Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Vermilion Energy's Virtual 2021 Annual General Meeting. Following the formal portion of the meeting, a presentation will be given by Curtis Hicks, Vermilion's President. As a reminder, this event is being broadcast live on the internet and is being recorded. The archive event will be posted on Vermilion's website under the heading "Invest with Us" and subheading "Events and Presentations." To participate in the discussion, or to ask a question during the formal portion of the meeting, or to ask a question during our presentation, select the messaging tab, type your comment, click the send button. I would now like to turn the conference over to Lorenzo Donadeo, Vermilion's Executive Chairman. Please go ahead, Mr. Donadeo.
Thank you. Good afternoon, ladies and gentlemen. In light of continued limits on larger gatherings and our concern for health and safety of our employees and shareholders, as permitted by Vermilion's Bylaw Number One, our meeting will be held today as a virtual-only shareholder meeting with participation electronically, as explained in the proxy statement and information circular which was mailed to all shareholders on March 23rd, 2021. I would like to begin by welcoming you to Vermilion's Virtual 2021 Annual General Meeting of Shareholders. We will complete the formal part of the meeting first, and afterwards, Curtis Hicks, the President of the company, will provide you with an overview of our business and an update on our strategy moving forward. Because we are not able to be together in person, I would like to review the rules for discussion and debate to facilitate an orderly virtual meeting.
The formal meeting will deal with the items of business outlined in the proxy circular. Once we have completed that work, we will move to the informal part of the meeting. During the formal meeting, each shareholder or proxy holder wishing to address a motion may do so when I have indication the motion is open for discussion. To participate in the discussion, select the messaging tab, type your comment, and click the send button. Each shareholder may take up to five minutes to contribute to the discussion, but I reserve the right to terminate discussion on a matter. All discussion must be courteous and respectful of other participants in the meeting. All questions for management will be dealt with in the informal part of the meeting after the formal meeting is completed. Thank you in advance for your cooperation.
Ladies and gentlemen, the meeting will now come to order. As Executive Chairman of the Board of Directors of Vermilion Energy, Inc, it is my responsibility and privilege to chair this annual general meeting of the shareholders of Vermilion. Bob Englund of Norton Rose Fulbright Canada, LLP, will act as treasurer of the meeting, and Jacquie Fisher of Odyssey Trust Company will act as a scrutineer. I would like to welcome to the meeting all others participating in this online meeting. At this point, I'd like to introduce the other directors of Vermilion electronically attending the meeting today: , who's our lead director; Carin Knickel; Stephen Larke; Timothy Marchant; Robert Michaleski; William Roby; and Catherine Williams. Mr. Leiker has advised that he will not be standing for reelection to Vermilion's board in 2021. Mr. Leiker has been a director of Vermilion since 2012.
Mr. Leiker was a key contributor to our success at Vermilion. On behalf of the entire management and the Board of Directors of Vermilion, we'd like to thank Mr. Leiker for his significant contributions to Vermilion's success over the years, and he and we wish him the best in his future endeavors. I would also like to introduce the members of the executive leadership team participating electronically in the meeting. We have Curtis Hicks, President, Lars Glemser, Vice President and Chief Financial Officer, Dion Hatcher, Vice President, North America, Darcy Kerwin, Vice President, International and Health, Safety and Environment, and Jenson Tan, Vice President, Business Development.
The notice calling this meeting of shareholders a proxy for use at this meeting and the proxy statement and information circular were mailed on March 23rd, 2021, to all shareholders as of the record date for this meeting being the close of business on March 15th, 2021. As part of our ongoing stewardship of the environment and as a cost-saving measure for the fourth consecutive year, beneficial shareholders received a voting instruction form and a notice and access notification which included a link to the meeting materials consisting of the proxy statement and information circular and 2020 annual report. This procedure for the electronic delivery of meeting materials is known as notice and access and, as mentioned, is an environmentally friendly alternative that is now used by a number of companies.
As in past years, registered shareholders and those beneficial shareholders that previously requested received paper copies continue to receive a printed copy of the meeting materials and a form of proxy. I would ask that copies of all such documents be filed with the minutes of this meeting. A quorum for the transaction of business today at today's meeting is at least two people present being a registered shareholder or duly appointed proxy holder and representing an aggregate not less than 25% of the total outstanding common shares. According to Vermilion's bylaw, a person participating in today's meeting through the virtual meeting platform for today's meeting is deemed to be present at the meeting. I am advised by the scrutineer there is a quorum present. The scrutineer's report is available for inspection, and I ask the secretary to file it with the minutes of this meeting.
I hereby declare this annual general meeting of shareholders of Vermilion Energy, Inc, to be properly convened and regularly constituted to conduct business. There are various matters of business to be dealt with today. A description of each matter is provided in the information circular, a copy of which is available on our website under the heading "Invest with Us" and subheading "Annual General Meeting." In the interest of time, I do not propose to make a detailed presentation on each item. For the purposes of moving the meeting along, shareholders who are representative of Vermilion, Kyle Preston, Dion Hatcher, Darcy Kerwin, and Jenson Tan, have been asked to move and second the motions to be brought before the meeting. I would like to take a moment to comment on the voting procedures to be used at today's meeting.
Voting for all matters will proceed by way of electronic ballot through the virtual meeting platform. Polls are now open and will remain open until the end of the formal part of the meeting. If you have not voted your shares, please vote now. If you wish to wait until the end of the formal session, there will be additional time allocated for voting as well. If you have previously voted, you do not need to vote again. By voting again, you will revoke your votes made prior to the voting cutoff, and only the live votes will be counted. The exact results of the ballot voting on the items of business at today's meeting will be announced tomorrow, Thursday, April 29th, in our press release and in the report of voting results, and will be filed on SEDAR.com under Vermilion's profile.
First item of business is fixing the number of directors of Vermilion Energy Inc to be elected at eight. May I have a motion to fix the number of directors to be elected at eight?
My name is Kyle Preston, and I am a representative of Vermilion and a shareholder. I move that the number of directors of Vermilion Energy, Inc, to be elected be fixed at eight.
May I have the motion seconded?
My name is Dion Hatcher, and I am a representative of Vermilion and a shareholder. I second the motion.
Is there any discussion?
I am advised that there is no further discussion requested on this item. The next item of business is the election of the Directors of Vermilion for the ensuing year or until their successors are elected or appointed. As we have done in previous years, we will be nominating and approving individual directors and not a slate of directors. The Board of Directors has adopted a policy stipulating that if a director nominee receives a greater number of votes withheld from the election of that director than votes for the election, the nominee will offer to resign. The Governance and Human Resources Committee will then review the matter and recommend to the board whether to accept the resignation, and the board's decision to accept or reject the resignation will be publicly announced within 90 days of the meeting.
It is expected that resignations will be accepted, except in situations where exceptional circumstances would warrant that the applicable director continue to serve as a board member. The number of directors to be elected at this meeting has been fixed at eight. Information with respect to each of the nominees was set forth in the information circular for this meeting. I now declare the meeting open for nominations for Board of Directors of Vermilion Energy, Inc. May I have a motion to nominate the Board of Directors of Vermilion Energy, Inc?
I nominate Lorenzo Donadeo, Larry Macdonald, Carin Knickel, Stephen Larke, Timothy Marchant, Robert Michaleski, William Roby, and Catherine Williams as Directors of Vermilion Energy, Inc, for the ensuing year.
I will now ask Dion Hatcher to move the resolution electing those individuals nominated as directors of Vermilion Energy, Inc, to serve as directors until the close of the next annual meeting of shareholders or until their successors are duly appointed.
I move that each of the eight persons nominated be elected as a director of Vermilion Energy, Inc, to hold office until the close of the next annual meeting of shareholders or until a successor is duly elected or appointed.
Will Kyle Preston please second the motion?
I second the motion.
As previously stated, the Directors will be elected individually and not as a slate. For a nominee to be elected as a Director of Vermilion Energy Inc, the votes cast in favor of the election of the director nominee should represent no less than a majority of the votes cast by shareholders represented in person or by proxy at this meeting. Is there any discussion? I am advised that there is no further discussion requested on this item. The next item of business is the appointment of the auditors of Vermilion. Deloitte LLP are Vermilion's current auditors and have agreed to act as auditors of Vermilion if appointed. May I have a motion for the appointment of the auditors?
I move that Deloitte LLP be appointed as the auditors of Vermilion to hold office until the next annual meeting of shareholders.
May I have the motion seconded?
I second the motion.
Is there any discussion? I am advised that there is no further discussion requested on this item. The next item of business is the advisory vote on executive compensation. As part of Vermilion's ongoing commitment to strong corporate governance practices, the board has determined that it would be appropriate to hold a non-binding advisory vote at this meeting on the approach to executive compensation, commonly referred to as a say-on-pay advisory vote. This is the eighth year we are holding a say-on-pay advisory vote with an average 91% shareholder support over the last seven years. Last year, the say-on-pay support was 65%. The vote on executive compensation was an advisory vote, and the results were not binding upon the board. However, in response to shareholder engagement, we have made numerous changes to our programs.
A detailed discussion of our shareholder engagement and corresponding leadership and compensation program changes made are set out on pages 21 and 22 of the information circular and the approach to executive compensation is set forth in the executive compensation section of the information circular. May I have a motion for the say-on-pay advisory vote?
I move that on an advisory basis and not to diminish the role and responsibilities of the board of directors that the shareholders accept the approach to executive compensation disclosed in the information circular accompanying the notice of this meeting.
May I have the motion seconded?
I second the motion.
Is there any discussion? I am advised that there is no further discussion requested on this item. If you have not already voted, please complete the electronic ballot for all items of business now through the virtual meeting platform. The voting will close momentarily. The next item of business is to table the consolidated audited financial statements of Vermilion for the year ended December 31st, 2020, and the report of the auditors thereon. These financial statements were included in Vermilion's annual report, which was mailed to those shareholders who requested the financial statements along with the notice of this meeting and the information circular. For your ease of reference, links to Vermilion's annual report, which includes the financial statements, are available under our website under the heading "Invest with Us" subheading "Reports and Filings." Are there any questions regarding the financial statements?
I am advised that there are no questions regarding the financial statements. At this time, the voting is closed on all items of business. Please allow us a few moments to tally the votes and collect the scrutineer's report. As mentioned at the beginning of the meeting, the exact results of the ballot voting on the items of business at today's meeting will be disclosed in the voting results report and our press release, which will be filed tomorrow, Thursday, April 29th, 2021. The scrutineers have provided a preliminary report of the results of voting at today's voting. On the matter of fixing the number of directors of Vermilion Energy, Inc, to be elected at eight, I am advised by the scrutineer that greater than a majority of the votes cast has been voted in favor of this resolution.
Therefore, I declare the motion to fix the number of directors is carried. On the matter of electing Directors of Vermilion Energy Inc, I'm advised by the scrutineer that for each of the director nominees, greater than a majority of the votes cast has been voted in favor of the election of each director. Therefore, I declare that this motion is carried, and each of the nominees for election as Director has been elected. On the matter of appointing Deloitte LLP auditors to hold office until the close of the next annual meeting of Vermilion shareholders or until their successors are appointed, I am advised by the scrutineer that greater than a majority of the votes cast has been voted in favor of the appointment of Deloitte as auditors. Therefore, I declare that this motion is carried.
On the matter of the approval of the say-on-pay advisory vote, I am advised by the scrutineer that the majority of the votes cast by the shareholders have not been voted in favor of this resolution. Therefore, I declare that this motion is not carried. Voting results on this item of business are not binding. However, the board will take these results into account when considering future executive compensation policies and decisions. Is there any further business? As there is no further business to be brought before this meeting, this meeting is concluded. I will now turn it over to Curtis Hicks, President of Vermilion, to provide you with an update on our business and our strategy moving forward. Questions will be addressed at the end of his presentation. Thank you.
Thank you, Lorenzo. It is now my privilege and pleasure to take you through a presentation with respect to what's happening at Vermilion. First, we're going to take a look at 2020 and review. I know everybody wants to put 2020 in the rearview mirror and not speak about it again, but it's important to understand what happened in 2020 as it certainly influences and impacts what is happening at Vermilion today and going forward. We released our first quarter 2021 results earlier this afternoon. I'll touch on those results. And then have a look at what is going on over the balance of 2021 in Vermilion. We'll show you our advisory. I'll leave that for you to read at your leisure. And now we'll start with 2020 and review. As we're all aware, the events of 2020 caused a lot of turmoil in our personal and business lives.
This graph depicts WTI pricing over the last 16 months and reflects the timing of the particular events that had a major impact on both Vermilion and the energy industry. With the onset of COVID and the OPEC+ price war, oil prices collapsed in March and April last year. Vermilion acted quickly and decisively and took action to protect the balance sheet and to preserve the company's financial liquidity. We reduced our annual cash outflows by more than $550 million, including the suspension of our dividend. We made some significant changes to the senior leadership team. We reestablished the executive committee. This is a management structure that we used successfully under Lorenzo's tenure as CEO, and we believe is an effective way to manage the company. We put a renewed focus on the core business principles that were fundamental to our success in prior years.
Over the past few years, we have strayed from the core business principles that we adopted in 2003 and that underpinned our success for so many years. Maintaining a strong balance sheet provides the company with financial flexibility and allows us to execute our business plan regardless of the commodity price environment that we are in. A payout ratio under 100% contributes to operational flexibility. Meeting or beating market expectations is important in establishing a reputation as a company that can be counted on to do what they say. We want to protect our equity and minimize the dilution of our existing shareholders. We believe that a strong corporate culture provides a key foundation for successful companies. To summarize 2020, we had an extremely challenging first half. But with Vermilion's prompt response to the oil price collapse, we started to turn things around the second half.
Year-over-year, production declined by 5%. When you combine the impact of the oil price collapse with the reduction in production, it resulted in a 45% reduction in funds from operations to just over $500 million. Capital spending was reduced by $100 million from the originally budgeted amount. As I mentioned, the dividend was suspended. As a result, we were able to generate free cash flow of $135 million before the impact of dividends or $53 million net of our dividend payments. Net debt at the end of the year amounted to $2.1 billion, up slightly over year-end 2019 levels. On a positive note, Vermilion continues to be a leader in the mid-cap energy space when it comes to ESG, as demonstrated by the positive recognition we continue to receive from the independent ESG rating agencies.
Moving on to 2021, I want to touch briefly on some of the attributes that make Vermilion an attractive investment at this time. Our global portfolio mitigates commodity price risk through exposure to multiple commodity price environments. Our assets drive strong free cash flow, which support a dividend capital markets model. It is our intent to get back to that model once we have made some significant progress on deleveraging our balance sheet. The primary focus for us in 2021 will be to maximize free cash flow and reduce the absolute amount of debt outstanding. Vermilion has a long history of strong profitability, free cash flow generation, and an average annual 11% return on capital employed since the inception of the company some 27 years ago. We have significant leverage to recovering global commodity prices.
At $60 WTI, we are forecasting free cash flow in excess of $350 million, which will be used to reduce outstanding debt. We trade at one of the highest free cash flow yields amongst our peer group, making Vermilion a compelling investment opportunity at this time. And as I just mentioned, our ESG performance continues to lead our sector. We announced our 2021 guidance in January. And like I'd like to point out a few things on this page. The blue bars represent our capital spend by quarter. As you can see, we had a heavily front-end loaded program in 2020 whereby we invested approximately 65% of our total capital for the year in the first quarter. That's great for near-term production as we had near-record production levels in Q2, as reflected in the red line.
Unfortunately, with no production added and capital invested over the balance of the year, our production base was in decline. For 2021, we have a level-loaded capital program, which results in a much more balanced and manageable production profile. It also has better capital efficiencies and enables us to maximize the generation of free cash flow. Looking at 2021, you can see that our Q1 production was just above the top end of our guidance range for the year, which is 83,000-85,000 BOEs a day. A couple of other things to point out. We have set our capital program this year at $300 million as our priority is to maximize free cash flow and use it to reduce our debt, as I've mentioned. To the extent that commodity prices remain favorable, we will consider adding some incremental capital in the fourth quarter.
However, that capital will not add incremental volumes for 2021. Rather, it'll kickstart our 2022 program. A decision on whether or not to add capital will be made sometime this summer. We announced our Q1 results earlier this afternoon. I won't go into a lot of detail, but I would like to make a few points. As I mentioned, our production came in just above the top end of our guidance range for the year at 86,276 BOEs a day. After recording funds from operations of $ 162 million and investing $ 83 million in our capital program, we generated $79 million of free cash flow in the quarter. Our net debt was reduced by approximately $ 100 million over the quarter. Since the end of Q2 in 2020, we have reduced the amount outstanding under our credit facility by over $ 190 million.
This is a good start in getting the balance sheet leveraged to where we want it. We will stay disciplined over the balance of the year and continue to focus on reducing our debt levels. Moving on to one of the hot topics, not only in our industry but globally, and that's ESG. As I mentioned, we're a leader in, in our sector with respect to ESG. On this page, we list the assessment of Vermilion's ESG performance by a number of independent ESG rating agencies. In the interest of time, I won't go through this list in detail, but suffice to say we are ranked at the top of our peer group by all of these agencies, and we have been ranked there for a number of years.
In our press release this afternoon, in addition to our first quarter results, we released our emissions reduction targets. We are targeting net zero emissions in our own operations by 2050. This is an aspirational target at this point, but it is an important target as it aligns Vermilion with many of our key stakeholders. We will use our short-term intensity reduction targets to ultimately help us define the pathway to net zero emissions. We are also targeting a 15%-20% reduction in our Scope 1 emissions intensity by 2025. All of our business units have ESG plans in place, and we continue to generate ideas for enhanced environmental operations across the company. Our recent emissions and methane intensity history is shown here. We've been able to reduce flaring reduction targets and resulting emissions after oil-based acquisitions in 2014 and 2018.
We have been innovative with the use of geothermal energy produced from water in France. When you combine our track record with additional definitive plans for emissions reductions in the coming years, we are confident of achieving our ESG targets. We believe there is a place for responsibly produced oil and gas for the foreseeable future and that Vermilion can play a key role in the ongoing energy transition. We are excited about the progress we are making with respect to our ESG strategy, and we look forward to executing on our plans and reporting back to you on our progress. Now, touching on the asset base and the diversification. As you're all aware, we have assets in North America as well as international assets. The pie charts here reflect the contribution of the two main regions in which we operate on a number of different metrics.
As you can see, we are reasonably balanced between the two regions. Here you can see the contribution of production and FFO by product. As I mentioned previously, our international diversification mitigates pricing risk through exposure to multiple commodity price markets. We essentially produce four products that are differentiated by the markets that we sell those products in. We sell WTI price crude, Brent price crude, European gas, and North American gas. We'll show you here the advantage that we have in selling crude oil globally. Of note, for 2021, we are selling our Brent crude at a $5 premium to WTI, which is bolstered by our Australian crude, which is currently selling at a premium to Brent in excess of $11. This equates to a premium to WTI in excess of $14.
Overall, our basket of crude sells at a slight discount to WTI, which we wanted a better, if not the best, oil sales price in our peer group. Here we reflect the premium that we get for our European gas portfolio. European gas is currently trading in the CAD 8-CAD 10 per MMBtu range, with a slightly backwardated curve out to 2023. Conversely, North American gas is selling in the CAD 2-CAD 3.50 range, with modest backwardation. As you can see, the current premium for European gas is fairly typical, with only a couple of exceptions over the last 10 years. Now, moving on to our cash flow and profitability. On this slide, we illustrate the ability of our asset base to generate free cash flow, which we are showing as funds from operation net of capital spending.
Including estimates for the full year of 2021, we will have generated almost $1.8 billion over the last six years by the end of this year. That gives us the confidence that we'll be able to achieve our debt reduction targets and get back to a dividend capital markets model in due course. As I mentioned earlier, Vermilion trades at one of the highest free cash flow yields of our peer group. If we were to trade at the average of the peer group, that would translate into share price appreciation of approximately 25%-30% from current levels. And this supports the attractiveness of Vermilion as an investment at this time. Part of our ability to generate free cash flow is the strength of the assets. Vermilion's asset base delivers top quartile operating netbacks in spite of the gas weighting in our portfolio.
This reflects the pricing advantage we have from our crude portfolio as well as from our European gas assets. Moving on to the balance sheet for a couple of minutes. We have sufficient liquidity to execute our business plans over the next few years as we have in excess of $500 million available to us on our bank facility, which is currently termed out to 2024. The $400 million of high-yield notes on the balance sheet mature in 2025. So there's no immediate balance sheet concerns other than our own desire to reduce outstanding debt and the resulting leverage. The gray shaded area here represents our targeted leverage range of between 0.8-1.5 times debt to cash flow from operations. We operated within or below this range for many years. Unfortunately, over the last few years, our leverage has increased.
One of the reasons not to carry excess leverage is demonstrated by what happened in 2020. When commodity prices collapse, your leverage automatically increases. In this case, our leverage doubled as our FFO was essentially cut in half. It is our intention to get back to where we operate with our financial leverage within the targeted range. As I've already stated, our first priority for 2021 is debt reduction. Here we reflect the sensitivity of our balance sheet to oil prices. You can see the impact on our leverage depending on where oil prices go. We are cautiously optimistic about the direction of oil prices, but we certainly aren't planning for any prices higher than what we are seeing on strip pricing. On current strip pricing, our leverage is expected to be in the range of 2.5 times at the end of 2021.
So in summary, you know, we believe it is a good time to be a Vermilion shareholder. We have a strong portfolio of assets. We have an exceptional group of talented people at Vermilion. We believe we have adopted an approach and strategy that will enable us to deliver positive results over the long term. And we believe that we are currently undervalued in the market. That concludes my formal remarks, and we'll now invite questions from the audience. We do have one question from the audience. Given the low say-on-pay results, what steps did the company take to address shareholders' concerns? And I'm going to pass this question over to the Chair of our Governance and Human Resources Committee, Carin Knickel. Carin.
Thank you, Curtis. We weren't satisfied with the response that we received last year for our say-on-pay resolution, so we initiated a number of actions in 2020 to address shareholder concerns. Specifically, we solicited feedback from a number of large shareholders to identify their specific concerns. We made significant personnel changes at the senior management level, including the CEO. We formed a new management structure with an executive chairman and president who were brought in at a much lower targeted annual compensation level than the previous CEO. The new president's targeted compensation is at the 46th percentile of the company's Canadian peer group for that position. That amounts to CAD 3.5 million as compared to between CAD 5 million and CAD 6.5 million for the previous CEO. The executive compensation peer group, which included a number of U.S. companies, was eliminated.
Executive compensation is now benchmarked against our short-term incentive program performance peer group. The scorecards for both the short-term and long-term incentive plan programs were revised to include metrics that focused on executing the budget, reducing debt, and increasing overall profitability, which together should provide enhanced shareholder returns and awards that are more closely aligned with corporate performance. In response to the economic challenges facing our industry and company, we proactively and frankly, ahead of many of our peers, froze base pay in 2020 and significantly reduced the 2019 short-term incentive plan payable in early 2020. The board believes it has responded appropriately and promptly to the issues raised through shareholder outreach efforts last year and has reset executive compensation to be in line with its peer group.
Of course, we will continue to assess our future compensation policies, our procedures, and decisions in the context of this say-on-pay feedback.
Thank you, Carin. We have no other questions from the audience. If that's the case, we want to thank you for your participation and attendance at today's meeting, and have a great rest of the day. Thank you.