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SUSTAINABLE GROWTH AND INCOME

JUNE 2016

SUSTAINABLE GROWTH AND INCOME JUNE 2016
ADVISORY
ADVISORY

This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an offer to sell or the solicitation of an offer to buy, securities of Vermilion. This presentation and its contents should not be construed, under any circumstances, as investment, tax or legal advice. Any person accepting delivery of this presentation acknowledges the need to conduct their own thorough investigation into Vermilion and its activities before considering any investment in its securities.

Forward-Looking Statements. In the interest of providing information regarding Vermilion, including management's assessment of Vermilion's future plans and operations, certain statements made by the presenter and contained in these presentation materials (collectively, this "presentation") are "forward-looking statements" or "forward-looking information" within the meaning of applicable Canadian and United States securities laws (collectively, "forward-looking statements"). Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target", "seek", "budget", "predict", "might" and similar words suggesting future events or future performance. All statements other than statements of historical fact may be forward-looking statements. In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. The forward-looking statements contained in this presentation speak only as of the date of this presentation and are expressly qualified by this cautionary statement.

Specifically, this presentation contains forward-looking financial and operational information including information relating to our business strategies, plans and objectives; our growth strategies over the near, medium and long term including targeted production (including timing to reach peak production from the Corrib field), production mix and related growth rates, composition and quantity of estimated reserves and contingent and prospective resources, reserve-life index, and the related current and future costs of finding, developing and producing estimated reserves and resources; fund flows from operations (FFO) and related growth rates; the sensitivity of our 2016 FFO to changes in West Texas Intermediate (WTI) oil prices, Dated Brent (Brent) oil prices and Title Transfer Facility (TTF) prices based assumptions for natural gas prices and oil pricing differentials in Canada relative to WTI as well as Canada-United States and Canada-Euro foreign exchange rates; compound annual growth rate (CAGR); commodity pricing expectations and anticipated commodity mix and suitability to a dividend growth and growth and income model; net debt levels and net debt to FFO ratios; cash flow and related growth rates and stability; potential free cash flow; dividends and related growth, sustainability and rate of return; anticipated netbacks; planned capital expenditures and our plans for developing our assets and funding our capital expenditures and dividends on our common shares; capital expenditure projections and the allocation of our capital expenditures to various projects and geographic regions; drilling plans; drilling prospects; the existence, operation and strategy of our risk management program, including the portion of future exposures that have been hedged; targeted total returns; anticipated benefits of acquisitions; our business strategy for future growth.

In addition, information and statements relating to reserves are deemed to be forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, that the reserves described exist in quantities predicted or estimated, and that the reserves can be profitably produced in the future. Cash dividends on our common shares are paid at the discretion of our Board of Directors and can fluctuate. In establishing the level of cash dividends, the Board of Directors considers all factors that it deems relevant, including, without limitation, the outlook for commodity prices, our operational execution, the amount of funds from operations and capital expenditures and our prevailing financial circumstances at the time.

This information is based on Vermilion’s current expectations and is subject to a number of risks and uncertainties that could materially affect future results. These risks include, but are not limited to, general economic risks and uncertainties, future commodity prices, exchange rates, interest rates, geological risk, political risk, regulatory approval risk, production demand, transportation restrictions, risks associated with changes in tax, royalty and regulatory regimes and risks associated with international activities. Additional risks and uncertainties are described in Vermilion’s Annual Information Form, as well as Vermilion’s Management’s Discussion and Analysis (“MD&A”) which are filed on SEDAR at www.sedar.com and on the SEC’s EDGAR system at www.sec.gov. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in the Company's securities should not place undue reliance on these forward-looking statements. Forward looking statements contained in this document are made as of the date hereof and are subject to change. The Company assumes no obligation to revise or update forward looking statements to reflect new circumstances, except as required by applicable securities laws.

All references are to Canadian dollars unless otherwise specified.

This presentation contains certain non-standardized financial measures including net debt and fund flows from operations as well as non-GAAP measures including netbacks that are not determined in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. These measures as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with calculations of similar measures by other companies. Reference is made to Vermilion's publicly filed documents, including our most recently filed MD&A, for a discussion of these measures, including a reconciliation of fund flows from operations to cash flow from operating activities and net debt to long-term debt. Management believes that, in conjunction with results presented in accordance with IFRS, these measures assist in providing a more complete understanding of certain aspects of Vermilion’s results of operations and financial performance. Investors are cautioned, however, that these measures should not be construed as an alternative to measures determined in accordance with IFRS as an indication of our performance.

Certain natural gas volumes have been converted on the basis of six thousand cubic feet of gas to one barrel equivalent of oil. Barrels of oil equivalent (boe’s) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

ADVISORY This presentation is for information purposes only and is not intended to, and should not

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ADVISORY (Continued)
ADVISORY (Continued)

Reserves & Resource Definitions

All reserves and resources estimates in this presentation are derived from evaluation reports (dated February 8, 2016 with an effective date of December 31, 2015) prepared by GLJ Petroleum Consultants Ltd. (“GLJ”), an independent qualified reserves evaluator, in accordance with the Canadian Oil and Gas Evaluation Handbook (the "COGEH") and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The following provides the definitions of the various reserves and resource categories used in this presentation as set out in the COGEH. Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:

Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved (“1P”) reserves.

Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable (“2P”) reserves.

"Contingent resource" is not, and should not be confused with, petroleum and natural gas reserves. "Contingent resource" is defined in the COGEH as: "those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. All of the contingent resources and location estimates disclosed in this presentation are categorized as Development Pending, which is where resolution of the final conditions for development is being actively pursued (high chance of development). Resources classified in this sub-category must be economic and have been assigned a chance of development ranging between 80% and 99%.

A range of contingent resource estimates (low, best and high) were prepared by GLJ. A low estimate (C1) is considered to be a conservative estimate of the quantity of the resource that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. Those resources at the low end of the estimate range have the highest degree of certainty (a 90% confidence level) that the actual quantities recovered will be equal or exceed the estimate. A best estimate (C2) is considered to be the best estimate of the quantity of the resource that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Those resources that fall within the best estimate have a 50% confidence level that the actual quantities recovered will be equal or exceed the estimate. A high estimate (C3) is considered to be an optimistic estimate of the quantity of the resource that will actually be recovered. It is unlikely that the actual remaining quantities of resource recovered will meet or exceed the high estimate. Those resources at the high end of the estimate range have a lower degree of certainty (a 10% confidence level) that the actual quantities recovered will equal or exceed the estimate.

The primary contingencies which currently prevent the classification of the contingent resource as reserves include but are not limited to: preparation of firm development plans, including determination of the specific scope and timing of the project; project sanction; access to capital markets; stakeholder and regulatory approvals; access to required services and field development infrastructure; oil and natural gas prices in Canada and internationally in jurisdictions in which Vermilion operates; demonstration of economic viability; future drilling program and testing results; further reservoir delineation and studies; facility design work; limitations to development based on adverse topography or other surface restrictions; and the uncertainty regarding marketing and transportation of petroleum from development areas.

There is no certainty that it will be commercially viable to produce any portion of the contingent resources or that Vermilion will produce any portion of the volumes currently classified as contingent resources. All contingent resources evaluated by GLJ were deemed economic at the effective date of December 31, 2015. The estimates of contingent resources involve implied assessment, based on certain estimates and assumptions, that the resources described exist in the quantities predicted or estimated and that the resources can be profitably produced in the future. The risked net present value of the future net revenue from the contingent resources does not necessarily represent the fair market value of the contingent resources. Actual contingent resources (and any volumes that may be reclassified as reserves) and future production therefrom may be greater than or less than the estimates provided herein.

For more detail, including the forecast price and cost assumptions used by GLJ in preparing their evaluation reports, please refer to Vermilion’s Annual Information Form for the year ended December 31, 2015 available under the Company profile at www.sedar.com.

ADVISORY (Continued) Reserves & Resource Definitions All reserves and resources estimates in this presentation are derived

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VERMILION OVERVIEW

VERMILION OVERVIEW

VERMILION OVERVIEW
VERMILION’S KEY ATTRIBUTES
VERMILION’S KEY ATTRIBUTES

Global independent with leading positions in high netback businesses in Europe, North America and Australia

Self-funded growth and income model supported by high margins, low decline rates and strong capital efficiencies

Defensive issue with multiple risk-reducing attributes: global commodity exposure, project diversification and relatively low financial leverage

Consistent production growth from well-defined conventional projects + additional growth potential in

unconventional resource plays

All major business units generate free cash flow with flat-to-growing production

Substantial management and director ownership and a consistent record of market out-performance

VERMILION = INCOME + FULLY FUNDED LONG-TERM GROWTH + COMMODITY DIVERSIFICATION
VERMILION = INCOME + FULLY FUNDED LONG-TERM GROWTH + COMMODITY DIVERSIFICATION
VERMILION’S KEY ATTRIBUTES ► Global independent with leading positions in high netback businesses in Europe, North

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CAPITAL MARKETS SUMMARY
CAPITAL MARKETS SUMMARY

Market Summary

Trading Price (May 31, 2016) Ticker Symbol (TSX & NYSE) Shares Outstanding

$43.39 (TSX), $33.08 (NYSE) VET 115.3 million

Monthly Dividend

$0.215/share

Dividend Yield

5.9%

Director and Officer Ownership

6%

Capital Structure

Market Capitalization Enterprise Value Net Debt (including net working capital) Net Debt-to-FFO Ratio

VERMILION REPRESENTS A DEFENSIVE ISSUE IN A VOLATILE MARKET
VERMILION REPRESENTS A DEFENSIVE ISSUE IN A VOLATILE MARKET

*

Net debt to fund flows from operations (FFO) - based on trailing twelve month FFO at March 31, 2016. Non-GAAP measures, see Advisory.

$5.0 billion $6.4 billion $1.4 billion 2.9 x *

CAPITAL MARKETS SUMMARY Market Summary Trading Price (May 31, 2016) Ticker Symbol (TSX & NYSE) Shares

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PRODUCTION GROWTH AND CAPEX
PRODUCTION GROWTH AND CAPEX
 

Y/Y

E&D

Capital

Production

Y/Y

PPS

Capex

Intensity

Year

(boe/d)

Growth

Growth

($MM)

($/boe/d)*

  • 2011 35,202

10%

6%

491

13,900

  • 2012 37,803

7%

0%

453

12,000

  • 2013 41,005

8%

5%

543

13,200

  • 2014 49,573

21%

16%

688

13,900

  • 2015 54,922

11%

7%

487

8,900

2016E

62,500-63,500

16%

10%

235

3,700

2016 GUIDANCE – 62,500 TO 63,500 BOE/D 70,000 60,000 15% CAGR 50,000 40,000 6% CAGR 30,000
2016 GUIDANCE – 62,500 TO 63,500 BOE/D
70,000
60,000
15% CAGR
50,000
40,000
6% CAGR
30,000
20,000
10,000
0
BOE/D
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
TARGETING ~30% PRODUCTION GROWTH COMPARED TO 2014 WITH A FOUR-FOLD IMPROVEMENT IN CAPITAL INTENSITY * Capital
TARGETING ~30% PRODUCTION GROWTH COMPARED TO 2014 WITH A FOUR-FOLD IMPROVEMENT IN CAPITAL INTENSITY
*
Capital Intensity calculated as E&D Capex divided by daily Production. Capital Intensity differs from Production Efficiency included on the slide “Capital Efficiency” (Slide 42).
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E&D CAPITAL BUDGET
E&D CAPITAL BUDGET

Capital Expenditures by Country

2014 Actuals ($MM)

2015 Actuals ($MM)

2016 Budget* ($MM)

2016 vs 2015 % Change

2016 vs 2014 % Change

Canada

336

202

54

(73%)

(84%)

France

148

92

59

(36%)

(60%)

Netherlands

62

47

28

(40%)

(55%)

Germany

3

5

8

60%

167%

Australia

44

62

66

6%

50%

USA

1

12

8

(33%)

800%

Ireland

94

67

9

(87%)

(90%)

Central and Eastern Europe

-

-

3

-

-

Total E&D Capital Expenditures 688 487 235 (52%) (66%)
Total E&D Capital Expenditures
688
487
235
(52%)
(66%)

Total Development Capital by Category

2014 Actuals ($MM)

2015 Actuals ($MM)

2016 Budget* ($MM)

Drilling, completion, new well equipment and tie-in, workovers and recompletions

438

327

132

Production equipment and facilities

189

131

58

Seismic, studies, land and other

61

29

45

Total E&D Capital Expenditures 688 487 235
Total E&D Capital Expenditures
688
487
235
OUR CAPITAL PLAN ENHANCES ASSET VALUE IN A LOW COMMODITY PRICE ENVIRONMENT
OUR CAPITAL PLAN ENHANCES ASSET VALUE IN A LOW COMMODITY PRICE ENVIRONMENT

*

2016 Budget reflects foreign exchange assumptions of CAD/USD 1.41, CAD/EUR 1.55 and CAD/AUD 0.99.

E&D CAPITAL BUDGET Capital Expenditures by Country ($MM) 2015 Actuals ($MM) 2016 Budget* ($MM) 2016 vs

8

FUNDS FLOWS FROM OPERATIONS (FFO)
FUNDS FLOWS FROM OPERATIONS (FFO)

Year

Fund Flows from Operations ($MM)

Fund Flows per Share

Y/Y

Growth

2011

$474

$5.22

33%

2012

$558

$5.69

18%

2013

$668

$6.61

20%

2014

$805

$7.63

21%

2015

$516

$4.71

(36%)

2016E*

$465

$4.01

(10%)

$1,000 $800 $600 $400 $200 $0 FFO ($MM) 2003 2004 2005 2006 2007 2008 2009 2010
$1,000
$800
$600
$400
$200
$0
FFO ($MM)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
SELF-FUNDED FOR CASH USES (E&D CAPEX, CASH DIVIDENDS AND ABANDONMENT)
SELF-FUNDED FOR CASH USES (E&D CAPEX, CASH DIVIDENDS AND ABANDONMENT)

* Company estimates as at May 26, 2016. 2016 FFO estimate based on 4 months of actual prices + remainder of year at May 25, 2016 strip: Brent US$49.83/bbl; WTI US$50.10/bbl; MSW = WTI less US$3.52; TTF $5.86/mmbtu; AECO $1.80/mmbtu; CAD/USD 1.30; CAD/EUR 1.46 & CAD/AUD 0.94. Assumes constant DRIP and includes existing hedges. FFO is a non-standardized measure (see Advisory).

FUNDS FLOWS FROM OPERATIONS (FFO) Year Fund Flows from Operations ($MM) Fund Flows per Share Y/Y

9

FFO SENSITIVITY
FFO SENSITIVITY
2016 FFO @ C$5.00/MMBTU EUROPEAN GAS
2016 FFO @ C$5.00/MMBTU EUROPEAN GAS
2016 FFO @ C$6.00/MMBTU EUROPEAN GAS
2016 FFO @ C$6.00/MMBTU EUROPEAN GAS
   

BRENT (US$)

       

BRENT (US$)

 

OIL

35

40

45

50

55

60

65

OIL

421

PRICE

35

40

45

50

55

60

65

PRICE

       
   

Forecast FFO (C$MM)

     

Forecast FFO (C$MM)

 

WTI (US$)

35

 
  • 360 385

405

420

  • 438 454

 
  • 471 35

WTI (US$)

   
  • 369 394

414

431

  • 448 464

 

480

40

 
  • 370 395

415

430

  • 448 465

 
  • 481 40

   
  • 379 404

424

441

  • 458 475

 

490

45

  • 382 407

 

427

444

  • 460 477

 
  • 493 45

 
  • 391 417

 

436

453

  • 470 487

 

502

50

  • 394 419

 

439

456

  • 473 490

 
  • 505 50

 
  • 404 429

 

451

466

  • 483 499

 

515

 

55

  • 403 428

 

450

465

  • 482 499

 
  • 514 55

   
  • 413 438

 

460

475

  • 492 508

 

524

60

 
  • 411 436

458

473

  • 490 506

 
  • 522 60

 
  • 421 446

 

468

483

 
  • 500 516

532

65

  • 419 444

 

466

481

  • 498 514

 
  • 530 65

 
  • 428 454

 

475

491

 
  • 508 524

539

FFO sensitivity to AECO = ~$3.5MM for every $0.25/mmbtu change in AECO pricing FFO sensitivity to MSW differential = ~$2.1MM for every US$1/bbl change in differential FFO sensitivity to USD/CAD = ~$2.1MM for every $0.01 change in CAD/USD exchange rate FFO sensitivity to CAD/EUR = ~$0.8MM for every $0.01 change in CAD/EUR exchange rate

OUR THREE LARGEST COMMODITY EXPOSURES ARE BRENT OIL, EUROPEAN GAS AND WTI OIL
OUR THREE LARGEST COMMODITY EXPOSURES ARE BRENT OIL, EUROPEAN GAS AND WTI OIL

* Company estimates as at May 26, 2016. Sensitivities are based on 4 months of actual prices + remainder of year at noted prices or May 25, 2016 strip: MSW = WTI less US$3.52/bbl; AECO $1.80/mmbtu; CAD/USD 1.30, CAD/EUR 1.46 & CAD/AUD 0.94; assumes constant DRIP and includes existing hedges. FFO is a non-standardized measure (see Advisory).

FFO SENSITIVITY 2016 FFO @ C$5.00/MMBTU EUROPEAN GAS 2016 FFO @ C$6.00/MMBTU EUROPEAN GAS BRENT (US$)

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RELIABLE AND GROWING DIVIDENDS
RELIABLE AND GROWING DIVIDENDS
CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q1 2016) = $29.66 $0.25 $0.215 $0.20 $0.20 $0.19
CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q1 2016) = $29.66
$0.25
$0.215
$0.20
$0.20
$0.19
$0.17
$0.15
$0.10
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Q1 2016
MONTHLY DIVIDENDS
VERMILION HAS NEVER CUT ITS DIVIDEND
VERMILION HAS NEVER CUT ITS DIVIDEND
RELIABLE AND GROWING DIVIDENDS CUMULATIVE DIVIDENDS PAID PER SHARE (2003 THRU Q1 2016) = $29.66 $0.25

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SUSTAINABILITY RATIO
SUSTAINABILITY RATIO
86% AVERAGE PRE-CORRIB CORRIB DEVELOPMENT PHASE CORRIB CASH FLOW 175% 162% 150% 140% 121% 125% 121%
86% AVERAGE PRE-CORRIB
CORRIB DEVELOPMENT PHASE
CORRIB
CASH FLOW
175%
162%
150%
140%
121%
125%
121%
117%
111%
111%
108%
109%
100%
81%
74%
73%
71%
75%
59%
50%
25%
0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
Net Dividend
Base E&D Capex (Excludes Corrib)
New Venture Land
Corrib Capex
TOTAL EXPENDITURES / FFO *
HIGH MARGINS + LOW DECLINE + STRONG CAPITAL EFFICIENCY = SUSTAINABILITY
HIGH MARGINS + LOW DECLINE + STRONG CAPITAL EFFICIENCY = SUSTAINABILITY

* 2003 - 2010 Vermilion results reported under Canadian GAAP. As of 2011, Vermilion reports in accordance with IFRS. FFO is a non-standardized measure (see Advisory). Base E&D Capex includes Abandonment & Reclamation Costs. 2016E: Company estimates with four months of actual prices and remainder of year at May 25, 2016 strip: Brent US$49.83/bbl; WTI US$50.10/bbl; MSW = WTI less US$3.52; TTF $5.86/mmbtu; AECO $1.80/mmbtu; CAD/USD 1.30; CAD/EUR 1.46 & CAD/AUD 0.94; assumes constant DRIP/premium dividend participation, includes existing hedges.

SUSTAINABILITY RATIO 86% AVERAGE PRE-CORRIB CORRIB DEVELOPMENT PHASE CORRIB CASH FLOW 175% 162% 150% 140% 121%

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RESERVES / RESOURCES

RESERVES / RESOURCES

RESERVES / RESOURCES
RESERVES
RESERVES

2015 Year End P+P Reserves* (mmboe)

Canada

France

Netherlands

Germany

Ireland

Australia United States

Total

At December 31, 2014

120.2

58.0

14.2

10.3

24.1

18.0

2.1

246.9

Additions from E&D

8.7

10.2

4.9

(1.1)

1.4

1.8

4.6

30.5

Additions from A&D

2.1

-

-

-

-

-

1.3

3.5

2015 Production

(9.3)

(4.5)

(2.8)

(1.0)

-

(2.4)

(0.1)

(20.0)

At December 31, 2015

121.7

63.6

16.3

8.3

25.5

17.5

8.0

260.9

Reserves Growth 1% 10% 15% (20%) 6% (3%) 275% 6%
Reserves Growth
1%
10%
15%
(20%)
6%
(3%)
275%
6%
RESERVES / RESOURCE BASE
RESERVES / RESOURCE BASE

2015 YEAR END WORKING INTEREST RESERVES AND RISKED CONTINGENT RESOURCE (DEVELOPMENT PENDING)*

(mmboe)

Canada

France

Netherlands

Germany

Ireland

Australia

United States

Total
Total

After-Tax NPV Discounted at 10% ($B)

Proved plus Probable WI Reserves

Risked Contingent Resource (Development Pending)

 

Low

Best Estimate

High

121.7

67.8

110.1

177.2

63.6

12.8

25.8

41.7

16.3

-

0.8

1.6

8.3

-

-

-

25.5

0.7

1.1

1.8

17.5

-

3.0

4.0

8.0

13.7

19.8

28.4

260.9

 

95.1

160.7

254.7

 

$3.7

 

$0.5

$0.9

$1.6

~80% of our Best Estimate contingent resources are in the Development Pending category, the lowest risk category in the contingent resource framework Converted 17.5 mmboe of contingent resources to reserves in 2015

RESERVES GROWTH
RESERVES GROWTH

2015 F&D / FD&A Costs*

Including FDC ($/boe)

F&D (E&D CAPEX) FD&A (Total CAPEX, including acquisitions)

$8.98

$10.03

FD&A Operating Recycle Ratio

3.2x

11.7 year P+P reserve life index**

6% year over year reserve growth

40 35 30 25 20 15 10 5 0 2011 2012 2013 2014 2015 2P F&D
40
35
30
25
20
15
10
5
0
2011
2012
2013
2014
2015
2P F&D (incl. FDC)
$/BOE
275 250 225 10% CAGR 200 175 150 125 100 75 50 25 0 2003 2004
275
250
225
10% CAGR
200
175
150
125
100
75
50
25
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Proved Reserves
Probable Reserves
*Proved and Probable reserves as evaluated by GLJ.
(report dated February 8, 2016 with an effective date of December 31, 2015)
MMBOE

*

APPROXIMATELY 80% OF RESERVES WEIGHTED TO LIQUIDS AND EUROPEAN GAS
APPROXIMATELY 80% OF RESERVES WEIGHTED TO LIQUIDS AND EUROPEAN GAS

E&D CAPEX for 2015 ($486.9 MM) includes Corrib spending ($66.4 MM). Change in FDC includes acquisitions ($38.4 MM) and development ($-212.6 MM).

** Reserve life index based on annualized Q4 2015 production. F = ”Finding”; D = ”Development”; A =”Acquisition”; E&D = ”Exploration and Development”; FDC = “Future Development Costs”

Operating Recycle Ratio = Operating Netback divided by FD&A costs.

RESERVES GROWTH 2015 F&D / FD&A Costs* Including FDC ($/boe) F&D (E&D CAPEX) FD&A (Total CAPEX,

16

PDP RECYCLE RATIO

2015 PDP FD&A RECYCLE RATIOS* 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x VET CR
2015 PDP FD&A RECYCLE RATIOS*
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
0.5x
0.0x
VET
CR
ERF
RRX
PEY
BNE
CPG
WCP
BNP
NVA
PPY
VII
BTE
KEL
LTS
INCREASING RECYCLE RATIOS DESPITE COMMODITY PRICE WEAKNESS
INCREASING RECYCLE RATIOS DESPITE COMMODITY PRICE WEAKNESS

* AltaCorp Capital research, May 2016. Proved Developed Producing (PDP) FD&A recycle ratio = 2015 Operating Netback divided by PDP FD&A. PDP FD&A = Net 2015 capital expenditures (less ½ of facilities capital expenditures) divided by the year-over-year change in PDP reserves excluding 2015 production.

PDP RECYCLE RATIO 2015 PDP FD&A RECYCLE RATIOS* 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x

17

BALANCE SHEET

BALANCE SHEET

BALANCE SHEET
CONSERVATIVE BALANCE SHEET
CONSERVATIVE BALANCE SHEET
CREDIT CAPACITY $2.0 BILLION 520 1,480 REVOLVING CREDIT FACILITY Bank Debt Unutilized Capacity
CREDIT CAPACITY $2.0 BILLION
520
1,480
REVOLVING CREDIT FACILITY
Bank Debt
Unutilized Capacity
NET DEBT TO FFO RATIO* 5.0 PEER AVERAGE 2016 = 4.6x PEER AVERAGE 2017 = 4.0x
NET DEBT TO FFO RATIO*
5.0
PEER AVERAGE 2016 = 4.6x
PEER AVERAGE 2017 = 4.0x
4.0
VET 2016 = 3.2x
3.0
2.0
VET 2017 = 2.0x
1.0
0.0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015 2016E2017E
Source: BMO Capital Markets, May 26, 2016
Peer Group: ARX, BIR, BNE, BTE, CPG, CR, NVA, PEY, POU, PWT**, SGY, TOG, TOU, VII,
restricted on BNP, ERF, MEG, WCP
AMPLE LIQUIDITY TO EXECUTE OUR BUSINESS PLAN
AMPLE LIQUIDITY TO EXECUTE OUR BUSINESS PLAN

* Net Debt and FFO are non-standardized measures (see Advisory). BMO Capital Markets price deck: 2016 WTI US$40.10/bbl, 2017 WTI US$51.00/bbl. ** 2016 D/CF outlier PWT (54.6x), excluded from 2016 Peer Average

CONSERVATIVE BALANCE SHEET CREDIT CAPACITY $2.0 BILLION 520 1,480 REVOLVING CREDIT FACILITY Bank Debt Unutilized Capacity

19

RELATIVE LEVERAGE

DEBT TO CASH FLOW 16.0x 14.0x 12.0x 10.0x US AVERAGE 8.0x 6.0x CANADA AVERAGE 4.0x 2.0x
DEBT TO CASH FLOW
16.0x
14.0x
12.0x
10.0x
US AVERAGE
8.0x
6.0x
CANADA AVERAGE
4.0x
2.0x
0.0x
US
CANADA
VET
TPLM
WTI
ECR
DNR
POU
SGY
BXE
WPX
TET
OAS
JONE
BIR
BTE
BBG
EPE
BNP
LPI
PGF
ERF
CRZO
BNE
MRD
RSPP
CR
VET
TOG
KOS
WCP
NVA
FRU
FANG
PE
AAV
SPE
PDCE
RRX
PSK
RELATIVELY LOW LEVERAGE BASED ON INDEPENDENT RESEARCH
RELATIVELY LOW LEVERAGE BASED ON INDEPENDENT RESEARCH

* AltaCorp Capital research, May 2016. Includes US and Canadian companies with production <100 mboe/d. Sourced from FactSet: debt is the average of year end 2015 debt and consensus year end 2016 debt, cash flow is the 2016 consensus cash flow.

RELATIVE LEVERAGE DEBT TO CASH FLOW 16.0x 14.0x 12.0x 10.0x US AVERAGE 8.0x 6.0x CANADA AVERAGE

20

CREDIT METRICS
CREDIT METRICS

YE 2012

YE 2013

YE 2014

YE 2015

Q1 2016

Credit Facility ($ millions)

Approved credit facility

950

1,200

1,750

2,000

2,000

Bank line undrawn*

481

425

727

812

545

Total debt to EBITDA**

0.8

1.1

1.2

2.2

2.5

Total debt to FFO**

1.2

1.5

1.5

2.7

2.9

Debt to Reserves ($/boe)

Proved

6.10

7.68

8.17

8.64

-

Proved + Probable

3.89

4.99

5.01

5.32

-

Debt to Enterprise Value

11%

14%

17%

25%

25%

DEBT COVENANTS

Covenant Limit

Q1 2016

Total debt / Consolidated EBITDA

Less than 4.0

2.5

Senior debt / Total capitalization

Less than 55%

45%

RECORD OF CONSISTENTLY STRONG CREDIT METRICS
RECORD OF CONSISTENTLY STRONG CREDIT METRICS

*

Letters of credit in the following amounts deducted from available bank line; $49.2 M (2012), $8.1 M (2013), $8.6 M (2014), $25.2 M (2015) and $24.7M (Q1 2016).

** FFO is a non-standardized measure. EBIT and EBITDA are non-GAAP measures (see Advisory).

Q1 2016 values represent trailing twelve months.

CREDIT METRICS YE 2012 YE 2013 YE 2014 YE 2015 Q1 2016 Credit Facility ($ millions)

21

RISK MANAGEMENT

RISK MANAGEMENT

RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT

Vermilion employs a systematic process to identify and manage risk across our business

Financial Risk

Target low financial leverage to impart stability during challenging economic conditions

Low utilization of available credit facility provides liquidity

Extended credit-line term

Comprehensive system of internal

controls and SOX compliance

Market Risk

Hedging program reduces risk

associated with Vermilion’s

exposure to:

Commodity prices

Foreign currency exchange rates

Interest rates

Operational Risk

Integrated, corporate-wide safety programs reduce potential of HSE incidents

Emergency Response Plan and regular practice drills prepare Vermilion to respond to an adverse event

Global asset integrity programs

reduce hydrocarbon release risk

Comprehensive insurance program protects against unplanned business interruptions

VERMILION ACTIVELY MANAGES RISK TO STABILIZE RETURNS FOR SHAREHOLDERS
VERMILION ACTIVELY MANAGES RISK TO STABILIZE RETURNS FOR SHAREHOLDERS
RISK MANAGEMENT ► Vermilion employs a systematic process to identify and manage risk across our business

23

HEDGING PHILOSOPHY
HEDGING PHILOSOPHY

Targeting up to 50% of net of royalty volumes through a portfolio of collars and swaps

Control commodity, currency and cost exposures

Typically hedge 12 - 18 months forward; however, we have European gas contracts up to 36 months forward

Increases stability of revenues, fund flows from operations, capital programs and dividends

Assists in planning capital programs and helps to ensure strong project economics

COMMODITY HEDGING
COMMODITY HEDGING

Full Year 2016

Full Year 2017

Full Year 2018

WTI

Percent of Production Hedged

15%

-

-

Average Floor / Ceiling / Swap ($/bbl)

$57.31 / $70.54 / -

- / - / -

- / - / -

Brent

Percent of Production Hedged

13%

-

-

Average Floor / Ceiling / Swap ($/bbl)

$69.32 / $87.02 / -

- / - / -

- / - / -

Total Oil Percent of Production Hedged

14%

-

-

North American Gas (AECO/NYMEX)

Percent of Production Hedged

47%

33%

-

Average Floor / Ceiling / Swap ($/mmbtu)

$2.61 / $3.32 / $2.73

$2.30 / $3.02 / $3.73

- / - / -

European Gas (TTF/NBP)

Percent of Production Hedged

48%

36%

11%

Average Floor / Ceiling / Swap ($/mmbtu)

$7.98 / $9.32 / $9.06

$6.97 / $8.60 / $8.15

$6.46 / $7.99 / $8.01

Total Gas – Percent of Production Hedged 45% 35% 6%
Total Gas – Percent of Production Hedged
45%
35%
6%
Total BOE – Percent of Production Hedged* 31% 18% 3%
Total BOE – Percent of Production Hedged*
31%
18%
3%
VERMILION HAS 31% OF PRODUCTION HEDGED FOR 2016
VERMILION HAS 31% OF PRODUCTION HEDGED FOR 2016

* Company estimate as at May 30, 2016. All percentages based on estimated 2016 net of royalty production. All prices in Canadian dollars. Hedges converted at 1.47 CAD/EURO, 1.30 CAD/USD, where applicable. See website for more detailed hedging information www.vermilionenergy.com/ir/hedging.cfm.

COMMODITY HEDGING Full Year 2016 Full Year 2017 Full Year 2018 WTI Percent of Production Hedged

25

INTERNATIONAL DIVERSIFICATION

INTERNATIONAL DIVERSIFICATION

INTERNATIONAL DIVERSIFICATION
CORE OPERATING AREAS
CORE OPERATING AREAS
NORTH AMERICA EUROPE AUSTRALIA
NORTH AMERICA
EUROPE
AUSTRALIA
VERMILION IS FOCUSED IN THREE CORE AREAS
VERMILION IS FOCUSED IN THREE CORE AREAS
CORE OPERATING AREAS NORTH AMERICA EUROPE AUSTRALIA VERMILION IS FOCUSED IN THREE CORE AREAS 27

27

VERMILION’S INTERNATIONAL ADVANTAGE
VERMILION’S INTERNATIONAL ADVANTAGE

Focused in three core areas (Europe, North America and Australia) with stable, well-developed fiscal and regulatory regimes

Global asset portfolio provides commodity diversification and premium pricing

Diversified product portfolio reduces price correlation, increasing the stability of our cash flows

Project diversification allows allocation of CAPEX to the highest return commodity products and jurisdictions, increasing ROCE and producing more reliable growth

Greater selection of business development opportunities due to global reach

Less competitive asset market outside of North America increases M&A returns

VERMILION IS THE ONLY ONE OF ITS CANADIAN PEERS WITH GLOBAL EXPOSURE
VERMILION IS THE ONLY ONE OF ITS CANADIAN PEERS WITH GLOBAL EXPOSURE
VERMILION’S INTERNATIONAL ADVANTAGE ► Focused in three core areas (Europe, North America and Australia) with stable,

28

COMMODITY MIX
COMMODITY MIX
PRODUCTION (2016)* Australia France 11% United 19% States Germany 1% 4% OIL (BRENT) 30% OIL (WTI)
PRODUCTION (2016)*
Australia
France
11%
United
19%
States
Germany
1%
4%
OIL (BRENT)
30%
OIL (WTI)
15%
EUROPEAN GAS
CANADIAN GAS
29%
22%
NGL
Ireland
Canada
4%
12%
40%
Netherlands
13%
2P RESERVES (YE 2015)** France Australia 24% 7% United States 3% Germany OIL (BRENT) 3% 30%
2P RESERVES (YE 2015)**
France
Australia
24%
7%
United
States
3%
Germany
OIL (BRENT)
3%
30%
OIL (WTI)
17%
EUROPEAN GAS
20%
NORTH AMERICAN
GAS 22%
NGL
Ireland
11%
10%
Canada
Netherlands
47%
6%
ESTIMATED FFO CONTRIBUTION (2016)* Australia United States Canada 0% 15% France 22% 28% OIL (BRENT) 43%
ESTIMATED FFO CONTRIBUTION (2016)*
Australia
United
States
Canada 0%
15%
France
22%
28%
OIL (BRENT)
43%
OIL/CONDENSATE
(WTI) 20%
EUROPEAN GAS
35%
Germany
Netherlands
3%
12%
Ireland
20%

*

COMMODITY AND GEOGRAPHIC DIVERSIFICATION REDUCE VOLATILITY
COMMODITY AND GEOGRAPHIC DIVERSIFICATION REDUCE VOLATILITY

Company estimates as at May 26, 2016. FFO Contribution is a non-standardized measure (see Advisory) and excludes interest expense. 2016 FFO Contribution estimate based 4 months of actual prices + remainder of year at May 25, 2016 strip:

COMMODITY MIX PRODUCTION (2016)* Australia France 11% United 19% States Germany 1% 4% OIL (BRENT) 30%

Brent US$49.83/bbl; WTI US$50.10/bbl; MSW = WTI less US$3.52; TTF $5.86/mmbtu; AECO $1.80/mmbtu; CAD/USD 1.30; CAD/EUR 1.46 & CAD/AUD 0.94. Assumes constant DRIP and includes existing hedges. ** Proved plus probable (2P) reserves as evaluated by GLJ (see Advisory).

29

GLOBAL PRICING ADVANTAGE
GLOBAL PRICING ADVANTAGE
CRUDE OIL* VET BRENT US$50 Differential ($3) Differential ($15) VET BRENT PRODUCTION EDMONTON INDEX $50 HARDISTY
CRUDE OIL*
VET BRENT US$50
Differential ($3)
Differential ($15)
VET
BRENT
PRODUCTION
EDMONTON
INDEX
$50
HARDISTY
$47
HEAVY
$35
0% OF VET
PRODUCTION***
15% OF VET
PRODUCTION***
30% OF VET
PRODUCTION***
June 2016 Swap Pricing (USD)
NATURAL GAS** $12 2016 Euro Gas Swap C$9.06 2016 Euro Gas Collar Ceiling $10 C$9.32 2016
NATURAL GAS**
$12
2016 Euro Gas
Swap C$9.06
2016 Euro Gas
Collar Ceiling
$10
C$9.32
2016 Euro Gas
Collar Floor
$8
C$7.98
$6
European gas
price approximately
3x Canadian gas price
$4
$2
$0
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
TTF (Title Transfer Facility - Netherlands)
AECO (Canada)
NBP (UK)
GAS PRICE ($/MMBTU)

*

OUR GLOBAL PORTFOLIO RECEIVES PREMIUM PRODUCT PRICES
OUR GLOBAL PORTFOLIO RECEIVES PREMIUM PRODUCT PRICES

Forecast oil pricing based on June swap prices and differentials (as at May 25, 2016), where applicable.

2004 - 2015: actual prices. 2016E - 2018E : AECO, Netherlands gas TTF and UK gas NBP forward curves as at May 25, 2016. *** Relative weighting of production based on anticipated 2016 production forecast as at May 26, 2016.

**

GLOBAL PRICING ADVANTAGE CRUDE OIL* VET BRENT US$50 Differential ($3) Differential ($15) VET BRENT PRODUCTION EDMONTON

30

COMMODITY PRICE DIVERSIFICATION
COMMODITY PRICE DIVERSIFICATION
PORTFOLIO MIX STANDARD DEVIATION* 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% VET
PORTFOLIO MIX STANDARD DEVIATION*
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
VET
BNE BNP PGF WCP BTE
ERF CPG ARX PEY
ANNUALIZED STANDARD DEVIATION

Commodity Price Correlation

NYMEX

NBP

WTI Crude Oil

Brent Crude Oil

NYMEX

1.00

0.39

0.39

0.25

NBP

0.39

1.00

0.51

0.58

WTI Crude Oil

0.39

0.51

1.00

0.96

Brent Crude Oil

0.25

0.58

0.96

1.00

Commodity

Exposures

North American Natural Gas

European Natural Gas

WTI Crude Oil

Brent Crude Oil

Vermilion

North American Peers

International Peers

Diversified commodity exposures reduce volatility due to imperfect price correlation between products

Independent research concluded that Vermilion had the lowest revenue portfolio volatility amongst a sample of Canadian peers*

Long USD / short CAD currency exposure

Vermilion represents a defensive investment in this period of increased commodity price volatility

EUROPEAN NATURAL GAS OUTLOOK SUMMARY

Vermilion expects European gas prices to remain significantly above North American gas prices Recent price decline reflects impact of several near-term factors, including:

Consecutive abnormally warm winters reduced weather-driven demand and left unseasonably high gas-in-storage With current low oil prices, oil-linked long-term contracts place additional downside pressure on gas pricing Anticipation of surplus LNG supply to land in Europe Tepid European demand (but expected to improve with economic recovery)

European gas demand growth supported by decreased reliance on coal, nuclear and other non-renewable sources for power generation

We believe current price levels represent an approximate floor established by coal-to-gas switching and marginal cost to deliver LNG to Europe

Longer term gas prices are expected to rise to reflect the full-cycle cost for LNG as a source of incremental supply to Europe, which we believe to be greater than US$7.50/mmbtu

EUROPEAN GAS PRICES ARE APPROXIMATELY 3X CANADIAN PRICES
EUROPEAN GAS PRICES ARE APPROXIMATELY 3X CANADIAN PRICES
EUROPEAN NATURAL GAS OUTLOOK – SUMMARY ► Vermilion expects European gas prices to remain significantly above

32

EUROPEAN NATURAL GAS OUTLOOK LNG SUPPLY/DEMAND

Global nameplate liquefaction capacity to grow by a net 16 17 Bcf/d through 2020, however:

Historic utilization has averaged only 80%-85% of nameplate capacity, which is not reflected in most supply forecasts

85%+ of LNG supply is contracted through 2020, but contracts becoming more flexible allowing cargoes to seek higher-priced markets

Fuel switching potential on the rise due to economics as well as environmental and regulatory pressures which favour gas-fired power generation

Over the longer-term, incremental LNG supply requires full-cycle cost recovery

Marginal cost to supply LNG to Europe (not including capital cost recovery) is approximately US$4.50/mmbtu, providing very little incentive at current European gas price

Full-cycle US LNG economics to the European market require a European price greater than US$7.50/mmbtu

GLOBAL LNG SUPPLY/DEMAND 50 40 30 20 10 0 2012 2013 2014 2015 2016 2017 2018
GLOBAL LNG SUPPLY/DEMAND
50
40
30
20
10
0
2012
2013
2014
2015
2016
2017
2018
2019
2020
Operational
Under Construction (Nameplate)
LNG Demand
LNG Exports (Supply)
Bcf/d

LNG Costing (US$/mmbtu) to Europe

US Gulf Coast

Fixed Cost (Tolling fee / Capital cost recovery)

3.00

Source Gas + 15%

3.43

Shipping cost

0.70

Regasification & blending cost

0.40

Transport to Citygate

0.15

Full Cost (Wellhead to Burner Tip)

7.68

FULL-CYCLE COST TO SUPPLY LNG SIGNIFICANTLY EXCEEDS CURRENT EUROPEAN GAS PRICE
FULL-CYCLE COST TO SUPPLY LNG SIGNIFICANTLY EXCEEDS CURRENT EUROPEAN GAS PRICE

Source: Bloomberg, IGU, Oxford Institute for Energy Studies, Goldman Sachs, PIRA and Company Reports. Gas supply cost based on 2017 NYMEX strip on May 26, 2016.

EUROPEAN NATURAL GAS OUTLOOK – LNG SUPPLY/DEMAND ► Global nameplate liquefaction capacity to grow by a

33

EUROPEAN NATURAL GAS OUTLOOK DOMESTIC SUPPLY/DEMAND

EUROPEAN SUPPLY

European domestic production continues to decline

Expect continued restrictions on Groningen production

UK’s mature fields facing strong decline

Overall supply from two biggest pipeline supply sources (Russia and Norway) expected to maintain current market share

LNG imports expected to increase by around 45% by 2020

Combination of growing domestic demand and fuel switching should be able to absorb incremental LNG supply

By 2017, Europe will have a regas capacity of 20.5 Bcf/d (2015

imports were 4.4 Bcf/d)

European Supply & Demand (Bcf/d)

2012

2015E

2017E

2020E

European Domestic Production

26.5

22.5

21.5

20.0

Russia

9.9

13.8

14.5

14.8

Other Pipeline Supply

3.8

4.0

5.0

5.2

LNG

6.1

4.4

7.5

9.0

Total Supply

46.3

44.7

47.3

49.0

Less: European Consumption

46.8

44.5

48.5

49.5

Implied Storage Injection/(Withdrawal)

(0.5)

0.2

0.5

(0.5)

EUROPEAN FUEL SWITCHING VS. US LNG EXPORTS 10 8 6 4 2 0 US LNG Capacity
EUROPEAN FUEL SWITCHING VS. US LNG EXPORTS
10
8
6
4
2
0
US LNG Capacity (Nameplate)
US LNG Capacity (85% Utilization)
US LNG Exports*
European Fuel Switching Capacity
* Goldman Sachs Forecast
Bcf/d
2015
2016
2017
2018
2019
2020
EUROPEAN DEMAND SHOULD ABSORB AVAILABLE LNG
EUROPEAN DEMAND SHOULD ABSORB AVAILABLE LNG

Source: Composite of IHS, IGU, Energy Aspects, IEA, Oxford Institute for Energy Studies, Goldman Sachs, PIRA & Company Reports

EUROPEAN NATURAL GAS OUTLOOK – DOMESTIC SUPPLY/DEMAND EUROPEAN SUPPLY ► European domestic production continues to decline

34

EUROPEAN NATURAL GAS OUTLOOK DOMESTIC SUPPLY/DEMAND

DEMAND

Europe’s large consumer base and infrastructure allow for LNG to be

absorbed, particularly by the power sector

Europe’s gas-fired power generation significantly underutilized, with utilization rates of around 20% in 2014

Probable upside from >50 GW of coal, oil and nuclear capacity

closures by 2020 Coal-to-gas switching

Although coal is less expensive than natural gas, it is less efficient

Coal is significantly more carbon intensive (higher carbon cost for

power generation) Current gas prices support coal-to-gas switching in the UK

EU expected to increase carbon price to incentivize coal-to-gas switching on the continent

FUEL SWITCHING CAPACITY 2.0 Total unconstrained fuel switching capacity = 7.7 Bcf/d Additional infrastructure in Italy
FUEL SWITCHING CAPACITY
2.0
Total unconstrained fuel switching capacity = 7.7 Bcf/d
Additional infrastructure in Italy could add 1.1 Bcf/d of capacity
1.5
1.0
0.5
0.0
UK
Bel, Net,
Deu, Aus
Pol, Hun,
Italy
Greece
Iberia
Fra
Cze
Bcf/d
COAL TO GAS SWITCHING ECONOMICS 8 EU Dark - Spark Spread UK Dark - Spark Spread
COAL TO GAS SWITCHING ECONOMICS
8
EU Dark - Spark Spread
UK Dark - Spark Spread
6
4
Historical
Forward
2
0
-2
-4
-6
Source: Bloomberg
Coal Plant Efficiency = 30% Gas Plant Efficiency = 56%
$US/MMBTU
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Gas
Coal
Advantage
ENVIRONMENTAL ADVANTAGES OF GAS TO ENCOURAGE FUEL SWITCHING AND SUPPORT LONG-TERM PRICES Source: Composite of IHS,
ENVIRONMENTAL ADVANTAGES OF GAS TO ENCOURAGE FUEL SWITCHING AND SUPPORT LONG-TERM PRICES
Source: Composite of IHS, IGU, Energy Aspects, IEA, Oxford Institute for Energy Studies, Goldman Sachs, PIRA, Bloomberg & Company Reports

35

SUSTAINABLE MODEL

SUSTAINABLE MODEL

SUSTAINABLE MODEL
ELEMENTS OF SUSTAINABLE MODEL
ELEMENTS OF SUSTAINABLE MODEL

Vermilion's asset base delivers the three key elements necessary to support a sustainable, long-term dividend growth model:

High margins (represented as $/boe)

Low base production decline rates

Strong capital efficiencies (represented as $/boe/d)

All major business units are anticipated to be FCF positive in 2016*

Allows Vermilion to execute growth-and-income model within internally generated cash flow

INTERNATIONAL DIVERSIFICATION UNDERPINS OUR SUSTAINABLE CAPITAL MARKETS MODEL
INTERNATIONAL DIVERSIFICATION UNDERPINS OUR SUSTAINABLE CAPITAL MARKETS MODEL

*

Excludes allocation of interest expense.

ELEMENTS OF SUSTAINABLE MODEL ► Vermilion's asset base delivers the three key elements necessary to support

37

COST REDUCTION
COST REDUCTION
20.00 48% Reduction 18.00 16.00 14.00 19% Reduction 12.00 10.00 8.00 6.00 29% Reduction 4.00 26%
20.00
48% Reduction
18.00
16.00
14.00
19% Reduction
12.00
10.00
8.00
6.00
29% Reduction
4.00
26% Reduction
2.00
61% Reduction
0.00
2P F&D (incl. FDC)
Opex
Transportation
G&A
ARO
2014
2015
2016E
$ / BOE
NETBACKS
NETBACKS
 

United

Total

Q1 2016 Netbacks by Country ($/boe*)

Canada

France

Netherlands

Germany

Ireland

Australia

States

Company

Revenue

$21.16

$43.16

$33.26

$31.78

$33.07

$46.93

$30.10

$30.53

Royalties

(2.07)

(6.07)

(0.56)

(3.58)

-

-

(9.03)

(2.40)

Operating Cost

(8.05)

(12.84)

(7.28)

(10.71)

(7.05)

(17.63)

(6.82)

(9.58)

PRRT

-

-

-

-

-

(0.30)

-

(0.02)

Transportation

(1.57)

(3.33)

-

(3.67)

(3.19)

-

-

(1.79)

Hedging Gain / Loss

-

-

-

-

-

-

-

4.89

Operating Netback

$9.47

$20.92

$25.42

$13.82

$22.83

$29.00

$14.25

$21.63

 

After-Tax Cash Flow Netback

$8.53

$16.70

$21.80

$3.79

$20.52

$24.05

$(13.40)

$16.12

 

Q1 2016 Production (boe/d)

29,141

12,293

9,015

2,660

5,650

6,180

450

65,389

VERMILION HAS A CONSISTENT HISTORY OF TOP QUARTILE NETBACKS
VERMILION HAS A CONSISTENT HISTORY OF TOP QUARTILE NETBACKS

*

Source Q1 2016 MD&A. Netbacks are a non-GAAP Measure.

NETBACKS United Total Q1 2016 Netbacks by Country ($/boe*) Canada France Netherlands Germany Ireland Australia States

39

RELATIVE NETBACKS
RELATIVE NETBACKS
2015 OPERATING NETBACK EXCL. HEDGING* $35 $30 $25 $20 $15 $10 $5 $0 $/BOE GTE VET
2015 OPERATING NETBACK EXCL. HEDGING*
$35
$30
$25
$20
$15
$10
$5
$0
$/BOE
GTE
VET
BNE
PXT
CPG
WCP
TOG
PSK
VII
ARX
SGY
BTE
MEG
PEY
BIR
POU
PWT
NVA
PGF
TOU
BNP
CR
ERF
2015 AFTER TAX CASH NETBACK EXCL. HEDGING* $30 $25 $20 $15 $10 $5 $0 $/BOE VET
2015 AFTER TAX CASH NETBACK EXCL. HEDGING*
$30
$25
$20
$15
$10
$5
$0
$/BOE
VET
BNE
PSK
CPG
WCP
GTE
TOG
PXT
PEY
ARX
SGY
VII
BIR
TOU
BTE
NVA
BNP
CR
ERF
PGF
POU
PWT
MEG
TOP CASH FLOW NETBACK AMONG PEER GROUP
TOP CASH FLOW NETBACK AMONG PEER GROUP

* Source: Company Reports. 2015 actuals as reported. Netbacks are a non-GAAP Measure (see Advisory).

RELATIVE NETBACKS 2015 OPERATING NETBACK EXCL. HEDGING* $35 $30 $25 $20 $15 $10 $5 $0 $/BOE

40

BASE PRODUCTION DECLINE RATES
BASE PRODUCTION DECLINE RATES

Country

Effective Decline Rate*

Natural Decline Rate*

France

Netherlands**

Germany

Ireland

Australia**

Canada

United States

11%

11%

0%

19%

14%

14%

0%

18%

0%

20%

23%

27%

37%

37%

Composite Corporate Decline

13%

21%

50% VET 40% CORPORATE NATURAL VET CANADA ONLY DECLINE DECLINE 30% VET CORPORATE EFFECTIVE DECLINE 20%
50%
VET
40%
CORPORATE
NATURAL
VET CANADA
ONLY DECLINE
DECLINE
30%
VET
CORPORATE
EFFECTIVE
DECLINE
20%
10%
0%
Average corporate decline rate for coverage group = 28%
RRX
TOU
DEE
RMP
PEY
PMT
POU
VII
BXE
NVA
BTE
CR
KEL
SPE
ATH
AAV
ECA
TET
CPG
BNE
VET
BIR
ERF
PWT
ARX
TOG
PPY
SGY
VET
NBZ
HSE
PXX
CNQ
WCP
PGF
EGL
VET
PNE
CVE
LOW BASE DECLINE RATES REDUCE VERMILION’S CAPITAL REQUIREMENTS
LOW BASE DECLINE RATES REDUCE VERMILION’S CAPITAL REQUIREMENTS

* Source: Scotia Capital Inc. Oil & Gas Research June 2016. Other Non-Canadian decline rates are GLJ 2P developed estimates. ** Netherlands and Australia producing at restricted rates, resulting in effective decline rates of 0%.

BASE PRODUCTION DECLINE RATES Country Effective Decline Rate* Natural Decline Rate* France Netherlands** Germany Ireland Australia**

41

CAPITAL EFFICIENCY
CAPITAL EFFICIENCY
 

Investment

Well Cost (C$M)

IP365 (boe/d)

ATAX ROR %

Recycle Ratio

ATAX Payout (Years)

Prod. Efficiency (IP365 $/boed)

 

European Gas

EUROPE

Netherlands E&D

$12.0

1,260

75%

3.3 x

1.9

$9,500

Brent Crude

Champotran Development (France)

$4.3

210

71%

2.1 x

2.3

$20,500

 

Neocomian Development (France)

$2.6

90

37%

1.8 x

3.0

$28,300

Vulaines Development (France)

$4.5

140

17%

1.3 x

4.4

$31,500

 

Australia Development

$34.8

1,600

18%

3.2 x

2.9

$21,800

 

North America Light Crude

NORTH AMERICA

SE Sask. Midale Development

$1.9

120

27%

1.8 x

3.5

$15,800

Cardium Development

$3.4

150

32%

2.0 x

3.2

$23,100

Turner Sand Development

$4.2

260

27%

2.6 x

3.1

$16,100

Canadian Condensate Rich Gas

Mannville Ellerslie

$3.7

520

96%

2.6 x

1.8

$7,000

Canadian Low Yield Gas

 

Mannville Notikewin

$3.7

590

15%

1.5 x

4.7

$6,300

EUROPEAN ASSETS

EUROPEAN ASSETS

EUROPEAN ASSETS
EUROPEAN CORE AREA
EUROPEAN CORE AREA

DEVELOPING LEADING-TO-DOMINANT BUSINESSES IN EACH JURISDICTION

FRANCE

#1 oil producer, with ¾ share of domestic industry

NETHERLANDS

GERMANY

IRELAND

#2 onshore gas producer

Entry into the significant German E&P Industry

Corrib field will constitute 95% of Ireland’s gas production

HUNGARY / CROATIA

Entry positions in under-invested basins with modest,

back-loaded commitments

IRELAND NETHERLANDS GERMANY FRANCE HUNGARY CROATIA
IRELAND
NETHERLANDS
GERMANY
FRANCE
HUNGARY
CROATIA
FIVE MILLION ACRE POSITION SUPPORTS ORGANIC GROWTH + FREE CASH FLOW
FIVE MILLION ACRE POSITION SUPPORTS ORGANIC GROWTH + FREE CASH FLOW
EUROPEAN CORE AREA DEVELOPING LEADING-TO-DOMINANT BUSINESSES IN EACH JURISDICTION FRANCE #1 oil producer, with ¾ share

44

EUROPEAN PRODUCTION
EUROPEAN PRODUCTION
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015 2016E
France
Netherlands
Germany
Ireland
BOE/D
BUILDING OUR EUROPEAN FRANCHISE FOR TWO DECADES
BUILDING OUR EUROPEAN FRANCHISE FOR TWO DECADES

* 2016E: Company estimates as of May 26, 2016.

EUROPEAN PRODUCTION 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003

45

FRANCE
FRANCE

Entered France in 1997

Record production level in 2015

Assets characterized by large OOIP conventional fields with high working interest (OOIP in 5 largest fields >1.7 billion barrels of oil)

Workover, infill drilling and secondary recovery opportunities

Strong free cash flow generator with organic growth

Brent indexed production base with low base decline rate

Potential resource play development over long-term

VERMILION IS THE #1 OIL PRODUCER IN FRANCE
VERMILION IS THE #1 OIL PRODUCER IN FRANCE

* Q1 2016 average production.

PARIS PARIS BASIN FRANCE BORDEAUX AQUITAINE BASIN
PARIS
PARIS BASIN
FRANCE
BORDEAUX
AQUITAINE BASIN

~12,300 boe/d* (99% Oil)

FRANCE ► Entered France in 1997 ► Record production level in 2015 ► Assets characterized by

46

FRANCE PRODUCTION
FRANCE PRODUCTION
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1998 1999 2000 2001 2002 2003 2004 2005
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015 2016E
E&D CAPEX
AS A % OF FFO*
n/a
43%
51%
101%
45%
73%
111%
82%
30%
43%
30%
57%
41%
37%
21%
43%
63%
48%
39%
Crude Oil
Gas
BOE/D
LONG-TERM OIL PRODUCTION GROWTH WHILE GENERATING SIGNIFICANT FREE CASH FLOW
LONG-TERM OIL PRODUCTION GROWTH WHILE GENERATING SIGNIFICANT FREE CASH FLOW

* 2016E: Company estimates as of May 26, 2016 with four months of actual prices + remainder of year at May 25, 2016 strip: Brent US$49.83/bbl; CAD/USD 1.30; CAD/EUR 1.46; includes existing hedges and excludes interest.

FRANCE PRODUCTION 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1998 1999 2000 2001 2002 2003

47

FRANCE ACTIVITY
FRANCE ACTIVITY
CHAMPOTRAN FIELD 2015 CAPITAL ACTIVITIES ► Resumption of solution gas sales PARIS PARIS BASIN ► 4-well
CHAMPOTRAN
FIELD
2015
CAPITAL ACTIVITIES
Resumption of solution gas sales
PARIS
PARIS BASIN
4-well drilling program in Champotran
FRANCE
Well workovers and waterflood program
2016
CAPITAL ACTIVITIES
BORDEAUX
AQUITAINE BASIN
Producing wells
2015
Drills
Well workovers and optimization activities
2014
Drills
2013
Drills
Future Drills
Injection wells
Observation wells
ACHIEVING LONG-TERM ORGANIC OIL AND GAS GROWTH + FCF + BUILDING PROJECT INVENTORY
48
CHAMPOTRAN DEVELOPMENT
CHAMPOTRAN DEVELOPMENT

14 wells drilled from 2013 to 2015 at 100% success rate

Reduced DCET costs by 23% since 2013

30 identified future net drilling locations in reserves and resources*

Successful waterflood program expansion

in progress

FRANCE actual per well economics 2013-2015

DCET Well Cost ($ million)

$4.3

IP30 Rate (boe/d)

260

EUR per well (mboe)

345

After Tax ROR (%)

71%

After Tax Payout (years)

2.3

After Tax NPV10 ($ million)

$4.1

Recycle Ratio

2.1x

F&D ($/boe)

$12.50

Production Efficiency at IP30 ($/boe/d)

$16,500

Pricing Assumptions: Brent US$40/bbl, CAD/USD 1.30, CAD/EUR 1.45

CHAMPOTRAN PRODUCTION 6,000 5,000 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016E
CHAMPOTRAN PRODUCTION
6,000
5,000
4,000
3,000
2,000
1,000
0
2010
2011
2012
2013
2014
2015
2016E 2017E 2018E 2019E 2020E
Base
Drilling
Waterflood Enhancement
BOE/D

NEOCOMIAN DEVELOPMENT

Part of Paris Basin light oil assets (Neocomian field) acquired from ZaZa Energy France in December 2012

45% production growth since acquisition

 
 

Achieved solely through workovers and artificial lift optimization, without new drilling

Capital efficiency of workover program = $6,500 per bbl/d

 
 

>50% increase in 2P reserves since acquisition

 
   

P+P Reserves

(mmboe)

 
 

At Acquisition

5.8

Additions from Vermilion Activities

3.6

2013 2015 Production

(0.6)

   

At December 31, 2015

8.8*

 
 
   

Contingent Resource (Best Estimate) - development pending

4.9*

 

Significant future development identified

 

Waterflood enhancement underway

27 future horizontal net drilling locations (no fracing required)

NEOCOMIAN – GROWTH POTENTIAL – 10 WELLS PER YEAR 3,500 Pre-acquisition Vermilion Workovers / Optimizations 10
NEOCOMIAN – GROWTH POTENTIAL – 10 WELLS PER YEAR
3,500
Pre-acquisition
Vermilion
Workovers /
Optimizations
10 Wells per Year
Drilling Program
3,000
2,500
2,000
1,500
45% Increase
1,000
500
0
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
2021E
Base Volumes
Drilling Volumes
BOE/D

FRANCE Expected per well risked economics Neocomian Drills

DCET Well Cost ($ million)

$2.6

IP30 Rate (boe/d)

110

EUR per well (mboe)

145

After Tax ROR (%)

37%

After Tax Payout (years)

3.0

After Tax NPV10 ($ million)

$1.2

Recycle Ratio

1.8x

F&D ($/boe)

$17.60

Production Efficiency at IP30 ($/boe/d)

$22,800

Pricing Assumptions: Brent US$40/bbl, CAD/USD 1.30, CAD/EUR 1.45

DEMONSTRATES VERMILION’S EXPERTISE IN REDEVELOPING UNDEREXPLOITED ASSETS
DEMONSTRATES VERMILION’S EXPERTISE IN REDEVELOPING UNDEREXPLOITED ASSETS

* 2P reserves and risked contingent resource (best estimate) in the development pending category as evaluated by GLJ identified 12 net proved plus probable reserve locations and 15.3 net risked contingent resource (best estimate) locations in the development pending category.

NEOCOMIAN DEVELOPMENT ► Part of Paris Basin light oil assets (Neocomian field) acquired from ZaZa Energy

50

NETHERLANDS
NETHERLANDS

Entered Netherlands in 2004 High impact natural gas drilling and development Strong gas price, favorable fiscal regime, and low OPEX enhance netbacks Seven consecutive years of organic production growth Undeveloped land base of ~800,000 net acres

HARLINGEN AMSTERDAM NETHERLANDS
HARLINGEN
AMSTERDAM
NETHERLANDS

Key Wells to Date

Year

Gross Production Rate (mmcf/d)

 

<5

5 - 10

10 - 20

>20

Vinkega-1

2009

Vinkega-1 2009

De Hoeve-1

2009

De Hoeve-1 2009

Middenmeer-3

2009

Middenmeer-3 2009

Middelburen-2

2009

Middelburen-2 2009

Langezwaag

2011

Langezwaag 2011

Vinkega-2

2012

Vinkega-2 2012

Eernewoude-2

2012

Eernewoude-2 2012

Diever-2

2014

Diever-2 2014

Langezwaag-2

2014

Langezwaag-2 2014

Sonnega-2

2014

Sonnega-2 2014

Slootdorp-6

2015

Slootdorp-6 2015

Slootdorp-7

2015

Slootdorp-7 2015

~9,000 boe/d* (99% gas)

WORLD CLASS CONVENTIONAL NATURAL GAS BASIN
WORLD CLASS CONVENTIONAL NATURAL GAS BASIN

* Q1 2016 average production.

NETHERLANDS Entered Netherlands in 2004 High impact natural gas drilling and development Strong gas price, favorable

51

NETHERLANDS PRODUCTION
NETHERLANDS PRODUCTION
NETHERLANDS - Expected per well risked economics (based on recent drilling) 10,000 8,000 DCET Well Cost
NETHERLANDS - Expected per well risked economics (based on recent drilling)
10,000
8,000
DCET Well Cost ($ million)
Expected IP30 Rate (boe/d)
Expected EUR per well (mboe)
After Tax ROR (%)
After Tax Payout (years)
After Tax NPV10 ($ million)
Recycle Ratio
Expected F&D ($/boe)
Production Efficiency at IP30 ($/boe/d)
$12.0
1,690
1,350
75%
1.9
$9.2
3.3x
$9.00
$7,100
6,000
Pricing Assumptions: TTF $5.50/mmbtu. CAD/EUR 1.45. Success rate to-date in Netherlands since 2009 is 68%
4,000
2,000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
E&D CAPEX
AS A % OF FFO*
24%
7%
55%
16%
54%
19%
32%
28%
35%
71%
52%
42%
Gas
NGL
BOE/D
GROWING GAS PRODUCTION WITH FREE CASH FLOW GENERATION
GROWING GAS PRODUCTION WITH FREE CASH FLOW GENERATION

* 2016E: Company estimates as of May 26, 2016 with four months of actual prices and remainder of year at May 25, 2016 strip: TTF $5.86/mmbtu; CAD/EUR 1.46; includes existing hedges and excludes interest.

NETHERLANDS PRODUCTION NETHERLANDS - Expected per well risked economics (based on recent drilling) 10,000 8,000 DCET

52

NETHERLANDS ACTIVITY
NETHERLANDS ACTIVITY

Vermilion has tripled its undeveloped land base since the beginning of 2012

2015

CAPITAL ACTIVITIES

Two-well development drilling program

Equip and tie-in four previous discovery wells

2016

CAPITAL ACTIVITIES

Drill two wells

Permitting and optimization activities

NETHERLANDS ACTIVITY ► Vermilion has tripled its undeveloped land base since the beginning of 2012 2015
GERMAN PRODUCING ASSETS
GERMAN PRODUCING ASSETS

OVERVIEW

Acquired a 25% non-operated interest in a four-partner consortium in February 2014

Assets include 4 gas producing fields across 11 production licenses

204,000 gross acres (85% in the exploration license)

Awarded two additional exploration licenses covering approximately 110,000 net acres

ASSET CHARACTERISTICS

Supplies largest gas market in Europe

Low decline production base (11% annual decline rate)

Significant free cash flow generation

Extensive producing infrastructure in place

Full spectrum of conventional natural gas investment opportunities across the permeability range

2015 CAPITAL ACTIVITIES

Participated in second well on non-operated interest position (Burgmoor Z3a)

Well producing at 8 mmcf/d of gas (25% working interest)

GAS PRODUCING FIELDS BERLIN GERMANY MUNICH
GAS
PRODUCING
FIELDS
BERLIN
GERMANY
MUNICH

~2,700 boe/d* (100% gas)

GERMANY PRODUCTION
GERMANY PRODUCTION
GERMANY – Burgmoor Z3 Sidetrack (Based on Vermilion’s 25% W.I.) 5,000 DCET Well Cost ($ million)
GERMANY – Burgmoor Z3 Sidetrack (Based on Vermilion’s 25% W.I.)
5,000
DCET Well Cost ($ million)
IP30 Rate (boe/d)
EUR per well (mboe)
After Tax ROR (%)
After Tax Payout (years)
After Tax NPV10 ($ million)
Recycle Ratio
F&D ($/boe)
Production Efficiency at IP30 ($/boe/d)
$3.9
350
780
22%
4.0
4,000
$2.3
1.7x
$5.00
$11,100
3,000
Pricing Assumptions: TTF C$5.50/mmbtu, CAD/EUR 1.45
2,000
1,000
0
2014
2015
2016E
E&D CAPEX
AS A % OF FFO*
16%
28%
55%
Gas
BOE/D
STABLE PRODUCTION WITH FREE CASH FLOW + MAJOR EXPLORATORY FARM-IN
STABLE PRODUCTION WITH FREE CASH FLOW + MAJOR EXPLORATORY FARM-IN

* 2016E: Company estimates as of May 26, 2016 with four months of actual prices and remainder of year at May 25, 2016 strip: TTF $5.86/mmbtu; CAD/EUR 1.46; includes existing hedges and excludes interest.

GERMANY PRODUCTION GERMANY – Burgmoor Z3 Sidetrack (Based on Vermilion’s 25% W.I.) 5,000 DCET Well Cost

55

NORTH GERMAN BASIN FARM-IN
NORTH GERMAN BASIN FARM-IN

OVERVIEW

Entered into a significant farm-in agreement in July 2015

11 of 18 licenses under farm-in will be Vermilion operated

Provides participating interest in 850,000 net undeveloped onshore acres in exchange for carrying 50% of the costs associated with 6 net exploration wells

Provides access to significant data set spanning the assets

Prospective for both oil and gas

FUTURE FARM-IN CAPITAL PLANS

Farm-in includes commitment to drill 11 gross (6 net) wells over a 5-year period

Drilling expected to commence in 2017

Capital commitment may vary from approximately 46MM to 75MM (constitutes both Vermilion’s and carried interests)

75 exploratory and semi-exploratory leads and prospects currently identified in Rotliegend, Carboniferous, Triassic and Zechstein formations

Net land cost approximately 44 per acre

VET Operatorship Non-Operatorship Oil Fields Dϋmmersee-Uchte Producing Assets Gas Fields
VET Operatorship
Non-Operatorship
Oil Fields
Dϋmmersee-Uchte
Producing Assets
Gas Fields

OVERVIEW

IRELAND
IRELAND

Vermilion holds 18.5% non-operated interest in the Corrib gas field, offshore Ireland

Over 90% of supply imported prior to Corrib startup

Corrib is anticipated to deliver 60% to 65% of Ireland’s gas needs at peak production

ASSET CHARACTERISTICS

Pricing indexed to National Balancing Point (NBP) (UK)

Low opex and minimal ongoing capex translate to high netbacks and significant free cash flow

E&D capex reinvestment ratio represents less than 10%* of FFO for 2016

Efficient translation of revenue FFO FCF PRODUCTION

First gas production commenced on December 30, 2015

Well deliverability and uptime to date have been better than expected

Approximate 6 month ramp-up to peak gas production of 58 mmcf/d (9,700 boe/d) net **

BELLANABOY GAS PLANT NORTHERN IRELAND IRELAND
BELLANABOY GAS PLANT
NORTHERN
IRELAND
IRELAND

CORRIB GAS FIELD (83km Offshore)

PIPELINE

OVERVIEW IRELAND ► Vermilion holds 18.5% non-operated interest in the Corrib gas field, offshore Ireland ►

FROM UK

FIELD CHARACTERISTICS

PARTNERSHIP INTERESTS

WATER DEPTH

350 M

SHELL

45.0%

WELL DEPTH

3,000 M

STATOIL

36.5%

 

VERMILION

18.5%

HIGH NETBACK NATURAL GAS + MINIMAL FUTURE CAPEX = SIGNIFICANT FREE CASH FLOW
HIGH NETBACK NATURAL GAS + MINIMAL FUTURE CAPEX = SIGNIFICANT FREE CASH FLOW

Company estimate based on full year assumptions of NBP C$5.75/mmbtu; CAD/EUR 1.47 and EUR/GBP 1.28; includes existing 2016 hedges. ** Company estimated volumes.

*

OVERVIEW IRELAND ► Vermilion holds 18.5% non-operated interest in the Corrib gas field, offshore Ireland ►

57

IRELAND PRODUCTION
IRELAND PRODUCTION
10,000 8,000 6,000 4,000 2,000 0 2015 2016E E&D CAPEX AS A % OF FFO* NM
10,000
8,000
6,000
4,000
2,000
0
2015
2016E
E&D CAPEX
AS A % OF FFO*
NM
9%
Gas
BOE/D
EFFICIENT TRANSLATION OF REVENUE  FUND FLOWS FROM OPERATIONS  FREE CASH FLOW
EFFICIENT TRANSLATION OF REVENUE  FUND FLOWS FROM OPERATIONS  FREE CASH FLOW

* 2016E: Company estimates as of May 26, 2016 with four months of actual prices and remainder of year at May 25, 2016 strip: NBP$6.00/mmbtu; CAD/EUR 1.46; includes existing hedges and excludes interest.

IRELAND PRODUCTION 10,000 8,000 6,000 4,000 2,000 0 2015 2016E E&D CAPEX AS A % OF

58

CENTRAL AND EASTERN EUROPE (CEE)
CENTRAL AND EASTERN EUROPE (CEE)
BUDAPEST EBES HUNGARY SOUTH BATTONYA ZAGREB DR-04 CROATIA SA-08 SA-10 SA-09 Vermilion Acreage
BUDAPEST
EBES
HUNGARY
SOUTH
BATTONYA
ZAGREB
DR-04
CROATIA
SA-08
SA-10
SA-09
Vermilion Acreage

EXTENSION OF EUROPEAN GROWTH STRATEGY

Modest back-loaded capital commitments

Prospective for both oil and gas

HUNGARY

Awarded Ebes and South Battonya concessions covering more than 320,000 acres (100% working interest)

CROATIA

Conditionally awarded 4 exploration concessions covering nearly 2.35 million acres (100% working interest)

Significant portion of the acreage located near producing oil and gas fields

Limited activity in the Croatian part of the Pannonian Basin for the past 25 years

FOCUSED ON ESTABLISHING LOW COST POSITIONS IN THE UNDER-EXPLOITED PANNONIAN BASIN
FOCUSED ON ESTABLISHING LOW COST POSITIONS IN THE UNDER-EXPLOITED PANNONIAN BASIN
CENTRAL AND EASTERN EUROPE (CEE) BUDAPEST EBES HUNGARY SOUTH BATTONYA ZAGREB DR-04 CROATIA SA-08 SA-10 SA-09

59

NORTH AMERICAN ASSETS

NORTH AMERICAN ASSETS

NORTH AMERICAN ASSETS
CANADA
CANADA

Production and assets focused in West Pembina near Drayton Valley and Northgate in SE Saskatchewan In West Pembina, potential for three significant development projects sharing the same surface infrastructure Cardium light oil development (1,800 m depth) Mannville liquids-rich gas development (2,400 - 2,700 m depth) Extensive land position in Duvernay liquids-rich gas resource play (3,200 - 3,400 m depth) Canadian cash flows fully tax-sheltered for 8+ years

CANADA ► ► ► Production and assets focused in West Pembina near Drayton Valley and Northgate
ALBERTA
ALBERTA
SASKATCHEWAN
SASKATCHEWAN
SLAVE LAKE EDMONTON DRAYTON VALLEY CENTRAL AB SASKATOON CALGARY REGINA NORTHGATE
SLAVE LAKE
EDMONTON
DRAYTON VALLEY
CENTRAL AB
SASKATOON
CALGARY
REGINA
NORTHGATE

~29,100 boe/d* (44% oil and NGL)

CANADA PRODUCTION
CANADA PRODUCTION
30,000 25,000 20,000 15,000 10,000 5,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012
30,000
25,000
20,000
15,000
10,000
5,000
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
E&D CAPEX
AS A % OF FFO *
21%
36%
67%
58%
31%
76%
247%
225%
165%
101%
86%
104%
50%