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Vermilion Energy Inc. Announces 2013 Year-End Summary Reserves and Resource Information

March 3, 201412:11 AM CNW

CALGARY, March 3, 2014 /CNW/ – Vermilion Energy Inc. (“Vermilion”, the “Company”, “We” or “Our”) (TSX, NYSE: VET) is pleased to announce summary 2013 year-end reserves and resource information.  The estimates of reserves and resources and other oil and gas information contained in this news release has been estimated by GLJ Petroleum Consultants Ltd. (“GLJ”) and prepared in accordance with National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” of the Canadian Securities Administrators (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGEH”). For additional information about Vermilion, including Vermilion’s statement of reserves data and other information in Form 51-101F1, report on reserves data by independent qualified reserves evaluator or auditor in Form 51-101F2 and report of management and directors on oil and gas disclosure in Form 51-101F3, please review the Company’s Annual Information Form for the year ended December 31, 2013, to be filed and available on SEDAR at www.sedar.com and on the SEC’s EDGAR system at www.sec.gov.

HIGHLIGHTS

  • Total proved (“1P”) reserves increased 23% to 129.0 mmboe, while total proved plus probable (“2P”) reserves increased 20% to 198.6 mmboe.
  • In 2013, we added 48.7 mmboe of 2P reserves with 46.3 mmboe (95%) of 2P reserves additions coming from exploration and development (“E&D”) activities and 2.4 mmboe (5%) of 2P reserves additions through acquisitions.
  • At the 2P level, we replaced 309% of 2013 production through E&D activities (excluding acquisitions). Excluding Corrib-related expenditures and reserves additions, Vermilion reinvested 68% of fund flows from operations(1) to achieve a finding and development (“F&D”) cost of $16.48/boe for E&D related 2P reserves additions (including future development costs “FDC”) and a recycle ratio of 3.7 times.  Including Corrib-related development expenditures and reserves additions, Vermilion reinvested 81% of fund flows from operations to achieve an F&D cost of $16.59/boe for E&D related 2P reserves additions (including FDC costs) and a recycle ratio of 3.6 times.
  • At the 2P level, we replaced 325% of 2013 production through all activities (including both E&D activities and acquisitions), at a finding, development and acquisition (“FD&A”) cost of $17.02/boe (including future development costs) and a recycle ratio of 3.6 times. Our 2P FD&A cost for 2013 represents a 27% reduction from our FD&A cost in 2012.
  • The GLJ 2013 Resources Assessment (as defined below) estimated contingent resources of 74.4 mmboe (low estimate) to 351.7 mmboe (high estimate), with a best estimate of 233.5 mmboe, and prospective resources of 59.4 mmboe (low estimate) to 818.8 mmboe (high estimate), with a best estimate of 498.7 mmboe.
  • At year-end 2013, 2P reserves were comprised  of 36% Brent-based light crude, 16% Canadian-based light crude, 7% natural gas liquids, 20% European natural gas and 21% Canadian natural gas.
  • Reserve life index increased to 13.3 years for 2P reserves and 8.6 years for 1P reserves based on year-end 2013 reserves and annualized fourth quarter 2013 production of 40,960 boe/d, as compared to 12.5 years for 2P reserves and 8.0 years for 1P reserves at year-end 2012.
  • Based on a successful six-well program in 2013, an additional 40 (28.4 net) undeveloped wells were added at the 2P level in the Mannville liquids-rich gas play in Alberta, with average reserves of 650 mboe/well.
  • A successful five-well infill and extension drilling program in the Champotran field in the Paris Basin in France added 5.5 mmbbl of 2P reserves.
  • The continued strong performance of our existing wells in combination with the results of our successful 2013 two-well drilling program resulted in the addition of 4.7 mmbbl of 2P reserves in Australia in 2013.
(1) Additional GAAP Financial Measure.  Please see the “Advisories” section of this 2013 Year-end Summary Reserves and Resource Information news release.

DISCLAIMER

Certain statements included or incorporated by reference in this document may constitute forward looking statements or financial outlooks under applicable securities legislation.  Such forward looking statements or information typically contain statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, or similar words suggesting future outcomes or statements regarding an outlook.  Forward looking statements or information in this document may include, but are not limited to: capital expenditures; business strategies and objectives; estimated reserve quantities and the discounted present value of future net cash flows from such reserves; petroleum and natural gas sales; future production levels (including the timing thereof) and rates of average annual production growth; estimated contingent resources and prospective resources; exploration and development plans; acquisition and disposition plans and the timing thereof; operating and other expenses, including the payment and amount of future dividends; royalty and income tax rates; the timing of regulatory proceedings and approvals; and the timing of first commercial natural gas and the estimate of Vermilion’s share of the expected natural gas production from the Corrib field.

Such forward looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect.  In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of Vermilion to obtain equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally; the ability of Vermilion to market crude oil, natural gas liquids and natural gas successfully to current and new customers; the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate product transportation; the timely receipt of required regulatory approvals; the ability of Vermilion to obtain financing on acceptable terms; foreign currency exchange rates and interest rates; future crude oil, natural gas liquids and natural gas prices; and management’s expectations relating to the timing and results of exploration and development activities.

Although Vermilion believes that the expectations reflected in such forward looking statements and information are reasonable, undue reliance should not be placed on forward looking statements because Vermilion can give no assurance that such expectations will prove to be correct.  Financial outlooks are provided for the purpose of understanding Vermilion’s financial strength and business objectives and the information may not be appropriate for other purposes.  Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Vermilion and described in the forward looking statements or information.  These risks and uncertainties include but are not limited to: the ability of management to execute its business plan; the risks of the oil and gas industry, both domestically and internationally, such as operational risks in exploring for, developing and producing crude oil, natural gas liquids and natural gas; risks and uncertainties involving geology of crude oil, natural gas liquids and natural gas deposits; risks inherent in Vermilion’s marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life and estimates of resources and associated expenditures; the uncertainty of estimates and projections relating to production and associated expenditures; potential delays or changes in plans with respect to exploration or development projects; Vermilion’s ability to enter into or renew leases on acceptable terms; fluctuations in crude oil, natural gas liquids and natural gas prices, foreign currency exchange rates and interest rates; health, safety and environmental risks; uncertainties as to the availability and cost of financing; the ability of Vermilion to add production and reserves through exploration and development activities; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; uncertainty in amounts and timing of royalty payments; risks associated with existing and potential future law suits and regulatory actions against Vermilion; and other risks and uncertainties described elsewhere in this document or in Vermilion’s other filings with Canadian securities regulatory authorities.

The forward looking statements or information contained in this document are made as of the date hereof and Vermilion undertakes no obligation to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

All oil and natural gas reserve information contained in this document has been prepared and presented in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.  The actual oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document.  The estimated future net revenue from the production of the disclosed oil and natural gas reserves does not represent the fair market value of these reserves.  Natural gas volumes have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent.  Barrels of oil equivalent (boe) 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.

Financial data contained within this document are reported in Canadian dollars, unless otherwise stated.

Abbreviations

Oil and Natural Gas Liquids
bbl Barrel
Mbbl thousand barrels
MMbbl million barrels
bbl/d barrels per day
NGLs natural gas liquids
Natural Gas
Mcf thousand cubic feet
MMcf million cubic feet
Mcf/d thousand cubic feet per day
MMcf/d million cubic feet per day
MMBtu million British Thermal Units
Other
API American Petroleum Institute
°API An indication of the specific gravity of crude oil measured on the API gravity scale.
Liquid petroleum with a specified gravity of 28 °API or higher is generally referred to as light crude oil.
boe barrel of oil equivalent
M$ thousand dollars
MM$ million dollars
Mboe 1,000 barrels of oil equivalent
MMboe million barrels of oil equivalent
WTI West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for crude oil of
standard grade

RESERVES, FUTURE NET REVENUE AND OTHER OIL AND GAS INFORMATION

The following is a summary of the oil and natural gas reserves and the value of future net revenue of Vermilion as evaluated by GLJ, independent petroleum engineering consultants in Calgary in a report dated February 4, 2014 with an effective date of December 31, 2013 (the “GLJ 2013 Reserves Evaluation”).  The GLJ 2013 Reserves Evaluation was prepared in accordance with National Instrument 51-101 and COGEH.

Reserves and other oil and gas information in this news release is effective December 31, 2013 unless otherwise stated.

All evaluations of future net production revenue set forth in the tables below are stated after overriding and lessor royalties, Crown royalties, freehold royalties, mineral taxes, direct lifting costs, normal allocated overhead and future capital investments, including abandonment and reclamation obligations.  Future net production revenues estimated by the GLJ 2013 Reserves Evaluation do not represent the fair market value of the reserves.  Other assumptions relating to the costs, prices for future production and other matters are included in the GLJ 2013 Reserves Evaluation.  There is no assurance that the future price and cost assumptions used in the GLJ 2013 Reserves Evaluation will prove accurate and variances could be material.

Reserves for Australia, Canada, France, Ireland and the Netherlands are established using deterministic methodology.  Total proved reserves are established at the 90 percent probability (P90) level.  There is a 90 percent probability that the actual reserves recovered will be equal to or greater than the P90 reserves.  Total proved plus probable reserves are established at the 50 percent probability (P50) level.  There is a 50 percent probability that the actual reserves recovered will be equal to or greater than the P50 reserves.

Estimates of reserves have been made assuming that development of each property, in respect of which estimates have been made, will occur without regard to the availability of funding required for that development.

With respect to finding and development costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.

Pricing used in the forecast price estimates is set forth in the table below and referenced in the notes to subsequent tables.

Table 1: Forecast Prices used in Estimates (1)

Natural Gas Natural Gas Natural Gas Inflation Exchange Exchange
Light and Medium Crude Oil Crude Oil Canada France/Netherlands Liquids Rate Rate Rate
WTI Edmonton Cromer Brent Blend National
Cushing Par Price Medium FOB AECO Balancing FOB
Oklahoma 40˚ API 29.3˚ API North Sea Gas Price Point Field Gate Percent
Year ($US/bbl) ($Cdn/bbl) ($Cdn/bbl) ($US/bbl) ($Cdn/MMBtu) (UK) ($Cdn/bbl) Per Year ($US/$Cdn) (EUR/$Cdn)
2013 97.88 93.33 88.05 108.76 3.24 10.83 68.65 1.0 1.000 1.369
Forecast
2014 97.50 92.76 86.27 107.50 4.03 11.32 66.66 2.0 0.950 1.420
2015 97.50 97.37 90.55 107.50 4.26 11.32 69.12 2.0 0.950 1.420
2016 97.50 100.00 93.00 105.00 4.50 11.05 70.45 2.0 0.950 1.420
2017 97.50 100.00 93.00 102.50 4.74 10.79 69.83 2.0 0.950 1.420
2018 97.50 100.00 93.00 102.50 4.97 10.79 69.19 2.0 0.950 1.420
Thereafter 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 0.950 1.420
Note:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

All forecast prices in the table above are provided by GLJ.  For 2013, the price of Vermilion’s natural gas in the Netherlands was based on the TTF day-ahead index, as determined on the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services, plus various fees. GasTerra, a state owned entity purchases all natural gas produced by Vermilion in the Netherlands.  Prior to 2013, the natural gas price received by Vermilion in the Netherlands was calculated using a formula based on the trailing average of Dated Brent and natural gas prices from European trading hubs.  France natural gas production was benchmarked to National Balancing Point (UK).  The benchmark price for Australia and France crude oil was Dated Brent. The benchmark price for Canadian crude oil was Edmonton Par and Canadian natural gas was priced against AECO.  For the year ended December 31, 2013, the average realized sales prices before hedging were $119.38 per bbl (Australia), $10.61 per Mcf (Netherlands), $108.55 per bbl (France) for Brent-based crude oil, $89.78 per bbl for Canadian-based crude oil and NGLs and $3.40 per Mcf for Canadian natural gas.

The following table summarizes the capital expenditures made by Vermilion on oil and natural gas properties for the year ended December 31, 2013:

Table 2: Capital Costs Incurred

Acquisition Costs
Proved Unproved Exploration Development Total
(M$) Properties (1) Properties Costs (1) Costs Costs
Australia – – – 77,931 77,931
Canada – – 19,079 235,086 254,165
France – – 3,899 96,479 100,378
Ireland – – – 90,898 90,898
Netherlands 24,124 – – 28,543 52,667
Total 24,124 – 22,978 528,937 576,039
Note:
(1) Includes costs of acquiring undeveloped properties.

The following table sets forth the reserve life index based on total proved and proved plus probable reserve and fourth quarter 2013 production of 40,960 boe/d.

Table 3: Reserve Life Index

Commodity Production          Reserve Life Index (years)
Fourth Quarter
2013
Total
Proved
Proved Plus
Probable
Oil and natural gas liquids (bbl/d) 27,800 7.6 11.6
Natural gas (mmcf/d) 78.96 10.7 16.9
Oil Equivalent (boe/d) 40,960 8.6 13.3

The following tables provide reserves data and a breakdown of future net revenue by component and production group using forecast prices and costs.  For Canada, the tables following include Alberta gas cost allowance.

The following tables may not total due to rounding.

Table 4: Oil and Gas Reserves – Based on Forecast Prices and Costs (1)

Light and Medium Oil Heavy Oil Natural Gas Natural Gas Liquids BOE BOE
Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross Net
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboe) (Mboe)
Proved Developed Producing (3) (5) (6)
Australia 12,824 12,824 – – – – – – 12,824 12,824
Canada 11,394 9,323 13 12 64,246 58,142 2,804 1,920 24,919 20,945
France 30,895 28,741 – – 7,561 7,554 – – 32,155 30,000
Ireland – – – – – – – – –  –
Netherlands – – – – 22,794 22,794 44 44 3,843 3,843
Total Proved Developed Producing 55,113 50,888 13 12 94,601 88,490 2,848 1,964 73,741 67,612
Proved Developed Non-Producing (3) (5) (7)
Australia – – – – – – – – – –
Canada 459 392 – – 16,330 14,633 629 408 3,810 3,239
France 686 635 – – 3,470 3,457 – – 1,264 1,211
Ireland – – – – – – – – – –
Netherlands – – – – 13,956 13,956 17 17 2,343 2,343
Total Proved Developed Non-Producing 1,145 1,027 – – 33,756 32,046 646 425 7,417 6,793
Proved Undeveloped (3) (8)
Australia 1,200 1,200 – – – – – – 1,200 1,200
Canada 8,997 7,768 – – 74,385 68,950 4,734 3,671 26,129 22,931
France 2,810 2,665 – – – – – – 2,810 2,665
Ireland – – – – 105,931 105,931 – – 17,655 17,655
Netherlands – – – – – – – – – –
Total Proved Undeveloped 13,007 11,633 – – 180,316 174,881 4,734 3,671 47,794 44,451
Proved (3)
Australia 14,024 14,024 – – – – – – 14,024 14,024
Canada 20,850 17,483 13 12 154,961 141,725 8,167 5,999 54,857 47,115
France 34,391 32,041 – – 11,031 11,011 – – 36,230 33,876
Ireland – – – – 105,931 105,931 – – 17,655 17,655
Netherlands – – – – 36,750 36,750 61 61 6,186 6,186
Total Proved 69,265 63,548 13 12 308,673 295,417 8,228 6,060 128,952 118,856
Probable (4)
Australia 5,439 5,439 – – – – – – 5,439 5,439
Canada 10,450 8,645 3 3 90,663 81,662 5,685 3,942 31,249 26,200
France 18,394 17,178 – – 3,269 3,266 – – 18,939 17,722
Ireland – – – – 38,707 38,707 – – 6,451 6,451
Netherlands – – – – 44,592 44,592 99 99 7,531 7,531
Total Probable 34,283 31,262 3 3 177,231 168,227 5,784 4,041 69,609 63,344
Proved Plus Probable (3) (4)
Australia 19,463 19,463 – – – – – – 19,463 19,463
Canada 31,300 26,128 16 15 245,624 223,387 13,852 9,941 86,105 73,315
France 52,785 49,219 – – 14,300 14,277 – – 55,168 51,599
Ireland – – – 144,638 144,638 – – 24,107 24,106
Netherlands – – – – 81,342 81,342 160 160 13,717 13,717
Total Proved Plus Probable 103,548 94,810 16 15 485,904 463,644 14,012 10,101 198,560 182,200
Notes:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)  “Gross Reserves” are Vermilion’s working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of Vermilion.  “Net Reserves” are Vermilion’s working interest (operating or non-operating) share after deduction of royalty obligations, plus Vermilion’s royalty interests in reserves.
(3)  “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 reserves.
(4)  “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 reserves.
(5) “Developed” reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(6) “Developed Producing” reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate.  These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(7) “Developed Non-Producing” reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(8)  “Undeveloped” reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production.  They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

Table 5: Net Present Values of Future Net Revenue – Based on Forecast Prices and Costs (1)

Before Deducting Future Income Taxes Discounted At After Deducting Future Income Taxes Discounted At
(M$) 0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
Proved Developed Producing (2) (4) (5)
Australia 652,521 585,705 531,671 487,436 450,743 441,525 389,286 347,679 314,159 286,801
Canada 917,542 732,428 611,019 526,184 463,924 917,542 732,428 611,019 526,184 463,924
France 1,922,512 1,441,270 1,169,507 995,695 874,106 1,515,215 1,143,202 924,201 781,406 680,775
Ireland – – – – – – – – – –
Netherlands 171,171 166,503 160,726 154,867 149,274 127,777 124,483 119,963 115,260 110,734
Total Proved Developed Producing 3,663,746 2,925,906 2,472,923 2,164,182 1,938,047 3,002,059 2,389,399 2,002,862 1,737,009 1,542,234
Proved Developed Non-Producing (2) (4) (6)
Australia – – – – – – – – – –
Canada 70,195 55,001 45,425 38,749 33,807 70,195 55,001 45,425 38,749 33,807
France 58,478 44,933 36,291 30,396 26,117 37,859 28,837 22,976 18,988 16,109
Ireland – – – – – – – – – –
Netherlands 58,744 42,746 32,922 26,583 22,305 48,215 32,962 23,789 18,026 14,260
Total Proved Developed Non-Producing 187,417 142,680 114,638 95,728 82,229 156,269 116,800 92,190 75,763 64,176
Proved Undeveloped (2) (7)
Australia 60,146 46,820 36,877 29,331 23,516 27,883 19,651 13,726 9,397 6,192
Canada 746,436 530,852 394,101 302,160 237,346 448,077 321,004 240,489 185,988 147,108
France 186,477 149,805 119,575 96,365 78,740 124,123 93,815 71,553 55,102 42,883
Ireland 716,287 559,569 435,502 341,954 271,427 716,287 559,569 435,502 341,954 271,427
Netherlands – – – – – – – – – –
Total Proved Undeveloped 1,709,346 1,287,046 986,055 769,810 611,029 1,316,370 994,039 761,270 592,441 467,610
Proved (2)
Australia 712,667 632,525 568,548 516,767 474,259 469,408 408,937 361,405 323,556 292,993
Canada 1,734,173 1,318,281 1,050,545 867,093 735,077 1,435,814 1,108,433 896,933 750,921 644,839
France 2,167,467 1,636,008 1,325,373 1,122,456 978,963 1,677,197 1,265,854 1,018,730 855,496 739,767
Ireland 716,287 559,569 435,502 341,954 271,427 716,287 559,569 435,502 341,954 271,427
Netherlands 229,915 209,249 193,648 181,450 171,579 175,992 157,445 143,752 133,286 124,994
Total Proved 5,560,509 4,355,632 3,573,616 3,029,720 2,631,305 4,474,698 3,500,238 2,856,322 2,405,213 2,074,020
Probable (3)
Australia 342,887 268,934 216,210 177,749 149,013 191,359 143,212 109,895 86,417 69,505
Canada 1,066,302 679,218 473,035 351,453 273,764 805,234 505,288 346,615 253,689 194,789
France 1,328,916 752,046 490,337 346,386 257,336 867,907 479,851 302,221 204,717 144,824
Ireland 413,592 250,341 164,931 116,333 86,526 413,592 250,341 164,931 116,333 86,526
Netherlands 379,491 280,351 220,037 180,195 152,184 281,161 204,108 156,473 124,925 102,879
Total Probable 3,531,188 2,230,890 1,564,550 1,172,116 918,823 2,559,253 1,582,800 1,080,135 786,081 598,523
Proved Plus Probable (2) (3)
Australia 1,055,554 901,459 784,758 694,516 623,272 660,767 552,149 471,300 409,973 362,498
Canada 2,800,475 1,997,499 1,523,580 1,218,546 1,008,841 2,241,048 1,613,721 1,243,548 1,004,610 839,628
France 3,496,383 2,388,054 1,815,710 1,468,842 1,236,299 2,545,104 1,745,705 1,320,951 1,060,213 884,591
Ireland 1,129,879 809,910 600,433 458,287 357,953 1,129,879 809,910 600,433 458,287 357,953
Netherlands 609,406 489,600 413,685 361,645 323,763 457,153 361,553 300,225 258,211 227,873
Total Proved Plus Probable 9,091,697 6,586,522 5,138,166 4,201,836 3,550,128 7,033,951 5,083,038 3,936,457 3,191,294 2,672,543
Notes:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)  “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 reserves.
(3) “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 reserves.
(4) “Developed” reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(5) “Developed Producing” reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate.  These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(6) “Developed Non-Producing” reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(7) “Undeveloped” reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production.  They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

Table 6: Total Future Net Revenue (Undiscounted) Based on Forecast Prices and Costs (1)

Future Net Future Net
Capital Abandonment and Revenue Revenue
Operating Development Reclamation Before Future After
(M$) Revenue Royalties Costs Costs Costs Income Taxes Income Taxes Income Taxes
Proved (2)
Australia 1,646,523 – 694,410 201,855 37,591 712,667 243,259 469,408
Canada 3,566,032 523,536 823,146 444,584 40,594 1,734,172 298,358 1,435,814
France 3,825,846 255,263 1,070,681 149,246 183,193 2,167,463 490,266 1,677,197
Ireland 1,186,463 – 217,845 184,480 67,851 716,287 – 716,287
Netherlands 447,859 – 136,074 40,558 41,311 229,916 53,924 175,992
Total Proved 10,672,723 778,799 2,942,156 1,020,723 370,540 5,560,505 1,085,807 4,474,698
Proved Plus Probable (2) (3)
Australia 2,312,683 – 970,836 243,471 42,822 1,055,554 394,787 660,767
Canada 5,666,550 874,308 1,256,300 685,624 49,843 2,800,475 559,427 2,241,048
France 5,992,965 398,363 1,522,445 346,678 229,097 3,496,382 951,278 2,545,104
Ireland 1,676,002 – 293,792 184,480 67,851 1,129,879 – 1,129,879
Netherlands 1,004,424 – 257,731 85,689 51,599 609,405 152,252 457,153
Total Proved Plus Probable 16,652,624 1,272,671 4,301,104 1,545,942 441,212 9,091,695 2,057,744 7,033,951
Notes:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)  “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 reserves.
(3) “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 reserves.

Table 7: Future Net Revenue by Production Group Based on Forecast Prices and Costs (1)

Future Net Revenue
Before Income Taxes (2)
(Discounted at 10% Per Year) Unit Value
Proved Developed Producing (M$) ($/boe)
Light and medium oil (3) 2,142,591 39.70
Natural gas (4) 328,991 26.45
Non-conventional oil and gas activities 1,341 1.11
Total Proved Developed Producing 2,472,923 36.57
Proved Developed Non-Producing
Light and medium oil (3) 32,403 28.38
Natural gas (4) 80,346 15.83
Non-conventional oil and gas activities 1,889 3.29
Total Proved Developed Non-Producing 114,638 16.88
Proved Undeveloped
Light and medium oil (3) 457,303 30.83
Natural gas (4) 524,088 18.93
Non-conventional oil and gas activities 4,664 2.42
Total Proved Undeveloped 986,055 22.18
Proved
Light and medium oil (3) 2,632,297 37.64
Natural gas (4) 933,425 20.64
Non-conventional oil and gas activities 7,894 2.12
Total Proved 3,573,616 30.07
Probable
Light and medium oil (3) 1,009,856 29.05
Natural gas (4) 547,769 20.29
Non-conventional oil and gas activities 6,925 4.38
Total Probable 1,564,550 24.70
Proved Plus Probable
Light and medium oil (3) 3,642,153 34.79
Natural gas (4) 1,481,194 20.51
Non-conventional oil and gas activities 14,819 2.80
Total Proved Plus Probable 5,138,166 28.20
Notes:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)  Other Company revenue and costs not related to a specific production group have been allocated proportionately to production groups.  Unit values are based on Company Net Reserves.  Net present values of reserves categories are an approximation based on major products.
(3)  Including solution gas and other by-products.
(4) Including by-products but excluding solution gas.

Reconciliations of Changes in Reserves

The following tables set forth a reconciliation of the changes in Vermilion’s gross light and medium crude oil, heavy oil and associated and non-associated gas (combined) reserves as at December 31, 2013 compared to such reserves as at December 31, 2012 based on the forecast price and cost assumptions set forth in note 3.

Table 8: Reconciliation of Company Gross Reserves by Principal Product Type – Based on Forecast Prices and Costs

AUSTRALIA Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 10,327 6,816 17,143 10,327 6,816 17,143 – – – – – –
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 3,300 (650) 2,650 3,300 (650) 2,650 – – – – – –
Technical Revisions 2,763 (727) 2,036 2,763 (727) 2,036 – – – – – –
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (2,366) – (2,366) (2,366) – (2,366) – – – – – –
At December 31, 2013 14,024 5,439 19,463 14,024 5,439 19,463 – – – – – –
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 – – – – – – – – – 10,327 6,816 17,143
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery – – – – – – – – – 3,300 (650) 2,650
Technical Revisions – – – – – – – – – 2,763 (727) 2,036
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production – – – – – – – – – (2,366) – (2,366)
At December 31, 2013 – – – – – – – – – 14,024 5,439 19,463
CANADA Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 18,132 14,102 32,234 18,115 14,099 32,214 17 3 20 3,565 2,026 5,591
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 1,056 1,487 2,543 1,056 1,487 2,543 – – – 3,839 3,256 7,095
Technical Revisions 4,736 (5,136) (400) 4,736 (5,136) (400) – – – 1,371 403 1,774
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (3,061) – (3,061) (3,057) – (3,057) (4) – (4) (608) – (608)
At December 31, 2013 20,863 10,453 31,316 20,850 10,450 31,300 13 3 16 8,167 5,685 13,852
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 114,014 65,654 179,668 91,978 53,713 145,691 22,036 11,941 33,977 40,700 27,070 67,770
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 41,210 35,959 77,169 41,210 35,959 77,169 – – – 11,763 10,736 22,500
Technical Revisions 15,209 (10,950) 4,259 11,942 (9,136) 2,806 3,267 (1,814) 1,453 8,641 (6,558) 2,083
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (15,472) – (15,472) (14,072) – (14,072) (1,400) – (1,400) (6,248) – (6,248)
At December 31, 2013 154,961 90,663 245,624 131,058 80,536 211,594 23,903 10,127 34,030 54,857 31,249 86,105
FRANCE Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 32,516 14,263 46,779 32,516 14,263 46,779 – – – – – –
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 3,194 3,910 7,104 3,194 3,910 7,104 – – – – – –
Technical Revisions 2,650 221 2,871 2,650 221 2,871 – – – – – –
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (3,969) – (3,969) (3,969) – (3,969) – – – – – –
At December 31, 2013 34,391 18,394 52,785 34,391 18,394 52,785 – – – – – –
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 1,377 24 1,401 1,377 24 1,401 – – – 32,746 14,266 47,012
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 3,470 1,290 4,760 3,470 1,290 4,760 – – – 3,772 4,125 7,897
Technical Revisions 7,425 1,955 9,380 7,425 1,955 9,380 – – – 3,888 548 4,435
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (1,241) – (1,241) (1,241) – (1,241) – – – (4,176) – (4,176)
At December 31, 2013 11,031 3,269 14,300 11,031 3,269 14,300 – – – 36,230 18,939 55,168
IRELAND Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 – – – – – – – – – – – –
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery – – – – – – – – – – – –
Technical Revisions – – – – – – – – – – – –
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production – – – – – – – – – – – –
At December 31, 2013 – – – – – – – – – – – –
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 91,954 35,079 127,033 91,954 35,079 127,033 – – – 15,326 5,846 21,172
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 3,578 929 4,507 3,578 929 4,507 – – – 596 155 751
Technical Revisions 10,399 2,699 13,098 10,399 2,699 13,098 – – – 1,733 450 2,183
Acquisitions – – – – – – – – – – – –
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production – – – – – – – – – – – –
At December 31, 2013 105,931 38,707 144,638 105,931 38,707 144,638 – – – 17,655 6,451 24,106
NETHERLANDS Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 – – – – – – – – – 62 61 123
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery – – – – – – – – – 6 3 9
Technical Revisions – – – – – – – – – 7 (20) (13)
Acquisitions – – – – – – – – – 9 55 64
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production – – – – – – – – – (23) – (23)
At December 31, 2013 – – – – – – – – – 61 99 160
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 36,606 33,277 69,883 36,606 33,277 69,883 – – – 6,163 5,607 11,770
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 1,445 2,799 4,244 1,445 2,799 4,244 – – – 247 470 716
Technical Revisions 7,906 (1,602) 6,304 7,906 (1,602) 6,304 – – – 1,325 (287) 1,038
Acquisitions 3,721 10,118 13,839 3,721 10,118 13,839 – – – 629 1,741 2,371
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (12,928) – (12,928) (12,928) – (12,928) – – – (2,178) – (2,178)
At December 31, 2013 36,750 44,592 81,342 36,750 44,592 81,342 – – – 6,186 7,531 13,717
TOTAL COMPANY Total Oil Light and Medium Oil Heavy Oil Natural Gas Liquids
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2012 60,975 35,181 96,156 60,958 35,178 96,136 17 3 20 3,627 2,086 5,714
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 7,550 4,747 12,297 7,550 4,747 12,297 – – – 3,845 3,259 7,104
Technical Revisions 10,149 (5,642) 4,507 10,149 (5,642) 4,507 – – – 1,378 383 1,761
Acquisitions – – – – – – – – – 9 56 64
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (9,396) – (9,396) (9,392) – (9,392) (4) – (4) (631) – (631)
At December 31, 2013 69,278 34,286 103,564 69,265 34,283 103,548 13 3 16 8,228 5,784 14,012
Total Gas Conventional Natural Gas Coal Bed Methane BOE
Proved + Proved + Proved + Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2012 243,951 134,034 377,985 221,915 122,093 344,008 22,036 11,941 33,977 105,262 59,605 164,867
Discoveries – – – – – – – – – – – –
Extensions & Improved Recovery 49,703 40,977 90,680 49,703 40,977 90,680 – – – 19,679 14,836 34,514
Technical Revisions 40,939 (7,898) 33,041 37,672 (6,084) 31,588 3,267 (1,814) 1,453 18,350 (6,574) 11,775
Acquisitions 3,721 10,118 13,839 3,721 10,118 13,839 – – – 629 1,742 2,371
Dispositions – – – – – – – – – – – –
Economic Factors – – – – – – – – – – – –
Production (29,641) – (29,641) (28,241) – (28,241) (1,400) – (1,400) (14,967) – (14,967)
At December 31, 2013 308,673 177,231 485,904 284,770 167,104 451,874 23,903 10,127 34,030 128,952 69,609 198,560
Notes:
(1) “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 reserves.
(2) “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 reserves.
(3) The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

The table below sets out the future development costs deducted in the estimation of future net revenue attributable to total proved reserves and total proved plus probable reserves (using forecast prices and costs).

Table 9: Future Development Costs (1)

Total Proved Total Proved Plus Probable
(M$) Estimated Using Forecast Prices and Costs       Estimated Using Forecast Prices and Costs
Australia
2014 22,500 22,500
2015 68,646 110,262
2016 2,913 2,913
2017 40,963 40,963
2018 64,405 64,405
Remainder 2,428 2,428
Total for all years undiscounted 201,855 243,471
Canada
2014 188,687 196,593
2015 179,314 250,776
2016 55,508 156,334
2017 5,636 65,039
2018 541 541
Remainder 14,899 16,341
Total for all years undiscounted 444,585 685,624
France
2014 38,884 77,422
2015 44,609 126,820
2016 22,923 54,801
2017 7,861 46,171
2018 9,272 15,767
Remainder 25,699 25,697
Total for all years undiscounted 149,248 346,678
Ireland
2014 107,703 107,703
2015 50,832 50,832
2016 3,288 3,288
2017 – –
2018 – –
Remainder 22,657 22,657
Total for all years undiscounted 184,480 184,480
Netherlands
2014 1,245 9,236
2015 2,818 5,586
2016 416 2,757
2017 29,072 45,187
2018 433 16,350
Remainder 6,574 6,573
Total for all years undiscounted 40,558 85,689
Total Company
2014 359,020 413,454
2015 346,219 544,277
2016 85,046 220,093
2017 83,532 197,361
2018 74,653 97,064
Remainder 72,253 73,693
Total for all years undiscounted 1,020,723 1,545,942
Note:
(1)  The pricing assumptions used in the GLJ 2013 Reserves Evaluation with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above.  See “Forecast Prices used in Estimates”.  The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation.  GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

Vermilion expects to source its capital expenditure requirements from internally generated cash flow and, as appropriate, from the existing credit facility, equity or debt financing.  It is anticipated that costs of funding the future development costs will not impact development of its properties or Vermilion’s reserves or future net revenue.

CONTINGENT AND PROSPECTIVE RESOURCES

Vermilion retained GLJ to conduct an independent resource evaluation to assess contingent and prospective resources across all of the Company’s key operating regions with an effective date of December 31, 2013 (the “GLJ 2013 Resources Assessment”).  All contingent and prospective resources evaluated in the GLJ 2013 Resources Assessment were deemed economic at the effective date of December 31, 2013.

The estimates of volumes of, and the net present value of the future net revenue attributable to, contingent resources and prospective resources in this news release are derived from the GLJ 2013 Resources Assessment.  The GLJ 2013 Resources Assessment was prepared in accordance with COGEH and NI 51-101 by GLJ, an independent qualified reserve evaluator.

A range of contingent and prospective resources estimates (low, best and high) were prepared by GLJ.  See notes 5 to 8 of following Table 11 in this section for a description of low estimate, best estimate and high estimate.

Contingent Resources

“Contingent resources” are not, and should not be confused with, petroleum and natural gas reserves. “Contingent resources” are defined in 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. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resource the estimated discovered recoverable quantities associated with a project in the early evaluation stage.

The primary contingencies which currently prevent the classification of Vermilion’s contingent resource as reserves include but are not limited to:

  • preparation of firm development plans, including determination of the specific scope and timing of projects;
  • project sanction;
  • access to capital markets;
  • shareholder 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. The estimates of contingent resources involve implied assessment, based on certain estimates and assumptions, that the resources described exists in the quantities predicted or estimated and that the resources can be profitably produced in the future.  The 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.

Prospective Resources

Prospective resources are not, and should not be confused with, petroleum and natural gas reserves. “Prospective resources” are defined in COGEH as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.

There is no certainty that any portion of the prospective resources will be discovered.  If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources or that Vermilion will produce any portion of the volumes currently classified as prospective resources. The estimates of prospective resources involve implied assessment, based on certain estimates and assumptions, that the resources described exists in the quantities predicted or estimated and that the resources can be profitably produced in the future. The net present value of the future net revenue from the prospective resources does not necessarily represent the fair market value of the prospective resources. The recovery and resources estimates provided herein are estimates only.  Actual prospective resources (and any volumes that may be reclassified as reserves or contingent resources) and future production from such prospective resources may be greater than or less than the estimates provided herein.

Summary information regarding contingent and prospective resources and net present values of future net revenues from contingent and prospective resources are set forth below

Table 10: Company Gross and Net Contingent and Prospective Resources as at December 31, 2013 (1) (2) – Forecast Prices and Costs (3) (4)

Gross Gross Net
Reserves Contingent Resources Prospective Resources Contingent Resources Prospective Resources
P+P Low Best High Low Best High Low Best High Low Best High
Oil and NGLs (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
Australia 19,463 1,250 3,900 6,200 – 1,207 3,046 1,250 3,900 6,200 – 1,207 3,046
Canada 45,168 28,377 84,022 128,092 4,607 157,571 295,063 21,140 61,487 92,143 3,711 121,446 222,692
France 52,785 8,463 21,203 33,879 289 3,782 13,584 7,744 19,489 31,364 271 3,171 12,637
Ireland – – – – – – – – – – – – –
Netherlands 160 13 41 1,112 112 199 389 13 41 1,112 112 199 389
Total 117,576 38,103 109,166 169,283 5,008 162,759 312,082 30,147 84,917 130,819 4,094 126,023 238,764
Gross Gross Net
Reserves Contingent Resources Prospective Resources Contingent Resources Prospective Resources
P+P Low Best High Low Best High Low Best High Low Best High
Natural Gas (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf)
Australia – – – – – – – – – – – – –
Canada 245,624 204,370 704,875 1,023,206 196,373 1,772,471 2,559,987 188,177 642,287 920,915 184,256 1,648,071 2,370,533
France 14,300 653 816 1,020 – – – 653 816 1,020 – – –
Ireland 144,638 5,807 18,780 29,587 – – – 5,807 18,780 29,587 – – –
Netherlands 81,342 6,874 21,627 40,864 130,038 242,939 480,613 6,874 21,627 40,864 130,038 242,939 480,613
Total 485,904 217,704 746,098 1,094,677 326,411 2,015,410 3,040,600 201,511 683,510 992,386 314,294 1,891,010 2,851,146
Gross Gross Net
Reserves Contingent Resources Prospective Resources Contingent Resources Prospective Resources
P+P Low Best High Low Best High Low Best High Low Best High
Total Oil Equivalent (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe) (Mboe)
Australia 19,463 1,250 3,900 6,200 – 1,207 3,046 1,250 3,900 6,200 – 1,207 3,046
Canada 86,105 62,439 201,502 298,626 37,336 452,983 721,727 52,503 168,534 245,629 34,421 396,125 617,781
France 55,168 8,571 21,339 34,049 289 3,782 13,584 7,853 19,625 31,534 271 3,171 12,637
Ireland 24,106 968 3,130 4,931 – – – 968 3,130 4,931 – – –
Netherlands 13,717 1,159 3,646 7,922 21,785 40,689 80,492 1,159 3,646 7,922 21,785 40,689 80,492
Total 198,560 74,387 233,517 351,728 59,410 498,661 818,849 63,733 198,835 296,216 56,477 441,192 713,956

Table 11: Summary of Net Present Value of Future Net Revenues as at December 31, 2013 – Forecast Prices and Costs (3)

Contingent Resources Before Income Taxes, Discounted at (5) After Income Taxes, Discounted at (5)
(M$) 0% 5% 8% 10% 0% 5% 8% 10%
Low Estimate (C1) (6)
Australia 46,057 30,848 24,342 20,805 10,709 4,554 2,164 950
Canada 1,338,563 750,862 547,973 448,543 1,003,891 535,982 376,779 299,666
France 500,810 299,434 225,931 188,618 328,076 183,183 131,181 105,100
Ireland 23,215 7,833 3,793 2,180 17,411 5,360 2,280 1,081
Netherlands 24,785 13,825 9,362 6,996 13,325 5,213 1,997 325
Total Low Estimate 1,933,430 1,102,802 811,401 667,142 1,373,412 734,292 514,401 407,122
Best Estimate (C2) (7)
Australia 270,083 190,153 155,779 136,973 103,615 67,961 53,278 45,456
Canada 4,757,350 2,548,856 1,810,553 1,455,506 3,567,982 1,841,038 1,268,888 995,788
France 1,219,657 706,205 527,066 438,131 799,382 433,198 307,628 246,078
Ireland 142,895 49,811 25,559 15,511 107,171 35,501 16,748 8,965
Netherlands 105,017 65,145 49,059 40,535 57,271 30,298 19,610 14,023
Total Best Estimate 6,495,002 3,560,170 2,568,016 2,086,656 4,635,421 2,407,996 1,666,152 1,310,310
High Estimate (C3) (8)
Australia 533,218 375,068 307,885 271,318 216,856 146,938 118,024 102,536
Canada 8,520,437 4,598,611 3,337,210 2,738,201 6,390,285 3,371,269 2,405,989 1,949,949
France 2,268,722 1,266,202 939,778 782,450 1,487,408 794,121 570,941 464,372
Ireland 324,184 99,583 52,899 35,341 243,138 73,269 37,734 24,313
Netherlands 287,748 191,967 152,366 131,052 157,267 95,126 69,804 56,317
Total High Estimate 11,934,309 6,531,431 4,790,138 3,958,362 8,494,954 4,480,723 3,202,492 2,597,487
Prospective Resources Before Income Taxes, Discounted at (5) After Income Taxes, Discounted at (5)
(M$) 0% 5% 8% 10% 0% 5% 8% 10%
Low Estimate (Pr1) (6)
Australia – – – – – – – –
Canada 492,575 236,916 154,804 116,698 369,217 167,763 104,048 74,831
France 10,422 8,547 7,634 7,097 5,484 4,069 3,398 3,011
Ireland – – – – – – – –
Netherlands 848,414 416,721 294,433 239,170 460,342 208,317 135,776 103,074
Total Low Estimate 1,351,411 662,184 456,871 362,965 835,043 380,149 243,222 180,916
Best Estimate (Pr2) (7)
Australia 106,915 64,513 48,429 40,247 43,520 25,183 18,433 15,061
Canada 11,548,288 4,767,690 2,918,816 2,131,682 8,659,120 3,427,761 2,023,953 1,434,147
France 150,457 93,762 72,020 60,756 97,837 55,234 39,133 30,889
Ireland – – – –  – – – –
Netherlands 2,078,111 1,132,690 848,113 714,874 1,132,370 599,681 438,362 363,004
Total Best Estimate 13,883,771 6,058,655 3,887,378 2,947,559 9,932,847 4,107,859 2,519,881 1,843,101
High Estimate (Pr3) (8)
Australia 334,608 191,460 141,219 116,472 140,264 78,871 57,603 47,208
Canada 27,794,746 11,888,521 7,639,101 5,813,417 20,845,987 8,778,815 5,574,461 4,204,916
France 758,262 428,747 319,835 267,173 496,839 265,350 190,141 154,240
Ireland – – – –  – – – –
Netherlands 4,736,149 2,635,340 1,989,491 1,684,266 2,585,545 1,421,568 1,062,681 893,256
Total High Estimate 33,623,765 15,144,068 10,089,646 7,881,328 24,068,635 10,544,604 6,884,886 5,299,620
Notes:
(1)  The contingent and prospective resource assessments were prepared by GLJ in accordance with the definitions, standards and procedures contained in the COGEH and NI 51-101. Contingent resource is defined in the COGEH as those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology or technology under development, but which do not currently qualify as reserves or commercially recoverable due to one or more contingencies.  See “Presentation of Oil and Gas Reserves and Production Information – Contingent Resources” for the primary contingencies which prevent the classification of the resources as reserves. 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. The estimates of contingent resources involve implied assessment, based on certain estimates and assumptions, that the resources described exists in the quantities predicted or estimated, as at a given date, and that the resources can be profitably produced in the future. The 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.   Prospective resource is defined in the COGEH are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.  There is no certainty that any portion of the prospective resources will be discovered.  If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources or that Vermilion will produce any portion of the volumes currently classified as prospective resources. The estimates of prospective resources involve implied assessment, based on certain estimates and assumptions, that the resources described exists in the quantities predicted or estimated and that the resources can be profitably produced in the future. The net present value of the future net revenue from the prospective resources does not necessarily represent the fair market value of the prospective resources. The recovery and resources estimates provided herein are estimates only.  Actual prospective resources (and any volumes that may be reclassified as reserves or contingent resources) and future production from such prospective resources may be greater than or less than the estimates provided herein.
(2) GLJ prepared the estimates of contingent and prospective resources shown for each property using deterministic principles and methods. Probabilistic aggregation of the low and high property estimates shown in the table might produce different total volumes than the arithmetic sums shown in the table.
(3)  The forecast price and cost assumptions utilized in the year-end 2013 reserves report were also utilized by GLJ in preparing the contingent resource and prospective resource assessments. See “GLJ December 31, 2013 Forecast Prices” in this Annual Information Form.
(4) “Gross” Reserves or Contingent Resources or Prospective Resources are Vermilion’s working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of Vermilion.  “Net” Reserves or Contingent Resources or Prospective Resources are Vermilion’s working interest (operating or non-operating) share after deduction of royalty obligations, plus Vermilion’s royalty interests in Reserves or Contingent Resources or Prospective Resources.
(5) The net present value of future net revenue attributable to the contingent or prospective resources does not necessarily represent the fair market value of the contingent or prospective resources. Estimated abandonment and reclamation costs have been included in the evaluation.
(6) Low estimate is considered to be a conservative estimate of the quantity of contingent (C1) or prospective (Pr1) resources that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate.  Those contingent or prospective 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.
(7) Best estimate is considered to be the best estimate of the quantity of contingent (C2) or prospective (Pr2) resources 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 contingent or prospective resources that fall within the best estimate have a 50% confidence level that the actual quantities recovered will be equal or exceed the estimate.
(8) High estimate is considered to be an optimistic estimate of the quantity of contingent (C3) or prospective (Pr3) resources that will actually be recovered. It is unlikely that the actual remaining quantities of contingent or prospective resources recovered will meet or exceed the high estimate. Those contingent or prospective 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.

ABOUT VERMILION

Vermilion is an oil-leveraged producer that adheres to a value creation strategy through the execution of full cycle exploration and production programs focused on the acquisition, exploration, development and optimization of producing properties in Western Canada, Europe and Australia. Our business model targets annual organic production growth of approximately 5% along with providing reliable and increasing dividends to investors.  Vermilion is targeting growth in production primarily through the exploitation of conventional resource plays in Western Canada, including Cardium light oil and liquids rich natural gas, the exploration and development of high impact natural gas opportunities in the Netherlands and through drilling and workover programs in France and Australia. Vermilion also holds an 18.5% working interest in the Corrib gas field in Ireland. In addition, Vermilion pays a monthly dividend of Canadian $0.215 per share, which provides a current yield in excess of 4%.  Management and directors of Vermilion hold approximately 8% of the outstanding shares and are dedicated to consistently delivering superior rewards for all stakeholders, featuring an 20-year history of market outperformance. Vermilion trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbol VET.

Advisories & Contact

ADVISORIES

Natural gas volumes have been converted on the basis of six thousand cubic feet of natural gas to one barrel equivalent of oil.  Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation.  A boe conversion ratio of six thousand cubic feet of natural gas 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.

Fund flows from operations is considered an additional GAAP financial measure, recycle ratio and Netbacks are non-GAAP financial measures.  These are measures (as defined herein) that do not have standardized meanings prescribed by International Financial Reporting Standards (“IFRS”) and therefore are unlikely to be comparable with similar measures for other issuers. We define fund flows from operations as cash flows from operating activities before changes in non-cash operating working capital and asset retirement obligations settled.  Management believes that by excluding the temporary impact of changes in non-cash operating working capital, fund flows from operations provides a measure of our ability to generate cash (that is not subject to short-term movements in non-cash operating working capital) necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments. As we have presented fund flows from operations in the “Segmented Information” note of our audited consolidated financial statements for the year ended December 31, 2013, we consider fund flows from operations to be an additional GAAP financial measure.  “Recycle Ratio” means a measure of capital efficiency calculated by dividing the operating netback of production by the cost of adding reserves.  “Netbacks” are per boe and per mcf measures used in the analysis of operational activities.

SOURCE Vermilion Energy Inc.

For further information:

Anthony Marino, President & COO;
Curtis W. Hicks, Executive VP & CFO; and/or
Dean Morrison, Director Investor Relations
TEL (403) 269-4884
IR TOLL FREE 1-866-895-8101
investor_relations@vermilionenergy.com
www.vermilionenergy.com

 

Vermilion Energy

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