Oh, yeah. That was very nice. Thanks, everybody, for settling down quick. Dave, is everyone in here who's here for now? Yeah, great. Okay, so good morning, everyone. Thanks for taking time out of your busy schedules to be here with us today. A few of you have traveled as well. We really appreciate that. Just a couple of housekeeping items here before we go live right at 9:00 A.M. We'll start at 9:00 A.M. We'll go through our prepared remarks. It'll take a little over an hour. At that point, we'll have the. Good morning, everyone, and thank you for joining us for the 2025 Vermilion Energy Investor Day presentation. I'm Travis Ferguson, Director, Investor Relations and Corporate Planning, and I'm excited to tell you what we have planned for today.
We will cover our corporate overview and strategic advantages as we spotlight the depth, quality, and duration of our growth assets in both Europe and Canada. We'll discuss portfolio management and review our near-term outlook, along with the capital allocation principles that guide our decision-making. Please refer to the advisory on forward-looking statements provided at the end of this presentation. It's forward-looking information on non-GAAP measures and oil and gas transfers today and outlines risk factors and assumptions relevant to this discussion. As we near the end of a highly impactful year in 2025, we are looking ahead to a bright future as a global gas producer.
Vermilion is focused on investing in our global gas assets over the next five years, with approximately 85% of our capital expenditure planned to be allocated to our Deep Basin, Montney, and onshore European gas assets, particularly Germany, as they will be the key drivers of a step change in excess free cash flow generation for the company. As a reminder, we define excess free cash flow, or EFCF, as our fund flows, less capital expenditures, and abandonment and lease obligations. We'll also continue to harvest cash from our assets in Ireland, France, and Australia, which have contributed a significant amount of excess free cash flow over the years. It's been a critical component of the company's success. The slide four highlights the long-term commodity price forecast used in today's presentation.
This forecast reflects natural gas prices relatively in line with where the forward strip is today, while oil prices are reflective of a longer-term average, both WTI and Brent. Our global gas portfolio is uniquely positioned to benefit from top decile realized natural gas prices, with meaningful contributions from our 30% production. We will continue to apply financial discipline to navigate commodity cycles with resilience. Today's presenters include Dion Hatcher, President and CEO, Geff McDonald, VP Geosciences, Darcy Kerwin, VP International and HSE, Randy McQuaig, VP North America, Lara Conrad, VP Business Development, and Lars Glemser, VP and CFO. The team brings a depth of knowledge and expertise well suited to delivering priorities they will discuss today and drive Vermilion's future success. With that, I'll hand it off to you.
Great. Thank you, Travis, and good morning for everyone joining us today. I'm Dion Hatcher. This is my third year as CEO after having the privilege to be a part of Vermilion for over 20 years. Now, our last Investor Day was in 2018. That is over seven years ago. I'm proud to say today there's positive change in that time. I'm proud of our team and our portfolio. I'm quite excited to share our five-year plan today. After looking through these numbers, we're going to generate CAD 1.7 billion of excess free cash flow over a five-year period. That represents approximately 90% of our current market cap. So today, we want to leave you with three key takeaways. First, it starts with strategy. We've captured, we've discovered large in-place resources with repeatable idea outcomes that we are excited to share.
Second, we're going to show you lots of examples of operational excellence. Continued improvement on controllable items, which safety production costs when combined really helps to improve our profitability. Third, and of course, the most critical element then becomes per-share outcomes. We have only 153 million shares outstanding, which positions us to add meaningful value per share as we execute our plan. So this ties directly into our per-share excess free cash flow that is doubling to CAD 2.75 by 2028. More importantly, that number is sustainable. With this increasing excess free cash flow, the base dividend and share buybacks will continue to increase, and our balance sheet will become even stronger. As I mentioned, it's been a very impactful year. We're pretty excited about what Vermilion offers investors today. Our repositioning global gas portfolio has more production, is more focused, and is more efficient, and is underpinned by long-life assets.
This global gas portfolio provides exposure to both Canada as well as premium-priced European gas. That combination offers the top decile realized gas price. We move to our key assets. We have a Germany production growth plan, which is the lowest cost way to gain access to international pricing, so today, you're going to hear from Darcy and Geff talking about our largest discovery in over a decade in Europe, as well as the potential for material discoveries, given the number of identified prospects we've got offsetting large fields, each which have produced over a TCF of gas. Also, we'll review the milestones which will enable us to double Germany's production by 2030, and it's great to see the team off to such a strong start with our production year to date in Germany, up over 25%. In Canada, we've got a Deep Basin asset.
We've got over 1.1 million acres. We've got multiple liquid-rich opportunities where we can profitably grow our production and utilize existing infrastructure. We're going to pair the Deep Basin with our liquid-rich Montney asset. That's a concentrated asset that's nearing an inflection in free cash flow in 2028. The production ramps up, and then the capital ramps down. I don't want to steal Randy's and Geff's thunder, but with recent well results, in particular in the Deep Basin, are well above our peers. And we're excited as this backstops the depth and the quality of inventory that we've got in our portfolio. With this repositioned portfolio, strong operational performance, and a structural improvement in Excess Free Cash Flow, we are well positioned for returning capital over the long term. We've bought back over 20 million shares in the last three years alone.
We've increased our dividend in each of the last five years, yet the dividend payout today is quite low, sub 10% of our fund flows. Lars and Lara walked through our portfolio, the resilience of our business, and the capital markets opportunity later in the presentation. So when I took the CEO chair, we moved quickly to recalibrate the portfolio, something that we had not done in the history of our company. Today, we are in the position of being prospect and inventory rich. We've got over 25+ years, 20+ years, and 10+ years of inventory in the Deep Basin, in the Montney, and in Germany. In the table, you can see the Excess Free Cash Flow growth. Deep Basin is today, Montney inflects, and pivots in 2028. In Germany, with just the gas that we've already discovered that's behind pipe, we'll grow in 2028 and beyond.
Our direct global gas exposure is unique. We produce 100 million cu ft a day of gas in Europe. For LNG, there is significant cost. You've got to build, operate, and ship LNG across the ocean. What we do is shown on the right. We do a vertical conventional well. Our finding and development cost is around CAD 1.50 per MCF Canadian, and we sell that gas to the grid. That gas sells for a premium price. This year, our average will be about CAD 15 Canadian per MCF. By doing it this way, we avoid, for our international gas exposure, the risk of these multi-decade large volume contracts, which often have fixed fees to deliver gas into a facility. Later in the presentation, Darcy and Lars will explain why our Germany drilling program is the lowest cost way to gain exposure to international premium pricing.
Conversely, given our amount of gas, over 400 million cu ft a day of gas that we produce in Canada, a combination of the Deep Basin and the Montney, we have a lot of torque to improving AECO pricing, which we think will be a backdrop with the increased LNG export capacity in Canada. To put this in perspective, every dollar increased pricing would add over CAD 130 million of free cash flow, again with 153 million shares outstanding. That is impactful on a per-share basis. Our business has become more efficient. We are now bigger with lower costs. In Q3, given the performance we're seeing in the second half of the year, we reduced our capital guidance. We reduced our operating costs, yet still delivered on our production. Our production was actually above the midpoint of our guidance range. In Q3, we also announced our 2026 budget.
Our repositioned portfolio, if you compare back to 2024, the year before the portfolio streamlining, the production per share has increased by over 40%, while the combination of unit activity has been reduced by over 30%, as well as our capital intensity has improved by 30%. These reductions, although important, are just part of the story for structural increases in excess free cash flow. Our repositioned portfolio has structural increases, structural tailwinds as we go into 2028. First is improving capital efficiency. If you look at our drilling inventory, we've high-graded our drilling inventory. Second is the Montney infrastructure. That build-out is nearing completion, and the capital requirements will recede. Third is our ability to grow our Deep Basin volumes within existing combination. These three things will improve our capital efficiency as we go forward. Second is our decline.
Our peer group average, but as we start these new German wells, which are essentially flat production, our base decline will further moderate with time, and the third is the long, long runway of decades of inventory that we now have and the flexibility to allocate either Canada or European drilling, then the structural improvements and use the price stack that Travis noted at the start of the presentation, so again, gas prices, longer-term average price of crude of CAD 70 WTI were forecast to generate $1.7 billion of excess free cash flow between 2026 and 2030, with a significant increase starting in 2028. Our investments in Montney infrastructure and expanding our Deep Basin position provides confidence in our five-year plan. Production will grow from 120,000- 130,000 BOE a day, while on a per-share basis, when you combine that with our share buybacks, production will grow by over 40%.
We moved to capital. Our average E&D investment is CAD 600 million-CAD 630 million. As a reminder, we're guiding to CAD 635 million this year. That includes operating gas for half of the year. In 2026, we're guiding to CAD 615 million. Both 2025 and 2026 will also include Montney infrastructure, which again will decrease over time. There's one year of higher capital spend in our five-year plan when we execute our Australia drilling program tentatively in 2027. So under this scenario, we generate CAD 1.7 billion of excess free cash flow. Looking at how we would allocate that capital and the impact that would have on monthly and shareholders, we would find ourselves in 2030 with net debt approximately CAD 700 million lower than today. We would buy back over 40 million shares based on today's price.
We're able to significantly grow our base dividend while maintaining a payout ratio as low as around 10%. So later in the presentation, Lars will speak more on this topic, but you can get a feel for how impactful this level of excess free cash flow will be for return to capital and share price appreciation. Last slide before I pass it over to the team outlines the step change in excess free cash flow starting in 2028 that aligns with the CAD 1.7 billion over the five-year period. We start with the bar on the left. In 2026, using the current strip pricing of crude sub CAD 60 oil, we generate excess free cash flow of about CAD 200 million. The next bar is the excess free cash flow inflection. That's an additional $200 million, of which a third or CAD 60 million is a structural increase.
That's driven by the strategic investments and assumes no increase in commodity prices. Of note, the doubling of our excess free cash flow from CAD 200 million-CAD 400 million does not factor in any additional operational excellence improvements beyond what we are achieving today, which, of course, is a key focus of our teams every day. The table outlines the key milestones required to deliver a structural increase of excess free cash flow. Our teams have been busy delivering our plan. I'm confident we'll keep this momentum going into 2026 and beyond. So next, I will pass it to Geff. We'll start with the depth and quality of our inventory and our key assets.
Thank you, Dion. Good morning. I understand the slides are not advancing online, so I'll just reference that we're on slide 17 and to those participants outside of the room. I'm Geoff MacDonald.
I work as Vice President of Geoscience here at Vermilion. I've been here since 2019. I'm happy today to have the opportunity to walk you through a bit of Vermilion's past, but more importantly, a discussion about the resilience of our portfolio's growth assets in the future. I'd like to start this section on slide 18 by sharing some insight into Vermilion's technical culture. I'm proud to say that our geoscience staff considers several commercial fundamentals in every well drill. For our Canadian teams, we constantly strive to unlock more value on every acre we own and make each well better than the last. For our European teams, it's about understanding and mitigating risk while constantly striving to find bigger and better targets to chase. We build our core positions where there is a significant resource in place for two reasons. First, our fairways are proven.
We believe in small exploration, adding zones and acres through time, which is the second reason. Where there is resource concentration, time works in your favor, technology unlocking opportunity. Because every dollar matters, we strive to mitigate capital exposure risk through partnerships, competitive intelligence, and technology. On slide 19, we'll discuss the Deep Basin. Back in the 1990s, early in our history, Vermilion began to acquire and develop resources in the Deep Basin of Alberta. Despite being a trust, Vermilion was a pioneer in several emerging tight sand plays. We've drilled literally hundreds of wells in the Cardium, the Spirit River, the Ellersley, and now the Rock Creek formations, unlocking liquid-rich inventory across our acreage base that has led to meaningful organic production growth. Complementary to this success, Vermilion entered the Montney at Mica, straddling the Alberta and British Columbia border in 2022.
This geologically unique area secured Vermilion's portfolio a foothold in a stacked and high productivity, high liquids, and inventory deep area. Finally, through the Westbrick acquisition, which closed earlier this year, our Deep Basin position now exceeds 1.1 million net acres. We have decades of inventory on both assets, yet two-thirds of this inventory remains unbooked. For geologists, the Deep Basin is an exciting fairway. It has the attributes of a basin-centered cell where water risk is minimal, yet, as we've shown across our acreage, carbon liquids are prolific. We've identified nine productive stacked siliciclastic horizons and counting. We're combining depositional models with 3D seismic visibly unlocks inventory that can be calibrated to outcrops in the foothills and also to local core. Randy will later show the exceptional performance of recent wells within the Spirit River formation, i.e., the Notikewin, Falher, and Wilrich, that have exceeded our pre-positioned estimates.
He'll also show recent performance from the Lower Mannville and Jurassic interval, where early-time oil rates from two recent Ellersley wells have outperformed much of our 10 years of legacy drilling. With decades of running room in these plays spanning from Badger in the south to Carrot Creek in the north, the Deep Basin is an exciting zone where our teams will continue to unlock new areas and new zones for years to come. On slide 21, I'll shift to a discussion on the Montney. As we discussed later, our excess free cash flow inflection point is approaching, and once reached, our Mica asset has the inventory depth to then hold flat for the next 20-plus years.
Mica has subsurface attributes such as an anomalously thick and liquids-rich anchor zone in the Middle Montney, but we also have synergistic yet isolated emerging upside in the Upper Montney and a massive liquids resource in the Lower Montney, a resource we currently exploit through our Middle Montney completions. The inventory potential makes Mica an area that can deliver for decades with the ability to surprise to the upside. On slide 22, I'll shift to our international business crossing the Atlantic. Vermilion entered the Netherlands in 2004 with our first drilling campaign in 2009. Over our two decades there, we've had a 70% track record of success and will realize 270 billion cu ft of gas production from our organic drilling to date. This is the equivalent of our inner team in unrisked resource predictions.
For context, we risk our conventional prospects, and by 70%, we mean that 21 of the first 30 wells that we drilled successfully discovered hydrocarbons. On a portfolio basis, we apply similar probabilistic techniques to our volume forecasts as a means to balance risk and reward in our conventional exploration portfolio. Discovering the unrisked and therefore higher volume demonstrates our commitment to technical rigor and risk mitigation. Vermilion entered Germany a decade after the Netherlands in 2014, expanding its position to approximately 1.5 million net acres across the productive Permian reservoir fairways of the North German Basin. Our acreage is almost completely covered by 3D seismic, and with this, our strong teams have been able to build a funnel of opportunities that includes more than 50 leads, more than half of which have been adequately technically matured to be included in a long-range plan.
Several of these prospects, both in the Netherlands but in Germany especially, have multiple potential follow-up drills once proven. Our multi-decade track record of success suggests that we will continue to realize economic production, reserve replacement, and growth for years to come. On slide 23, in Germany specifically, where our activity has ramped up, our most recent three-well campaign made significant discoveries at Osterheide and especially Wisselshorst, which has a P mean predicted original gas in place of 380 billion cu ft, which is proportionate in size to its neighboring fields. Development of this field alone, along with our exploration campaigns over the coming years, maintains a robust level of activity. Any further success simply amplifies our capital allocation possibilities. Our third drill in 2024 at Weissenmoor South encountered permeability challenges during its discovery of a gas column literally hundreds of meters thick.
However, there is ample room to sidetrack from the crest of the structure to an area where amplitudes suggest better and thicker multi-zone reservoirs less than 1,000 meters away. I'd like to put our acreage in the context of the stacked zone schematic and map of adjacent producing fields on this slide. Several Rotliegend fields have each produced more than a trillion cu ft in the area outside our Bommelsen and Osterheide licenses. These lie within the dune and fluvial facies belt of the Rotliegend formation, where chlorite mineralization preserves permeability despite the reservoir interval being approximately 5,000m deep. Moving up the stack to the Zechstein carbonates, our Bahrenborstel and Barenburg licenses are nestled in among several large Zechstein fields producing from prolific platform facies. It is here that our Scholen prospect lies.
Coming back down the stack instead, there are both legacy and more recent discoveries in Carboniferous age rock, of which Vermilion also has prospectivity and will test at Uchte and at Geesbrug in the Netherlands. Again, this is not frontier exploration. Rather, this is small exploration in a proven basin where significant gas pools, some over a trillion cu ft, are common. Our successful track record of discovering gas fields in the Netherlands and Germany is undergoing an unequal transition now for two reasons. First, the scale of targets in Germany is significantly larger than the targets we've been able to historically pursue in the Netherlands. Second, the volume metrics of the targets we are chasing in the Netherlands is also increasing. These two factors nearly triple the mean unrisked gross per well gas recovery from nine billion cu ft in our historical Netherlands drills.
Looking back, our first 30 wells discovered more volume than our unrisked internal estimates at approximately 270 billion cu ft. Looking forward, our technical teams have identified 31 single and multi-well structures that are on average two and a half times larger than those drilled to date. This is a meaningful step change to our European gas prospectivity. I'll wrap it up on slide 25 before I pass the mic to Darcy. Here, I'll touch on Vermilion's opportunity set in the context of how we book our reserves. In the Deep Basin, across our 1.1 million net acres, only 21%, or approximately 300 of the 1,450 locations we've mapped, was included in our year-end legacy 2024 reserves or the acquisition reserve estimate commissioned for the Westbrick deal. In the Montney, we've booked six years of our inventory.
For context, once the ramp up to 28,000 BOE a day is realized, our remaining inventory will generate meaningful excess free cash flow for two decades to come. Finally, building on comments from the last slide, only 16%, or five of the 31 single and multi-well structures we've identified in the Netherlands and Germany, is included in our 2P reserves. Given our conservative philosophy in Canada, along with our strong track record of replacing reserves in Europe, not to mention the opportunity set in front of us, we are confident that the duration of our business is meaningfully longer than our reserve life index. With that, I thank you for your time this morning, and I'll pass it to Darcy to discuss our European gas business in more detail.
Thanks, Geff. Good morning, everyone. Thanks for joining us today. My name is Darcy Kerwin.
I lead Vermilion's international operations as well as our corporate HSE group. Over my 20 years with the company, I've had the pleasure to manage our assets in Australia, in France, and in Ireland. Now my priority is unlocking the next phase of growth in our European gas assets, specifically in the Netherlands and Germany. Geff has already presented the geology of the region, and I will further expand on our opportunities to show how these assets and our people will position us for profitable European gas growth. Our teams in Europe combine deep technical capability with strong relationships in these jurisdictions, both of which are critical for permitting and execution and continuing success in Europe. I will show you how our land base in Germany and the Netherlands is core to our European gas strategy.
The first item I'd like to point out is the close proximity of our German and Dutch operations. The distances between our offices in Amsterdam and in Hanover, shown in blue on the slide, is approximately 400 km, a four-hour drive, not significantly different than the distance between Calgary to Edmonton or Boston to New York. Within this relatively small region, we have a dominant land base. This, combined with the proximity, reduces complexity and allows for synergies between our Dutch and German operations. Together, Germany and the Netherlands represent a significant undeveloped land base. With approximately 1.5 million acres of land and almost 50 million cu ft per day of gas production in these two countries alone, we see a long runway of high-return projects across the basin.
In Germany, we're building out key infrastructure that will enable us to bring new discoveries online efficiently, improving costs and cycle time of several large prospects in our portfolio. In the Netherlands, we continue to build on a history of successful exploration and development and will focus on larger structures adjacent to our current infrastructure. These assets generate strong, low-decline cash flows, which underpin long-term excess free cash flow growth. Importantly, this growth comes without the burden of long-term LNG commitments, giving us flexibility to allocate capital where returns are greatest. Execution matters. We're building on more than two decades of European gas development expertise. The track record of our strong technical teams speaks for itself. Since entering the Netherlands in 2004, we've drilled 30 wells with a 70% success rate, and we've added over 180 billion cu ft of reserves.
Some recent permitting achievements will allow us to focus on larger pool developments in the Netherlands adjacent to our asset base. By leveraging these skills in Germany on similar geologic formations, our deep gas program is targeting substantially sized pools of 30 billion cu ft each. These are large prospects, each with the potential for numerous follow-up locations. As an example, the 1.6 net wells that we've drilled at Osterheide and Wisselshorst have added more than 20% to our European gas reserves. From a production point of view, once these wells are debottlenecked, these two wells will produce 25 million standard cu ft per day compared to our current European production of 100 million cu ft per day.
Looking to the future, our strong technical teams are working with our extensive 3D seismic coverage, and our permitting teams are working with host governments to deliver permits in a timely and a predictable way. Together, we have identified over 10 years of development prospects, which will unlock significant value from these conventional gas assets. These opportunities are large. On the Bommelsen license in Germany, our most recent discovery, Wisselshorst, is Europe's largest in over a decade, adding 68 BCF of gross reserves. This discovery validates our technical approach and highlights the scale of opportunity in the North German Basin. Germany presents an opportunity not seen in Western Canada since well before the unconventional revolution. Large conventional targets that have the ability to produce at flat or very low decline rates for years, reliably generating meaningful excess free cash flow without consuming additional drilling capital to offset declines.
Building on this success, within the broader Bommelsen exploration license, we have identified multiple follow-up locations with in-place gas of 380 billion cu ft, which will be the focus of our early 2027 drilling program. Now, these wells have big reserves. Successful exploration in Germany can replace all of our current European gas reserves. We've identified up to 30 drilling locations with six gross, 3.9 net wells planned to be drilled by 2030. Each of these wells has the potential to add approximately 30 billion cu ft to our portfolio, which is transformational for our European gas. Our recent gas discovery in Germany could fully replace all of our current European gas reserves. I should point out that these wells are a combination of exploration, appraisal, and development wells.
We may elect to farm down some of the initial exploration wells to manage capital at risk and improve prospect economics. This is not just incremental growth. It's a step change in our ability to deliver premium-priced gas in Europe. These wells are very impactful. To put them in perspective, two gas wells in Germany is equivalent to 12 wells in the Deep Basin in terms of reserves and value. Both opportunities are compelling. With similar investment costs and reserves, the premium European gas pricing drives higher NPVs in Germany. Two wells drilled in Germany can deliver the same impact as a full year of drilling in the Deep Basin, but with higher margins and longer durations. We like to think about these wells in terms of how many times they pay out during their lifetime. Again, both Deep Basin and German wells are impressive.
Our Deep Basin wells pay out over three times, which is better than most unconventional assets, but our German deep gas wells are even stronger, paying out four times over their lifetime. These high payout numbers mean less capital is required, driving outsized MPV per well, resulting in higher excess free cash flow per share for Vermilion, confirming why Germany is still a strategic growth lever for us. We're focused on efficiency. By batch drilling wells and leveraging high-performance rigs, we're reducing cycle times and capital costs. Standardized modular gas facilities have similar impacts on capital costs and cycle times, but will also significantly lower operations and maintenance costs going forward. As an example, we expect that the follow-up wells to our Wisselshorst discovery will have a 20% decrease in capital and a 30% reduction in cycle time from well release to first production, further enhancing economics.
We're confident that the costs for our new exploration wells will be significantly lower than our current European legacy cost structure. With unit operating costs of approximately CAD 0.50 per MCF projected for our Osterheide and Wisselshorst developments, and F&Ds in the CAD 1.50 per MCF range going forward, we see significant cost advantages over LNG imported into Europe. Follow-up development wells will benefit from this improved structure and accelerated development timelines. Later in his presentation, Lars will show you how this cost performance offers investors the best exposure to premium European gas prices. Our goal is to deliver the lowest cost of supply for international gas exposure, and we're well on our way. Infrastructure is key to unlocking value. We've completed the Osterheide facility and pipeline tie-in, and we're progressing the next phase of the Wisselshorst processing facilities and network.
These investments set the stage for bringing additional wells online efficiently. With long lead equipment already ordered and permits secured, we're positioned to execute and grow quickly and cost-effectively. On slide 35, Germany is now pivoting from investment to excess free cash flow generation. With two wells drilled and infrastructure in place, we expect meaningful contributions starting in 2026, growing through 2030 and beyond. With our Osterheide well currently online and producing above our pre-drill expectations, with strong production rates heading into winter, we will bring our discovery well at Wisselshorst online in the second quarter of next year and will focus on infrastructure debottlenecking into 2027. The revenue generated from these first two discoveries will generate significant and sufficient excess free cash flow to self-fund planned further development and exploration wells in Europe.
We have additional drilling opportunities on the Bommelsen license and have two wells planned for 2027, expected to come on stream in 2028, with production continuing to grow into 2029 and 2030. The program offers low-cost international exposure to European gas and long-duration cash flow. By 2028, German deep gas production will represent a significant portion of our European output, driving structural improvements in our cost profile. In summary, by 2030, we expect Germany's production to be approximately 10,000 BOEs per day, driven by the addition of over 8,000 BOEs per day of production from our deep gas exploration program. Finally, Germany played a key role in more than offsetting declines from more mature assets like Ireland. As Ireland naturally declines, production from Germany will replace reserves and more than sustain European gas output for years to come.
This is a skill advantage that supports Vermilion's long-term excess free cash flow profile and positions us to deliver consistent returns to shareholders. I'll now pass to Randy McQuaig, VP, North America, who will give you an overview of our Deep Basin and Montney assets. Thank you.
Morning, everyone. My name is Randy McQuaig. I lead our North American operations, and I've been with Vermilion for 12 years. As Travis said, this has been an impactful year for Vermilion, where we've repositioned and simplified our North American portfolio, and I'll review our two main assets, the Deep Basin and the Montney. So why are we in these plays? In this slide, you can see the independent research shows that these are two of the top four North American gas plays.
And I'll note the payout shown here around one year, and I'll reference those when we review the economics later in the presentation. So starting with the Deep Basin, Geff went through our history of working here for years. You can see our significant land position in the area and the large amount of infrastructure where we currently have an excess of 100,000 bbl a day of capacity. This area provides us with significant upside and optionality with the high-graded position that we achieved through the Westbrick acquisition, and I'll walk you through some of the key attributes in the coming slides. The key stats that reflect our dominant position is that we are a top five Deep Basin producer by both volume and land base. We also have significant liquids weighting compared to our peers, which drives robust rates of returns.
And as Dion had mentioned, there is significant infrastructure in place to support our plans. So really, our half-cycle returns become full-cycle with a minimal amount of CapEx required. You can also see on the map the contiguous acreage position, which provides us the ability to drill longer wells, which also increases the rates of returns. Lastly, as mentioned in our Q3 release, our recent well results have exceeded our Deep Basin. With our focus on profitability and the decision to defer, most of these wells were brought on production last month into a stronger AECO pricing environment. The map on the right highlights a few of these wells where you can see they are not concentrated in any one area or any one zone, which really speaks to the depth of our inventory.
Moving into inventory, the team has identified over 1,400 locations across our land base where there are nine discrete zones within the Deep Basin stack. This provides us with decades of inventory that support production rates of 70,000- 90,000 bbl a day, assuming we're drilling 40 wells a year. With this depth of inventory and existing infrastructure capacity, we have the ability to materially grow this production if we choose to allocate more CapEx to this play. The inventory number is also quite dynamic, where we allocate a portion of all of our drill programs to strategic wells to test new concepts, and when they're successful, they prove up additional inventory.
We've also been very active in increasing this land base, where we've already added 38 sections of land this year through crown land sales and various swaps and farm-ins, and our teams continue to be active here with the goal of dominating the Deep Basin in our area. On the theme of operational excellence, where Dion mentioned we have a culture of continuous improvement and focusing on what we can control. You can see the drilling cost comparison is a 30% improvement from previous programs. This is done through our ability to drill longer laterals on our contiguous acreage block while having shallower depths in comparison to our peers. We're also starting to see the cost benefits of running a consistent three-rig drilling program by realizing the efficiency and the optimization gains, which is helpful to further drive down these costs.
The other key component to our program is achieving strong well results, where you can see the significant improvement in our 2026 budget forecast compared to the average of the prior programs. The star on here is showing the IP30 for the Q3 program, which is coming in at over 1,000 bbl a day, which is almost twice the rate of our previous programs and over 200 bbl a day above our budget forecast. This 13-well program definitely exceeded our expectations, and I am really proud of our team's efforts to deliver such a solid result, and I wouldn't be surprised to see a few of these wells show up in the top well reports later this month. Finally, we move to the economics. Our improved type curve combined with the lower cost is driving the robust economics shown on this slide.
The independent research that I showed at the start of this presentation had our Deep Basin payout at one year, and you can see that our economics are aligned with this. With our focus on continuous improvement and achieving strong results, I fully expect to see this get better over time. So in summary, we have a strong technical team in place who've been energized with our recent results and the ability to work on the significant land position in a prolific part of the Deep Basin, and I have full confidence that they will continue to deliver on our Deep Basin commitments while providing further optionality to provide meaningful Excess Free Cash Flow to Vermilion. So with that, I will move to our Montney asset review.
As Geff mentioned, we entered the Montney in 2022, which established this large contiguous land block, and we've grown our production from 4,000 bbl a day to the current rate of 16,000 bbl a day while building out some of the key infrastructure that support our plans to achieve our target rate of 28,000 bbl a day in 2028. A key component to achieving this target is having our infrastructure in place, which is nearing completion. You can see the progress that we've made here in the phased approach we took in expanding our 8-33 battery in BC, along with building the water hub, which resulted in CAD 650,000 per well savings due to reduced water sourcing and handling costs. Final phase three expansion of 8-33 is scheduled to be completed in the second half of 2027, with the estimated CAD 40 million of spend occurring over the next two years.
This will bring our capacity in BC to 27,000 bbl a day. 20,000, or 120 million a day, is related to gas compression. This gas will be processed at the expanded third-party West Doe facility, which is being constructed by Tourmaline, and scheduled to be completed in late 2027. We also have 6,000 bbl a day of capacity in Alberta, where we plan to drill a four-well pad next year. With the interpretation of our recently shot seismic and the strong results of our recent retention well in the area, we see upside on these lands and are excited to get these results. Success here would provide further development upside and the optionality to exceed the current 28,000 barrel a day target we have for Mica. So with the majority of infrastructure investment behind us in 2028, Mica will be pivoting to a long-term free cash flow generating asset.
To get there, we forecast drilling 40 wells to reach our target rate, and then we can sustain that production level with around eight wells per year. And as Geff reviewed, we currently have enough identified inventory to hold this flat for over 20 years. We also have the long-term marketing agreements in place and multiple egress points that allow us to maximize profitability of this asset, and Lars will expand more on that later in the presentation. On the theme of operational excellence, you can see the significant improvement that our teams have made in reducing the DCET costs through various optimizations in both drilling and completions. In the past year alone, we've seen our DCET decrease by over CAD 1 million per well, bringing our current estimate down to CAD 8.5 million per well.
This reduction has been critically important when you consider the large number of wells we plan to drill in the next few years, and with our team's focus on this, I wouldn't be surprised to see it come down even further over time. Moving to the economics, you can see here that our top quartile DCET for extended reach oily Montney, along with the strong production and high liquid rates, is driving this robust rate of return. The economics are better than the industry payout of one year that I referenced earlier, and much like the Deep Basin, this play is moving to half-cycle returns because we're coming full-cycle with the infrastructure investment spend behind us. So in summary, you can see the progress that has been made as we approach the significant milestone of pivoting Mica to an Excess Free Cash Flow generating asset.
Once we reach the target production of 28,000 bbl a day, which once again could be higher with an accelerated Alberta program, we estimate the free cash flow generation to be in the CAD 125-150 million dollar range, which would be sustainable for 20 years, and with the strong technical team that we have working this asset and their continued focus on optimizing the NPV, I fully expect to see these cash flow estimates increase over time, and so with that, I will now pass to Lara Conrad to review how we manage our portfolio.
Hello and good morning. I am Lara Conrad, VP of Business Development, and I am very much newer to Vermilion than any of my colleagues, having just joined the team here in May. I made the decision to join Vermilion for two key reasons.
First off, it's due to the strength of the leadership team here. The entire executive leadership shares talent, humility, and hard work, and the professionals here are top-notch, so very excited to be part of this team. Secondly, this team has made some really important changes to the portfolio, and I want to be part of that. Vermilion is now very well positioned in both Canada and in Europe. From a business development perspective, this means we are not pressured to make major moves on the acquisition and divestiture front. However, with the opportunity set that we have, we will continue to enhance the portfolio by looking at opportunities that increase our profitability, provide synergies, and fit within our strategy of our unique group of assets. This is what makes me very excited to be part of this team.
On slide 55, Vermilion's portfolio can be seen, and it includes assets across the play life cycle. In the early stages, we have exploration opportunities in Germany, infrastructure growth projects in the Montney, and a wealth of inventory to sustain production in the Deep Basin. Our excess free cash flow generating international assets in France, Australia, and Ireland, while now later in the asset life cycle, enabled Vermilion to build the land positions that we enjoy today in Germany, the Netherlands, Montney, and the Deep Basin. These assets continue to deliver free cash flows that supply funding for infrastructure build-out at Mica and provide returns to shareholders. Vermilion benefits from diversified downstream exposure as a result of the geographies in which our assets are positioned, with commodity sales exposure to both North American and international pricing points. We will continue to invest in coring up our current positions.
Vermilion's inventory in the Deep Basin and Montney provides stable base production to support scalable growth in Canada and opportunistic exploration growth in Europe. In addition to organic development, we will continue to actively pursue acquisition opportunities where high net back margins exist. When reviewing these opportunities, careful consideration will be given to value, strategic fit, and market conditions. These considerations support the streamlining of our asset base, which we've already undertaken, while ensuring we make value-based decisions on both acquisitions and divestitures. On slide 56, we're showing the experience that Vermilion has in both international and Canadian markets. This provides us a very unique view, as we have in-depth knowledge and understanding of evolving plays and policies in both North America and in European markets, while being a small enough company to be nimble and make decisions efficiently.
We'll pursue opportunities that have synergies in our core areas, with the ability to compare and contrast the excess free cash flow margins across our asset fleet. We have had success acquiring international assets from the majors, having built strong global relationships. Having operated in diverse jurisdictions for almost 30 years, the Vermilion team has proven experience in both onshore and offshore environments, have delivered success from exploration wells, development programs, and later in life field optimization, and have delivered significant excess free cash flow from our European and Australian assets. The quality of the portfolio following our asset high grading. We have raised the bar when looking at acquisition opportunities. We are in a position to build on a strong base and look forward to being able to create additional value in the Vermilion portfolio.
Liquids-rich positions will continue to be our focus in Canada, where we have a depth of knowledge in both unconventional and conventional plays. As Geff noted, we started amassing our position in the Deep Basin in 1995 and have successfully integrated the Westbrick acquisition, driving significant synergies that were not included in our original evaluation. We will pursue tuck-in acquisitions adjacent to our existing acreage to deliver synergies and maximize value. We entered Europe in 1997, just two years after taking a position in the Deep Basin. We look forward to continuing to pursue acquisitions in Europe that add value and compete with our organic development, and additionally support bala nce between our international assets and main assets in our portfolio. We will safely take care of fields that are later in life.
Through rigorous evaluation and disciplined action in our portfolio management, we look forward to enhancing Vermilion's Excess Free Cash Flow. I will now pass to Lars Glemser to discuss our outlook and capital allocation.
Thanks, Lara. Good morning. Just a quick coordinate check for those that are online. I understand you to be advancing the slides on your own. So under Invest with Us, upcoming events, you'll find the slide deck that we're progressing through here. Slide 59 is where we're at. Just as you're navigating there, no disrespect to my colleagues, but this really is the fun part of the presentation where I get to take all of their good work, wrap it up, and share it through the corporate lens. So looking forward to that. I'm Lars Glemser, CFO, and it has been a real pleasure to be part of the Vermilion team for the past 10 years.
As referenced in this session, I'll walk you through our outlook and how our capital allocation is driving long-term shareholder value. Over the past hour or so, you've heard how we've repositioned our asset base, and now I'm going to pull that together through three themes at the corporate level: resilience, sophistication, and opportunity. On resilience, this allows us to thrive through commodity price cycles, not just survive them, and it extends beyond the balance sheet. We then take a sophisticated approach to maximize our revenue and margins through a multi-year strategy supported by our long-duration assets to maximize returns. This positions Vermilion uniquely in the capital markets for opportunity. On the global gas front, we have no real peer.
Our decisions are driven by a laser focus on per-share growth, both in production and excess free cash flow, giving us flexibility in the short term and delivering enhanced returns over the long term. On resilience, debt comes in many forms. As shown here on slide 61, we've addressed it decisively to create both financial and operational resilience. As shown on the left of this slide, we've reduced net debt while repositioning the portfolio over the past five years. By the end of 2026, we expect net debt to production to be down 50% from 2021, and we are committed to strong financial leverage and reducing debt to FFO to a one-times ratio where we have operated for a number of years. We've also strengthened our debt maturity profile. Over the past three years, we accessed U.S.
public debt markets twice, terming most of our debt out to 2030 and 2033 at approximately a 7% interest rate. Today, over 85% of our debt is termed out compared to just 20% in 2020. In the bottom right, we show the combined impact of debt reduction and extended tenor, which leaves us with over CAD 1 billion in liquidity on our covenant-based revolving credit facility, which is termed out to 2029 and supported by a 14-bank North American syndicate. Commodity cycles will remain volatile, but with this level of financial resilience, we're positioned to emerge stronger from downturns as a result of our repositioning and fully capture upside. Financial strength is only part of the story. On slide 62, we show how we've reinforced operational resilience at the same time.
On the left, we show the progress we have made over the past four years as we significantly reduced the number of well bores while increasing production per well bore. The chart on the top right reinforces how we've invested meaningfully in infrastructure, primarily in our Mica asset, to unlock long-term resource potential, which will benefit future production additions and EFCF. That investment phase is now winding down, and post-2026, our focus is shifting to production and adding activities in Mica and bringing gas behind pipe in Germany, as well as follow-up drilling in our German discovery to support EFCF growth. Today, we are a larger company and more focused, with over 90% of our production concentrated in global gas assets, the areas where we allocate capital.
This clarity of focus positions us for the next leg of organic growth and, more importantly, for per-share growth in production and excess free cash flow. We take a technically driven, sophisticated approach across the business. Marketing our global gas is a great example of this and how we enhance our realized price. With over 20 years of experience in European gas markets and over 30 years in North America, paired with long-duration assets, we can take a long-term view to optimize revenues. To elaborate on a couple of the examples on this slide, we have a diversified AECO exposure. We have diversified exposure through basis swaps. We currently have AECO basis swapped from a legacy 10-year trade, and we recently added to this with a basis swap for the 2029 to 2035 period.
This reduces our AECO exposure in place of Henry Hub, and we continue to evaluate other opportunities to diversify a portion of our gas from AECO to hubs such as Henry Hub and others. We also look to diversify with our physical transport capabilities, and we've recently extended our Alliance Pipeline capacity by 10 years to 2035, which gives us access to the Chicago gas market. In addition, we will have capacity on Westc oast Pipeline beginning late 2026. On our Mica Montney asset, we have secured pipeline takeaway capacity to produce 20. We also locked in firm capacity at a deep cut plant, giving us a 35% liquids weighting, and more importantly, a 55% revenue weighting at Mica's high-value liquids. The result is shown on the right and reinforces the advantage we have with multiple markets that are not necessarily correlated.
Our corporate and operational teams work together to maximize the value of our production. On slide 64, we show how we have a sophisticated and disciplined approach to hedging that provides market diversification, protecting capital outlays as well as the balance sheet. This all ties to capital allocation and return on capital employed, as well as our business development strategy. As an example, we hedge 70% of the acquired production in the 2023 core transaction to affect a less than two-year payout and not expose the balance sheet on a cash transaction. Similarly, our Westbrick acquisition was done in a low gas price environment, and the combination of an active hedge strategy on first WTI and then gas paired with a disposition program was used to manage risk while protecting the balance sheet.
This all serves the purpose of backstopping the strategy over the long term and to emerge from downturns in a better position than we went in. Our target is 25%-50% of production hedged, with positions initiated up to three years out. For the period of 2023 to 2025, we expect approximately $700 million in hedge proceeds and have hedged about 40% of our production for 2026. Market diversification is only effective if it impacts the bottom line, and as you can see on the left, the combination of our market exposure and financial hedges results in the highest realized gas price amongst our peers and without the risk of LNG contracts. We think this is the better way to provide investors with exposure to global gas.
At the end of the day, these are all commodities, and they will cycle up and down over the years and overshoot and undershoot cost of supply. We're not trying to make a quick call on where we want exposure for the short term, but are building a portfolio for the long term. We see a lot of advantages to having structural long-life resource in Canada and in two of the most prolific basins to participate in the North American and global desire to use and export more gas. Our low cost of supply for European gas growth pairs well, and investment today into Germany will set the stage for continued meaningful European gas volumes once the next decade to ensure meaningful exposure over the coming years to global gas. The opportunity starting on slide 65.
Investing in the global gas thesis through public companies, it's challenging with limited options, especially in the mid-cap space. In Canada and the U.S., there are few companies with gas weightings above 50% and even fewer with meaningful global pricing exposure today. Most LNG entities require investment-grade entities, categories, sorry, to enter supply contracts, and this is due to the longevity and associated risks with those contracts. This limits investor options when seeking high-quality, long-duration resource with global price exposure. Vermilion stands out as one of the only companies with material global gas exposure and a market cap over 1 billion and the only mid-cap to do it. As North America works to supply gas globally for decades to come and as gas becomes more critical, Vermilion is uniquely positioned. To add to the Vermilion opportunity, show on the right our production and revenue split.
70% of our production is gas, but the 30% of liquids we produce is high value and predominantly oil and condensate, with exposure to Brent and Brent premium pricing in France, Germany, and Australia, and WTI and condensate pricing in Canada. As our revenue is almost liquids and gas at 51% gas, 49% liquids, but we retain that meaningful exposure to the rising tide of global gas demand. Slide 66. Recall earlier that Darcy went through our European gas opportunities in Germany, and what we have done here is stack those opportunities against various LNG economics out of North America. Think of this as a cost of supply curve. The lower, the better. Investing through cycles for the upside with costs eating less into the margin between North American and basis. Canada West Coast LNG is extremely competitive, the most competitive source of LNG supply in North America.
This has the potential to provide a tailwind to Canada gas demand and create a new and growing source to compete against our own growing demand requirements and exports to the U.S. This is positive for AECO and provides a direct advantage to Vermilion. For example, as Dion referenced earlier, a $ 1 increase in AECO pricing, whether through higher Henry Hub or a tighter AECO basis, translates into more than $130 million in additional EFCF per year. We will pair this with our low cost of supply global gas. With this chart, we show a couple of data points indicating the cost to produce and ship gas from North America and Europe.
More than 50% advantage that Vermilion has to the next lowest cost of supply results in Vermilion providing the most direct exposure to global gas prices and supporting investment into our European gas projects through the cycles without the exposure of long-term contracts. This combination gives us flexibility to monitor global commodity price signals and invest where returns are strongest. On slide 67, our repositioned portfolio sets us up for meaningful growth, not just in production per share, but more importantly, free cash flow per share. Let me remind you how we define EFCF. We do start with funds flow from operations, deduct all exploration and development spending, as well as the asset retirement and capital lease obligations. The investments we've made, Montney Infrastructure, de-risking Germany, and expanding our Deep Basin position structurally improves our ability to generate EFCF in 120/20.
That means per share EFCF growth that outpaces production growth. And that's a key differentiator for us going forward. As we enter this EFCF realization phase and work towards the $2.75 per share of EFCF, the yield at our current share price would increase to in excess of 20%. On slide 68, our return to capital priorities are unchanged. We will structurally add EFCF per share. Similar to how we have multiple options on the operational front to create value, we have multiple levers to pull to achieve per share EFCF growth, and the optimum approach will shift with the market cycles. We will be flexible. We will balance EFCF allocation between debt reduction, production growth organically and through acquisitions, share buybacks, and dividends. As the team has outlined, we are an exciting part for Vermilion.
Operational plans we have shared and a return to historical pricing, there will be ample EFCF to meaningfully reduce debt, reduce the share count, and pay a dividend. To put another way, our projected EFCF over the next five years at the price deck we have disclosed is close to our current market capitalization. Slide 69. To wrap up this section, this final slide puts the CAD 1.7 billion of EFCF over the next five years into perspective. We will prioritize debt reduction in the short term, which will allow for the potential to allocate more EFCF to shareholder returns over the next five years. In addition to the potential CAD 2.70 per share of dividends over this five-year period at the current dividend rate, the share count could be reduced by over 30% with net debt well below one times.
We will also have organic opportunities in the portfolio that can be evaluated against the sale. As we have inventory remaining in the Deep Basin and 15 years of inventory remaining in the Montney, our Germany production will be growing at the end of this five-year period. We are excited to have this EFCF optionality in the portfolio and will relentlessly evaluate the best allocation to support a growing EFCF profile over time. With that, I'll pass it back to Dion.
Thank you, Lara. Thank you to the team for the presentation today. The organization has done an incredible job delivering on our business plan so as we look forward to 2026 and beyond, again, confidence that we'll do the same. I want to take this opportunity to sincerely thank everyone in our organization. Their efforts have made this greatly improved at what looked possible.
In closing, there are three items that we kicked off the meeting with. First, strategically, we play large with our largest discovery in over a decade in Europe. We've talked about a decade of inventory in the Deep Basin and Montney, two of the top plays in North America. Second was our focus on what we can control, operational excellence with tangible examples of lower costs in each of our plays, as well as production exceeding our type curves in the Deep Basin. Third and most critical element, which Lars just touched on, is that excess free cash flow growth per share with only 153 million shares outstanding. We have the potential to meaningfully double our excess free cash flow to $2.75 in 2028.
We're excited about that level of excess free cash flow, what that can do for return to capital, and what that can do for shareholders' appreciation in the stock price. So again, I want to thank you for your time today. That concludes our presentation.