted after cyclone repairs and had no lifting in the quarter. Full-year guidance moved to 121,000 to 123,000 boe/d, 70 percent gas. Capital stayed $600 million to $630 million. Third quarter is 116,000 to 118,000 because of maintenance in Ireland, Germany, and Canada. The return-of-capital target is now 40 to 60 percent of excess free cash flow, up from 40 percent. The dividend is $0.135, payable September 29.
Neutral read
VET is on the listed producer list. Banks were skipped. 125,789 boe/d and $5.08 gas are the prints. Wisselshorst is first gas on a choke, not a European field. Write the 67 Bcf as reserves on one well, not as 2026 volumes. Watch the restricted-rate print in Q3, whether Bommelsen actually spuds in early 2027, and whether the $1 billion net-debt target lands before the payout ratio does the talking.