Why Vermilion Energy (VET) Remains a Strong Buy Despite Near-Term Headwinds

In the face of volatile energy markets and declining crude oil prices declining crude oil prices, Vermilion Energy (VET) has emerged as a compelling case study in strategic resilience. While broader sector pressures have dragged down its stock price, the company's disciplined approach to repositioning, asset optimization, and undervaluation relative to its net asset value (NAV) positions it as a strong buy for long-term investors.

Strategic Repositioning: A Foundation for Stability

Vermilion Energy has been methodically reshaping its portfolio to align with a free cash flow-oriented business model, as detailed in the Deep Basin acquisition. A cornerstone of this strategy is its recent $768 million acquisition of Westbrick in the Deep Basin, which enhances its operational scale in core regions, according to a Seeking Alpha analysis. By focusing on North America, Europe, and Australia, the company leverages international diversification to mitigate regional volatility and secure stable pricing, the press release noted.

Simultaneously, Vermilion has divested non-core assets, including U.S. properties for ~$88 million and Saskatchewan/Manitoba assets for ~$300 million, according to Seeking Alpha. These exits not only streamline operations but also fund debt reduction, reinforcing financial flexibility. As stated by Vermilion's leadership, these moves are part of a broader initiative to "prioritize long-life, high-quality inventory with a lower cost structure," the company said in its press release.

Asset Optimization: Driving Efficiency and Growth

Vermilion's operational focus has shifted toward maximizing efficiency and production. The company aims to reduce CAPEX and unit costs by 30% while boosting production from ~85 boe/d in 2024 to ~120 boe/d by 2026, per Seeking Alpha. This growth is underpinned by improvements at its Montney project in Canada, where cost reductions and technological advancements are unlocking value, as discussed in the Seeking Alpha piece.

Notably, insider buying activity-such as a CAD 250,000 investment by VP of Business Development Lara Conrad and a CAD 200,000 purchase by independent director Stephen Larke-signals renewed confidence in the company's strategic direction, as reported by Yahoo Finance. These purchases hint at potential M&A activity or asset consolidation, further strengthening Vermilion's competitive edge.

Undervaluation: A Discount to Intrinsic Value

Despite its robust fundamentals, Vermilion's stock trades at a significant discount to its NAV. As of October 29, 2025, the company's NAV is reported at $1.14 billion, according to Macrotrends, while its market capitalization-calculated using a recent stock price of $7.27 per share reported by Yahoo Finance-suggests a valuation gap. This discount is exacerbated by short-term energy sector headwinds, including falling crude oil prices and global trade uncertainties, as noted by Nasdaq.

The disparity between NAV and market price presents an opportunity for investors. Vermilion's gas-focused portfolio, with ~70% of production attributed to natural gas, is well-positioned to benefit from a 5%+ CAGR in demand over the next decade, per Seeking Alpha. Additionally, the company's target net debt-to-FFO ratio of less than 1 underscores its commitment to financial discipline, according to the Seeking Alpha analysis.

Conclusion: A Compelling Long-Term Play

While near-term challenges persist, Vermilion Energy's strategic repositioning, operational efficiency gains, and undervaluation relative to NAV make it a compelling investment. By prioritizing core assets, optimizing costs, and leveraging international diversification, the company is laying the groundwork for sustained value creation. For investors with a long-term horizon, VET offers a rare combination of defensive positioning and growth potential.