Equibles

40-F

VERMILION ENERGY INC. (VET)

40-F 2022-03-07 For: 2021-12-31
View Original
Added on April 12, 2026

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 40-F

◻ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934; or

þ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2021

Commission file number: No. 001-35829

Vermilion Energy Inc.

(Exact name of registrant as specified in its charter)

Alberta

(Province or other jurisdiction of incorporation or organization)

1311

(Primary standard industrial classification code number)

N/A

(I.R.S. employer identification number)

3500, 520 - 3rd Avenue S.W.

Calgary , Alberta **** T2P 0R3 Canada

( 403 ) 269-4884

(Address and telephone number of registrant’s principal executive office)

National Corporate Research, Ltd .

225 West 34th Street, Suite 910

New York , New York **** 10122 U.S.A.

( 212 ) 947-7200

(Name, address and telephone number of agent for service in the United States)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Trading Symbol: Name of each exchange on which registered:
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Common Shares VET New York Stock Exchange

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Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this form:

þ Annual Information Form þ Audited Annual Financial Statements

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Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: **** 162,260,989 shares

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ◻

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes þ No ◻

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company   ◻

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the  Exchange Act.      ◻

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.      þ

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DOCUMENTS FILED PURSUANT TO GENERAL INSTRUCTIONS

In accordance with General Instruction B.(3) of Form 40-F, the Registrant has filed the following documents as part of this Annual Report on Form 40-F, as set forth in the Exhibit Index attached hereto:

Exhibit 99.1 - Annual Information Form for the fiscal year ended December 31, 2021

Exhibit 99.2 - Management’s Discussion and Analysis for the fiscal year ended December 31, 2021; and

Exhibit 99.3 - Audited Annual Financial Statements for the fiscal year ended December 31, 2021

In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed the written consent of certain experts named in the foregoing Exhibits as Exhibit 99.5 and the written consent of its Independent Registered Public Accounting Firm as Exhibit 99.4, as set forth in the Exhibit Index attached hereto.

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DISCLOSURE CONTROLS AND PROCEDURES

A. Evaluation of Disclosure Controls and Procedures

Vermilion Energy Inc. (the "Registrant") maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission (the "Commission"). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Registrant in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Registrant's President, acting in the capacity of Chief Executive Officer, and Chief Financial Officer, after having evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report have concluded that, as of such date, the Registrant's disclosure controls and procedures are effective.

It should be noted that while the Registrant’s President and the Chief Financial Officer believe that the Registrant’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Registrant’s disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

B. Management’s Annual Report on Internal Control Over Financial Reporting

See page 3 of the 2021 Audited Consolidated Financial Statements included as Exhibit 99.3 to this report.

C. Auditor Attestation

See page 5 of the 2021 Audited Consolidated Financial Statements included as Exhibit 99.3 to this report.

D. Changes in Internal Control Over Financial Reporting

There was no change in the Registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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NOTICES REQUIRED BY RULE 104 OF REGULATION BTR

None

AUDIT COMMITTEE FINANCIAL EXPERT

The Registrant's Board of Directors has determined that it has at least one audit committee financial expert (as such term is defined in the rules and regulations of the Commission) serving on its Audit Committee. Robert B. Michaleski has been determined to be such audit committee financial expert and is independent (as such term is defined by the New York Stock Exchange's corporate governance standards).

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The Commission has indicated that the designation of Robert B. Michaleski as an audit committee financial expert does not make him an "expert" for any purpose, impose on his any duties, obligations or liability that are greater than the duties, obligations or liability imposed on him as a member of the Audit Committee and the Board of Directors in absence of such designation, or affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.

CODE OF ETHICS

The Registrant has adopted a written “code of ethics” (as that term is defined in Form 40-F) that applies to its directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of such code of ethics is available upon request or on the Registrant’s website at http://www.vermilionenergy.com/about/governance.cfm. In 2021, there were no amendments to the code of ethics or waivers, including implicit waivers, from any provisions of the code of ethics.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information about aggregate fees billed to us by our principal accountant, Deloitte LLP (PCAOB ID No. 1208) will be presented under the caption “Audit Committee Matters - External audit service fees” on page 54 of the Annual Information Form for the year ended December 31, 2021 included as Exhibit 99.1 to this report.

The Audit Committee pre-approves all audit related fees. The auditors present the estimate for the annual audit related services to the Audit Committee for approval prior to undertaking the annual audit of the financial statements.

All non-audit fees were pre-approved by the Audit Committee and none were approved on the basis of the de minimis exemption set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X.

OFF-BALANCE SHEET ARRANGEMENTS

The Registrant does not have any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons (which are not otherwise discussed in the Registrant's Management’s Discussion and Analysis for the fiscal year ended December 31, 2021, filed as Exhibit 99.2 to this annual report on Form 40-F), that have or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The required disclosure is included under the heading “Liquidity and Capital Resources - Contractual Obligations and Commitments” in the Registrant’s Management’s Discussion and Analysis for the fiscal year ended December 31, 2021, filed as Exhibit 99.2 to this annual report on Form 40-F.

IDENTIFICATION OF THE AUDIT COMMITTEE

The Registrant’s Board of Directors has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act which satisfies the requirements of Exchange Act Rule 10A-3. The Registrant’s Audit Committee is comprised of Robert B. Michaleski (Chair), Stephen P. Larke, Larry J. Macdonald, and Manjit Sharma, all of whom, in the opinion of the Registrant’s Board of Directors are independent (as determined under Rule 10A-3 of the Exchange Act and the corporate governance standards of the NYSE) and are financially literate. Please refer to the Registrant's Annual Information Form attached as Exhibit 99.1 to this annual report on Form 40-F for details in connection with each of these members and their qualifications.

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The members of the Audit Committee do not have fixed terms and are appointed from time to time by resolution of the directors.

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The Audit Committee meets with the Registrant's President, Chief Financial Officer and the Registrant's independent auditors to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls, as well as audit procedures and audit plans. The Audit Committee also recommends to the Board of Directors which independent registered public auditing firm should be appointed by the Registrant, and reviews and recommends to the Board of Directors for approval the Registrant’s audited annual financial statements and accompanying management’s discussion and analysis. ​

The full text of the Audit Committee Terms of Reference is disclosed in the Registrant's Annual Information Form, attached hereto as Exhibit 99.1, and is incorporated by reference in this annual report on Form 40-F.

NYSE STATEMENT OF GOVERNANCE DIFFERENCES

As a Canadian corporation with securities listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”), the Registrant is required to comply with all applicable Canadian requirements adopted by the Canadian Securities Administrators and the TSX, and applicable rules for foreign private issuers adopted by the Commission which give effect to the provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).

The Registrant’s corporate governance practices meet or exceed all applicable Canadian and Sarbanes-Oxley requirements and also incorporate many “best practices” derived from those required to be followed by U.S. domestic companies under the NYSE listing standards. In accordance with Section 303A.11 of the NYSE Listed Company Manual, the Registrant has prepared a summary of the significant ways in which its corporate governance practices differ from those required to be followed by U.S. domestic companies under the NYSE’s corporate governance standards, which is accessible on the Registrant’s website at http://www.vermilionenergy.com/about/governance.cfm.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A. Undertaking

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

B. Consent to Service of Process

The Registrant has previously filed with the Commission a Form F-X in connection with the class of securities in relation to which the obligation to file this report arises.

Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the Commission by amendment to Form F-X referencing the file number of the Registrant.

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

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​ VERMILION ENERGY INC (the Registrant)
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Date: March 4, 2022 ​ By: /s/ (“Lars Glemser”)
​ ​ Lars Glemser
​ ​ Vice President and Chief Financial Officer

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EXHIBIT INDEX

The following exhibits have been filed as part of this annual report:

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Exhibits **** Description
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99.1 ​ Annual Information Form for the Year Ended December 31, 2021
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99.2 ​ Management's Discussion and Analysis from the 2021 Annual Report to Shareholders
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99.3 ​ Audited Annual Financial Statements for the Year Ended December 31, 2021
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99.4 ​ Consent of Independent Registered Public Accounting Firm
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99.5 ​ Consent of Independent Petroleum Consultants
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99.6 ​ Officers’ Certifications of President, acting in the capacity of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
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99.7 ​ Certifications of President, acting in the capacity of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
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101 ​ Interactive Data File (formatted as Inline XBRL)
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104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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Exhibit 99.1

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Table of Contents

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Glossary, Conventions, Abbreviations, and Conversions 2
Special Note Regarding Forward Looking Information 4
Presentation of Oil and Gas Information 6
Non-GAAP Measures 6
Vermilion's Organizational Structure 7
Description of the Business 7
General Development of the Business 11
Statement of Reserves Data and Other Oil and Gas Information 13
Directors and Officers 48
Description of Capital Structure 51
Market for Securities 53
Audit Committee Matters 53
Conflicts of Interest 55
Interest of Management and Others in Material Transactions 55
Legal Proceedings 55
Material Contracts 55
Interests of Experts 55
Transfer Agent and Registrar 55
Risk Factors 55
Additional Information 63
Appendix A ​
Report on reserves data by Independent Qualified Reserves Evaluator or Auditor (Form 51-101F2) 64
Appendix B ​
Report of Management and Directors on reserves data and other information (Form 51-101F3) 65
Appendix C ​
Terms of reference for the Audit Committee 66

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Glossary

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In addition to terms defined elsewhere in this annual information form, the following are defined terms used in this annual information form:

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“ABCA” means the Business Corporations Act(Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder.

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“AIF” means this Annual Information Form and the appendices attached hereto.

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“Affiliate” when used to indicate a relationship with a person or company, has the same meaning as set forth in the Securities Act (Alberta).

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“Common Shares” means a common share in the capital of the Company.

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“Conversion Arrangement” means the plan of arrangement effected on September 1, 2010 under section 193 of the ABCA pursuant to which the Trust converted from an income trust to a corporate structure, and Unitholders exchanged their Trust Units for common shares of the Company on a one-for-one basis and holders of exchangeable shares of Vermilion Resources Ltd., previously a subsidiary of the company ("VRL"), received 1.89344 common shares for each exchangeable share held.

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“Dividend” means a dividend paid by Vermilion in respect of the common shares, expressed as an amount per common share.

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“GLJ” means GLJ Petroleum Consultants Ltd., independent petroleum engineering consultants of Calgary, Alberta.

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“GLJ Report” means the independent engineering reserves evaluation of certain oil, NGL and natural gas interests of the Company prepared by GLJ dated February 11, 2022 and effective December 31, 2021.

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“Shareholders” means holders from time to time of the Company’s common shares.

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“Subsidiary” means, in relation to any person, any corporate, partnership, joint venture, association or other entity of which more than 50% of the total voting power of common shares or units of ownership or beneficial interest entitled to vote in the election of directors (or members of a comparable governing body) is owned or controlled, directly or indirectly, by such person.

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“Trust” means Vermilion Energy Trust, an unincorporated open-ended investment trust governed by the laws of the Province of Alberta that was dissolved and ceased to exist pursuant to the Conversion Arrangement.

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“Trust Unit” means units in the capital of the Trust.

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“Unitholders” means former unitholders of the Trust.

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“Vermilion” or the “Company” means Vermilion Energy Inc. and where context allows, its consolidated business enterprise, except that a reference to “Vermilion” prior to the date of the Conversion Arrangement means the consolidated business enterprise of the Trust, unless otherwise indicated.

​ Vermilion Energy Inc. ■ Page 2 ■ 2021 Annual Information Form

Conventions

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Unless otherwise indicated, references herein to "$" or "dollars" are to Canadian dollars.

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Production numbers stated refer to Vermilion's working interest share before deduction of crown, freehold, and other royalties. Reserve amounts are gross reserves, stated before deduction of royalties, as at December 31, 2021, based on forecast costs and price assumptions as evaluated in the GLJ Report.

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Abbreviations

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$M thousand dollars
$MM million dollars
°API An indication of the specific gravity of crude oil measured on the API (American Petroleum Institute) gravity scale
AECO the daily average benchmark price for natural gas at the AECO ‘C’ hub in southeast Alberta
bbl(s) barrel(s)
bbls/d barrels per day
boe barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf of natural gas)
mbbl thousand barrels
mboe thousand barrels of oil equivalent
mcf thousand cubic feet
mcf/d thousand cubic feet per day
mmboe million barrels of oil equivalent
mmbtu million British Thermal Units
mmcf million cubic feet
mmcf/d million cubic feet per day
NBP the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point operated by National Grid
TTF the day-ahead price for natural gas at the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services
WTI West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for crude oil of standard grade

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Conversions

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The following table sets forth certain standard conversions from Standard Imperial Units to the International System of Units (or metric units):

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To Convert From To Multiply By
mcf Cubic metres 28.174
Cubic metres Cubic feet 35.494
bbls Cubic metres 0.159
Cubic metres bbls oil 6.290
Feet Metres 0.305
Metres Feet 3.281
Miles Kilometres 1.609
Kilometres Miles 0.621
Acres Hectares 0.405
Hectares Acres 2.471

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​ Vermilion Energy Inc. ■ Page 3 ■ 2021 Annual Information Form

Special Note Regarding Forward Looking Statements

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Certain statements included or incorporated by reference in this annual information form 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 annual information form may include, but are not limited to:

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● capital expenditures;
● business strategies and objectives;
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● estimated reserve quantities and the discounted present value of future net cash flows from such reserves;
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● petroleum and natural gas sales;
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● future production levels (including the timing thereof) and rates of average annual production growth;
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● exploration and development plans;
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● acquisition and disposition plans and the timing thereof;
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● operating and other expenses, including the payment of future dividends;
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● royalty and income tax rates; and
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● the timing of regulatory proceedings and approvals.
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Such forward-looking statements or information are based on a number of assumptions of which all or any may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things:

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● the ability of the Company to obtain equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally;
● the ability of the Company to market crude oil, natural gas liquids and natural gas successfully to current and new customers;
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● the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate product transportation;
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● the timely receipt of required regulatory approvals;
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● the ability of the Company to obtain financing on acceptable terms;
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● foreign currency exchange rates and interest rates;
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● future crude oil, natural gas liquids and natural gas prices; and
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● Management’s expectations relating to the timing and results of development activities.
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Although the Company believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because the Company can give no assurance that such expectations will prove to be correct. Financial outlooks are provided for the purpose of understanding the Company’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 the Company and described in the forward looking statements or information. These risks and uncertainties include but are not limited to:

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● 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;
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● risks and uncertainties involving geology of crude oil, natural gas liquids and natural gas deposits;
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● risks inherent in the Company's marketing operations, including credit risk;
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● the uncertainty of reserves estimates and reserves life and associated expenditures;
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● the uncertainty of estimates and projections relating to production, costs and expenses;
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● potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
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● the Company's ability to enter into or renew leases on acceptable terms;
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● fluctuations in crude oil, natural gas liquids and natural gas prices, foreign currency exchange rates and interest rates;
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● health, safety and environmental risks;
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● uncertainties as to the availability and cost of financing;
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● the ability of the Company to add production and reserves through exploration and development activities;
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● general economic and business conditions;
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● the possibility that government policies or laws may change or governmental approvals may be delayed or withheld;
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● uncertainty in amounts and timing of royalty payments;
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● risks associated with existing and potential future law suits and regulatory actions against the Company; and
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● other risks and uncertainties described elsewhere in this annual information form or in the Company's other filings with Canadian securities authorities.
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Vermilion Energy Inc. ■ Page 4 ■ 2021 Annual Information Form

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The forward-looking statements or information contained in this annual information form are made as of the date hereof and the Company 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.

​ Vermilion Energy Inc. ■ Page 5 ■ 2021 Annual Information Form

Presentation of Oil and Gas Information

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Oil and gas reserves and production

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All oil and natural gas reserve information contained in this annual information form is derived from the GLJ Report and has been prepared and presented in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). The actual oil and natural gas reserves and future production will be greater than or less than the estimates provided in this annual information form. 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.

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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 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.

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Additional Non-GAAP and Other Financial Measures

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This AIF includes references to certain financial and performance measures which do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures disclosed by other issuer. These measures include:

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● Fund flows from operations: Fund flows from operations is a total of segments measure comparable to net earnings and is comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, interest expense, and realized loss on derivatives, add realized gain on foreign exchange and realized other income. Information is included in this document by reference, more information and a reconciliation to primary financial statement measures can be found within the "Consolidated Financial Performance Review" section of the December 31, 2021 MD&A available on SEDAR at www.sedar.com.
● Operating Netbacks: Operating Netbacks is a non-GAAP financial measure most directly comparable to GAAP measure net earnings and is calculated as sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses presented on a per unit basis.  Information is included in this document by reference, more information and a reconciliation to primary financial statement measures can be found within the "Supplemental Table 1: Netbacks" section of the December 31, 2021 MD&A available on SEDAR at www.sedar.com.
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In addition, this AIF includes references to certain financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-GAAP financial measures. These non-GAAP financial measures are unlikely to be comparable to similar financial measures presented by other issuers. These non-GAAP financial measures include:

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● Cash dividends per share: Represents actual cash dividends paid per share by the Company during the relevant periods. Information is included in this document by reference, more information and a reconciliation to primary financial statement measures can be found within the "Non-GAAP Financial Measures" section of the December 31, 2021 MD&A available on SEDAR at www.sedar.com.
● Capital expenditures: Represents the sum of drilling and development and exploration and evaluation. Information is included in this document by reference, more information and a reconciliation to primary financial statement measures can be found within the "Non-GAAP Financial Measures" section of the December 31, 2021 MD&A available on SEDAR at www.sedar.com.
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​ Vermilion Energy Inc. ■ Page 6 ■ 2021 Annual Information Form

Vermilion's Organizational Structure

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Vermilion Energy Inc. is the successor to the Trust, following the completion of the Conversion Arrangement whereby the Trust converted from an income trust to a corporate structure by way of a court approved plan of arrangement under the ABCA on September 1, 2010.

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As at December 31, 2021, Vermilion had 716 full time employees of which 213 employees were located in its Calgary head office, 128 employees in its Canadian field offices, 141 employees in France, 60 employees in the Netherlands, 30 employees in Australia, 23 employees in the United States, 34 employees in Germany, 4 employees in Hungary, 3 employees in Croatia and 80 employees in Ireland.

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Vermilion was incorporated on July 21, 2010 pursuant to the provisions of the ABCA for the purpose of facilitating the Conversion Arrangement. The registered and head office of Vermilion Energy Inc. is located at Suite 3500, 520 – 3rd Avenue S.W., Calgary, Alberta, T2P 0R3.

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The following is a list of the Company's material subsidiaries and where each material subsidiary was incorporated or formed. The Company holds 100% of the votes attaching to all voting securities of each material subsidiary beneficially owned directly or indirectly by Vermilion.

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● Vermilion Oil & Gas Australia Pty (Australia)
● Vermilion Energy Canada Ltd. (Alberta)
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● Vermilion Energy Germany GmbH & Co. KG (Germany)
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● Vermilion Energy Ireland Limited (Ireland)
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● Vermilion Energy Netherlands B.V. (Netherlands)
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● Vermilion Energy USA LLC (United States)
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● Vermilion Exploration and Production Ireland Limited (Ireland)
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● Vermilion Exploration SAS (France)
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● Vermilion Hungary Southern Battonya Concession Ltd. (Hungary)
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● Vermilion Moraine SAS (France)
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● Vermilion Pyrénées SAS (France)
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● Vermilion Rep SAS (France)
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● Vermilion Resources (Alberta)
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● Vermilion Slovakia Exploration s.r.o. (Slovakia)
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● Vermilion Zagreb Exploration d.o.o. (Croatia)
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Description of the Business

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Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets in North America, Europe and Australia. Our business model emphasizes free cash flow generation and returning capital to investors when economically warranted, augmented by value-adding acquisitions. Vermilion's operations are focused on the exploitation of light oil and liquids-rich natural gas conventional resource plays in North America and the exploration and development of conventional natural gas and oil opportunities in Europe and Australia.

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Vermilion's priorities are health and safety, the environment, and profitability, in that order. Nothing is more important to us than the safety of the public and those who work with us, and the protection of our natural surroundings. We have been recognized by leading ESG rating agencies for our transparency on and management of key environmental, social and governance issues. In addition, we emphasize strategic community investment in each of our operating areas.

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Vermilion has operations in two core areas: North America and International. Vermilion's business within these regions is managed at the country level through business units which form the basis of the Company's operating segments. These business units and the material crude oil and natural gas properties, facilities and installations in which Vermilion has an interest are discussed below.

​ Vermilion Energy Inc. ■ Page 7 ■ 2021 Annual Information Form

The following table summarizes production, sales, proved reserves, and proved plus probable reserves for each of Vermilion's business units as at and for the year ended December 31, 2021:

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​ **** ​ **** ​ **** ​ **** ​ **** ​ **** ​ **** Gross Proved
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Proved ​ Plus Probable
​ ​ Production ​ Oil sales ​ NGL sales ​ Natural gas sales ​ Sales ​ Reserves ​ Reserves
Business Unit ​ (boe/d) ​ ($ millions) ​ ($ millions) ​ ($ millions) ​ ($ millions) ​ (mboe)^(1)^ ​ (mboe)^(1)^
Canada ​ 51,968 ​ 625,053 ​ 86,932 ​ 189,790 ​ 901,775 ​ 182,344 ​ 287,465
France ​ 8,799 ​ 279,263 ​ — ​ — ​ 279,263 ​ 33,627 ​ 45,845
Netherlands 7,334 2,640 — 293,083 295,723 8,013 16,213
Germany 3,679 32,607 — 99,328 131,935 18,911 33,050
Ireland 4,875 23 — 214,402 214,425 8,405 12,643
Australia 3,810 143,014 — — 143,014 7,855 12,768
United States 4,890 80,208 17,723 14,484 112,415 41,134 70,315
Central and Eastern Europe 51 — — 1,211 1,211 1,762 2,708
Total 85,408 1,162,808 104,655 812,298 2,079,761 302,052 481,007
North America 56,858 705,261 104,655 204,274 1,014,190 223,478 357,780
International 28,548 457,547 — 608,024 1,065,571 78,574 123,227
(1) "Gross Reserves" are Vermilion's working interest (operating or non-operating) share before deduction of royalty obligations and without including any royalty interests of Vermilion.
--- ---

​

Canada Business Unit

​

​

Vermilion’s Canadian operations are primarily focused in the West Pembina region of West Central Alberta and in southeast Saskatchewan and Manitoba. In West Pembina, the company targets condensate-rich Mannville natural gas and Cardium light oil, while in southeast Saskatchewan and Manitoba the company targets light oil in the Mississippian Midale, Frobisher/Alida and Ratcliffe formations. West Pembina is the Company's main natural gas liquids ("NGL") producing area.

​

Vermilion holds an average 81% working interest in 782,423 (636,714 net) acres of developed land, and an average 85% working interest in 356,120 (301,026 net) acres of undeveloped land in Canada. Vermilion had 644.0 (401.0 net) producing conventional natural gas wells and 3,392.0 (2,132.0 net) producing light and medium crude oil wells in Canada as at December 31, 2021.

​

Vermilion has access to ample facilities and processing capacity across the major plays in its Canadian portfolio. In Alberta, Vermilion's operations are concentrated in core geographic regions where the Company owns and operates the large majority of associated key infrastructure including pipelines, compressor stations, oil batteries and gas plants, many of which have surplus capacity for future production. Furthermore, the Company is interconnected in several locations with third party midstream infrastructure that provides significant capacity for growth. In Saskatchewan, where operations are focused on light crude oil, Vermilion owns and operates an extensive network of pipelines and oil batteries that also have surplus capacity for future production. This high degree of operating control and access to key infrastructure across Vermilion's Canadian properties allows the Company to drive operating efficiencies in the field while supporting future growth opportunities.

​

During 2021, Vermilion drilled or participated in 77 (56.0 net) wells across our Alberta and Saskatchewan assets. In 2022, we plan to drill or participate in 31 (28.1 net) light crude oil wells in Saskatchewan and twelve (12.0 net) natural gas liquids rich conventional natural gas wells in Alberta.

​

United States Business Unit

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​

Vermilion entered the United States in 2014 through the acquisition of land and producing assets in the East Finn crude oil field in the Powder River Basin of northeastern Wyoming and expanded its position through the 2018 acquisition of mineral land and producing assets in the Hilight crude oil field located approximately 40 miles northwest of the East Finn assets. The Company's assets include 163,258 (130,715 net) acres of land in the Powder River basin, of which 48% is undeveloped. Vermilion had 195.0 (167.6 net) producing light and medium crude oil wells in the United States as at December 31, 2021. All of our working interest ownership in Wyoming is Company operated.

​

During 2021, Vermilion continued to focus on the Turner Sand development in the Powder River Basin, drilling four (4.0 net) wells on its Hilight asset. Further to this, the Company completed a strategic acquisition which included 20,000 net acres of land adjacent to its Hilight field in Wyoming, with production of approximately 1,500 boe/d. Total consideration for the acquisition was US$76 million. In 2022, Vermilion expects to drill seven (6.2 net) wells on its Hilight assets.

France Business Unit

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​

Vermilion entered France in 1997 and completed three additional acquisitions in subsequent years. Vermilion is the largest oil producer in the country with approximately two-thirds of the domestic market share. The Company's oil is priced with reference to Dated Brent. Vermilion Energy Inc. ■ Page 8 ■ 2021 Annual Information Form

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Vermilion’s main producing areas in France are located in the Aquitaine Basin which is southwest of Bordeaux, France and in the Paris Basin, located just east of Paris. The two major fields in the Paris Basin area are Champotran and Chaunoy and the two major fields in the Aquitaine Basin are Parentis and Cazaux. Vermilion operates several oil batteries in the country and, given the legacy nature of these assets, the throughput capability of these batteries exceeds any projected future requirements. Vermilion holds an average 96% working interest in 258,125 (248,873 net) acres of developed land and an average 86% working interest in 156,387 (134,160 net) acres of undeveloped land in the Aquitaine and Paris Basins. Vermilion had 303.0 (297.0 net) producing light and medium crude oil wells and three (3.0 net) producing conventional natural gas wells in France as at December 31, 2021.

​

In 2022, Vermilion intends to continue its ongoing program of workovers and well optimizations. By continuing to develop its inventory in France, while mitigating declines through workovers and optimizations, Vermilion seeks to maintain its French production.

​

Netherlands Business Unit

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​

Vermilion entered the Netherlands in 2004 and is the country's second largest onshore operator. Vermilion's natural gas production in the Netherlands is priced off of the TTF index.

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Vermilion’s Netherlands assets consist of 28 onshore concessions (all operated) and 19 offshore concessions (all non-operated). Production consists primarily of natural gas with a small amount of associated natural gas liquids. Vermilion’s total land position in the Netherlands covers 1,695,812 (901,791 net) acres at an average 53% working interest, of which 89% is undeveloped. Vermilion had 105.0 (47.0 net) producing natural gas wells as at December 31, 2021.

​

During 2021, the Company drilled two (1.5 net) natural gas wells in the Netherlands. In 2022, Vermilion plans to drill two (1.1 net) natural gas wells and expects that its inventory of potentially high-impact exploration and development opportunities in the Netherlands will maintain or moderately grow the Company's production base in the country.

​

Germany Business Unit

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​

Vermilion entered Germany in 2014 through the acquisition of a 25% non-operated interest in natural gas producing assets. In December 2016, Vermilion completed an acquisition of crude oil and natural gas producing properties that provided Vermilion with its first operated position in the country. Vermilion holds a significant undeveloped land base in Germany as a result of an extensive farm-in agreement the Company entered into in 2015. In 2021, Vermilion completed two minor acquisitions, increasing the Company’s non-operated working interest in certain assets to 50%. Vermilion’s natural gas production in Germany is priced off the THE index, which is highly correlated to the TTF benchmark, and Vermilion's light and medium crude oil production is priced with reference to Dated Brent.

​

Vermilion’s producing assets in Germany consist of operated and non-operated interests in eleven natural gas fields and nine light and medium crude oil fields with extensive infrastructure in place. Vermilion had 66.0 (56.5 net) producing light and medium crude oil wells and 20.0 (11.4 net) producing natural gas wells as at December 31, 2021.

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Vermilion’s land position in northwest Germany is comprised of 107,351 (54,625 net) developed acres and 2,065,780 (920,723 net) undeveloped acres. In addition, the Company holds a 50% equity interest in Hannoversche Erdölleitung GmbH ("HEG"), a joint venture company created in 1959 that collects and transports crude oil through a 185 km network of infrastructure from the Hannover region to rail loading facilities in Hannover.

​

During 2021, Vermilion brought the Burgmoor Z-5 well (71% working interest) on production, successfully drilled one (1.0 net) well and continued to execute various well optimization and workover programs to preserve production, and completed two small acquisitions to further consolidate the Company's interest in the region. In 2022, Vermilion plans to drill three (3.0 net) wells.

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Ireland Business Unit

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​

Vermilion has a 20% operated interest in the offshore Corrib natural gas field and related processing facilities located off the northwest coast of Ireland. Vermilion initially acquired an 18.5% non-operated interest in 2009. In 2018, Vermilion entered into a strategic partnership with the Canadian Pension Plan Investment Board ("CPPIB"), as a result of which Vermilion acquired an additional 1.5% working interest and assumed operatorship of Corrib.

​

Corrib first began natural gas production in late December 2015. Production volumes reached full plant capacity of approximately 350 mmcf/d (gross) at the end of 2016. Production plateaued at this level until decline started at the beginning of 2018. The Corrib field constitutes 100% of Ireland's domestic natural gas production. Vermilion Energy Inc. ■ Page 9 ■ 2021 Annual Information Form

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On November 29, 2021, Vermilion announced an agreement to acquire an incremental 36.5% working interest in Corrib from Equinor ASA,  increasing the Company's operated ownership to 56.5% and adding approximately 7,700 boe/d of production for total consideration of $556 million, before closing adjustments and contingent payment. The acquisition has an effective date of January 1, 2022, and is anticipated to close in the second half of 2022 after all requisite approvals have been received. During 2022, Vermilion plans to continue to focus on facility maintenance and optimization.

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Central and Eastern Europe ("CEE") Business Unit

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​

Vermilion established its CEE business unit in 2014 with a head office in Budapest, Hungary. The CEE business unit is responsible for business development in the CEE, including managing the exploration and development opportunities associated with the Company's land holdings in Hungary, Slovakia and Croatia.

​

Vermilion's land position in the CEE consists of 975,375 (975,375 net) acres in Croatia, 946,666 (946,666 net) acres in Hungary and 97,907 (48,954 net) acres in Slovakia. Currently, 99% of Vermilion's land position in the CEE is undeveloped.

​

During 2021, Vermilion drilled one (1.0 net) well in Croatia and one (1.0 net) well in Hungary; neither well encountered commercial hydrocarbons. In Croatia, the Company also continued to advance the planning, design and regulatory work for the gas plant on the SA-10 block in preparation for the tie-in of the two previously drilled gas wells in 2023 and executed its 3-D seismic program. In 2022, Vermilion plans to continue our exploratory drilling activity in CEE by drilling two (2.0 net) natural gas wells in Croatia, and two (2.0 net) crude oil wells and one (1.0 net) shallow gas well in Hungary.

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Australia Business Unit

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​

Vermilion holds a 100% operated working interest in the Wandoo offshore crude oil field and related production facilities, located on Western Australia's northwest shelf. Vermilion acquired its interest over two acquisitions completed in 2005 and 2007. Production is sourced from 19 producing well-bores including five dual laterals that are tied into two platforms, Wandoo 'A' and Wandoo 'B'. Wandoo 'B' is permanently manned, houses the required production facilities and incorporates 400,000 bbls of crude oil storage within the platform's concrete gravity structure. The Wandoo 'B' facilities are capable of processing 208,000 bbl/d of total fluid to separate crude oil from produced water. Vermilion's land position in the Wandoo field is comprised of 59,553 acres (gross and net).

​

In 2022, Vermilion plans to drill two (2.0 net) wells and does not presently expect to drill any additional Australian wells for another two to three years thereafter. The Company intends to manage its Australian production and related capital investment programs to achieve corporate targets while meeting long-term supply requirements of our customers.

​ Vermilion Energy Inc. ■ Page 10 ■ 2021 Annual Information Form

General Development of the Business

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​

Three Year History and Outlook

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​

The following describes the development of Vermilion's business over the last three completed financial years.

​

2019

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Vermilion achieved annual production of 100,357 boe/d representing an increase of 15% compared to 2018. Production in Canada reached record levels as the Company benefited from a full-year contribution from the Spartan assets acquired in May 2018, achieving average annual production of nearly 60,000 boe/d in 2019. Production also achieved record annual average levels in the Netherlands and in the United States.

​

Vermilion maintained its monthly dividend at $0.23 per share throughout 2019. In July 2019, Vermilion received approval from the TSX for a normal course issuer bid (“NCIB”), allowing the Company to buy back up to 7.75 million shares. Vermilion intended to use the NCIB, in combination with debt reduction, when excess free cash flow was available (beyond dividends) to enhance per share growth. In October 2019, the Company announced its intention to phase out the Dividend Reinvestment Plan ("DRIP") in 2020 by prorating the available DRIP shares by 25% each quarter starting in Q1 2020.

​

During the third quarter of 2019, Vermilion was awarded two exploration licenses in Ukraine, subject to a final production sharing agreement, in a 50/50 partnership with Ukrgazvydobuvannya ("UGV"), a Ukrainian state-owned gas producer. The licenses cover approximately 500,000 gross acres situated in one of Europe's most prolific natural gas regions (Dnieper-Donets Basin). During 2020, Vermilion decided not to enter into a production sharing agreement and withdrew from the Ukraine.

​

Vermilion's ISS Governance QualityScore increased to 2 from 3 (where a decile score of 2 indicates lower governance risk), while its Environment and Social QualityScores remained at 1 and 2 respectively in 2019. Vermilion was rated "AA" in MSCI's annual environmental, social and governance ("ESG") rankings for 2019, placing the Company in the top 19% of oil and gas companies worldwide. This rating was an improvement from "A" in the previous two years. Vermilion received top quartile rankings for 2019 for its industry sector in both the Sustainalytics ESG Rating and SAM (formerly known as RobecoSAM) annual Corporate Sustainability Assessment ("CSA"). These rankings reflected Vermilion's continued commitment to ESG matters across its business, positioning Vermilion as one of the most responsible producers of energy in the industry.

​

2020

​

Vermilion achieved annual production of 95,190 boe/d representing a decrease of 5% compared to 2019. This level of annual production was the outcome of a front-end weighted capital program whereby 65% of our E&D capital was invested in Q1 2020, resulting in peak production of over 100,000 boe/d in Q2 2020 and declining to 87,800 boe/d in Q4 2020. Over the last nine months, capital investment was primarily focused on maintenance capital as the Company navigated its way through the global economic slowdown induced by the COVID-19 pandemic.

​

In March 2020, Vermilion reduced its monthly dividend by 50% to $0.115 per share and announced an $80 to $100 million reduction to its annual capital budget in response to the COVID-19 pandemic and the resulting negative impact on near-term oil demand and commodity prices. In addition, subsequent to the first quarter of 2020, our Board of Directors suspended the monthly dividend as a further measure to strengthen the financial position of the Company during a period of weak commodity prices.

​

On May 25, 2020, Vermilion's Board of Directors appointed Lorenzo Donadeo as Executive Chairman and Curtis Hicks as President following the departure of Anthony Marino as President and Chief Executive Officer. Mr. Donadeo is one of the co-founders of Vermilion and served as Chairman of the Board since March 1, 2016. Previously, Mr. Donadeo was the Chief Executive Officer of Vermilion from 2003 to 2016. Mr. Hicks was previously the CFO of Vermilion from 2003 to 2018.

​

In lieu of filling the role of Chief Executive Officer, Vermilion re-established an Executive Committee consisting of a minimum of five senior executives from within the Company with a mandate to review and approve key organizational, financial, operational and strategic decisions. The re-established Executive Committee included the Executive Chairman, President, Vice President and Chief Financial Officer, Vice President North America, Vice President International and HSE, Vice President European Operations and the Vice President Business Development.

​

Vermilion continued to build on its track record of industry-leading ESG performance based on rankings by third party ratings agencies in 2020. Vermilion ranked at the top of its peer group in 2020 in the SAM Corporate Sustainability Assessment (“CSA”). The Company was also selected for The Sustainability Yearbook 2021, which recognizes that our CSA sustainability performance is within the top 15% of our industry (SAM's Upstream Oil & Gas and Integrated category). Vermilion received a rating of "AA" on a scale of AAA (leader) to CCC (laggard) in the MSCI ESG Ratings assessment, which reflects exposure to industry-specific ESG risks and the ability to manage those risks. Vermilion was named to the CDP Climate Vermilion Energy Inc. ■ Page 11 ■ 2021 Annual Information Form

Leadership Level (A-) for the fourth consecutive year in 2020. Vermilion was one of five Canadian oil and gas companies, one of seven oil and gas companies in North America, and one of 20 oil and gas companies globally to achieve this level, ranking Vermilion in the top 10% of oil and gas companies globally. In November 2020, Vermilion released its 2020 Corporate Sustainability Report, marking the Company's 7th year of ESG reporting. The 2020 report highlights Vermilion's ongoing focus on reducing emissions within its operations, along with a content index that includes recommendations from the Task Force on Climate-related Financial Disclosures and the Sustainability Accounting Standards Board.

​

2021

​

Vermilion achieved annual production of 85,408 boe/d representing a decrease of 10% compared to 2020 primarily as a result of natural declines and reduced capital spending levels in 2021 as the Company focused on preserving liquidity, maximizing free cash flow and reducing debt.

​

During the third quarter of 2021, the Company completed a strategic acquisition which included 20,000 net acres of land adjacent to its Hilight field in Wyoming, with production of approximately 1,500 boe/d. Total consideration for the acquisition was US$76 million.

​

On September 8, 2021, Vermilion appointed Dion Hatcher as President effective January 1, 2022, replacing Curtis Hicks as President (and who has remained with the Company as an advisor until April 1, 2022). Mr. Hatcher has over 25 years of industry experience and spent the last 15 years in a variety of leadership roles during his tenure at Vermilion and most recently held the role of Vice President, North America.

​

On November 29, 2021, Vermilion announced an agreement to acquire an incremental 36.5% working interest in Corrib from Equinor ASA, increasing the Company's operated ownership to 56.5% and adding approximately 7,700 boe/d of production for total consideration of $556 million, before closing adjustments and contingent payment. The acquisition has an effective date of January 1, 2022, and is anticipated to close in the second half of 2022 after all requisite approvals have been received. This acquisition consolidates interest in a high margin, low decline and low emission asset, while increasing exposure to premium priced European natural gas and rebalances Vermilion's international weighting.

​

Vermilion continued to deliver superior ESG performance based on rankings by third party rating agencies in 2021. Vermilion ranked at the top of its peer group in 2021 in the S&P Global Corporate Sustainability Assessment (“CSA”). The Company was also selected for The Sustainability Yearbook 2022, which recognizes that our CSA sustainability performance is within the top 15% of our industry (S&P Global’s Upstream Oil & Gas and Integrated category). Vermilion maintained its rating of "AA" on a scale of AAA (leader) to CCC (laggard) in the MSCI ESG Ratings assessment, which reflects exposure to industry-specific ESG risks and the ability to manage those risks. Vermilion received a B in 2021 for both CDP Climate and CDP Water submissions, a combined performance that places it tied for the top decile of oil and gas companies globally. As of February 2022, Vermilion’s performance in the Sustainalytics ESG Risk Ratings places it second in its peer group. In August 2021, Vermilion released its 2021 Sustainability Report, marking the Company's 8th year of ESG reporting. Note that effective in 2022, Vermilion’s reporting in alignment with the Task Force on Climate-related Financial Disclosure relating to: Governance is located in our management proxy circular for our annual meeting of shareholders, and relating to Strategy, Risk Management, and Metrics and Targets in our annual MD&A. This information is also located in the Energy Transition section of our Sustainability Report, available online at http://sustainability.vermilionenergy.com.

​

Outlook

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​

In November 2021, Vermilion announced an E&D capital budget for 2022 of $425 million with corresponding production guidance of 83,000 to 85,000 boe/d. The production guidance excludes the impact from the Corrib acquisition and will be updated once the Company has confirmation on the timing of the Corrib acquisition closing date. In conjunction with the 2022 budget release, the Company also announced its plan to reinstate a quarterly dividend in the amount of $0.06 per share in Q1 2022 and expect to increase the return of capital to our shareholders over time as further debt targets are achieved. Vermilion's business model continues to allow for flexibility in response to volatile commodity prices and regulatory changes. The Company intends to fund future dividends and E&D capital investment from internally generated cash flow from operating activities while allocating access free cash flow to debt reduction until we achieve or have line of sight to our next target level of $1.2 billion of net debt, at which time we will evaluate other options to augment the return of capital to shareholders.

​ Vermilion Energy Inc. ■ Page 12 ■ 2021 Annual Information Form

Statement of Reserves Data and Other Oil and Gas Information

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Reserves and future net revenue

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The following is a summary of the crude oil and natural gas reserves and the value of future net revenue of Vermilion as evaluated by GLJ in a report dated February 11, 2022 with an effective date of December 31, 2021. Pricing used in the forecast price evaluations is set forth in the notes to the tables.

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Reserves and other oil and gas information contained in this section is effective December 31, 2021 unless otherwise stated.

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All evaluations of future net 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 revenues estimated by the GLJ Report 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 Report. There is no assurance that the future price and cost assumptions used in the GLJ Report will prove accurate and variances could be material.

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Reserves 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.

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The Report on Reserves Data by Independent Qualified Reserves Evaluator  or Auditor in Form 51-101F2 and the Report of Management and Directors on Oil and Gas Disclosure in Form 51-101F3 are contained in Schedules "A" and "B", respectively.

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The following tables provide reserves data and a breakdown of future net revenue by component and product type using forecast prices and costs. For Canada, the tables following include Alberta Gas Cost Allowance.

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​ Vermilion Energy Inc. ■ Page 13 ■ 2021 Annual Information Form

The following tables may not total due to rounding.

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Oil and gas reserves - Gross and net interest^(2)^, based on forecast prices and costs^(1)^

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Proved Developed Producing ^(3) (5) (6)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ 6,077 ​ 6,077 ​ — ​ — ​ — ​ — ​ — ​ —
Canada 43,545 38,844 17 16 — — 242,337 225,859
CEE — — — — — — 1,150 839
France 27,859 24,054 — — — — — —
Germany 4,846 4,713 — — — — 47,986 45,864
Ireland — — — — — — 50,427 50,427
Netherlands — — — — — — 40,872 40,185
United States 8,131 6,804 — — — — 40,427 33,752
Total Proved Developed Producing **** 90,457 **** 80,492 **** 17 **** 16 **** — **** — **** 423,199 **** 396,928
North America 51,676 45,648 17 16 — — 282,764 259,611
International 38,781 34,844 — — — — 140,435 137,316

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Shale Gas (mmcf) ​ Coal Bed Methane (mmcf) ​ Natural Gas Liquids (mbbl) ​ BOE (mboe)
Proved Developed Producing ^(3) (5) (6)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ 6,077 ​ 6,077
Canada 356 338 5,079 4,731 20,959 17,615 105,817 94,963
CEE — — — — — — 192 140
France — — — — — — 27,859 24,054
Germany — — — — — — 12,843 12,357
Ireland — — — — — — 8,405 8,405
Netherlands — — — — 75 74 6,887 6,771
United States — — — — 5,068 4,231 19,936 16,660
Total Proved Developed Producing **** 356 **** 338 **** 5,079 **** 4,731 **** 26,102 **** 21,920 **** 188,016 **** 169,428
North America 356 338 5,079 4,731 26,027 21,846 125,753 111,624
International — — — — 75 74 62,262 57,804

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Proved Developed Non-Producing ^(3) (5) (7)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ —
Canada 2,948 2,504 2 2 — — 21,143 19,935
CEE — — — — — — 9,423 6,302
France 1,238 1,062 — — — — — —
Germany 546 533 — — — — 19,719 19,094
Ireland — — — — — — — —
Netherlands — — — — — — 4,517 4,497
United States 353 286 — — — — 464 377
Total Proved Developed Non-Producing **** 5,084 **** 4,385 **** 2 **** 2 **** — **** — **** 55,267 **** 50,206
North America 3,301 2,790 2 2 — — 21,607 20,312
International 1,784 1,595 — — — — 33,660 29,894

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Shale Gas (mmcf) **** Coal Bed Methane (mmcf) **** Natural Gas Liquids (mbbl) **** BOE (mboe)
Proved Developed Non-Producing ^(3) (5) (7)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ —
Canada — — 666 628 1,583 1,377 8,167 7,310
CEE — — — — — — 1,570 1,050
France — — — — — — 1,238 1,062
Germany — — — — — — 3,832 3,716
Ireland — — — — — — — —
Netherlands — — — — 10 10 763 759
United States — — — — 66 53 496 402
Total Proved Developed Non-Producing **** — **** — **** 666 **** 628 **** 1,658 **** 1,440 **** 16,066 **** 14,300
North America — — 666 628 1,649 1,431 8,663 7,713
International — — — — 10 10 7,403 6,587

​ Vermilion Energy Inc. ■ Page 14 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Proved Undeveloped ^(3) (8)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ 1,778 ​ 1,778 ​ — ​ — ​ — ​ — ​ — ​ —
Canada 38,978 33,378 85 73 — — 105,272 97,883
CEE — — — — — — — —
France 4,531 3,870 — — — — — —
Germany 1,407 1,373 — — — — 4,974 4,699
Ireland — — — — — — — —
Netherlands — — — — — — 2,133 2,135
United States 14,251 11,646 — — — — 21,870 17,934
Total Proved Undeveloped **** 60,945 **** 52,045 **** 85 **** 73 **** — **** — **** 134,249 **** 122,652
North America 53,229 45,024 85 73 — — 127,143 115,817
International 7,716 7,021 — — — — 7,106 6,834

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Shale Gas (mmcf) **** Coal Bed Methane (mmcf) Natural Gas Liquids (mbbl) BOE (mboe)
Proved Undeveloped ^(3) (8)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ 1,778 ​ 1,778
Canada — — 376 301 11,689 10,167 68,360 59,981
CEE — — — — — — — —
France — — — — — — 4,531 3,870
Germany — — — — — — 2,236 2,156
Ireland — — — — — — — —
Netherlands — — — — 8 8 363 364
United States — — — — 2,806 2,300 20,702 16,936
Total Proved Undeveloped **** — **** — **** 376 **** 301 **** 14,502 **** 12,475 **** 97,970 **** 85,085
North America — — 376 301 14,495 12,467 89,062 76,917
International — — — — 8 8 8,908 8,168

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Proved ^(3)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ 7,855 ​ 7,855 ​ — ​ — ​ — ​ — ​ — ​ —
Canada 85,471 74,726 103 90 — — 368,752 343,678
CEE — — — — — — 10,573 7,141
France 33,627 28,985 — — — — — —
Germany 6,798 6,619 — — — — 72,678 69,657
Ireland — — — — — — 50,427 50,427
Netherlands — — — — — — 47,522 46,818
United States 22,735 18,737 — — — — 62,761 52,063
Total Proved **** 156,487 **** 136,923 **** 103 **** 90 **** — **** — **** 612,715 **** 569,785
North America 108,206 93,463 103 90 — — 431,514 395,740
International 48,281 43,460 — — — — 181,201 174,044

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Shale Gas (mmcf) **** Coal Bed Methane (mmcf) **** Natural Gas Liquids (mbbl) **** BOE (mboe)
Proved ^(3)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^ ​ Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ 7,855 ​ 7,855
Canada 356 338 6,121 5,659 34,231 29,159 182,344 162,255
CEE — — — — — — 1,762 1,190
France — — — — — — 33,627 28,985
Germany — — — — — — 18,911 18,229
Ireland — — — — — — 8,405 8,405
Netherlands — — — — 93 91 8,013 7,894
United States — — — — 7,939 6,585 41,134 33,999
Total Proved **** 356 **** 338 **** 6,121 **** 5,659 **** 42,263 **** 35,835 **** 302,052 **** 268,812
North America 356 338 6,121 5,659 42,170 35,744 223,478 196,254
International — — — — 93 91 78,574 72,559

​

​ Vermilion Energy Inc. ■ Page 15 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Probable ^(4)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ 4,912 ​ 4,912 ​ — ​ — ​ — ​ — ​ — ​ —
Canada 45,374 39,833 31 27 — — 229,393 213,238
CEE — — — — — — 5,676 3,432
France 12,218 10,482 — — — — — —
Germany 4,815 4,677 — — — — 55,943 52,463
Ireland — — — — — — 25,431 25,431
Netherlands — — — — — — 48,560 45,956
United States 19,296 15,994 — — — — 33,370 27,746
Total Probable **** 86,615 **** 75,897 **** 31 **** 27 **** — **** — **** 398,373 **** 368,265
North America 64,670 55,826 31 27 — — 262,764 240,984
International 21,945 20,071 — — — — 135,609 127,281

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Shale Gas (mmcf) ​ Coal Bed Methane (mmcf) ​ Natural Gas Liquids (mbbl) ​ BOE (mboe)
Probable ^(4)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ — ​ — ​ — ​ — ​ — ​ — ​ 4,912 ​ 4,912
Canada 105 99 1,907 1,759 21,148 17,802 105,121 93,511
CEE — — — — — — 946 572
France — — — — — — 12,218 10,482
Germany — — — — — — 14,139 13,421
Ireland — — — — — — 4,238 4,238
Netherlands — — — — 107 100 8,200 7,760
United States — — — — 4,323 3,593 29,180 24,211
Total Probable **** 105 **** 99 **** 1,907 **** 1,759 **** 25,577 **** 21,495 **** 178,954 **** 159,106
North America 105 99 1,907 1,759 25,471 21,395 134,301 117,722
International — — — — 107 100 44,653 41,385

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & MediumCrude Oil (mbbl) ​ Heavy Crude Oil (mbbl) ​ Tight Oil (mbbl) ​ Conventional Natural Gas(mmcf)
Proved Plus Probable ^(3) (4)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia ​ 12,768 ​ 12,768 ​ — ​ — ​ — ​ — ​ — ​ —
Canada 130,845 114,559 135 117 — — 598,146 556,915
CEE — — — — — — 16,250 10,573
France 45,845 39,467 — — — — — —
Germany 11,613 11,296 — — — — 128,621 122,120
Ireland — — — — — — 75,858 75,858
Netherlands — — — — — — 96,082 92,774
United States 42,031 34,730 — — — — 96,132 79,809
Total Proved Plus Probable **** 243,102 **** 212,820 **** 135 **** 117 **** — **** — **** 1,011,088 **** 938,050
North America 172,876 149,289 135 117 — — 694,277 636,725
International 70,225 63,531 — — — — 316,810 301,325

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Shale Gas (mmcf) ​ Coal Bed Methane (mmcf) ​ Natural Gas Liquids (mbbl) ​ BOE (mboe)
Proved Plus Probable ^(3) (4)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^ **** Gross ^(2)^ **** Net ^(2)^
Australia — — — — — — 12,768 12,768
Canada 461 438 8,029 7,419 55,379 46,961 287,465 255,766
CEE — — — — — — 2,708 1,762
France — — — — — — 45,845 39,467
Germany — — — — — — 33,050 31,649
Ireland — — — — — — 12,643 12,643
Netherlands — — — — 200 192 16,213 15,654
United States — — — — 12,262 10,178 70,315 58,209
Total Proved Plus Probable **** 461 **** 438 **** 8,029 **** 7,419 **** 67,841 **** 57,331 **** 481,007 **** 427,919
North America 461 438 8,029 7,419 67,641 57,139 357,780 313,975
International — — — — 200 192 123,227 113,943

​

Notes:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth in “Forecast Prices used in Estimates”. 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 royalty obligations 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.
--- ---

Vermilion Energy Inc. ■ Page 16 ■ 2021 Annual Information Form

(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.
--- ---

​

​ Vermilion Energy Inc. ■ Page 17 ■ 2021 Annual Information Form

Net present value 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 82,825 134,106 156,888 164,924 165,375 88,823 115,080 125,120 126,977 124,795
Canada 2,238,333 1,827,094 1,547,215 1,350,275 1,205,122 2,238,333 1,827,094 1,547,215 1,350,275 1,205,122
CEE 6,636 5,941 5,398 4,969 4,622 6,636 5,941 5,398 4,969 4,622
France 798,970 702,723 601,743 519,687 456,311 703,500 630,002 542,739 469,604 412,415
Germany 364,349 403,730 386,148 359,790 335,158 343,252 384,509 368,442 343,327 319,732
Ireland 502,967 477,928 448,881 421,132 396,268 502,967 477,928 448,881 421,132 396,268
Netherlands 325,077 347,432 351,983 348,410 341,255 172,404 200,687 210,581 211,853 209,117
United States 387,748 281,960 226,516 192,352 168,944 387,748 281,960 226,516 192,352 168,944
Total Proved Developed Producing 4,706,904 **** 4,180,913 **** 3,724,772 **** 3,361,538 **** 3,073,056 **** 4,443,662 **** 3,923,201 **** 3,474,892 **** 3,120,488 **** 2,841,014
North America 2,626,081 2,109,054 1,773,731 1,542,626 1,374,066 2,626,081 2,109,054 1,773,731 1,542,626 1,374,066
International 2,080,823 2,071,859 1,951,042 1,818,912 1,698,990 1,817,581 1,814,147 1,701,161 1,577,862 1,466,949
Proved Developed Non-Producing (2) (4) (6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia — — — — — — — — — —
Canada 220,901 170,986 140,294 119,602 104,743 220,901 170,986 140,294 119,602 104,743
CEE 55,867 48,147 41,918 36,823 32,600 55,039 47,429 41,290 36,270 32,109
France 39,601 34,145 28,065 23,111 19,330 25,529 23,905 20,130 16,662 13,894
Germany 123,114 97,265 71,535 53,867 41,948 65,065 61,371 45,167 32,761 24,246
Ireland — — — — — — — — — —
Netherlands 12,443 19,277 21,105 20,818 19,694 (5,056) 3,928 7,489 8,617 8,668
United States 8,802 5,583 3,353 1,777 635 8,802 5,583 3,353 1,777 635
Total Proved Developed Non-Producing 460,728 **** 375,403 **** 306,271 **** 255,997 **** 218,950 **** 370,279 **** 313,202 **** 257,724 **** 215,688 **** 184,295
North America 229,703 176,569 143,647 121,378 105,378 229,703 176,569 143,647 121,378 105,378
International 231,025 198,834 162,624 134,619 113,572 140,576 136,632 114,077 94,309 78,917
Proved Undeveloped (2) (7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia 119,545 104,508 92,077 81,717 73,008 69,599 60,772 53,456 47,343 42,193
Canada 1,604,659 1,007,418 670,130 463,994 330,104 1,433,915 914,117 616,896 432,462 310,804
CEE — — — — — — — — — —
France 164,311 122,708 90,888 67,772 51,045 119,775 86,959 61,602 43,337 30,326
Germany 75,443 59,658 42,480 30,225 21,814 70,693 49,057 32,084 21,012 13,752
Ireland — — — — — — — — — —
Netherlands 4,954 4,563 3,943 3,288 2,681 7,921 6,991 5,973 5,023 4,191
United States 460,996 297,073 203,066 145,014 106,880 425,795 278,263 192,060 138,218 102,517
Total Proved Undeveloped 2,429,908 **** 1,595,929 **** 1,102,583 **** 792,010 **** 585,532 **** 2,127,698 **** 1,396,159 **** 962,071 **** 687,395 **** 503,783
North America 2,065,656 1,304,491 873,196 609,008 436,984 1,859,709 1,192,381 808,956 570,679 413,321
International 364,253 291,438 229,387 183,002 148,548 267,988 203,779 153,115 116,715 90,462
Proved (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia 202,370 238,614 248,965 246,641 238,384 158,422 175,852 178,575 174,321 166,988
Canada 4,063,893 3,005,498 2,357,638 1,933,871 1,639,969 3,893,149 2,912,197 2,304,405 1,902,338 1,620,669
CEE 62,503 54,088 47,317 41,792 37,223 61,674 53,369 46,688 41,238 36,731
France 1,002,882 859,576 720,696 610,570 526,685 848,804 740,865 624,471 529,602 456,635
Germany 562,906 560,653 500,163 443,882 398,920 479,010 494,937 445,693 397,100 357,729
Ireland 502,967 477,928 448,881 421,132 396,268 502,967 477,928 448,881 421,132 396,268
Netherlands 342,473 371,272 377,031 372,516 363,630 175,269 211,605 224,044 225,494 221,975
United States 857,547 584,616 432,936 339,142 276,459 822,345 565,806 421,929 332,346 272,096
Total Proved 7,597,540 **** 6,152,245 **** 5,133,627 **** 4,409,545 **** 3,877,537 **** 6,941,639 **** 5,632,562 **** 4,694,686 **** 4,023,570 **** 3,529,092
North America 4,921,440 3,590,114 2,790,574 2,273,013 1,916,428 4,715,494 3,478,004 2,726,334 2,234,684 1,892,765
International 2,676,100 2,562,131 2,343,053 2,136,532 1,961,110 2,226,145 2,154,558 1,968,352 1,788,886 1,636,328

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 18 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ 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%
Probable (3)
Australia 212,250 190,420 160,084 132,175 109,256 115,149 102,721 85,346 69,457 56,531
Canada 3,076,555 1,804,474 1,207,494 877,667 674,249 2,295,207 1,352,693 916,241 676,482 528,604
CEE 32,862 26,770 22,412 19,175 16,689 27,579 22,272 18,518 15,760 13,662
France 581,769 390,555 273,270 198,835 149,794 427,498 282,685 193,413 137,001 100,194
Germany 626,966 417,681 282,282 202,320 152,801 417,542 284,155 187,783 130,642 95,713
Ireland 177,997 130,448 94,277 69,104 51,855 177,997 130,448 94,277 69,104 51,855
Netherlands 309,422 260,634 213,993 176,481 147,733 168,325 144,719 116,393 92,566 74,294
United States 926,174 536,535 346,279 241,385 177,794 730,257 423,857 274,399 192,165 142,386
Total Probable 5,943,994 **** 3,757,517 **** 2,600,091 **** 1,917,143 **** 1,480,171 **** 4,359,554 **** 2,743,548 **** 1,886,370 **** 1,383,178 **** 1,063,239
North America 4,002,728 2,341,009 1,553,773 1,119,052 852,042 3,025,465 1,776,550 1,190,639 868,647 670,990
International 1,941,265 1,416,508 1,046,318 798,091 628,129 1,334,090 966,999 695,730 514,530 392,249
Proved Plus Probable (2) (3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia 414,620 429,035 409,049 378,816 347,640 273,571 278,573 263,921 243,778 223,519
Canada 7,140,448 4,809,973 3,565,132 2,811,538 2,314,217 6,188,356 4,264,890 3,220,646 2,578,820 2,149,273
CEE 95,364 80,858 69,728 60,967 53,912 89,253 75,641 65,207 56,999 50,393
France 1,584,651 1,250,131 993,966 809,405 676,479 1,276,302 1,023,550 817,884 666,603 556,829
Germany 1,189,872 978,334 782,446 646,202 551,721 896,551 779,092 633,476 527,741 453,442
Ireland 680,964 608,375 543,158 490,236 448,124 680,964 608,375 543,158 490,236 448,124
Netherlands 651,895 631,906 591,025 548,997 511,363 343,594 356,324 340,437 318,060 296,269
United States 1,783,721 1,121,151 779,214 580,527 454,253 1,552,602 989,664 696,328 524,511 414,482
Total Proved Plus Probable 13,541,534 **** 9,909,762 **** 7,733,718 **** 6,326,688 **** 5,357,709 **** 11,301,193 **** 8,376,110 **** 6,581,056 **** 5,406,748 **** 4,592,331
North America 8,924,169 5,931,123 4,344,347 3,392,065 2,768,470 7,740,958 5,254,554 3,916,973 3,103,332 2,563,755
International 4,617,366 3,978,639 3,389,371 2,934,623 2,589,239 3,560,235 3,121,556 2,664,082 2,303,416 2,028,576

All values are in US Dollars.

​

Notes:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth in “Forecast Prices used in Estimates”. 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.
--- ---

​ Vermilion Energy Inc. ■ Page 19 ■ 2021 Annual Information Form

Total future net revenue (undiscounted) - Based on forecast prices and costs^(1)^

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Abandonment ​ Future Net ​ ​ ​ Future Net
​ ​ ​ ​ ​ ​ ​ ​ Capital ​ and ​ Revenue ​ ​ ​ Revenue
​ ​ ​ ​ ​ ​ Operating ​ Development ​ Reclamation ​ Before Future ​ Future ​ After Future
($M) ​ Revenue ​ Royalties ​ Costs ^(5)^ ​ Costs ​ Costs ​ Income Taxes ​ Income Taxes ^(4)^ ​ Income Taxes
Proved ^(2)^ **** ​ **** ​ **** ​ **** ​ **** ​ **** ​ **** ​ **** ​
Australia ​ 819,008 ​ — ​ 358,879 ​ 53,412 ​ 204,347 ​ 202,370 ​ 43,948 ​ 158,422
Canada ​ 10,498,431 ​ 1,393,756 ​ 3,695,044 ​ 1,022,234 ​ 323,503 ​ 4,063,893 ​ 170,745 ​ 3,893,149
CEE ​ 123,191 ​ 37,876 ​ 14,261 ​ 8,204 ​ 348 ​ 62,503 ​ 828 ​ 61,674
France ​ 2,928,418 ​ 401,630 ​ 1,163,504 ​ 93,188 ​ 267,215 ​ 1,002,882 ​ 154,078 ​ 848,804
Germany 1,429,139 51,959 533,972 48,115 232,186 562,906 83,896 479,010
Ireland 727,244 — 140,994 18,418 64,864 502,967 — 502,967
Netherlands 733,040 11,159 231,306 9,060 139,042 342,473 167,204 175,269
United States 2,670,776 737,380 741,198 302,958 31,694 857,547 35,202 822,345
Total Proved **** 19,929,248 **** 2,633,759 **** 6,879,159 **** 1,555,589 **** 1,263,199 **** 7,597,540 **** 655,902 **** 6,941,639
North America 13,169,207 2,131,136 4,436,243 1,325,192 355,197 4,921,440 205,946 4,715,494
International 6,760,040 502,623 2,442,917 230,398 908,003 2,676,100 449,955 2,226,145
Proved Plus Probable ^(2) (3)^ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia 1,355,701 — 666,478 53,412 221,192 414,620 141,049 273,571
Canada 16,828,784 2,209,868 5,549,184 1,538,541 390,742 7,140,448 952,092 6,188,356
CEE 187,961 63,092 20,913 8,204 388 95,364 6,111 89,253
France 4,009,585 554,157 1,372,095 205,757 292,925 1,584,651 308,349 1,276,302
Germany 2,471,566 100,919 787,209 99,925 293,641 1,189,872 293,320 896,551
Ireland 1,022,940 — 228,297 40,632 73,048 680,964 — 680,964
Netherlands 1,327,035 38,654 395,895 75,318 165,273 651,895 308,301 343,594
United States 4,871,242 1,339,623 1,194,411 513,886 39,602 1,783,721 231,118 1,552,602
Total Proved Plus Probable **** 32,074,814 **** 4,306,313 **** 10,214,481 **** 2,535,674 **** 1,476,811 **** 13,541,534 **** 2,240,341 **** 11,301,193
North America 21,700,026 3,549,492 6,743,595 2,052,427 430,344 8,924,169 1,183,210 7,740,958
International 10,374,788 756,822 3,470,887 483,247 1,046,467 4,617,366 1,057,131 3,560,235

​

Notes:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth in “Forecast Prices used in Estimates”. 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) "Future Income Taxes" are calculated using future net revenue before income taxes as shown, after incorporating Vermilion's existing tax pools, corporate charge-outs, and related expenditures. This calculation applies the year-end statutory rate, taking into account future tax rates already legislated.
--- ---
(5) Capital Development Costs include the costs for the drilling, completion, and tie-in of wells, the construction of production and processing facilities, major facilities projects and well workovers. For the purposes of determining Future Net Revenue, costs related to the replacement of certain downhole and facilities equipment as well as facility turnarounds are included in Operating Costs.
--- ---

​ Vermilion Energy Inc. ■ Page 20 ■ 2021 Annual Information Form

Future net revenue by product type - Based on forecast prices and costs^(1)^

​

​ ​ ​ ​ ​
​ **** Future Net Revenue **** ​
​ ​ Before Income Taxes^(2)^ ​ ​
​ ​ (Discounted at 10% Per Year) ($M) ​ Unit Value ($/boe)
Proved Developed Producing
Light Crude Oil & Medium Crude Oil ^(3)^ 2,067,862 ​ 21.86
Heavy Crude Oil ^(3)^ 818 ​ 31.75
Conventional Natural Gas ^(4)^ 1,650,306 ​ 22.33
Shale Gas 325 ​ 5.12
Coal Bed Methane 5,462 ​ 6.57
Total Proved Developed Producing **** 3,724,772 ​ 21.98
Proved Developed Non-Producing ​ ​ ​
Light Crude Oil & Medium Crude Oil ^(3)^ 120,537 ​ 23.42
Heavy Crude Oil ^(3)^ 49 ​ 17.00
Conventional Natural Gas ^(4)^ 185,042 ​ 20.47
Shale Gas — ​ —
Coal Bed Methane 643 ​ 5.76
Total Proved Developed Non-Producing **** 306,271 ​ 21.42
Proved Undeveloped ​ ​ ​
Light Crude Oil & Medium Crude Oil ^(3)^ 916,419 ​ 14.50
Heavy Crude Oil ^(3)^ 555 ​ 9.21
Conventional Natural Gas ^(4)^ 185,343 ​ 8.51
Shale Gas — ​ —
Coal Bed Methane 267 ​ 4.98
Total Proved Undeveloped **** 1,102,583 ​ 12.96
Proved ​ ​ ​
Light Crude Oil & Medium Crude Oil ^(3)^ 3,118,195 ​ 18.95
Heavy Crude Oil ^(3)^ 2,190 ​ 14.15
Conventional Natural Gas ^(4)^ 2,006,546 ​ 19.47
Shale Gas 325 ​ 5.12
Coal Bed Methane 6,372 ​ 6.39
Total Proved **** 5,133,627 ​ 19.10
Probable ​ ​ ​
Light Crude Oil & Medium Crude Oil ^(3)^ 1,716,124 ​ 17.88
Heavy Crude Oil ^(3)^ 978 ​ 21.25
Conventional Natural Gas ^(4)^ 881,109 ​ 14.04
Shale Gas 107 ​ 5.63
Coal Bed Methane 1,772 ​ 5.67
Total Probable **** 2,600,091 ​ 16.34
Proved Plus Probable ​ ​ ​
Light Crude Oil & Medium Crude Oil ^(3)^ 4,834,319 ​ 18.56
Heavy Crude Oil ^(3)^ 3,168 ​ 15.78
Conventional Natural Gas ^(4)^ 2,887,655 ​ 17.41
Shale Gas 432 ​ 5.23
Coal Bed Methane 8,144 ​ 6.22
Total Proved Plus Probable **** 7,733,718 ​ 18.07

​

Notes:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth in “Forecast Prices used in Estimates”. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2) Other Company revenue and costs not related to a specific product type have been allocated proportionately to the specified product types. Unit values are based on Company net reserves. Net present value 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.
--- ---

​ Vermilion Energy Inc. ■ Page 21 ■ 2021 Annual Information Form

Forecast prices used in estimates^(1)(2)^

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & Medium ​ Conventional Natural Gas ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Crude Oil Crude Oil Canada Europe Natural Gas Liquids Inflation Rate ​ Exchange Rate
​ ​ WTI ​ Edmonton Cromer Brent Blend ​ UK National ​ ​ ​ ​ ​ ​ ​ ​
​ **** Cushing **** Par Price Light FOB AECO Balancing Edmonton Edmonton Edmonton ​ ​ ​ ​ ​
​ ​ Oklahoma ​ 40˚ API 35˚ API North Sea Gas Price Point Ethane Propane Butane Edmonton C5+ ​ ​ ​ ​
Year ​ ($US/bbl) ​ (Cdn/bbl) (Cdn/bbl) (US/bbl) (Cdn/mmbtu) (US/mmbtu) (Cdn/bbl) (Cdn/bbl) (Cdn/bbl) (Cdn/bbl) Percent Per Year **** /CAD CAD/EUR
2021 67.92 80.27 80.12 70.79 3.51 15.64 14.45 45.69 35.36 85.50 3.40 % 0.80 1.48
Forecast ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
2022 72.83 86.82 87.24 75.33 3.56 20.58 11.48 43.39 57.49 91.85 — % 0.80 1.43
2023 68.78 80.73 81.09 71.46 3.20 12.05 10.33 35.92 50.17 85.53 2.30 % 0.80 1.46
2024 66.76 78.01 78.35 69.62 3.05 8.37 9.81 34.62 48.53 82.98 2.00 % 0.80 1.49
2025 68.09 79.57 79.91 71.01 3.10 8.53 10.01 35.31 49.50 84.63 2.00 % 0.80 1.49
2026 69.45 81.16 81.51 72.44 3.17 8.70 10.22 36.02 50.49 86.33 2.00 % 0.80 1.49
2027 70.84 82.78 83.14 73.88 3.23 8.88 10.42 36.74 51.50 88.05 2.00 % 0.80 1.49
2028 72.26 84.44 84.81 75.36 3.30 9.06 10.64 37.47 52.53 89.82 2.00 % 0.80 1.49
2029 73.70 86.13 86.50 76.87 3.36 9.23 10.86 38.22 53.58 91.61 2.00 % 0.80 1.49
2030 75.18 87.85 88.23 78.40 3.43 9.42 11.08 38.99 54.65 93.44 2.00 % 0.80 1.49
2031 76.68 89.60 90.00 79.97 3.50 9.61 11.31 39.77 55.74 95.32 2.00 % 0.80 1.49
Thereafter +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr 0.80 1.49

All values are in US Dollars.

​

Notes:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. The pricing assumptions above are the January 2022, 3 Consultants' Average pricing which were provided by GLJ, an independent qualified reserves evaluator appointed pursuant to NI 51-101. The consultants are GLJ, Sproule and McDaniel and Associates, all independent qualified reverse evaluators.
(2) For light crude oil and medium crude oil, the pricing assumptions used are WTI, Edmonton Par Price, Cromer Medium, and Brent Blend. For conventional natural gas in Canada, the pricing assumptions used are AECO and for conventional natural gas in Europe, the pricing assumptions used are National Balancing Point.
--- ---

​

For 2021, average realized prices before hedging were:

​

​ ​ ​ ​ ​ ​
​ **** Crude **** NGLs Natural gas
Country ​ oil ($/bbl) ​ (/bbl) ($/mcf)
Australia ​ 103.01 ​ — —
Canada ​ 78.61 ​ 51.44 3.77
CEE — ​ — 10.77
France 88.15 ​ — —
Germany 85.02 ​ — 17.21
Ireland — ​ — 20.08
Netherlands — ​ 72.10 18.50
United States 84.42 ​ 42.52 5.81

All values are in US Dollars.

​

​ Vermilion Energy Inc. ■ Page 22 ■ 2021 Annual Information Form

Reconciliations of changes in reserves

​

​

The following tables set forth a reconciliation of the changes by product type (light crude oil and medium crude oil, heavy crude oil, tight oil, conventional natural gas, coal bed methane, shale gas and NGLs) in Vermilion's gross reserves as at December 31, 2021 compared to such reserves as at December 31, 2020 based on the forecast price and cost assumptions set forth in note 3.

​

Reconciliation of Company Gross Reserves by Principal Product Type - Based on Forecast Prices and Costs ^(3)^

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia ​ Total Oil^(4)^ ​ Light & Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil
Proved Probable P+P ^(1) (2)^ **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl)
At December 31, 2020 8,541 5,109 13,650 8,541 5,109 13,650 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions 706 (197) 509 706 (197) 509 — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production (1,391) — (1,391) (1,391) — (1,391) — — — — — —
At December 31, 2021 **** 7,855 **** 4,912 **** 12,768 **** 7,855 **** 4,912 **** 12,768 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia **** Total Gas^(4)^ **** Conventional Natural Gas **** Coal Bed Methane Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf)
At December 31, 2020 — — — — — — — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions — — — — — — — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production — — — — — — — — — — — —
At December 31, 2021 **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Australia **** Natural Gas Liquids BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mboe) ​ (mboe) ​ (mboe)
At December 31, 2020 — — — 8,541 5,109 13,650
Discoveries — — — — — —
Extensions & Improved Recovery — — — — — —
Technical Revisions — — — 706 (197) 509
Acquisitions — — — — — —
Dispositions — — — — — —
Economic Factors — — — — — —
Production — — — (1,391) — (1,391)
At December 31, 2021 **** — **** — **** — **** 7,855 **** 4,912 **** 12,768

​

​ Vermilion Energy Inc. ■ Page 23 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Canada **** Total Oil^(4)^ **** Light & Medium Crude Oil Heavy Crude Oil Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl)
At December 31, 2020 83,497 46,620 130,116 83,442 46,547 129,989 55 73 128 — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 1,379 1,320 2,700 1,379 1,320 2,700 — — — — — —
Technical Revisions 1,105 (1,813) (708) 1,090 (1,811) (721) 15 (2) 13 — — —
Acquisitions 195 76 271 195 76 271 — — — — — —
Dispositions (61) (199) (260) (61) (199) (260) — — — — — —
Economic Factors 5,648 (598) 5,049 5,608 (558) 5,049 40 (40) — — — —
Production (6,188) — (6,188) (6,182) — (6,182) (6) — (6) — — —
At December 31, 2021 **** 85,575 **** 45,405 **** 130,980 **** 85,471 **** 45,374 **** 130,845 **** 103 **** 31 **** 135 **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Canada **** Total Gas^(4)^ **** Conventional Natural Gas Coal Bed Methane Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf)
At December 31, 2020 359,287 244,012 603,299 353,965 242,219 596,184 4,795 1,592 6,387 527 201 728
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 19,978 15,846 35,824 19,978 15,846 35,824 — — — — — —
Technical Revisions 31,633 (28,743) 2,889 30,324 (28,891) 1,432 1,396 244 1,640 (87) (96) (183)
Acquisitions 188 220 407 188 220 407 — — — — — —
Dispositions (44) (519) (562) (44) (519) (562) — — — — — —
Economic Factors 14,570 589 15,159 13,879 518 14,397 692 71 763 — — —
Production (50,381) — (50,381) (49,536) — (49,536) (761) — (761) (84) — (84)
At December 31, 2021 **** 375,230 **** 231,405 **** 606,635 **** 368,752 **** 229,394 **** 598,146 **** 6,121 **** 1,907 **** 8,029 **** 356 **** 105 **** 461

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Canada **** Natural Gas Liquids BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mboe) ​ (mboe) ​ (mboe)
At December 31, 2020 34,670 21,731 56,401 178,048 109,019 287,067
Discoveries — — — — — —
Extensions & Improved Recovery 1,832 1,634 3,466 6,541 5,595 12,136
Technical Revisions 1,053 (2,176) (1,123) 7,430 (8,779) (1,350)
Acquisitions 4 3 7 230 116 346
Dispositions (3) (40) (43) (71) (325) (397)
Economic Factors 1,059 (4) 1,054 9,135 (505) 8,630
Production (4,383) — (4,383) (18,968) — (18,968)
At December 31, 2021 **** 34,231 **** 21,148 **** 55,379 **** 182,344 **** 105,121 **** 287,465

​

​ Vermilion Energy Inc. ■ Page 24 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CEE **** Total Oil^(4)^ **** Light & Medium Crude Oil Heavy Crude Oil Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P
Factors ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl)
At December 31, 2020 — — — — — — — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions — — — — — — — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production — — — — — — — — — — — —
At December 31, 2021 **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CEE **** Total Gas^(4)^ **** Conventional Natural Gas Coal Bed Methane Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf)
At December 31, 2020 10,296 6,081 16,377 10,296 6,081 16,377 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions 224 (421) (197) 224 (421) (197) — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 165 16 181 165 16 181 — — — — — —
Production (112) — (112) (112) — (112) — — — — — —
At December 31, 2021 **** 10,573 **** 5,676 **** 16,250 **** 10,573 **** 5,676 **** 16,250 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CEE **** Natural Gas Liquids BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mboe) ​ (mboe) ​ (mboe)
At December 31, 2020 — — — 1,716 1,014 2,730
Discoveries — — — — — —
Extensions & Improved Recovery — — — — — —
Technical Revisions — — — 37 (70) (33)
Acquisitions — — — — — —
Dispositions — — — — — —
Economic Factors — — — 28 3 30
Production — — — (19) — (19)
At December 31, 2021 **** — **** — **** — **** 1,762 **** 946 **** 2,708

​

​ Vermilion Energy Inc. ■ Page 25 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
France ​ Total Oil ^(4)^ **** Light & Medium Crude Oil **** Heavy Crude Oil **** Tight Oil
Proved Probable P+P ^(1) (2)^ **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl)
At December 31, 2020 33,389 11,857 45,246 33,389 11,857 45,246 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — 100 100 — 100 100 — — — — — —
Technical Revisions 1,009 (322) 687 1,009 (322) 687 — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 2,442 583 3,024 2,442 583 3,024 — — — — — —
Production (3,212) — (3,212) (3,212) — (3,212) — — — — — —
At December 31, 2021 **** 33,627 **** 12,218 **** 45,845 **** 33,627 **** 12,218 **** 45,845 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
France **** Total Gas^(4)^ **** Conventional Natural Gas **** Coal Bed Methane **** Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf)
At December 31, 2020 — — — — — — — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions — — — — — — — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production — — — — — — — — — — — —
At December 31, 2021 **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
France **** Natural Gas Liquids **** BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mboe) **** ​ (mboe) **** ​ (mboe)
At December 31, 2020 — — — 33,389 11,857 45,246
Discoveries — — — — — —
Extensions & Improved Recovery — — — — 100 100
Technical Revisions — — — 1,009 (322) 687
Acquisitions — — — — — —
Dispositions — — — — — —
Economic Factors — — — 2,442 583 3,024
Production — — — (3,212) — (3,212)
At December 31, 2021 **** — **** — **** — **** 33,627 **** 12,218 **** 45,845

​

​ Vermilion Energy Inc. ■ Page 26 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Germany **** Total Oil^(4)^ **** Light & Medium Crude Oil **** Heavy Crude Oil **** Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P
Factors ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl)
At December 31, 2020 5,647 4,257 9,904 5,647 4,257 9,904 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 24 5 29 24 5 29 — — — — — —
Technical Revisions 46 (157) (111) 46 (157) (111) — — — — — —
Acquisitions 882 587 1,469 882 587 1,469 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 580 123 703 580 123 703 — — — — — —
Production (381) — (381) (381) — (381) — — — — — —
At December 31, 2021 **** 6,798 **** 4,815 **** 11,613 **** 6,798 **** 4,815 **** 11,613 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Germany **** Total Gas^(4)^ **** Conventional Natural Gas **** Coal Bed Methane **** Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P
Factors ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf) ​ (mmcf) **** ​ (mmcf) **** ​ (mmcf)
At December 31, 2020 42,285 50,997 93,282 42,285 50,997 93,282 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery (1) — (1) (1) — (1) — — — — — —
Technical Revisions (3,094) (13,686) (16,780) (3,094) (13,686) (16,780) — — — — — —
Acquisitions 38,125 16,121 54,247 38,125 16,121 54,247 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 1,135 2,510 3,645 1,135 2,510 3,645 — — — — — —
Production (5,772) — (5,772) (5,772) — (5,772) — — — — — —
At December 31, 2021 **** 72,678 **** 55,943 **** 128,621 **** 72,678 **** 55,943 **** 128,621 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Germany **** Natural Gas Liquids BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mboe) ​ (mboe) ​ (mboe)
At December 31, 2020 — — — 12,694 12,757 25,451
Discoveries — — — — — —
Extensions & Improved Recovery — — — 24 5 29
Technical Revisions — — — (470) (2,438) (2,908)
Acquisitions — — — 7,236 3,274 10,510
Dispositions — — — — — —
Economic Factors — — — 769 541 1,311
Production — — — (1,343) — (1,343)
At December 31, 2021 **** — **** — **** — **** 18,911 **** 14,139 **** 33,050

​

​ Vermilion Energy Inc. ■ Page 27 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ireland **** Total Oil ^(4)^ **** Light & Medium Crude Oil Heavy Crude Oil Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P **** Proved **** Probable ​ P+P
Factors ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) **** ​ (mbbl) ​ (mbbl) ​ (mbbl) **** ​ (mbbl) **** ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl)
At December 31, 2020 — — — — — — — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions — — — — — — — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production — — — — — — — — — — — —
At December 31, 2021 **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ireland **** Total Gas ^(4)^ **** Conventional Natural Gas Coal Bed Methane Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P **** Proved **** Probable ​ P+P
Factors ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf) ​ (mmcf)
At December 31, 2020 61,620 33,398 95,018 61,620 33,398 95,018 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions (516) (7,968) (8,484) (516) (7,968) (8,484) — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production (10,676) — (10,676) (10,676) — (10,676) — — — — — —
At December 31, 2021 **** 50,427 **** 25,431 **** 75,858 **** 50,427 **** 25,431 **** 75,858 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ireland **** Natural Gas Liquids BOE
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mboe) ​ (mboe) ​ (mboe)
At December 31, 2020 — — — 10,270 5,566 15,836
Discoveries — — — — — —
Extensions & Improved Recovery — — — — — —
Technical Revisions — — — (86) (1,328) (1,414)
Acquisitions — — — — — —
Dispositions — — — — — —
Economic Factors — — — — — —
Production — — — (1,779) — (1,779)
At December 31, 2021 **** — **** — **** — **** 8,405 **** 4,238 **** 12,643

​

​ Vermilion Energy Inc. ■ Page 28 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Netherlands **** Total Oil ^(4)^ **** Light & Medium Crude Oil Heavy Crude Oil Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P ​ Proved **** Probable **** P+P **** Proved **** Probable **** P+P
Factors ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl) ​ (mbbl)
At December 31, 2020 — — — — — — — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery — — — — — — — — — — — —
Technical Revisions — — — — — — — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors — — — — — — — — — — — —
Production — — — — — — — — — — — —
At December 31, 2021 **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Netherlands ​ Total Gas^(4)^ ​ Conventional Natural Gas Coal Bed Methane ​ Shale Gas
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf)
At December 31, 2020 56,121 47,741 103,862 56,121 47,741 103,862 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 72 (3) 69 72 (3) 69 — — — — — —
Technical Revisions 2,862 (406) 2,456 2,862 (406) 2,456 — — — — — —
Acquisitions — — — — — — — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 4,310 1,228 5,537 4,310 1,228 5,537 — — — — — —
Production (15,842) — (15,842) (15,842) — (15,842) — — — — — —
At December 31, 2021 **** 47,522 **** 48,560 **** 96,082 **** 47,522 **** 48,560 **** 96,082 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Netherlands ​ Natural Gas Liquids ​ BOE
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mboe) **** (mboe) **** (mboe)
At December 31, 2020 117 110 227 9,470 8,067 17,537
Discoveries — — — — — —
Extensions & Improved Recovery — — — 12 (1) 11
Technical Revisions 2 (8) (6) 479 (75) 403
Acquisitions — — — — — —
Dispositions — — — — — —
Economic Factors 11 4 15 729 209 938
Production (36) — (36) (2,677) — (2,677)
At December 31, 2021 **** 93 **** 107 **** 200 **** 8,013 **** 8,200 **** 16,213

​

​ Vermilion Energy Inc. ■ Page 29 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
United States ​ Total Oil^(4)^ ​ Light & Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 15,440 17,807 33,247 15,440 17,807 33,247 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 698 330 1,028 698 330 1,028 — — — — — —
Technical Revisions (991) (221) (1,212) (991) (221) (1,212) — — — — — —
Acquisitions 7,081 1,906 8,986 7,081 1,906 8,986 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 1,458 (526) 932 1,458 (526) 932 — — — — — —
Production (951) — (951) (951) — (951) — — — — — —
At December 31, 2021 **** 22,735 **** 19,296 **** 42,031 **** 22,735 **** 19,296 **** 42,031 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
United States ​ Total Gas^(4)^ ​ Conventional Natural Gas ​ Coal Bed Methane^(5)^ ​ Shale Gas^(5)^
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf)
At December 31, 2020 56,677 36,036 92,713 56,677 36,036 92,713 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 1,507 817 2,324 1,507 817 2,324 — — — — — —
Technical Revisions (10,793) (4,302) (15,095) (10,793) (4,302) (15,095) — — — — — —
Acquisitions 13,193 3,394 16,587 13,193 3,394 16,587 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 4,672 (2,575) 2,097 4,672 (2,575) 2,097 — — — — — —
Production (2,495) — (2,495) (2,495) — (2,495) — — — — — —
At December 31, 2021 **** 62,761 **** 33,370 **** 96,132 **** 62,761 **** 33,370 **** 96,132 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
United States ​ Natural Gas Liquids ​ BOE
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mboe) **** (mboe) **** (mboe)
At December 31, 2020 6,248 4,137 10,385 31,135 27,950 59,085
Discoveries — — — — — —
Extensions & Improved Recovery 189 103 292 1,138 569 1,708
Technical Revisions (318) (20) (339) (3,108) (959) (4,066)
Acquisitions 1,659 433 2,091 10,938 2,904 13,842
Dispositions — — — — — —
Economic Factors 580 (330) 250 2,816 (1,285) 1,531
Production (418) — (418) (1,785) — (1,785)
At December 31, 2021 **** 7,939 **** 4,323 **** 12,262 **** 41,134 **** 29,180 **** 70,315

​

​ Vermilion Energy Inc. ■ Page 30 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Company ​ Total Oil^(4)^ ​ Light & Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 146,514 85,650 232,163 146,459 85,577 232,036 55 73 128 — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 2,102 1,756 3,857 2,102 1,756 3,857 — — — — — —
Technical Revisions 1,874 (2,710) (836) 1,859 (2,708) (849) 15 (2) 13 — — —
Acquisitions 8,157 2,569 10,727 8,157 2,569 10,727 — — — — — —
Dispositions (61) (199) (260) (61) (199) (260) — — — — — —
Economic Factors 10,128 (419) 9,709 10,088 (379) 9,709 40 (40) — — — —
Production (12,124) — (12,124) (12,118) — (12,118) (6) — (6) — — —
At December 31, 2021 **** 156,590 **** 86,646 **** 243,236 **** 156,487 **** 86,615 **** 243,102 **** 103 **** 31 **** 135 **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Company ​ Total Gas^(4)^ ​ Conventional Natural Gas ​ Coal Bed Methane^(5)^ ​ Shale Gas^(5)^
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf) **** (mmcf)
At December 31, 2020 586,285 418,265 1,004,551 580,963 416,472 997,436 4,795 1,592 6,387 527 201 728
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 21,556 16,660 38,216 21,556 16,660 38,216 — — — — — —
Technical Revisions 20,315 (55,525) (35,210) 19,006 (55,673) (36,667) 1,396 244 1,640 (87) (96) (183)
Acquisitions 51,506 19,735 71,241 51,506 19,735 71,241 — — — — — —
Dispositions (44) (519) (562) (44) (519) (562) — — — — — —
Economic Factors 24,852 1,768 26,620 24,160 1,697 25,857 692 71 763 — — —
Production (85,279) — (85,279) (84,434) — (84,434) (761) — (761) (84) — (84)
At December 31, 2021 **** 619,192 **** 400,385 **** 1,019,577 **** 612,715 **** 398,373 **** 1,011,088 **** 6,121 **** 1,907 **** 8,029 **** 356 **** 105 **** 461

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Company ​ Natural Gas Liquids ​ BOE
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mboe) **** (mboe) **** (mboe)
At December 31, 2020 41,035 25,978 67,013 285,263 181,339 466,601
Discoveries — — — — — —
Extensions & Improved Recovery 2,021 1,737 3,758 7,716 6,269 13,985
Technical Revisions 736 (2,204) (1,467) 5,996 (14,168) (8,172)
Acquisitions 1,663 436 2,098 18,404 6,294 24,699
Dispositions (3) (40) (43) (71) (325) (397)
Economic Factors 1,649 (330) 1,320 15,919 (454) 15,465
Production (4,837) — (4,837) (31,174) — (31,174)
At December 31, 2021 **** 42,263 **** 25,578 **** 67,841 **** 302,052 **** 178,954 **** 481,007

​

​ Vermilion Energy Inc. ■ Page 31 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
North America ​ Total Oil^(4)^ ​ Light & Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 98,937 64,427 163,364 98,883 64,354 163,236 55 73 128 — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 2,077 1,651 3,728 2,077 1,651 3,728 — — — — — —
Technical Revisions 114 (2,034) (1,921) 99 (2,032) (1,934) 15 (2) 13 — — —
Acquisitions 7,275 1,982 9,257 7,275 1,982 9,257 — — — — — —
Dispositions (61) (199) (260) (61) (199) (260) — — — — — —
Economic Factors 7,106 (1,125) 5,981 7,066 (1,085) 5,981 40 (40) — — — —
Production (7,139) — (7,139) (7,133) — (7,133) (6) — (6) — — —
At December 31, 2021 **** 108,310 **** 64,701 **** 173,011 **** 108,206 **** 64,670 **** 172,876 **** 103 **** 31 **** 135 **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Total Gas^(4)^ ​ Conventional Natural Gas ​ Coal Bed Methane^(5)^ ​ Shale Gas^(5)^
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 415,964 280,048 696,012 410,642 278,255 688,897 4,795 1,592 6,387 527 201 728
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 21,485 16,664 38,148 21,485 16,664 38,148 — — — — — —
Technical Revisions 20,839 (33,045) (12,206) 19,531 (33,193) (13,662) 1,396 244 1,640 (87) (96) (183)
Acquisitions 13,381 3,613 16,994 13,381 3,613 16,994 — — — — — —
Dispositions (44) (519) (562) (44) (519) (562) — — — — — —
Economic Factors 19,242 (1,986) 17,256 18,550 (2,057) 16,494 692 71 763 — — —
Production (52,876) — (52,876) (52,031) — (52,031) (761) — (761) (84) — (84)
At December 31, 2021 **** 437,991 **** 264,776 **** 702,767 **** 431,514 **** 262,764 **** 694,277 **** 6,121 **** 1,907 **** 8,029 **** 356 **** 105 **** 461

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Natural Gas Liquids ​ BOE
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 40,918 25,868 66,786 209,182 136,969 346,152
Discoveries — — — — — —
Extensions & Improved Recovery 2,021 1,737 3,758 7,679 6,164 13,844
Technical Revisions 735 (2,196) (1,461) 4,322 (9,738) (5,416)
Acquisitions 1,663 436 2,098 11,168 3,020 14,188
Dispositions (3) (40) (43) (71) (325) (397)
Economic Factors 1,638 (334) 1,304 11,951 (1,789) 10,162
Production (4,801) — (4,801) (20,753) — (20,753)
At December 31, 2021 **** 42,170 **** 25,471 **** 67,641 **** 223,478 **** 134,301 **** 357,780

​

​ Vermilion Energy Inc. ■ Page 32 ■ 2021 Annual Information Form

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
International ​ Total Oil^(4)^ ​ Light & Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil
​ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 47,577 21,223 68,800 47,577 21,223 68,800 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 24 105 129 24 105 129 — — — — — —
Technical Revisions 1,760 (676) 1,084 1,760 (676) 1,084 — — — — — —
Acquisitions 882 587 1,469 882 587 1,469 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 3,022 705 3,728 3,022 705 3,728 — — — — — —
Production (4,985) — (4,985) (4,985) — (4,985) — — — — — —
At December 31, 2021 **** 48,281 **** 21,945 **** 70,225 **** 48,281 **** 21,945 **** 70,225 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Total Gas^(4)^ ​ Conventional Natural Gas ​ Coal Bed Methane^(5)^ ​ Shale Gas^(5)^
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 170,322 138,217 308,539 170,322 138,217 308,539 — — — — — —
Discoveries — — — — — — — — — — — —
Extensions & Improved Recovery 71 (3) 68 71 (3) 68 — — — — — —
Technical Revisions (524) (22,480) (23,004) (524) (22,480) (23,004) — — — — — —
Acquisitions 38,125 16,121 54,247 38,125 16,121 54,247 — — — — — —
Dispositions — — — — — — — — — — — —
Economic Factors 5,610 3,754 9,363 5,610 3,754 9,363 — — — — — —
Production (32,403) — (32,403) (32,403) — (32,403) — — — — — —
At December 31, 2021 **** 181,201 **** 135,609 **** 316,810 **** 181,201 **** 135,609 **** 316,810 **** — **** — **** — **** — **** — **** —

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Natural Gas Liquids ​ BOE
Proved Probable P+P ^(1) (2)^ ​ Proved ​ Probable ​ P+P ​ Proved ​ Probable ​ P+P
Factors **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl) **** (mbbl)
At December 31, 2020 117 110 227 76,081 44,370 120,450
Discoveries — — — — — —
Extensions & Improved Recovery — — — 36 104 141
Technical Revisions 2 (8) (6) 1,675 (4,430) (2,756)
Acquisitions — — — 7,236 3,274 10,510
Dispositions — — — — — —
Economic Factors 11 4 15 3,968 1,335 5,303
Production (36) — (36) (10,421) — (10,421)
At December 31, 2021 **** 93 **** 107 **** 200 **** 78,574 **** 44,653 **** 123,227

​

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 Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth in “Forecast Prices used in Estimates”. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
--- ---
(4) “Total Oil” is the sum of Light Crude Oil and Medium Crude Oil, Heavy Crude Oil and Tight Oil. For reporting purposes, and “Total Gas” is the sum of Conventional Natural Gas, Coal Bed Methane and Shale Gas.
--- ---

​ Vermilion Energy Inc. ■ Page 33 ■ 2021 Annual Information Form

Undeveloped reserves

​

​

Proved 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. These reserves have a 90% probability of being recovered. Vermilion's current plan is to develop these reserves in the following three years. The pace of development of these reserves is influenced by many factors, including but not limited to, the outcomes of yearly drilling and reservoir evaluations, changes in commodity pricing, changes in capital allocations, changing technical conditions, regulatory changes and impact of future acquisitions and dispositions. As new information becomes available these reserves are reviewed and development plans are revised accordingly.

​

Probable 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. These reserves have a 50% probability of being recovered. Vermilion's current plan is to develop these reserves over the next five years. In general, development of these reserves requires additional evaluation data to increase the probability of success to a level that favourably ranks the project against other projects in Vermilion's inventory. This increases the timeline for the development of these reserves. This timetable may be altered depending on outside market forces, changes in capital allocations and impact of future acquisitions and dispositions.

​

Timing of initial undeveloped reserves assignment

​

​

Undeveloped Reserves Attributed in Current Year

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & Medium Crude Oil ​ Conventional Natural Gas ​ Heavy Crude Oil ​ Coal Bed Methane ​ Natural Gas Liquids ​ Total Oil Equivalent
​ ​ First ​ ​ ​ First ​ ​ ​ First ​ ​ ​ First ​ ​ ​ First ​ ​ ​ First ​ ​
​ Attributed ^(1)^ Booked (mbbl) Attributed ^(1)^ Booked (mmcf) Attributed ^(1)^ Booked (mbbl) Attributed^(1)^ Booked (mmcf) Attributed ^(1)^ Booked (mbbl) Attributed ^(1)^ Booked (mboe)
Proved ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
2019 ​ 7,220 ​ 55,017 ​ 28,369 ​ 145,253 ​ — ​ 77 ​ — ​ 259 ​ 3,080 ​ 15,811 ​ 15,029 ​ 95,157
2020 ​ 4,750 ​ 50,919 ​ 20,851 ​ 128,421 ​ — ​ 43 ​ — ​ 446 ​ 875 ​ 14,708 ​ 9,100 ​ 87,147
2021 ​ 6,645 ​ 60,945 ​ 21,123 ​ 134,249 ​ — ​ 85 ​ — ​ 376 ​ 2,118 ​ 14,502 ​ 12,284 ​ 97,970
Probable ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
2019 ​ 5,470 ​ 54,566 ​ 54,866 ​ 273,081 ​ — ​ 74 ​ — ​ 513 ​ 3,900 ​ 17,165 ​ 18,515 ​ 117,403
2020 ​ 2,835 ​ 55,447 ​ 39,583 ​ 256,151 ​ — ​ 68 ​ — ​ 121 ​ 2,413 ​ 17,866 ​ 11,845 ​ 116,092
2021 ​ 3,447 ​ 56,057 ​ 32,741 ​ 226,458 ​ — ​ 24 ​ — ​ 109 ​ 2,776 ​ 16,293 ​ 11,680 ​ 110,136

​

Note:

(1) “First Attributed” refers to reserves first attributed at year-end of the corresponding fiscal year.

​

Future development costs

​

​

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). The future development cost estimates disclosed below are associated with reserves as evaluated by GLJ. The future development cost estimates will differ from the costs ultimately incurred by Vermilion due to a number of factors, including costs incurred for properties that do not have associated reserves as evaluated by GLJ and economic factors that may alter development pace and project selection.

​ Vermilion Energy Inc. ■ Page 34 ■ 2021 Annual Information Form

Vermilion expects to source its capital expenditure requirements from internally generated cash flow and, as appropriate, from Vermilion’s existing credit facility or 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.

​

​ ​ ​ ​ ​
​ **** Total Proved **** Total Proved Plus Probable
($M) ​ Estimated Using Forecast Prices and Costs^(1)^ ​ Estimated Using Forecast Prices and Costs ^(1)^
Australia ​ ​
2022 53,412 53,412
2023 — —
2024 — —
2025 — —
2026 — —
Remainder — —
Australia total for all years undiscounted **** 53,412 **** 53,412
Canada
2022 95,135 118,564
2023 336,614 464,192
2024 277,484 391,936
2025 182,057 320,277
2026 69,472 157,415
Remainder 61,471 86,157
Canada total for all years undiscounted **** 1,022,234 **** 1,538,541
CEE
2022 5,552 5,552
2023 2,652 2,652
2024 — —
2025 — —
2026 — —
Remainder — —
CEE total for all years undiscounted **** 8,204 **** 8,204
France
2022 7,609 8,139
2023 32,893 49,328
2024 18,558 37,533
2025 21,524 50,562
2026 9,984 40,550
Remainder 2,621 19,645
France total for all years undiscounted **** 93,188 **** 205,757
Germany
2022 12,421 15,283
2023 12,120 18,080
2024 6,236 16,903
2025 14,505 25,991
2026 2,833 23,668
Remainder — —
Germany for all years undiscounted **** 48,115 **** 99,925

​ Vermilion Energy Inc. ■ Page 35 ■ 2021 Annual Information Form

​ ​ ​ ​ ​
​ **** Total Proved **** Total Proved Plus Probable
($M) ​ Estimated Using Forecast Prices and Costs^(1)^ ​ Estimated Using Forecast Prices and Costs ^(1)^
Ireland ​ ​ ​ ​
2022 ​ 1,145 1,145
2023 ​ 2,721 2,721
2024 ​ 1,117 1,117
2025 ​ 4,771 23,854
2026 ​ 6,083 9,213
Remainder ​ 2,582 2,582
Ireland total for all years undiscounted ​ 18,418 40,632
Netherlands ​ ​ ​ ​
2022 ​ 1,552 1,795
2023 ​ 6,941 23,750
2024 ​ 406 11,398
2025 ​ 92 13,197
2026 ​ 34 15,144
Remainder ​ 35 10,034
Netherlands total for all years undiscounted ​ 9,060 75,318
United States ​ ​ ​ ​
2022 ​ 59,863 59,863
2023 ​ 55,893 69,176
2024 ​ 73,303 107,710
2025 ​ 76,435 142,200
2026 ​ 37,212 127,613
Remainder ​ 253 7,324
United States total for all years undiscounted ​ 302,958 513,886
Total Company ​ ​ ​ ​
2022 ​ 236,688 263,751
2023 ​ 449,834 629,899
2024 ​ 377,105 566,598
2025 ​ 299,384 576,081
2026 ​ 125,618 373,603
Remainder ​ 66,961 125,743
Total for all years undiscounted ​ 1,555,589 2,535,674
North America ​ ​ ​ ​
2022 ​ 154,998 178,427
2023 ​ 392,507 533,367
2024 ​ 350,788 499,646
2025 ​ 258,492 462,477
2026 ​ 106,684 285,028
Remainder ​ 61,723 93,482
North America total for all years undiscounted ​ 1,325,192 2,052,427
International ​ ​ ​ ​
2022 ​ 81,690 85,324
2023 ​ 57,327 96,531
2024 ​ 26,317 66,951
2025 ​ 40,892 113,604
2026 ​ 18,934 88,575
Remainder ​ 5,238 32,261
International total for all years undiscounted ​ 230,398 483,247

​

Note:

(1) The pricing assumptions used in the GLJ Report with respect to net present value of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are detailed in “Forecast Prices used in Estimates”.

​ Vermilion Energy Inc. ■ Page 36 ■ 2021 Annual Information Form

Crude oil and natural gas properties and wells

​

​

The following table sets forth the number of wells (based on wellbores) in which Vermilion held a working interest as at December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Crude Oil ​ Natural Gas
​ ​ Producing ​ Non-Producing^(4)^ ​ Producing ​ Non-Producing^(4)^
​ **** Gross Wells^(2)^ **** Net Wells^(3)^ **** Gross Wells^(2)^ **** Net Wells^(3)^ **** Gross Wells^(2)^ **** Net Wells^(3)^ **** Gross Wells^(2)^ **** Net Wells^(3)^
Canada ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Alberta 505 276 180 83 627 401 ​ 433 260
Saskatchewan 2,887 1,856 2,750 1,912 17 — 38 17
Total Canada 3,392 2,132 2,930 1,995 644 401 471 277
Australia ^(1)^ 19 19 1 1 — — 1 1
Croatia — — — — — — 2 2
France 303 297 131 129 — — 3 3
Germany 66 57 119 96 20 11 10 5
Ireland ^(1)^ — — — — 6 1 — —
Netherlands — — — — 105 47 113 66
Hungary — — — — 1 1 1 —
Total United States 195 168 60 54 — — — —
Total Vermilion 3,975 2,673 3,241 2,275 776 461 601 354
North America 3,587 2,300 2,990 2,049 644 401 471 277
International 388 373 251 226 132 60 130 77

​

Notes:

(1) Wells for Australia and Ireland are located offshore.
(2) "Gross" refers to the total wells in which Vermilion has an interest, directly or indirectly.
--- ---
(3) "Net" refers to the total wells in which Vermilion has an interest, directly or indirectly, multiplied by the percentage working interest owned by Vermilion, directly or indirectly, therein.
--- ---
(4) Non-producing wells include wells which are capable of producing, but which are currently not producing, and are re-evaluated with respect to future commodity prices, proximity to facility infrastructure, design of future exploration and development programs, and access to capital.
--- ---

​

Costs incurred

​

​

The following table summarizes the capital expenditures made by Vermilion on oil and gas properties for the year ended December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ Acquisition Costs for Proved ​ Acquisition Costs for Unproved ​ Exploration ​ Development ​ Total
(M) Properties **** Properties **** Costs **** Costs **** Costs
Australia — ​ — ​ — ​ 34,785 ​ 34,785
Canada 1,699 ​ — ​ — ​ 190,242 ​ 191,941
Croatia — — 25,385 ​ 25,385
France — — 121 39,587 39,708
Germany 33,139 — 1,073 19,234 53,446
Hungary — — 1,741 1,543 3,284
Ireland 1,879 — — 1,261 3,140
Netherlands — — 6,839 20,198 27,037
Slovakia — — 247 ​ 247
United States 94,248 — — 32,540 126,788
Total 130,965 — 35,406 339,390 505,761
North America 95,947 — — 222,782 318,729
International 35,018 — 35,406 116,608 187,032

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 37 ■ 2021 Annual Information Form

Acreage

​

​

The following table summarizes the acreage for the year ended December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Developed ^(1)^ ​ Undeveloped ​ Total
​ **** Gross ^(2)^ **** Net ^(3)^ **** Gross ^(2)^ **** Net ^(3)^ **** Gross ^(2)(4)^ **** Net ^(3)(4)^
Australia 20,164 20,164 39,389 39,389 59,553 59,553
Canada 782,423 636,714 356,120 301,026 1,138,543 937,740
Croatia 5,624 5,624 969,751 969,751 975,375 975,375
France 258,125 248,873 156,387 134,160 414,512 383,033
Germany 107,351 54,625 2,065,780 920,723 2,173,131 975,348
Hungary 1,220 1,220 945,446 945,446 946,666 946,666
Ireland 7,200 1,440 — — 7,200 1,440
Netherlands 188,021 79,829 1,507,791 821,962 1,695,812 901,791
Slovakia — — 97,907 48,954 97,907 48,954
United States 84,476 69,177 78,782 61,538 163,258 130,715
Total 1,454,604 1,117,666 6,217,353 4,242,949 7,671,957 5,360,615
North America 866,899 705,891 434,902 362,564 1,301,801 1,068,455
International 587,705 411,775 5,782,451 3,880,385 6,370,156 4,292,160

​

Notes:

(1) “Developed” means the acreage assigned to productive wells based on applicable regulations.
(2) “Gross” means the total acreage in which Vermilion has a working interest, directly or indirectly.
--- ---
(3) “Net” means the total acreage in which Vermilion has a working interest, directly or indirectly, multiplied by the percentage working interest of Vermilion.
--- ---
(4) When determining gross and net acreage for two or more leases covering the same lands but different rights, the acreage is reported for each lease. Where there are multiple discontinuous rights in a single lease, the acreage is reported only once.
--- ---

​ Vermilion Energy Inc. ■ Page 38 ■ 2021 Annual Information Form

Exploration and development activities

​

​

The following table sets forth the number of development and exploration wells which Vermilion completed during its 2021 financial year:

​

​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Exploration Wells ​ Development Wells
​ **** Gross^(1)^ **** Net^(2)^ **** Gross^(1)^ **** Net^(2)^
Australia ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Dry Holes — — — —
Total Australia — — — —
Canada ​ ​ ​ ​ ​ ​
Oil — — 50.0 34.7
Gas — — 25.0 21.0
Service ​ — ​ — ​ 2.0 ​ 0.2
Dry Holes — — — —
Total Canada — — 77.0 55.9
Croatia ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Dry holes 1.0 1.0 — —
Total Croatia 1.0 1.0 — —
France ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Dry Holes — — — —
Total France — — — —
Germany ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Service — — 1.0 1.0
Dry Holes — — — —
Total Germany — — 1.0 1.0
Hungary ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Dry Holes 1.0 1.0 — —
Total Hungary 1.0 1.0 — —
Ireland ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — — —
Dry Holes — — — —
Total Ireland — — — —
Netherlands ​ ​ ​ ​ ​ ​
Oil — — — —
Gas — — 2.0 1.5
Dry Holes — — — —
Total Netherlands — — 2.0 1.5
United States ​ ​ ​ ​ ​ ​
Oil — — 5.0 4.3
Gas — — — —
Dry Holes — — — —
Total United States — — 5.0 4.3

​ Vermilion Energy Inc. ■ Page 39 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​ ​
Total Company **** ​ **** ​ **** ​ **** ​
Oil ​ — — 55.0 39.0
Gas ​ — — 27.0 22.5
Service ​ — ​ — ​ 3.0 ​ 1.2
Dry Holes ​ 2.0 2.0 — —
Total Company ​ 2.0 2.0 85.0 62.7
North America ​ ​ ​ ​ ​ ​ ​ ​
Oil ​ — — 55.0 39.0
Gas ​ — — 25.0 21.0
Service ​ — ​ — ​ 2.0 ​ 0.2
Dry Holes ​ — — — —
Total North America ​ — — 82.0 60.2
International ​ ​ ​ ​ ​ ​ ​ ​
Oil ​ — — — —
Gas ​ — — 2.0 1.5
Service ​ — — 1.0 1.0
Dry Holes ​ 2.0 2.0 — —
Total International ​ 2.0 2.0 3.0 2.5

​

Notes:

(1) "Gross" refers to the total wells in which Vermilion has an interest, directly or indirectly.
(2) "Net" refers to the total wells in which Vermilion has an interest, directly or indirectly, multiplied by the percentage working interest owned by Vermilion, directly or indirectly therein.
--- ---

​

Properties with no attributed reserves

​

​

The following table sets out Vermilion's properties with no attributed reserves as at December 31, 2021:

​

​ ​ ​ ​ ​
Country **** Gross Acres^(1)^ **** Net Acres^(2)^
Australia 39,389 39,389
Canada 43,225 37,601
Croatia 966,710 966,710
France 50,983 43,737
Germany 1,974,150 879,883
Hungary 944,829 944,829
Ireland — —
Netherlands 1,357,939 740,271
Slovakia 97,907 48,954
United States 15,956 12,464
Total **** 5,369,739 **** 3,610,198
North America 59,181 50,065
International 5,431,907 3,663,773

​

Notes:

(1) "Gross" refers to the total acres in which Vermilion has an interest, directly or indirectly.
(2) "Net" refers to the total acres in which Vermilion has an interest, directly or indirectly, multiplied by the percentage working interest owned by Vermilion, directly or indirectly therein.
--- ---

​

Vermilion expects its rights to explore, develop, and exploit approximately 68,400 (64,222 net) acres in Canada, 467,632 (467,632 net) acres in Croatia, 117,068 (117,068 net) acres in Hungary, 87,966 (87,966 net) acres in France, and 5,093 (4,122 net) acres in the United States to expire within one year, unless the Company initiates the capital activity necessary to retain the rights. Work commitments on these lands are categorized as seismic acquisition, geophysical studies, or well commitments. No such rights are expected to expire within one year for Australia, Germany, Ireland, the Netherlands, and Slovakia. Vermilion currently has no material work commitments in Australia, Canada, Ireland, the Netherlands and the United States. Vermilion's work commitments with respect to its European lands held are estimated to be $54.3 million in the next year.

​

Vermilion’s properties with no attributed reserves do not have any significant abandonment and reclamation costs. All properties with no attributed reserves do not have high expected development or operating costs or contractual sales obligations to produce and sell at substantially lower prices than could be realized.

​ Vermilion Energy Inc. ■ Page 40 ■ 2021 Annual Information Form

Production estimates

​

​

The following table sets forth the volume of production estimated for the year ended December 31, 2022 as reflected in the estimates of gross proved reserves and gross proved plus probable reserves in the GLJ Report:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Light Crude Oil & ​ ​ ​ ​ ​ Conventional ​ Shale ​ Coal Bed ​ Natural **** Gas ​ ​
​ ​ Medium Crude Oil ​ Heavy Crude Oil ​ Tight Oil ​ Natural Gas ​ Natural **** Gas ​ Methane ​ Liquids ​ BOE
​ **** (bbl/d) **** (bbl/d) **** (bbl/d) **** (mcf/d) **** (mcf/d) **** (mcf/d) **** (bbl/d) **** (boe/d)
Australia
Proved 5,508 — — — — — — 5,508
Probable 269 — — — — — — 269
Proved Plus Probable **** 5,776 **** — **** — **** — **** — **** — **** — **** 5,776
Canada
Proved 17,443 14 — 127,330 185 2,550 10,863 49,998
Probable 988 1 — 15,732 5 50 1,599 5,220
Proved Plus Probable **** 18,432 **** 15 **** — **** 143,063 **** 190 **** 2,601 **** 12,463 **** 55,218
CEE
Proved — — — 475 — — — 79
Probable — — — 95 — — — 16
Proved Plus Probable **** — **** — **** — **** 570 **** — **** — **** — **** 95
France
Proved 8,910 — — — — — — 8,910
Probable 260 — — — — — — 260
Proved Plus Probable **** 9,170 **** — **** — **** — **** — **** — **** — **** 9,170
Germany
Proved 1,456 — — 25,398 — — — 5,689
Probable 245 — — 803 — — — 379
Proved Plus Probable **** 1,701 **** — **** — **** 26,201 **** — **** — **** — **** 6,068
Ireland
Proved — — — 27,735 — — — 4,622
Probable — — — 211 — — — 35
Proved Plus Probable **** — **** — **** — **** 27,946 **** — **** — **** — **** 4,658
Netherlands
Proved — — — 33,813 — — 72 5,707
Probable — — — 3,981 — — 10 673
Proved Plus Probable **** — **** — **** — **** 37,794 **** — **** — **** 81 **** 6,380
United States
Proved 4,633 — — 11,393 — — 1,431 7,963
Probable 136 — — 247 — — 31 208
Proved Plus Probable **** 4,769 **** — **** — **** 11,640 **** — **** — **** 1,462 **** 8,171
Corporate
Total Proved 37,951 14 — 226,144 185 2,550 12,366 88,477
Probable 1,898 1 — 21,070 5 50 1,640 7,060
Total Proved Plus Probable **** 39,849 **** 15 **** — **** 247,213 **** 190 **** 2,601 **** 14,006 **** 95,537
North America
Total Proved 22,077 14 — 138,723 185 2,550 12,295 57,961
Probable 1,125 1 — 15,979 5 50 1,630 5,428
Total Proved Plus Probable **** 23,201 **** 15 **** — **** 154,702 **** 190 **** 2,601 **** 13,925 **** 63,390
International
Total Proved 15,874 — — 87,421 — — 72 30,516
Probable 774 — — 5,090 — — 10 1,632
Total Proved Plus Probable **** 16,648 **** — **** — **** 92,511 **** — **** — **** 81 **** 32,148

​ Vermilion Energy Inc. ■ Page 41 ■ 2021 Annual Information Form

Production history

​

​

The following table sets forth certain information in respect of production, product prices received, royalties paid, production costs, and netbacks received by Vermilion for each quarter of its most recently completed financial year:

​

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months EndedMarch 31, 2021 **** Three Months EndedJune 31, 2021 **** Three Months EndedSeptember 31, 2021 **** Three Months EndedDecember 31, 2021
Australia ​ ​ ​ ​ ​ ​ ​
Average Daily Production ​ ​ ​ ​ ​ ​ ​
Light Crude Oil and Medium Crude Oil (bbl/d) 4,489 3,835 4,190 2,742
Conventional Natural Gas (mmcf/d) — — — —
Natural Gas Liquids (bbl/d) — — — —
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 94.50 97.49 105.17 112.26
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 33.61 32.46 35.06 44.31
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 60.89 65.03 70.11 67.95
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Canada
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 17,767 16,868 16,809 16,388
Conventional Natural Gas (mmcf/d) 138.41 146.55 138.42 128.85
Natural Gas Liquids (bbl/d) 11,572 13,325 11,288 11,858
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 66.35 74.51 81.60 92.73
Conventional Natural Gas (/mcf) 3.63 2.71 3.77 5.10
Natural Gas Liquids (/bbl) 42.71 46.46 52.30 64.51
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 8.02 10.95 11.61 12.54
Conventional Natural Gas (/mcf) 0.19 0.14 0.19 0.37
Natural Gas Liquids (/bbl) 6.27 6.91 7.13 12.64
Transportation
Light Crude Oil and Medium Crude Oil (/bbl) 1.73 1.46 1.63 1.46
Conventional Natural Gas (/mcf) 0.22 0.20 0.20 0.22
Natural Gas Liquids (/bbl) 1.13 1.15 1.09 1.06
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 8.41 7.42 8.72 8.91
Conventional Natural Gas (/mcf) 1.32 1.35 1.21 1.25
Natural Gas Liquids (/bbl) 5.48 5.86 5.86 6.44
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 48.19 54.68 59.65 69.83
Conventional Natural Gas (/mcf) 1.90 1.02 2.17 3.26
Natural Gas Liquids (/bbl) 29.83 32.53 38.22 44.36

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 42 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months Ended **** Three Months Ended **** Three Months Ended **** Three Months Ended
​ March 31, 2021 ​ June 31, 2021 ​ September 31, 2021 ​ December 31, 2021
France
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 9,062 9,013 8,677 8,453
Conventional Natural Gas (mmcf/d) — — — —
Natural Gas Liquids (bbl/d) — — — —
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 77.19 81.80 91.60 100.18
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 10.82 11.01 12.72 12.77
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Transportation
Light Crude Oil and Medium Crude Oil (/bbl) 6.60 10.95 7.34 8.25
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 17.66 15.12 15.52 17.88
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 42.11 44.72 56.02 61.28
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Germany
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 911 1,093 1,043 1,127
Conventional Natural Gas (mmcf/d) 13.40 15.60 16.19 18.00
Natural Gas Liquids (bbl/d) — — — —
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 71.70 78.00 82.31 99.74
Conventional Natural Gas (/mcf) 7.18 8.83 16.55 32.29
Natural Gas Liquids (/bbl) — — — —
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 0.48 1.24 1.53 2.29
Conventional Natural Gas (/mcf) 0.77 0.17 0.31 0.38
Natural Gas Liquids (/bbl) — — — —
Transportation
Light Crude Oil and Medium Crude Oil (/bbl) 7.84 10.82 12.49 11.19
Conventional Natural Gas (/mcf) 0.44 0.34 0.30 0.43
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 23.43 23.71 25.26 28.16
Conventional Natural Gas (/mcf) 4.02 3.14 2.80 2.35
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 39.95 42.23 43.03 58.10
Conventional Natural Gas (/mcf) 1.95 5.18 13.14 29.13
Natural Gas Liquids (/bbl) — — — —

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 43 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months EndedMarch 31, 2021 **** Three Months EndedJune 31, 2021 **** Three Months EndedSeptember 31, 2021 **** Three Months EndedDecember 31, 2021
Hungary
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) — — — —
Conventional Natural Gas (mmcf/d) 0.63 0.28 0.22 0.12
Natural Gas Liquids (bbl/d) — — — —
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 6.71 7.51 13.60 33.63
Natural Gas Liquids (/bbl) — — — —
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 1.08 1.95 5.82 19.37
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 5.63 5.56 7.78 14.26
Natural Gas Liquids (/bbl) — — — —
Ireland
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) — — — —
Conventional Natural Gas (mmcf/d) 34.14 30.19 22.67 30.12
Natural Gas Liquids (bbl/d) — — — —
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 8.81 10.98 22.93 39.46
Natural Gas Liquids (/bbl) — — — —
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) — — — —
Transportation
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 0.36 0.39 0.52 0.34
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 1.19 1.51 1.42 1.48
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 7.26 9.08 20.99 37.64
Natural Gas Liquids (/bbl) — — — —

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 44 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months EndedMarch 31, 2021 **** Three Months EndedJune 31, 2021 **** Three Months EndedSeptember 31, 2021 **** Three Months EndedDecember 31, 2021
Netherlands
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) — — — —
Conventional Natural Gas (mmcf/d) 41.45 37.59 42.48 51.98
Natural Gas Liquids (bbl/d) 98 96 110 97
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 7.57 9.34 17.51 34.39
Natural Gas Liquids (/bbl) 37.37 67.76 79.70 101.75
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 0.03 0.04 0.06 0.09
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 1.99 2.31 2.18 2.39
Natural Gas Liquids (/bbl) — — — —
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) — — — —
Conventional Natural Gas (/mcf) 5.55 6.99 15.27 31.91
Natural Gas Liquids (/bbl) 37.37 67.76 79.70 101.75
United States
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 2,322 1,888 3,520 2,647
Conventional Natural Gas (mmcf/d) 5.95 5.51 6.75 9.09
Natural Gas Liquids (bbl/d) 1,058 930 1,208 1,414
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 69.74 79.00 87.78 96.28
Conventional Natural Gas (/mcf) 12.09 2.87 4.36 4.62
Natural Gas Liquids (/bbl) 34.43 32.48 42.65 54.91
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 17.97 20.78 4.91 4.72
Conventional Natural Gas (/mcf) 3.24 1.02 1.23 1.28
Natural Gas Liquids (/bbl) 0.79 0.56 1.23 1.71
Transportation
Light Crude Oil and Medium Crude Oil (/bbl) 0.56 0.56 0.96 0.55
Conventional Natural Gas (/mcf) — — — —
Natural Gas Liquids (/bbl) 0.26 0.28 0.33 0.29
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 7.25 6.71 6.69 6.52
Conventional Natural Gas (/mcf) 1.69 1.64 1.37 1.19
Natural Gas Liquids (/bbl) 3.30 3.31 2.30 3.48
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 43.96 50.95 75.22 84.49
Conventional Natural Gas (/mcf) 7.16 0.21 1.76 2.15
Natural Gas Liquids (/bbl) 30.08 28.34 38.79 49.43

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 45 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months EndedMarch 31, 2021 **** Three Months EndedJune 31, 2021 **** Three Months EndedSeptember 31, 2021 **** Three Months EndedDecember 31, 2021
Total Company
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 34,556 32,698 34,245 31,356
Conventional Natural Gas (mmcf/d) 233.98 235.72 226.73 238.16
Natural Gas Liquids (bbl/d) 12,722 14,351 12,600 13,369
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 65.61 79.00 91.04 102.45
Conventional Natural Gas (/mcf) 5.51 5.24 9.20 17.89
Natural Gas Liquids (/bbl) 41.97 45.71 51.60 63.76
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 14.90 19.33 23.78 24.19
Conventional Natural Gas (/mcf) 0.25 0.13 0.19 0.30
Natural Gas Liquids (/bbl) 7.06 7.47 8.37 14.36
Transportation Costs
Light Crude Oil and Medium Crude Oil (/bbl) 2.33 2.86 2.52 2.44
Conventional Natural Gas (/mcf) 0.21 0.20 0.19 0.19
Natural Gas Liquids (/bbl) 0.86 1.26 0.93 1.04
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 11.57 10.49 11.97 12.71
Conventional Natural Gas (/mcf) 1.58 1.65 1.53 1.62
Natural Gas Liquids (/bbl) 4.26 4.61 4.40 5.42
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 36.80 46.31 52.77 63.11
Conventional Natural Gas (/mcf) 3.47 3.26 7.29 15.78
Natural Gas Liquids (/bbl) 29.80 32.38 37.90 42.95
North America
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 20,089 18,756 20,329 19,035
Conventional Natural Gas (mmcf/d) 144.36 152.06 145.18 137.93
Natural Gas Liquids (bbl/d) 12,630 14,255 12,496 13,272
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 66.74 74.97 82.67 93.23
Conventional Natural Gas (/mcf) 3.98 2.72 3.80 5.06
Natural Gas Liquids (/bbl) 41.55 45.55 51.93 64.18
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 9.17 11.94 13.65 14.86
Conventional Natural Gas (/mcf) 0.32 0.17 0.24 0.43
Natural Gas Liquids (/bbl) 6.39 6.98 7.64 12.97
Transportation Costs
Light Crude Oil and Medium Crude Oil (/bbl) 2.97 2.94 2.89 2.72
Conventional Natural Gas (/mcf) 0.21 0.20 0.19 0.20
Natural Gas Liquids (/bbl) 2.12 1.82 1.91 1.74
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 8.28 7.35 8.37 8.57
Conventional Natural Gas (/mcf) 1.34 1.36 1.22 1.25
Natural Gas Liquids (/bbl) 5.30 5.69 5.51 6.13
Netback Received
Light Crude Oil and Medium Crude Oil (/bbl) 46.33 52.73 57.75 67.07
Conventional Natural Gas (/mcf) 2.12 0.99 2.15 3.19
Natural Gas Liquids (/bbl) 27.75 31.05 36.87 43.35

All values are in US Dollars.

​ Vermilion Energy Inc. ■ Page 46 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ ​ ​
​ Three Months EndedMarch 31, 2020 **** Three Months EndedJune 31, 2020 **** Three Months EndedSeptember 31, 2020 **** Three Months EndedDecember 31, 2020
International
Average Daily Production
Light Crude Oil and Medium Crude Oil (bbl/d) 14,468 13,942 13,916 12,322
Conventional Natural Gas (mmcf/d) 89.62 83.66 81.55 100.22
Natural Gas Liquids (bbl/d) 92 95 104 97
Average Net Prices Received
Light Crude Oil and Medium Crude Oil (/bbl) 64.03 84.42 103.26 116.70
Conventional Natural Gas (/mcf) 7.98 9.83 18.82 35.54
Natural Gas Liquids (/bbl) 35.49 70.57 80.17 102.82
Royalties
Light Crude Oil and Medium Crude Oil (/bbl) 5.57 7.32 8.78 9.22
Conventional Natural Gas (/mcf) 0.14 0.05 0.10 0.13
Natural Gas Liquids (/bbl) — — — —
Transportation Costs
Light Crude Oil and Medium Crude Oil (/bbl) 4.37 8.65 6.59 7.67
Conventional Natural Gas (/mcf) 0.20 0.20 0.20 0.18
Natural Gas Liquids (/bbl) — — — —
Production Costs
Light Crude Oil and Medium Crude Oil (/bbl) 22.96 20.56 22.13 24.70
Conventional Natural Gas (/mcf) 1.98 2.17 2.10 2.13
Natural Gas Liquids (/bbl) — — — —
Netback Received ​
Light Crude Oil and Medium Crude Oil (/bbl) 31.12 47.89 65.76 75.11
Conventional Natural Gas (/mcf) 5.65 7.40 16.41 33.10
Natural Gas Liquids (/bbl) 35.49 70.57 80.17 102.82

All values are in US Dollars.

​

Marketing

​

​

The nature of Vermilion’s operations results in exposure to fluctuations in commodity prices, interest rates, and foreign currency exchange rates. Vermilion monitors and, when appropriate, uses derivative financial instruments to manage its exposure to these fluctuations. All transactions of this nature entered into by Vermilion are related to an underlying financial position or to future crude oil and natural gas production. Vermilion does not use derivative financial instruments for speculative purposes. Vermilion has not obtained collateral or other security to support its financial derivatives as management reviews the creditworthiness of its counterparties prior to entering into derivative contracts.

​

During the normal course of business, Vermilion may also enter into fixed price arrangements to sell a portion of its production or purchase commodities for operational use.

​

Vermilion’s outstanding risk management positions as at December 31, 2021 are summarized in Supplemental Table 2: Hedges, included in the Company’s 2021 Management’s Discussion and Analysis, dated March 4, 2022, available on SEDAR at www.sedar.com, under Vermilion’s SEDAR profile.

​

​ Vermilion Energy Inc. ■ Page 47 ■ 2021 Annual Information Form

Directors and Officers

​

As at January 31, 2022, the directors and officers of Vermilion beneficially owned, or controlled or directed, directly or indirectly, 4,159,967 common shares representing approximately 2.6% of the issued and outstanding common shares.

​

Set forth below is certain information respecting the current directors and officers of Vermilion. References to Vermilion in the following tables for dates prior to the Conversion Arrangement refer to VRL and to the Company following the date of the Conversion Arrangement.

​

Board of Directors

​

​

Vermilion’s Board of Directors currently consists of ten directors. The directors are nominated by the Company and elected annually by Shareholders and hold office until the next annual meeting of Shareholders, or until their successors are elected or appointed.

​

​ ​ ​ ​ ​ ​ Year First ​ ​
Name and ​ ​ ​ ​ ​ Elected or ​ ​
Municipality of ​ ​ ​ ​ ​ Appointed ​ ​
Residence **** Committee(s) **** Office Held **** as Director **** Principal Occupation During the Past Five Years
Lorenzo Donadeo<br>Calgary, Alberta<br>Canada ​ (1) ​ Executive Chairman ​ 1994 ​ Since May 2021, Executive Chairman of Vermilion<br>​<br><br>March 2016 – May 2021, Chairman of the Board of Vermilion<br>​<br><br>Since January 2015, Managing Director of a group of private wealth management companies
Larry J. Macdonald<br>Okotoks, Alberta<br>Canada ​ (2) (4) (8) (10) ​ Lead Director ​ 2002 ​ Since March 2016, Lead Director of Vermilion<br>​<br><br>Since June 2018, Chairman of the Board of United Way Canada Gives Across Borders, a non-profit organization<br>​<br><br>2003 to 2019, Chairman & Chief Executive Officer and Director of Point Energy Ltd., a private oil and gas company
James J. Kleckner Jr.<br>Edwards, Colorado<br>USA ​ (8) (10) ​ Director ​ 2021 ​ Since 2020, Director of Parsley Energy, a public oil and gas company<br><br>​<br>2018 to 2020, Chief Executive Officer of Jagged Peak Energy Inc., a public oil and gas company<br>​<br><br>2018 to 2020, Director of Jagged Peak Energy Inc., a public oil and gas company
Carin S. Knickel<br>Golden, Colorado<br>USA ​ (5) (8) (12) ​ Director ​ 2018 ​ Since 2015, Director of Hudbay Minerals, Inc., a public mining company<br>​<br><br>Since 2014, Director of National MS Society (Colorado/Wyoming Chapter), a non-profit organization
Stephen Larke<br>Calgary, Alberta<br>Canada ​ (4) (6) (11) ​ Director ​ 2017 ​ Since 2020, Director of Headwater Exploration Inc., a public oil and gas company<br>​<br><br>Since 2019, Director of Topaz Energy Corp., a public energy company<br>​<br><br>2016 to 2018, Operating Partner and Advisory Board Member, Azimuth Capital Management, a private equity fund
Timothy R. Marchant<br>Calgary, Alberta<br>Canada ​ (7) (10) (12) ​ Director ​ 2010 ​ Since 2015, Non-Executive Director, Valeura Energy Inc., a public oil and gas company<br>​<br><br>Since 2020, Non-Executive Director of TransGlobe Energy Corporation, a public oil and gas company<br>​<br><br>2013 to 2020, Non-Executive Director of Cub Energy Inc., a public oil and gas company<br>​<br><br>Since 2009, Adjunct Professor of Strategy and Energy Geopolitics, Haskayne School of Business
Robert Michaleski<br>Calgary, Alberta<br>Canada ​ (3) (6) ​ Director ​ 2016 ​ 2000 to 2020, Director of Pembina Pipeline Corporation<br>​<br><br>2013 to 2018, Director of United Way of Calgary and Area, a non-profit organization<br>​<br><br>Since 2012, Director of Essential Energy Services Ltd., a public oilfield services company<br>​<br><br>Since 2003, Director of Coril Holdings Ltd., a private investment company
William Roby<br>Katy, Texas<br>USA ​ (8) (9) (12) ​ Director ​ 2017 ​ Since 2015, Chief Executive Officer, Shepherd Energy, LLC., a private energy efficiency services company<br>​

Vermilion Energy Inc. ■ Page 48 ■ 2021 Annual Information Form

​ ​ ​ ​ ​ ​ Year First ​ ​
Name and ​ ​ ​ ​ ​ Elected or ​ ​
Municipality of ​ ​ ​ ​ ​ Appointed ​ ​
Residence **** Committee(s) **** Office Held **** as Director **** Principal Occupation During the Past Five Years
Since 2020, Director of California Resources Corp, a public oil and gas company
Manjit Sharma<br>Toronto, Ontario<br>Canada ​ (4) (8) ​ Director ​ 2021 ​ Since 2020, Director of Export Development Canada<br>​<br><br>2020 to 2021, Chief Financial Officer of WSP Canada, a civil engineering company<br>​<br><br>2016 to 2019, Chief Financial Officer of GE Canada, an industrial engineering company
Judy Steele<br>Halifax, Nova Scotia<br>Canada ​ (6) (12) ​ Director ​ 2021 ​ Since 2012, President and Chief Operating Officer of Emera Energy, an energy marketing and trading company<br>​<br><br>Since 2017, Director of Canadian Blood Services, a non-profit organization

​

Committees:

^(1)^ Executive Chairman
^(2)^ Lead Director
--- ---
^(3)^ Audit Committee Chair (Independent)
--- ---
^(4)^ Audit Committee Member
--- ---
^(5)^ Governance and Human Resources Committee Chair (Independent)
--- ---
^(6)^ Governance and Human Resources Committee Member
--- ---
^(7)^ Health, Safety and Environment Committee Chair (Independent)
--- ---
^(8)^ Health, Safety and Environment Committee Member
--- ---
^(9)^ Independent Reserves Committee Chair (Independent)
--- ---
^(10)^ Independent Reserves Committee Member
--- ---
^(11)^ Sustainability Committee Chair (Independent)
--- ---
^(12)^ Sustainability Committee Member
--- ---

​

​ Vermilion Energy Inc. ■ Page 49 ■ 2021 Annual Information Form

Officers

​

​

Name and ​ Office Held ​ Principal Occupation During the Past Five Years
Municipality of ​ ​ ​ ​
Residence **** ​ **** ​
Dion Hatcher<br>Calgary, Alberta<br>Canada ​ President ​ Since January 2022, President of Vermilion<br><br>​<br><br>November 2020 to December 2021 Vice President North America of Vermilion<br><br>​<br><br>March 2016 to November 2020, Vice President Canada Business Unit of Vermilion
Lars Glemser<br>Calgary, Alberta<br>Canada ​ Vice President<br>& Chief Financial Officer ​ Since April 2018, Vice President and Chief Financial Officer of Vermilion<br><br>​<br><br>January 2018 to April 2018, Director, Finance of Vermilion<br><br>​<br><br>June 2015 to January 2018, Finance Professional of Vermilion
Terry Hergott<br>Calgary, Alberta<br>Canada ​ Vice President <br>Marketing ​ Since April 2012, Vice President, Marketing of Vermilion
Yvonne Jeffery<br>Calgary, Alberta<br>Canada ​ Vice President<br>Sustainability ​ May 2021, Vice President, Sustainability of Vermilion<br><br>​<br><br>August 2020 to May 2021, Director, Sustainability of Vermilion<br><br>​<br><br>April 2018 to August 2020, Manager Communications, Community Investment and Sustainability of Vermilion<br><br>​<br><br>November 2015 to March 2018, Team Lead, Communications, Community Investment and Sustainability of Vermilion
Darcy Kerwin<br>Calgary, Alberta<br>Canada ​ Vice President<br>International & HSE ​ Since November 2020, Vice President, International & HSE of Vermilion<br><br>​<br><br>September 2020 to November 2020, Vice President, Strategic Planning of Vermilion<br><br>​<br><br>February 2018 to September 2020, Managing Director, Ireland Business Unit of Vermilion<br><br>​<br><br>March 2014 to February 2018, Managing Director, France Business Unit of Vermilion
Bryce Kremnica<br>Calgary, Alberta<br>Canada ​ Vice President<br>North America ​ Since November 2021, Vice President, North America of Vermilion<br><br>​<br><br>May 2014 to November 2021, Director, Field Operations Canada Business Unit of Vermilion
Geoff MacDonald<br>Calgary, Alberta<br>Canada ​ Vice President<br>Geosciences ​ Since November 2021, Vice President, Geosciences of Vermilion<br><br>​<br><br>March 2019 to November 2021, Chief Geoscientist of Vermilion<br><br>​<br><br>August 2015 to March 2019, Vice President, Exploration of Velvet Energy, a private oil and gas company
Kyle Preston<br>Calgary, Alberta<br>Canada ​ Vice President<br>Investor Relations ​ Since July 2019, Vice President, Investor Relations of Vermilion<br><br>​<br><br>May 2016 to July 2019, Director, Investor Relations of Vermilion
Averyl Schraven<br>Calgary, Alberta<br>Canada ​ Vice President<br><br>People and Culture ​ Since November 2021, Vice President, People & Culture of Vermilion<br><br>​<br><br>December 2020 to November 2021, Director, People and Culture of Vermilion<br><br>​<br><br>February 2014 to December 2020, Manager, Global Human Resources Services of Vermilion
Jenson Tan<br>Calgary, Alberta<br>Canada ​ Vice President<br><br>Business Development ​ Since October 2017, Vice President, Business Development of Vermilion<br><br>​<br><br>July 2016 to October 2017, Director, Business Development of Vermilion
Gerard Schut<br>Den Haag<br>The Netherlands ​ Vice President<br><br>European Operations ​ Since July 2012, Vice President, European Operations of Vermilion
Robert J. Engbloom, Q.C.<br>Calgary, Alberta<br>Canada ​ Corporate Secretary ​ Since January 2015, senior partner with Norton Rose Fulbright Canada LLP, a law firm

​

​

​ Vermilion Energy Inc. ■ Page 50 ■ 2021 Annual Information Form

Description of Capital Structure

​

Credit ratings

​

​

Credit ratings affect the Company's ability to obtain short-term and long-term financing and the cost of such financing. Additionally, the ability of the Company to engage in certain collateralized business activities on a cost effective basis depends on the Company's credit ratings. A reduction in the credit rating of the Company or the Company's debt or a negative change in the Company's ratings outlook could adversely affect the Company's cost of financing and its access to sources of liquidity and capital. In addition, changes in credit ratings may affect the Company's ability to enter into ordinary course hedging arrangements or contracts with customers and suppliers.

​

Credit ratings are intended to provide investors with an independent measure of the credit quality of an issuer of securities. The credit ratings accorded to the Senior Unsecured Notes and the Company are not recommendations to purchase, hold or sell such securities and are not a comment upon the market price of the Company's securities or their suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant. A revision or withdrawal of a credit rating could have a material adverse effect on the pricing or liquidity of the Senior Unsecured Notes or the common shares in any secondary markets. Vermilion does not undertake any obligation to maintain the ratings or to advise holders of the Senior Unsecured Notes or the common shares of any change in ratings. Each agency's rating should be evaluated independently of any other agency's rating.

​

As at March 4, 2022, Vermilion had the following credit ratings from S&P Global Ratings ("S&P"), Moody's Investors Service (“Moody’s”), and Fitch Ratings (“Fitch”):

​

Rating Agency **** Company Rating **** Outlook **** Senior Unsecured Notes
S&P ^(1)^ ​ B ^(1)^ ​ Stable ​ B+ ^(4)^
Moody's ^(2)^ ​ B1 ^(2)^ ​ Stable ​ B3 ^(5)^
Fitch ^(3)^ ​ BB- ^(3)^ ​ Negative ​ BB- ^(6)^

​

Notes:

^(1)^ S&P rates long-term corporate credit ratings by rating categories ranging from a high of "AAA" to a low of "D". Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. In addition, S&P may add a rating outlook of “positive”, “negative” or “stable” which assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). An obligor rated “B” is within the sixth highest of the ten categories, and is characterized by S&P as more vulnerable in the near term than obligors rated "BB", but has the capacity to meet its financial commitments on the obligation. However, it faces major ongoing uncertainties and exposure to adverse business, financial or economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitments.
^(2)^ Moody's corporate family ratings are on a rating scale that ranges from Aaa to C, which represents the highest to lowest opinions of creditworthiness. Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa, with 3 indicating a ranking in the lower end of the generic rating category. A rating of B1 by Moody’s is within the sixth highest of nine categories. An obliger rated B1 is considered non-investment grade speculative and is subject to high credit risk.
--- ---
^(3)^ Fitch’s corporate credit rating categories range from “investment grade“ for those with ratings of “AAA” to “BBB”, and “speculative grade” for those with “BB” to “D” ratings. Modifiers may be used by Fitch within these rating categories, either (+) or (-), appended to a rating to indicate relative status within the major rating categories. Rating outlooks may be provided to direct where a rating may potentially move within the next year or two, and fall under four outlooks: “positive”, “stable”, “negative”, or “evolving”. A “BB-” rating for an obliger denotes an increased vulnerability to default risk, especially if experiencing adverse changes in economic or business conditions over time; conversely, there remains a financial or business flexibility that sustains the servicing of financial obligations.
--- ---
^(4)^ S&P rates long-term debt instruments by rating categories ranging from a high of "AAA" to a low of "D". The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. An obligation rated "B+" is characterized as less vulnerable to nonpayment than other speculative issues. However, an obligation rated "B+" faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. The "B" category is the sixth highest of the ten available categories.
--- ---
^(5)^ Moody’s long-term obligations ratings are on a rating scale that ranges from Aaa to C, which represents the highest to lowest opinions of creditworthiness. Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa, with 3 indicating a ranking in the lower end of the generic rating category. A rating of B3 by Moody’s is within the sixth highest of nine categories. Obligations rated B3 are considered non-investment grade speculative and are subject to high credit risk.
--- ---
^(6)^ Fitch’s long-term debt instrument ratings are categorized from “investment grade“ for those with ratings of “AAA” to “BBB”, and “speculative grade” for those with “BB” to “D” ratings. Modifiers may be used by Fitch within these rating categories, either (+) or (-), appended to a rating to indicate relative status within the major rating categories. A “BB-” rating for an obliger denotes an increased vulnerability to default risk, especially if experiencing adverse changes in economic or business conditions over time; conversely, there remains a financial or business flexibility that sustains the servicing of financial obligations.
--- ---

​ Vermilion Energy Inc. ■ Page 51 ■ 2021 Annual Information Form

Common shares

​

​

The Company is authorized to issue an unlimited number of common shares. Each common share entitles the holder to receive notice of and to attend all meetings of Shareholders and to one vote at any such meeting. The holders of common shares are, at the discretion of the board and subject to applicable legal restrictions, entitled to receive any dividends declared by the board on the common shares. The holders of common shares are entitled to share equally in any distribution of the assets of the Company upon the liquidation, dissolution, bankruptcy or winding-up of the Company or other distribution of its assets among the Shareholders for the purpose of winding-up the Company’s affairs.

​

Awards pursuant to which a holder may receive Common Shares have been issued under certain Vermilion compensation arrangements. See Vermilion's annual financial statements as at and for the year ended December 31, 2021 (a copy of which is available on SEDAR at www.sedar.com under Vermilion’s SEDAR profile) for further details regarding the amount and value of such awards.

​

Dividend history

​

​

The Company paid a monthly dividend from January 2003 through March 2020. The dividend was suspended in April 2020 in response to the deterioration in near-term commodity prices and worsening outlook for global oil demand as a result of the COVID-19 pandemic and OPEC+ oil price war. Vermilion has a long history of paying dividends and we remain strong proponents of returning capital to Shareholders. Nonetheless, financial strength and flexibility remains our overriding goal, and the suspension of our dividend enhanced our work toward that objective. As a result of this focus on financial strength we reinstated the dividend in the first quarter of 2022.

​

Solvency tests imposed by the ABCA on corporations for the declaration and payment of dividends must be satisfied prior to the declaration of a dividend. In addition, decisions with respect to the declaration of dividends on the common shares are made by the Board of Directors on the basis of the Company's net earnings, financial requirements, and other conditions.

​

The following table sets forth the history of Vermilion's monthly dividend per share:

​

​ ​ ​ ​
Date **** Monthly dividend per unit or share
January 2003 to December 2007 ​ $ 0.170
January 2008 to December 2012 ​ $ 0.190
January 2013 to December 2013 ​ $ 0.200
January 2014 to March 2018 ​ $ 0.215
April 2018 to February 2020 ​ $ 0.230
March 2020 ​ $ 0.115

​

The following table outlines dividends declared per share for each of the three most recently completed financial years:

​

​ ​ ​ ​
Date **** Dividends per common share
January 2019 to December 2019 ​ $ 2.76
January 2020 to March 2020 ​ $ 0.58

​

In the first quarter of 2022 we reinstated a fixed quarterly dividend due to stronger commodity prices and a balance sheet that reflects our ability to pay a dividend over a long-term period. The dividend of $0.06 per share for Q1 2022 was declared on March 7, 2022.

​ Vermilion Energy Inc. ■ Page 52 ■ 2021 Annual Information Form

Market for Securities

​

The outstanding common shares of the Company are listed and posted for trading on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") under the symbol VET. The following table sets forth the closing price range and trading volume of the common shares on the TSX for the periods indicated:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
2021 **** High **** Low **** Close **** Volume
January ​ $ 7.57 ​ $ 5.52 ​ $ 5.60 52,011,832
February ​ $ 8.54 ​ $ 5.58 ​ $ 7.97 45,462,849
March ​ $ 11.10 ​ $ 7.84 ​ $ 9.13 60,159,914
April ​ $ 9.75 ​ $ 7.96 ​ $ 9.12 32,937,537
May ​ $ 9.98 ​ $ 8.68 ​ $ 9.36 30,679,461
June ​ $ 11.51 ​ $ 9.58 ​ $ 10.86 33,785,646
July ​ $ 11.19 ​ $ 8.17 ​ $ 8.97 27,201,082
August ​ $ 9.35 ​ $ 7.06 ​ $ 8.42 33,327,441
September ​ $ 12.82 ​ $ 8.25 ​ $ 12.52 44,742,476
October ​ $ 14.55 ​ $ 12.57 ​ $ 13.42 47,379,735
November ​ $ 15.00 ​ $ 11.15 ​ $ 12.76 40,318,587
December ​ $ 16.72 ​ $ 12.04 ​ $ 15.90 39,783,100

​

​

Audit Committee Matters

​

Audit committee charter

​

​

Vermilion has established an audit committee (the "Audit Committee") to assist the board of directors in carrying out its oversight responsibilities with respect to, among other things, financial reporting, internal controls, and the external audit process of the Company. The Audit Committee Terms of Reference are set out in Schedule "C" to this annual information form.

​ Vermilion Energy Inc. ■ Page 53 ■ 2021 Annual Information Form

Composition of the Audit Committee

​

​

The following table sets forth the name of each current member of the Audit Committee, whether pursuant to applicable securities legislation, such member is considered independent, whether pursuant to applicable securities legislation, such member is considered financially literate and the relevant education and experience of such member.

​

Name **** Independent **** Financially<br><br>Literate **** Relevant Education and Experience
Robert Michaleski<br>(Chair) ​ Yes ​ Yes ​ Mr. Michaleski holds a Bachelor of Commerce (Honours) degree from the University of Manitoba and is a Chartered Accountant. He has over 30 years of experience in various senior management and executive capacities at Pembina Pipeline Corporation. He was Chief Executive Officer from 2000 to 2013 and also President from 2000 to 2012. He was Vice President and Chief Financial Officer from 1997 to 2000, Vice President of Finance from 1992 to 1997, Controller from 1980 to 1992, and Manager of Internal Audit from 1978 to 1980. He was a Director of Pembina from 2000 to 2020, a Director of Essential Energy Services Ltd. since 2012, and a Director of Coril Holdings Ltd. since 2003. He is a member of the Institute of Corporate Directors.
Stephen Larke ​ Yes ​ Yes ​ Mr. Larke holds a Bachelor of Commerce (Distinction) degree from the University of Calgary and is a Chartered Financial Analyst. He brings over 20 years of experience in energy capital markets, including research, sales, trading, and equity finance. From 2017 to 2018, he was Operating Partner and Advisory Board member with Azimuth Capital Management, an energy-focused private equity fund based in Calgary, Alberta. From 2005 to 2015, Mr. Larke was Managing Director and Executive Committee member with Peters & Co., an independent energy investment firm based in Calgary. From 1997 to 2005, he was Vice-President and Director with TD Newcrest, serving in the role of energy equity analyst.
Larry J. Macdonald ​ Yes ​ Yes ​ Mr. Macdonald holds a Bachelor of Science degree from the University of Alberta. He has more than 49 years of experience in the oil and gas industry, with an extensive background in leadership, strategy and growth, finance, exploration, corporate relations, and marketing. Mr. Macdonald completed the Executive Management Program at the Wharton Business School at the University of Pennsylvania in 1993 and attended a Financial Literacy Course at the Rotman Business School at the University of Toronto in coordination with the Institute of Corporate Directors. Currently, he is the Chairman and Chief Executive Officer (since 2003) of Point Energy Ltd., a private oil and gas exploration company.  From 2012 to 2016, he was Chairman of Northpoint Resources. From 2003 to 2006, he was a Managing Director of Northpoint Energy Ltd., and from 2006 to 2013 a director of Sure Energy Inc. Previously, he was the Chairman and Chief Executive Officer of Pointwest Energy Inc. and President and Chief Operating Officer of Anderson Exploration Ltd. He began his career with PanCanadian Petroleum Limited in 1969 (until 1977) and later worked for several exploration firms.
Manjit Sharma ​ Yes ​ Yes ​ Ms. Sharma has over 30 years of experience operating in complex global organizations across many industry sectors including power, energy, transportation, oil & gas, financial services, mining, and consulting. While Ms. Sharma most recently served as Chief Financial Officer of WSP Canada, the bulk of her career has been with GE Canada. While at GE, Ms. Sharma held a variety of progressively senior management roles, lastly as its Chief Financial Officer, her responsibilities spanned strategic planning and analysis, mergers and acquisitions, tax oversight, risk, governance, diversity and inclusion. Ms. Sharma serves as a member of the Board of Directors for Export Development Canada, and is a member of the GE Canada Pension Trust Investment Committee. She previously served as a Director of the BGO Prime Canadian Property Fund, the Board of GE Canada Company, the Ontario Chamber of Commerce and the YMCA of the Greater Toronto Area. Ms. Sharma was also recognized as one of Canada’s Top 100 Most Powerful Women in 2019. Ms. Sharma holds a Bachelors of Commerce degree from the University of Toronto, is a FCPA FCA and has completed the Institute of Corporate Directors Education Program.

​

External audit service fees

​

​

Prior to the commencement of any work, fees for all audit and non-audit services provided by the Company’s auditors must be approved by the Audit Committee.

​

During the years ended December 31, 2021 and 2020, Deloitte LLP (PCAOB ID No. 1208), the auditors of the Company, received the following fees from the Company:

​

​ ​ ​ ​ ​ ​ ​
Item **** 2021 **** 2020
Audit fees ^(1)^ ​ $ 1,530,485 ​ $ 1,575,000
Tax fees ^(2)^ ​ $ 80,533 ​ $ 177,434

​

Notes:

^(1)^ Audit fees consisted of professional services rendered by Deloitte LLP for the audit of the Company's financial statements for the years ended December 31, 2021 and 2020.
^(2)^ Tax fees consist of fees for tax compliance services in various jurisdictions.
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​ Vermilion Energy Inc. ■ Page 54 ■ 2021 Annual Information Form

Conflicts of Interest

​

The directors and officers of Vermilion are engaged in and will continue to engage in other activities in the oil and natural gas industry and, as a result of these and other activities, the directors and officers of Vermilion may become subject to conflicts of interest. The ABCA provides that in the event that a director has an interest in a contract or proposed contract or agreement, the director shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement unless otherwise provided under the ABCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the ABCA.

​

As at the date hereof, Vermilion is not aware of any existing or potential material conflicts of interest between Vermilion and a director or officer of Vermilion.

​

Interest of Management and Others in Material Transactions

​

No director or officer of the Company, nor any other insider of the Company, nor their associates or affiliates has or has had, at any time within the three most recently completed financial years ending December 31, 2021, any material interest, direct or indirect, in any transaction or proposed transaction that has materially affected or would materially affect the Company.

​

Legal Proceedings

​

The Company is not party to any significant legal proceedings as of March 4, 2022.

​

Material Contracts

​

The Company has not entered into any material contracts outside its normal course of business.

​

Interests of Experts

​

As at the date hereof, principals of GLJ, the independent engineers for the Company, personally disclosed in certificates of qualification that they neither had nor expect to receive any common shares. The principals of GLJ and their employees (as a group) beneficially own less than one percent of any of the Company’s securities.

​

Deloitte LLP is the auditor of the Company and is independent within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Alberta.

​

Transfer Agent and Registrar

​

The transfer agent and registrar for the Company’s common shares is Odyssey Trust Company at its principal offices in Calgary, Alberta and Toronto, Ontario and Vancouver, British Columbia.

​

Risk Factors

​

The following is a summary of certain risk factors relating to the business of the Company. The following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this AIF. Additional risks and uncertainties not currently known to Vermilion that it currently views as immaterial may also materially and adversely affect its business, financial condition and/or results of operations. Shareholders and potential Shareholders should carefully consider the information contained herein and, in particular, the following risk factors.

​

Market risks

​

​

Volatility of oil and gas prices

​

The Company's reserves, financial performance, financial position, and cash flows are dependent on the prices received for oil and natural gas production. Oil and natural gas prices have fluctuated materially during recent years and are determined by supply and demand factors. Supply factors can include availability (or lack thereof) of transportation capacity and production curtailments by independent producers or by OPEC members. Vermilion Energy Inc. ■ Page 55 ■ 2021 Annual Information Form

Demand factors can be impacted by general economic conditions, supply chain requirements, environmental and other factors. Environmental and other factors include changes in weather, weather patterns, fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and gas, and technology advances in fuel economy and energy generation devices. Shifts in supply and demand for certain commodities, products, and services may occur as climate-related risks are increasingly taken into account.

​

Volatility of foreign exchange rates

​

The Company's reserves, financial performance, financial position, and cash flows are affected by prevailing foreign exchange rates. An increase in the exchange rate for the Canadian dollar versus the U.S. dollar and Euro would reduce the Canadian equivalent cash receipts for Vermilion's production. Conversely, a decrease in the exchange rate for the Canadian dollar versus the U.S. dollar and Euro would increase the Canadian equivalent cash outflows for Vermilion's operating and capital expenditures.

​

Volatility of market price of Common Shares

​

The market price of Vermilion's Common Shares may be volatile and this volatility may affect the ability of Shareholders to sell Common Shares at an advantageous price. Market price fluctuations in the common shares may be due to: the Company’s operating results or financial performance failing to meet the expectations of securities analysts or investors in any quarter; downward revision in securities analysts’ estimates; governmental regulatory action; adverse change in general market conditions or economic trends; acquisitions, dispositions or other material public announcements by the Corporation or its competitors, along with a variety of additional factors, including, without limitation, those set forth under “Forward-Looking Statements” in this AIF. In addition, the market price for securities in stock markets including Common Shares may experience significant price and trading fluctuations. These fluctuations may result in volatility in the market prices of securities that may be unrelated or disproportionate to changes in the Company's operating and financial performance.

​

Hedging arrangements

​

Vermilion may enter into agreements to fix commodity prices, interest rates, and foreign exchange rates to offset the risks affecting the business. To the extent that Vermilion engages in price risk management activities to protect the Company from unfavourable fluctuations in prices and rates, the Company may also be prevented from realizing the full benefits of favourable fluctuations in prices and rates.

​

To the extent that risk management activities and hedging strategies are employed to address these risks, the Company would also be exposed to risks associated with such activities and strategies, including: counterparty risk, settlement risk, basis risk, liquidity risk and market risk. These risks could impact or negate any benefits of risk management activities and hedging strategies.

​

In addition, commodity hedging arrangements could expose the Company to the risk of financial loss if: production falls short of the hedged volumes; there is a widening of price-basis differentials between delivery points for production and the delivery point assumed in the hedge arrangements; or a sudden unexpected event materially impacts oil and natural gas prices.

​

Operational risks

​

​

Increase in operating costs or a decline in production level

​

The Company's financial performance, financial position, and cash flows are affected by the Company's operating costs and production levels. Operating costs may increase and production levels may decline at rates greater than anticipated due to unforeseen circumstances, many of which are beyond Vermilion's control.

​

Production levels may decline due to an inability for Vermilion to market oil and natural gas production. This could result from the availability, proximity and capacity of gathering systems, pipelines and processing facilities that Vermilion depends on in the jurisdictions in which it operates.

​

Operating costs could increase as a result of blowouts, environmental damage, unforeseen circumstances related to climate-change, and other unexpected and dangerous conditions which could result from a number of operating and natural hazards associated with Vermilion's operations. In addition to higher costs, Vermilion may have a potential liability to regulators and third parties as a result. Vermilion maintains liability insurance, where available, in amounts consistent with industry standards. Business interruption insurance may also be purchased for selected operations, to the extent that such insurance is commercially viable. Vermilion may become liable for damages arising from such events against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons.

​ Vermilion Energy Inc. ■ Page 56 ■ 2021 Annual Information Form

Operator performance and payment delays

​

Continuing production from a property are dependent upon the ability of the operator of the property, and the operator may fail to perform these functions properly. Payments from production generally flow through the operator and there is a risk of delay and additional expense in receiving such revenues if the operator becomes insolvent. Although satisfactory title reviews are generally conducted in accordance with industry standards, such reviews do not guarantee or certify that a defect in the chain of title may not arise to defeat the claim of Vermilion or its subsidiaries to certain properties.

​

In addition to the usual delays in payment by purchasers of oil and natural gas to the operators of the properties, and by the operator to Vermilion, payments between any of such parties may also be delayed by restrictions imposed by lenders, delays in the sale or delivery of products, delays in the connection of wells to a gathering system, blowouts or other accidents, recovery by the operator of expenses incurred in the operation of the properties or the establishment by the operator of reserves for such expenses.

​

Weather conditions

​

Vermilion's operations may be impacted by changing weather conditions, which may include: changes in temperature extremes, changes in precipitation patterns (including drought and flooding), rising sea levels, and increased severity of extreme weather events such as cyclones or floods. These events can impact Vermilion's operations, causing shutdowns and increased costs. In the Netherlands, rising water levels could impact facilities below sea level and in Australia a severe cyclonic event could cause damage to the Company's Wandoo platform.

​

Cost of new technology

​

The oil and natural gas industry is characterized by rapid and significant technological advancements and introductions of new products and services utilizing new technologies. Other oil and natural gas companies may have greater financial, technical and personnel resources that provide them with technological advantages and may in the future allow them to implement new technologies before Vermilion does. There can be no assurance that Vermilion will be able to respond to such competitive pressures and implement such technologies on a timely basis or at an acceptable cost. One or more of the technologies currently utilized by the Company or implemented in the future may become obsolete.

​

Regulatory and political risks

​

​

Tax, royalty, and other government legislation

​

Income tax laws, royalty and other government legislation relating to the oil and gas industry in the jurisdictions in which the Company operates may change in a manner that adversely affects Vermilion.

​

Government regulations

​

Vermilion's operations are governed by many levels of governments in which jurisdiction the Company operates. Vermilion is subject to laws and regulations regarding environment, health and safety issues, lease interests, taxes and royalties, among others. Failure to comply with the applicable laws can result in significant increases in costs, penalties and even losses of operating licenses. The regulatory process involved in each of the countries in which Vermilion operates is not uniform and regulatory regimes vary as to complexity, timeliness of access to, and response from, regulatory bodies and other matters specific to each jurisdiction. If regulatory approvals or permits are delayed, not obtained, or revoked, there can also be delays or abandonment of projects, decreases in production and increases in costs, and Vermilion may not be able to fully execute its strategy. Governments may also amend or create new legislation and regulatory bodies may also amend regulations or impose additional requirements which could result in reduced production and increased capital, operating and compliance costs.

​

Policy and legal risks

​

Policy actions that attempt to constrain actions that contribute to the adverse effects of climate change or policy actions that seek to promote adaptation to climate change continue to evolve. Policy changes could include implementing carbon-pricing mechanisms to reduce GHG emissions, shifting energy-efficient solutions, and promoting more sustainable land-use practices. The risks and financial impact of policy changes depend on the nature and timing of the policy change.

​

Vermilion may be exposed to increased litigation risk relating to climate change. The oil and gas industry has seen an increase in climate-related litigation claims being brought before the courts by property owners, municipalities, and public interest organizations. Some of these claims include the failure of organizations to mitigate the impacts of climate change, failure to adapt to climate change, and the insufficiency of disclosure around material financial risks. As the value of loss and damage arising from climate change increases, litigation risk will also grow.

​ Vermilion Energy Inc. ■ Page 57 ■ 2021 Annual Information Form

Political events and terrorist attacks

​

Political events throughout the world that cause disruptions in the supply of oil affect the marketability and price of oil and natural gas acquired or discovered by Vermilion. Political developments arising in the countries in which Vermilion operates have a significant impact on the price of oil and natural gas.

​

Vermilion’s oil and natural gas properties, wells and facilities could be subject to a terrorist attack. If any of Vermilion’s properties, wells or facilities or any infrastructure on which the Company relies are the subject of a terrorist attack, such attack may have a material adverse effect on Vermilion’s financial performance, financial position, and cash flows.

​

Financing risks

​

​

Discretionary nature of dividends

​

The declaration and payment (including the amount thereof) of future cash dividends, if any, is subject to the discretion of the Board of Directors of the Company and may vary depending on a variety of factors and conditions, including the satisfaction of the liquidity and solvency tests under the ABCA for the declaration and payment of dividends and the amount of the Company's cash flows. The Company's cash flows may be impacted by risks affecting the Company's business including: fluctuations in commodity prices, foreign exchange and interest rates; production and sales volume levels; production costs; capital expenditure requirements; royalty and tax burdens; external financing availability, and debt service requirements.

​

Depending on these and other factors considered relevant to the declaration and payment of dividends by the Board of Directors and management of the Company, the Company may change its dividend policy from time to time. Any reduction of dividends may adversely affect the market price or value of Common Shares.

​

Additional financing

​

Vermilion’s credit facility and any replacement credit facility may not provide sufficient liquidity. The amounts available under Vermilion's credit facility may not be sufficient for future operations, or Vermilion may not be able to obtain additional financing on attractive economic terms, if at all.

​

To the extent that external sources of capital, including the issuance of additional Common Shares, become limited or unavailable, Vermilion's ability to make the necessary capital investments to maintain or expand its oil and natural gas reserves may be impaired. To the extent the Company is required to use cash flow to finance capital expenditures or property acquisitions, the level of cash available that may be declared payable as dividends will be reduced.

​

Debt service

​

Vermilion may finance a significant portion of its operations through debt. Amounts paid in respect of interest and principal on debt incurred by Vermilion may impair Vermilion's ability to satisfy its other obligations. Variations in interest rates and scheduled principal repayments could result in significant changes in the amount required to be applied to debt service before payment by Vermilion of its debt obligations.

​

Lenders may be provided with security over substantially all of the assets of Vermilion and its Subsidiaries. If Vermilion becomes unable to pay its debt service charges or otherwise commits an event of default such as bankruptcy, a lender may be able to foreclose on or sell the assets of Vermilion and/or its Subsidiaries.

​

Variations in interest rates and foreign exchange rates

​

An increase in interest rates could result in a significant increase in the amount the Company pays to service debt. A decrease in the exchange rate of the Canadian dollar versus the Euro would result in higher interest and ultimate principle payment on the Company's Senior Unsecured Notes, which are denominated in US dollar but have been swapped to a Euro equivalent obligation.

​

Environmental risks

​

​

Environmental legislation

​

The oil and natural gas industry is subject to environmental regulation pursuant to local, provincial, state and federal legislation. A breach of such legislation may result in the imposition of fines, the issuance of clean up orders in respect of Vermilion or its assets, or the loss or suspension of Vermilion Energy Inc. ■ Page 58 ■ 2021 Annual Information Form

regulatory approvals. Such legislation may include carbon taxes, enhanced emissions reporting obligations, mandates on the equipment specifications, and emissions regulations. Such legislation may be changed to impose higher standards and potentially more costly obligations on Vermilion. In addition, such legislation may inhibit Vermilion's ability to operate the Company's assets and may make it more difficult for Vermilion to compete in the acquisition of new property rights. Presently, the Company does not believe the financial impact of these regulations on capital expenditures and earnings will be material. However, the Company actively monitors and assesses its exposure to this legislation.

​

Vermilion expects to incur abandonment and reclamation costs in the ordinary course of business as existing oil and gas properties are abandoned and reclaimed. These costs may materially differ from the Company's estimates due to changes in environmental regulations.

​

Vermilion's exploration and production facilities and other operations and activities emit some amount of greenhouse gases, which may be subject to legislation regulating emissions of greenhouse gases. This may result in a requirement to reduce emissions or emissions intensity from Vermilion's operations and facilities. It is possible that future regulations may require further reductions of emissions or emissions intensity.

​

Hydraulic fracturing regulations

​

Hydraulic fracturing involves the injection of water, sand and small amounts of additives under pressure into rock formations to stimulate oil and natural gas production. Hydraulic fracturing is used to produce commercial quantities of oil and natural gas from reservoirs that were previously unproductive. Hydraulic fracturing has featured prominently in recent political, media and activist commentary on the subject of water usage and environmental damage. Any new laws, regulations or permitting requirements regarding hydraulic fracturing could lead to operational delays, increased operating costs, third party or governmental claims, and could increase Vermilion's costs of compliance and doing business as well as delay the development of oil and natural gas resources from shale formations, which are not commercial without the use of hydraulic fracturing. Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that the Company is ultimately able to produce from its reserves, as well as increase costs.

​

With activist groups expressing concern about the impact of hydraulic fracturing on the environment and water supplies, Vermilion's corporate reputation may be negatively affected by the negative public perception and public protests against hydraulic fracturing. In addition, concerns regarding hydraulic fracturing may result in changes in regulations that delay the development of oil and natural gas resources and adversely affect Vermilion's costs of compliance and reputation. Changes in government may result in new or enhanced regulatory burdens in respect of hydraulic fracturing which could affect Vermilion's business.

​

Climate change

​

In addition to other climate-related risks discussed elsewhere in this AIF, Vermilion faces transition risks and physical risks.

​

Transition risks are risks that relate to the transition to a lower-carbon economy. Transition risks impact the volatility of oil and gas prices (as consumer demand for oil and gas may decrease); environmental legislation and hydraulic fracturing regulations (which may delay or restrict the development of oil and gas); the ability to obtain additional financing (as sources of financing for oil and gas development may become more restricted); and the reliance on key personnel, management, and labour (as the workforce may transition to other sources of energy development). Practices and disclosures relating to environmental matters, including climate change, are attracting increasing scrutiny by stakeholders. Vermilion’s response to addressing environmental matters can impact the Company’s reputation and affect the Company's ability to hire and retain employees; to compete for reserve acquisitions, exploration leases, licenses and concessions; and to receive regulatory approvals required to execute operating programs.

​

Physical risks relate to the physical impact of climate change, which can be event driven (acute) or longer-term shifts (chronic) in climate patterns. Physical risks can have financial implications for the Company, such as direct damage to assets and indirect impacts from production disruptions. Physical risks may also increase Vermilion's operating costs.

​

Acquisition and expansion risks

​

​

Competition

​

Vermilion actively competes for reserve acquisitions, exploration leases, licences, concessions and skilled industry personnel with a substantial number of other oil and gas companies, some of which have significantly greater financial resources than Vermilion. Vermilion's competitors include major integrated oil and natural gas companies and numerous other independent oil and natural gas companies and individual producers and operators.

​

Vermilion's ability to successfully bid on and acquire additional property rights, to discover reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will be dependent upon developing and maintaining close working relationships with its future industry partners and joint operators and its ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. Vermilion Energy Inc. ■ Page 59 ■ 2021 Annual Information Form

​

International operations and future geographical/industry expansion

​

The operations and expertise of Vermilion's management are currently focused primarily on oil and natural gas production, exploration and development in three geographical regions, North America, Europe and Australia. In the future Vermilion may acquire or move into new industry related activities, enter into new geographical areas, or acquire different energy related assets. These actions may result in unexpected risks or alternatively, significantly increase the Company's exposure to one or more existing risk factors.

​

Acquisition assumptions

​

When making acquisitions, Vermilion estimates the future performance of the assets to be acquired. These estimates are subject to inherent risks associated with predicting the future performance of those assets. These estimates may not be realized over time. As such, assets acquired may not possess the value Vermilion attributed to them.

​

Failure to realize anticipated benefits of prior acquisitions

​

Vermilion may complete one or more acquisitions for various strategic reasons including to strengthen its position in the oil and natural gas industry and to create the opportunity to realize certain benefits. In order to achieve the benefits of any future acquisitions, Vermilion will be dependent upon its ability to successfully consolidate functions and integrate operations, procedures and personnel in a timely and efficient manner and to realize the anticipated growth opportunities and synergies from combining the acquired assets and operations with those of the Company. The integration of acquired assets and operations requires the dedication of management effort, time and resources, which may divert management's focus and resources from other strategic opportunities and from operational matters during the process. The integration process may result in the disruption of ongoing business and customer relationships that may adversely affect Vermilion's ability to achieve the anticipated benefits of such prior acquisitions.

​

Reserve estimates

​

​

Reserves and estimated future net revenue to be derived from reserves are estimates and have been independently evaluated by GLJ. The estimation of reserves is a complex process and requires significant judgment. Actual production and ultimate reserves will vary from those estimates and these variations may be material.

​

Assumptions incorporated into the estimation of reserves are based on information available when the estimate was prepared. These assumptions are subject to change and many are beyond the Company's control. These assumptions include: initial production rates; production decline rates; ultimate recovery of reserves; timing and amount of capital expenditures; marketability of production; future prices of crude oil and natural gas; operating costs; well abandonment costs; royalties, taxes, and other government levies that may be imposed over the producing life of the reserves.

​

In addition, estimates of reserves that may be developed and produced in the future are often based on methods other than actual production history, including: volumetric calculations, probabilistic methods, and upon analogy to similar types of reserves. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result in variations, which may be material, in the estimated reserves. As such, reserve estimates may require revision based on actual production experience.

​

The present value of estimated future net revenue referred to in this annual information form should not be construed as the fair market value of estimated crude oil and natural gas reserves attributable to the Company's properties. The estimated discounted future revenue from reserves are based upon price and cost estimates which may vary from actual prices and costs and such variance could be material. Actual future net revenue will also be affected by factors such as the amount and timing of actual production, supply and demand for crude oil and natural gas, curtailments or increases in consumption by purchasers and changes in governmental regulations and taxation.

​

Other risks

​

​

Cyber security

​

Vermilion manages cyber security risk by ensuring appropriate technologies, processes and practices are effectively designed and implemented to help prevent, detect and respond to threats as they emerge and evolve. The primary risks to Vermilion include, loss of data, destruction or corruption of data, compromising of confidential customer or employee information, leaked information, disruption of business, theft or extortion of funds, regulatory infractions, loss of competitive advantage and damage to the Company's reputation. Vermilion relies upon a variety of advanced controls as protection from such attacks including:

​ Vermilion Energy Inc. ■ Page 60 ■ 2021 Annual Information Form

a) Enterprise class firewall infrastructure, secure network architecture and anti-malware defense systems to protect against network intrusion, malware infection and data loss.
b) Regularly conducted comprehensive third party reviews and vulnerability assessments to ensure that information technology systems are up-to-date and properly configured, to reduce security risks arising from outdated or misconfigured systems and software.
--- ---
c) Disaster recovery planning, ongoing monitoring of network traffic patterns to identify potential malicious activities or attacks.
--- ---

​

Incident response processes are in place to isolate and control potential attacks. Data backup and recovery processes are in place to minimize risk of data loss and resulting disruption of business. Through ongoing vigilance and regular employee awareness, Vermilion has not experienced a cyber security event of a material nature. As it is difficult to quantify the significance of such events, cyber attacks such as, security breaches of company, customer, employee, and vendor information, as well as hardware or software corruption, failure or error, telecommunications system failure, service provider error, intentional or unintentional personnel actions, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data, may in certain circumstances be material and could have an adverse effect on Vermilion’s business, financial condition and results of operations. As result of the unpredictability of the timing, nature and scope of disruptions from such attacks, Vermilion could potentially be subject to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of its systems and networks or financial losses, any of which could have a material adverse effect on Vermilion’s competitive position, financial condition or results of operations.

​

Accounting adjustments

​

The presentation of financial information in accordance with IFRS requires that management apply certain accounting policies and make certain estimates and assumptions which affect reported amounts in Vermilion’s consolidated financial statements. The accounting policies may result in non-cash charges to net income and write-downs of net assets in the consolidated financial statements and such adjustments may be viewed unfavourably by the market and may result in an inability to borrow funds or a decline in price of Common Shares.

​

Ineffective internal controls

​

Effective internal controls are necessary for Vermilion to provide reliable financial reports and to help prevent fraud. Although the Company has undertaken and will undertake a number of procedures in order to help ensure the reliability of its financial reports, including those that may be imposed on Vermilion under Canadian Securities Laws and applicable U.S. federal and state securities laws, Vermilion cannot be certain that such measures will ensure that the Company will maintain adequate control over financial processes and reporting. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm Vermilion's results of operations or cause the Company to fail to meet its reporting obligations. Additionally, implementing and monitoring effective internal controls can be costly. If Vermilion or its independent auditors discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market's confidence in Vermilion's consolidated financial statements and may result in a decline in the price of Common Shares.

​

Reliance on key personnel, management, and labour

​

Vermilion's success depends in large measure on certain key personnel. The loss of the services of such key personnel may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. Vermilion does not have any key person insurance in effect. The contributions of Vermilion's existing management team to immediate and near term operations are likely to be of central importance. In addition, the labour force in certain areas in which the Company operates is limited and the competition for qualified personnel in the oil and natural gas industry is intense. Vermilion expects that similar projects or expansions will proceed in the same area during the same time frame as the Company's projects. Vermilion's projects require experienced employees, and such competition may result in increases in compensation paid to such personnel or in a lack of qualified personnel. There can be no assurance that the Company will be able to continue to attract and retain all personnel necessary for the development and operation of the business.

​

Potential conflicts of interest

​

Circumstances may arise where members of the board of directors or officers of Vermilion are directors or officers of companies which compete with Vermilion. No assurances can be given that opportunities identified by such persons will be provided to Vermilion.

​

COVID-19

​

COVID-19 has continued to result in varied actions by governments worldwide, which has had an effect in all of our operating jurisdictions. The actions taken by these governments have typically included, but is not limited to travel bans, mandatory and self-imposed quarantines and isolations, social distancing, and the closing of non-essential businesses which may have significant negative effects on economies, including a substantial decline in crude oil and natural gas demand. Vermilion Energy Inc. ■ Page 61 ■ 2021 Annual Information Form

​

The extent of the risks surrounding the severity and timing of the COVID-19 pandemic is continually evolving; therefore, there is significant risk and uncertainty which may have a material and adverse effect on our operations. The following risks disclosed in the Risk Factors section above may be exacerbated as a result of the COVID-19 pandemic: market risks related to the volatility of oil and gas prices, volatility of foreign exchange rates, volatility of the market price of common shares, and hedging arrangements; operational risks related to increasing operating costs or declines in production levels, operator performance and payment delays, and government regulations; financing risks related to the ability to obtain additional financing, ability to service debt, and variations in interest rates and foreign exchanges rates; and other risks related to cyber-security as parts of our workforce continue to work through remote connections, accounting adjustments, effectiveness of internal controls, and reliance on key personnel, management, and labour.

​ Vermilion Energy Inc. ■ Page 62 ■ 2021 Annual Information Form

Additional Information

​

Additional information relating to the Company may be found on SEDAR at www.sedar.com under Vermilion’s SEDAR profile. Additional information related to the remuneration and indebtedness of the directors and officers of the Company, and the principal holders of common shares and Rights to purchase common shares and securities authorized for issuance under the Company's equity compensation plans, where applicable, are contained in the information circular of the Company in respect of its most recent annual meeting of Shareholders involving the election of directors. Additional financial information is provided in the Company's audited financial statements and management's discussion and analysis for the year ended December 31, 2021.

​

​ Vermilion Energy Inc. ■ Page 63 ■ 2021 Annual Information Form

Appendix A

​

REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR OR AUDITOR (FORM 51-101F2)

​

To the Board of Directors of Vermilion Energy Inc. (the "Company"):

​

1. We have evaluated the Company’s reserves data as at December 31, 2021. The reserves data are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2021, estimated using forecast prices and costs.
2. The reserves data are the responsibility of the Company’s management. Our responsibility is to express an opinion on the reserves data based on our evaluation.
--- ---
3. We carried out our evaluation in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook as amended from time to time (the "COGE Handbook") maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter).
--- ---
4. Those standards require that we plan and perform an evaluation to obtain reasonable assurance as to whether the reserves data are free of material misstatement. An evaluation also includes assessing whether the reserves data are in accordance with principles and definitions presented in the COGE Handbook.
--- ---
5. The following table shows the net present value of future net revenue (before deduction of income taxes) attributed to proved plus probable reserves, estimated using forecast prices and costs and calculated using a discount rate of 10 percent, included in the reserves data of the Company evaluated for the year ended December 2021, and identifies the respective portions thereof that we have evaluated and reported on to the Company's board of directors:
--- ---

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ Location of Reserves ​ ​ ​ Net Present Value of Future Net Revenue
Independent Qualified Reserves ​ Effective Date of ​ (Country or Foreign ​ ​ ​ (before income taxes, 10% discount rate - M)
Evaluator **** Evaluation Report **** Geographic Area) **** Audited **** Evaluated Reviewed **** Total
GLJ Petroleum Consultants ​ ​ December 31, 2021 ​ Australia ​ — ​ 409,049 — ​ 409,049
GLJ Petroleum Consultants ​ ​ December 31, 2021 Canada — 3,565,132 — 3,565,132
GLJ Petroleum Consultants ​ ​ December 31, 2021 CEE — 69,728 — 69,728
GLJ Petroleum Consultants ​ ​ December 31, 2021 France — 993,966 — 993,966
GLJ Petroleum Consultants ​ ​ December 31, 2021 Germany — 782,446 — 782,446
GLJ Petroleum Consultants ​ ​ December 31, 2021 Ireland — 543,158 — 543,158
GLJ Petroleum Consultants ​ ​ December 31, 2021 Netherlands — 591,025 — 591,025
GLJ Petroleum Consultants ​ ​ December 31, 2021 United States — 779,214 — 779,214
Total ​ **** **** **** **** **** — **** 7,733,718 — **** 7,733,718

All values are in US Dollars.

​

6. In our opinion, the reserves data evaluated by us have, in all material respects, been determined and are in accordance with the COGE Handbook, consistently applied. We express no opinion on the reserves data that we reviewed but did not audit or evaluate.
7. We have no responsibility to update our reports referred to in paragraph 5 for events and circumstances occurring after the effective date of our reports.
--- ---
8. Because the reserves data are based on judgments regarding future events, actual results will vary and the variations may be material.
--- ---

​

EXECUTED as to our reports referred to above:

​

GLJ Petroleum Consultants Ltd., Calgary, Alberta, Canada, February 11, 2022

​

"Jodi L. Anhorn"
Jodi L. Anhorn, M.Sc., P.Eng.
Executive Vice President & COO

​

​

​ Vermilion Energy Inc. ■ Page 64 ■ 2021 Annual Information Form

Appendix B

​

REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE (FORM 51-101F3)

​

Terms to which a meaning is ascribed in National Instrument 51-101 have the same meaning herein.

​

Management of Vermilion Energy Inc. (the "Company") are responsible for the preparation and disclosure of information with respect to the Company's oil and gas activities in accordance with securities regulatory requirements. This information includes reserves data and related future net revenue as at December 31, 2021, estimated using forecast prices and costs.

​

An independent qualified reserves evaluator has evaluated the Company's reserves data. The report of the independent qualified reserves evaluator is presented in Appendix A to the Annual Information Form of the Company for the year ended December 31, 2021.

​

The Independent Reserves Committee of the Board of Directors of the Company has:

​

(a) reviewed the Company's procedures for providing information to the independent qualified reserves evaluator;
(b) met with the independent qualified reserves evaluator to determine whether any restrictions affected the ability of the independent qualified reserves evaluator to report without reservation; and
--- ---
(c) reviewed the reserves data with management and the independent qualified reserves evaluator.
--- ---

​

The Independent Reserves Committee of the Board of Directors has reviewed the Company's procedures for assembling and reporting other information associated with oil and gas activities and has reviewed that information with management. The Board of Directors has, on the recommendation of the Audit and Independent Reserves Committees, approved:

​

(a) the content and filing with securities regulatory authorities of Form 51-101F1 containing reserves data and other oil and gas information;
(b) the filing of Form 51-101F2 which is the report of the independent qualified reserves evaluator on the reserves data; and
--- ---
(c) the content and filing of this report.
--- ---

​

Because the reserves data is based on judgments regarding future events, actual results will vary and the variations may be material.

​

“Dion Hatcher”
Dion Hatcher, President
"Lars Glemser"
Lars Glemser, Vice President and Chief Financial Officer
“Lorenzo Donadeo”
Lorenzo Donadeo, Executive Chairman and Chairman of the Board
“William Roby”
William Roby, Director
​
March 4, 2022

​

​

​ Vermilion Energy Inc. ■ Page 65 ■ 2021 Annual Information Form

Appendix C

​

Terms of reference for the Audit Committee

​

I. PURPOSE

​

The primary function of the Audit Committee (the "Committee") is to assist the Board of Directors (the "Board") of Vermilion Energy Inc. (the "Corporation") in fulfilling its oversight responsibilities with respect to the Corporation’s accounting and financing reporting processes and the audit of the Corporation’s financial statements, including oversight of:

​

A. the integrity of the Corporation’s financial statements;
B. the Corporation’s compliance with legal and regulatory requirements;
--- ---
C. the independent auditors’ qualifications and independence;
--- ---
D. the financial information that will be provided to the shareholders and others;
--- ---
E. the Corporation’s systems of disclosure controls and internal controls regarding finance, accounting, legal compliance and ethics, which management and the Board have established;
--- ---
F. the performance of the Corporation’s audit processes; and
--- ---
G. such other matters required by applicable laws and rules of any stock exchange on which the Corporation’s shares are listed for trading.
--- ---

​

While the Committee has the responsibilities and powers set forth in its terms of reference, it is not the duty of the Committee to prepare financial statements, plan or conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with International Financial Reporting Standards and applicable rules and regulations. Primary responsibility for the financial reporting, information systems, risk management, and disclosure controls and internal controls of the Corporation is vested in management.

​

II. COMPOSITION AND OPERATIONS

​

A. The Committee shall be composed of not fewer than three directors and not more than five directors, all of whom are “independent”^1^ under the requirements or guidelines for audit committee service under applicable securities laws and rules of any stock exchange on which the Corporation’s shares are listed for trading.
B. All Committee members shall be "financially literate,"^2^ and at least one member shall have "accounting or related financial expertise" as such terms are interpreted by the Board in its business judgment in light of, and in accordance with, the requirements or guidelines for audit committee service under applicable securities laws and rules of any stock exchange on which the Corporation’s shares are listed for trading. The Committee may include a member who is not financially literate, provided he or she attains this status within a reasonable period of time following his or her appointment and providing the Board has determined that including such member will not materially adversely affect the ability of the Committee to act independently.
--- ---
C. No Committee member shall serve on the audit committees of more than two other public issuers without prior determination by the Board that such simultaneous service would not impair the ability of such member to serve effectively on the Committee.
--- ---
D. The Committee shall operate in a manner that is consistent with the Committee Guidelines outlined in the Board Manual.
--- ---
E. The Corporation's auditors shall be advised of the names of the Committee members and will receive notice of and be invited to attend meetings of the Committee, and to be heard at those meetings on matters relating to the auditor's duties.
--- ---
F. The Committee may request any officer or employee of the Corporation, or the Corporation’s legal counsel, or any external or internal auditors to attend a meeting of the Committee to provide such pertinent information as the Committee requests or to meet with any members of, or consultants to the Committee. The Committee has the authority to communicate directly with the internal and external auditors as it deems appropriate to consider any matter that the Committee or auditors determine should be brought to the attention of the Board or shareholders.
--- ---
G. The Committee shall have the authority to select, retain, terminate and approve the fees and other retention terms of special independent legal counsel and other consultants or advisers to advise the Committee, as it deems necessary or appropriate, at the Corporation’s expense.
--- ---

​

1 Committee members must be “independent”, as defined in Sections 1.4 and 1.5 of National Instrument 52-110 and ‘‘independent’’ under the requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and Section 303A.06 of the NYSE Listed Company Manual.
2 The Board has adopted the NI 52-110 definition of "financial literacy", which is an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer's financial statements.
--- ---

​

H. The Corporation shall provide for appropriate funding, as determined by the Committee, for payment of (i) compensation to the independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit review or attest services for the Corporation, (ii) compensation to any advisers employed by the Committee and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate for carrying out its duties.

​ Vermilion Energy Inc. ■ Page 66 ■ 2021 Annual Information Form

I. The Committee shall meet at least four times each year.

​

**III.**DUTIES AND RESPONSIBILITIES

​

Subject to the powers and duties of the Board, the Committee will perform the following duties:

​

A. Financial Statements and Other Financial Information

​

The Committee will review and recommend for approval to the Board financial information that will be made publicly available. This includes the responsibility to:

​

i) review and recommend approval of the Corporation's annual financial statements, MD&A and earnings press release and report to the Board of Directors before the statements are approved by the Board of Directors;
ii) review and recommend approval for release the Corporation's quarterly financial statements, MD&A and press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
--- ---
iii) satisfy itself that adequate procedures are in place for the review of the public disclosure of financial information extracted or derived from the Corporation's financial statements, other than the public disclosure referred to in items (i) and (ii) above, and periodically assess the adequacy of those procedures; and
--- ---
iv) review the Annual Information Form and any Prospectus/Private Placement Memorandums.
--- ---

​

Review, and where appropriate, discuss:

​

v) the appropriateness of critical accounting policies and financial reporting practices used by the Corporation;
vi) major issues regarding accounting principles and financial statement presentations, including any significant proposed changes in financial reporting and accounting principles, policies and practices to be adopted by the Corporation and major issues as to the adequacy of the Corporation’s internal controls and any special audit steps adopted in light of material control deficiencies;
--- ---
vii) analyses prepared by management or the external auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative International Financial Reporting Standards (“IFRS”) methods on the financial statements of the Corporation and any other opinions sought by management from an independent or other audit firm or advisor with respect to the accounting treatment of a particular item;
--- ---
viii) any management letter or schedule of unadjusted differences provided by the external auditor and the Corporation’s response to that letter and other material written communication between the external auditor and management;
--- ---
ix) any problems, difficulties or differences encountered in the course of the audit work including any disagreements with management or restrictions on the scope of the external auditor’s activities or on access to requested information and management’s response thereto;
--- ---
x) any new or pending developments in accounting and reporting standards that may affect the Corporation;
--- ---
xi) the effect of regulatory and accounting initiatives, as well as any off-balance sheet structures on the financial statements of the Corporation and other financial disclosures;
--- ---
xii) any reserves, accruals, provisions or estimates that may have a significant effect upon the financial statements of the Corporation;
--- ---
xiii) the use of special purpose entities and the business purpose and economic effect of off balance sheet transactions, arrangements, obligations, guarantees and other relationships of Corporation and their impact on the reported financial results of the Corporation;
--- ---
xiv) the use of any “pro forma” or “adjusted” information not in accordance with generally accepted accounting principles;
--- ---
xv) any litigation, claim or contingency, including tax assessments, that could have a material effect upon the financial position of the Corporation, and the manner in which these matters may be, or have been, disclosed in the financial statements; and
--- ---
xvi) accounting, tax and financial aspects of the operations of the Corporation as the Committee considers appropriate.
--- ---

​

**B.**Risk Management, Internal Control and Information Systems

​

The Committee will review and discuss with management, and obtain reasonable assurance that the risk management, internal control and information systems are operating effectively to produce accurate, appropriate and timely management and financial information. This includes the responsibility to:

​

i) review the Corporation's risk management controls and policies with specific responsibility for Credit & Counterparty, Market & Financial, Political and Strategic & Repatriation risks;
ii) obtain reasonable assurance that the information systems are reliable and the systems of internal controls are properly designed and effectively implemented through separate and periodic discussions with and reports from management, the internal auditor and external auditor; and
--- ---
iii) review management steps to implement and maintain appropriate internal control procedures including a review of policies.
--- ---

​ Vermilion Energy Inc. ■ Page 67 ■ 2021 Annual Information Form

**C.**External Audit

​

The external auditor is required to report directly to the Committee, which will review the planning and results of external audit activities and the ongoing relationship with the external auditor. This includes:

​

i) review and recommend to the Board, for shareholder approval, the appointment of the external auditor;
ii) review and approve the annual external audit plan, including but not limited to the following:
--- ---
a) engagement letter between the external auditor and financial management of the Corporation;
--- ---
b) objectives and scope of the external audit work;
--- ---
c) procedures for quarterly review of financial statements;
--- ---
d) materiality limit;
--- ---
e) areas of audit risk;
--- ---
f) staffing;
--- ---
g) timetable; and
--- ---
h) compensation and fees to be paid by the Corporation to the external auditor.
--- ---
iii) meet with the external auditor to discuss the Corporation's quarterly and annual financial statements and the auditor's report including the appropriateness of accounting policies and underlying estimates;
--- ---
iv) maintain oversight of the external auditor's work and advise the Board, including but not limited to:
--- ---
a) the resolution of any disagreements between management and the external auditor regarding financial reporting;
--- ---
b) any significant accounting or financial reporting issue;
--- ---
c) the auditors' evaluation of the Corporation's system of internal controls, procedures and documentation; the post audit or management letter containing any findings or recommendation of the external auditor, including management's response thereto and the subsequent follow-up to any identified internal control weaknesses;
--- ---
d) any other matters the external auditor brings to the Committee's attention; and
--- ---
e) evaluate and assess the qualifications and performance of the external auditors for recommendation to the Board as to the appointment or reappointment of the external auditor to be proposed for approval by the shareholders, and ensuring that such auditors are participants in good standing pursuant to applicable regulatory laws.
--- ---
v) review the auditor's report on all material subsidiaries;
--- ---
vi) review and discuss with the external auditors all significant relationships that the external auditors and their affiliates have with the Corporation and its affiliates in order to determine the external auditors' independence, including, without limitation:
--- ---
a) requesting, receiving and reviewing, on a periodic basis, a formal written statement from the external auditors, including a list of all relationships between the external auditor and the Corporation that may reasonably be thought to bear on the independence of the external auditors with respect to the Corporation;
--- ---
b) discussing with the external auditors any disclosed relationships or services that the external auditors believe may affect the objectivity and independence of the external auditors; and
--- ---
c) recommending that the Board take appropriate action in response to the external auditors' report to satisfy itself of the external auditors' independence.
--- ---
vii) annually request and review a report from the external auditor regarding (a) the external auditor’s quality-control procedures, (b) any material issues raised by the most recent quality-control review, or peer review, of the external auditor, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, and (c) any steps taken to deal with any such issues;
--- ---
viii) review and pre-approve any non-audit services to be provided to the Corporation or any affiliates by the external auditor's firm or its affiliates (including estimated fees), and consider the impact on the independence of the external audit;
--- ---
ix) review the disclosure with respect to its pre-approval of audit and non-audit services provided by the external auditors; and
--- ---
x) meet periodically, and at least annually, with the external auditor without management present.
--- ---

​

**D.**Compliance

​

The Committee shall:

i) Ensure that the external auditor's fees are disclosed by category in the Annual Information Form in compliance with regulatory requirements;
ii) Disclose any specific policies or procedures adopted for pre-approving non-audit services by the external auditor including affirmation that they meet regulatory requirements;
--- ---
iii) Assist the Governance and Human Resources Committee with preparing the Corporation's governance disclosure by ensuring it has current and accurate information on:
--- ---
a) the independence of each Committee member relative to regulatory requirements for audit committees;
--- ---
b) the state of financial literacy of each Committee member, including the name of any member(s) currently in the process of acquiring financial literacy and when they are expected to attain this status; and
--- ---
c) the education and experience of each Committee member relevant to his or her responsibilities as Committee member.
--- ---

Vermilion Energy Inc. ■ Page 68 ■ 2021 Annual Information Form

iv) Disclose, if required, if the Corporation has relied upon any exemptions to the requirements for committees under applicable securities laws and rules of any stock exchange on which the Corporation’s shares are listed for trading.

​

**E.**Other

​

The Committee shall:

​

i)establish and periodically review procedures for:

a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls, or auditing matters; and
b) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters or other matters that could negatively affect the Corporation, such as violations of the Code of Business Conduct and Ethics.
--- ---
ii) review and approve the Corporation's hiring policies regarding partners, employees and former partners and employees of the present and former external auditor;
--- ---
iii) review insurance coverage of significant business risks and uncertainties;
--- ---
iv) review material litigation and its impact on financial reporting;
--- ---
v) review policies and procedures for the review and approval of officers' expenses and perquisites;
--- ---
vi) review the policies and practices concerning the expenses and perquisites of the Chairman, including the use of the assets of the Corporation;
--- ---
vii) review with external auditors any corporate transactions in which directors or officers of the Corporation have a personal interest; and
--- ---
viii) review the terms of reference for the Committee at least annually and otherwise as it deems appropriate, and recommend changes to the Board as required. The Committee shall evaluate its performance with reference to the terms of reference annually.
--- ---

​

**IV.**ACCOUNTABILITY

​

A. The Committee Chair has the responsibility to make periodic reports to the Board, as requested, on financial and other matters considered by the Committee relative to the Corporation.

​

B. The Committee shall report its discussions to the Board by maintaining minutes of its meetings and providing an oral report at the next Board meeting.

Vermilion Energy Inc. ■ Page 69 ■ 2021 Annual Information Form

Exhibit 99.2

​

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 and Vermilion’s ability to fund such expenditures; Vermilion’s additional debt capacity providing it with additional working capital; the flexibility of Vermilion’s capital program and operations; business strategies and objectives; operational and financial performance; estimated volumes of reserves and resources; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion’s 2022 guidance, and rates of average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange rates and significant declines in production or sales volumes due to unforeseen circumstances; the effect of possible changes in critical accounting estimates; statements regarding the growth and size of Vermilion’s future project inventory, and the wells expected to be drilled in 2022; exploration and development plans and the timing thereof; Vermilion’s ability to reduce its debt; statements regarding Vermilion’s hedging program, its plans to add to its hedging positions, and the anticipated impact of Vermilion’s hedging program on project economics and free cash flows; the potential financial impact of climate-related risks; 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 and Vermilion’s expectations regarding future taxes and taxability; and the timing of regulatory proceedings and approvals.

​

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 or 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 position 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 crude oil and natural gas reserve and resource 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 and the Canadian Oil and Gas Evaluation Handbook. Reserves estimates have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of funding required for such development. The actual crude oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document.

​

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.

​

Vermilion Energy Inc.  ■  Page 1  ■  2021 Management's Discussion and Analysis

​

Abbreviations

​

$M thousand dollars
$MM million dollars
AECO the daily average benchmark price for natural gas at the AECO ‘C’ hub in Alberta
bbl(s) barrel(s)
bbls/d barrels per day
boe barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf of natural gas)
boe/d barrel of oil equivalent per day
GJ gigajoules
LSB light sour blend crude oil reference price
mbbls thousand barrels
mcf thousand cubic feet
mmcf/d million cubic feet per day
NBP the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point
NGLs natural gas liquids, which includes butane, propane, and ethane
PRRT Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia
tCO2e tonnes of carbon dioxide equivalent
TTF the price for natural gas in the Netherlands, quoted in megawatt hours of natural gas, at the Title Transfer Facility Virtual Trading Point
WTI West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma

​

​

​

Vermilion Energy Inc.  ■  Page 2  ■  2021 Management's Discussion and Analysis

​

Management's Discussion and Analysis

​

The following is Management’s Discussion and Analysis (“MD&A”), dated March 4, 2022, of Vermilion Energy Inc.’s (“Vermilion”, “we”, “our”, “us” or the “Company”) operating and financial results as at and for the three months and year ended December 31, 2021 compared with the corresponding periods in the prior year.

​

This discussion should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 and 2020, together with the accompanying notes. Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR at www.sedar.com or on Vermilion’s website at www.vermilionenergy.com.

​

The audited consolidated financial statements for the year ended December 31, 2021 and comparative information have been prepared in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS” or, alternatively, “GAAP”) as issued by the International Accounting Standards Board ("IASB").

​

This MD&A includes references to certain financial and performance measures which do not have standardized meanings prescribed by IFRS. These measures include:

​

● Fund flows from operations: Fund flows from operations (FFO) is a total of segments measure most directly comparable to net earnings and is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, interest expense, and realized loss on derivatives, plus realized gain on foreign exchange and realized other income. The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments. A reconciliation to Net Earnings can be found within the "Consolidated Financial Performance Review" section of this MD&A.
● Free cash flow: Free cash flow (FCF) is a non-GAAP financial measure most directly comparable to cash flows from operating activities and is comprised of FFO less drilling and development and exploration and evaluation expenditures. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. A reconciliation to primary financial statement measures can be found within the "Non-GAAP Financial Measures" section of this MD&A.
--- ---
● Net debt: Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. A reconciliation to primary financial statement measures can be found within the "Financial Position Review" section of this MD&A.
--- ---
● Operating Netbacks: Operating Netbacks is a non-GAAP financial measure most directly comparable to net earnings and is calculated as sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the profitability and efficiency of our field operations. A reconciliation to primary financial statement measures can be found within "Supplemental Table 1: Netbacks" of this MD&A.
--- ---
● Fund flows from operations per boe: Fund flows from operations per boe also includes general and administration expense. Fund flows from operations netback is used by management to assess the profitability of our business units and Vermilion as a whole. A reconciliation to primary financial statement measures can be found within "Supplemental Table 1: Netbacks" of this MD&A.
--- ---

​

In addition, this MD&A includes references to certain financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-GAAP financial measures. These non-GAAP financial measures are unlikely to be comparable to similar financial measures presented by other issuers. For a full description of these non-GAAP financial measures and a reconciliation of these measures to their most directly comparable GAAP measures, please refer to “Non-GAAP Financial Measures”.

​

Product Type Disclosure

​

Under National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities", disclosure of production volumes should include segmentation by product type as defined in the instrument. In this report, references to "crude oil" and "light and medium crude oil" mean "light crude oil and medium crude oil" and references to "natural gas" mean "conventional natural gas".

​

In addition, in Supplemental Table 4 "Production", Vermilion provides a reconciliation from total production volumes to product type and also a reconciliation of "crude oil and condensate" and "NGLs" to the product types "light crude oil and medium crude oil" and "natural gas liquids".

​

Vermilion Energy Inc.  ■  Page 3  ■  2021 Management's Discussion and Analysis

​

Production volumes reported are based on quantities as measured at the first point of sale.

​

Guidance

​

On January 18, 2021, we released our 2021 capital budget and associated production guidance. On November 9, 2021, we increased our 2021 capital expenditure guidance to $375 million and our 2021 annual production guidance to 84,500 to 85,500 boe/d. Actual 2021 capital spending of $375 million was in line with our revised guidance and 2021 average production of 85,408 boe/d was at the upper end of our revised guidance range.

​

On November 29, 2021, we released our 2022 capital budget and associated production guidance. 2022 guidance does not include contribution from the Corrib Acquisition and will be updated upon close.

​

The following table summarizes our guidance:

​

​ ​ ​ ​ ​ ​
​ **** Date **** Capital Expenditures (MM) Production (boe/d)
2021 Guidance ​ ​ ​ ​ ​
2021 Guidance ​ January 18, 2021 300 83,000 to 85,000
2021 Guidance ​ November 9, 2021 375 84,500 to 85,500
2021 Actual Results ​ March 7, 2022 375 85,408
2022 Guidance ​ ​
2022 Guidance ​ November 29, 2021 425 83,000 to 85,000

All values are in US Dollars.

​

​

Vermilion Energy Inc.  ■  Page 4  ■  2021 Management's Discussion and Analysis

​

Vermilion's Business

​

Vermilion is a Calgary, Alberta based international oil and gas producer focused on the acquisition, exploration, development, and optimization of producing properties in North America, Europe, and Australia. We manage our business through our Calgary head office and our international business unit offices.

​

​

​

​

Vermilion Energy Inc.  ■  Page 5  ■  2021 Management's Discussion and Analysis

​

Consolidated Results Overview

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ Q4/21 vs. ​ ​ ​ ​ ​ 2021 vs. ​
​ Q4 2021 **** Q4 2020 **** Q4/20 **** 2021 **** 2020 **** 2020 ****
Production (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate (bbls/d) 36,264 40,555 ​ (11) % 38,143 43,421 (12) %
NGLs (bbls/d) 8,461 8,627 ​ (2) % 8,325 8,937 (7) %
Natural gas (mmcf/d) 238.16 232.00 ​ 3 % 233.64 256.99 (9) %
Total (boe/d) 84,417 87,848 ​ (4) % 85,408 95,190 (10) %
(Draw) build in inventory (mbbls) (144) (118) ​ ​ 44 (260) ​
Financial metrics ​ ​
Fund flows from operations (M) (2) 322,173 135,212 ​ 138 % 919,862 502,065 83 %
Per share (/basic share) 1.99 0.85 ​ 134 % 5.71 3.18 80 %
Net earnings (loss) (M) 344,588 (57,707) ​ N/A 1,148,696 (1,517,427) N/A ​
Per share (/basic share) 2.12 (0.36) ​ N/A 7.13 (9.61) N/A ​
Cash flows from operating activities (M) 250,352 ​ 135,102 ​ 85 % 834,453 ​ 500,152 ​ 67 %
Free cash flow (M) (3) 176,366 ​ 75,318 ​ 134 % 545,066 ​ 134,863 ​ 304 %
Long-term debt (M) 1,651,569 1,933,848 ​ (15) % 1,651,569 1,933,848 (15) %
Net debt (M) (4) 1,644,786 2,009,325 ​ (18) % 1,644,786 2,009,325 (18) %
Activity ​ ​
Capital expenditures (M)(5) 145,807 59,894 ​ 143 % 374,796 367,202 2 %
Acquisitions (M)(6) 23,633 4,821 ​ ​ 130,965 25,810 ​

All values are in US Dollars.

​

^(1)^ Please refer to Supplemental Table 4 "Production" for disclosure by product type.
^(2)^ Fund flows from operations (FFO) and FFO per share are a total of segments measure and non-GAAP ratio respectively most directly comparable to net earnings and net earnings per share, the measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. FFO is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, interest expense, and realized loss on derivatives, plus realized gain on foreign exchange and realized other income. The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments. A reconciliation to primary financial statement measures can be found within the "Consolidated Financial Performance Review" section of this MD&A.
--- ---
^(3)^ Free cash flow is a non-GAAP financial measure most directly comparable to cash flows from operating activities and does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers and is comprised of funds flows from operations less drilling and development and exploration and evaluation expenditures. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. A reconciliation to primary financial statement measures can be found within the "Non-GAAP Financial Measures and Other Specified Financial Measures" section of this MD&A.
--- ---
^(4)^ Net debt prior period comparatives have been revised to meet the current definition. Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. A reconciliation to primary financial statement measures can be found within the "Financial Position Review" section of this MD&A.
--- ---
^(5)^ Capital expenditures is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The measure is calculated as the sum of drilling and development and exploration and evaluation from the Consolidated Statements of Cash Flows. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital.  A reconciliation to primary financial statement measures can be found within the "Non-GAAP Financial Measures and Other Specified Financial Measures" section of this MD&A.
--- ---
^(6)^ Acquisitions is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The measure is calculated as the sum of acquisitions from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed plus or net of acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity. A reconciliation to the acquisitions line item in the Consolidated Statements of Cash Flows can be found in "Supplemental Table 3: Capital Expenditures and Acquisitions" section of this MD&A.
--- ---

​

Vermilion Energy Inc.  ■  Page 6  ■  2021 Management's Discussion and Analysis

​

Financial performance review

​

Q4 2021 vs. Q4 2020

​

Graphic

​

·We recorded net earnings of $344.6 million ($2.12/basic share) for Q4 2021 compared to a net loss of $57.7 million ($0.36/basic share) in Q4 2020. The increase in net earnings was primarily driven by unrealized gains on derivatives due to commodity price movement, combined with an increase in FFO predominantly driven by an increase in realized pricing.

Chart, waterfall chart Description automatically generated

​

Vermilion Energy Inc.  ■  Page 7  ■  2021 Management's Discussion and Analysis

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● We generated cash flows from operating activities of $250.4 million in Q4 2021 compared to $135.1 million in Q4 2020 and fund flows from operations of $322.2 million in Q4 2021 compared to $135.2 million in Q4 2020. The increases were primarily as a result of higher commodity prices which is reflected in our consolidated realized price per boe increasing from $38.57/boe in Q4 2020 to $96.82/boe in Q4 2021. This was partially offset by increased current taxes and royalties, driven by increased pricing, as well as a decrease in sales volume driven by natural decline. Variances between cash flows from operating activities and funds flow from operations are primarily driven by working capital timing differences.

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YTD 2021 vs. YTD 2020

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Graphic

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Vermilion Energy Inc.  ■  Page 8  ■  2021 Management's Discussion and Analysis

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·For the year ended December 31, 2021, we achieved net earnings of $1,148.7 million compared to a net loss of $1,517.4 million for the comparable period in 2020. The increase in net earnings was primarily due to impairment charges we recorded in 2020 of $1,272.1 million (net of $410.2 million income tax recovery), compared to impairment reversal charges we recorded in 2021 of $987.1 million (net of $315.5 million income tax expense) and higher fund flows from operations driven by increased consolidated realized pricing. These increases were partially offset by higher unrealized derivative losses driven by increased commodity prices.

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Graphic

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·Cash flows from operating activities increased by $334.3 million to $834.5 million for the year ended December 31, 2021, and fund flows from operations increased by $417.8 million for the year ended December 31, 2021 versus the same period in 2020. These increases were primarily driven by a 109% increase in our consolidated realized price from $31.90/boe to $66.81/boe. Sales volumes decreased year-over-year primarily due to natural decline in North America, Ireland, and Netherlands, as well as timing of liftings in Australia, while royalties and taxes increased primarily due to increased commodity prices. Variances between cash flows from operating activities and funds flow from operations are primarily driven by working capital timing differences.

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Production review

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Q4 2021 vs. Q4 2020

· Consolidated average production of 84,417 boe/d in Q4 2021 represented a decrease of 4% from Q4 2020 production of 87,848 boe/d. Production decreases were primarily driven by natural decline in Canada of 4,120 boe/d due to reduced capital activity as we focused on maximizing free cash flow and reducing debt in 2021.

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2021 vs. 2020

· Consolidated average production of 85,408 boe/d for the year ended December 31, 2021 represented a decrease of 10% from the prior year comparable period of 95,190 boe/d. Production decreases were mainly in Canada of 6,974 boe/d due to reduced capital activity and natural decline, and in Ireland of 1,365 boe/d due to natural decline.

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Activity review

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● For the three months ended December 31, 2021, capital expenditures of $145.8 million were incurred.
● In our North America core region, capital expenditures of $89.6 million were incurred during Q4 2021. In Canada, $86.1 million was incurred primarily related to drilling and facility activity. During the quarter we drilled seven (7.0 net) wells in south-east Saskatchewan and completed eight
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Vermilion Energy Inc.  ■  Page 9  ■  2021 Management's Discussion and Analysis

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wells, seven of which were brought on production during the quarter. In addition, we drilled fourteen (11.5 net) and completed nine (8.96 net) Mannville natural gas wells in Alberta.
● In our International core region, capital expenditures of $56.2 million were incurred during Q4 2021. Our activities included $15.0 million of France investment primarily focused on increased subsurface maintenance, workovers and facilities activities, $10.9 million in Germany mainly related to tie-in, drilling and workover activity, $9.0 million in Central and Eastern Europe mainly related to seismic expenditures in Croatia on the SA-10 block, and $8.8 million incurred in Australia primarily related to a planned turnaround.
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Financial sustainability review

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Cash flow from operations and free cash flow

​

● Cash flows from operating activities of $834.5 million increased by $334.3 million for the year ended December 31, 2021 compared to the prior year period which was primarily driven by a 109% increase in consolidated realized prices.
● Free cash flow of $545.1 million increased by $410.2 million for the year ended December 31, 2021 compared to the prior year period due to increased funds flow from operations and conservative capital spending as we focused on reducing debt in 2021.
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Long-term debt and net debt

● Long-term debt decreased to $1.7 billion as at December 31, 2021 from $1.9 billion as at December 31, 2020.
● Net debt decreased to $1.6 billion as at December 31, 2021 from $2.0 billion as at December 31, 2020 (revised), mainly due to a decrease in long-term debt as a result of debt repayments of $341.3 million partially offset by foreign exchange effects on USD borrowings.
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● In Q3 2021, we adjusted our net debt calculation in order to provide more meaningful and comparable information.
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● The ratio of net debt to four quarter trailing fund flows from operations^(1)^ decreased to 1.79 as at December 31, 2021 (December 31, 2020 - 4.00 (revised)) mainly due to lower net debt combined with higher four quarter trailing fund flows from operations.
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(1) Net debt to four quarter trailing fund flows from operations is a non-GAAP ratio that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. It is calculated as net debt (capital measure) over the FFO from the preceding 4 quarters (total of segments measure). The measure is used to assess our ability to repay debt.

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Vermilion Energy Inc.  ■  Page 10  ■  2021 Management's Discussion and Analysis

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Benchmark Commodity Prices

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ **** ​ **** Q4/21 vs. **** ​ **** ​ **** 2021 vs. ****
​ Q4 2021 ​ Q4 2020 ​ Q4/20 ​ 2021 ​ 2020 ​ 2020 ****
Crude oil ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
WTI (/bbl) 97.21 55.58 75 % 85.14 52.86 61 %
WTI (US /bbl) 77.19 42.66 81 % 67.92 39.40 72 %
Edmonton Sweet index (/bbl) 93.30 50.28 86 % 80.27 45.72 76 %
Edmonton Sweet index (US /bbl) 74.09 38.59 92 % 64.03 34.08 88 %
Saskatchewan LSB index (/bbl) 92.90 50.76 83 % 80.12 45.80 75 %
Saskatchewan LSB index (US /bbl) 73.77 38.96 89 % 63.91 34.14 87 %
Canadian C5+ Condensate index (/bbl) 99.65 55.43 80 % 85.50 49.85 72 %
Canadian C5+ Condensate index (US /bbl) 79.13 42.54 86 % 68.20 37.16 84 %
Dated Brent (/bbl) 100.40 57.63 74 % 88.67 55.90 59 %
Dated Brent (US /bbl) 79.73 44.23 80 % 70.73 41.67 70 %
Natural gas ​
AECO (/mcf) 4.66 2.64 77 % 3.62 2.23 62 %
NBP (/mcf) 37.76 6.99 440 % 19.62 4.30 356 %
NBP (/mcf) 26.21 4.50 482 % 13.22 2.81 371 %
TTF (/mcf) 38.86 6.63 486 % 19.86 4.18 375 %
TTF (/mcf) 26.97 4.27 532 % 13.39 2.74 389 %
Henry Hub (/mcf) 7.34 3.47 112 % 4.82 2.78 73 %
Henry Hub (US /mcf) 5.83 2.66 119 % 3.85 2.07 86 %
Average exchange rates ​
CDN /US 1.26 1.30 (3) % 1.25 1.34 ​ (7) %
CDN /Euro 1.44 1.55 (7) % 1.48 1.53 (3) %
Realized prices ​
Crude oil and condensate (/bbl) 96.88 55.31 75 % 83.78 50.53 66 %
NGLs (/bbl) 47.27 19.20 146 % 34.44 13.06 164 %
Natural gas (/mcf) 17.89 4.13 333 % 9.53 2.77 244 %
Total (/boe) 96.82 38.57 151 % 66.81 31.90 109 %

All values are in US Dollars.

​

As an internationally diversified producer, we are exposed to a range of commodity prices. In our North America core region, our crude oil is sold at benchmarks linked to WTI (including the Edmonton Sweet index, the Saskatchewan LSB index, and the Canadian C5+ index) and our natural gas is sold at benchmarks linked to AECO index (in Canada) or the Henry Hub index (in the United States). In our International core region, our crude oil is sold with reference to Dated Brent and our natural gas is sold with reference to NBP, TTF, or indices highly correlated to TTF.

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Graphic

Vermilion Energy Inc.  ■  Page 11  ■  2021 Management's Discussion and Analysis

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● Crude oil prices increased in Q4 2021 relative to Q4 2020. Global crude oil demand has increased from recent lows faster than production and successive COVID-19 waves have had smaller impacts on demand. Year-over-year, Canadian dollar WTI and Brent prices rose 75% and 74% respectively.
● In Canadian dollar terms, year-over-year, the Edmonton Sweet differential narrowed by $1.39/bbl to a discount of $3.91/bbl against WTI, and the Saskatchewan LSB differential narrowed by $0.51/bbl to a discount of $4.31/bbl against WTI.
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● Approximately 37% of Vermilion’s Q4 2021 crude oil and condensate production was priced at the Dated Brent index (which averaged a premium to WTI of US$2.54/bbl), while the remainder of our crude oil and condensate production was priced at the Saskatchewan LSB, Canadian C5+, Edmonton Sweet, and WTI indices.
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Graphic

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● In Canadian dollar terms, prices for European natural gas linked to NBP and TTF rose by 440% and 486%, respectively, in Q4 2021 compared to Q4 2020 as a result of record low inventory levels leading into winter driven by declining supply and competition for LNG in the global market. Demand proved to be inelastic at high natural gas prices. High global coal and European carbon prices have also been supportive to natural gas prices.
● Natural gas prices at AECO increased by 77% in Q4 2021 compared to Q4 2020. NYMEX prices benefited from a strong winter premium and increased by a greater extent than AECO natural gas prices. Strong Alberta natural gas demand resulting from permanent additions in the power sector and from oil sands production growth, combined with historically low storage levels to start the winter, helped offset high WCSB production growth.
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● For Q4 2021, average European natural gas prices represented a $33.65/mcf premium to AECO. Approximately 42% of our natural gas production in Q4 2021 benefited from this premium European pricing.
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Graphic

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● For the three months ended December 31, 2021, the Canadian dollar strengthened 7% against the Euro compared to Q4 2020. The annual average in 2021 was 3% stronger versus 2020.
● For the three months ended December 31, 2021, the Canadian dollar strengthened 3% against the US Dollar compared to Q4 2020. The annual average in 2021 was 7% stronger versus 2020.
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​

North America

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​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 **** 2021 **** 2020
Production ^(1)^
Crude oil and condensate (bbls/d) **** 23,846 26,459 **** 24,390 29,043
NGLs (bbls/d) **** 8,461 8,628 **** 8,325 8,937
Natural gas (mmcf/d) **** 137.93 142.13 **** 144.87 158.85
Total production volume (boe/d) **** 55,295 58,774 **** 56,858 64,456

​

^(1)^Please refer to Supplemental Table 4 "Production" for disclosure by product type.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 2021 2020
​ ​ M $/boe ​ M $/boe ​ M $/boe ​ M $/boe
Sales **** 305,054 59.97 ​ 175,808 32.51 **** 1,014,190 48.87 635,637 26.94
Royalties **** (47,119) (9.26) (19,670) (3.64) **** (144,398) (6.96) (72,407) (3.07)
Transportation **** (9,447) (1.86) (10,358) (1.92) **** (40,100) (1.93) (42,843) (1.82)
Operating **** (59,425) (11.68) (59,162) (10.94) **** (232,370) (11.20) (236,704) (10.03)
General and administration ^(1)^ **** (10,224) (2.01) (10,484) (1.94) **** (27,887) (1.34) (29,784) (1.26)
Corporate income tax (expense) ^(1)^ ​ 2,140 0.42 ​ 241 0.04 ​ 1,451 0.07 ​ (202) (0.01)
Fund flows from operations **** 180,979 35.58 76,375 14.12 **** 570,886 27.51 253,697 10.75
Drilling and development **** (89,643) ​ **** (33,781) ​ (222,782) ​ (265,261)
Free cash flow **** 91,336 ​ **** 42,594 ​ 348,104 ​ (11,564)

All values are in US Dollars.

​

^(1)^Includes amounts from Corporate segment.

​

Production from our North American operations averaged 55,295 boe/d in Q4 2021, a decrease of 3% from the prior quarter primarily due to natural decline and unplanned downtime. This impact was partially offset by new production from our southeast Saskatchewan drilling program in Canada. During the fourth quarter 2021, we drilled seven (7.0 net) light oil wells in southeast Saskatchewan and brought on production seven (7.0 net) wells. In west-central Alberta, we commenced our condensate-rich Mannville natural gas drilling program where we drilled 14 (11.5 net) wells and completed nine (8.96 net) wells. By executing the majority of this program in Q4 2021, ahead of the busy winter drilling season, we were able to secure our preferred service providers and reduce overall costs, resulting in approximately $85,000 savings per well. The wells were brought on production in early 2022.

​

No drilling or completion activity occurred in the United States during the fourth quarter 2021. Similar to our program in 2021, we plan to move an experienced drilling crew from our Alberta winter program down to Wyoming in Q2 2022 to complete the six (5.9 net) well Turner drilling program which will include three (2.9 net) two-mile lateral wells which are significantly more economic than one-mile laterals. In addition, one (0.3 net) two-mile non-operated Turner well is planned for Q4, 2022.

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Sales

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 2021 2020
​ ​ M $/boe ​ M $/boe ​ M $/boe ​ M $/boe
Canada **** 270,600 59.16 160,719 32.45 **** 901,775 47.54 569,191 26.38
United States **** 34,454 67.18 15,089 33.24 **** 112,415 62.98 66,446 32.93
North America **** 305,054 59.97 175,808 32.51 **** 1,014,190 48.87 635,637 26.94

All values are in US Dollars.

​

Sales in North America increased on a dollar and per unit basis for the three months and the year ended December 31, 2021 versus the comparable prior periods due to higher benchmark prices across all products, partially offset by lower production volumes.

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Vermilion Energy Inc.  ■  Page 13  ■  2021 Management's Discussion and Analysis

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Royalties

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 2021 2020
​ ​ M $/boe ​ M $/boe ​ M $/boe ​ M $/boe
Canada **** (37,064) (8.10) (15,240) (3.08) **** (113,651) (5.99) (54,961) (2.55)
United States **** (10,055) (19.60) (4,430) (9.76) **** (30,747) (17.23) (17,446) (8.65)
North America **** (47,119) (9.26) (19,670) (3.64) **** (144,398) (6.96) (72,407) (3.07)

All values are in US Dollars.

​

Royalties in North America increased on a dollar and per unit basis for the three months and the year ended December 31, 2021 versus the comparable prior periods primarily due to higher benchmark prices. Royalties as a percentage of sales for the three months and the year ended December 31, 2021 of 15.4% and 14.2% increased versus comparable prior periods primarily due to the effect of higher commodity prices on sliding scale royalties.

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Transportation

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 2021 2020
​ ​ M $/boe ​ M $/boe ​ M $/boe ​ M $/boe
Canada **** (9,134) (2.00) (9,987) (2.02) **** (38,764) (2.04) (41,494) (1.92)
United States **** (313) (0.61) **** (371) (0.82) **** (1,336) (0.75) (1,349) (0.67)
North America **** (9,447) (1.86) (10,358) (1.92) **** (40,100) (1.93) (42,843) (1.82)

All values are in US Dollars.

​

Transportation expense in North America remained relatively consistent on a dollar basis for the three months and the year ended December 31, 2021 versus the comparable prior periods. On a per unit basis for the three months ended December 31, 2021 transportation expense remained relatively consistent, while for the year ended December 31, 2021 transportation expense increased versus the comparable period primarily due to an increase in rates and lower production.

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Operating expense

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 2021 2020
​ ​ M $/boe ​ M $/boe ​ M $/boe ​ M $/boe
Canada **** (54,695) (11.96) (54,725) (11.05) **** (215,378) (11.35) (218,596) (10.13)
United States **** (4,730) (9.22) (4,437) (9.77) **** (16,992) (9.52) (18,108) (8.97)
North America **** (59,425) (11.68) (59,162) (10.94) **** (232,370) (11.20) (236,704) (10.03)

All values are in US Dollars.

​

Operating expenses in North America on a dollar basis for the three months ended December 31, 2021 remained consistent, increasing by 0.4%, while on a per boe basis operating expenses increased by 6.8% due to lower production volumes and resulting impact in fixed costs per unit. For the year ended December 31, 2021 operating expenses decreased by 1.8% on a dollar basis primarily due to lower spend on maintenance projects, and increased 11.7% on a per boe basis versus the comparable prior period primarily due to lower production volumes and the resulting impact of fixed costs per unit.

​

​

International

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​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4 2021 **** Q4 2020 **** 2021 **** 2020
Production ^(1)^ **** **** **** ****
Crude oil and condensate (bbls/d) **** 12,419 14,096 **** 13,753 14,376
Natural gas (mmcf/d) **** 100.22 89.86 **** 88.77 98.15
Total production volume (boe/d) **** 29,123 29,073 **** 28,548 30,734
Total sales volume (boe/d) **** 30,689 30,336 **** 28,430 31,444

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^(1)^Please refer to Supplemental Table 4 "Production" for disclosure by product type.

Vermilion Energy Inc.  ■  Page 14  ■  2021 Management's Discussion and Analysis

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​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 Q4 2020 2021 2020
​ **** M /boe M /boe M /boe M $/boe
Sales **** 460,861 163.23 140,390 50.30 1,065,571 102.69 483,908 42.05
Royalties **** (11,666) (4.13) (8,438) (3.02) (41,724) (4.02) (34,147) (2.97)
Transportation **** (9,586) (3.40) (6,699) (2.40) (37,061) (3.57) (24,868) (2.16)
Operating **** (53,255) (18.86) (47,414) (16.99) (180,643) (17.41) (180,547) (15.69)
General and administration **** (7,150) (2.53) (8,158) (2.92) (24,990) (2.41) (31,056) (2.70)
Corporate income tax recovery (expense) **** (34,374) (12.17) 6,291 2.25 (31,617) (3.05) 6,012 0.52
PRRT **** (5,544) (1.96) (4,038) (1.45) (15,688) (1.51) (20,151) (1.75)
Fund flows from operations **** 339,286 120.17 71,934 25.77 733,848 70.72 199,151 17.30
Drilling and development **** (29,359) ​ (19,122) ​ (116,608) (87,220)
Exploration and evaluation ​ (26,805) ​ (6,991) ​ (35,406) ​ (14,721) ​
Free cash flow **** 283,122 ​ 45,821 ​ 581,834 97,210

All values are in US Dollars.

​

Production from our International assets averaged 29,123 boe/d in Q4 2021, an increase of 5% from the prior quarter primarily due to higher production in the Netherlands and Ireland. The Netherlands operations benefited from stronger performance from the recently drilled Nijega well and successful optimization work on several other wells. Ireland operations benefited from the absence of planned maintenance activities. Elsewhere in Europe, we commenced drilling on our 2022 three-well program in Germany and completed a small European gas  acquisition to further consolidate our interest in the region. No drilling or completion activity occurred in France during the quarter, however we have offset the majority of natural declines through our ongoing workover campaign. In Croatia we received approval for the spatial plan on the SA-10 gas plant where we continue to advance design work and regulatory work in preparation for the 2023 tie-in of the two standing gas wells.

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The higher production from our European assets was partially offset by a planned turnaround in Australia which was successfully completed during the quarter. Detailed engineering work and planning for the two well Australia program continued, with drilling expected to commence in Q2 2022.

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Sales

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 Q4 2020 2021 2020
​ **** M /boe M /boe M /boe M $/boe
Australia **** 40,332 112.26 30,148 75.99 143,014 103.01 141,452 76.70
France **** 79,809 100.18 53,198 58.11 279,263 88.15 182,292 55.39
Netherlands **** 165,370 205.17 22,967 34.40 295,723 110.47 65,575 23.02
Germany **** 65,623 164.96 10,681 39.87 131,935 98.06 34,210 30.40
Ireland **** 109,352 236.78 23,118 43.38 214,425 120.51 58,446 25.59
Central and Eastern Europe **** 375 203.80 278 27.22 1,211 65.06 1,933 16.66
International **** 460,861 163.23 140,390 50.30 1,065,571 102.69 483,908 42.05

All values are in US Dollars.

​

As a result of changes in inventory levels, our sales volumes for crude oil in Australia, France, and Germany may differ from our production volumes in those business units. The following table provides the crude oil sales volumes (consisting entirely of "light crude oil and medium crude oil") for those jurisdictions.

​

​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil sales volumes (bbls/d) **** Q4 2021 **** Q4 2020 **** 2021 **** 2020
Australia **** 3,905 4,312 **** 3,804 5,039
France **** 8,659 9,951 **** 8,680 8,991
Germany **** 1,324 996 **** 1,051 967
International ​ 13,888 ​ 15,259 ​ 13,535 ​ 14,997

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Sales increased on a dollar and per boe basis for the three months and year ended December 31, 2021 versus the prior year comparable periods due to higher realized prices across all business units. These increases were partially offset by lower sales volumes in Ireland, the Netherlands, and Central Eastern Europe driven by natural decline combined with the timing of liftings in France and Australia.

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Vermilion Energy Inc.  ■  Page 15  ■  2021 Management's Discussion and Analysis

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Royalties

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 **** Q4 2020 2021 2020
​ **** M $/boe ​ M /boe M /boe M $/boe
France **** (10,174) (12.77) (9,416) (10.28) (37,666) (11.89) (32,069) (9.75)
Netherlands **** (419) (0.52) (150) (0.22) (873) (0.33) (444) (0.16)
Germany **** (909) (2.29) 1,190 4.44 (2,847) (2.12) (990) (0.88)
Central and Eastern Europe **** (164) (89.13) (62) (6.07) (338) (18.16) (644) (5.55)
International **** (11,666) (4.13) (8,438) (3.02) (41,724) (4.02) (34,147) (2.97)

All values are in US Dollars.

​

Royalties in our International core region are primarily incurred in France, where royalties include charges based on a percentage of sales and fixed per boe charges. Our production in Australia and Ireland is not subject to royalties.

​

For the three months ended December 31, 2021 versus the same period in the prior year, royalties increased due to higher sales prices in France, the Netherlands and Germany combined with a refund recorded in the fourth quarter of 2020 related to Germany gas royalties.

​

Royalties increased in our International core region for the year ended December 31, 2021 versus the same period in the prior year due to higher sales prices in France, the Netherlands and Germany.

​

Royalties as a percentage of sales for the three months and year ended December 31, 2021 of 2.5% and 3.9% decreased versus the prior year comparable periods of 6.0% and 7.1% primarily due to higher sales in business units that are not subject to royalties combined with the impact of RCDM royalties in France, which are levied on units of production and not subject to changes in commodity prices.

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Transportation

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 Q4 2020 2021 2020
​ **** M /boe M /boe M /boe M $/boe
France **** (6,574) (8.25) (4,264) (4.66) (26,497) (8.36) (14,604) (4.44)
Germany **** (2,076) (5.22) (1,537) (5.74) (6,359) (4.73) (5,839) (5.19)
Ireland **** (936) (2.03) (898) (1.68) (4,205) (2.36) (4,425) (1.94)
International **** (9,586) (3.40) (6,699) (2.40) (37,061) (3.57) (24,868) (2.16)

All values are in US Dollars.

​

Transportation expense increased for the three months and year ended December 31, 2021 versus the comparable prior year periods. This increase was primarily in France relating to the use of incremental trucking in the Paris Basin following the conversion of the Grandpuits refinery combined with higher production in Germany due to an acquisition in the second quarter of 2021.

​

Our production in Australia, Netherlands and Central and Eastern Europe is not subject to transportation expense.

​

​

Operating expense

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 Q4 2020 2021 2020
​ **** $M ​ /boe $M ​ /boe $M ​ /boe $M ​ $/boe
Australia **** (15,918) **** (44.31) (14,438) (36.39) (50,748) **** (36.55) (54,581) (29.59)
France **** (14,242) **** (17.88) (16,230) (17.73) (52,147) **** (16.46) (57,128) (17.36)
Netherlands **** (11,449) **** (14.20) (7,772) (11.64) (35,269) **** (13.17) (32,410) (11.38)
Germany **** (7,323) **** (18.41) (5,643) (21.07) (27,149) **** (20.18) (20,732) (18.42)
Ireland **** (4,107) **** (8.89) (3,232) (6.06) (14,889) **** (8.37) (15,232) (6.67)
Central and Eastern Europe **** (216) **** (117.39) (99) (9.69) (441) **** (23.69) (464) (4.00)
International **** (53,255) **** (18.86) (47,414) (16.99) (180,643) **** (17.41) (180,547) (15.69)

All values are in US Dollars.

​

Operating expenses on a dollar and per boe basis increased for Q4 2021 versus Q4 2020 by $5.9 million and $1.87/boe, respectively. This increase was primarily due to higher electricity prices in the Netherlands, higher facility maintenance costs in Germany and planned maintenance in Ireland.

​

For the year ended December 31, 2021 versus the comparable prior year period, operating expenses remained relatively flat on a dollar basis as higher electricity prices in the Netherlands and higher facility maintenance costs in Germany were partially offset by decreased costs in Australia resulting from a higher deferral of costs relating to inventory builds on the balance sheet in 2019.

Vermilion Energy Inc.  ■  Page 16  ■  2021 Management's Discussion and Analysis

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​

Operating expenses on a per boe basis for the year ended December 31, 2021 increased by $1.72 versus the comparable prior year period primarily due to relatively flat operating expenses spread across lower volumes.

​

​

Consolidated Financial Performance Review

​

​ ​ ​ ​ ​ ​
(M except per share) Dec 31, 2021 **** Dec 31, 2020 **** Dec 31, 2019
Total assets 5,905,323 ​ 4,109,139 ​ 5,866,120
Long-term debt 1,651,569 1,933,848 1,924,665
Petroleum and natural gas sales 2,079,761 1,119,545 1,689,863
Net earnings (loss) 1,148,696 (1,517,427) 32,799
Net earnings (loss) per share
Basic 7.13 (9.61) 0.21
Diluted 6.97 (9.61) 0.21
Cash dividends (/share) — 0.58 2.76

All values are in US Dollars.

​

Financial performance

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Q4 2021 Q4 2020 2021 2020
​ **** M /boe M /boe M /boe M $/boe
Sales **** 765,915 96.82 316,198 38.57 2,079,761 66.81 1,119,545 31.90
Royalties **** (58,785) (7.43) (28,108) (3.43) (186,122) (5.98) (106,554) (3.04)
Transportation **** (19,033) (2.41) (17,057) (2.08) (77,161) (2.48) (67,711) (1.93)
Operating **** (112,680) (14.24) (106,576) (13.00) (413,013) (13.27) (417,251) (11.89)
General and administration **** (17,374) (2.20) (18,642) (2.27) (52,877) (1.70) (60,840) (1.73)
Corporate income tax recovery (expense) **** (32,234) (4.07) 6,532 0.80 (30,166) (0.97) 5,810 0.17
PRRT **** (5,544) (0.70) (4,038) (0.49) (15,688) (0.50) (20,151) (0.57)
Interest expense **** (16,279) (2.06) (19,808) (2.42) (73,075) (2.35) (75,077) (2.14)
Realized (loss) gain on derivatives **** (189,598) (23.97) 790 0.10 (327,384) (10.52) 109,093 3.11
Realized foreign exchange (loss) gain **** (2,395) (0.30) 1,329 0.16 (6,613) (0.21) 11,110 0.32
Realized other income **** 10,180 1.29 4,592 0.56 22,200 0.71 4,091 0.12
Fund flows from operations **** 322,173 40.73 135,212 16.50 919,862 29.54 502,065 14.32
Equity based compensation ​ (6,666) ​ (11,012) ​ (41,565) ​ (42,906) ​
Unrealized gain (loss) on derivative instruments ^(1)^ ​ 172,265 ​ (66,863) ​ (181,094) ​ (100,955) ​
Unrealized foreign exchange loss (gain) ^(1)^ ​ 7,122 ​ 50,519 ​ (64,963) ​ 49,012 ​
Accretion ​ (10,983) ​ (9,134) ​ (43,552) ​ (35,318) ​
Depletion and depreciation ​ (148,216) ​ (148,219) ​ (571,688) ​ (580,461) ​
Deferred tax (expense) recovery ​ (14,834) ​ (8,008) ​ (187,343) ​ 374,313 ​
Gain on business combinations ​ — ​ — ​ 17,198 ​ — ​
Impairment reversal (expense) ​ 23,922 ​ — ​ 1,302,619 ​ (1,682,344) ​
Unrealized other expense ^(1)^ ​ (195) ​ (202) ​ (778) ​ (833) ​
Net earnings (loss) ​ 344,588 ​ (57,707) ​ 1,148,696 ​ (1,517,427) ​

All values are in US Dollars.

​

(1) Unrealized (loss) gain on derivative instruments, Unrealized foreign exchange loss, and Unrealized other expense are line items from the respective consolidated statements of cash flows.

​

Fluctuations in fund flows from operations may occur as a result of changes in production levels, commodity prices, and costs to produce petroleum and natural gas. In addition, fund flows from operations may be affected by the timing of crude oil shipments in Australia and France. When crude oil inventory is built up, the related operating expense, royalties, and depletion expense are deferred and carried as inventory on the consolidated balance sheet. When the crude oil inventory is subsequently drawn down, the related expenses are recognized within profit or loss.

​

General and administration

● General and administration expense decreased in Q4 2021 versus Q4 2020 primarily due to increased recoveries driven by increased capital spending in Q4 2021. General and administration expense decreased for the year ended December 31, 2021 versus the comparable prior year period primarily due to work-force reductions made in 2020.

Vermilion Energy Inc.  ■  Page 17  ■  2021 Management's Discussion and Analysis

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​

PRRT and corporate income taxes

● PRRT increased for the three months ended December 31, 2021 versus the prior year comparable period primarily due to higher sales in Australia, partially offset by higher capital expenditures.
● PRRT decreased for the year ended December 31, 2021 versus the prior year comparable period due to higher capital expenditures in Australia.
--- ---
● Corporate income taxes for the three months and year ended December 31, 2021 increased versus the prior year comparable periods primarily due to higher taxable income in the Netherlands partially offset with the application of tax losses in France and Australia.
--- ---

​

Interest expense

● Interest expense decreased for the three months and year ended December 31, 2021 versus the prior year comparable periods primarily due to lower average drawn balances on the credit facility and a related change to the pricing grid level.

​

Realized gain or loss on derivatives

● For the three months and year ended December 31, 2021, we recorded realized losses on our crude oil and natural gas hedges due to higher commodity pricing compared to the strike prices on our hedges. Realized gains on derivatives for the prior year comparable periods relate to receipts for European natural gas and crude oil hedges.
● A listing of derivative positions as at December 31, 2021 is included in “Supplemental Table 2” of this MD&A.
--- ---

​

Realized other income

● Realized other income for the three months and year ended December 31, 2021 primarily relates to amounts for funding under the Saskatchewan Accelerated Site Closure program to complete abandonment and reclamation on inactive oil and gas wells and facilities.

​

Net earnings

​

Fluctuations in net earnings from period-to-period are caused by changes in both cash and non-cash based income and charges. Cash based items are reflected in fund flows from operations. Non-cash items include: equity based compensation expense, unrealized gains and losses on derivative instruments, unrealized foreign exchange gains and losses, accretion, depletion and depreciation expense, and deferred taxes. In addition, non-cash items may also include gains resulting from business combinations or charges resulting from impairment or impairment reversals.

​

Equity based compensation

Equity based compensation expense relates primarily to non-cash compensation expense attributable to long-term incentives granted to directors, officers, and employees under security-based arrangements. Equity based compensation expense decreased for the three months ended December 31, 2021 compared to the three months ended December 31, 2020 due to a lower average performance factor applied to grants, while equity based compensation remained relatively flat for the year ended December 31, 2021 compared to the year ended December 31, 2020.

​

Unrealized gain or loss on derivative instruments

Unrealized gain or loss on derivative instruments arise as a result of changes in forecasts for future prices and rates. As Vermilion uses derivative instruments to manage the commodity price exposure of our future crude oil and natural gas production, we will normally recognize unrealized gains on derivative instruments when future commodity price forecasts decline and vice-versa. As derivative instruments are settled, the unrealized gain or loss previously recognized is reversed, and the settlement results in a realized gain or loss on derivative instruments.

​

USD-to-CAD cross currency interest rate swaps and foreign exchange swaps may be entered into to hedge the foreign exchange movements on USD borrowings on our revolving credit facility. As such, unrealized gains and losses on our cross currency interest swaps are offset by unrealized losses and gains on foreign exchange relating to the underlying USD borrowings from our revolving credit facility.

​

For the three months ended December 31, 2021, we recognized a net unrealized gain on derivative instruments of $172.3 million. This consists of unrealized gains of $150.8 million on our European natural gas commodity derivative instruments, $12.4 million on our North American natural gas commodity derivative instruments, $12.7 million on our equity swaps, and $3.8 million on our crude oil commodity derivative instruments, partially offset by unrealized losses of $7.4 million on our USD-to-CAD foreign exchange swaps.

​

For the year ended December 31, 2021, we recognized a net unrealized loss on derivative instruments of $181.1 million. This consists of unrealized losses of $280.4 million on our European natural gas commodity derivative instruments and $5.4 million on our crude oil commodity derivative instruments, partially offset by unrealized gains of $56.3 million on our USD-to-CAD foreign exchange swaps, $38.3 million on our equity swaps, and $10.1 million on our North American natural gas commodity derivative instruments.

​

Vermilion Energy Inc.  ■  Page 18  ■  2021 Management's Discussion and Analysis

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Unrealized foreign exchange gains or losses

As a result of Vermilion’s international operations, Vermilion has monetary assets and liabilities denominated in currencies other than the Canadian dollar. These monetary assets and liabilities include cash, receivables, payables, long-term debt, derivative instruments and intercompany loans. Unrealized foreign exchange gains and losses result from translating these monetary assets and liabilities from their underlying currency to the Canadian dollar.

​

In 2021, unrealized foreign exchange gains and losses primarily resulted from:

● The translation of Euro denominated intercompany loans from Vermilion Energy Inc. to our international subsidiaries. An appreciation in the Euro against the Canadian dollar will result in an unrealized foreign exchange gain (and vice-versa). Under IFRS, the offsetting foreign exchange loss or gain is recorded as a currency translation adjustment within other comprehensive income. As a result, consolidated comprehensive income reflects the offsetting of these translation adjustments while net earnings reflects only the parent company's side of the translation.
● The translation of USD borrowings on our revolving credit facility. The unrealized foreign exchange gains or losses on these borrowings are offset by unrealized derivative gains or losses on associated USD-to-CAD cross currency interest rate swaps (discussed further below).
--- ---
● The translation of our USD denominated senior unsecured notes prior to June 12, 2019 and from May 5, 2020 onward. During the period between June 12, 2019 and May 5, 2020 the USD senior notes were hedged by a USD-to-CAD cross currency interest rate swap. Subsequent to the termination of these instruments, amounts previously recognized in the hedge accounting reserve will be recognized into earnings through unrealized foreign exchange loss over the period of the hedged cash flows.
--- ---

​

For the three months ended December 31, 2021, we recognized a net unrealized foreign exchange gain of $7.1 million, driven by unrealized gains of $7.0 million on our USD borrowings from our revolving credit facility, as well as an unrealized gain of $1.4 million on US dollar-denominated intercompany loans resulting from the US dollar strengthening 0.3% against the Canadian dollar in Q4 2021. This was partially offset by unrealized loss of $1.2 million on our senior unsecured notes due to the stronger US dollar. In addition, we recognized an unrealized loss of $2.4 million on Euro-denominated intercompany loans due to the Euro weakening 2.7% against the Canadian dollar in Q4 2021.

​

For the year ended December 31, 2021, we recognized a net unrealized foreign exchange loss of $65.0 million. This was due to unrealized losses of $59.8 million on our USD borrowings from our revolving credit facility and $9.9 million on intercompany loans due primarily to the Euro weakening 7.8% against the Canadian dollar. These were partially offset by the impact of the US dollar weakening 0.4% against the Canadian dollar resulting in an unrealized gain of $1.7 million on our senior unsecured notes.

​

As at December 31, 2021, a $0.01 appreciation of the Euro against the Canadian dollar would result in a $0.3 million increase to net earnings as a result of an unrealized gain on foreign exchange. In contrast, a $0.01 appreciation of the US dollar against the Canadian dollar would result in a $2.1 million decrease to net earnings as a result of an unrealized loss on foreign exchange.

​

Accretion

Accretion expense is recognized to update the present value of the asset retirement obligation balance. For the three months and year ended December 31, 2021 accretion expense increased versus the comparable prior year periods, primarily due to additional obligations recognized at the end of 2020 through 2021, partially offset by the weakening of the Euro against the Canadian dollar.

​

Depletion and depreciation

Depletion and depreciation expense is recognized to allocate the cost of capital assets over the useful life of the respective assets. Depletion and depreciation expense per unit of production is determined for each depletion unit (which are groups of assets within a specific production area that have similar economic lives) by dividing the sum of the net book value of capital assets and future development costs by total proved plus probable reserves.

​

Fluctuations in depletion and depreciation expense are primarily the result of changes in produced crude oil and natural gas volumes, and changes in depletion and depreciation per unit. Fluctuations in depletion and depreciation per unit are the result of changes in reserves, depletable base (net book value of capital assets and future development costs), and relative production mix.

​

Depletion and depreciation on a per boe basis for the three months and year ended December 31, 2021 of $18.74 and $18.36, respectively, increased from $18.08 and $16.54 in respective the prior year comparable periods primarily due to impairment reversals and increases in ARO assets recorded in the first half of 2021.

​

Deferred tax

Deferred tax assets arise when the tax basis of an asset exceeds its accounting basis (known as a deductible temporary difference). Conversely, deferred tax liabilities arise when the tax basis of an asset is less than its accounting basis (known as a taxable temporary difference). Deferred tax assets are recognized only to the extent that it is probable that there are future taxable profits against which the deductible temporary difference can

Vermilion Energy Inc.  ■  Page 19  ■  2021 Management's Discussion and Analysis

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be utilized. Deferred tax assets and liabilities are measured at the enacted or substantively enacted tax rate that is expected to apply when the asset is realized, or the liability is settled.

​

As such, fluctuations in deferred tax expenses and recoveries primarily arise as a result of: changes in the accounting basis of an asset or liability without a corresponding tax basis change (e.g. when derivative assets and liabilities are marked-to-market or when accounting depletion differs from tax depletion), changes in available tax losses (e.g. if they are utilized to offset taxable income), changes in estimated future taxable profits resulting in a derecognition or recognition of deferred tax assets, and changes in enacted or substantively enacted tax rates.

​

For the three months and year ended December 31, 2021, the Company recorded a deferred tax expense of $14.8 million and $187.3 million, respectively compared to deferred tax expense of $8.0 million and recovery of $374.3 million for the respective prior year comparable periods. The deferred tax expense for the three months ended December 31, 2021 is primarily due to deferred taxes on unrealized derivative gains, and increased taxable income across all jurisdictions, partially offset by the recognition of a portion of non-expiring tax loss pools in Ireland that are expected to be utilized due to an increase in forecast commodity prices. The deferred tax expense for the year ended December 31, 2021 is primarily due to impairment reversals in the during 2021, partially offset by the recognition of a portion of non-expiring tax loss pools in Ireland, Australia, and Germany that are expected to be utilized due to an increase in forecast commodity prices.

​

Impairment

Impairment losses or reversals of losses are recognized when indicators of impairment or impairment reversal arise and the carrying amount of a cash generating unit ("CGU") greater than (impairment) or less than (impairment reversal) its recoverable amount, determined as the higher of fair value less costs of disposal or value-in-use.

​

In the fourth quarter of 2021, indicators of impairment reversal were present in our France - Neocomian CGU due to increases and stabilization of commodity prices resulting in increased cash flow estimates. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGU and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGU tested and $17.7 million (net of $6.2 million deferred income tax expense) of impairment reversal was recorded.

​

In the third quarter of 2021, indicators of impairment reversal were present in our Ireland CGU due to an increase and stabilization in forecast natural gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the Ireland CGU and the recoverable amount was determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, the recoverable amount was determined to be greater than the carrying value and $16.7 million (net of $5.5 million deferred income tax expense) of impairment reversal was recorded.

​

In the second quarter of 2021, indicators of impairment reversal were present in our Alberta, Saskatchewan, Germany, Ireland and United States CGUs due to an increase and stabilization in forecast crude oil and natural gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $460.4 million (net of $133.2 million deferred income tax expense) of impairment reversal was recorded.

​

In the first quarter of 2021, indicators of impairment reversal were present in our Australia, Alberta, Saskatchewan, and United States CGUs due to an increase and stabilization in forecast crude oil prices versus 2020 when impairment charges were taken. As a result of the indicators of impairment reversal, the Company performed impairment reversal tests on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $492.2 million (net of $170.7 million deferred income tax expense) of impairment reversal was recorded.

​

In the fourth quarter of 2020, indicators of impairment were present in our France CGUs due to a decrease in estimated reserves as a result of economic revisions. As a result of the indicators of impairment, the Company performed impairment tests on its four France CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 9.5%. Based on the results of the impairment tests completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and no impairment charges were recorded.

​

In the third quarter of 2020, indicators of impairment were present due to a decline in the Company’s market capitalization. As a result of the indicators of impairment, the Company performed impairment tests across all CGUs. The recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of

Vermilion Energy Inc.  ■  Page 20  ■  2021 Management's Discussion and Analysis

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the impairment tests completed, the Company recognized non-cash impairment charges of $35.4 million (net of $12.4 million income tax recovery) in the Neocomian CGU due to increased estimated transportation expenses as a result of an announcement during the quarter that the third-party Grandpuits refinery plans on converting into a zero-crude platform in 2021. As a result of this change, the Company's estimates that incremental transportation expenses will be incurred to transport the crude oil production in the Neocomian, Chaunoy, and Champotran CGUs to alternative refineries in France.

​

In the second quarter of 2020, indicators of impairment were present due to the Company’s market capitalization falling below the carrying value of its net assets as at June 30, 2020. As a result of the indicators of impairment, the Company performed an impairment test. The recoverable amount was determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of the impairment calculations completed, the Company recognized non-cash impairment charges of $53.1 million (net of $16.6 million income tax recovery).

​

In the first quarter of 2020, indicators of impairment were present due to global commodity price forecasts deteriorating from decreases in demand and an increase of supply around the world. As a result of the indicators of impairment, the Company performed impairment tests across all CGUs. The recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of the impairment calculations completed, the Company recognized non-cash impairment charges of $1.2 billion (net of $0.4 billion income tax recovery).

​

Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.

​

Gain on business combinations

A gain on business combination is recognized when the total consideration paid in a business combination is less than the fair value of the net assets acquired. For the year ended December 31, 2021, a gain of $17.2 million was recognized on our purchase of assets in Germany in the second quarter of 2021.

​

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Vermilion Energy Inc.  ■  Page 21  ■  2021 Management's Discussion and Analysis

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Taxes

​

Current income tax rates

​

Vermilion typically pays corporate income taxes in France, Netherlands, and Australia. In addition, Vermilion pays PRRT in Australia which is a profit based tax applied at a rate of 40% on sales less operating expenses, capital expenditures, and other eligible expenditures. PRRT is deductible in the calculation of taxable income in Australia.

​

For 2021 and 2020, taxable income was subject to corporate income tax at the following statutory rates:

​

​ ​ ​ ​ ​ ​
Jurisdiction **** 2021 **** 2020 ****
Canada 24.6 % 25.3 %
United States 21.0 % 21.0 %
France 27.4 % 28.9 %
Netherlands ^(1)^ 50.0 % 50.0 %
Germany 31.4 % 31.6 %
Ireland 25.0 % 25.0 %
Australia 30.0 % 30.0 %

​

^(1)^ In the Netherlands, an additional 10% uplift deduction is allowed against taxable income that is applied to operating expenses, eligible general and administration expenses, and tax deductions for depletion and abandonment retirement obligations.

​

Tax legislation changes

​

On December 21, 2021, the Dutch Senate approved the 2022 Tax Plan that included an increase to the Dutch corporate tax rate from 25.0% in 2021 to 25.8% in 2022. Due to the tax regime applicable to natural gas producers in the Netherlands, the increase to the corporate tax rate is not expected to have a material impact to Vermilion taxes in the Netherlands.

​

On July 1, 2020, the Alberta government reduced the provincial corporate tax rate from 10% to 8%, accelerating the previously enacted schedule of rate reductions.

​

On December 28, 2019, the French Parliament approved the Finance Bill for 2020. The Finance Bill for 2020 provides for a progressive decrease of the French corporate income tax rate for companies with sales below €250 million from 32.0% to 25.8% by 2022.

​

Tax pools

​

As at December 31, 2021, we had the following tax pools:

​

​ ​ ​ ​ ​ ​ ​ ​
(M) Oil & GasAssets **** Tax Losses **** Other **** Total
Canada 1,853,946 ^(1)^​ 1,415,731 ^(4)^​ 17,574 ^^​ 3,287,251
United States 277,505 ^(2)^​ 180,694 ^(7)^​ 20,225 ^^​ 478,424
France 290,715 ^(2)^​ — ^(6)^​ 15,502 ^^​ 306,217
Netherlands 35,113 ^(3)^​ — ^(6)^​ — ^^​ 35,113
Germany 204,766 ^(3)^​ 147,608 ^(5)^​ 17,810 ^^​ 370,184
Ireland — ​ 944,053 ^(4)^​ — 944,053
Australia 204,215 ^(1)^​ 3,374 ^(4)^​ — 207,589
Total 2,866,260 ​ 2,691,460 **** 71,111 **** 5,628,831

All values are in US Dollars.

​

(1) Deduction calculated using various declining balance rates.
(2) Deduction calculated using a combination of straight-line over the assets life and unit of production method.
--- ---
(3) Deduction calculated using a unit of production method.
--- ---
(4) Tax losses can be carried forward and applied at 100% against taxable income.
--- ---
(5) Tax losses carried forward are available to offset the first €1 million of taxable income and 60% of taxable profits in excess each taxation year.
--- ---
(6) Tax losses carried forward are available to offset the first €1 million of taxable income and 50% of taxable profits in excess each taxation year.
--- ---
(7) Tax losses of $47 million created prior to January 1, 2018 are carried forward and applied at 100% against taxable income, tax losses of $134 million created after January 1, 2018 are carried forward and applied to 80% of taxable income in each taxation year.
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Vermilion Energy Inc.  ■  Page 22  ■  2021 Management's Discussion and Analysis

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​

​

Financial Position Review

​

Balance sheet strategy

​

We regularly review whether our forecast of fund flows from operations is sufficient to finance planned capital expenditures, dividends, and abandonment and reclamation expenditures. To the extent that fund flows from operations forecasts are not expected to be sufficient to fulfill such expenditures, we will evaluate our ability to finance any shortfall by reducing some or all categories of expenditures, with issuances of equity, or with debt (including borrowing using the unutilized capacity of our existing revolving credit facility). We have a long-term goal of achieving and maintaining a ratio of net debt to fund flows from operations of approximately 1.0.

​

As at December 31, 2021, we have a ratio of net debt to fund flows from operations of 1.79. We will continue to monitor for changes in forecasted fund flows from operations and, as appropriate, will adjust our exploration and development capital plans (and associated production targets) to target optimal debt levels. We intend to continue to strengthen our balance sheet in 2022 through debt reduction and have announced a quarterly dividend in the first quarter of 2022. We will continue to assess our return of capital strategy as we strengthen our balance sheet and may further augment our return of capital to shareholders as debt targets are achieved.

​

Net debt

​

Net debt is reconciled to long-term debt, as follows:

​

​ ​ ​ ​
​ As at
(M) Dec 31,2021 **** Dec 31,2020 (revised)
Long-term debt 1,651,569 1,933,848
Adjusted working capital deficiency (1) 9,284 35,258
Unrealized FX on swapped borrowings (16,067) 40,219
Net debt 1,644,786 2,009,325
​ ​ ​ ​
Ratio of net debt to four quarter trailing fund flows from operations 1.79 4.00

All values are in US Dollars.

​

^(1)^ Adjusted working capital is a non-GAAP financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers, it is defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, capital measure disclosed above. Reconciliation to primary financial statement measures can be found in the “Non-GAAP Financial Measures and Other Specified Financial Measures” section of this document.

​

In Q3 2021, the Company adjusted the calculation for net debt in order to provide more meaningful and comparable information to users.

​

As at December 31, 2021, net debt decreased to $1.6 billion (December 31, 2020 - $2.0 billion (revised)) primarily as a result of debt repayments of $341.3 million funded by free cash flow generated for the year ended December 31, 2021 of $545.1 million. We will draw on unutilized capacity of the revolving credit facility to fund working capital deficiencies. The ratio of net debt to four quarter trailing fund flows from operations decreased to 1.79 (December 31, 2020 - 4.00 (revised)) mainly due to the decrease in net debt combined with higher four quarter trailing fund flows from operations.

​

Long-term debt

​

The balances recognized on our balance sheet are as follows:

​

​ ​ ​ ​
​ As at
(M) Dec 31,2021 **** Dec 31,2020
Revolving credit facility 1,273,755 1,555,215
Senior unsecured notes 377,814 378,633
Long-term debt 1,651,569 1,933,848

All values are in US Dollars.

​

Vermilion Energy Inc.  ■  Page 23  ■  2021 Management's Discussion and Analysis

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Revolving Credit Facility

​

As at December 31, 2021, Vermilion had in place a bank revolving credit facility maturing May 31, 2024 with terms and outstanding positions as follows:

​

​ ​ ​ ​
​ As at
(M) Dec 31,2021 **** Dec 31,2020
Total facility amount 2,100,000 2,100,000
Amount drawn (1,273,755) (1,555,215)
Letters of credit outstanding (11,035) (23,210)
Unutilized capacity 815,210 521,575

All values are in US Dollars.

​

As at December 31, 2021, the revolving credit facility was subject to the following financial covenants:

​

​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ As at
Financial covenant **** Limit **** Dec 31,2021 **** Dec 31,2020
Consolidated total debt to consolidated EBITDA Less than 4.0 **** 1.61 3.48
Consolidated total senior debt to consolidated EBITDA Less than 3.5 **** 1.24 2.82
Consolidated EBITDA to consolidated interest expense Greater than 2.5 **** 14.78 8.12

​

Our financial covenants include financial measures defined within our revolving credit facility agreement that are not defined under IFRS. These financial measures are defined by our revolving credit facility agreement as follows:

● Consolidated total debt: Includes all amounts classified as “Long-term debt”, “Current portion of long-term debt”, and “Lease obligations” (including the current portion included within "Accounts payable and accrued liabilities" but excluding operating leases as defined under IAS 17) on our balance sheet.
● Consolidated total senior debt: Defined as consolidated total debt excluding unsecured and subordinated debt.
--- ---
● Consolidated EBITDA: Defined as consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items, adjusted for the impact of the acquisition of a material subsidiary.
--- ---
● Total interest expense: Includes all amounts classified as "Interest expense", but excludes interest on operating leases as defined under IAS 17.
--- ---

​

In addition, our revolving credit facility has provisions relating to our liability management ratings in Alberta and Saskatchewan whereby if our security adjusted liability management ratings fall below specified limits in a province, a portion of the asset retirement obligations are included in the definitions of consolidated total debt and consolidated total senior debt. An event of default occurs if our security adjusted liability management ratings breach additional lower limits for a period greater than 90 days. As of December 31, 2021, Vermilion's liability management ratings were higher than the specified levels, and as such, no amounts relating to asset retirement obligations were included in the calculation of consolidated total debt and consolidated total senior debt.

​

Senior Unsecured Notes

On March 13, 2017, Vermilion issued US $300.0 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum, paid semi-annually on March 15 and September 15, and mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes rank equally in right of payment with existing and future senior indebtedness of the Company.

​

The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.

​

Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table plus any accrued and unpaid interest, if redeemed during the twelve-month period beginning on March 15 of each of the years indicated below:

​

​ ​ ​ ​
Year **** Redemption price ****
2021 102.813 %
2022 101.406 %
2023 and thereafter 100.000 %

​

Vermilion Energy Inc.  ■  Page 24  ■  2021 Management's Discussion and Analysis

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Shareholders' capital

​

The following table outlines our dividend payment history:

​

​ ​ ​ ​
Date **** Monthly dividend per unit or share
January 2003 to December 2007 ​ $ 0.170
January 2008 to December 2012 ​ $ 0.190
January 2013 to December 2013 ​ $ 0.200
January 2014 to March 2018 ​ $ 0.215
April 2018 to February 2020 ​ $ 0.230
March 2020 ​ $ 0.115

​

In the first quarter of 2022 we announced our plan to distribute a fixed quarterly dividend due to stronger commodity prices and strengthened balance sheet.

​

The following table reconciles the change in shareholders’ capital:

​

​ ​ ​ ​ ​
Shareholders’ Capital **** Number of Shares ('000s) **** Amount ($M)
Balance at December 31, 2020 **** 158,724 **** 4,181,160
Vesting of equity based awards **** 2,385 **** 49,922
Equity based compensation **** 911 **** 8,365
Share-settled dividends on vested equity based awards **** 241 **** 2,326
Balance at December 31, 2021 **** 162,261 **** 4,241,773

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As at December 31, 2021, there were approximately 6.4 million equity based compensation awards outstanding. As at March 4, 2022, there were approximately 162.3 million common shares issued and outstanding.

​

​

Contractual Obligations and Commitments

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As at December 31, 2021, we had the following contractual obligations and commitments:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(M) Less than 1 year **** 1 - 3 years **** 3 - 5 years **** After 5 years **** Total
Long-term debt (1) 48,375 1,354,761 391,037 — 1,794,173
Lease obligations 36,776 34,946 29,908 9,011 110,641
Processing and transportation agreements 25,394 30,449 13,014 27,620 96,477
Purchase obligations 29,667 7,035 21 — 36,723
Drilling and service agreements 27,916 17,954 27,986 — 73,856
Total contractual obligations and commitments 168,128 1,445,145 461,966 36,631 2,111,870

All values are in US Dollars.

​

^(1)^ Interest on revolving credit facility calculated assuming an annual interest rate of 2.12%.
^(2)^ Commitments denominated in foreign currencies have been translated using the related spot rates on December 31, 2021.
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​

​

Asset Retirement Obligations

​

As at December 31, 2021, asset retirement obligations were $1,000.6 million compared to $467.7 million as at December 31, 2020. The increase in asset retirement obligations is primarily attributable to a decrease in the credit-adjusted risk-free rate from 10.0% at December 31, 2020 to 4.9% at December 31, 2021, as well as an increase in inflation rates in certain business units. This increase was partially offset by the Euro weakening against the Canadian dollar and obligations settled.

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The present value of the obligation is calculated using a credit-adjusted risk-free rate, calculated using a credit spread added to risk-free rates based on long-term, risk-free government bonds. Vermilion's credit spread is determined using the Company's expected cost of borrowing at the end of the reporting period.

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Vermilion Energy Inc.  ■  Page 25  ■  2021 Management's Discussion and Analysis

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The risk-free rates and credit spread used as inputs to discount the obligations were as follows:

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​ ​ ​ ​ ​ ​ ​ ​
​ **** Dec 31,2021 **** Dec 31,2020 **** Change ****
Credit spread added to below noted risk-free rates 4.9 % 10.0 % (5.1) %
Country specific risk-free rate **** ​ ​ ​ ​ ​ ​
Canada **** 1.8 % 1.2 % 0.6 %
United States **** 1.9 % 1.6 % 0.3 %
France **** 0.8 % 0.3 % 0.5 %
Netherlands **** (0.3) % (0.6) % 0.3 %
Germany **** 0.1 % (0.2) % 0.3 %
Ireland **** 0.5 % (0.1) % 0.6 %
Australia **** 1.9 % 1.3 % 0.6 %

​

​

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Risks and Uncertainties

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Crude oil and natural gas exploration, production, acquisition and marketing operations involve a number of risks and uncertainties that have affected the financial statements and are reasonably likely to affect them in the future. These risks and uncertainties are discussed further below.

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Commodity prices

Crude oil and natural gas prices have fluctuated significantly in recent years due to supply and demand factors. Changes in crude oil and natural gas prices affect the level of revenue we generate, the amount of proceeds we receive and payments we make on our commodity derivative instruments, and the level of taxes that we pay. In addition, lower crude oil and natural gas prices would reduce the recoverable amount of our capital assets and could result in impairments or impairment reversals.

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Exchange rates

Exchange rate changes impact the Canadian dollar equivalent revenue and costs that we recognize. The majority of our crude oil and condensate revenue stream is priced in US dollars and as such an increase in the strength of the Canadian dollar relative to the US dollar would result in the receipt of fewer Canadian dollars for our revenue. We also incur expenses and capital costs in US dollars, Euros and Australian dollars and thus a decrease in strength of the Canadian dollar relative to those currencies may result in the payment of more Canadian dollars for our expenditures.

​

In addition, exchange rate changes impact the Canadian equivalent carrying balances for our assets and liabilities. For foreign currency denominated monetary assets (such as cash and cash equivalents, long-term debt, and intercompany loans), the impact of changes in exchange rates is recorded in net earnings as a foreign exchange gain or loss.

​

Production and sales volumes

Our production and sales volumes affect the level of revenue we generate and correspondingly the royalties and taxes that we pay. In addition, significant declines in production or sales volumes due to unforeseen circumstances may also result in an indicator of impairment and potential impairment charges.

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Interest rates

Changes in interest rates impact the amount of interest expense we pay on our variable rate debt and also our ability to obtain fixed rate financing in the future.

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Tax and royalty rates

Changes in tax and royalty rates in the jurisdictions that we operate in would impact the amount of current taxes and royalties that we pay. In addition, changes to substantively enacted tax rates would impact the carrying balance of deferred tax assets and liabilities, potentially resulting in a deferred tax recovery or incremental deferred tax expense.

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In addition to the above, we are exposed to risk factors that impact our company and business. For further information on these risk factors, please refer to our Annual Information Form, available on SEDAR at www.sedar.com or on our website at www.vermilionenergy.com.

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COVID-19

COVID-19 has continued to result in varied actions by governments worldwide, which has had an effect in all of our operating jurisdictions. The actions taken by these governments have typically included, but is not limited to travel bans, mandatory and self-imposed quarantines and isolations, social distancing, and the closing of non-essential businesses which in the past has had, and in the future may have significant negative effects on economies, including a substantial decline in crude oil and natural gas demand.

Vermilion Energy Inc.  ■  Page 26  ■  2021 Management's Discussion and Analysis

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The extent of the risks surrounding the severity and timing of the COVID-19 pandemic is continually evolving; therefore, there is significant risk and uncertainty which may have a material and adverse effect on our operations. The following risks disclosed in our Annual Information Form for the year ended December 31, 2021 may be exacerbated as a result of the continued COVID-19 pandemic: market risks related to the volatility of oil and gas prices, volatility of foreign exchange rates, volatility of the market price of common shares, and hedging arrangements; operational risks related to increasing operating costs or declines in production levels, operator performance and payment delays, and government regulations; financing risks related to the ability to obtain additional financing, ability to service debt, and variations in interest rates and foreign exchanges rates; and other risks related to cyber-security as parts of our workforce continue to work through remote connections, accounting adjustments, effectiveness of internal controls, and reliance on key personnel, management, and labour.

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Due to the COVID-19 pandemic, Vermilion has implemented social distancing measures which require deemed non-critical employees to work remotely and has encouraged critical staff to do the same. These measures may, but are not expected to have an effect on the design and performance of internal controls throughout the Company and will be continually monitored to mitigate any risks associated with changes in its control environment.

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As part of our cyber security program, policies governing access, networks, and systems are reviewed at minimum on an annual basis. In 2020, with increased work from home requirements due to COVID-19, a further risk assessment was performed against these policies and a series of recommendations were implemented to further strengthen the organization’s cyber resiliency while balancing the need to enable our workforce to continue to be efficient when working from home. In, 2021, we continued efforts to raise staff awareness in order to reduce cyber security risks and safeguard assets.

​

Other than Vermilion's response to COVID-19 in 2020, there has been no change in Vermilion’s internal control over financial reporting during the period covered by this MD&A that materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

​

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Financial Risk Management

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To mitigate the risks affecting our business whenever possible, we seek to hire personnel with experience in specific areas. In addition, we provide continued training and development to staff to further develop their skills. When appropriate, we use third party consultants with relevant experience to augment our internal capabilities with respect to certain risks.

​

We consider our commodity price risk management program as a form of insurance that protects our cash flow and rate of return. The primary objective of the risk management program is to support our dividends and our internal capital development program. The level of commodity price risk management that occurs is dependent on the amount of debt that is carried. When debt levels are higher, we will be more active in protecting our cash flow stream through our commodity price risk management strategy.

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When executing our commodity price risk management programs, we use derivative financial instruments encompassing over-the-counter financial structures as well as fixed and collar structures to economically hedge a part of our physical crude oil and natural gas production. We have strict controls and guidelines in relation to these activities and contract principally with counterparties that have investment grade credit ratings.

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Critical Accounting Estimates

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The preparation of financial statements in accordance with IFRS requires us to make estimates. Critical accounting estimates are those accounting estimates that require us to make assumptions about matters that are highly uncertain at the time the estimate is made and a different estimate could have been made in the current period or the estimate could change period-to-period.

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The carrying amount of asset retirement obligations

The carrying amount of asset retirement obligations ($1,000.6 million as at December 31, 2021) is the present value of estimated future costs, discounted from the estimated abandonment date using a credit-adjusted risk-free rate. Estimated future costs are based on our assessment of regulatory requirements and the present condition of our assets. The estimated abandonment date is based on the reserve life of the associated assets. The credit-adjusted risk-free rate is based on prevailing interest rates for the appropriate term, risk-free government bonds adjusted for our estimated credit spread (determined by reference to the trading prices for debt issued by similarly rated independent oil and gas producers). Changes in these estimates would result in a change in the carrying amount of asset retirement obligations and capital assets and, to a significantly lesser degree, future accretion and depletion expense.

​

The estimated abandonment date may change from period to period as the estimated abandonment date changes in response to new information, such as changes in reserve life assumptions or regulations. A one year increase or decrease in the estimated abandonment date would decrease or increase asset retirement obligations (with an offsetting increase to capital assets) by approximately $37.3 million.

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Vermilion Energy Inc.  ■  Page 27  ■  2021 Management's Discussion and Analysis

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The estimated credit-adjusted risk-free rate may change from period to period in response to market conditions in Canada and the international jurisdictions that we operate in. A 0.5% increase or decrease in the credit-adjusted risk-free rate would decrease or increase asset retirement obligations by approximately $73.0 million.

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The recognition of deferred tax assets

The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on estimated future commodity prices and estimates of reserves. As at December 31, 2021, the deferred tax asset balance of $375.0 million related to Canada ($310.5 million) and Ireland ($64.5 million).

​

In Canada, we have $28.7 million of non-expiring oil and gas tax pools where $7.1 million of deferred tax assets has not been recognized as there is uncertainty on our ability to fully use these pools based on estimated future taxable profits. Estimated future taxable profits are calculated using proved and probable reserves and forecast pricing. A 5% increase or decrease in sales would increase or decrease the amount of deferred tax assets recognized by approximately $0.3 million.

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In Ireland, we have $409.7 million of non-expiring tax loss pools where $102.4 million of deferred tax assets has not been recognized as there is uncertainty on our ability to fully use these losses based on estimated future taxable profits. Estimated future taxable profits are calculated using proved and probable reserves and forecast pricing. A 5% increase or decrease in sales would increase or decrease the amount of deferred tax assets recognized by approximately $8.5 million.

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Depletion and depreciation

Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives. Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and depreciation.

​

The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production.

​

Key judgments that are made to reserve estimates such as revisions in reserves, changes in forecast commodity prices, foreign exchange rates, capital or operating costs would impact the amount of depletion and depreciation recorded in a period.

​

The estimated recoverable amount of cash generating units

Each reporting period, we assess our CGUs for indicators of impairment or impairment reversal. If an indicator of impairment or impairment reversal is identified, we estimate the recoverable amount of the CGU. Judgment is required when determining whether indicators of impairment or impairment reversal exist, as well as judgments made when determining the recoverable amount of a CGU. Changes in any of the key judgments, such as a revision in reserves, changes in forecast commodity prices, foreign exchange rates, capital or operating costs would impact the estimated recoverable amount.

​

In the fourth quarter of 2021, indicators of impairment reversal were present in our France - Neocomian CGU due to increases and stabilization of commodity prices resulting in increased cash flow estimates. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGU and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGU tested and $17.7 million (net of $6.2 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an lower impairment reversal of $6.4 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $12.9 million.

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In the third quarter of 2021, indicators of impairment reversal were present in our Ireland CGU due to an increase and stabilization in forecast gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the Ireland CGU and the recoverable amount was determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, the recoverable amount was determined to be greater than the carrying value and $16.7 million (net of $5.5 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an impairment of $5.6 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in an impairment of $24.8 million. A 1% increase in the assumed after-tax discount rate or a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would not effect the amount of impairment reversal recorded.

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Vermilion Energy Inc.  ■  Page 28  ■  2021 Management's Discussion and Analysis

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In the second quarter of 2021, indicators of impairment reversal were present in our Alberta, Saskatchewan, Germany, Ireland and United States CGUs due to an increase and stabilization in forecast oil and gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $460.4 million (net of $133.2 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an lower impairment reversal of $116.8 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $254.9 million.

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In the first quarter of 2021, indicators of impairment reversal were present in our Australia, Alberta, Saskatchewan, and United States CGUs due to an increase and stabilization in forecast crude oil prices versus 2020 when impairment charges were taken. As a result of the indicators of impairment reversal, the Company performed impairment reversal tests on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $492.2 million (net of $170.7 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an lower impairment reversal of $146.4 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $285.6 million.

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In the fourth quarter of 2020, indicators of impairment were present in our France CGUs due to a decrease in estimated reserves as a result of economic revisions. As a result of the indicators of impairment, the Company performed impairment tests on its four France CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 9.5%. Based on the results of the impairment tests completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and no impairment charges were recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an impairment of $5.6 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in an impairment of $24.8 million.

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In the third quarter of 2020, indicators of impairment were present due to a decline in the Company’s market capitalization. As a result of the indicators of impairment, the Company performed impairment tests across all CGUs. The recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $35.4 million (net of $12.4 million income tax recovery) in the Neocomian CGU due to increased estimated transportation expenses as a result of an announcement during the quarter that the third-party Grandpuits refinery plans on converting into a zero-crude platform in 2021. As a result of this change, the Company's estimates that incremental transportation expenses will be incurred to transport the crude oil production in the Neocomian, Chaunoy, and Champotran CGUs to alternative refineries in France. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of impaired assets by $5.2 million (resulting in a $53.0 million impairment) while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of impaired assets by $13.2 million (resulting in a $61.0 million impairment).

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In the second quarter of 2020, indicators of impairment were present due to a decline in the Company’s market capitalization. As a result of the indicators of impairment, the Company performed impairment tests across all CGUs. The recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $53.1 million (net of $16.6 million income tax recovery). A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of impaired assets by $14.0 million (resulting in a $83.7 million impairment) while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of impaired assets by $37.5 million (resulting in a $107.2 million impairment).

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In the first quarter of 2020, indicators of impairment were present due to global commodity price forecasts deteriorating from decreases in demand and an increase of supply around the world. As a result of the indicators of impairment, the Company performed impairment tests across all CGUs. The recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 11.5%. Based on the results of the impairment tests completed, the Company recognized non-cash impairment charges of $1.2 billion (net of $0.4 billion income tax recovery). A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of impaired assets by $137.7 million (resulting in a $1.7 billion impairment) while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of impaired assets by $272.3 million (resulting in a $1.8 billion impairment).

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Vermilion Energy Inc.  ■  Page 29  ■  2021 Management's Discussion and Analysis

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Off Balance Sheet Arrangements

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We have not entered into any guarantee or off balance sheet arrangements that would materially impact our financial position or results of operations.

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Recently Adopted Accounting Pronouncements

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Vermilion did not adopt any new accounting pronouncements as at December 31, 2021.

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Health, Safety and Environment

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We are committed to ensuring we conduct our activities in a manner that protects the health and safety of our employees, our contractors and the public. Our HSE Vision is to consistently apply our core values of Excellence, Trust, Respect and Responsibility. We strive to create a workplace free of incidents and ensures that our proactive culture and behaviours create a high-reliability organization where HSE is fully integrated into our business – it is our way of life. Our mantra is HSE: Everywhere. Everyday. Everyone.

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Vermilion seeks to maintain health, safety and environmental practices and procedures that comply with or exceed regulatory requirements and industry standards. All of our personnel are expected to work safely and in accordance with established regulations and procedures, and we seek to reduce impacts to land, water and air. During 2021 we:

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● Maintained clear priorities around 5 key focus areas of HSE Culture, Communication and Knowledge Management, Management Systems, Environmental & Operational Stewardship, and Health;
● Proactively adjusted our Emergency Response and Business Continuity Plans to address COVID-19 changes with a primary focus on healthy and safe operations;
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● Completed ongoing HSE performance monitoring through key performance indicator development, analysis and reporting;
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● Continued comprehensive investigations of our incidents and near misses to ensure root causes were identified and corrective actions effectively implemented;
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● Updated our HSE Strategy and further enhanced our Visible Active Leadership program;
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● Developed enhancements of our recently implemented Event and Environmental Management Information System;
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● Developed and initiated implementation of our new Process Safety Management System;
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● Continued reinforcement of the “Vermilion High 5”, an individual safety awareness initiative aimed at keeping front-line workers safe;
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● Updated our in-house fatal risk program to the Energy Safety Canada and International Oil and Gas Producers Life Saving Rules;
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● Submitted our CDP Water and Climate reports;
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● Managed our waste products by reducing, recycling and recovering;
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● Reduced long-term environmental liabilities through decommissioning, abandoning and reclaiming well leases and facilities;
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● Continued the development of a robust hazard identification and risk mitigation program specific to environmentally sensitive areas;
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● Performed auditing, management inspections and workforce observations to measure compliance and identify potential hazards and apply risk reduction measures; and
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● Assessed the effectiveness of our performance management standards across multiple business units.
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We are a member of several organizations concerned with environment, health and safety, including numerous regional co-operatives and synergy groups. In the area of stakeholder relations, we work to build long-term relationships with environmental stakeholders and communities.

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Sustainability - Environmental, Social and Governance (ESG)

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As an international company, Vermilion responsibly produces essential energy while delivering long-term value to our stakeholders. We believe that integrating sustainability principles into our business increases shareholder returns, enhances development opportunities, reduces long-term risks, and supports the wellbeing of key stakeholders including the communities in which we operate.

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Vermilion has established a leadership position in sustainability performance and disclosure, launching our first CDP Climate submission and our first Sustainability Report in 2014, with data to 2012, aligned with the Global Reporting Initiative (GRI). We have since aligned our sustainability reporting with additional recommendations from the Task Force on Climate-related Financial Disclosure (TCFD), the Value Reporting Foundation (VRF) including the Sustainability Accounting Standards Board (SASB), and the International Sustainability Standards Board (ISSB). Of note this year, we have maintained our discussion of Governance in the Information Circular and provided detailed discussions of Strategy, Risk Management, and Metrics and Targets in this MD&A. This recognizes the importance of climate-specific disclosure while reflecting its intersectionality with other environment-related risks and opportunities, social factors such as safety and community engagement, and governance issues.

Vermilion Energy Inc.  ■  Page 30  ■  2021 Management's Discussion and Analysis

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Sustainability and Climate-Related Strategy

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Vermilion understands our stakeholders’ expectations that we deliver strong financial results in a responsible and ethical way. As a result, we align our strategic priorities in the following order:

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● the safety and health of our staff and those involved directly or indirectly in our operations;
● our responsibility to protect the environment. We follow the Precautionary Principle introduced in 1992 by the United Nations "Rio Declaration on Environment and Development" by using environmental risk as part of our development decision criteria, and by continually seeking improved environmental performance in our operations; and
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● economic success through a focus on operational excellence across our business, which includes technical and process excellence, efficiency, expertise, stakeholder relations, and respectful and fair treatment of staff, contractors, partners and suppliers.
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Reflecting these priorities, we have positioned Vermilion purposefully within the energy transition. Our scenario analysis demonstrated that Vermilion can best contribute by focusing on producing energy responsibly: safely, reliably and cost-effectively. Our Sustainability Report provides further details at: sustainability.vermilionenergy.com.

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Vermilion Energy Inc.  ■  Page 31  ■  2021 Management's Discussion and Analysis

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Description of Sustainability- and Climate-related Risks and Opportunities, and Impacts

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Given the intersectionality of environmental and social issues, and their impact over varying timeframes, we have identified climate-related risks and opportunities within short-term (0-3 years), medium-term (3-6 years) and long-term (6-50 years) horizons. We describe these below, along with their potential company and financial impact (assessed using processes such as scenario analysis, cost projections and our Carbon Liability Assessment Tool), and our resulting management approach, including operations such as equipment upgrade, and capital allocation. Our annual CDP Climate Change and Water Security submissions provide additional information, including where in the value chain these risks and opportunities occur: see “Download Report” at sustainability.vermilionenergy.com.

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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
Short-term Transition Risks (0-3 Years)
Policy and Legal:<br><br>Increased Pricing of GHG Emissions<br><br>e.g. Carbon Tax Short-term impact is primarily in Canada and Ireland. Canadian Federal Greenhouse Gas Pollution Pricing Act has set carbon tax rates at $50 per tCO2e in 2022, rising to $170 by 2030. Our exposure is mitigated by provincial responses to the Act, including Alberta's Technology Innovation and Emissions Reduction (TIER) regulation and Saskatchewan’s Output-Based Pricing System (OBPS). Our Ireland operations are subject to the EU ETS and Ireland Carbon Tax systems.<br><br>Longer-term impact rests on carbon pricing’s vulnerability to changes in government policy. We note the political focus in the EU, Canada and USA on a COVID-19 economic recovery that is both climate-focused and responsive to social justice issues such as labour practices. Based on the probable cost scenarios identified in our Carbon Liability Assessment Tool, and our direct experience, our Canadian carbon tax liability is not expected to exceed $0.5MM/year in the medium term. The Ireland EU ETS liability was forecasted to be approximately $2.8MM in 2021, increasing to approximately $3.2MM in 2025 and $4.2MM in 2030. The Ireland Carbon Tax liability is forecasted to be an additional approximately $0.2MM/year over this period. We voluntarily opted into Alberta’s TIER regulation, which provides tax exemptions contingent on emissions reduction activities that Vermilion is in the process of implementing. Our ongoing efforts to reduce the energy and emissions intensity of our operations are integral to managing this risk, including our announcement of two emission reduction targets in 2021. Vermilion continues to monitor and comply with taxation requirements, engaging external subject matter experts and in-house experts in engineering, asset integrity, optimization, health safety & environment, and sustainability that assess our operations.
​ ​ ​ ​
Policy and Legal:<br><br>Enhanced Emissions Reporting Obligations Emissions reporting obligations are an ongoing risk and can change due to political and regulatory evolution. The impact to Vermilion would be a decreased netback on a per BOE basis, due to increased expenditures for staff time and system development and implementation. Based on the current output of Vermilion's facilities in Canada and Europe and on the current regulated thresholds, the cost associated with meeting emission reporting obligations will likely increase in the short-term. The financial impact is a small increase in operational cost associated with the management and quantification of emissions to meet new reporting requirements. This is built into Vermilion's operating expenses and is currently estimated at $0.4MM annually. Regulations in all of our business units are monitored on an ongoing basis, and assumptions/scenario planning is used annually to assess risk. In Canada, we implemented an external emission data gathering software in 2021 to support the evolving regulatory landscape. Vermilion also engages stakeholders relating to emissions reporting obligations. Management of this risk is built into Vermilion's operations and our ERM.
​ ​ ​ ​
Policy and Legal<br><br>and Technology:<br><br>Mandates on and Regulation of Existing Products and Services Vermilion's operations are subject to regional regulatory changes that result in changes to equipment requirements such as engineering Operational changes to comply with methane reduction regulations is expected at approx. $1.5MM in the short term, with those associated Vermilion is allocating resources to complete these works on a planned program basis, as opposed to a reactive single replacement

Vermilion Energy Inc.  ■  Page 32  ■  2021 Management's Discussion and Analysis

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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
and equipment modifications to reduce carbon emissions and / or emissions of criteria air contaminants. The most likely short-term impact is regulations in Canada to reduce methane emissions, in France to reduce flaring and in Netherlands to reduce NOx. with eliminating routine flaring in France subject to a detailed review in 2022. program, resulting in an overall reduction in costs associated with the work. Tying in vented equipment to flaring infrastructure in Canada is an example of projects planned in the near term to address this risk; in Netherlands we have used NOx scrubbers on recent drills and purchased NOx certificates for upcoming drills.
Medium-term Transition Risks (3-6 Years)
Policy and Legal:<br><br>Changes in Emissions Regulations The risk associated with a change in emission regulations in one or more of our business units is accounted for by Vermilion's Enterprise Risk Matrix, with mitigation measures being reviewed, updated, and implemented on an annual basis. A shift in international regulations may also result in an impact to Vermilion's supply chain, resulting in a limitation of market access or direct impact to the price of our products. As Vermilion maintains a diversified asset base, we believe the risk to the marketability of our products is low. Based on the anticipated changes in the various regulatory regimes under which Vermilion operates, the financial impact due to a regulatory change over the next 3 years is anticipated to be less than $2.0MM. This does not include the cost associated with emission reduction projects completed on an annual basis, or previous projects that have annual emissions reductions. Our ongoing efforts to proactively reduce the energy and emissions intensity of our operations are integral to managing this risk, including our announcement of two emission reduction targets in 2021. We are also working with external partners to further implement and develop emission reduction technologies that are economic to the Company, in part due to the potential generation of carbon credits.
Medium-term Transition Risks (3-6 Years)
Market and Reputational: Changing Customer Behaviour As consumers and governments become more socially aware of the sources of their energy, negative perceptions of organizations or production methods have the potential to impact energy sector companies through company valuations, restricted licensing and permitting, and stakeholder concerns leading to opposition to our activities. The impact of decreased consumer confidence and perception is not calculable. On a per share basis, the market impact of the loss of $1 per share would be approximately $156.0MM. The direct cost of Vermilion's operating excellence and risk management cannot be quantified on a single risk basis. Based on stakeholder engagement, Vermilion believes that independent assessments of our operations by third parties are an important tool to demonstrate our responsible approach to production of essential energy. As a result, we have sought and achieved Equitable Origin responsible gas producer certification for 3 of our Canadian sites, the AFNOR CSR Committed label in France, and the Business Working Responsibly mark in Ireland.
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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
Medium-term Physical Risks (3-6 Years)
Acute:Increased Severity of Extreme Weather Events such as Cyclones and Floods Vermilion owns and operates an offshore platform in the Wandoo field off northwestern Australia, co-owns and operates the Corrib project off the Irish coast, and owns and operates oil fields in the coastal area of SW France. Extreme weather events have the potential to directly impact our offshore operations resulting in down time or damage to infrastructure, and can impact the downstream handling capacity of our partners, resulting in a limitation to the distribution and sale of our products. Based on the value of the Wandoo Platform and a 1-in-10,000-year cyclonic event, the financial implications associated with damage due to a severe weather event is estimated at $234.5MM (total impact before insurance). The third-party costs associated with potential damages from extreme weather events are not tracked. Vermilion maintains insurance as a mitigative measure to reduce the financial impact associated with damage to our assets due to severe weather events. We also have a robust asset integrity program that maintains our offshore facilities to their original design specifications of CAT 5 hurricane force. We also have protocols for monitoring and preparing for cyclones, and have invested in our emergency response capabilities in the event of damage to our assets due to severe weather.
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Long-term Transition Risks (6-50 Years)
Technology:<br><br>Substitution of existing products and services with lower emissions options Although we see demand for oil and natural gas remaining robust in the short- to mid-term, it is likely that demand for oil and, to a lesser degree, natural gas will eventually fall as the energy transition evolves and various alternatives for renewable energy options become technologically and economically available. This could impact the need for our products in the longer term, post 2030 for oil and even further out for natural gas. As 2021 and early 2022 have demonstrated, it will be critical to maintain adequate supplies of both oil and natural gas during the energy transition, to provide both accessibility and affordability. Given the uncertain timeline and progression of the energy transition, and supply-demand dynamics, we are not using a financial forecast for impact. We are, however, using our scenario analysis to identify potential opportunities that would mitigate the risk to our products. Based on our scenario analysis, we identified the need to explore new and evolving technologies and processes to identify synergistic fits for our business in both traditional and renewable energy production. We are pursuing this via our established track record in geothermal energy from produced water, for which our internal expertise in engineering, geoscience and drilling is particularly well suited. We are also investing in early R&D in other areas, such as biogas and the conversion of traditional oil and gas assets to geothermal and hydrogen production, to better understand the long-term potential.

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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
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Long-term Physical Risks (6-50 Years)
Chronic:<br>Changes in Temperature Extremes, Including Rising Mean Temperatures A decrease or increase in the temperature extremes experienced in winter/summer months (i.e. lower seasonal lows, higher seasonal highs) could result in an increase in fuel gas for a variety of equipment essential for safe production, along with additional equipment (e.g. building heaters, line heaters). This would require additional resources (infrastructure) as well as increase our carbon footprint. Temperature extremes also have the potential to increase capital costs associated with drilling, completion and workover operations due to increased timelines, decreased productivity, equipment breakdown, etc. For example, an overall increase in seasonal lows (warmer winters) would have a direct impact on Vermilion's more northern onshore operations, via a decreased ability to access lands and an increase in construction capital requirements. The financial implications on an annual basis are difficult to quantify; however, based on Vermilion's experience, the most significant financial implications would result from shutdowns in drilling or completions locations. The estimated cost of this would be $0.5MM per day of delay. As weather extremes cannot be controlled, Vermilion uses our Management Systems and processes to protect the health and safety of our workers, contractors and the public, and to protect the environment from adverse effect. For example, we have reduced the potential impact related to access in remote assets by using multi-well pads wherever possible. This would significantly decrease capital considerations in the event that limited frost days occurred. Each risk associated with weather is assessed on a case-by-case basis.
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Chronic:<br><br>Changes In Precipitation Patterns and Extreme Variability in Weather Patterns Vermilion holds assets inland, in coastal regions, and offshore, where a change in precipitation could negatively impact on operations due to drought or flooding. Flooding could result in limited access to locations / facilities, and poses a risk to our corporate headquarters. Alternatively, drought conditions could impact the availability of surface and / or groundwater, which Vermilion, in part, relies on for drilling and completion activities. This could negatively impact forecasted growth by increasing the timelines and capital costs to bring new infrastructure onto production. The financial implications of a single time event (i.e. wildfire) have been assessed on a case-specific basis, and are believed to be substantive (impact > $10.0MM). Vermilion maintains insurance to mitigate the potential impact of precipitation-related extreme events (i.e. Wildfire, Flooding). As these incidents are out of Vermilion's control, we take all measures possible to ensure effective emergency response to extreme weather events, to ensure the protection of the health and safety of our workers, contractors and the public, the protection of the environment and limiting the financial impact of the event. In the case of a longer term extreme precipitation event or drought, Vermilion would implement water management programs to reduce our reliance on fresh water sources to limit the potential impact on operations.
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Chronic:<br><br>Rising Sea Levels Vermilion owns and operates assets in the Netherlands, where we have assessed the potential risk associated with rising sea levels. This could physically impact our operations due to issues such as flooding, transportation difficulties and supply chain interruptions. Rising sea levels also pose a threat related to the salinization of groundwater. We have estimated that a rise in sea level could have a maximum foreseeable financial impact of $91.3MM at our main gas processing facility Garijp (GTC) in the Netherlands, caused by an extreme 1-in-10000-years tide/extreme wind event. The cost of insurance coverage associated with this risk is estimated at $0.4MM per annum. Other than conventional berm protection, there is no measure available to protect Vermilion's assets in the Netherlands if water levels rise to a level resulting in one of our main facilities being temporarily invaded by sea water. Based on Vermilion's assessment of the probability of these events occurring over the next 5 years being less than 0.05%, Vermilion has accepted this level of risk exposure. Vermilion currently includes a review of this risk in our annual risk management process.
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Short-term Opportunities (0-3 Years)
Products and Services, and<br><br>Resilience:<br><br>Development of New Products and Services through R&D and Directly related to the long-term transitional risk associated with the substitution of low-carbon products, we have the opportunity to participate in the development of those products. This has the potential to reuse our current infrastructure to provide alternative products, such as biogas or hydrogen, or to develop new products such as geothermal energy, creating new revenue streams.<br><br>An example of this opportunity is the geothermal heat we are providing heat from the produced water in our oil operations to develop sustainable agriculture and residential projects near our operations. As this opportunity is in the early stage of assessment, it is difficult to quantify the financial impact, but it is estimated at up to $2.0MM per year in revenue and returns on investment. Potential also exists for significant cost adjustments, as assets slated for abandonment would be repurposed to enable them to continue to generate energy. We are leveraging our technical experts and partnerships to provide input into alternative and renewable energy projects as they are identified. An example of the development of low emission goods/services is our France-based industry partnership with Avenia to expand the use of geothermal energy production in oil production, and a

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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
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Innovation; participation in renewable energy programs geothermal association in Germany. We have also developed criteria for approving the move of these ideas into our Vermilion Opportunity Development Process, which provides clear gates and criteria for considering and implementing such projects.
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Products and Services:<br><br>Access to New Markets More stringent global measures to reduce emissions from individual ships by 30% by 2030, established through amendments to MARPOL Annex VI, came into force on Jan 1 2020, limiting the sulphur content of bunker fuel to a maximum of 0.5%. Vermilion’s Australian Wando facility produces 4500 bbl/d of low sulphur crude oil that meets the needs of refineries in the short term to meet IMO regulations. Vermilion conservatively foresees achieving a premium of $10/bbl for its Wandoo production over the next three years for cumulative incremental revenue of $49.3MM. Vermilion continues to access local markets for our low sulphur production, while exploring regions to expand our operations. Our Marketing group ensures that Vermilion meets its contractual obligation with our buyers in terms of volumes, delivery dates and crude quality, and maintains our reputation of being a reliable source of low sulphur feedstock to refineries.
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Products and Services:<br><br>Ability to Diversify Business Activities; Shift in Consumer Preferences Vermilion maintains a diverse, stable global portfolio of oil and gas assets. Our strong record of safe and socially conscious development of energy resources has provided opportunities to access and develop these resources. We see our commitment to sustainability as core to our business, which has provided important organizational focus on emissions quantification and management. As consumers become more aware of and involved in the selection of their energy sources and associated carbon intensity, we believe that Vermilion will continue to be a top quartile choice, providing us with opportunities not available to peer organizations. The financial impact of changing consumer preferences in difficult to quantify. We foresee revenue opportunities in two distinct areas. (1) In consumers selecting premium energy products, with these products demanding a higher price than other energy sources on the market; currently we estimate the potential impact of premium pricing in the long-term to be $1-5 per BOE, or $31.0MM/year based on $1 at 2021 production levels. (2) Access to more stringent markets, supported by our environmental and sustainability performance. Vermilion has entered into the German, Hungarian, Croatian and Slovak oil and gas operations in the last several years, which our sustainability performance has supported. Based on stakeholder engagement, Vermilion believes that independent assessments of our operations by third parties are an important tool to demonstrate our responsible approach to production of essential energy, and generate premium. As a result, we have sought and achieved Equitable Origin responsible gas producer certification for 3 of our Canadian sites, the AFNOR CSR Committed label in France, and the Business Working Responsibly mark in Ireland. We are currently assessing the potential to expand these certifications.
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Medium-term Opportunities (3-6 Years)
Energy Source:<br><br>Participation in Carbon Market Under the revised EU ETS Directive in effect 2021-2030, it is anticipated that there will be an active market and consumers for the offset credits generated at some of Vermilion's sustainability initiatives around the world. This shift in the cap and trade scheme will likely provide opportunities for Vermilion to generate certified energy reduction / offset credits through our geothermal cogeneration projects in France. Vermilion is not accounting for any short term financial impact. It is currently estimated that following the change to the EU ETS in Phase 4, the carbon price will stabilize at approximately €60per tCO2e; however, this is fluctuating due to the operations of the market. The financial impact to revenue annually is estimated to be up to $1.0MM. We are currently evaluating the benefit that certified offset credits from various emission reduction projects across our operations could provide.<br><br>​<br><br>Examples of projects that have the potential to generate credits include four geothermal co-production projects in France. Vermilion's project assessment framework is applied to each identified opportunity, including considerations associated with emissions offset.

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Category / <br>Issue Description of Impacts^1^ Potential Financial Impact Management Approach
Long-term Opportunities (6-50 Years)
Products and Services:<br><br>Shift in Consumer Preferences Under the Canadian Environmental Protection Act and based on commitments made by the Canadian and Alberta governments and energy utilities relating to COP21, there is a commitment to reduce emissions for coal-fired power generation. Based on this and with a number of power generating facilities in Alberta nearing the end of their service life, the demand for natural gas is likely to increase due to increased use of combined cycle gas turbine (CCGT) power generation. The short term impact of this regulatory change on gas pricing is anticipated to be low and increase to medium in the mid- to long-term. Once the regulations have come into effect and the implementation period has occurred, there is a potential to see an impact on the marketable price and demand for natural gas. As a natural gas and oil producer, Vermilion would benefit from an increase in marketable prices for natural gas in our Canadian operations. Based on 2021 production, an increase in gas price of $1 per MMBTU would impact sales by approximately $85MM. As we move further into the energy transition, we foresee natural gas playing an impactful role as a less carbon intense fuel than other options (i.e. coal). Vermilion continues to focus on the identification of resources and assets where we have the opportunity to apply our industry leading expertise to optimize production while reducing emissions. An example of our strategy to realize this opportunity is our asset base in Alberta, which currently includes a large liquids rich gas play. Vermilion's marketing team is also actively pursuing options for our natural gas production that will enable Vermilion to achieve the best netbacks on production.
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Energy Source:<br><br>Shift Toward Decentralized Energy Generation The carbon intensity of energy used around the world has a direct relationship to where the energy product was generated. Vermilion’s business unit structure supports production and distribution of energy products into local markets. This strategy results in the significant reduction of the carbon footprint of our energy when compared to non-local sources. On an operating netback (sales) basis, based on current estimates, the financial premium of our non-Canadian assets was $450.0MM. Vermilion continues to assess where we can access local markets for our production, while exploring regions to expand our operations. The actions taken in the past several years to realize this opportunity include alterations to our structure, our strategic objectives and our operational development plans to support Vermilion as a distributed energy provider, and exploration and development programs in regions with relatively low energy production as compared to consumption (i.e. Hungary).

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Notes:

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^(1)^Risk summary is based on our fiscal year 2020 environmental reporting through CDP Climate. Fiscal year 2021 environmental reporting will be available in mid-2022.

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Resilience of the Company’s Strategy

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Countries in all of our operating regions are implementing policies to create a low-carbon future for the world’s economy, consistent with a 1.5-2C or lower scenario. As a global energy producer, we have an opportunity to be part of the solution: to help ensure the supply of safe, reliable and affordable energy during this transition. The Board of Directors and senior leadership therefore responded to our risk and opportunity identification using a robust scenario analysis. Vermilion examined two energy transitions scenarios from the World Economic Forum. These compared a Gradual versus Rapid low-carbon transition based on inputs that included the International Energy Agency’s New Policies Scenario (Gradual) and Sustainable Development Scenario (Rapid), which meets the Paris Agreement’s goal to limit global temperature increases to 1.5 to 2ºC. Vermilion examined key factors impacting the speed of the transition – including the influence of new energy technologies; potential speed of their adoption; anticipated changes in policy and regulation; and emerging market pathways such as India – and resulting factors that could impact the Company, including economics (demand, supply, consumer behaviour, and costs of energy); technological advancement; capital availability; government policy; and Company reputation. Among these, government policy was seen as most influential in the near to mid-term.

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We applied these findings to Vermilion’s strategy to 2050 and beyond, described below. In particular, the scenario analysis led us to develop two emission-related targets that were announced in 2021: an aspirational commitment to net zero emissions in our own operations, including Scope 1 and Scope 2 emissions, by 2050, and a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a baseline year of 2019. See Metrics and Targets, below, for more information.

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Overall, our strategy to ensure our resilience under various scenarios rests on three strategic activities:

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● Focusing on efficient and responsible production of oil and natural gas, viewing emissions as potential energy sources:
° Lower carbon fuels. Since 2012, we have shifted our production mix towards natural gas as a cleaner burning fuel than other fossil fuels. We also sell our fuels within the country of production wherever possible, reducing the carbon footprint associated with transportation of the fuel to consumers while increasing national energy security.
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° Socially responsible fuels. We are committed to ensuring that our products are produced in an environmentally and socially responsible manner, respecting worker rights and community engagement. We operate in regions noted for their stable, well-developed fiscal and regulatory policies related to oil and gas exploration and development, and for their robust health, safety, environmental and human rights legislation.
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° Transparency and reporting. We have established a strong record of reporting on greenhouse gas emissions, energy usage and other key environmental metrics, which has supported our emission reduction targets.
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● Implementing technically and economically feasible options for emission reduction, covering combustion, flaring, venting and fugitive emissions:
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° Greater energy efficiency. Many energy and operational efficiency initiatives go hand-in-hand, which in turn helps us minimize our carbon footprint and reduce greenhouse gas emissions.
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° Lower greenhouse gas emission intensity. We are committed to reducing the greenhouse gas emissions associated with our production, with particular focus on methane.
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● Exploring new and evolving technologies and processes to identify synergistic fits for our business in both traditional and renewable energy production:
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° Alternative energy. We are continuing to develop our knowledge and use of alternative energy sources, including geothermal energy, for which our internal expertise in engineering, geoscience and drilling is particularly well suited. This work has begun with the geothermal potential of our produced water, supporting a circular economy model that conserves, reuses and recycles resources to better protect our environment. It is also expanding into areas such as biogas and the conversion of traditional oil and gas assets to geothermal and hydrogen production.
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In addition, we identified two further pillars of our sustainability strategy that are integral to managing sustainability- and climate-related issues:

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Conservation

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We are committed to reducing the impact our operations have, beginning with regulatory compliance across all business units. Our conservation efforts are further focused in three areas:

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● Water: We recognize water as a basic human right, and as a vital resource that is shared among many stakeholders in our communities. We are therefore committed to protecting both the supply and the quality of water sources in our areas of operation by:
° Proactively preventing harm and supporting healthy surface and groundwater bodies
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° Reducing potable and freshwater usage to the lowest level practical, and
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° Taking a lifecycle and circular economy approach to water, exploring opportunities to reuse and recycle products such as produced water
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● Asset Retirement Obligations: We are adapting our long-term Asset Retirement Obligation management to include revitalizing or reusing assets to benefit our environment and our communities.
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● Biodiversity: We are focusing on protecting the species and habitats around us by proactively identifying biodiversity risks and opportunities, and implementing associated plans.
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Community

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Our communities comprise a wide diversity of people and organizations, but they have one key thing in common: they care deeply about the safety, environmental stewardship and corporate citizenship that we bring to our local operations. In addition, our people care deeply about their communities - whether we work there or live there, these are the places we call home. We therefore steward our operations and relationships to demonstrate our commitment to being a responsible producer and a valued and trusted neighbor and business partner, including:

● Transparency with respect to safe and environmentally responsible operations, including our potential impacts on local communities
● Maintaining strong, genuine relationships with our communities, with engagement based on respect, listening and openness, and
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● Creating a shared value focused on local economic and social development
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Sustainability and Climate-Related Risk Management

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Process for Identifying, Assessing and Managing Sustainability- and Climate-related Risks, and

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Integration into the Company’s Enterprise Risk Management (ERM) System

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Sustainability-related risks and opportunities, including those related to climate, are integrated into multi-disciplinary Company-wide risk identification, assessment, and management processes as part of our ERM system, based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. This provides an integrated approach to managing risk as it impacts strategy and performance, and includes Operational, Market & Financial, Credit, Organizational, Political, Regulatory Compliance, Strategic and Reputational, and Sustainability categories. Our sustainability materiality analysis, which assesses issues with impact for both the Company and our key stakeholders, is integrated into our ERM system using the Corporate Risk Register through a collaboration between our Finance, HSE and Sustainability teams.

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Overall, risk management is the responsibility of the Board and the Executive Committee based on a Top-Down, Bottom-Up approach to engage all staff. Top-Down begins with our Board and its committees with clear terms of reference, including oversight for identification and management of specific allocations of risk type. This is translated into action by our Executive Committee, which reviews and manages the ERM process through implementation of associated policies and procedures. Our staff help develop systems, standards and procedures. Bottom-Up is how staff implement, maintain and improve risk management processes, applying the hazard-risk-mitigation process in every part of our business.

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Risks are identified by key staff across our Company, including our Operations, Finance, Health, Safety and Environment, Economics, Government and Public Relations, and Sustainability teams at corporate, business unit and asset levels. These employees have significant experience, and use a wide array of inputs, including operational and facility assessments, technical and research reports, external stakeholder organizations, government policy and regulation changes, industry initiatives, communities and landowners, and non-governmental entities.

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The results are incorporated into our Corporate Risk Register, which provides a consistent framework to ensure the effective tracking and communication of our material risks. Using our Risk Matrix as a prioritization tool, Teams assess severity, likelihood, speed of onset, and vulnerability using scales from 1 to 5 for each factor, described in terms of human, environment, financial, social license and cybersecurity impacts. Every risk case has also been assessed to determine where sustainability- or climate-related risk is a contributing factor. The results are provided annually at minimum to senior management, the Executive Committee and the Board and its Committees as appropriate, who further assess the risks including interdependencies.

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Our risk management approach focuses on reducing the risk to a level as low as reasonably practicable, accepting the risk, and/or controlling it (such as insuring it). For example, if direct mitigation is not possible (e.g. changes in temperature extremes), we would adapt our business processes to reduce the potential impact (e.g. changing work hours to avoid extreme mid-day heat). In other situations (e.g. increasing risk of flood), we may take measures to protect against the risk (e.g. flood controls) while also insuring our operations.

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To support climate risk identification and management, we have developed a Carbon Liability Assessment Tool, with Scope 1 emissions quantification and regulatory information for each business unit. We assessed the price of carbon on both a realized cost and shadow pricing basis, and have identified likely carbon pricing scenarios for all our operating areas. The Tool provides the basis for developing carbon liability risk cases for all business units, supports ongoing identification of carbon opportunities, and supports activities such as business development, taxation review and marginal abatement cost curve preparation. In 2021, we launched development of an Emissions Long-Range Planning Tool, to further support our planning of production, capital allocation, and mergers and acquisitions.

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Sustainability and Climate-Related Metrics and Targets

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Metrics Used to Assess Sustainability- and Climate-Related Risks and Opportunities

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Our sustainability reporting (sustainability.vermilionenergy.com) continues to describe significant economic, environmental, social and governance measures, which are reported with reference to CDP, SASB and GRI. These include but are not limited to:

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● Climate: energy consumption and intensity; investment in and generation of renewable energy; greenhouse gas emission and intensity, including flaring and venting, and avoided emissions; and water withdrawal, including from areas of high baseline water stress, and discharge.
● Environment: Waste generation and management; Asset integrity and spills; and Environmental investment
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● Social: Health and Safety; People; and Community investment
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● Governance: Ethics
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These metrics contribute to our performance for CDP Climate, S&P Global Corporate Sustainability Assessment and Sustainalytics scores, which comprise 10% of the Corporate Performance Scorecard for our Long-term Incentive Plan. In addition, HSE metrics comprise 25% of the scorecard for our Short-Term Incentive Plan. These plans apply to all employees, including our executive team.

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We also track carbon pricing, and have identified actual and likely pricing scenarios for all of our operations based on current government policies and published research relating to the Paris Agreement. For example, in Canada, the 2021 carbon tax was $40 per tCO2e, and in Ireland, carbon pricing was 52 € per tCO2e. Further information is available in our CDP Climate submission, available at sustainability.vermilionenergy.com in the Download Reports section.

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In addition, we benchmark our performance via third-party ESG rating agencies, including:

● CDP Climate Change and Water Security: CDP Climate and Water scores of “B” in 2021 have us tied for the top decile for our industry
● ISS ESG QualityScore: Recognized as a leader in managing risk in our industry with a decile rating of “1” for Environmental and “2’ for Social practices as of February 2022. A decile score of “1” indicates lower governance risk, while “10” indicates higher risk.
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● MSCI ESG Rating: In 2021, Vermilion maintained an MSCI ESG rating of AA.
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● S&P Global Corporate Sustainability Assessment: Vermilion was top of our peer group in S&P Global’s 2021 Corporate Sustainability Assessment, and was selected for inclusion in The Sustainability Yearbook 2022, reflecting sustainability performance within the top 15% of our industry.
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● Sustainalytics ESG Risk Rating: As of February 2022, Vermilion was second in our peer group in the Sustainalytics ESG Risk Rating, and within the top 10 percent of our industry.
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Scope 1, 2 and 3 GHG Emissions Disclosure

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We report Scopes 1, 2 and 3 emissions, which are externally verified under ISO 14064-3. Historical, corporate and business unit data can be found in the Energy and Emissions Performance Metric document available at sustainability.vermilionenergy.com, summarized in the charts below. The 2018 increase in emissions was associated with the acquisition of southeast Saskatchewan assets. Our Scope 1 and 2 emissions intensity and methane emissions intensity decreased in 2019 and 2020, primarily related to our first full year of operatorship for the Corrib gas asset in Ireland, and our focus on reducing post-acquisition emissions over time through superior operations, as we did in 2014 to 2017 following the acquisition of previous Saskatchewan assets. This has been achieved through a variety of gas conservation and recovery initiatives including construction of new infrastructure, operational changes and increased infrastructure runtimes.

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Related Targets and Performance

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Vermilion announced two emission-related targets in 2021:

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● A commitment to net zero emissions in our own operations, including Scope 1 and Scope 2 emissions, by 2050. We are transparent that this is an aspirational goal, and that we will build the plan to achieve this target over time.
● As a first step, we set a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a baseline year of 2019. We intend to set new targets every five years at minimum, building on this foundation while exploring broader options, including the potential to reduce Scope 3 emissions.
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We will track our performance using Scope 1 and 2 absolute and intensity emission metrics. Fiscal year 2021 environmental reporting will be available in mid-2022 at http://sustainability.vermilionenergy.com, where additional targets to reduce emissions and methane in our southeast Saskatchewan assets, reduce Scope 2 emissions in our Netherlands Business Unit, and generate renewable energy in our France Business Unit can also be found.

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For more information on our sustainability- and climate-related performance, please see our 2021 Proxy Statement and Information Circular, online sustainability reporting, particularly the Index and Performance Metrics sections, and 2021 CDP Responses.

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Corporate Governance

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We are committed to a high standard of corporate governance practices, a dedication that begins at the Board level and extends throughout the Company. We believe good corporate governance is in the best interest of our shareholders, and that successful companies are those that deliver growth and a competitive return along with a commitment to the environment, to the communities where they operate, and to their employees.

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We comply with the objectives and guidelines relating to corporate governance adopted by the Canadian Securities Administrators and the Toronto Stock Exchange ("TSX"). In addition, the Board monitors and considers the implementation of corporate governance standards proposed by various regulatory and non-regulatory authorities in Canada. A discussion of corporate governance policies is included each year in our proxy materials for our annual general meeting of shareholders, copies of which are available on SEDAR (www.sedar.com).

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As a Canadian reporting issuer with securities listed on the TSX and the New York Stock Exchange (“NYSE”), Vermilion is required to comply with all applicable Canadian requirements adopted by the Canadian Securities Administrators and the TSX, and applicable rules for foreign private issuers adopted by the U.S. Securities and Exchange Commission that give effect to the provisions of the Sarbanes-Oxley Act of 2002.

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Our corporate governance practices also incorporate many “best practices” derived from those required to be followed by US domestic companies under the NYSE listing standards. We are required by Section 303A.11 of the NYSE Listed Company Manual to identify any significant ways in which our corporate governance practices differ from those required to be followed by US domestic companies under NYSE listing standards. We believe that there are no such significant differences in our corporate governance practices, except as follows:

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● Shareholder Approval of Equity Compensation Plans. Section 303A.8 of the NYSE Listed Company Manual requires shareholder approval of all “equity compensation plans” and material revisions to those plans. The definition of “equity compensation plans” covers plans that provide for the delivery of newly issued securities, and also plans which rely on securities reacquired on the market by the issuing company for the purpose of redistribution to employees and directors. The TSX rules provide that equity compensation plans and material amendments thereto require shareholder approval only if they involve newly issued securities and the amendments are not otherwise addressed in the plan’s amendment procedures. In addition, the TSX rules require that every three years after institution, all unallocated options, rights or other entitlements under equity compensation plans which do not have a fixed maximum aggregate of securities issuable must be approved by shareholders. Vermilion follows the TSX rules with respect to shareholder approval of equity compensation plans and material revisions to those plans.

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Disclosure Controls and Procedures

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Our officers have established and maintained disclosure controls and procedures and evaluated the effectiveness of these controls in conjunction with our filings.

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As of December 31, 2021, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the President, for this specific purpose of acting in the capacity of Chief Executive Officer, and Chief Financial Officer have concluded and certified that our disclosure controls and procedures are effective.

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Internal Control Over Financial Reporting

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A company's internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

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Vermilion Energy Inc.  ■  Page 41  ■  2021 Management's Discussion and Analysis

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The President, for this specific purpose of acting in the capacity of Chief Executive Officer, and the Chief Financial Officer of Vermilion have assessed the effectiveness of Vermilion’s internal control over financial reporting as defined in Rule 13a-15 under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. The assessment was based on the framework in *Internal Control – Integrated Framework (2013)*issued by the Committee of Sponsoring Organizations of the Treadway Commission. The President, for this specific purpose of acting in the capacity of Chief Executive Officer, and the Chief Financial Officer of Vermilion have concluded that Vermilion’s internal control over financial reporting was effective as of December 31, 2021. The effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2021 has been audited by Deloitte LLP, as reflected in their report included in the 2021 audited annual financial statements filed with the US Securities and Exchange Commission. No changes were made to Vermilion’s internal control over financial reporting during the year ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

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Vermilion Energy Inc.  ■  Page 42  ■  2021 Management's Discussion and Analysis

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Supplemental Table 1: Netbacks

​

The following table includes financial statement information on a per unit basis by business unit. Liquids includes crude oil, condensate, and NGLs. Natural gas sales volumes have been converted on a basis of six thousand cubic feet of natural gas to one barrel of oil equivalent.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ **** Q4 2021 **** ​ **** ​ 2021 Q4 2020 2020
​ Liquids ​ Natural Gas ​ Total ​ Liquids ​ Natural Gas ​ Total ​ Total ​ Total
​ $/bbl ​ $/mcf ​ $/boe ​ $/bbl ​ $/mcf ​ $/boe ​ $/boe ​ $/boe
Canada
Sales 80.89 5.10 **** 59.16 67.35 3.77 **** 47.54 32.45 26.38
Royalties (12.58) (0.37) **** (8.10) (9.71) (0.22) **** (5.99) (3.08) (2.55)
Transportation (2.52) (0.22) **** (2.00) (2.68) (0.21) **** (2.04) (2.02) (1.92)
Operating (15.35) (1.25) **** (11.96) (14.26) (1.28) **** (11.35) (11.05) (10.13)
Operating netback 50.44 3.26 **** 37.10 40.70 2.06 **** 28.16 16.30 11.78
General and administration ​ **** ​ (0.71) ​ (0.97) (1.60) (1.18)
Fund flows from operations (/boe) **** **** ​ 36.39 **** 27.19 14.70 10.60
United States
Sales 81.90 4.62 **** 67.18 71.53 5.81 **** 62.98 33.24 32.93
Royalties (24.05) (1.28) **** (19.60) (19.48) (1.64) **** (17.23) (9.76) (8.65)
Transportation (0.84) — **** (0.61) (0.98) — **** (0.75) (0.82) (0.67)
Operating (10.00) (1.19) **** (9.22) (9.80) (1.43) **** (9.52) (9.77) (8.97)
Operating netback 47.01 2.15 **** 37.75 41.27 2.74 **** 35.48 12.89 14.64
General and administration ​ **** ​ (3.10) ​ (2.56) (5.22) (3.68)
Fund flows from operations (/boe) ​ **** ​ 34.65 ​ 32.92 7.67 10.96
France
Sales 100.18 — **** 100.18 88.15 — **** 88.15 58.11 55.39
Royalties (12.77) — **** (12.77) (11.88) — **** (11.89) (10.28) (9.75)
Transportation (8.25) — **** (8.25) (8.36) — **** (8.36) (4.66) (4.44)
Operating (17.88) — **** (17.88) (16.46) — **** (16.46) (17.73) (17.36)
Operating netback 61.28 — **** 61.28 51.45 — **** 51.44 25.44 23.84
General and administration ​ **** ​ (3.02) ​ (3.46) (3.68) (3.98)
Current income taxes ​ **** ​ (4.12) ​ 2.88 (0.15) (0.04)
Fund flows from operations (/boe) ​ **** ​ 54.14 ​ 50.86 21.61 19.82
Netherlands
Sales 101.75 34.39 **** 205.17 72.10 18.50 **** 110.47 34.40 23.02
Royalties — (0.09) **** (0.52) — (0.06) **** (0.33) (0.22) (0.16)
Operating — (2.39) **** (14.20) — (2.23) **** (13.17) (11.64) (11.38)
Operating netback 101.75 31.91 **** 190.45 72.10 16.21 **** 96.97 22.54 11.48
General and administration ​ **** ​ (0.88) ​ (0.46) — (0.43)
Current income taxes ​ **** ​ (41.66) ​ (17.40) 4.74 1.32
Fund flows from operations (/boe) ​ **** ​ 147.91 ​ 79.11 27.28 12.37
Germany
Sales 99.74 32.29 **** 164.96 85.02 17.21 **** 98.06 39.87 30.40
Royalties (2.29) (0.38) **** (2.29) (1.53) (0.39) **** (2.12) 4.44 (0.88)
Transportation (11.19) (0.43) **** (5.22) (10.90) (0.38) **** (4.73) (5.74) (5.19)
Operating (28.16) (2.35) **** (18.41) (25.48) (3.01) **** (20.18) (21.07) (18.42)
Operating netback 58.10 29.13 **** 139.04 47.11 13.43 **** 71.03 17.50 5.91
General and administration ​ **** ​ (3.80) ​ (3.91) (7.44) (5.80)
Fund flows from operations (/boe) ​ **** ​ 135.24 ​ 67.12 10.06 0.11
Ireland
Sales — 39.46 **** 236.78 — 20.08 **** 120.51 43.38 25.59
Transportation — (0.34) **** (2.03) — (0.39) **** (2.36) (1.68) (1.94)
Operating — (1.48) **** (8.89) — (1.39) **** (8.37) (6.06) (6.67)
Operating netback — 37.64 **** 225.86 — 18.30 **** 109.78 35.64 16.98
General and administration ​ **** ​ (0.81) ​ 0.01 (0.07) (0.26)
Fund flows from operations (/boe) ​ ​ ​ ​ 225.05 ​ ​ ​ ​ ​ 109.79 ​ 35.57 ​ 16.72

All values are in US Dollars.

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Vermilion Energy Inc.  ■  Page 43  ■  2021 Management's Discussion and Analysis

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ Q4 2021 ​ ​ ​ ​ ​ 2021 ​ ​ Q4 2020 2020
​ **** Liquids **** Natural Gas **** Total **** Liquids **** Natural Gas **** Total **** Total **** Total
​ ​ $/bbl ​ $/mcf ​ $/boe ​ $/bbl ​ $/mcf ​ $/boe ​ $/boe ​ $/boe
Australia ​ ​ ​ ​ ​ ​
Sales ​ 112.26 — ​ 112.26 103.01 ​ — ​ 103.01 ​ 75.99 ​ 76.70
Operating ​ (44.31) — ​ (44.31) (36.55) ​ — ​ (36.55) ​ (36.39) ​ (29.59)
PRRT ^(1)^ ​ (15.43) — ​ (15.43) (11.30) ​ — ​ (11.30) ​ (10.18) ​ (10.93)
Operating netback ​ 52.52 — ​ 52.52 55.16 ​ — ​ 55.16 ​ 29.42 ​ 36.18
General and administration ​ ​ **** ​ ​ (3.07) ​ ​ ​ (2.49) ​ (2.56) ​ (2.08)
Current income taxes ​ ​ **** ​ ​ 6.73 ​ ​ ​ 4.15 ​ 7.55 ​ 1.14
Fund flows from operations ($/boe) ​ ​ **** ​ ​ 56.18 ​ ​ ​ 56.82 ​ 34.41 ​ 35.24
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total Company ​ ​ ​ ​ ​ ​
Sales ​ 87.81 17.89 ​ 96.82 74.92 ​ 9.53 ​ 66.81 ​ 38.57 ​ 31.90
Realized hedging (loss) gain ​ (1.54) (8.35) ​ (23.97) (2.80) ​ (3.28) ​ (10.52) ​ 0.10 ​ 3.11
Royalties ​ (12.24) (0.30) ​ (7.43) (9.90) ​ (0.22) ​ (5.98) ​ (3.43) ​ (3.04)
Transportation ​ (3.48) (0.19) ​ (2.41) (3.56) ​ (0.20) ​ (2.48) ​ (2.08) ​ (1.93)
Operating ​ (18.13) (1.62) ​ (14.24) (16.37) ​ (1.60) ​ (13.27) ​ (13.00) ​ (11.89)
PRRT ^(1)^ ​ (1.30) — ​ (0.70) (0.93) ​ — ​ (0.50) ​ (0.49) ​ (0.57)
Operating netback ​ 51.12 7.43 ​ 48.07 41.36 ​ 4.23 ​ 34.06 ​ 19.67 ​ 17.58
General and administration ​ ​ **** ​ ​ (2.20) ​ ​ ​ (1.70) ​ (2.27) ​ (1.73)
Interest expense ​ ​ **** ​ ​ (2.06) ​ ​ ​ (2.35) ​ (2.42) ​ (2.14)
Realized foreign exchange loss ​ ​ **** ​ ​ (0.30) ​ ​ ​ (0.21) ​ 0.16 ​ 0.32
Other income ​ ​ **** ​ ​ 1.29 ​ ​ ​ 0.71 ​ 0.56 ​ 0.12
Corporate income taxes ​ ​ **** ​ ​ (4.07) ​ ​ ​ (0.97) ​ 0.80 ​ 0.17
Fund flows from operations ($/boe) ​ ​ **** ​ ​ 40.73 ​ ​ ​ 29.54 ​ 16.50 ​ 14.32

​

^(1)^Vermilion considers Australian PRRT to be an operating item and, accordingly, has included PRRT in the calculation of operating netbacks. Current income taxes presented above excludes PRRT.

​

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Vermilion Energy Inc.  ■  Page 44  ■  2021 Management's Discussion and Analysis

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Supplemental Table 2: Hedges

​

The prices in these tables may represent the weighted averages for several contracts with foreign currency amounts translated to the disclosure currency using forward rates as at the month-end date. The weighted average price for the portfolio of options listed below may not have the same payoff profile as the individual contracts. As such, the presentation of the weighted average prices is purely for indicative purposes.

​

The following tables outline Vermilion’s outstanding risk management positions as at December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted
​ Weighted Weighted Weighted Weighted Average
​ ​ ​ ​ ​ Bought ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Bought ​ Bought
​ ​ ​ ​ ​ Put ​ Bought Put ​ Sold Call ​ Sold Call ​ Sold Put ​ Sold Put ​ Sold Swap ​ Sold Swap ​ Swap ​ Swap
​ ​ Unit ​ Currency Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price
Dated Brent
Q1 2022 bbl 2,700 62.50 2,700 81.01 2,700 47.50 500 52.00 — —
Q2 2022 bbl 3,450 63.59 3,450 83.34 3,450 47.50 — — — —
Q3 2022 ​ bbl ​ 2,600 ​ 63.94 ​ 2,600 ​ 84.35 ​ 2,600 ​ 47.50 ​ — ​ — ​ — ​ —
Q4 2022 ​ bbl ​ 2,600 ​ 63.94 ​ 2,600 ​ 84.35 ​ 2,600 ​ 47.50 ​ — ​ — ​ — ​ —
WTI
Q1 2022 bbl 9,550 60.52 9,550 75.89 9,550 45.52 — — — —
Q2 2022 bbl 9,300 60.93 9,300 78.39 9,300 45.54 — — — —
Q3 2022 ​ bbl ​ 4,500 ​ 60.82 ​ 4,500 ​ 82.92 ​ 4,500 ​ 45.00 ​ — ​ — ​ — ​ —
Q4 2022 ​ bbl ​ 4,500 ​ 60.82 ​ 4,500 ​ 82.92 ​ 4,500 ​ 45.00 ​ — ​ — ​ — ​ —
AECO Basis (AECO less NYMEX Henry Hub)
Q1 2022 mcf — — — — — — 30,000 (1.10) — —
Q2 2022 mcf — — — — — — 35,000 (1.09) — —
Q3 2022 mcf — — — — — — 35,000 (1.09) — —
Q4 2022 mcf — — — — — — 11,793 (1.09) — —
NYMEX Henry Hub
Q2 2022 mcf 30,000 3.33 30,000 4.81 — — — — — —
Q3 2022 mcf 30,000 3.33 30,000 4.81 — — — — — —
Q4 2022 mcf 10,109 3.33 10,109 4.81 — — — — — —

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted
​ **** **** **** **** **** **** Weighted **** ​ **** Weighted Weighted Weighted Average
​ ​ ​ ​ ​ ​ ​ ​ Average ​ Sold ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Bought ​ Bought
​ ​ ​ ​ ​ ​ Bought Put ​ Bought Put ​ Call ​ Sold Call ​ Sold Swap ​ Sold Put ​ Sold Swap ​ Sold Swap ​ Swap ​ Swap
​ ​ Unit ​ Currency ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price
NBP
Q1 2022 mcf ​ EUR ​ 36,851 ​ 6.04 ​ 36,851 ​ 7.59 ​ 34,394 ​ 3.63 ​ 4,913 ​ 4.91 ​ — ​ —
Q2 2022 mcf ​ EUR ​ 27,024 ​ 5.07 ​ 27,024 ​ 5.84 ​ 27,024 ​ 3.50 ​ 4,913 ​ 4.91 ​ — ​ —
Q3 2022 mcf ​ EUR ​ 19,654 ​ 5.11 ​ 19,654 ​ 6.24 ​ 19,654 ​ 3.66 ​ 4,913 ​ 4.91 ​ — ​ —
Q4 2022 mcf ​ EUR ​ 19,654 ​ 5.11 ​ 19,654 ​ 6.23 ​ 19,654 ​ 3.66 ​ 4,913 ​ 4.91 ​ — ​ —
Q1 2023 mcf ​ EUR ​ 12,284 ​ 5.19 ​ 12,284 ​ 6.45 ​ 12,284 ​ 3.75 ​ — ​ — ​ — ​ —
Q2 2023 ​ mcf ​ EUR ​ 4,913 ​ 5.86 ​ 4,913 ​ 8.24 ​ 4,913 ​ 4.40 ​ — ​ — ​ — ​ —
TTF — —
Q1 2022 mcf ​ EUR ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —
Q2 2022 mcf ​ EUR ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —
Q3 2022 mcf ​ EUR ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —
Q4 2022 mcf ​ EUR ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —
Q1 2023 mcf ​ EUR ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —

​

​ ​ ​ ​ ​ ​ ​ ​ ​
VET Equity Swaps **** ​ **** Initial Share Price ​ ​ Share Volume
Swap Jan 2020 - Apr 2023 20.9788 CAD 2,250,000
Swap Jan 2020 - Apr 2023 22.4587 CAD 1,500,000

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Foreign Currency Swaps **** ​ **** Notional Amount **** ​ Notional Amount **** ​ Average Rate
Swap January 2022 562,166,987 700,000,000 CAD 1.2452

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cross Currency Interest Rate **** ​ **** Notional Amount **** ​ Receive Rate **** Notional Amount **** ​ Pay Rate
Swap January 2022 398,373,887 LIBOR + 1.70% 500,000,000 CAD CDOR + 1.08%

All values are in US Dollars.

​

​

​

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Vermilion Energy Inc.  ■  Page 45  ■  2021 Management's Discussion and Analysis

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Supplemental Table 3: Capital Expenditures and Acquisitions

​

​ ​ ​ ​ ​ ​ ​ ​
By classification (M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Drilling and development 119,002 52,903 **** 339,390 352,481
Exploration and evaluation 26,805 6,991 **** 35,406 14,721
Capital expenditures 145,807 59,894 **** 374,796 367,202
​ ​ ​ ​ ​ ​ ​ ​
Acquisitions 26,848 4,821 **** 131,628 25,810
Contingent consideration — ​ — ​ 330 ​ —
Working capital assumed (3,215) ​ — ​ (993) ​ —
Acquisitions 23,633 4,821 **** 130,965 25,810

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​
By category (M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Drilling, completion, new well equip and tie-in, workovers and recompletions 97,833 42,063 **** 252,734 285,401
Production equipment and facilities 30,919 21,866 **** 93,901 70,483
Seismic, studies, land and other 17,055 (4,035) **** 28,161 11,318
Capital expenditures 145,807 59,894 **** 374,796 367,202
Acquisitions 23,633 4,821 **** 130,965 25,810
Total capital expenditures and acquisitions 169,440 64,715 **** 505,761 393,012

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​
Capital expenditures by country (M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Canada 86,051 32,942 **** 190,242 199,141
United States 3,592 839 **** 32,540 66,120
France 15,030 12,830 **** 39,708 42,328
Netherlands 12,432 3,417 **** 27,037 10,105
Germany 10,883 3,127 **** 20,307 15,819
Ireland 105 211 **** 1,261 1,823
Australia 8,755 4,392 **** 34,785 24,520
Central and Eastern Europe 8,959 2,136 **** 28,916 7,346
Total capital expenditures 145,807 59,894 **** 374,796 367,202

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​
Acquisitions by country (M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Canada 1,191 791 **** 1,699 13,111
United States 78 946 **** 94,248 7,643
Germany 20,485 828 **** 33,139 1,420
Ireland 1,879 ​ — ​ 1,879 ​ —
Central and Eastern Europe — 2,256 **** — 3,636
Total acquisitions 23,633 4,821 **** 130,965 25,810

All values are in US Dollars.

​

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Vermilion Energy Inc.  ■  Page 46  ■  2021 Management's Discussion and Analysis

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Supplemental Table 4: Production

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4/21 **** Q3/21 **** Q2/21 **** Q1/21 **** Q4/20 **** Q3/20 **** Q2/20 **** Q1/20 **** Q4/19 **** Q3/19 **** Q2/19 **** Q1/19
Canada
Light and medium crude oil (bbls/d) **** 16,388 16,809 16,868 17,767 19,301 19,847 22,545 22,767 23,259 23,610 23,973 25,067
Condensate ^(1)^ (bbls/d) **** 4,785 4,426 5,558 4,556 4,662 5,200 5,047 4,634 4,140 4,072 4,872 4,096
Other NGLs ^(1)^ (bbls/d) **** 7,073 6,862 7,767 7,016 7,334 8,350 8,248 6,943 7,005 6,632 7,352 6,968
NGLs (bbls/d) **** 11,858 11,288 13,325 11,572 11,996 13,550 13,295 11,577 11,145 10,704 12,224 11,064
Conventional natural gas (mmcf/d) **** 128.85 138.42 146.55 138.41 135.27 155.15 164.08 151.16 145.14 145.14 151.87 151.37
Total (boe/d) **** 49,720 51,168 54,618 52,407 53,840 59,256 63,187 59,537 58,593 58,504 61,507 61,360
United States
Light and medium crude oil (bbls/d) **** 2,647 3,520 1,888 2,322 2,495 3,243 3,971 2,481 3,149 2,717 2,421 1,750
Condensate ^(1)^ (bbls/d) **** 26 2 2 — 1 6 6 6 12 4 63 (8)
Other NGLs ^(1)^ (bbls/d) **** 1,388 1,206 928 1,058 1,294 1,158 1,340 1,079 1,156 1,140 754 929
NGLs (bbls/d) **** 1,414 1,208 930 1,058 1,295 1,164 1,346 1,085 1,168 1,144 817 921
Conventional natural gas (mmcf/d) **** 9.09 6.75 5.51 5.95 6.87 7.94 8.35 6.72 8.20 6.38 7.06 5.89
Total (boe/d) **** 5,575 5,854 3,736 4,373 4,934 5,730 6,708 4,685 5,683 4,925 4,414 3,653
France
Light and medium crude oil (bbls/d) **** 8,453 8,677 9,013 9,062 9,255 9,347 7,046 9,957 10,264 10,347 9,800 11,342
Conventional natural gas (mmcf/d) **** — — — — — — — — — — — 0.77
Total (boe/d) **** 8,453 8,677 9,013 9,062 9,255 9,347 7,046 9,957 10,264 10,347 9,800 11,470
Netherlands
Light and medium crude oil (bbls/d) **** — 6 1 6 1 — 1 3 4 1 9 —
Condensate ^(1)^ (bbls/d) **** 97 104 95 92 99 83 86 84 86 81 91 93
NGLs (bbls/d) **** 97 104 95 92 99 83 86 84 86 81 91 93
Conventional natural gas (mmcf/d) **** 51.98 42.48 37.59 41.45 42.95 46.09 47.31 48.33 47.99 44.08 52.90 51.51
Total (boe/d) **** 8,761 7,190 6,362 7,006 7,257 7,764 7,972 8,143 8,088 7,429 8,917 8,677
Germany
Light and medium crude oil (bbls/d) **** 1,127 1,043 1,093 911 960 964 1,039 909 800 845 1,047 978
Conventional natural gas (mmcf/d) **** 18.00 16.19 15.60 13.40 11.50 11.25 13.23 14.64 15.44 14.54 14.56 16.71
Total (boe/d) **** 4,127 3,741 3,694 3,144 2,876 2,839 3,244 3,349 3,373 3,269 3,474 3,763
Ireland
Conventional natural gas (mmcf/d) **** 30.12 22.67 30.19 34.14 34.76 35.12 38.57 41.38 42.30 43.21 49.21 51.71
Total (boe/d) **** 5,020 3,778 5,031 5,690 5,793 5,853 6,428 6,896 7,049 7,202 8,201 8,619
Australia
Light and medium crude oil (bbls/d) **** 2,742 4,190 3,835 4,489 3,781 4,549 5,299 4,041 4,548 5,564 6,689 5,862
Total (boe/d) **** 2,742 4,190 3,835 4,489 3,781 4,549 5,299 4,041 4,548 5,564 6,689 5,862
Central and Eastern Europe
Conventional natural gas (mmcf/d) **** 0.12 0.22 0.28 0.63 0.67 0.80 2.89 3.27 1.66 — — —
Total (boe/d) **** 20 36 46 104 111 132 483 546 276 — — —
Consolidated
Light and medium crude oil (bbls/d) **** 31,356 34,245 32,698 34,556 35,793 37,951 39,899 40,157 42,024 43,084 43,938 45,001
Condensate ^(1)^ (bbls/d) **** 4,908 4,532 5,656 4,648 4,762 5,289 5,142 4,724 4,237 4,158 5,026 4,181
Other NGLs ^(1)^ (bbls/d) **** 8,461 8,068 8,695 8,074 8,627 9,509 9,588 8,022 8,160 7,772 8,107 7,897
NGLs (bbls/d) **** 13,369 12,600 14,351 12,722 13,389 14,798 14,730 12,746 12,397 11,930 13,133 12,078
Conventional natural gas (mmcf/d) **** 238.16 226.73 235.72 233.98 232.00 256.34 274.42 265.51 260.72 253.36 275.60 277.96
Total (boe/d) **** 84,417 84,633 86,335 86,276 87,848 95,471 100,366 97,154 97,875 97,239 103,003 103,404

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Vermilion Energy Inc.  ■  Page 47  ■  2021 Management's Discussion and Analysis

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** 2021 **** 2020 **** 2019 **** 2018 **** 2017 **** 2016
Canada ​ ​
Light and medium crude oil (bbls/d) 16,954 ​ 21,106 23,971 17,400 6,015 6,657
Condensate ^(1)^ (bbls/d) 4,831 ​ 4,886 4,295 3,754 3,036 2,514
Other NGLs ^(1)^ (bbls/d) 7,179 ​ 7,719 6,988 5,914 4,144 2,552
NGLs (bbls/d) 12,010 ​ 12,605 11,283 9,668 7,180 5,066
Conventional natural gas (mmcf/d) 138.03 ​ 151.38 148.35 129.37 97.89 84.29
Total (boe/d) 51,968 ​ 58,942 59,979 48,630 29,510 25,771
United States **** ​ ​
Light and medium crude oil (bbls/d) 2,597 ​ 3,046 2,514 1,069 662 393
Condensate ^(1)^ (bbls/d) 8 ​ 5 18 8 4 —
Other NGLs ^(1)^ (bbls/d) 1,146 ​ 1,218 996 452 50 29
NGLs (bbls/d) 1,154 ​ 1,223 1,014 460 54 29
Conventional natural gas (mmcf/d) 6.84 ​ 7.47 6.89 2.78 0.39 0.21
Total (boe/d) 4,890 ​ 5,514 4,675 1,992 781 457
France **** ​ ​
Light and medium crude oil (bbls/d) 8,799 ​ 8,903 10,435 11,362 11,084 11,896
Conventional natural gas (mmcf/d) — ​ — 0.19 0.21 — 0.44
Total (boe/d) 8,799 ​ 8,903 10,467 11,396 11,085 11,970
Netherlands **** ​ ​
Light and medium crude oil (bbls/d) 3 ​ 1 3 — — —
Condensate ^(1)^ (bbls/d) 97 ​ 88 88 90 90 88
NGLs (bbls/d) 97 ​ 88 88 90 90 88
Conventional natural gas (mmcf/d) 43.40 ​ 46.16 49.10 46.13 40.54 47.82
Total (boe/d) 7,334 ​ 7,782 8,274 7,779 6,847 8,058
Germany **** ​ ​
Light and medium crude oil (bbls/d) 1,044 ​ 968 917 1,004 1,060 —
Conventional natural gas (mmcf/d) 15.81 ​ 12.65 15.31 15.66 19.39 14.90
Total (boe/d) 3,679 ​ 3,076 3,468 3,614 4,291 2,483
Ireland **** ​ ​
Conventional natural gas (mmcf/d) 29.25 ​ 37.44 46.57 55.17 58.43 50.89
Total (boe/d) 4,875 ​ 6,240 7,762 9,195 9,737 8,482
Australia **** ​ ​
Light and medium crude oil (bbls/d) 3,810 ​ 4,416 5,662 4,494 5,770 6,304
Total (boe/d) 3,810 ​ 4,416 5,662 4,494 5,770 6,304
Central and Eastern Europe **** ​ ​
Conventional natural gas (mmcf/d) 0.31 ​ 1.90 0.42 1.02 — —
Total (boe/d) 51 ​ 317 70 169 — —
Consolidated **** ​ ​
Light and medium crude oil (bbls/d) 33,208 ​ 38,441 43,502 35,329 24,591 25,250
Condensate ^(1)^ (bbls/d) 4,936 ​ 4,980 4,400 3,853 3,130 2,602
Other NGLs ^(1)^ (bbls/d) 8,325 ​ 8,937 7,984 6,366 4,194 2,582
NGLs (bbls/d) 13,261 ​ 13,917 12,384 10,219 7,324 5,184
Conventional natural gas (mmcf/d) 233.64 ​ 256.99 266.82 250.33 216.64 198.55
Total (boe/d) 85,408 ​ 95,190 100,357 87,270 68,021 63,526

​

^(1)^Under National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities", disclosure of production volumes should include segmentation by product type as defined in the instrument. This table provides a reconciliation from "crude oil and condensate", "NGLs" and "natural gas" to the product types. In this report, references to "crude oil" and "light and medium crude oil" mean "light crude oil and medium crude oil" and references to "natural gas" mean "conventional natural gas". Production volumes reported are based on quantities as measured at the first point of sale.

​

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Vermilion Energy Inc.  ■  Page 48  ■  2021 Management's Discussion and Analysis

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Supplemental Table 5: Segmented Financial Results

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Three Months Ended December 31, 2021
($M) ​ Canada **** USA **** France **** Netherlands **** Germany **** Ireland **** Australia **** Corporate **** Total
Drilling and development 86,051 3,592 15,021 5,663 10,626 105 8,755 (10,811) 119,002
Exploration and evaluation — — 9 6,769 257 — — 19,770 26,805
Crude oil and condensate sales 180,376 23,611 79,809 911 12,146 — 40,332 — 337,185
NGL sales 29,812 6,979 — — — — — — 36,791
Natural gas sales 60,412 3,864 — 164,459 53,477 109,352 — 375 391,939
Sales of purchased commodities — — — — — — — 37,936 37,936
Royalties (37,064) (10,055) (10,174) (419) (909) — — (164) (58,785)
Revenue from external customers 233,536 24,399 69,635 164,951 64,714 109,352 40,332 38,147 745,066
Purchased commodities — — — — — — — (37,936) (37,936)
Transportation (9,134) (313) (6,574) — (2,076) (936) — — (19,033)
Operating (54,695) (4,730) (14,242) (11,449) (7,323) (4,107) (15,918) (216) (112,680)
General and administration (3,233) (1,589) (2,407) (711) (1,513) (372) (1,103) (6,446) (17,374)
PRRT — — — — — — (5,544) — (5,544)
Corporate income taxes — — (3,282) (33,581) — — 2,418 2,211 (32,234)
Interest expense — — — — — — — (16,279) (16,279)
Realized loss on derivative instruments — — — — — — — (189,598) (189,598)
Realized foreign exchange loss — — — — — — — (2,395) (2,395)
Realized other income — — — — — — — 10,180 10,180
Fund flows from operations **** 166,474 **** 17,767 **** 43,130 **** 119,210 **** 53,802 **** 103,937 **** 20,185 **** (202,332) **** 322,173

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Year Ended December 31, 2021
($M) ​ Canada **** USA **** France **** Netherlands **** Germany **** Ireland **** Australia **** Corporate **** Total
Total assets 3,100,322 545,296 771,707 227,779 422,030 427,362 217,852 192,975 5,905,323
Drilling and development 190,242 32,540 39,587 20,198 19,234 1,261 34,785 1,543 339,390
Exploration and evaluation — — 121 6,839 1,073 — — 27,373 35,406
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate sales 625,053 80,208 279,263 2,640 32,607 23 143,014 — 1,162,808
NGL sales 86,932 17,723 — — — — — — 104,655
Natural gas sales 189,790 14,484 — 293,083 99,328 214,402 — 1,211 812,298
Sales of purchased commodities — — — — — — — 147,091 147,091
Royalties (113,651) (30,747) (37,666) (873) (2,847) — — (338) (186,122)
Revenue from external customers 788,124 81,668 241,597 294,850 129,088 214,425 143,014 147,964 2,040,730
Purchased commodities — — — — — — — (147,091) (147,091)
Transportation (38,764) (1,336) (26,497) — (6,359) (4,205) — — (77,161)
Operating (215,378) (16,992) (52,147) (35,269) (27,149) (14,889) (50,748) (441) (413,013)
General and administration (18,380) (4,563) (10,954) (1,243) (5,257) 9 (3,457) (9,032) (52,877)
PRRT — — — — — — (15,688) — (15,688)
Corporate income taxes — — 9,120 (46,567) — — 5,759 1,522 (30,166)
Interest expense — — — — — — — (73,075) (73,075)
Realized loss on derivative instruments — — — — — — — (327,384) (327,384)
Realized foreign exchange loss — — — — — — — (6,613) (6,613)
Realized other income — — — — — — — 22,200 22,200
Fund flows from operations **** 515,602 **** 58,777 **** 161,119 **** 211,771 **** 90,323 **** 195,340 **** 78,880 **** (391,950) **** 919,862

​

​

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Supplemental Table 6: Operational and Financial Data by Core Region

​

Production volumes ^(1)^

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4/21 **** Q3/21 **** Q2/21 **** Q1/21 **** Q4/20 **** Q3/20 **** Q2/20 **** Q1/20 **** Q4/19 **** Q3/19 **** Q2/19 **** Q1/19
North America ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate (bbls/d) 23,846 24,757 24,316 24,645 26,459 28,296 31,569 29,888 30,560 30,403 31,329 30,905
NGLs (bbls/d) 8,461 8,068 8,695 8,074 8,628 9,508 9,588 8,022 8,161 7,772 8,106 7,897
Natural gas (mmcf/d) 137.93 145.18 152.06 144.36 142.13 163.09 172.43 157.88 153.34 151.52 158.93 157.26
Total (boe/d) **** 55,295 **** 57,022 **** 58,354 **** 56,780 **** 58,774 **** 64,986 **** 69,895 **** 64,222 **** 64,276 **** 63,429 **** 65,921 **** 65,013
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
International
Crude oil and condensate (bbls/d) 12,419 14,020 14,037 14,560 14,096 14,943 13,471 14,994 15,702 16,838 17,636 18,275
Natural gas (mmcf/d) 100.22 81.55 83.66 89.62 89.86 93.25 101.99 107.63 107.38 101.83 116.67 120.70
Total (boe/d) **** 29,123 **** 27,612 **** 27,981 **** 29,495 **** 29,073 **** 30,484 **** 30,472 **** 32,932 **** 33,598 **** 33,811 **** 37,081 **** 38,391
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Consolidated
Crude oil and condensate (bbls/d) 36,264 38,777 38,354 39,204 40,555 43,240 45,041 44,881 46,261 47,242 48,964 49,182
NGLs (bbls/d) 8,461 8,068 8,695 8,074 8,627 9,509 9,588 8,022 8,160 7,772 8,107 7,897
Natural gas (mmcf/d) 238.16 226.73 235.72 233.98 232.00 256.34 274.42 265.51 260.72 253.36 275.60 277.96
Total (boe/d) **** 84,417 **** 84,633 **** 86,335 **** 86,276 **** 87,848 **** 95,471 **** 100,366 **** 97,154 **** 97,875 **** 97,239 **** 103,003 **** 103,404

​

^(1)^Please refer to Supplemental Table 4 "Production" for disclosure by product type.

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Vermilion Energy Inc.  ■  Page 50  ■  2021 Management's Discussion and Analysis

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Sales volumes

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** Q4/21 **** Q3/21 **** Q2/21 **** Q1/21 **** Q4/20 **** Q3/20 **** Q2/20 **** Q1/20 **** Q4/19 **** Q3/19 **** Q2/19 **** Q1/19
North America ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate (bbls/d) 23,845 24,757 24,316 24,645 26,459 28,297 31,569 29,888 30,560 30,404 31,327 30,906
NGLs (bbls/d) 8,461 8,068 8,695 8,074 8,628 9,508 9,588 8,022 8,161 7,772 8,106 7,897
Natural gas (mmcf/d) 137.93 145.18 152.06 144.36 142.13 163.09 172.43 157.88 153.34 151.52 158.93 157.26
Total (boe/d) **** 55,295 **** 57,022 **** 58,354 **** 56,780 **** 58,774 **** 64,986 **** 69,895 **** 64,222 **** 64,276 **** 63,429 **** 65,921 **** 65,013
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
International
Crude oil and condensate (bbls/d) 13,985 15,227 13,859 11,421 15,359 15,689 12,202 17,090 13,864 18,575 16,009 20,163
Natural gas (mmcf/d) 100.22 81.55 83.66 89.62 89.86 93.25 101.99 107.63 107.38 101.83 116.67 120.70
Total (boe/d) **** 30,689 **** 28,820 **** 27,802 **** 26,357 **** 30,336 **** 31,229 **** 29,201 **** 35,028 **** 31,760 **** 35,547 **** 35,454 **** 40,279
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Consolidated
Crude oil and condensate (bbls/d) 37,830 39,985 38,174 36,066 41,818 43,985 43,771 46,977 44,423 48,979 47,337 51,068
NGLs (bbls/d) 8,461 8,068 8,695 8,074 8,627 9,509 9,588 8,022 8,160 7,772 8,107 7,897
Natural gas (mmcf/d) 238.16 226.73 235.72 233.98 232.00 256.34 274.42 265.51 260.72 253.36 275.60 277.96
Total (boe/d) **** 85,984 **** 85,841 **** 86,156 **** 83,138 **** 89,111 **** 96,217 **** 99,096 **** 99,250 **** 96,037 **** 98,976 **** 101,377 **** 105,291

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Vermilion Energy Inc.  ■  Page 51  ■  2021 Management's Discussion and Analysis

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Financial results

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ Q4/21 **** Q3/21 **** Q2/21 **** Q1/21 **** Q4/20 **** Q3/20 **** Q2/20 **** Q1/20 **** Q4/19 **** Q3/19 **** Q2/19 **** Q1/19
North America ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate sales (/bbl) 92.99 82.23 75.43 66.31 51.06 49.79 28.94 50.25 66.31 66.67 72.40 65.95
NGL sales (/bbl) 47.26 35.55 25.43 29.39 19.20 15.04 8.94 8.92 14.63 6.14 11.25 22.49
Natural gas sales (/mcf) 5.07 3.80 2.72 3.98 2.77 2.02 1.60 1.92 2.29 1.18 1.15 2.52
Sales (/boe) 59.97 50.40 42.30 43.08 32.51 28.94 18.24 29.22 38.86 35.52 38.56 40.17
Royalties (/boe) (9.26) (7.14) (5.98) (5.49) (3.64) (3.58) (1.67) (3.54) (4.98) (4.93) (4.22) (5.00)
Transportation (/boe) (1.86) (1.92) (1.90) (2.05) (1.92) (1.74) (1.72) (1.91) (1.76) (1.78) (1.63) (1.83)
Operating (/boe) (11.68) (11.02) (10.89) (11.21) (10.94) (7.82) (9.60) (11.93) (11.15) (10.67) (10.66) (11.46)
General and administration (/boe) (2.01) (1.14) (0.91) (1.34) (1.94) (0.78) (1.52) (0.84) (0.97) (0.60) (1.04) (0.83)
Corporate income taxes (/boe) 0.42 (0.05) (0.04) (0.04) 0.04 (0.02) (0.02) (0.04) (0.11) 0.09 (0.02) (0.03)
Fund flows from operations (/boe) 35.58 **** 29.12 **** 22.58 **** 22.94 **** 14.12 **** 14.99 **** 3.72 **** 10.96 **** 19.89 **** 17.63 **** 20.99 **** 21.03
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fund flows from operations 180,979 152,764 119,916 117,227 76,375 89,635 23,639 64,048 117,623 102,867 125,893 123,071
Drilling and development (89,643) ​ (35,179) ​ (38,847) ​ (59,113) ​ (33,781) ​ (9,575) ​ (23,979) ​ (197,926) ​ (69,775) ​ (91,027) ​ (42,047) ​ (148,091)
Exploration and evaluation — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ —
Free cash flow 91,336 **** 117,585 **** 81,069 **** 58,114 **** 42,594 **** 80,060 **** (340) **** (133,878) **** 47,848 **** 11,840 **** 83,846 **** (25,020)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
International
Crude oil and condensate sales (/bbl) 103.53 94.91 85.41 81.40 62.65 58.19 50.27 73.35 82.14 84.55 93.28 84.95
Natural gas sales (/mcf) 35.54 18.82 9.83 7.98 6.27 2.91 2.28 4.44 5.49 4.29 5.73 8.46
Sales (/boe) 163.23 103.39 72.16 62.39 50.30 37.94 28.98 49.42 54.42 56.46 60.98 67.87
Royalties (/boe) (4.13) (4.52) (3.83) (3.53) (3.02) (3.32) (2.16) (3.27) (3.85) (3.89) (3.97) (3.89)
Transportation (/boe) (3.40) (3.47) (4.64) (2.76) (2.40) (2.28) (2.04) (1.94) (1.77) (2.76) (3.40) (1.66)
Operating (/boe) (18.86) (17.55) (16.56) (16.42) (16.99) (15.18) (14.35) (16.13) (15.28) (13.13) (11.76) (15.28)
General and administration (/boe) (2.53) (2.40) (2.61) (2.06) (2.92) (2.53) (2.72) (2.63) (3.70) (3.10) (2.93) (2.27)
Corporate income taxes (/boe) (12.17) 0.64 (0.19) 0.66 2.25 0.04 (0.02) (0.11) 2.22 (1.55) (3.63) (4.30)
PRRT (/boe) (1.96) (2.74) (0.58) (0.60) (1.45) (1.27) (1.21) (2.90) (0.50) (1.78) (2.56) (2.87)
Fund flows from operations (/boe) 120.17 **** 73.36 **** 43.74 **** 37.69 **** 25.77 **** 13.40 **** 6.47 **** 22.44 **** 31.54 **** 30.26 **** 32.73 **** 37.60
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fund flows from operations 339,286 194,505 110,654 89,403 71,934 38,498 17,193 71,526 92,160 98,955 105,600 136,298
Drilling and development (29,359) ​ (27,994) ​ (38,856) ​ (20,399) ​ (19,122) ​ (20,187) ​ (18,404) ​ (29,507) ​ (27,339) ​ (26,096) ​ (33,102) ​ (49,200)
Exploration and evaluation (26,805) ​ (3,277) ​ (1,473) ​ (3,851) ​ (6,991) ​ (1,568) ​ 109 ​ (6,271) ​ (3,511) ​ (10,756) ​ (17,458) ​ (4,762)
Free cash flow 283,122 **** 163,234 **** 70,325 **** 65,153 **** 45,821 **** 16,743 **** (1,102) **** 35,748 **** 61,310 **** 62,103 **** 55,040 **** 82,336
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ Q4/21 **** Q3/21 **** Q2/21 **** Q1/21 **** Q4/20 **** Q3/20 **** Q2/20 **** Q1/20 **** Q4/19 **** Q3/19 **** Q2/19 **** Q1/19
Consolidated
Crude oil and condensate sales (/bbl) 96.88 87.05 79.06 71.09 55.31 52.79 34.89 58.66 71.25 73.45 79.46 73.45
NGL sales (/bbl) 47.26 35.55 25.43 29.39 19.20 15.04 8.94 8.92 14.63 6.14 11.25 22.49
Natural gas sales (/mcf) 17.89 9.20 5.24 5.51 4.13 2.34 1.85 2.94 3.61 2.43 3.09 5.10
Sales (/boe) 96.82 68.19 51.93 49.20 38.57 31.86 21.40 36.35 44.01 43.04 46.40 50.77
Royalties (/boe) (7.43) (6.26) (5.29) (4.87) (3.43) (3.50) (1.81) (3.45) (4.60) (4.56) (4.13) (4.58)
Transportation (/boe) (2.41) (2.44) (2.78) (2.27) (2.08) (1.92) (1.81) (1.92) (1.76) (2.13) (2.25) (1.76)
Operating (/boe) (14.24) (13.21) (12.72) (12.86) (13.00) (10.21) (11.00) (13.41) (12.52) (11.55) (11.04) (12.92)
General and administration (/boe) (2.20) (1.56) (1.46) (1.57) (2.27) (1.35) (1.88) (1.47) (1.88) (1.50) (1.70) (1.38)
Corporate income taxes (/boe) (4.07) 0.18 (0.09) 0.18 0.80 — (0.02) (0.06) 0.66 (0.50) (1.28) (1.66)
PRRT (/boe) (0.70) (0.92) (0.19) (0.19) (0.49) (0.41) (0.36) (1.02) (0.16) (0.64) (0.90) (1.10)
Interest (/boe) (2.06) (2.37) (2.41) (2.57) (2.42) (1.97) (1.98) (2.21) (2.17) (2.16) (2.34) (2.21)
Realized derivatives (/boe) (23.97) (9.19) (5.05) (3.43) 0.10 0.47 6.07 5.47 2.57 4.06 1.54 1.09
Realized foreign exchange (/boe) (0.30) 0.37 (0.25) (0.69) 0.16 (0.31) 0.44 0.94 0.23 (0.37) (0.17) (0.22)
Realized other (/boe) 1.29 0.48 0.35 0.73 0.56 0.29 0.03 (0.37) 0.03 0.04 0.02 0.73
Fund flows from operations (/boe) 40.73 **** 33.26 **** 22.06 **** 21.66 **** 16.49 **** 12.97 **** 9.08 **** 18.85 **** 24.40 **** 23.74 **** 24.14 **** 26.76
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Fund flows from operations 322,173 262,696 172,942 162,051 135,212 114,776 81,852 170,225 215,592 216,153 222,738 253,572
Drilling and development (119,002) ​ (63,173) ​ (77,703) ​ (79,512) ​ (52,903) ​ (29,762) ​ (42,383) ​ (227,433) ​ (97,114) ​ (117,123) ​ (75,149) ​ (197,291)
Exploration and evaluation (26,805) ​ (3,277) ​ (1,473) ​ (3,851) ​ (6,991) ​ (1,568) ​ 109 ​ (6,271) ​ (3,511) ​ (10,756) ​ (17,458) ​ (4,762)
Free cash flow 176,366 **** 196,246 **** 93,766 **** 78,688 **** 75,318 **** 83,446 **** 39,578 **** (63,479) **** 114,967 **** 88,274 **** 130,131 **** 51,519

All values are in US Dollars.

​

​

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Vermilion Energy Inc.  ■  Page 52  ■  2021 Management's Discussion and Analysis

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Non-GAAP Financial Measures and Other Specified Financial Measures

​

This MD&A includes references to certain financial measures which do not have standardized meanings and may not be comparable to similar measures presented by other issuers. These financial measures include fund flows from operations, a total of segments measure of profit or loss in accordance with IFRS 8 “Operating Segments” (please see Segmented Information in the Notes to the Consolidated Financial Statements) and net debt, a capital management measure in accordance with IAS 1 “Presentation of Financial Statements” (please see Capital Disclosures in the Notes to the Consolidated Financial Statements).

​

In addition, this MD&A includes financial measures which are not specified, defined, or determined under IFRS and are therefore considered non-GAAP financial measures and may not be comparable to similar measures presented by other issuers. These non-GAAP financial measures include:

​

Acquisitions: The sum of acquisitions from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed plus or net of acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity. A reconciliation to the acquisitions line item in the Consolidated Statements of Cash Flows can be found in Supplemental Table 3 of this MD&A.

​

Capital expenditures: The sum of drilling and development and exploration and evaluation from the Consolidated Statements of Cash Flows. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital. Reconciliation to primary financial statement measures can be found below.

​

​ ​ ​ ​ ​ ​ ​ ​
(M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Drilling and development 119,002 52,903 **** 339,390 352,481
Exploration and evaluation 26,805 6,991 **** 35,406 14,721
Capital expenditures 145,807 59,894 **** 374,796 367,202

All values are in US Dollars.

​

Cash dividends per share: Is a non-GAAP ratio that represents cash dividends declared per share and is a useful measure of the dividends a common shareholder was entitled to during the period.

​

Covenants: The financial covenants on our revolving credit facility contain non-GAAP measures. The definitions for these financial covenants are included in Financial Position Review.

​

Diluted shares outstanding: The sum of shares outstanding at the period end plus outstanding awards under the VIP, based on current estimates of future performance factors and forfeiture rates.

​

​ ​ ​ ​ ​
('000s of shares) **** Q4 2021 **** Q4 2020
Shares outstanding **** 162,261 158,724
Potential shares issuable pursuant to the VIP **** 6,485 6,672
Diluted shares outstanding **** 168,746 165,396

​

Free cash flow: Represents a non-GAAP financial Measure comparable to cash flows from operating activities and is comprised of funds flows from operations less drilling and development and exploration and evaluation expenditures. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. Reconciliation to primary financial statement measures can be found below.

​

​ ​ ​ ​ ​ ​ ​ ​
(M) Q4 2021 **** Q4 2020 **** 2021 **** 2020
Cash flows from operating activities 250,352 135,102 **** 834,453 500,152
Changes in non-cash operating working capital 58,782 (7,161) **** 56,884 (12,365)
Asset retirement obligations settled 13,039 7,271 **** 28,525 14,278
Fund flows from operations 322,173 135,212 **** 919,862 502,065
Drilling and development (119,002) (52,903) **** (339,390) (352,481)
Exploration and evaluation (26,805) (6,991) **** (35,406) (14,721)
Free cash flow 176,366 75,318 **** 545,066 134,863

All values are in US Dollars.

​

Fund flows from operations per basic and diluted share: Represents a non-GAAP ratio, management assesses fund flows from operations on a per share basis as we believe this provides a measure of our operating performance after taking into account the issuance and potential future issuance of Vermilion common shares. Fund flows from operations per basic share is calculated by dividing fund flows from operations (total of segments measure) by the basic weighted average shares outstanding as defined under IFRS. Fund flows from operations per diluted share is calculated by

Vermilion Energy Inc.  ■  Page 53  ■  2021 Management's Discussion and Analysis

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dividing fund flows from operations by the sum of basic weighted average shares outstanding and incremental shares issuable under the equity based compensation plans as determined using the treasury stock method.

​

Net debt: Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities), and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset.

​

Net debt to four quarter trailing fund flows from operations: Represents a non-GAAP ratio that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers, it is calculated as net debt (capital measure) over the FFO from the preceding 4 quarters. The measure is used to assess the ability to repay debt.

​

Adjusted working capital: Represents a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers, defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, a capital measure disclosed above.

​

​ ​ ​ ​
​ Twelve Months Ended
(M) Dec 31, 2021 **** Dec 31, 2020
Current assets (472,845) (260,993)
Current derivative asset 19,321 16,924
Current liabilities 746,813 433,128
Current lease liability (15,032) (22,882)
Current derivative liability (268,973) (130,919)
Adjusted working capital deficiency 9,284 35,258

All values are in US Dollars.

​

Net dividends: Represents a non-GAAP measures most directly comparable to dividends declared. We define net dividends as dividends declared less proceeds received for the issuance of shares pursuant to the Dividend Reinvestment Plan. Management monitors net dividends and net dividends as a percentage of fund flows from operations to assess our ability to pay dividends.

​

Operating netback: a non-GAAP ratio most directly comparable to GAAP measure net earnings and is calculated as sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses presented on a per unit basis. Management assesses operating netback as a measure of the profitability and efficiency of our field operations.

​

Fund flows from operations per boe: a Non-GAAP ratio calculated as FFO by boe production. Fund flows from operations netback is used by management to assess the profitability of our business units and Vermilion as a whole.

​

Payout: a non-GAAP financial measure most directly comparable to net dividends and is comprised of net dividends plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled, the measure is used to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining production and organic growth. The reconciliation of the measure to primary financial statement measure can be found below. Management uses payout and payout as a percentage of fund flows from operations (also referred to as the payout or sustainability ratio).

​

​ ​ ​ ​ ​ ​ ​ ​ ​
(M) Q4 2021 **** Q4 2020 **** 2021 **** 2020 ****
Dividends declared — — **** — 90,067 ​
Shares issued for the Dividend Reinvestment Plan — — **** — (8,277) ​
Net dividends — — **** — 81,790 ​
Drilling and development 119,002 52,903 **** 339,390 352,481 ​
Exploration and evaluation 26,805 6,991 **** 35,406 14,721 ​
Asset retirement obligations settled 13,039 7,271 **** 28,525 14,278 ​
Payout 158,846 67,165 **** 403,321 463,270 ​
% of fund flows from operations 49 % 50 % 44 % 92 %

All values are in US Dollars.

​

Return on capital employed (ROCE): Represents a non-GAAP ratio**,** ROCE is a measure that we use to analyze our profitability and the efficiency of our capital allocation process, the comparable primary financial statement measure is NIBT. ROCE is calculated by dividing net earnings before interest and taxes ("EBIT") by average capital employed over the preceding twelve months. Capital employed is calculated as total assets less current liabilities while average capital employed is calculated using the balance sheets at the beginning and end of the twelve-month period.

​

Vermilion Energy Inc.  ■  Page 54  ■  2021 Management's Discussion and Analysis

​

The following tables reconcile net dividends, payout, diluted shares outstanding, and free cash flow from their most directly comparable GAAP measures as presented in our financial statements:

​

The following table reconciles the calculation of return on capital employed:

​

​ ​ ​ ​ ​ ​
​ **** Twelve Months Ended
($M) ​ Dec 31, 2021 **** Dec 31, 2020 ****
Net earnings (loss) **** 1,148,696 (1,517,427) ​
Taxes **** 233,197 (359,972) ​
Interest expense **** 73,075 75,077 ​
EBIT **** 1,454,968 (1,802,322) ​
Average capital employed **** 4,417,260 4,562,960 ​
Return on capital employed **** 33 % (39) %

​

​

Vermilion Energy Inc.  ■  Page 55  ■  2021 Management's Discussion and Analysis

​

​

DIRECTORS OFFICERS / CORPORATE SECRETARY AUDITORS
​ ​ ​ ​ ​ ​
Lorenzo Donadeo ^1^ ​ Lorenzo Donadeo * ​ Deloitte LLP ​
Calgary, Alberta ​ Executive Chairman ​ Calgary, Alberta ​
​ ​ ​ ​ ​ ​
Larry J. Macdonald ^2, 4, 8, 10^ ​ Dion Hatcher * ​ BANKERS ​
Calgary, Alberta ​ President ​ ​ ​
​ ​ ​ ​ The Toronto-Dominion Bank ​
James J. Kleckner Jr. ^8, 10^ ​ Lars Glemser * ​ ​ ​
Edwards, Colorado ​ Vice President & Chief Financial Officer ​ Bank of Montreal ​
​ ​ ​ ​ ​ ​
Carin Knickel ^5, 8, 12^ ​ Terry Hergott ​ Canadian Imperial Bank of Commerce ​
Golden, Colorado ​ Vice President Marketing ​ ​ ​
​ ​ ​ ​ Export Development Canada ​
Stephen P. Larke ^4, 6, 11^ ​ Yvonne Jeffery ​ ​ ​
Calgary, Alberta ​ Vice President Sustainability ​ National Bank of Canada ​
​ ​ ​ ​ ​ ​
Timothy R. Marchant ^7, 10, 12^ ​ Darcy Kerwin * ​ Royal Bank of Canada ​
Calgary, Alberta ​ Vice President International & HSE ​ ​ ​
​ ​ ​ ​ The Bank of Nova Scotia ​
Robert Michaleski ^3, 6^ ​ Bryce Kremnica * ​ ​ ​
Calgary, Alberta ​ Vice President North America ​ Wells Fargo Bank N.A., Canadian Branch ​
​ ​ ​ ​ ​ ​
William Roby ^8, 9, 12^ ​ Geoff MacDonald ​ Bank of America N.A., Canada Branch ​
Katy, Texas ​ Vice President Geosciences ​ ​ ​
​ ​ ​ ​ Citibank N.A., Canadian Branch - Citibank Canada ​
Manjit Sharma ^4,8^ ​ Kyle Preston ​ ​ ​
Toronto, Ontario ​ Vice President Investor Relations ​ JPMorgan Chase Bank, N.A., Toronto Branch ​
​ ​ ​ ​ ​ ​
Judy Steele ^6,12^ ​ Averyl Schraven ​ La Caisse Centrale Desjardins du Québec ​
Halifax, Nova Scotia ​ Vice President People and Culture ​ ​ ​
​ ​ ​ ​ Alberta Treasury Branches ​
​ ​ ​ ​ ​ ​
^1^Executive Chairman ​ Jenson Tan * ​ Canadian Western Bank ​
^2^Lead Director (Independent) ​ Vice President Business Development ​ ​ ​
^3^Audit Committee Chair (Independent) ​ ​ ​ Goldman Sachs Lending Partners LLC ​
^4^Audit Committee Member ​ Gerard Schut * ​ ​ ​
^5^Governance and Human Resources Committee Chair (Independent) ​ Vice President European Operations ​ ​ ​
^6^Governance and Human Resources Committee Member ​ ​ ​ EVALUATION ENGINEERS ​
^7^Health, Safety and Environment Committee Chair (Independent) ​ Robert (Bob) J. Engbloom ​ ​ ​
^8^Health, Safety and Environment Committee Member ​ Corporate Secretary ​ GLJ Petroleum Consultants Ltd. ​
^9^Independent Reserves Committee Chair (Independent) ​ ​ ​ Calgary, Alberta ​
^10^Independent Reserves Committee Member ​ * Executive Committee ​ ​ ​
^11^Sustainability Committee Chair (Independent) ​ ​ ​ LEGAL COUNSEL ​
^12^Sustainability Committee Member ​ ​ ​ ​ ​
​ ​ ​ ​ Norton Rose Fulbright Canada LLP ​
​ ​ ​ ​ Calgary, Alberta ​
​ ​ ​ ​ ​ ​
​ ​ ​ ​ TRANSFER AGENT ​
​ ​ ​ ​ ​ ​
​ ​ ​ ​ Odyssey Trust Company ​
​ ​ ​ ​ ​ ​
​ ​ ​ ​ STOCK EXCHANGE LISTINGS ​
​ ​ ​ ​ ​ ​
​ ​ ​ ​ The Toronto Stock Exchange (“VET”) ​
​ ​ ​ ​ The New York Stock Exchange (“VET”) ​
​ ​ ​ ​ ​ ​
​ ​ ​ ​ INVESTOR RELATIONS ​
​ ​ ​ ​ Kyle Preston ​
​ ​ ​ ​ Vice President Investor Relations ​
​ ​ ​ ​ 403-476-8431 TEL ​
​ ​ ​ ​ 403-476-8100 FAX ​
​ ​ ​ ​ 1-866-895-8101 IR TOLL FREE ​
​ ​ ​ ​ investor_relations@vermilionenergy.com ​

​

Vermilion Energy Inc.  ■  Page 56  ■  2021 Management's Discussion and Analysis

​

​

Exhibit 99.3

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 and Vermilion’s ability to fund such expenditures; Vermilion’s additional debt capacity providing it with additional working capital; the flexibility of Vermilion’s capital program and operations; business strategies and objectives; operational and financial performance; estimated volumes of reserves and resources; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion’s 2022 guidance, and rates of average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange rates and significant declines in production or sales volumes due to unforeseen circumstances; the effect of possible changes in critical accounting estimates; statements regarding the growth and size of Vermilion’s future project inventory, and the wells expected to be drilled in 2022; exploration and development plans and the timing thereof; Vermilion’s ability to reduce its debt; statements regarding Vermilion’s hedging program, its plans to add to its hedging positions, and the anticipated impact of Vermilion’s hedging program on project economics and free cash flows; the potential financial impact of climate-related risks; 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 and Vermilion’s expectations regarding future taxes and taxability; and the timing of regulatory proceedings and approvals.

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 or 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 position 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 crude oil and natural gas reserve and resource 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 and the Canadian Oil and Gas Evaluation Handbook. Reserves estimates have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of funding required for such development. The actual crude oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document.

​

Vermilion Energy Inc.  ∎ Page 1 ∎  2021 Financial Statements

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

​

$M thousand dollars
$MM million dollars
AECO the daily average benchmark price for natural gas at the AECO ‘C’ hub in Alberta
bbl(s) barrel(s)
bbls/d barrels per day
boe barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf of natural gas)
boe/d barrel of oil equivalent per day
GJ gigajoules
LSB light sour blend crude oil reference price
mbbls thousand barrels
mcf thousand cubic feet
mmcf/d million cubic feet per day
NBP the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point
NGLs natural gas liquids, which includes butane, propane, and ethane
PRRT Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia
tCO2e tonnes of carbon dioxide equivalent
TTF the price for natural gas in the Netherlands, quoted in megawatt hours of natural gas, at the Title Transfer Facility Virtual Trading Point
WTI West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma

​

​

​

Vermilion Energy Inc.  ∎ Page 2 ∎  2021 Financial Statements

​

Management’s Report to Shareholders

Management’s Responsibility for Financial Statements

​

The accompanying consolidated financial statements of Vermilion Energy Inc. are the responsibility of management and have been approved by the Board of Directors of Vermilion Energy Inc. The consolidated financial statements have been prepared in accordance with the accounting policies detailed in the notes to the consolidated financial statements and are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Where necessary, management has made informed judgments and estimates of transactions that were not yet completed at the balance sheet date. Financial information throughout the Annual Report is consistent with the consolidated financial statements.

Management ensures the integrity of the consolidated financial statements by maintaining high-quality systems of internal control. Procedures and policies are designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded, and that the financial records are reliable for preparation of the consolidated financial statements. Deloitte LLP, Vermilion’s Independent Registered Public Accounting Firm, have conducted an audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and have provided their report.

The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control. The Board carries out this responsibility principally through the Audit Committee, which is appointed by the Board and is comprised entirely of independent Directors. The Committee meets periodically with management and Deloitte LLP to satisfy itself that each party is properly discharging its responsibilities and to review the consolidated financial statements, Management’s Discussion and Analysis and the Report of the Independent Registered Public Accounting Firm before they are presented to the Board of Directors.

​

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management, under the supervision and with the participation of the principal executive officer and principle financial officer, conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has assessed the effectiveness of Vermilion’s internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. Management concluded that Vermilion’s internal control over financial reporting was effective as of December 31, 2021.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even those systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.

The effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2021 has been audited by Deloitte LLP, the Company’s Independent Registered Public Accounting Firm, who also audited the Company’s consolidated financial statements for the year ended December 31, 2021.

(“Dion Hatcher”) (“Lars Glemser”)
​ ​
Dion Hatcher Lars Glemser
President Vice President & Chief Financial Officer
March 4, 2022

​

​

​

​

Vermilion Energy Inc.  ∎ Page 3 ∎  2021 Financial Statements

​

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Vermilion Energy Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Vermilion Energy Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated March 4, 2022, expressed an unqualified opinion on those financial statements.

​

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report to Shareholders. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Canada
March 4, 2022

​

​

Vermilion Energy Inc.  ∎ Page 4 ∎  2021 Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Vermilion Energy Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vermilion Energy Inc. (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of net earnings (loss) and comprehensive income (loss), consolidated statements of cash flows and consolidated statements of changes in shareholders' equity, for each of the two years in the period ended December 31, 2021 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

​

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Capital Asset impairment reversal   – Refer to Note 2 and 4 to the financial statements

Critical Audit Matter Description

​

The Company reviews all Cash Generating Units (“CGUs”) for indicators of potential impairment or reversal of impairment at each reporting date. As a result of increasing commodity price forecasts and a market capitalization appreciation during the year, indicators of impairment reversal were identified for those CGUs where impairment loss was recognized in prior years. An impairment reversal is recognized if the carrying amount of the CGU is less than its recoverable amount. The recoverable amount of a CGU is estimated based on the higher of its fair value less cost of disposal and its value-in-use, using future after-tax cash flows of the underlying proved and probable oil and natural gas reserves. The Company engages an independent reservoir engineer to estimate oil and natural gas reserves using estimates, assumptions, and engineering data. The development of the Company’s reserves and the related future after-tax cash flows used to evaluate the impairment reversal requires management to make significant estimates and assumptions related to future oil and natural gas prices, discount rates, reserves, and future operating and development costs. Impairment reversal totaling $1.30 billion were recorded for the year ended December 31, 2021.

​

Given the significant judgments made by management related to future oil and natural gas prices, discount rates, reserves, and future operating and development costs, these estimates and assumptions are subject to a high degree of estimation uncertainty. Auditing these estimates and assumptions are subject to a high degree of auditor judgment in applying audit procedures and in evaluation of the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists.

​

How the Critical Audit Matter Was Addressed in the Audit

Vermilion Energy Inc.  ∎ Page 5 ∎  2021 Financial Statements

​

Our audit procedures related to future oil and natural gas prices, discount rates, reserves, and future operating and development costs used to determine the recoverable amount of the CGUs included the following, among others:

​

● Evaluate management’s assessment and independently assess petroleum natural gas assets for indicators of impairment or impairment reversal.
● Evaluated the effectiveness of the relevant controls, including those over the determination of the future oil and natural gas prices, discount rates, reserves, and future operating and development costs.
--- ---
● Evaluated the Company’s independent reservoir engineer by:
--- ---
̊ Examining reports and assessing their scope of work and findings.
--- ---
̊ Assessing the competence, capability and objectivity by evaluating their relevant professional qualifications and experience.
--- ---
● Evaluated the reasonableness of reserves by testing the source financial information underlying the reserves and comparing the reserve volumes to historical production volumes.
--- ---
● Evaluated the reasonableness of future operating and development costs by testing the source financial information underlying the estimate, comparing future operating and development costs to historical results, and evaluating whether they are consistent with evidence obtained in other areas of the audit.
--- ---
● Evaluated the reasonableness of forecast oil and natural gas prices used by comparing the assumptions to historical data and available market trends.
--- ---
● With the assistance of fair value specialists,
--- ---
̊ Evaluated the future oil and natural gas prices by independently developing a reasonable range of forecasts based on reputable third-party forecasts and market data and comparing those to the future prices forecasted by management.
--- ---
̊ Evaluated the reasonableness of the discount rates by testing the source information underlying the determination of the discount rates and developing a range of independent estimates and comparing those to the discount rates determined by management.
--- ---

​

Deferred Taxes - Refer to Notes 2 and 9 to the financial statements

Critical Audit Matter Description

​

The Company recognizes deferred income taxes for differences between the financial statement and tax basis of assets and liabilities at substantively enacted statutory tax rates in effect for the years in which the differences are expected to reverse.

​

Deferred income tax assets are reduced to the amounts expected to be realized based on forecasts of future taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves). The Company recorded a deferred income tax asset for Canada primarily arising from past taxable losses in this jurisdiction.

​

To determine whether it is probable that the deferred income tax assets in Canada will be realized, management makes assumptions related to the forecasts of future taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves). As such, auditing the probability of the deferred income tax assets being realized and management’s commodity price forecasts and forecasted reserves involved a high degree of auditor judgement as the estimations made by management contain significant measurement uncertainty. This resulted in an increased extent of audit effort, which included the need to involve an income tax specialist.

​

How the Critical Audit Matter Was Addressed in the Audit

​

Our audit procedures related to assessing the probability of the deferred income tax assets being realized and management’s forecasts of taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves) to evaluate the deferred income tax assets in Canada included the following, among others:

​

● Evaluated the effectiveness of relevant controls, including those over the determination of the forecasts of future revenue, specifically commodity price forecasts and forecasted reserves in Canada.
● Evaluated management’s ability to accurately forecast future revenue by comparing management’s assumptions to historical data and available market trends.
--- ---
● Evaluated the reasonableness of management's forecasts of future revenue by:
--- ---
̊ Comparing the forecasts prepared by management’s expert to third party forecasts and,
--- ---
̊ Evaluating whether management’s estimates of commodity price forecasts and estimated reserves were consistent with the requirements of IAS 12 - Income Taxes relating to the probability of forecasted future revenue and the length of the forecast period.
--- ---

Vermilion Energy Inc.  ∎ Page 6 ∎  2021 Financial Statements

​

/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Canada
March 4, 2022

​

We have served as the Company’s auditor since 2000.

​

Vermilion Energy Inc.  ∎ Page 7 ∎  2021 Financial Statements

​

Consolidated Financial Statements

Consolidated Balance Sheet

thousands of Canadian dollars

​ ​ ​ ​ ​ ​ ​
​ Note December 31, 2021 December 31, 2020
Assets ​ ​ ​ ​ ​ ​
Current ​ ​ ​ ​ ​ ​
Cash and cash equivalents 17 6,028 6,904
Accounts receivable ​ 17 328,584 196,077
Crude oil inventory ​ 17 20,070 13,402
Derivative instruments 7 19,321 16,924
Prepaid expenses ​ 17 98,842 27,686
Total current assets ​ ​ 472,845 260,993
​ ​ ​ ​ ​ ​ ​
Derivative instruments 7 — 2,451
Deferred taxes 9 374,993 484,497
Exploration and evaluation assets 5 233,290 254,094
Capital assets 4 4,824,195 3,107,104
Total assets ​ ​ 5,905,323 4,109,139
​ ​ ​ ​ ​ ​ ​
Liabilities ​ ​ ​
Current ​ ​ ​
Accounts payable and accrued liabilities ​ 17 440,658 297,670
Derivative instruments 7 268,973 130,919
Income taxes payable ​ 17 37,182 4,539
Total current liabilities ​ ​ 746,813 433,128
​ ​ ​ ​ ​ ​ ​
Derivative instruments 7 51,213 8,228
Long-term debt 10 1,651,569 1,933,848
Lease obligations 8 60,190 76,524
Asset retirement obligations 6 1,000,554 467,737
Deferred taxes 9 328,839 264,272
Total liabilities ​ ​ 3,839,178 3,183,737
​ ​ ​ ​ ​ ​ ​
Shareholders' Equity ​ ​ ​
Shareholders' capital 11 4,241,773 4,181,160
Contributed surplus ​ ​ 49,529 66,250
Accumulated other comprehensive income ​ ​ 28,467 77,986
Deficit ​ ​ (2,253,624) (3,399,994)
Total shareholders' equity ​ ​ 2,066,145 925,402
Total liabilities and shareholders' equity ​ ​ 5,905,323 4,109,139

​

Approved by the Board

​

(Signed “Robert Michaleski”) (Signed “Lorenzo Donadeo”)
Robert Michaleski, Director Lorenzo Donadeo, Director

​

​

Vermilion Energy Inc.  ∎ Page 8 ∎  2021 Financial Statements

Consolidated Statements of Net Earnings (Loss) and Comprehensive Income (Loss)

thousands of Canadian dollars, except share and per share amounts

​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ Year Ended
​ Note Dec 31, 2021 Dec 31, 2020
Revenue ​ ​ ​ ​ ​ ​
Petroleum and natural gas sales ​ ​ **** 2,079,761 1,119,545
Royalties ​ ​ **** (186,122) (106,554)
Sales of purchased commodities ​ ​ ​ 147,091 ​ 127,853
Petroleum and natural gas revenue ​ ​ **** 2,040,730 1,140,844
​ ​ ​ ​
Expenses ​ ​ ​
Purchased commodities ​ ​ ​ 147,091 ​ 127,853
Operating 17 **** 413,013 417,251
Transportation ​ ​ **** 77,161 67,711
Equity based compensation 13 **** 41,565 42,906
Loss (gain) on derivative instruments 7 **** 508,478 (8,138)
Interest expense ​ ​ **** 73,075 75,077
General and administration 17 **** 52,877 60,840
Foreign exchange loss (gain) ​ ​ **** 71,576 (60,122)
Other income ​ ​ **** (21,422) (3,258)
Accretion 6 **** 43,552 35,318
Depletion and depreciation 4 **** 571,688 580,461
Impairment (reversal) expense ​ 4 ​ (1,302,619) ​ 1,682,344
Gain on business combinations 3 **** (17,198) —
​ ​ ​ **** 658,837 3,018,243
Earnings (loss) before income taxes ​ ​ **** 1,381,893 (1,877,399)
​ ​ ​
Income tax expense (recovery) ​
Deferred ​ 9 **** 187,343 (374,313)
Current ​ ​ **** 45,854 14,341
​ ​ ​ **** 233,197 (359,972)
​ ​ ​
Net earnings (loss) ​ ​ **** 1,148,696 (1,517,427)
​ ​ ​
Other comprehensive income (loss) ​ ​
Currency translation adjustments ​ ​ **** (55,632) 65,160
Unrealized gain (loss) on hedges ​ ​ ​ 6,113 ​ (36,752)
Comprehensive income (loss) ​ ​ **** 1,099,177 (1,489,019)
​ ​ ​ ​ ​ ​ ​
Net earnings (loss) per share 14
Basic ​ ​ **** 7.13 (9.61)
Diluted ​ ​ **** 6.97 (9.61)
​ ​ ​ ​
Weighted average shares outstanding ('000s) 14 ​
Basic ​ ​ **** 161,172 157,908
Diluted ​ ​ **** 164,765 157,908

​

​

​

Vermilion Energy Inc.  ∎ Page 9 ∎  2021 Financial Statements

Consolidated Statements of Cash Flows

thousands of Canadian dollars

​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ Year Ended
​ Note Dec 31, 2021 Dec 31, 2020
Operating ​ ​ ​ ​ ​ ​
Net earnings (loss) ​ ​ 1,148,696 (1,517,427)
Adjustments: ​ ​ ​ ​
Accretion 6 43,552 35,318
Depletion and depreciation 4 571,688 580,461
Impairment (reversal) expense ​ 4 ​ (1,302,619) ​ 1,682,344
Gain on business combinations 4 (17,198) —
Unrealized loss on derivative instruments 7 181,094 100,955
Equity based compensation 13 41,565 42,906
Unrealized foreign exchange loss (gain) ​ ​ 64,963 (49,012)
Unrealized other expense ​ ​ 778 833
Deferred taxes 9 187,343 (374,313)
Asset retirement obligations settled 6 (28,525) (14,278)
Changes in non-cash operating working capital 17 (56,884) 12,365
Cash flows from operating activities ​ ​ 834,453 500,152
​ ​ ​ ​ ​ ​ ​
Investing ​ ​ ​ ​
Drilling and development 4 (339,390) (352,481)
Exploration and evaluation 5 (35,406) (14,721)
Acquisitions 4 (131,628) (25,810)
Changes in non-cash investing working capital 17 36,724 (8,422)
Cash flows used in investing activities ​ ​ (469,700) (401,434)
​ ​ ​ ​ ​ ​ ​
Financing ​ ​ ****
(Repayments) borrowings on the revolving credit facility 10 (341,259) 22,183
Payments on lease obligations 8 (22,187) (25,048)
Cash dividends ​ — (117,737)
Cash flows used in financing activities ​ ​ (363,446) (120,602)
Foreign exchange loss on cash held in foreign currencies ​ ​ (2,183) (240)
​ ​ ​ ​ ​ ​ ​
Net change in cash and cash equivalents ​ ​ (876) (22,124)
Cash and cash equivalents, beginning of year ​ ​ 6,904 29,028
Cash and cash equivalents, end of year 17 6,028 6,904
​ ​ ​ ​ ​ ​ ​
Supplementary information for cash flows from operating activities ​ ​
Interest paid ​ ​ 71,369 74,125
Income taxes paid ​ ​ 13,212 15,218

​

​

​

Vermilion Energy Inc.  ∎ Page 10 ∎  2021 Financial Statements

Consolidated Statements of Changes in Shareholders’ Equity

thousands of Canadian dollars

​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ Year Ended
​ Note Dec 31, 2021 Dec 31, 2020
Shareholders' capital ​ 11 ​ ​ ​ ​
Balance, beginning of year **** ​ ​ 4,181,160 4,119,031
Shares issued for the Dividend Reinvestment Plan **** ​ ​ — 8,277
Vesting of equity based awards **** ​ ​ 49,922 49,188
Equity based compensation **** ​ ​ 8,365 3,203
Share-settled dividends on vested equity based awards **** ​ ​ 2,326 1,461
Balance, end of year ​ ​ ​ 4,241,773 4,181,160
Contributed surplus 11 ​ ​ ​
Balance, beginning of year **** ​ ​ 66,250 75,735
Equity based compensation **** ​ ​ 33,201 39,703
Vesting of equity based awards **** ​ ​ (49,922) (49,188)
Balance, end of year **** ​ ​ 49,529 66,250
Accumulated other comprehensive income ​ ​ ​ ​
Balance, beginning of year **** ​ ​ 77,986 49,578
Currency translation adjustments **** ​ ​ (55,632) 65,160
Hedge accounting reserve ​ ​ ​ 6,113 ​ (36,752)
Balance, end of year **** ​ ​ 28,467 77,986
Deficit ​ ​
Balance, beginning of year **** ​ ​ (3,399,994) (1,791,039)
Net earnings (loss) **** ​ ​ 1,148,696 (1,517,427)
Dividends declared **** ​ ​ — (90,067)
Share-settled dividends on vested equity based awards **** ​ ​ (2,326) (1,461)
Balance, end of year **** ​ ​ (2,253,624) (3,399,994)
​ ​ ​ ​ ​ ​ ​
Total shareholders' equity **** ​ ​ 2,066,145 925,402

​

​

Vermilion Energy Inc.  ∎ Page 11 ∎  2021 Financial Statements

Description of equity reserves

Shareholders’ capital

Represents the recognized amount for common shares when issued, net of equity issuance costs and deferred taxes.

Contributed surplus

Represents the recognized value of unvested equity based awards that will be settled in shares. Once vested, the value of the awards are transferred to shareholders’ capital.

Accumulated other comprehensive income

Represents currency translation adjustments and hedge accounting reserve.

Currency translation adjustments result from translating the balance sheets of subsidiaries with a foreign functional currency to Canadian dollars at period-end rates. These amounts may be reclassified to net earnings if there is a disposal or partial disposal of a subsidiary.

The hedge accounting reserve represents the effective portion of the change in fair value related to cash flow and net investment hedges recognized in other comprehensive income, net of tax and reclassified to the consolidated statement of net earnings in the same period in which the transaction associated with the hedged item occurs. For the year ended December 31, 2021, accumulated losses of $4.7 million and $1.4 million were recognized in the consolidated statement of net earnings on the cash flow hedges and net investment hedges, respectively, and will be recognized in net earnings through 2025 when the senior unsecured notes mature.

Deficit

Represents the cumulative net earnings less distributed earnings of Vermilion Energy Inc.

​

Vermilion Energy Inc.  ∎ Page 12 ∎  2021 Financial Statements

Notes to the Consolidated Financial Statements for the year ended December 31, 2021 and 2020

tabular amounts in thousands of Canadian dollars, except share and per share amounts

  1. Basis of presentation

Vermilion Energy Inc. and its subsidiaries (the “Company” or “Vermilion”) are engaged in the business of petroleum and natural gas exploration, development, acquisition, and production.

Vermilion was incorporated in Canada and the Company’s registered office and principal place of business is located at 3500, 520, 3rd Avenue SW, Calgary, Alberta, Canada.

These consolidated financial statements were approved and authorized for issuance by Vermilion’s Board of Directors on March 4, 2022.

​

  1. Significant accounting policies

Accounting framework

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Principles of consolidation

The consolidated financial statements include the accounts of Vermilion Energy Inc. and its subsidiaries. Vermilion’s subsidiaries include entities in each of the jurisdictions that Vermilion operates as described in Note 3 (Segmented information) including: Canada, France, Netherlands, Germany, Ireland, Australia, the United States, and Central and Eastern Europe (Hungary, Slovakia, and Croatia). Vermilion Energy Inc. directly or indirectly through holding companies owns all of the voting securities of each material subsidiary. Transactions between Vermilion Energy Inc. and its subsidiaries have been eliminated.

Vermilion accounts for joint operations by recognizing the Company’s share of assets, liabilities, income, and expenses.

Exploration and evaluation assets

Vermilion classifies costs as exploration and evaluation (“E&E”) assets when they relate to exploring and evaluating an area for which the Company has the license or right to explore and extract resources. E&E costs may include: geological and geophysical costs; land and license acquisition costs; and costs for the drilling, completion, and testing of exploration wells.

E&E costs are reclassified to capital assets if the technical feasibility and commercial viability of the area can be determined. E&E assets are assessed for impairment prior to any reclassification. The technical feasibility and commercial viability of extracting the reserves is considered to be determinable when proved and probable reserves are identified.

Costs incurred prior to the acquisition of the legal rights to explore an area are expensed as incurred. If reserves are not found within the license area or the area is abandoned, the related E&E costs are depreciated over a period not greater than five years. If an exploration license expires prior to the commencement of exploration activities, the cost of the exploration license is written off through depreciation in the year of expiration.

Capital assets

Vermilion recognizes capital assets at cost less accumulated depletion, depreciation, and impairment losses. Costs include directly attributable costs incurred for the drilling, completion, and tie-in of wells and the construction of production and processing facilities.

When components of capital assets are replaced, disposed of, or no longer in use, they are derecognized. Gains and losses on disposal of capital assets are determined by comparing the proceeds of disposal compared to the carrying amount.

Depletion and depreciation

Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives. Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and depreciation.

The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production.

Vermilion Energy Inc.  ∎ Page 13 ∎  2021 Financial Statements

For the purposes of the depletion calculations, oil and gas reserves are converted to a common unit of measure on the basis of their relative energy content based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent.

Impairment of capital assets and exploration and evaluation assets

Depletion units are aggregated into cash generating units (“CGUs”) for impairment testing. CGUs are the lowest level for which there are identifiable cash inflows that are largely independent of cash inflows of other groups of assets. CGUs are reviewed for indicators of potential impairment at each reporting date.

E&E assets are tested for impairment when reclassified to capital assets or when indicators of potential impairment are identified. E&E assets are reviewed for indicators of potential impairment at each reporting date. If indicators of potential impairment are identified, E&E assets are tested for impairment as part of the CGU attributable to the jurisdiction in which the exploration area resides.

If an indicator of potential impairment exists, the CGU’s carrying value is compared to its recoverable amount. A CGU’s recoverable amount is the higher of its fair value less costs of disposal and its value-in-use. If the carrying amount of a CGU exceeds its recoverable amount, an impairment loss is recognized to reduce the carrying value of the CGU to its recoverable amount.

If an impairment loss has been recognized in a prior period, an assessment is performed at each reporting date to determine if there are indicators that the circumstances which led to the impairment loss have reversed. If the change in circumstances results in the recoverable amount being higher than the carrying value after the impairment loss, then the impairment loss (net of depletion that would otherwise have been recorded) is reversed.

Lease obligations and right-of-use assets

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the lease commencement date, a lease obligation is recognized at the present value of future lease payments, typically using the applicable incremental borrowing rate. A corresponding right-of-use asset is recognized at the amount of the lease obligation, adjusted for lease incentives received and initial direct costs. Vermilion does not recognize leases for short-term leases with a lease term of 12 months or less, or leases for low-value assets.

Payments are applied against the lease obligation and interest expense is recognized on the lease obligations using the effective interest rate method. Depreciation is recognized on the right-of-use asset over the lease term.

Cash and cash equivalents

Cash and cash equivalents include cash on deposit with financial institutions and guaranteed investment certificates.

Crude oil inventory

Crude oil inventory is valued at the lower of cost or net realizable value. The cost of crude oil inventory produced includes related operating expense, royalties, and depletion determined on a weighted-average basis.

Asset retirement obligations

Vermilion recognizes a provision for asset retirement obligations when an event occurs giving rise to an obligation of uncertain timing or amount. Asset retirement obligations are recognized on the consolidated balance sheet as a long-term liability with a corresponding increase to E&E or capital assets.

Asset retirement obligations reflect the present value of estimated future settlement costs. The discount rate used to calculate the present value is specific to the jurisdiction the obligation relates to and is reflective of current market assessment of the time value of money and risks specific to the liabilities that have not been reflected in the cash flow estimates.

Asset retirement obligations are remeasured at each reporting period to reflect changes in market rates and estimated future settlement costs. Asset retirement obligations are increased each reporting period to reflect the passage of time with a corresponding charge to accretion expense.

Revenue recognition

Revenue associated with the sale of crude oil and condensate, natural gas, and natural gas liquids is measured based on the consideration specified in contracts with customers.

Revenue from contracts with customers is recognized when or as Vermilion satisfies a performance obligation by transferring control of crude oil and condensate, natural gas, or natural gas liquids to a customer at contractually specified transfer points. This transfer coincides with title passing to the customer and the customer taking physical possession of the commodity. Vermilion principally satisfies its performance obligations at a point in time and the amounts of revenue recognized relating to performance obligations satisfied over time are not significant.

Vermilion Energy Inc.  ∎ Page 14 ∎  2021 Financial Statements

Vermilion invoices customers for delivered products monthly and payment occurs shortly thereafter. Vermilion does not have any contracts where the period between the transfer of control of the commodity to the customer and payment by the customer exceeds one year. As a result, Vermilion does not adjust its revenue transactions to reflect significant financing components.

Financial instruments

On initial recognition, financial instruments are measured at fair value. Measurement in subsequent periods depends on the classification of the financial instrument as described below:

● Fair value through profit or loss ("FVTPL"): Financial instruments under this classification include cash and cash equivalents and derivative assets and liabilities. Transaction costs under this classification are expensed as incurred.
● Fair value through other comprehensive income ("FVTOCI"): Financial instruments under this classification include derivative assets and liabilities where hedge accounting is applied. Transaction costs under this classification are expensed as incurred.
--- ---
● Amortized cost: Financial instruments under this classification include accounts receivable, accounts payable and accrued liabilities, dividends payable, lease obligations, and long-term debt. Transaction costs under this classification are included in the measurement of the financial instrument.
--- ---

Accounts receivable are measured net of a loss allowance equal to the lifetime expected credit loss.

Hedge accounting

Hedge accounting is applied to financial instruments designated as hedging instruments in qualifying hedging relationships.  Qualifying hedge relationships may include cash flow hedges, fair value hedges, and hedges of net investments in foreign operations.  The purpose of hedge accounting is to represent the effect of Vermilion's risk management activities to manage exposures arising from specific risks that affect net earnings such as foreign currency risk.

In order to apply hedge accounting, the eligible hedging instrument must be highly effective in offsetting the exposure to changes in the eligible hedged item.  This effectiveness is assessed at inception and at the end of each reporting period thereafter.  At inception, formal designation and documentation of the hedging relationship, risk management objective and strategy is required for undertaking the hedge.

For cash flow and net investment hedges, gains and losses on the hedging instrument are recognized in the consolidated statement of earnings in the same period in which the transaction associated with the hedged item occurs.  Where the hedging instrument is a derivative instrument, a derivative asset or liability is recognized on the balance sheet at fair value (included in "Derivative instruments") with the effective portion of the gain or loss recorded to other comprehensive income.  Any gain or loss associated with the ineffective portion of the hedging relationship is recognized in the consolidated statement of net earnings as other income or expense.

If a hedging relationship no longer qualifies for hedge accounting, any gain or loss resulting from the discontinuation of hedge accounting is deferred in other comprehensive income until the forecasted transaction date.  If the forecasted transaction is no longer expected to occur, any gain or loss resulting from the discontinuation of hedge accounting is immediately recognized in the consolidated statement of net earnings.

Equity based compensation

Equity based compensation expense results from equity-settled awards issued under Vermilion’s long-term share-based compensation plans as well as the grant date fair value of Vermilion common shares issued under the Company’s bonus and employee share savings plans.

Vermilion’s long-term share-based compensation plans consist of the Vermilion Incentive Plan (“VIP”) and the Deferred Share Unit Plan ("DSU"). Equity-settled awards issued under the VIP vest over a period of one to three years and awards issued under the DSU vest immediately upon granting.

Equity based compensation expense for equity-settled plans is recognized over the vesting period with a corresponding adjustment to contributed surplus. The expense recognized is based on the grant date fair value of the awards, an estimate of the performance factor that will be achieved (if applicable), and an estimate of forfeiture rates based on historical vesting data. Dividends notionally accrue to the VIP and are excluded in the determination of grant date fair values. When the awards are converted to Vermilion common shares, the amount recognized in contributed surplus is reclassified to shareholders’ capital.

The grant date fair value of awards or Vermilion common shares issued is determined as the closing price of Vermilion’s common shares on the Toronto Stock Exchange on the grant date.

Per share amounts

Basic net earnings per share is calculated by dividing net earnings by the weighted-average number of shares outstanding during the period.

Vermilion Energy Inc.  ∎ Page 15 ∎  2021 Financial Statements

Diluted net earnings per share is calculated by dividing net earnings by the diluted weighted-average number of shares outstanding during the period. The diluted weighted-average number of shares outstanding is the sum of the basic weighted-average number of shares outstanding and (to the extent inclusion reduces diluted net earnings per share) the number of shares issuable for equity-settled awards determined using the treasury stock method. The treasury stock method assumes that the unrecognized equity based compensation expense are deemed proceeds used to repurchase Vermilion common shares at the average market price during the period.

Foreign currency translation

Vermilion Energy Inc.’s functional and presentation currency is the Canadian dollar. Vermilion has subsidiaries that transact and operate in countries other than Canada and have functional currencies other than the Canadian dollar.

Foreign currency translation includes the translation of foreign currency transactions and the translation of foreign operations.

Foreign currency transaction translation occurs when translating transactions and balances in foreign currencies to the applicable functional currency of Vermilion Energy Inc. and its subsidiaries. Gains and losses from foreign currency transactions are recorded as foreign exchange gains or losses in the statement of net earnings. Foreign currency transaction translation occurs as follows:

● Income and expenses are translated at the prevailing rates on the date of the transaction.
● Non-monetary assets or liabilities are carried at the prevailing rates on the date of the transaction.
--- ---
● Monetary items, including intercompany loans that are not deemed to represent net investments in a foreign subsidiary, are translated at the prevailing rates at the balance sheet date.
--- ---

Foreign operation translation occurs when translating the financial statements of non-Canadian functional currency subsidiaries to the Canadian dollar and when translating intercompany loans that are deemed to represent net investments in a foreign subsidiary. Gains and losses from foreign operation translations are recorded as currency translation adjustments in the statement of comprehensive earnings. Foreign operation translation occurs as follows:

● Income and expenses are translated at the average exchange rates for the period.
● Assets and liabilities are translated at the prevailing rates on the balance sheet date.
--- ---

Income taxes

Deferred tax assets and liabilities are calculated using the balance sheet method. Deferred tax assets and liabilities are recognized for the estimated effect of any temporary differences between the amounts recognized on Vermilion’s consolidated balance sheet and the respective tax basis. This calculation uses enacted or substantively enacted tax rates that are expected to be in effect when the temporary differences are expected to reverse. The effect of a change in tax rates on deferred taxes is recognized in the period the related legislation is substantively enacted.

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that the related tax benefit will be realized.

Business combinations

Acquisitions of corporations or groups of assets are accounted for as business combinations using the acquisition method if the acquired assets constitute a business. Under the acquisition method, assets acquired and liabilities assumed in a business combination (with the exception of deferred tax assets and liabilities) are measured at their fair values. Deferred tax assets or liabilities arising from the assets acquired and liabilities assumed are measured in accordance with the policies described in "Income taxes" above.

If applicable, the excess or deficiency of the fair value of net assets acquired compared to consideration paid is recognized as a gain on business combination or as goodwill on the consolidated balance sheet. Acquisition-related costs incurred to effect a business combination are expensed in the period incurred.

As part of the assessment to determine if the acquisition constitutes a business, Vermilion may elect to apply the concentration test on a transaction by transaction basis. The test is met if substantially all of the fair value related to the gross assets acquired is concentrated in a single identifiable asset (or group of similar assets) resulting in the acquisition not being deemed a business and recorded as an asset acquisition.

Segmented information

Vermilion has a decentralized business unit structure designed to manage assets in each country the Company operates. Each of Vermilion’s operating segments derives its revenues solely from the production and sale of petroleum and natural gas.

Vermilion Energy Inc.  ∎ Page 16 ∎  2021 Financial Statements

Vermilion’s Corporate segment aggregates costs incurred at the Company’s Corporate head office located in Calgary, Alberta, Canada as well as costs incurred relating to Vermilion’s exploration and production activities in Hungary, Slovakia, and Croatia (Central and Eastern Europe). These operating segments have similar economic characteristics as they do not currently generate material revenue.

Vermilion’s chief operating decision maker regularly reviews fund flows from operations generated by each of Vermilion’s operating segments. Fund flows from operations is a measure of profit or loss that provides the chief operating decision maker with the ability to assess the profitability of each operating segment and, correspondingly, the ability of each operating segment to fund its share of dividends, asset retirement obligations, and capital investments.

Management judgments and estimation uncertainty

The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the reported amount of assets, liabilities, income, and expenses. Actual results could differ significantly from these estimates. Key areas where management has made judgments, estimates, and assumptions are described below.

The determination of whether indicators of impairment or impairment reversals:

● Determining whether there are indicators of impairment or impairment reversals are based on management's assessments of the changes in estimates for future commodity prices, costs, discount rates, or reserves. Changes in these estimates and assumptions can directly impact the calculated fair value of capital assets and therefore could be indicators of impairment or impairment reversals. In addition, change in the Vermilion's market capitalization relative to its book value could be an indicator of impairment.

The measurement of the fair value of capital assets acquired in a business combination and the determination of the recoverable amount of cash generating units ("CGU"):

● Calculating the fair value of capital assets acquired in a business combination and the recoverable amount of CGUs (in the assessment of impairments or reversals of previous impairments if indicators of impairment or impairment reversal are identified) are based on estimated future commodity prices, discount rates and estimated reserves. Reserve estimates are based on: engineering data, estimated future commodity prices, expected future rates of production, and assumptions regarding the timing and amount of future expenditures. Changes in these estimates and assumptions can directly impact the calculated fair value of capital assets acquired (and thus the resulting goodwill or gain on business combination) and the recoverable amount of a CGU (and thus the resulting impairment loss or recovery).
● In addition, the recoverable amount of a CGU is impacted by the composition of CGUs, which are subject to management’s judgment of the lowest level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets. The factors used by Vermilion to determine CGUs vary by jurisdiction due to their unique operating and geographic conditions. In general, Vermilion will assess the following factors: geographic proximity of the assets within a group to one another, geographic proximity of the group of assets to other groups of assets, homogeneity of the production from the group of assets and the sharing of infrastructure used to process and/or transport production. Changes in these judgments can directly impact the calculated recoverable amount of a CGU (and thus the resulting impairment loss or recovery).
--- ---

The measurement of the carrying value of asset retirement obligations on the balance sheet, including the fair value and subsequent carrying value of asset retirement obligations assumed in a business combination:

● Asset retirement obligations are based on judgments regarding regulatory requirements, estimates of future costs, assumptions on the expected timing of expenditures, and estimates of the underlying risk inherent to the obligation. The carrying balance of asset retirement obligations and accretion expense may differ due to changes in: laws and regulations, technology, the expected timing of expenditures, and market conditions affecting the discount rate applied.

The recognition and measurement of deferred tax assets and liabilities:

● Tax interpretations, regulations, and legislation in the various jurisdictions in which Vermilion and its subsidiaries operate are subject to change and interpretation. Changes in laws and interpretations can affect the timing of the reversal of temporary tax differences, the tax rates in effect when such differences reverse and Vermilion’s ability to use tax losses and other tax pools in the future. The Company’s income tax filings are subject to audit by taxation authorities in numerous jurisdictions and the results of such audits may increase or decrease the tax liability. The determination of tax amounts recognized in the consolidated financial statements are based on management’s assessment of the tax positions, which includes consideration of their technical merits, communications with tax authorities and management’s view of the most likely outcome.
● The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on estimated future commodity prices and estimates of reserves. Judgments, estimates, and assumptions inherent in reserve estimates are described above.
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Vermilion Energy Inc.  ∎ Page 17 ∎  2021 Financial Statements

The measurement of lease obligations and corresponding right-of-use assets:

● The measurement of lease obligations are subject to management’s judgments of the applicable incremental borrowing rate and the expected lease term. The carrying balance of the right-of-use assets, lease obligations, and the resulting interest and depletion and depreciation expense, may differ due to changes in the market conditions and expected lease terms. Applicable incremental borrowing rates are based on judgments of the economic environment, term, currency, and the underlying risk inherent to the asset. Lease terms are based on assumptions regarding cancellation and extension terms that allow for operational flexibility based on future market conditions.

​

  1. Segmented information

Substantially all sales in the France and Netherlands operating segments for the years ended December 31, 2021 (2020 - France, Netherlands, and Ireland) were to one customer in each respective segment. In 2021, France and the Netherlands contributed more than 10%of Vermilion's consolidated revenues (2020 - France).

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Year Ended December 31, 2021
​ **** Canada ​ USA **** France **** Netherlands **** Germany **** Ireland **** Australia **** Corporate **** Total
Total assets 3,100,322 ​ 545,296 771,707 227,779 422,030 427,362 217,852 192,975 5,905,323
Drilling and development 190,242 ​ 32,540 39,587 20,198 19,234 1,261 34,785 1,543 339,390
Exploration and evaluation — ​ — 121 6,839 1,073 — — 27,373 35,406
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate sales 625,053 ​ 80,208 279,263 2,640 32,607 23 143,014 — 1,162,808
NGL sales 86,932 ​ 17,723 — — — — — — 104,655
Natural gas sales 189,790 ​ 14,484 — 293,083 99,328 214,402 — 1,211 812,298
Sales of purchased commodities ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ 147,091 ​ 147,091
Royalties (113,651) ​ (30,747) (37,666) (873) (2,847) — — (338) (186,122)
Revenue from external customers 788,124 ​ 81,668 241,597 294,850 129,088 214,425 143,014 147,964 2,040,730
Purchased commodities — ​ — — — — — — (147,091) (147,091)
Transportation (38,764) ​ (1,336) (26,497) — (6,359) (4,205) — — (77,161)
Operating (215,378) ​ (16,992) (52,147) (35,269) (27,149) (14,889) (50,748) (441) (413,013)
General and administration ​ (18,380) ​ (4,563) ​ (10,954) ​ (1,243) ​ (5,257) ​ 9 ​ (3,457) ​ (9,032) ​ (52,877)
PRRT — ​ — — — — — (15,688) — (15,688)
Corporate income taxes — ​ — 9,120 (46,567) — — 5,759 1,522 (30,166)
Interest expense — ​ — — — — — — (73,075) (73,075)
Realized loss on derivative instruments — ​ — — — — — — (327,384) (327,384)
Realized foreign exchange loss — ​ — — — — — — (6,613) (6,613)
Realized other income — ​ — — — — — — 22,200 22,200
Fund flows from operations **** 515,602 ​ 58,777 **** 161,119 **** 211,771 **** 90,323 **** 195,340 **** 78,880 **** (391,950) **** 919,862

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ Year Ended December 31, 2020
​ Canada ​ USA France Netherlands Germany Ireland Australia Corporate Total
Total assets 2,276,787 ​ 328,902 703,567 130,063 198,357 257,990 105,898 107,575 4,109,139
Drilling and development 199,141 ​ 66,120 42,145 10,331 13,005 1,823 24,520 (4,604) 352,481
Exploration and evaluation — ​ — 183 (226) 2,814 — — 11,950 14,721
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Crude oil and condensate sales 418,610 ​ 55,099 182,292 1,502 17,143 13 141,452 8 816,119
NGL sales 36,204 ​ 6,513 — — — — — — 42,717
Natural gas sales 114,377 ​ 4,834 — 64,073 17,067 58,433 — 1,925 260,709
Sales of purchased commodities ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ 127,853 ​ 127,853
Royalties (54,961) ​ (17,446) (32,069) (444) (990) — — (644) (106,554)
Revenue from external customers 514,230 ​ 49,000 150,223 65,131 33,220 58,446 141,452 129,142 1,140,844
Purchased commodities ​ — ​ — — — — — — (127,853) (127,853)
Transportation (41,494) ​ (1,349) (14,604) — (5,839) (4,425) — — (67,711)
Operating (218,596) ​ (18,108) (57,128) (32,410) (20,732) (15,232) (54,581) (464) (417,251)
General and administration (25,462) ​ (7,420) ​ (13,108) ​ (1,220) ​ (6,532) ​ (594) ​ (3,841) ​ (2,663) ​ (60,840)
PRRT — ​ — — — — — (20,151) — (20,151)
Corporate income taxes — ​ — (141) 3,774 — — 2,106 71 5,810
Interest expense — ​ — — — — — — (75,077) (75,077)
Realized gain on derivative instruments — ​ — — — — — — 109,093 109,093
Realized foreign exchange gain — ​ — — — — — — 11,110 11,110
Realized other income — ​ — — — — — — 4,091 4,091
Fund flows from operations **** 228,678 ​ 22,123 **** 65,242 **** 35,275 **** 117 **** 38,195 **** 64,985 **** 47,450 **** 502,065

​

Vermilion Energy Inc.  ∎ Page 18 ∎  2021 Financial Statements

Reconciliation of fund flows from operations to net earnings (loss):

​

​ ​ ​ ​ ​
​ ​ Year Ended
​ Dec 31, 2021 Dec 31, 2020
Fund flows from operations 919,862 502,065
Equity based compensation (41,565) (42,906)
Unrealized loss on derivative instruments (181,094) (100,955)
Unrealized foreign exchange (loss) gain (64,963) 49,012
Accretion (43,552) (35,318)
Depletion and depreciation (571,688) (580,461)
Deferred tax (expense) recovery (187,343) 374,313
Gain on business combinations 17,198 —
Impairment reversal (expense) ​ 1,302,619 ​ (1,682,344)
Unrealized other expense (778) (833)
Net earnings (loss) 1,148,696 (1,517,427)

​

​

  1. Capital assets

The following table reconciles the change in Vermilion’s capital assets:

​

​ ​ ​ ​ ​
​ 2021 2020
Balance at January 1 3,107,104 5,015,620
Acquisitions 180,806 24,430
Additions 339,390 352,481
Increase in right-of-use assets 551 5,245
Transfers from exploration and evaluation assets 11,495 —
Impairment reversal ​ 1,302,619 ​ (1,682,344)
Depletion and depreciation (538,704) (517,734)
Changes in asset retirement obligations 528,714 (200,454)
Foreign exchange (107,780) 109,860
Balance at December 31 4,824,195 3,107,104
​ ​ ​
Cost 10,849,047 9,863,537
Accumulated depletion, depreciation, and impairment (6,024,852) (6,756,433)
Carrying amount at December 31 4,824,195 3,107,104

​

In the fourth quarter of 2021, indicators of impairment reversal were present in our France - Neocomian CGU due to increases and stabilization of commodity prices resulting in increased cash flow estimates. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGU and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGU tested and $17.7 million (net of $6.2 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.

The following benchmark price forecasts were used to calculate the recoverable amounts:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** 2022 **** 2023 **** 2024 **** 2025 **** 2026 **** 2027 **** 2028 **** 2029 **** 2030 **** 2031 ^(2)^
Brent Crude ($ US/bbl) ^(1)^ ​ 76.00 ​ 72.51 ​ 71.24 ​ 72.66 ​ 74.12 ​ 75.59 ​ 77.11 ​ 78.66 ​ 80.22 ​ 81.83
Exchange rate (CAD/USD) ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79 ​ 0.79

​

^(1)^ The forecast benchmark prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the Company’s operations when determining recoverable amounts.

^(2)^ In 2032 and beyond, commodity price forecasts are inflated at a rate of 2.0% per annum. In 2031 and beyond there is no escalation of exchange rates.

​

Vermilion Energy Inc.  ∎ Page 19 ∎  2021 Financial Statements

The following are the results of tests completed, recoverable amounts, and sensitivity impacts which would decrease impairment reversals taken:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating Segment **** CGU **** Impairment Reversal ^(1)^ **** Recoverable Amount ​ 1% increase in discount rate **** 5% decrease in pricing
France Neocomian 23,923 129,189 ​ 6,359 12,894
Total **** ​ **** 23,923 **** 129,189 ​ 6,359 12,894

​

^(1)^ Impairment reversals are subject to the lower of the recoverable amount and the carrying value, which includes depletion and depreciation of the CGU had no impairment charges been previously taken.

In the third quarter of 2021, indicators of impairment reversal were present in our Ireland CGU due to increased European forecast gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the Ireland CGU and the recoverable amount was determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, the recoverable amount was determined to be greater than the carrying value and $16.7 million (net of $5.5 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.

In the second quarter of 2021, indicators of impairment reversal were present in our Alberta, Saskatchewan, Germany, Ireland and United States CGU due to an increase and stabilization in forecast oil and gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $460.4 million (net of $133.2 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.

The following benchmark price forecasts were used to calculate the recoverable amounts:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ 2H2021 **** 2022 **** 2023 **** 2024 **** 2025 **** 2026 **** 2027 **** 2028 **** 2029 **** 2030 ^(2)^
Brent Crude (US/bbl) (1) 73.25 69.55 66.42 67.75 69.11 70.49 71.90 73.34 74.80 76.30
WTI Crude (US/bbl) (1) 71.00 66.30 62.42 63.67 64.95 66.25 67.57 68.92 70.30 71.71
NBP (/mmbtu) (1) 9.17 7.19 5.53 5.65 5.75 5.87 5.99 6.11 6.23 6.35
Exchange rate (CAD/) 0.81 0.81 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80

All values are in US Dollars.

​

^(1)^ The forecast benchmark prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the Company’s operations when determining recoverable amounts.

^(2)^ In 2031 and beyond, commodity price forecasts are inflated at a rate of 2.0% per annum. In 2031 and beyond there is no escalation of exchange rates.

The following are the results of tests completed, recoverable amounts, and sensitivity impacts which would decrease impairment reversals taken:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ 1% increase in **** 5% decrease in
Operating Segment **** CGU **** Impairment Reversal ^(1)^ **** Recoverable Amount ​ discount rate ​ pricing
Canada Alberta 88,708 988,447 ​ — 29,716
Canada ​ Saskatchewan ​ 270,897 ​ 1,500,139 ​ 80,724 ​ 156,875
Ireland ​ Ireland ​ 133,005 ​ 339,315 ​ 9,136 ​ 23,975
Germany ​ Germany - Gas ​ 43,735 ​ 168,290 ​ — ​ —
United States ​ United States ​ 57,261 ​ 429,322 ​ 26,903 ​ 44,317
Total ​ ​ ​ 593,606 ​ 3,425,513 ​ 116,763 ​ 254,883

​

^(1)^ Impairment reversals are subject to the lower of the recoverable amount and the carrying value, which includes depletion and depreciation of the CGU had no impairment charges been previously taken.

In the first quarter of 2021, indicators of impairment reversal were present in our Australia, Alberta, Saskatchewan, and United States CGUs due to an increase and stabilization in forecast oil prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $492.2 million (net of $170.7 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy.

Vermilion Energy Inc.  ∎ Page 20 ∎  2021 Financial Statements

The following benchmark price forecasts were used to calculate the recoverable amounts:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ 2021 **** 2022 **** 2023 **** 2024 **** 2025 **** 2026 **** 2027 **** 2028 **** 2029 **** 2030^(2)^
Brent Crude (US/bbl) (1) 64.50 62.08 61.69 62.84 64.02 65.22 66.45 67.70 68.97 70.35
WTI Crude (US/bbl) (1) 62.00 58.58 57.69 58.84 60.02 61.22 62.45 63.70 64.97 66.27
Exchange rate (CAD/) 0.80 0.79 0.78 0.78 0.78 0.78 0.78 0.78 0.78 0.78

All values are in US Dollars.

​

^(1)^ The forecast benchmark prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the Company’s operations when determining recoverable amounts.

^(2)^ In 2031 and beyond, commodity price forecasts are inflated at a rate of 2.0% per annum. In 2031 and beyond there is no escalation of exchange rates.

The following are the results of tests completed, recoverable amounts, and sensitivity impacts which would decrease impairment reversals taken:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating Segment **** CGU **** Impairment Reversal ^(1)^ **** Recoverable Amount ​ 1% increase in discount rate **** 5% decrease in pricing
Australia Australia 82,016 189,749 ​ 6,921 19,756
Canada Alberta 232,724 859,706 ​ 46,223 81,212
Canada Saskatchewan 290,241 1,206,343 ​ 69,104 143,281
United States ​ United States ​ 57,885 ​ 364,242 ​ 24,180 ​ 41,345
Total **** ​ **** 662,866 **** 2,620,040 ​ 146,428 285,594

​

^(1)^ Impairment reversals are subject to the lower of the recoverable amount and the carrying value, which includes depletion and depreciation of the CGU had no impairment charges been previously taken.

​

Germany Acquisitions

In April 2021, Vermilion completed an acquisition within its Germany Gas CGU for total consideration of $11.6 million, in which $49.2 million in capital assets, $12.4 million in asset retirement obligations, and $7.9 million in deferred tax liabilities were recognized. The acquisition resulted in a gain on acquisition of $17.2 million which was due to increases in commodity prices from the effective date to close and was accounted for as a business combination under IFRS 3.

In December 2021, Vermilion completed an acquisition within its Germany Gas CGU for total consideration of $23.2 million. Included within total consideration are contingent payment provisions for production and revenue targets in which $8.4 million has been recognized in accordance with IAS 37. The acquisition increases Vermilion's non-operated working interest within the Dümmersee-Uchte region and was funded with cash flows from operating activities. Vermilion applied the optional concentration test under IFRS 3 Business Combinations which resulted in the purchase being accounted for as an asset acquisition.

Assets in Wyoming

In July 2021, Vermilion acquired mineral leasehold land and oil and gas producing assets from a private oil company for total cash consideration of $92.0 million. The assets are located in the Powder River Basin and are adjacent to Vermilion's Hilight assets within the USBU cash generating unit ("CGU"). The acquired assets complement Vermilion's existing Powder River operations and were funded with cash flows from operating activities. Vermilion applied the optional concentration test under IFRS 3 Business Combinations which resulted in the purchase being accounted for as an asset acquisition.

Right-of-use assets

The following table discloses the carrying balance and depreciation charge relating to right-of-use assets by class of underlying asset as at and for the year ended December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​
​ As at Dec 31, 2021 ​ As at Dec 31, 2020
(M) Depreciation **** Balance **** Depreciation **** Balance
Office space 8,921 **** 38,216 9,835 49,134
Gas processing facilities 7,691 **** 20,504 7,109 27,593
Oil storage facilities 2,644 **** 11,480 2,738 15,231
Vehicles and equipment 3,629 **** 6,038 3,608 8,035
Total 22,885 **** 76,238 23,290 99,993

All values are in US Dollars.

​

​

Vermilion Energy Inc.  ∎ Page 21 ∎  2021 Financial Statements

  1. Exploration and evaluation assets

The following table reconciles the change in Vermilion’s exploration and evaluation assets:

​ ​ ​ ​ ​
​ 2021 2020
Balance at January 1 254,094 286,148
Acquisitions — 1,380
Additions 35,406 14,721
Changes in asset retirement obligations 110 (500)
Transfers to capital assets (11,495) —
Depreciation (35,549) (54,838)
Foreign exchange (9,276) 7,183
Balance at December 31 233,290 254,094
​ ​
Cost 408,494 395,615
Accumulated depreciation (175,204) (141,521)
Carrying amount at December 31 233,290 254,094

​

​

  1. Asset retirement obligations

The following table reconciles the change in Vermilion’s asset retirement obligations:

​ ​ ​ ​ ​
​ 2021 2020
Balance at January 1 467,737 618,200
Additional obligations recognized 28,655 1,484
Changes in estimated abandonment timing and costs 85,022 74,235
Obligations settled (28,525) (14,278)
Accretion 43,552 35,318
Changes in discount rates 439,849 (276,673)
Foreign exchange (35,736) 29,451
Balance at December 31 1,000,554 467,737

​

Vermilion calculated the present value of the obligations using a credit-adjusted risk-free rate, calculated using a credit spread of 4.9% as at December 31, 2021 (December 31, 2020 – 10.0%) added to risk-free rates based on long-term, risk-free government bonds. Vermilion’s credit spread is determined using the Company’s expected cost of borrowing at the end of the reporting period.

The country specific risk-free rates used as inputs to discount the obligations were as follows:

​ ​ ​ ​ ​ ​
​ Dec 31, 2021 Dec 31, 2020 ****
Canada 1.8 % 1.2 %
United States ​ 1.9 % 1.6 %
France 0.8 % 0.3 %
Netherlands (0.3) % (0.6) %
Germany 0.1 % (0.2) %
Ireland 0.5 % (0.1) %
Australia 1.9 % 1.3 %

​

Vermilion has estimated the asset retirement obligations based on current cost estimates of $2.0 billion (2020 - $2.0 billion). Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.1% and 3.1% (2020 - between 0.2% and 2.9%), resulting in inflated cost estimates of $3.1 billion (2020 - $2.5 billion). These payments are expected to be made between 2022 and 2081, with the majority of costs occurring between 2030 and 2037 ($0.9 billion) and 2043 to 2050 ($1.1 billion).

A 0.5% increase/decrease in the discount rate applied to asset retirement obligations would decrease/increase asset retirement obligations by approximately $73.0 million. A one-year increase/decrease in the expected timing of abandonment spend would decrease/increase asset retirement obligations by approximately $37.3 million.

​

Vermilion Energy Inc.  ∎ Page 22 ∎  2021 Financial Statements

  1. Derivative instruments

The following table reconciles the change in the fair value of Vermilion’s derivative instruments:

​

​ ​ ​ ​ ​
​ ​ Year Ended
Dec 31, 2021 Dec 31, 2020
Fair value of contracts, beginning of year (119,772) (10,991)
Reversal of opening contracts settled during the year 112,679 12,811
Realized (loss) gain on contracts settled during the year (327,384) 109,093
Unrealized loss during the year on contracts outstanding at the end of the year (293,773) (113,766)
Net receipt from counterparties on contract settlements during the year 327,385 (109,093)
Unrealized loss on derivatives designated as cash flow hedges ​ — ​ (7,826)
Fair value of contracts, end of year (300,865) (119,772)
Comprised of:
Current derivative asset 19,321 16,924
Current derivative liability (268,973) (130,919)
Non-current derivative asset — 2,451
Non-current derivative liability (51,213) (8,228)
Fair value of contracts, end of year (300,865) (119,772)

​

The loss (gain) on derivative instruments for 2021 and 2020 were comprised of the following:

​

​ ​ ​ ​ ​
​ ​ Year Ended
Dec 31, 2021 Dec 31, 2020
Realized loss (gain) on contracts settled during the year 327,384 (109,093)
Reversal of opening contracts settled during the year (112,679) (12,811)
Unrealized loss on contracts outstanding at the end of the year 293,773 113,766
Loss (gain) on derivative instruments 508,478 (8,138)

​

Vermilion executes derivative instruments where there is an underlying exposure to offset the position. Consistent with our accounting policy we do not match unrealized gains / losses on these contracts with the underlying exposure. Please refer to Note 17 (Supplemental information) for a listing of Vermilion's outstanding derivative instruments as at December 31, 2021.

​

  1. Leases

Vermilion had the following future commitments associated with its lease obligations:

​

​ ​ ​ ​
​ As at
(M) Dec 31, 2021 Dec 31, 2020
Less than 1 year 19,045 27,927
1 - 3 years 38,136 41,270
3 - 5 years 25,226 31,412
After 5 years 3,686 14,178
Total lease payments 86,093 114,787
Amounts representing interest (10,871) (15,381)
Present value of net lease payments 75,222 99,406
Current portion of lease obligations (15,032) (22,882)
Non-current portion of lease obligations 60,190 76,524
​ ​ ​ ​
Total cash outflow 27,368 ​ 31,240
Interest on lease liabilities 5,181 ​ 6,192

All values are in US Dollars.

​

​

Vermilion Energy Inc.  ∎ Page 23 ∎  2021 Financial Statements

  1. Taxes

The following table reconciles Vermilion’s deferred tax asset and liability:

​

​ ​ ​ ​ ​
​ ​ As at
​ Dec 31, 2021 Dec 31, 2020
Deferred tax assets: ​ ​ ​
Non-capital losses 477,903 ​ 420,060
Derivative contracts 74,043 ​ 33,064
Other 2,879 ​ 14,766
Stock based compensation 8,651 ​ 12,218
Asset retirement obligations 83,461 ​ 7,581
Capital assets (268,615) ​ 443
Unrealized foreign exchange (3,329) ​ (3,635)
Deferred tax assets **** 374,993 ​ 484,497
Deferred tax liabilities: ​ ​ ​
Asset retirement obligations 104,258 ​ 184,144
Capital assets 322,641 ​ 112,818
Other (10,518) ​ 1,682
Non-capital losses (87,542) ​ (34,372)
Deferred tax liabilities **** 328,839 ​ 264,272

​

Income tax expense differs from the amount that would have been expected if the reported earnings had been subject only to the statutory Canadian income tax rate as follows:

​

​ ​ ​ ​ ​ ​
​ ​ Year Ended
Dec 31, 2021 Dec 31, 2020
Earnings before income taxes 1,381,893 (1,877,399)
Canadian corporate tax rate ^(1)^ 24.61 % 25.31 %
Expected tax expense 340,084 (475,170) ​
Increase (decrease) in taxes resulting from: ​ ​ ​
Petroleum resource rent tax rate (PRRT) differential ^(2)^ 27,281 (15,157) ​
Foreign tax rate differentials ^(2) (3)^ 43,301 (14,907) ​
Equity based compensation expense 6,794 2,445 ​
Amended returns and changes to estimated tax pools and tax positions (14,391) (2,598) ​
Statutory rate changes and the estimated reversal rates on temporary differences ^(4)^ 5,862 33,770 ​
Derecognition (recognition) of deferred tax assets (190,423) 141,315 ​
Adjustment for uncertain tax positions — — ​
Other non-deductible items 14,689 ​ (29,670) ​
Provision for income taxes 233,197 ​ (359,972) ​
(1) In Canada, the lower tax rate is a result of reductions to the Alberta corporate tax rate from 10% to 8%.
--- ---
(2) In Australia, current taxes include both corporate income tax rates and PRRT. Corporate income tax rates were applied at a rate of 30% and PRRT was applied at a rate of 40%.
--- ---
(3) The applicable tax rates for 2021 were: 27.4% in France, 50.0% in the Netherlands, 31.4% in Germany, 25.0% in Ireland, and 21.0% in the United States (2020: 28.9% in France, 50.0% in the Netherlands, 31.6% in Germany, 25.0% in Ireland, and 21.0% in the United States).
--- ---
(4) On December 28, 2019, the French Parliament approved the Finance Bill for 2020. The Finance Bill for 2020 provides for a progressive decrease of the French corporate income tax rate for companies with sales below €250 million from 32.0% to 25.8% by 2022. On July 1, 2020, the Alberta government reduced the provincial corporate tax rate from 10% to 8%, accelerating the previously enacted schedule of rate reductions. On December 21, 2021, the Dutch Senate approved the 2022 Tax Plan that included an increase to the Dutch corporate tax rate from 25.0% in 2021 to 25.8% in 2022. Due to the tax regime applicable to natural gas producers in the Netherlands, the increase to the corporate tax rate is not expected to have a material impact to Vermilion taxes in the Netherlands.
--- ---

At December 31, 2021, Vermilion had $2.7 billion (2020 - $2.9 billion) of unused tax losses of which $1.4 billion (2020 - $1.3 billion) relates to Vermilion's Canada segment and expire between 2028 and 2041. The majority of the remaining unused tax losses relate to Vermilion's Ireland segment and do not expire.

Vermilion Energy Inc.  ∎ Page 24 ∎  2021 Financial Statements

At December 31, 2021, Vermilion recognized $190.4 million (2020 - derecognized $141.3 million) of deferred income tax assets primarily relating to the aforementioned non-expiring tax loss in Ireland that are expected to be utilized due to an increase in forecast commodity prices.

The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities have not been recognized as at December 31, 2021 is approximately $0.4 billion (2020 – approximately $0.5 billion).

​

  1. Long-term debt

The following table summarizes Vermilion’s outstanding long-term debt:

​

​ ​ ​ ​ ​
​ ​ As at
​ Dec 31, 2021 Dec 31, 2020
Revolving credit facility 1,273,755 1,555,215
Senior unsecured notes 377,814 378,633
Long-term debt 1,651,569 1,933,848

​

The fair value of the revolving credit facility is equal to its carrying value due to the use of short-term borrowing instruments at market rates of interest. The fair value of the senior unsecured notes as at December 31, 2021 was $387.0 million (December 31, 2020 - $329.1 million).

The following table reconciles the change in Vermilion’s long-term debt:

​

​ ​ ​ ​ ​
2021 2020
Balance at January 1 1,933,848 ​ 1,924,665
(Repayments) borrowings on the revolving credit facility (341,259) ​ 22,183
Amortization of transaction costs 778 833
Foreign exchange 58,202 (13,833)
Balance at December 31 1,651,569 1,933,848

​

Revolving credit facility

In Q1 2020, we negotiated an extension to our $2.1 billion revolving credit facility to extend the maturity to May 31, 2024.

As at December 31, 2021, Vermilion had in place a bank revolving credit facility maturing May 31, 2024 with the following terms:

​ ​ ​ ​ ​
​ ​ As at
​ Dec 31, 2021 Dec 31, 2020
Total facility amount 2,100,000 2,100,000
Amount drawn (1,273,755) (1,555,215)
Letters of credit outstanding (11,035) (23,210)
Unutilized capacity 815,210 521,575

​

The facility can be extended from time to time at the option of the lenders and upon notice from Vermilion. If no extension is granted by the lenders, the amounts owing pursuant to the facility are due at the maturity date. The facility is secured by various fixed and floating charges against the subsidiaries of Vermilion.

The facility bears interest at a rate applicable to demand loans plus applicable margins.

As at December 31, 2021, the revolving credit facility was subject to the following financial covenants:

​

​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ As at
Financial covenant Limit Dec 31, 2021 Dec 31, 2020
Consolidated total debt to consolidated EBITDA Less than 4.0 1.61 3.48
Consolidated total senior debt to consolidated EBITDA Less than 3.5 1.24 2.82
Consolidated EBITDA to consolidated interest expense Greater than 2.5 ​ 14.78 ​ 8.12

​

Vermilion Energy Inc.  ∎ Page 25 ∎  2021 Financial Statements

The financial covenants include financial measures defined within the revolving credit facility agreement that are not defined under IFRS. These financial measures are defined by the revolving credit facility agreement as follows:

● Consolidated total debt: Includes all amounts classified as “Long-term debt” and “Lease obligations” (including the current portion included within “Accounts payable and accrued liabilities” but excluding operating leases as defined under IAS 17) on the balance sheet.
● Consolidated total senior debt: Defined as consolidated total debt excluding unsecured and subordinated debt.
--- ---
● Consolidated EBITDA: Defined as consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items, adjusted for the impact of the acquisition of a material subsidiary.
--- ---
● Consolidated total interest expense: Includes all amounts classified as “Interest expense”, but excludes interest on operating leases as defined under IAS 17.
--- ---

In addition, our revolving credit facility has provisions relating to our liability management ratings in Alberta and Saskatchewan whereby if our security adjusted liability management ratings fall below specified limits in a province, a portion of the asset retirement obligations are included in the definitions of consolidated total debt and consolidated total senior debt. An event of default occurs if our security adjusted liability management ratings breach additional lower limits for a period greater than 90 days. As of December 31, 2021, Vermilion’s liability management ratings were higher than the specified levels, and as such, no amounts relating to asset retirement obligations were included in the calculation of consolidated total debt and consolidated total senior debt.

As at December 31, 2021 and December 31, 2020, Vermilion was in compliance with the above covenants.

Senior unsecured notes

On March 13, 2017, Vermilion issued US $300.0 million of senior unsecured notes at par. The notes bear interest at a rate of 5.625% per annum, to be paid semi-annually on March 15 and September 15. The notes mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes rank equally with existing and future senior unsecured indebtedness of the Company.

The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance.

Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table plus any accrued and unpaid interest, if redeemed during the twelve-month period beginning on March 15 of each of the years indicated below:

​

​ ​ ​ ​
Year Redemption price ****
2021 102.813 %
2022 101.406 %
2023 and thereafter 100.000 %

​

​

​

  1. Shareholders’ capital

The following table reconciles the change in Vermilion’s shareholders’ capital:

​

​ ​ ​ ​ ​ ​ ​ ​
​ ​ 2021 2020
Shareholders’ capital Shares (‘000s) Amount (M) Shares (‘000s) Amount ($M)
Balance at January 1 ​ 158,724 ​ 4,181,160 156,290 ​ 4,119,031
Shares issued for the Dividend Reinvestment Plan — ​ — 619 ​ 8,277
Vesting of equity based awards 2,385 ​ 49,922 1,103 ​ 49,188
Shares issued for equity based compensation 911 ​ 8,365 415 ​ 3,203
Share-settled dividends on vested equity based awards 241 ​ 2,326 297 ​ 1,461
Balance at December 31 162,261 ​ 4,241,773 158,724 ​ 4,181,160

All values are in US Dollars.

​

Vermilion is authorized to issue an unlimited number of common shares with no par value.

Dividends declared to shareholders for the year ended December 31, 2021 were $— million or $0.00 per common share (2020 - $90.1 million or $0.58 per common share).

Subsequent to December 31, 2021 Vermilion declared a dividend of $0.06 per share to be paid April 18, 2022.

​

Vermilion Energy Inc.  ∎ Page 26 ∎  2021 Financial Statements

  1. Capital disclosures

Vermilion defines capital as net debt (long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital (defined as current assets less current liabilities, excluding current derivatives and current lease liabilities)) and shareholders’ capital. In managing capital, Vermilion reviews whether fund flows from operations is sufficient to fund capital expenditures, dividends, and asset retirement obligations.

Vermilion monitors the ratio of net debt to fund flows from operations. As at December 31, 2021, our ratio of net debt to trailing fund flows from operations is 1.79 (2020 – 4.00 (revised)). Vermilion manages the ratio of net debt to fund flows from operations (refer to Note 3 – Segmented information) by monitoring capital expenditures, dividends, and asset retirement obligations with expected fund flows from operations. Vermilion intends for the ratio of net debt to fund flows from operations to trend towards 1.0 over time.

The following table calculates Vermilion’s ratio of net debt to fund flows from operations:

​

​ ​ ​ ​ ​
​ ​ Year Ended
​ ​ ​ ​ Dec 31, 2020
Dec 31, 2021 (revised)
Long-term debt 1,651,569 1,933,848
Adjusted working capital deficiency^(1)^ ​ 9,284 ​ 35,258
Unrealized FX on swapped USD borrowings ​ (16,067) ​ 40,219
Net debt 1,644,786 2,009,325
​ ​
Ratio of net debt to four quarter trailing fund flows from operations 1.79 4.00
(^(1)^ Adjusted working capital is defined as current assets (excluding current derivatives), less current liabilities (excluding current derivatives and current lease liabilities).
--- ---

​

  1. Equity based compensation

The following table summarizes the number of awards outstanding under the VIP:

​

​ ​ ​ ​ ​
Number of VIP and Five Year Compensation Awards (‘000s) 2021 2020
Opening balance 6,244 2,268
Granted 2,745 5,120
Vested (1,520) (650)
Forfeited (1,064) (494)
Closing balance 6,405 6,244

​

For the year ended December 31, 2021, the awards had a weighted average grant date fair value of $9.53 (2020 - $5.92). Equity based compensation expense for the awards is calculated based on the number of awards outstanding multiplied by the estimated performance factor that will be realized upon vesting (2021 – 1.1; 2020 – 1.2) adjusted by an estimated annual forfeiture rate (2021 – 4.2%; 2020 – 5.8%). Equity based compensation expense of $31.3 million was recorded during the year ended December 31, 2021 (2020 - $38.9 million) relating to the awards.

For the year ended December 31, 2021, there were 388,896 DSUs granted and outstanding with a weighted average grant date fair value of $11.49. Equity based compensation expense of $1.9 million was recorded during the year ended December 31, 2021 (2020 - $0.8 million) relating to the DSUs.

​

Vermilion Energy Inc.  ∎ Page 27 ∎  2021 Financial Statements

  1. Per share amounts

Basic and diluted net earnings (loss) per share have been determined based on the following:

​

​ ​ ​ ​ ​
​ ​ Year Ended
​ Dec 31, 2021 Dec 31, 2020
Net earnings (loss) 1,148,696 (1,517,427)
​ ​ ​ ​ ​
Basic weighted average shares outstanding (‘000s) 161,172 157,908
Dilutive impact of equity based compensation (‘000s) 3,593 —
Diluted weighted average shares outstanding (‘000s) 164,765 157,908
​ ​
Basic earnings per share 7.13 (9.61)
Diluted earnings per share 6.97 (9.61)

​

​

  1. Financial instruments

Classification of financial instruments

The following table summarizes the carrying value relating to Vermilion’s financial instruments:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ As at Dec 31, 2021 ​ As at Dec 31, 2020 ​
​ ​ ​ ​ ​ Amortized ​ ​ ​ ​ ​ ​ ​ Amortized ​ ​ ​
(M) FVTPL FVTOCI Cost Total FVTPL FVTOCI Cost Total ****
Cash and cash equivalents 6,028 ​ — **** — ​ 6,028 6,904 ​ — — ​ 6,904 ​
Derivative assets 19,321 ​ — **** — ​ 19,321 19,375 ​ — — ​ 19,375 ​
Derivative liabilities (320,186) ​ — **** — ​ (320,186) (139,147) ​ — — ​ (139,147) ​
Accounts receivable — ​ — **** 328,584 ​ 328,584 — ​ — 196,077 ​ 196,077 ​
Accounts payable and accrued liabilities — ​ — **** (440,658) ​ (440,658) — ​ — (297,670) ​ (297,670) ​
Lease obligations — ​ — ​ (60,190) ​ (60,190) ​ — ​ — ​ (76,524) ​ (76,524) ​
Long-term debt (1) — ​ — **** (1,651,569) ​ (1,651,569) — ​ — (1,933,848) ​ (1,933,848) ​

All values are in US Dollars.

​

(1) The carrying value of the above equals fair value except for long-term debt. The fair value of long-term debt was $1,660,778 (2020 - $1,884,296).

The carrying value of accounts receivable, accounts payable and accrued liabilities, dividends payable and lease obligations are a reasonable approximation of their fair value due to the short maturity of these financial instruments.  The carrying value of long-term debt outstanding on the revolving credit facility approximates its fair value due to the use of short-term borrowing instruments at market rates of interest.

Fair value measurements are categorized into a fair value hierarchy based on the lowest level input that is significant to the fair value measurement:

● Level 1 inputs are determined by reference to unadjusted quoted prices in active markets for identical assets or liabilities. Inputs used in fair value measurement of cash and cash equivalents, the revolving credit facility, and the senior unsecured notes are categorized as Level 1.
● Level 2 inputs are determined based on inputs other than unadjusted quoted prices that are observable, either directly or indirectly. The fair value of Vermilion’s derivative assets and liabilities are determined using pricing models that incorporate future price forecasts (supported by prices from observable market transactions) and credit risk adjustments.
--- ---
● Level 3 inputs are not based on observable market data. Vermilion does not have any financial instruments classified as Level  3.
--- ---

There were no transfers between levels in the hierarchy in the years ended December 31, 2021 and 2020.

Nature and Extent of Risks Associated with Financial Instruments

Vermilion is exposed to financial risks from its financial instruments. These financial risks include: market risk (includes commodity price risk, interest rate risk, and currency risk), credit risk, and liquidity risk.

Commodity price risk

Vermilion is exposed to commodity price risk on its derivative assets and liabilities which are used as part of the Company’s risk management program to mitigate the effects of changes in commodity prices on future cash flows. While transactions of this nature relate to future petroleum and natural gas production, Vermilion does not designate these derivative assets and liabilities as accounting hedges. As such, changes in commodity prices impact the fair value of derivative instruments and the corresponding gains or losses recognized on derivative instruments.

Vermilion Energy Inc.  ∎ Page 28 ∎  2021 Financial Statements

Currency risk

Vermilion is exposed to currency risk on its financial instruments denominated in foreign currencies. These financial instruments include cash and cash equivalents, accounts receivables, accounts payables, lease obligations, long-term debt, derivative assets and derivative liabilities. These financial instruments are primarily denominated in the US dollar and the Euro. Vermilion monitors its exposure to currency risk and reviews whether the use of derivative financial instruments is appropriate to manage potential fluctuations in foreign exchange rates.

Interest rate risk

Vermilion is exposed to interest rate risk on its revolving credit facility, which consists of short-term borrowing instruments that bear interest at market rates. Thus, changes in interest rates could result in an increase or decrease in the amount paid by Vermilion to service this debt.

The following table summarizes the increase (positive values) or decrease (negative values) to net earnings before tax due to a change in the value of Vermilion’s financial instruments as a result of a change in the relevant market risk variable. This analysis does not attempt to reflect any interdependencies between the relevant risk variables.

​

​ ​ ​ ​
(M) Dec 31, 2021 Dec 31, 2020
Currency risk - Euro to Canadian dollar
0.01 increase in strength of the Canadian dollar against the Euro (273) (873)
0.01 decrease in strength of the Canadian dollar against the Euro 273 873
​ ​ ​ ​
Currency risk - US dollar to Canadian dollar ​
0.01 increase in strength of the Canadian dollar against the US 2,086 2,711
0.01 decrease in strength of the Canadian dollar against the US (2,086) (2,711)
​ ​ ​ ​
Commodity price risk - Crude oil ​
US 5.00/bbl increase in crude oil price used to determine the fair value of derivatives (9,324) (11,783)
US 5.00/bbl decrease in crude oil price used to determine the fair value of derivatives 1,636 7,207
​ ​ ​ ​
Commodity price risk - European natural gas ​
0.5/GJ increase in European natural gas price used to determine the fair value of derivatives (10,554) (23,904)
0.5/GJ decrease in European natural gas price used to determine the fair value of derivatives 10,554 24,088
​ ​ ​ ​
Share price risk - Equity swaps ​ ​ ​
1.00 increase from initial share price of the equity swap 3,750 ​ 3,750
1.00 decrease from initial share price of the equity swap (3,750) (3,750)

All values are in US Dollars.

​

Credit risk:

Vermilion is exposed to credit risk on accounts receivable and derivative assets in the event that customers, joint operation partners, or counterparties fail to discharge their contractual obligations. As at December 31, 2021, Vermilion’s maximum exposure to receivable credit risk was $347.9 million (December 31, 2020 - $215.5 million) which is the value of accounts receivable and derivative assets on the balance sheet.

Vermilion’s accounts receivable primarily relates to customers and joint operations partners in the petroleum and natural gas industry. These amounts are subject to normal industry payment terms and credit risks. Vermilion manages these risks by monitoring the creditworthiness of customers and joint operations partners and, where appropriate, obtaining assurances such as parental guarantees and letters of credit. Vermilion determines the lifetime expected credit losses recognized on accounts receivable using a provision matrix. In preparing the provision matrix, the Company takes into account historical credit loss experience based on the aging of accounts receivable, adjusted as necessary for current and future petroleum and natural gas prices to the extent that changes in pricing may negatively impact the Company’s customers and joint operations partners. The lifetime expected credit losses on accounts receivable as at December 31, 2021 and 2020 is not material. As at the balance sheet date, approximately 0.8% (2020 –1.4%) of the accounts receivable balance was outstanding for more than 90 days. Vermilion considers the balance of accounts receivable to be collectible.

Vermilion’s derivative assets primarily relates to the fair value of financial instruments used as part of the Company’s risk management program to mitigate the effects of changes in commodity prices on future cash flows. Vermilion manages this risk by monitoring the creditworthiness of counterparties, transacting primarily with counterparties that have investment grade third party credit ratings, and by limiting the concentration of financial exposure to individual counterparties. As a result, Vermilion has not obtained collateral or other security to support its financial derivatives.

Vermilion Energy Inc.  ∎ Page 29 ∎  2021 Financial Statements

Vermilion’s cash deposited in financial institutions and guaranteed investment certificates are also subject to counterparty credit risk. Vermilion mitigates this risk by transacting with financial institutions with high third party credit ratings.

Liquidity risk:

Liquidity risk is the risk that Vermilion will encounter difficulty in meeting obligations associated with its financial liabilities. Vermilion does not consider this to be a significant risk as its financial position and available committed borrowing facility provide significant financial flexibility and allow Vermilion to meet its obligations as they come due.

The following table summarizes Vermilion’s undiscounted non-derivative financial liabilities and their contractual maturities:

​

​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ 1 month to 3 months to 1 year to
($M) ​ 1 month ​ 3 months ​ 1 year ​ 5 years
December 31, 2021 191,298 223,885 25,475 1,718,475
December 31, 2020 92,991 181,475 23,204 2,006,530

​

​

  1. Related party disclosures

The compensation of directors and management is reviewed annually by the independent Governance and Human Resources Committee against industry practices for oil and gas companies of similar size and scope.

The following table summarizes the compensation of directors and other members of key management personnel during the years ended December 31, 2021 and 2020:

​

​ ​ ​ ​ ​
​ ​ Year Ended
​ Dec 31, 2021 Dec 31, 2020
Short-term benefits 4,654 4,800
Equity based compensation 14,570 ​ 13,169
​ 19,224 ​ 17,969
Number of individuals included in the above amounts 18 ​ 18

​

During the year ended December 31, 2021, Vermilion recorded $0.2 million of office rent recoveries (2020 - $0.2 million) relating to an office sub-lease to a company whose Managing Director is also a member of Vermilion’s Board of Directors. This related party transaction is provided in the normal course of business under the same commercial terms and conditions as transactions with unrelated companies and is recorded at the exchange amount.

​

  1. Supplemental information

Changes in non-cash working capital was comprised of the following:

​

​ ​ ​ ​ ​
​ ​ Year Ended
Dec 31, 2021 Dec 31, 2020
Changes in:
Accounts receivable (132,507) 15,332
Crude oil inventory (6,668) 15,987
Prepaid expenses (71,156) (5,476)
Accounts payable and accrued liabilities 142,988 (14,772)
Income taxes payable 32,643 (877)
Foreign exchange 14,540 (6,251)
Changes in non-cash working capital (20,160) 3,943
​ ​ ​ ​ ​
Changes in non-cash operating working capital (56,884) 12,365
Changes in non-cash investing working capital 36,724 (8,422)
Changes in non-cash working capital (20,160) 3,943

​

As at December 31, 2021, prepaid expenses includes a deposit of $68.5 million related to a previously announced transaction to acquire an additional working interest within the Corrib natural gas project.

​

Vermilion Energy Inc.  ∎ Page 30 ∎  2021 Financial Statements

Cash and cash equivalents was comprised of the following:

​

​ ​ ​ ​ ​
​ ​ As at
​ Dec 31, 2021 Dec 31, 2020
Cash on deposit with financial institutions 5,901 6,777
Guaranteed investment certificates 127 127
Cash and cash equivalents 6,028 6,904

​

Wages and benefits included in operating expenses and general and administration expenses were:

​

​ ​ ​ ​ ​
​ ​ Year Ended
​ Dec 31, 2021 Dec 31, 2020
Operating expense 73,739 70,414
General and administration expense 54,771 60,551
Wages and benefits 128,510 130,965

​

The following tables summarize Vermilion's outstanding risk management positions as at December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** ​ **** ​ ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted
​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Bought ​ Average
​ ​ ​ ​ ​ Bought Put ​ Bought Put ​ Sold Call ​ Sold Call ​ Sold Put ​ Sold Put ​ Sold Swap ​ Sold Swap ​ Swap ​ Bought
​ Unit Currency Volume Price Volume Price Volume Price Volume Price Volume Swap Price
Dated Brent
Q1 2022 ​ bbl ​ 2,700 ​ 62.50 ​ 2,700 ​ 81.01 ​ 2,700 ​ 47.50 ​ 500 ​ 52.00 ​ — ​ —
Q2 2022 ​ bbl ​ 3,450 ​ 63.59 ​ 3,450 ​ 83.34 ​ 3,450 ​ 47.50 ​ — ​ — ​ — ​ —
Q3 2022 ​ bbl ​ 2,600 ​ 63.94 ​ 2,600 ​ 84.35 ​ 2,600 ​ 47.50 ​ — ​ — ​ — ​ —
Q4 2022 ​ bbl ​ 2,600 ​ 63.94 ​ 2,600 ​ 84.35 ​ 2,600 ​ 47.50 ​ — ​ — ​ — ​ —
WTI
Q1 2022 ​ bbl ​ 9,550 ​ 60.52 ​ 9,550 ​ 75.89 ​ 9,550 ​ 45.52 ​ — ​ — ​ — ​ —
Q2 2022 ​ bbl ​ 9,300 ​ 60.93 ​ 9,300 ​ 78.39 ​ 9,300 ​ 45.54 ​ — ​ — ​ — ​ —
Q3 2022 ​ bbl ​ 4,500 ​ 60.82 ​ 4,500 ​ 82.92 ​ 4,500 ​ 45.00 ​ — ​ — ​ — ​ —
Q4 2022 ​ bbl ​ 4,500 ​ 60.82 ​ 4,500 ​ 82.92 ​ 4,500 ​ 45.00 ​ — ​ — ​ — ​ —
AECO Basis (AECO less NYMEX Henry Hub)
Q1 2022 ​ mcf ​ — ​ — ​ — ​ — ​ — ​ — ​ 30,000 ​ (1.10) ​ — ​ —
Q2 2022 mcf — — — — — — 35,000 (1.09) — —
Q3 2022 mcf — — — — — — 35,000 (1.09) — —
Q4 2022 mcf — — — — — — 11,793 (1.09) — —
NYMEX Henry Hub
Q2 2022 ​ mcf ​ 30,000 ​ 3.33 ​ 30,000 ​ 4.81 ​ — ​ — ​ — ​ — ​ — ​ —
Q3 2022 ​ mcf ​ 30,000 ​ 3.33 ​ 30,000 ​ 4.81 ​ — ​ — ​ — ​ — ​ — ​ —
Q4 2022 ​ mcf ​ 10,109 ​ 3.33 ​ 10,109 ​ 4.81 ​ — ​ — ​ — ​ — ​ — ​ —

All values are in US Dollars.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ **** ​ **** ​ ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted **** ​ **** Weighted
​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ Bought ​ Average
​ ​ ​ ​ ​ Bought Put ​ Bought Put ​ Sold Call ​ Sold Call ​ Sold Put ​ Sold Put ​ Sold Swap ​ Sold Swap ​ Swap ​ Bought
​ ​ Unit ​ Currency Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Price ​ Volume ​ Swap Price
NBP
Q1 2022 mcf 36,851 6.04 36,851 7.59 34,394 3.63 4,913 4.91 — —
Q2 2022 mcf 27,024 5.07 27,024 5.84 27,024 3.50 4,913 4.91 — —
Q3 2022 mcf 19,654 5.11 19,654 6.24 19,654 3.66 4,913 4.91 — —
Q4 2022 mcf 19,654 5.11 19,654 6.23 19,654 3.66 4,913 4.91 — —
Q1 2023 mcf 12,284 5.19 12,284 6.45 12,284 3.75 — — — —
Q2 2023 mcf 4,913 5.86 4,913 8.24 4,913 4.40 — — — —
TTF — —
Q1 2022 mcf 2,457 4.84 2,457 5.64 2,457 3.52 — — — —
Q2 2022 mcf 2,457 4.84 2,457 5.64 2,457 3.52 — — — —
Q3 2022 mcf 2,457 4.84 2,457 5.64 2,457 3.52 — — — —
Q4 2022 mcf 2,457 4.84 2,457 5.64 2,457 3.52 — — — —
Q1 2023 ​ mcf ​ 2,457 ​ 4.84 ​ 2,457 ​ 5.64 ​ 2,457 ​ 3.52 ​ — ​ — ​ — ​ —

All values are in Euros.

​

Vermilion Energy Inc.  ∎ Page 31 ∎  2021 Financial Statements

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
VET Equity Swaps **** Initial Share Price ​ Share Volume ​
Swap Jan 2020 - Apr 2023 ​ 20.9788 CAD ​ 2,250,000 ​
Swap Jan 2020 - Apr 2023 ​ 22.4587 CAD ​ 1,500,000 ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Foreign Currency Swaps ​ ​ **** Notional Amount ​ **** Notional Amount **** Average Rate ​
Swap January 2022 562,166,987 ​ ​ 700,000,000 CAD 1.2452 ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cross Currency Interest Rate ​ ​ ​ Notional Amount Receive Rate ​ Notional Amount ​ Pay Rate ​
Swap January 2022 ​ 398,373,887 LIBOR + 1.70% ​ 500,000,000 CAD ​ CDOR + 1.08% ​

All values are in US Dollars.

​

Vermilion Energy Inc.  ∎ Page 32 ∎  2021 Financial Statements

DIRECTORS<br><br>​<br><br>Lorenzo Donadeo ^1^<br><br>Calgary, Alberta<br><br>​<br><br>Larry J. Macdonald ^2, 4, 8, 10^<br><br>Calgary, Alberta<br><br>​<br><br>James J. Kleckner Jr.^8, 10^<br><br>Edwards, Colorado<br><br>​<br><br>Carin Knickel ^5, 8, 12^<br><br>Golden, Colorado<br><br>​<br><br>Stephen P. Larke^4, 6, 11^<br><br>Calgary, Alberta<br><br>​<br><br>Timothy R. Marchant ^7, 10, 12^<br><br>Calgary, Alberta<br><br>​<br><br>Robert Michaleski ^3, 6^<br><br>Calgary, Alberta<br><br>​<br><br>William Roby ^8, 9, 12^<br><br>Katy, Texas<br><br>​<br><br>Manjit Sharma ^4,8^<br><br>Toronto, Ontario<br><br>​<br><br>Judy Steele ^6,12^<br><br>Halifax, Nova Scotia<br><br>​<br><br>​<br><br>^1^Executive Chairman<br><br>^2^Lead Director (Independent)<br><br>^3^Audit Committee Chair (Independent)<br><br>^4^Audit Committee Member<br><br>^5^Governance and Human Resources Committee Chair __(Independent)<br><br>^6^Governance and Human Resources Committee Member<br><br>^7^Health, Safety and Environment Committee Chair __(Independent)<br><br>^8^Health, Safety and Environment Committee Member<br><br>^9^Independent Reserves Committee Chair (Independent)<br><br>^10^Independent Reserves Committee Member<br><br>^11^ Sustainability Committee Chair (Independent)<br><br>^12^ Sustainability Committee Member<br><br>​ OFFICERS / CORPORATE SECRETARY<br><br>​<br><br>Lorenzo Donadeo *<br><br>Executive Chairman<br><br>​<br><br>Dion Hatcher *<br><br>President<br><br>​<br><br>Lars Glemser *<br><br>Vice President & Chief Financial Officer<br><br>​<br><br>Terry Hergott<br><br>Vice President Marketing<br><br>​<br><br>Yvonne Jeffery<br><br>Vice President Sustainability<br><br>​<br><br>Darcy Kerwin *<br><br>Vice President International & HSE<br><br>​<br><br>Bryce Kremnica *<br><br>Vice President North America<br><br>​<br><br>Geoff MacDonald<br><br>Vice President Geosciences<br><br>​<br><br>Kyle Preston<br><br>Vice President Investor Relations<br><br>​<br><br>Averyl Schraven<br><br>Vice President People and Culture<br><br>​<br><br>Jenson Tan *<br><br>Vice President Business Development<br><br>​<br><br>Gerard Schut *<br><br>Vice President European Operations<br><br>​<br><br>Robert (Bob) J. Engbloom<br><br>Corporate Secretary<br><br>​<br><br>* Executive Committee<br><br>​<br><br>​<br><br>​ AUDITORS<br><br>​<br><br>Deloitte LLP<br><br>Calgary, Alberta<br><br>​<br><br>BANKERS<br><br>​<br><br>The Toronto-Dominion Bank<br><br>​<br><br>Bank of Montreal<br><br>​<br><br>Canadian Imperial Bank of Commerce<br><br>​<br><br>Export Development Canada<br><br>​<br><br>National Bank of Canada<br><br>​<br><br>Royal Bank of Canada<br><br>​<br><br>The Bank of Nova Scotia<br><br>​<br><br>Wells Fargo Bank N.A., Canadian Branch<br><br>​<br><br>Bank of America N.A., Canada Branch<br><br>​<br><br>Citibank N.A., Canadian Branch - Citibank Canada<br><br>​<br><br>JPMorgan Chase Bank, N.A., Toronto Branch<br><br>​<br><br>La Caisse Centrale Desjardins du Québec<br><br>​<br><br>Alberta Treasury Branches<br><br>​<br><br>Canadian Western Bank<br><br>​<br><br>Goldman Sachs Lending Partners LLC<br><br>​<br><br>​<br><br>EVALUATION ENGINEERS<br><br>​<br><br>GLJ Petroleum Consultants Ltd.<br><br>Calgary, Alberta<br><br>​<br><br>LEGAL COUNSEL<br><br>​<br><br>Norton Rose Fulbright Canada LLP<br><br>Calgary, Alberta<br><br>​<br><br>TRANSFER AGENT<br><br>​<br><br>Odyssey Trust Company<br><br>​<br><br>STOCK EXCHANGE LISTINGS<br><br>​<br><br>The Toronto Stock Exchange (“VET”)<br><br>The New York Stock Exchange (“VET”)<br><br>​<br><br>INVESTOR RELATIONS<br><br>Kyle Preston<br><br>Vice President Investor Relations<br><br>403-476-8431 TEL<br><br>403-476-8100 FAX<br><br>1-866-895-8101 IR TOLL FREE<br><br>investor_relations@vermilionenergy.com<br><br>​

​

​

Vermilion Energy Inc.  ∎ Page 33 ∎  2021 Financial Statements

Exhibit 99.4

​

Graphic ​ Deloitte LLP<br><br>700, 850 2 Street SW<br><br>Calgary, AB T2P 0R8<br><br>Canada
​ ​ Tel: 403-267-1700<br><br>Fax: 587-774-5379<br><br>www.deloitte.ca

​

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

We consent to the incorporation by reference in Registration Statement No. 333‐232837 on Form S‐8 and to the use of our reports dated March 4, 2022 relating to the financial statements of Vermilion Energy Inc. and the effectiveness of Vermilion Energy Inc.'s internal control over financial reporting, appearing in this Annual Report on Form 40‐F of Vermilion Energy Inc. for the year ended December 31, 2021.

​

/s/ Deloitte LLP

​

Chartered Professional Accountants March 4, 2022

​ Exhibit 99.5

​

Graphic

CONSENT OF GLJ LTD.

​

We hereby consent to the use of and reference to our name and our reports, and the inclusion of information derived from our reports, evaluating Vermilion Energy Inc.’s (the “Company”) petroleum and natural gas reserves as at December 31, 2021, in the Company’s Annual Information Form, news releases and investor presentations.

​

Yours truly,
GLJ LTD.
Jodi L. Anhorn, M.Sc., P. Eng.
President & CEO

​

Calgary, Alberta

February 11, 2022

​

1920, 401 – 9^th^ Ave SW Calgary, AB, Canada T2P 3C5 I teI 403-266-9500 I gIjpc.com

EXHIBIT 99.6

​

VERMILION ENERGY INC.

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

​

I, Dion Hatcher, President, certify that:

​

1.I have reviewed this annual report on Form 40-F of Vermilion Energy Inc.;

​

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

​

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

​

4. The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

​

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

​

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

​

c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

​

d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

​

5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

​

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

​

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

​

Date: March 4, 2022

​

/s/ Dion Hatcher
[Signature]
Dion Hatcher, President
Acting in the capacity of Chief Executive Officer

​

​

EXHIBIT 99.6

​

VERMILION ENERGY INC.

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

​

I, Lars Glemser, Vice President and Chief Financial Officer, certify that:

​

1. I have reviewed this annual report on Form 40-F of Vermilion Energy Inc.;

​

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

​

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

​

4. The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

​

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

​

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

​

c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

​

d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

​

5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

​

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

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b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

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Date: March 4, 2022

​

/s/ Lars Glemser
[Signature]
Lars Glemser, Vice President and Chief Financial Officer

​

EXHIBIT 99.7

​

VERMILION ENERGY INC.

CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER

​

Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002

Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18 of the United States Code

​

In connection with the annual report of Vermilion Energy Inc. (the “Corporation”) on Form 40-F for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis Hicks, President of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

​

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

​

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

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Dated at Calgary, Alberta, Canada this 4th day of March 2022.

​

​ ​
​ ("Dion Hatcher")
​ [Signature]
​ ​
​ Dion Hatcher, President
​ Acting in the capacity of Chief Executive Officer

​

​

EXHIBIT 99.7

​

VERMILION ENERGY INC.

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

​

Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002

Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18 of the United States Code

​

In connection with the annual report of Vermilion Energy Inc. (the “Corporation”) on Form 40-F for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lars Glemser, Vice President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

​

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

​

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

​

Dated at Calgary, Alberta, Canada this 4th day of March 2022.

​

​ ​
​ (“Lars Glemser”)
​ [Signature]
​ ​
​ Lars Glemser, Vice President and Chief Financial Officer

​

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