EX-99.1 2 v403627_ex991.htm EXHIBIT 99.1

 

EXHIBIT 99.1

 

 

 
  

TABLE OF CONTENTS

GLOSSARY OF TERMS 4
Conventions 6
Abbreviations 6
Conversion 6
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS 7
PRESENTATION OF OIL AND GAS RESERVES AND PRODUCTION INFORMATION 8
Contingent Resources 8
Prospective Resources 9
NON-GAAP MEASURES 9
VERMILION ENERGY inc. 10
General 10
Organizational Structure of the Company 10
Summary Description of the Business 11
Three Year History of Vermilion 11
NARRATIVE DESCRIPTION OF THE BUSINESS 13
Business Objectives 13
Description of Properties 13
STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION 16
Reserves and Future Net Revenue 16
Reconciliations of Changes in Reserves 21
Undeveloped Reserves 26
Timing of Initial Undeveloped Reserves Assignment 26
Future Development Costs 27
Oil and Gas Properties and Wells 28
Costs Incurred 29
Acreage 29
Exploration and Development Activities 30
Properties with No Attributed Reserves 31
Contingent and Prospective Resources 31
Abandonment and Reclamation Costs 34
Tax Information 35
Production Estimates 36
Production History 36
Marketing 40
ADDITIONAL INFORMATION RESPECTING VERMILION ENERGY INC. 42
Management 42
Common Shares 44
Cash Dividends 44
Premium Dividend™ and Reinvestment Plan 45
Shareholder Rights Plan 46
AUDIT COMMITTEE MATTERS 50
Audit Committee Charter 50
Composition of the Audit Committee 50
External Audit Service Fees 50
MARKET FOR PRICE RANGE AND TRADING VOLUME OF SECURITIES 51
CREDIT RATINGs 51
Vermilion Rating 52
CONFLICTS OF INTEREST 52
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 52
LEGAL PROCEEDINGS 52
MATERIAL CONTRACTS 52
INTERESTS OF EXPERTS 52
TRANSFER AGENT AND REGISTRAR 52

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

RISK FACTORS 53
Reserve Estimates 53
Uncertainty of Contingent Resource Estimates 53
Uncertainty of Prospective Resource Estimates 53
Volatility of Oil and Natural Gas Prices 54
Changes in Legislation 54
Government Regulations 54
Competition 54
Operational Matters 54
Environmental Concerns 55
Kyoto Protocol and Carbon Tax 55
Discretionary Nature of Dividends 55
Debt Service 55
Changes in Income Tax Laws 55
Depletion of Reserves 56
Net Asset Value 56
Volatility of Market Price of Common Shares 56
Variations in Interest Rates and Foreign Exchange Rates 56
Increase in Operating Costs or Decline in Production Level 56
Acquisition Assumptions 56
Failure to Realize Anticipated Benefits of Prior Acquisitions 57
Additional Financing 57
Potential Conflicts of Interest 57
Accounting Adjustments 57
Market Accessibility 57
ADDITIONAL INFORMATION 58
   
SCHEDULE "A"    
REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR OR AUDITOR (FORM 51-101F2) 59
REPORT ON resources DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR OR AUDITOR 60
   
SCHEDULE "B"  
REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE (FORM 51-101F3) 61
   
SCHEDULE "C"  
TERMS OF REFERENCE for the AUDIT COMMITTEE 62

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

GLOSSARY OF TERMS

 

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

 

“2003 Arrangement” means the plan of arrangement under the ABCA involving the Trust, Vermilion Resources Ltd., Clear Energy Inc. and Vermilion Acquisition Ltd., which was completed on January 22, 2003;

 

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

 

“AGCA” means Alberta Gas Cost Allowance;

 

“AIF” means Annual Information Form;

 

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

 

“board of directors” or “board” means the board of directors of Vermilion;

 

“CGUs” means cash generating units and based on managements’ judgement, represents the lowest level at which there is identifiable cash inflows that are largely independent of the cash inflows of other groups of assets or properties;

 

“common shares” means a common share in the capital of the Company;

 

“contingent resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies;

 

“control” means, with respect to control of a body corporate by a person, the holding (other than by way of security) by or for the benefit of that person of securities of that body corporate to which are attached more than 50% of the votes that may be cast to elect directors of the body corporate (whether or not securities of any other class or classes shall or might be entitled to vote upon the happening of any event or contingency) provided that such votes, if exercised, are sufficient to elect a majority of the board of directors of the body corporate;

 

“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;

 

“Depletion units” means groups of assets or properties that are within a specific production area and have similar economic lives. Depletion units represent the lowest level of disaggregation for which Vermilion accumulates costs for the purposes of calculating and recording depletion;

 

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

 

“Dividend Payment Date” means any date that Dividends are paid to Shareholders, generally being the 15th day of the calendar month following the determination of a Dividend Record Date;

 

“Dividend Record Date” means the last day of each calendar month or such other date as may be determined from time to time by the Company;

 

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

 

“GLJ Report” means the independent engineering reserves evaluation of certain oil, NGL and natural gas interests of the Company prepared by GLJ dated February 6, 2015 and effective December 31, 2014;

 

“IFRS” means International Financial Reporting Standards;

 

“Income Tax Act” or “Tax Act” means the Income Tax Act (Canada), R.S.C. 1985, c. 1. (5th Supp.), as amended, including the regulations promulgated thereunder;

 

“Meeting” means the annual meeting of Shareholders of the Company to be held on May 8, 2015 (or, if adjourned, such other date on which the meeting is held);

 

“NYSE” means New York Stock Exchange;

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

“PNG” means Petroleum and Natural Gas properties and equipment;

 

“PRRT” means Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia;

 

“Plan” means the Premium DividendTM and Dividend Reinvestment Plan of the Company dated effective February 27, 2015, as amended or supplemented from time to time;

 

“prospective resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects;

 

“Rights Plan” means the Shareholder Rights Plan of the Company;

 

“Senior Unsecured Notes” means the $225 million aggregate principal amount of five year senior unsecured notes of the Company issued February 10, 2011;

 

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

 

“Shareholder Rights Plan Agreement” means the Shareholder Rights Plan Agreement dated September 1, 2010 between the Company and Computershare Trust Company of Canada establishing the Rights Plan, as amended and restated as of May 1, 2013 and as amended or supplemented from time to time;

 

“subsidiary” means, in relation to any person, any body 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;

 

“TSX” means the Toronto Stock Exchange;

 

“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;

 

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

 

“Unitholders” means former unitholders of the Trust;

 

“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; and

 

“VRL” means Vermilion Resources Ltd., previously a subsidiary of the corporation.

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Conventions

 

Unless otherwise indicated, references herein to "$" or "dollars" are to Canadian dollars. All financial information herein has been presented in Canadian dollars in accordance with IFRS.

 

Abbreviations

 

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

 

Conversion

 

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

 

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.AIF for the year ended December 31, 2014 – Exhibit 99.1

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

 

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:

 

·capital expenditures;
·business strategies and objectives;
·estimated reserve quantities and the discounted present value of future net cash flows from such reserves;
·petroleum and natural gas sales;
·future production levels (including the timing thereof) and rates of average annual production growth, estimated contingent resources and prospective resources;
·exploration and development plans;
·acquisition and disposition plans and the timing thereof;
·operating and other expenses, including the payment of future dividends;
·royalty and income tax rates;
·the timing of regulatory proceedings and approvals;
·the timing of first commercial gas from the Corrib field; and
·the estimate of Vermilion’s share of the expected natural gas production from the Corrib field.

 

Such forward-looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things:

 

·the ability of 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;
·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 the Company 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 development activities.

 

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:

 

·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 the Company'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, costs and expenses;
·potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
·the Company'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 the Company to add production and reserves through exploration and development activities;
·general economic and business conditions;
·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 the Company; and
·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.AIF for the year ended December 31, 2014 – Exhibit 99.1

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.

 

PRESENTATION OF OIL AND GAS RESERVES AND PRODUCTION INFORMATION

 

All oil and natural gas reserve information contained in this annual information form has been prepared and presented in accordance with 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.

 

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.

 

Vermilion retained GLJ to conduct an independent resource evaluation to assess contingent and prospective resources across all of the Company’s key operating regions with an effective date of December 31, 2014 (the "GLJ Resources Assessment"). All contingent and prospective resources evaluated in the GLJ Resources Assessment were deemed economic at the effective date of December 31, 2014.

 

The estimates of volumes of, and the net present value of the future net revenue attributable to, contingent resources and prospective resources in this annual information form are derived from the GLJ Resources Assessment. The GLJ Resources Assessment was prepared in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and NI 51-101 by GLJ, an independent qualified reserve evaluator.

 

A range of contingent and prospective resources estimates (low, best and high) were prepared by GLJ. See notes 6 to 8 of the tables in the section entitled “Contingent and Prospective Resources” for a description of low estimate, best estimate and high estimate.

 

Contingent Resources

 

"Contingent resources" are not, and should not be confused with, petroleum and natural gas reserves. "Contingent resources" are defined in COGEH as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resource the estimated discovered recoverable quantities associated with a project in the early evaluation stage.

 

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

 

·preparation of firm development plans, including determination of the specific scope and timing of projects;
·project sanction;
·access to capital markets;
·Shareholder and regulatory approvals;
·access to required services and field development infrastructure;
·oil and natural gas prices in Canada and internationally in jurisdictions in which Vermilion operates;
·demonstration of economic viability;
·future drilling program and testing results;
·further reservoir delineation and studies;
·facility design work;
·limitations to development based on adverse topography or other surface restrictions; and
·the uncertainty regarding marketing and transportation of petroleum from development areas.

 

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

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Prospective Resources

 

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

 

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

 

NON-GAAP MEASURES

 

This annual information form includes non-GAAP measures as further described herein. Management of the Company believes these non-GAAP measures are a useful tool in analyzing operating performance. These measures do not have standardized meanings prescribed by GAAP and, therefore, may not be comparable with the calculations of similar measures for other entities.

 

“Cash dividends per share” represents actual cash dividends paid per share by the Company during the relevant periods.

 

“Netbacks” are per boe and per mcf measures used in the analysis of operational activities and are used by management as a basis for decisions on capital allocation. Netbacks are calculated by subtracting royalties, operating expenses and transportation costs from revenues.

 

“Net dividends” is calculated as dividends declared for a given period less proceeds received by Vermilion pursuant to the dividend reinvestment plan. Dividends both before and after the dividend reinvestment plan are reviewed by management and are assessed as a percentage of fund flows from operations to analyze how much of the cash that is generated by Vermilion is being used to fund dividends.

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

VERMILION ENERGY INC.

 

General

 

Vermilion Energy Inc. is the successor to the Trust, following the completion of the conversion of the Trust from an income trust to a corporate structure by way of a court approved plan of arrangement under the ABCA on September 1, 2010. Pursuant to the Conversion Arrangement, Unitholders exchanged their Trust Units for common shares of the Company on a one-for-one basis and holders of exchangeable shares of VRL received 1.89344 common shares for each exchangeable share held.

 

References to “Vermilion” prior to the date of the Conversion Arrangement are generally references to the consolidated business enterprise of the Trust prior to the date of the Conversion Arrangement, whose business the Company is a successor to as a result of the Conversion Arrangement, as accounted for by “continuity-of-interest” accounting.

 

Vermilion Energy Inc. 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.

 

Organizational Structure of the Company

 

The following diagram describes the intercorporate relationships among the Company and each of its material subsidiaries, where each principal subsidiary was incorporated or formed and the percentage of votes attaching to all voting securities of each subsidiary beneficially owned directly or indirectly by Vermilion. Reference should be made to the appropriate sections of this annual information form for a complete description of the structure of the Company.

 

 

Note:

(1) Vermilion Energy Ireland Limited is the Irish Branch of a Cayman Islands incorporated company.

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Summary Description of the Business

 

Vermilion Energy Inc.

 

The Company is actively engaged in the business of oil and natural gas exploitation, development, acquisition and production in Canada, France, Ireland, the Netherlands, Germany, Australia and the United States. The Company’s business plan is to expand its portfolio of organic growth opportunities and pursue its strategic plan that targets modest annual average production growth while maintaining a reliable and growing dividend. Vermilion continues to develop new venture initiatives which target the identification and capture of meaningful conventional and unconventional resource related exploration exposure in North America, Europe and Australia. Where possible, the Company will seek to expand its reserve base through the selective addition of high-quality, long-life conventional reserves with low risk development opportunities.

 

Shareholders receive monthly dividends of the cash flow generated by Vermilion as declared payable by the board of directors of the Company. The Company currently employs a strategy which: (i) provides Shareholders with a competitive annual cash-on-cash yield through monthly cash dividends, (ii) ensures that Vermilion's existing assets are maintained at a level that provides sustainable ongoing cash flow, and (iii) continues to expand the business of the Company through the development of growth opportunities that are intended to provide long-term stable cash flows and be accretive to the existing Shareholders. The Company intends to finance acquisitions through debt financing and, when necessary, the issuance of additional common shares from treasury, while maintaining prudent leverage.

 

Three Year History of Vermilion

 

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

 

On January 24, 2012, Vermilion announced that the Company, through its wholly-owned subsidiaries, acquired certain working interests in six producing fields located in the Paris and Aquitaine basins in France. Pursuant to the acquisition, Vermilion acquired the remaining working interests in three fields in which it previously held interests (Itteville, Vert Le Grand and Vic Bihl) and working interests in three new fields (Vert le Petit and La Croix Blanche at 100% working interest and Dommartin-Lettrée at 56% working interest). Taking into consideration an effective date of January 1, 2011 and customary closing adjustments, Vermilion paid approximately $106 million cash at closing. Vermilion financed this acquisition indirectly through proceeds received from the November 2011 equity issuance. The acquisition did not constitute a “significant acquisition” within the meaning of applicable securities laws.

 

On November 14, 2012, Vermilion announced that the board of directors approved an increase to its monthly dividend by 5.3% to $0.20 per share from $0.19 per share. The increase became effective for the January 2013 dividend paid on February 15, 2013. The dividend increase was Vermilion’s second increase since initiating a dividend in 2003. Also, on November 14, 2012 Vermilion announced that it had initiated the process with the NYSE Euronext for a secondary listing of the Company's common shares on the NYSE Euronext's New York Stock Exchange (“NYSE”). Vermilion’s common shares were listed and began trading on the NYSE on March 12, 2013 under the ticker symbol "VET".

 

On December 27, 2012, Vermilion announced that the Company, through its wholly-owned subsidiaries, acquired 100% of the shares of Zaza Energy France S.A.S. Pursuant to the acquisition, Vermilion acquired operating interests covering approximately 24,300 acres with 100% working interests in the Saint Firmin, Chateaurenard, Courtenay, Chuelles, and Charmottes fields in the Paris Basin. Taking into consideration an effective date for the acquisition of October 1, 2012 and customary closing adjustments, Vermilion paid approximately $75 million cash at closing including working capital. Vermilion financed this acquisition through its bank revolving credit facility. The acquisition did not constitute a “significant acquisition” within the meaning of applicable securities laws.

 

On December 31, 2012, pursuant to the terms of the acquisition agreement whereby Vermilion acquired an 18.5% non-operating working interest in the offshore Corrib gas field, Vermilion made a final payment to the vendor of $134.3 million (US$135 million).

 

In order to consolidate its Canadian subsidiaries, on January 1, 2013, Vermilion amalgamated with two of its wholly-owned subsidiaries, 1209974 Alberta Ltd. and Vermilion Resources Ltd. Vermilion Energy Inc. was the resulting entity upon completion of the amalgamations. As a result of the forgoing amalgamations, Vermilion Energy Inc. became the managing partner of Vermilion Resources.

 

On October 11, 2013, Vermilion announced the completion of the acquisition from Northern Petroleum Plc. of 100% of the shares of its subsidiary Northern Petroleum Nederland B.V. ("NPN") for approximately $27.5 million with an effective date of January 1, 2013. The acquisition included interests in nine concessions, including six onshore licences in production or development, three onshore exploration licenses, and one offshore production license ("P12") in the Netherlands (the "Assets"). Four licenses are located in the northeastern region, in close proximity to Vermilion's existing concessions and the remaining five onshore licenses are located in the southwestern region of the Netherlands. Vermilion assumed operatorship of all the acquired Assets following closing of the Acquisition, with the exception of the offshore license P12 in which Vermilion holds a 23.6% non-operated interest. The Assets cover approximately 298,500 net acres, of which approximately 98 percent is undeveloped.

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

On November 6, 2013, Vermilion announced that it had entered into a purchase and sale agreement with GDF SUEZ E&P Deutschland GmbH (“GDF SUEZ”), (an affiliate of GDF SUEZ S.A., a publicly traded, French multinational utility) whereby Vermilion, through its wholly-owned subsidiary, agreed to acquire GDF SUEZ’s 25% interest in four producing natural gas fields and a surrounding exploration license located in northwest Germany. The acquisition from GDF SUEZ was completed in February 2014, and was funded with cash balances on hand. The acquisition from GDF SUEZ did not constitute a “significant acquisition” within the meaning of applicable securities laws.

 

On November 7, 2013, Vermilion announced that the board of directors approved a 7.5% increase to its monthly dividend to $0.215 per share from $0.20 per share. The increase became effective for the January 2014 dividend payable on February 18, 2014. This marks the third increase to Vermilion’s monthly dividend, and the second annual increase.

 

In Q1 2014, Vermilion was awarded the Ijsselmuiden exploration concession in the Netherlands, which consists of approximately 66,300 net undeveloped acres (60% working interest).

 

In May 2014, we executed the Battonya South concession in Hungary with the Hungarian Ministry of National Development. The concession consists of 116,000 gross acres located in the southern part of Hungary.  The term of the concession is for 20 years, subject to continuation of development in a manner acceptable to both parties.

 

In early 2014, we informed the Moroccan government of our intention to relinquish our rights to the Haouz block in central Morocco.  Based on our evaluation of seismic data, we concluded that due to the structural complexity of the block, we would be unable to pursue a definitive appraisal and exploration program that would fit within the constraints of our predetermined new venture capital and risk parameters.  The relinquishment terminates our activities in Morocco after cumulative spending of $0.9 million to evaluate the 2.3 million acre block.

 

On April 29, 2014, Vermilion announced the completion of the acquisition of Elkhorn Resources Inc., a private S.E. Saskatchewan producer, for total consideration of approximately $427 million. Total consideration comprised the assumption of approximately $42 million of debt, $180 million of cash, and the issuance of 2.8 million common shares of Vermilion valued at approximately $205 million (based on the closing price per Vermilion common share of $72.50 on the Toronto Stock Exchange on April 29, 2014). The assets consist of high netback, light oil producing assets in the Northgate region of southeast Saskatchewan and include approximately 57,000 net acres of land (approximately 80% undeveloped), seven oil batteries, and preferential access to 50% or greater capacity at a solution gas facility.

 

On May 22, 2014, Vermilion announced the completion of tunnel boring operations beneath Sruwaddacon Bay, related to the Corrib project in Ireland. The tunnel will serve as a conduit for the gas pipeline between the Bellanaboy gas processing facility to the offshore pipeline landing valve at Glengad.

 

On November 10, 2014, Vermilion announced that it had acquired approximately 68,000 acres of land (98% undeveloped) in the Powder River Basin of northeastern Wyoming for approximately $11.1 million. The Wyoming acquisition did not constitute a “significant acquisition” within the meaning of applicable securities laws.

 

As at January 31, 2015, Vermilion had 532 full time employees of which 203 employees were located in its Calgary head office, 59 employees in its Canadian field offices, 161 employees in France, 60 employees in the Netherlands, 37 employees in Australia, 8 employees in the United States and 4 employees in Germany.

 

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Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

NARRATIVE DESCRIPTION OF THE BUSINESS

 

Business Objectives

 

Vermilion is an oil-leveraged energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing properties in North America, Europe and Australia. The Company’s business model targets annual organic production growth along with providing reliable and increasing dividends to investors. Vermilion is targeting growth in production primarily through the exploitation of light oil and liquids-rich natural gas conventional resource plays in Western Canada, the exploration and development of high impact natural gas opportunities in the Netherlands and Germany, and through drilling and workover programs targeting oil in France and Australia. Vermilion also holds an 18.5% working interest in the Corrib gas field in Ireland. In addition, Vermilion continues to develop new venture initiatives which target the identification and capture of meaningful conventional and unconventional resource related development and exploration exposure in North America, Europe and Australia. Where possible, the Company will seek to expand its reserve base through the selective addition of high-quality, long-life reserves with low risk development opportunities.

 

In reviewing potential participations or acquisitions, Vermilion will consider a number of factors, including: (a) the present value of the future revenue from such properties from the proved producing, total proved and proved plus probable reserves; (b) the amount of potential for additional reservoir development; (c) whether sufficient infrastructure exists in the prospect to provide for increased activity; (d) the cost of any potential development; (e) investments in properties that exhibit medium to long-life reserves and stable production base; and (f) the ability of Vermilion to enhance the value of acquired properties through additional exploitation efforts and additional development drilling. The board of directors of Vermilion may, in its discretion, approve asset or corporate acquisitions or investments that do not conform to these guidelines based upon the board's consideration of the qualitative aspects of the subject properties including risk profile, technical upside, reserve life, asset quality and the Company's business prospects.

 

Description of Properties

 

The following is a description of the oil and natural gas properties, facilities and installations in which Vermilion has an interest and that are material to Vermilion's operations and exploration activities. We manage our business through our Calgary head office and our international business unit offices.

 

·Canada business unit: Includes revenues and expenditures related directly to our assets in Alberta and Saskatchewan.
·France business unit: Relates to our operations in France in the Paris and Aquitaine basins.
·Netherlands business unit: Relates to our operations in the Netherlands.
·Germany business unit: Relates to our 25% contractual participation interest in a four-partner consortium in Germany.
·Ireland business unit: Relates to our 18.5% non-operated interest in the offshore Corrib natural gas field and related infrastructure.
·Australia business unit: Relates to operations on the Wandoo offshore crude oil field.
·United States business unit: Relates to our operations in Wyoming in the Powder River Basin.
·Corporate: Includes expenditures related to our global hedging program, financing expenses, and general and administration expenses, primarily incurred in Canada and not directly related to the operations of a specific business unit.

 

The production numbers stated refer to Vermilion's working interest share before deduction of Crown, freehold and other royalties. Reserve amounts are stated, before deduction of royalties, as at December 31, 2014, based on forecasted costs and price assumptions as evaluated in the GLJ Report.

 

Canada Business Unit

 

Vermilion’s production in Canada is located primarily in three areas of Alberta: Drayton Valley, Slave Lake and Central Alberta and the Northgate Region of southeast Saskatchewan. Vermilion's main gas producing areas are Drayton Valley and Central Alberta, while Northgate, Slave Lake and the Cardium light oil play in Drayton Valley are the main oil producing areas.

 

Vermilion holds 65% working interest in 481,700 (313,700 net) acres of developed land, and 86% working interest in 679,600 (582,300 net) acres of undeveloped land. Vermilion had 635 (443 net) producing natural gas wells and 619 (447 net) producing oil wells in Canada as at December 31, 2014.

 

Vermilion owns and operates four natural gas plants and has an ownership interest in five additional plants, resulting in combined gross processing capacity of over 80 MMcf/d. In addition, Vermilion has capacity of over 25,000 bbl/d of oil in eleven operated oil batteries including a 15,000 bbl/d oil battery that handles Cardium production which commenced operations August 1, 2011.

 

13
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Risks and uncertainties associated with weather conditions can shorten the winter drilling season and can impact the spring and summer drilling programs, potentially resulting in increased costs or reduced production.

 

For a discussion of the competitive conditions affecting Vermilion’s business, refer to "Competition" in the Risk Factors section of this AIF.

 

For the year ended December 31, 2014, production in Canada averaged approximately 55.7 MMcf/d of natural gas and 13,724 bbl/d of crude oil and NGL. Sales of natural gas in 2014 were approximately $92.1 million (2013 - $52.6 million) and sales from crude oil and NGLs were approximately $445.7 million (2013 - $329.4 million).

 

The GLJ Report assigned 70,608 Mboe of total proved reserves and 120,243 Mboe of proved plus probable reserves to Vermilion's properties located in Canada.

 

France Business Unit

 

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. Vermilion's assets in France are primarily oil producing properties. The two major fields in the Paris Basin area are Champotran and Chaunoy. The two major fields in the Aquitaine Basin are Parentis and Cazaux. Vermilion operates 13 oil batteries and 12 single well batteries with current throughput of approximately 12,000 bbl/d. Given the legacy nature of these assets, the throughput capability of these batteries exceeds any projected future requirements. Vermilion holds 96% working interest in 218,100 (208,900 net) acres of developed land and 100% working interest in 344,900 (344,900 net) acres of undeveloped land in the Aquitaine and Paris Basins. Vermilion had 333 (322 net) producing oil wells in France as at December 31, 2014.

 

Risks and uncertainties associated with well approvals can impact the drilling programs, potentially resulting in delays or reduced production.

 

For a discussion of the competitive conditions affecting Vermilion business, refer to "Competition" in the Risk Factors section of this AIF.

 

For the year ended December 31, 2014, production in France averaged approximately 11,011 bbl/d of oil. Sales from oil in 2014 were approximately $431.3 million (2013 - $449.9 million). Due to the closure of a third party facility, there were no sales of natural gas in 2014 (2013 - $3.4 million).

 

The GLJ Report assigned 37,249 Mboe of total proved reserves and 57,967 Mboe of proved plus probable reserves to Vermilion's properties located in France.

 

Netherlands Business Unit

 

Vermilion's Netherlands assets consist of 17 onshore concessions in the northern part of the country, five concessions in the southwestern part of the country, and two offshore concessions. Production consists solely of natural gas with a small amount of related condensate. Vermilion’s total position in the Netherlands covers 1,495,100 (845,700 net) acres at an average 57% working interest, of which 95% is undeveloped, and 50 (34 net) producing gas wells as at December 31, 2014.

 

Risks and uncertainties associated with drilling and production permits can impact drilling programs and production timing, potentially resulting in increased costs or reduced production.

 

For a discussion of the competitive conditions affecting Vermilion’s business, refer to "Competition" in the Risk Factors section of this AIF.

 

For the year ended December 31, 2014, Vermilion's production in the Netherlands averaged 77 bbl/d of NGLs and 38.2 MMcf/d of natural gas. Sales in 2014 of natural gas were approximately $121.2 million (2013 - $134.7 million) and sales from NGLs were approximately $2.6 million (2013 - $4.9 million).

 

The GLJ Report assigned 6,247 Mboe of total proved reserves and 14,196 Mboe of proved plus probable reserves to Vermilion's properties located in the Netherlands.

 

Germany Business Unit

 

Vermilion’s Germany assets consist of 25% interest in four producing natural gas fields and a surrounding exploration license located in northwest Germany. Vermilion also holds a 0.4% equity interest in Ergas Munster GmbH ("EGM"), a joint venture created in 1959 to jointly transport, process, and market gas in northwest Germany. This transportation interest allows for our proportionate share of produced volumes to be processed, blended, and transported to designated gas consumers through the EGM network of approximately 2,000 kilometres of pipeline. Vermilion’s interest in Germany include 207,300 (51,800 net) acres, of which 85% is undeveloped, and 16 (four net) producing gas wells as at December 31, 2014.

 

14
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

For the year ended December 31, 2014, production in Germany averaged approximately 15.0 MMcf/d of natural gas. Sales of natural gas in 2014 were approximately $42.0 million.

 

The GLJ Report assigned 6,710 Mboe of total proved reserves and 10,260 Mboe of proved plus probable reserves to Vermilion's properties located in Germany.

 

Ireland Business Unit

 

Vermilion holds an 18.5% non-operating interest in the offshore Corrib gas field located off the northwest coast of Ireland. Production from Corrib is expected to increase Vermilion’s volumes by approximately 58 MMcf (9,700 boe/d) once the field reaches peak production. Vermilion acquired its 18.5% working interest in the project on July 30, 2009, comprised of six offshore wells, both offshore and onshore pipeline segments as well as a natural gas processing facility. At the time of the acquisition most of the key components of the project, with the exception of the onshore pipeline, were either complete or in the latter stages of development. In 2011, approvals and permissions were granted for the onshore gas pipeline and tunneling commenced on December 16, 2012. On May 22, 2014, Vermilion announced the completion of tunnel boring operations. Vermilion expects to continue to invest capital in this project over the next year with approximately $60 million budgeted for 2015.  The project is anticipated to produce first gas in approximately mid-2015.

 

The GLJ Report assigned 17,655 Mboe of total proved reserves and 24,106 Mboe of proved plus probable reserves to Vermilion's property located in Ireland.

 

Australia Business Unit

 

Vermilion's Australia assets consist of a 100% operated interest in an offshore oil field located on Western Australia's northwest shelf. The platform has a current producing capacity of 162,000 bbl/d of total fluid. Vermilion holds a 100% working interest in the Wandoo block, which is comprised of 59,600 acres and is considered a production license.

 

Western Australia’s northwest shelf is subject to seasonal disruptions caused by cyclones. During cyclone season (December to March) the Company may have to reduce production rates at its offshore facilities as a result of the inability to offload to tankers due to bad weather. Cyclones may also cause production shut-ins due to the evacuation of staff or damage to equipment on the platform.

 

For a discussion of the competitive conditions affecting Vermilion’s business, refer to "Competition" in the Risk Factors section of this AIF.

For the year ended December 31, 2014, Vermilion's production in Australia averaged 6,571 bbl/d of crude oil. Sales in 2014 from crude oil were approximately $283.5 million (2013 - $298.9 million).

 

The GLJ Report assigned 12,534 Mboe of total proved reserves and 17,983 Mboe of proved plus probable reserves to Vermilion's property located in Australia.

 

United States Business Unit

 

Vermilion’s assets in the United States include approximately 104,100 (68,300 net) acres of land in the Powder River basin of northeastern Wyoming, of which 98% is undeveloped. Vermilion had six (three net) producing oil wells in the United States as at December 31, 2014.

 

From the acquisition date until December 31, 2014, production in the United States averaged approximately 195 bbl/d of crude oil. Sales from crude oil in 2014 were approximately $1.3 million.

 

The GLJ Report assigned 500 Mboe of total proved reserves and 2,129 Mboe of proved plus probable reserves to Vermilion's properties located in the United States.

 

15
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

 

Reserves and Future Net Revenue

 

The following is a summary of the oil and natural gas reserves and the value of future net revenue of Vermilion as evaluated by GLJ in a report dated February 6, 2015 with an effective date of December 31, 2014. Pricing used in the forecast price evaluations is set forth in the notes to the tables.

 

Reserves and other oil and gas information contained in this section is effective December 31, 2014 unless otherwise stated.

 

All evaluations of future net production revenue set forth in the tables below are stated after overriding and lessor royalties, Crown royalties, freehold royalties, mineral taxes, direct lifting costs, normal allocated overhead and future capital investments, including abandonment and reclamation obligations. Future net production revenues estimated by the GLJ 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.

 

Reserves for Australia, Canada, France, Germany Ireland, the Netherlands and United States 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.

 

The Report on Reserves Data by Independent Qualified Reserves Evaluator 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.

 

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

 

The following tables may not total due to rounding.

 

16
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Oil and Gas Reserves - Based on Forecast Prices and Costs (1)

 

  Light and Medium Crude Oil Heavy Oil Natural Gas Natural Gas Liquids BOE BOE
  Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross (2) Net (2) Gross Net
  (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboe) (Mboe)
Proved Developed Producing (3) (5) (6)                    
Australia  10,434  10,434  -     -     -     -     -     -     10,434  10,434
Canada  16,174  13,206  10  9  94,264  85,967  5,150  3,804  37,046  31,347
France  31,650  29,431  -     -     9,875  9,430  -     -     33,297  31,003
Germany  -     -     -     -     29,432  25,245  -     -     4,905  4,208
Ireland  -     -     -     -     -     -     -     -     -     -   
Netherlands  -     -     -     -     14,123  13,450  28  25  2,382  2,267
United States  165  137  -     -     61  51  2  2  177  148
Total Proved Developed Producing  58,423  53,208  10  9  147,755  134,143  5,180  3,831  88,241  79,407
Proved Developed Non-Producing (3) (5) (7)                    
Australia  -     -     -     -     -     -     -     -     -     -   
Canada  1,227  1,099  -     -     12,561  11,248  476  322  3,796  3,296
France  977  874  -     -     -     -     -     -     977  874
Germany  -     -     -     -     10,324  8,806  -     -     1,721  1,468
Ireland  -     -     -     -     -     -     -     -     -     -   
Netherlands  -     -     -     -     17,863  17,863  16  16  2,994  2,993
United States  -     -     -     -     -     -     -     -     -     -   
Total Proved Developed Non-Producing  2,204  1,973  -     -     40,748  37,917  492  338  9,488  8,631
Proved Undeveloped (3) (8)                    
Australia  2,100  2,100  -     -     -     -     -     -     2,100  2,100
Canada  10,077  8,789  -     -     70,589  64,886  7,924  6,542  29,766  26,145
France  2,975  2,780  -     -     -     -     -     -     2,975  2,780
Germany  -     -     -     -     502  (39)  -     -     84  (7)
Ireland  -     -     -     -     105,931  105,931  -     -     17,655  17,655
Netherlands  -     -     -     -     5,169  2,584  10  5  872  436
United States  284  234  -     -     182  150  8  6  322  265
Total Proved Undeveloped  15,436  13,903  -     -     182,373  173,512  7,942  6,553  53,774  49,374
Proved (3)                    
Australia  12,534  12,534  -     -     -     -     -     -     12,534  12,534
Canada  27,478  23,094  10  9  177,414  162,101  13,550  10,668  70,608  60,788
France  35,602  33,085  -     -     9,875  9,430  -     -     37,249  34,657
Germany  -     -     -     -     40,258  34,012  -     -     6,710  5,669
Ireland  -     -     -     -     105,931  105,931  -     -     17,655  17,655
Netherlands  -     -     -     -     37,155  33,897  54  46  6,247  5,696
United States  449  371  -     -     243  201  10  8  500  413
Total Proved  76,063  69,084  10  9  370,876  345,572  13,614  10,722  151,502  137,412
Probable (4)                    
Australia  5,449  5,449  -     -     -     -     -     -     5,449  5,449
Canada  14,797  12,175  2  2  141,032  126,232  11,331  8,689  49,635  41,905
France  20,288  18,848  -     -     2,582  2,465  -     -     20,719  19,259
Germany  -     -     -     -     21,301  17,816  -     -     3,550  2,969
Ireland  -     -     -     -     38,707  38,707  -     -     6,451  6,451
Netherlands  -     -     -     -     47,076  41,987  103  85  7,949  7,083
United States  1,338  1,104  -     -     1,402  1,159  58  48  1,630  1,345
Total Probable  41,872  37,576  2  2  252,100  228,366  11,492  8,822  95,383  84,461
Proved Plus Probable (3) (4)                    
Australia  17,983  17,983  -     -     -     -     -     -     17,983  17,983
Canada  42,275  35,269  12  11  318,446  288,333  24,881  19,357  120,243  102,693
France  55,890  51,933  -     -     12,457  11,895  -     -     57,967  53,916
Germany  -     -     -     -     61,559  51,828  -     -     10,260  8,638
Ireland  -     -     -     -     144,638  144,638  -     -     24,106  24,106
Netherlands  -     -     -     -     84,231  75,884  157  131  14,196  12,779
United States  1,787  1,475  -     -     1,645  1,360  68  56  2,129  1,758
Total Proved Plus Probable  117,935  106,660  12  11  622,976  573,938  25,106  19,544  246,884  221,873

 

Notes:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)"Gross Reserves" are Vermilion's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of Vermilion. "Net Reserves" are Vermilion's working interest (operating or non-operating) share after deduction of royalty obligations, plus Vermilion's royalty interests in reserves.
(3)"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

 

17
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

(4)"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(5)"Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(6)"Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(7)"Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(8)"Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

 

Net Present Values of Future Net Revenue - Based on Forecast Prices and Costs (1)

 

  Before Deducting Future Income Taxes Discounted At   After Deducting Future Income Taxes Discounted At
(M$) 0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
Proved Developed Producing (2) (4) (5)                    
Australia  291,164  263,104  239,218  218,979  201,803  280,825  242,543  213,082  189,932  171,394
Canada  1,262,154  972,328  790,894  668,312  580,565  1,262,155  972,328  790,895  668,312  580,565
France  2,054,566  1,447,105  1,120,222  918,238  781,399  1,655,535  1,184,551  921,918  755,890  641,911
Germany  104,703  88,743  76,967  68,031  61,063  104,703  88,743  76,967  68,031  61,063
Ireland  -     -     -     -     -     -     -     -     -     -   
Netherlands  44,934  46,660  46,565  45,756  44,670  44,726  46,457  46,366  45,563  44,480
United States  8,235  6,662  5,619  4,885  4,343  8,235  6,662  5,619  4,885  4,343
Total Proved Developed Producing  3,765,756  2,824,602  2,279,485  1,924,201  1,673,843  3,356,179  2,541,284  2,054,847  1,732,613  1,503,756
Proved Developed Non-Producing (2) (4) (6)                    
Australia  -     -     -     -     -     -     -     -     -     -   
Canada  101,096  72,953  56,758  46,332  39,099  54,946  50,000  44,899  39,996  35,611
France  57,393  38,340  27,990  21,760  17,681  37,650  24,928  18,020  13,868  11,154
Germany  46,636  32,713  23,976  18,295  14,442  46,636  32,713  23,976  18,295  14,442
Ireland  -     -     -     -     -     -     -     -     -     -   
Netherlands  61,915  45,630  34,900  27,543  22,322  60,340  44,093  33,399  26,075  20,884
United States  -     -     -     -     -     -     -     -     -     -   
Total Proved Developed Non-Producing  267,040  189,636  143,624  113,930  93,544  199,572  151,734  120,294  98,234  82,091
Proved Undeveloped (2) (7)                    
Australia  71,575  47,975  31,079  18,724  9,524  25,361  12,037  2,650  (4,084)  (8,989)
Canada  681,560  465,275  327,825  235,860  171,712  508,412  345,509  242,605  173,718  125,419
France  197,047  145,815  109,125  83,358  64,840  128,782  92,384  66,709  48,918  36,283
Germany  831  1,201  991  566  125  831  1,201  991  566  125
Ireland  774,335  642,348  534,368  451,049  387,017  774,335  642,348  534,368  451,049  387,017
Netherlands  14,875  12,536  10,658  9,129  7,868  14,704  12,369  10,495  8,969  7,712
United States  8,855  4,795  2,502  1,084  141  7,367  3,917  1,939  696  (139)
Total Proved Undeveloped  1,749,078  1,319,945  1,016,548  799,770  641,227  1,459,792  1,109,765  859,757  679,832  547,428
Proved (2)                    
Australia  362,739  311,079  270,297  237,703  211,327  306,187  254,580  215,732  185,848  162,405
Canada  2,044,810  1,510,556  1,175,477  950,504  791,376  1,825,513  1,367,837  1,078,399  882,026  741,595
France  2,309,006  1,631,260  1,257,337  1,023,356  863,920  1,821,967  1,301,863  1,006,647  818,676  689,348
Germany  152,170  122,657  101,934  86,892  75,630  152,170  122,657  101,934  86,892  75,630
Ireland  774,335  642,348  534,368  451,049  387,017  774,335  642,348  534,368  451,049  387,017
Netherlands  121,724  104,826  92,123  82,428  74,860  119,770  102,919  90,260  80,607  73,076
United States  17,090  11,457  8,121  5,969  4,484  15,602  10,579  7,558  5,581  4,204
Total Proved  5,781,874  4,334,183  3,439,657  2,837,901  2,408,614  5,015,544  3,802,783  3,034,898  2,510,679  2,133,275
Probable (3)                    
Australia  344,309  273,659  222,624  185,158  157,114  196,770  151,343  119,726  97,200  80,756
Canada  1,473,018  920,352  628,307  455,987  345,800  1,102,943  680,073  458,267  328,291  245,822
France  1,561,454  867,399  562,195  397,231  296,268  1,022,105  555,401  349,205  238,204  170,866
Germany  95,306  62,229  43,077  31,263  23,563  85,929  56,977  39,975  29,351  22,344
Ireland  430,350  269,590  183,438  133,486  102,376  430,350  269,590  183,438  133,486  102,376
Netherlands  302,536  222,307  172,861  140,087  117,110  259,231  184,444  138,913  109,209  88,748
United States  68,675  36,091  21,316  13,434  8,723  46,431  23,501  12,945  7,264  3,865
Total Probable  4,275,648  2,651,627  1,833,818  1,356,646  1,050,954  3,143,759  1,921,329  1,302,469  943,005  714,777
Proved Plus Probable (2) (3)                    
Australia  707,048  584,738  492,921  422,861  368,441  502,957  405,923  335,458  283,048  243,161
Canada  3,517,828  2,430,908  1,803,784  1,406,491  1,137,176  2,928,456  2,047,910  1,536,666  1,210,317  987,417
France  3,870,460  2,498,659  1,819,532  1,420,587  1,160,188  2,844,072  1,857,264  1,355,852  1,056,880  860,214
Germany  247,476  184,886  145,011  118,155  99,193  238,099  179,634  141,909  116,243  97,974
Ireland  1,204,685  911,938  717,806  584,535  489,393  1,204,685  911,938  717,806  584,535  489,393
Netherlands  424,260  327,133  264,984  222,515  191,970  379,001  287,363  229,173  189,816  161,824
United States  85,765  47,548  29,437  19,403  13,207  62,033  34,080  20,503  12,845  8,069
Total Proved Plus Probable  10,057,522  6,985,810  5,273,475  4,194,547  3,459,568  8,159,303  5,724,112  4,337,367  3,453,684  2,848,052

 

18
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Notes:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(3)"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(4)"Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(5)"Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(6)"Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(7)"Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

 

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 After
(M$) Revenue Royalties Costs Costs Costs Income Taxes Income Taxes Income Taxes
Proved (2)                
Australia  1,360,391  -     712,428  245,532  39,691  362,740  56,553  306,187
Canada  4,302,228  648,056  1,026,393  534,106  48,863  2,044,810  219,297  1,825,513
France  3,982,049  279,641  1,083,549  124,021  185,833  2,309,005  487,038  1,821,967
Germany  374,000  57,252  147,030  8,056  9,492  152,170  -     152,170
Ireland  1,149,786  -     218,436  89,042  67,973  774,335  -     774,335
Netherlands  378,250  32,084  135,382  44,893  44,167  121,724  1,954  119,770
United States  43,127  11,043  6,605  8,190  199  17,090  1,488  15,602
Total Proved  11,589,831  1,028,076  3,329,823  1,053,840  396,218  5,781,874  766,330  5,015,544
Proved Plus Probable (2) (3)                
Australia  2,035,436  -     1,039,962  245,532  42,893  707,049  204,092  502,957
Canada  7,407,493  1,181,971  1,715,243  931,517  60,935  3,517,827  589,371  2,928,456
France  6,504,904  456,374  1,596,847  342,728  238,496  3,870,459  1,026,387  2,844,072
Germany  598,427  93,266  234,697  12,180  10,808  247,476  9,377  238,099
Ireland  1,656,494  -     294,794  89,042  67,973  1,204,685  -     1,204,685
Netherlands  918,290  90,017  262,155  87,177  54,681  424,260  45,259  379,001
United States  198,397  50,816  26,673  34,589  554  85,765  23,732  62,033
Total Proved Plus Probable  19,319,441  1,872,444  5,170,371  1,742,765  476,340  10,057,521  1,898,218  8,159,303

 

Notes:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(3)"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

 

19
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

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

 

  Future Net Revenue  
  Before Income Taxes (2)  
  (Discounted at 10% Per Year) Unit Value
Proved Developed Producing (M$) ($/boe)
Light and medium crude oil (3)  1,993,508  33.44
Heavy Oil (3)  197  14.45
Natural gas (4)  278,281  15.12
Shale Gas  6,234  17.02
Coal Bed Methane  1,265  1.26
Total Proved Developed Producing  2,279,485  28.71
Proved Developed Non-Producing    
Light and medium crude oil (3)  55,301  26.31
Heavy Oil (3)  -     -   
Natural gas (4)  84,921  14.46
Shale Gas  -     -   
Coal Bed Methane  3,402  5.19
Total Proved Developed Non-Producing  143,624  16.64
Proved Undeveloped    
Light and medium crude oil (3)  338,689  18.97
Heavy Oil (3)  -     -   
Natural gas (4)  671,645  22.60
Shale Gas  -     -   
Coal Bed Methane  6,214  3.44
Total Proved Undeveloped  1,016,548  20.59
Proved    
Light and medium crude oil (3)  2,387,498  29.76
Heavy Oil (3)  197  14.22
Natural gas (4)  1,034,847  19.52
Shale Gas  6,234  16.75
Coal Bed Methane  10,881  3.22
Total Proved  3,439,657  25.03
Probable    
Light and medium crude oil (3)  1,192,527  27.46
Heavy Oil (3)  107  24.80
Natural gas (4)  632,758  16.07
Shale Gas  1,912  18.54
Coal Bed Methane  6,514  4.15
Total Probable  1,833,818  21.71
Proved Plus Probable    
Light and medium crude oil (3)  3,580,025  28.97
Heavy Oil (3)  304  16.75
Natural gas (4)  1,667,605  18.04
Shale Gas  8,146  17.24
Coal Bed Methane  17,395  3.50
Total Proved Plus Probable  5,273,475  23.77

 

Notes:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(2)Other Company revenue and costs not related to a specific production group have been allocated proportionately to production groups. Unit values are based on Company Net Reserves. Net present values of reserves categories are an approximation based on major products.
(3)Including solution gas and other by-products.
(4)Including by-products but excluding solution gas.

 

20
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Forecast Prices used in Estimates (1)

 

                     
          Natural Gas Natural Gas Natural Gas Inflation Exchange Exchange
  Light and Medium Crude Oil Crude Oil Canada Europe Liquids Rate Rate Rate
  WTI Edmonton Cromer Brent Blend   National Balancing        
  Cushing Par Price Medium FOB AECO Point FOB      
  Oklahoma 40˚ API 29.3˚ API North Sea Gas Price (UK) Field Gate Percent    
Year ($US/bbl) ($Cdn/bbl) ($Cdn/bbl)  ($US/bbl) ($Cdn/MMBtu) ($US/MMBtu) ($Cdn/bbl) Per Year ($US/$Cdn) (EUR/$Cdn)
2014  93.06  94.77  89.86  99.89  4.52  8.26  72.59  2.0  0.905  1.467
Forecast                    
2015  62.50  64.71  61.47  67.50  3.31  7.50  38.13  2.0  0.850  1.450
2016  75.00  80.00  76.00  82.50  3.77  8.25  47.68  2.0  0.875  1.450
2017  80.00  85.71  81.43  87.50  4.02  8.75  52.15  2.0  0.875  1.450
2018  85.00  91.43  86.86  90.00  4.27  9.00  55.62  2.0  0.875  1.450
2019  90.00  97.14  92.29  95.00  4.53  9.50  59.10  2.0  0.875  1.450
Thereafter 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%  0.875  1.450

 

Note:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

 

All forecast prices in the table above are provided by GLJ. For 2014, the price of Vermilion’s natural gas in the Netherlands was based on the TTF day-ahead index, as determined on the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services, plus various fees. GasTerra, a state owned entity purchases all natural gas produced by Vermilion in the Netherlands. The price of Vermilion’s natural gas in Germany is based on the TTF month-ahead index, as determined on the Title Transfer Facility Virtual Trading Point operated by Dutch TSO Gas Transport Services, plus various fees. The benchmark price for Australia and France crude oil was Dated Brent. The benchmark price for Canadian crude oil was Edmonton Par and Canadian natural gas was priced against AECO. For the year ended December 31, 2014, the average realized sales prices before hedging were $113.80 per bbl (Australia), $8.70 per Mcf (Netherlands), $7.67 per Mcf (Germany), $105.43 per bbl (France) for Brent-based crude oil, $74.08 per bbl (United States) for WTI, $88.98 per bbl for Canadian-based crude oil and NGLs and $4.53 per Mcf for Canadian natural gas.

 

Reconciliations of Changes in Reserves

 

The following tables set forth a reconciliation of the changes in Vermilion's gross light and medium crude oil, heavy oil and associated and non-associated gas (combined) reserves as at December 31, 2014 compared to such reserves as at December 31, 2013 based on the forecast price and cost assumptions set forth in note 3.

 

21
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

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

 

AUSTRALIA Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  14,024  5,439  19,463  14,024  5,439  19,463  -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  900  (900)  -     900  (900)  -     -     -     -     -     -     -   
Technical Revisions  8  910  918  8  910  918  -     -     -     -     -     -   
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (2,398)  -     (2,398)  (2,398)  -     (2,398)  -     -     -     -     -     -   
At December 31, 2014 12,534 5,449 17,983 12,534 5,449 17,983  -     -     -     -     -     -   
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  -     -     -     -     -     -     -     -     -     14,024  5,439  19,463
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     900  (900)  -   
Technical Revisions  -     -     -     -     -     -     -     -     -     8  910  918
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     (2,398)  -     (2,398)
At December 31, 2014  -     -     -     -     -     -     -     -     -     12,534  5,449  17,983
                         
CANADA Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  20,863  10,453  31,316  20,850  10,450  31,300  13  3  16  8,167  5,685  13,852
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  2,105  2,013  4,118  2,105  2,013  4,118  -     -     -     2,654  2,889  5,543
Technical Revisions  1,544  (1,950)  (406)  1,543  (1,949)  (406)  1  (1)  -     2,368  1,970  4,338
Acquisitions  7,081  4,283  11,364  7,081  4,283  11,364  -     -     -     1,265  787  2,052
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (4,105)  -     (4,105)  (4,101)  -     (4,101)  (4)  -     (4)  (904)  -     (904)
At December 31, 2014 27,488 14,799 42,287 27,478 14,797 42,275 10 2 12 13,550 11,331 24,881
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  154,961  90,663  245,624  131,058  80,536  211,594  23,903  10,127  34,030  54,857  31,249  86,105
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  28,466  47,945  76,411  26,811  47,525  74,336  1,656  420  2,076  9,503  12,893  22,396
Technical Revisions  2,716  (4,631)  (1,915)  1,296  (4,536)  (3,240)  1,420  (95)  1,325  4,365  (752)  3,613
Acquisitions  11,589  7,055  18,644  11,589  7,055  18,644  -     -     -     10,278  6,246  16,524
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (20,318)  -     (20,318)  (17,191)  -     (17,191)  (3,127)  -     (3,127)  (8,395)  -     (8,395)
At December 31, 2014 177,414 141,032 318,446 153,563 130,580 284,143 23,852 10,452 34,304 70,608 49,635 120,243

 

22
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

FRANCE Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  34,391  18,394  52,785  34,391  18,394  52,785  -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  1,049  2,195  3,244  1,049  2,195  3,244  -     -     -     -     -     -   
Technical Revisions  4,181  (301)  3,880  4,181  (301)  3,880  -     -     -     -     -     -   
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (4,019)  -     (4,019)  (4,019)  -     (4,019)  -     -     -     -     -     -   
At December 31, 2014  35,602  20,288  55,890  35,602  20,288  55,890  -     -     -     -     -     -   
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  11,031  3,269  14,300  11,031  3,269  14,300  -     -     -     36,230  18,939  55,168
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     1,049  2,195  3,244
Technical Revisions  (1,156)  (687)  (1,843)  (1,156)  (687)  (1,843)  -     -     -     3,989  (415)  3,574
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     (4,019)  -     (4,019)
At December 31, 2014  9,875  2,582  12,457  9,875  2,582  12,457  -     -     -     37,249  20,719  57,967
                         
GERMANY Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  -     -     -     -     -     -     -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     -     -     -   
Technical Revisions  -     -     -     -     -     -     -     -     -     -     -     -   
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     -     -     -   
At December 31, 2014  -     -     -     -     -     -     -     -     -     -     -     -   
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  -     -     -     -     -     -     -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  2,784  3,856  6,640  2,784  3,856  6,640  -     -     -     464  643  1,107
Technical Revisions  21  6  27  21  6  27  -     -     -     4  1  5
Acquisitions  42,923  17,439  60,362  42,923  17,439  60,362  -     -     -     7,154  2,906  10,060
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (5,470)  -     (5,470)  (5,470)  -     (5,470)  -     -     -     (912)  -     (912)
At December 31, 2014  40,258  21,301  61,559  40,258  21,301  61,559  -     -     -     6,710  3,550  10,260

 

23
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

IRELAND Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  -     -     -     -     -     -     -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     -     -     -   
Technical Revisions  -     -     -     -     -     -     -     -     -     -     -     -   
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     -     -     -   
At December 31, 2014  -     -     -     -     -     -     -     -     -     -     -     -   
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  105,931  38,707  144,638  105,931  38,707  144,638  -     -     -     17,655  6,451  24,106
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     -     -     -   
Technical Revisions  -     -     -     -     -     -     -     -     -     -     -     -   
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     -     -     -   
At December 31, 2014  105,931  38,707  144,638  105,931  38,707  144,638  -     -     -     17,655  6,451  24,106
                         
NETHERLANDS Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  -     -     -     -     -     -     -     -     -     61  99  160
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     14  9  23
Technical Revisions  -     -     -     -     -     -     -     -     -     7  (5)  2
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  -     -     -     -     -     -     -     -     -     (28)  -     (28)
At December 31, 2014  -     -     -     -     -     -     -     -     -     54  103  157
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  36,750  44,592  81,342  36,750  44,592  81,342  -     -     -     6,186  7,531  13,717
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  6,741  4,950  11,691  6,741  4,950  11,691  -     -     -     1,138  834  1,972
Technical Revisions  7,606  (2,466)  5,140  7,606  (2,466)  5,140  -     -     -     1,275  (416)  859
Acquisitions  -     -     -     -     -     -     -     -     -     -     -     -   
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  -     -     -     -     -     -     -     -     -     -     -     -   
Production  (13,942)  -     (13,942)  (13,942)  -     (13,942)  -     -     -     (2,352)  -     (2,352)
At December 31, 2014  37,155  47,076  84,231  37,155  47,076  84,231  -     -     -     6,247  7,949  14,196

 

24
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

UNITED STATES Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  -     -     -     -     -     -     -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     -     -     -   
Technical Revisions  -     -     -     -     -     -     -     -     -     -     -     -   
Acquisitions  477  1,340  1,817  477  1,340  1,817  -     -     -     12  66  78
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  (10)  (2)  (12)  (10)  (2)  (12)  -     -     -     (2)  (8)  (10)
Production  (18)  -     (18)  (18)  -     (18)  -     -     -     -     -     -   
At December 31, 2014  449  1,338  1,787  449  1,338  1,787  -     -     -     10  58  68
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  -     -     -     -     -     -     -     -     -     -     -     -   
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  -     -     -     -     -     -     -     -     -     -     -     -   
Technical Revisions  -     -     -     -     -     -     -     -     -     -     -     -   
Acquisitions  297  1,605  1,902  297  1,605  1,902  -     -     -     539  1,674  2,212
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  (54)  (203)  (257)  (54)  (203)  (257)  -     -     -     (21)  (44)  (65)
Production  -     -     -     -     -     -     -     -     -     (18)  -     (18)
At December 31, 2014  243  1,402  1,645  243  1,402  1,645  -     -     -     500  1,630  2,129
                         
TOTAL COMPANY Total Crude Oil Light and Medium Crude Oil Heavy Oil Natural Gas Liquids
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
At December 31, 2013  69,278  34,286  103,564  69,265  34,283  103,548  13  3  16  8,228  5,784  14,012
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  4,054  3,308  7,362  4,054  3,308  7,362  -     -     -     2,668  2,898  5,566
Technical Revisions  5,733  (1,341)  4,392  5,732  (1,340)  4,392  1  (1)  -     2,375  1,965  4,340
Acquisitions  7,558  5,623  13,181  7,558  5,623  13,181  -     -     -     1,277  853  2,130
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  (10)  (2)  (12)  (10)  (2)  (12)  -     -     -     (2)  (8)  (10)
Production  (10,540)  -     (10,540)  (10,536)  -     (10,536)  (4)  -     (4)  (932)  -     (932)
At December 31, 2014 76,073 41,874 117,947 76,063 41,872 117,935 10 2 12 13,614 11,492 25,106
  Total Natural Gas Conventional Natural Gas Unconventional Natural Gas BOE
      Proved +     Proved +     Proved +     Proved +
Proved Probable P+P (1) (2) Proved Probable Probable Proved Probable Probable Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (MMcf) (Mboe) (Mboe) (Mboe)
At December 31, 2013  308,673  177,231  485,904  284,770  167,104  451,874  23,903  10,127  34,030  128,952  69,609  198,559
Discoveries  -     -     -     -     -     -     -     -     -     -     -     -   
Extensions & Improved Recovery  37,991  56,751  94,742  36,336  56,331  92,667  1,656  420  2,076  13,054  15,665  28,719
Technical Revisions  9,187  (7,778)  1,409  7,767  (7,683)  84  1,420  (95)  1,325  9,640  (672)  8,969
Acquisitions  54,809  26,099  80,908  54,809  26,099  80,908  -     -     -     17,971  10,825  28,796
Dispositions  -     -     -     -     -     -     -     -     -     -     -     -   
Economic Factors  (54)  (203)  (257)  (54)  (203)  (257)  -     -     -     (21)  (44)  (65)
Production  (39,730)  -     (39,730)  (36,603)  -     (36,603)  (3,127)  -     (3,127)  (18,094)  -     (18,094)
At December 31, 2014 370,876 252,100 622,976 347,025 241,648 588,673 23,852 10,452 34,304 151,502 95,383 246,884

 

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 values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

 

25
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

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 an acceptable level for Vermilion. 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 & Medium Crude Oil Conventional Natural Gas Unconventional Natural Gas Natural Gas Liquids Total Oil Equivalent
  (Mbbl) (MMcf) (MMcf) (Mbbl) (Mboe)
  First   First   First   First   First  
  Attributed (1) Booked Attributed (1) Booked Attributed (1) Booked Attributed (1) Booked Attributed (1) Booked
Proved                    
Prior to 2011  4,627  6,588  6,454  107,633  4,943  12,958  268  751  6,795  27,438
2011  3,365  8,127  6,246  114,422  -     11,451  156  743  4,562  29,849
2012  3,378  9,062  10,998  121,962  -     10,939  415  1,051  5,626  32,263
2013  4,293  13,007  38,720  167,927  8,191  12,389  3,543  4,734  15,655  47,793
2014  5,614  15,434  26,111  170,763  -     11,610  2,175  7,942  12,140  53,772
Probable                    
Prior to 2011  6,306  12,417  8,106  38,296  2,435  8,066  342  931  8,405  21,075
2011  5,707  15,734  11,191  47,687  -     5,761  280  937  7,852  25,580
2012  3,910  17,536  8,714  75,358  -     8,340  360  1,276  5,723  32,762
2013  7,967  17,797  53,927  115,066  5,338  7,085  3,742  4,640  21,587  42,795
2014  6,541  22,050  60,779  163,645  -     6,741  3,762  9,615  20,432  60,063

 

Note:

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

 

26
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Future Development Costs (1)

 

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).

 

  Total Proved  Total Proved Plus Probable
(M$) Estimated Using Forecast Prices and Costs   Estimated Using Forecast Prices and Costs
Australia    
2015  81,700  81,700
2016  78,438  78,438
2017  21,120  21,120
2018  36,506  36,506
2019  13,747  13,747
Remainder  14,021  14,021
Total for all years undiscounted  245,532  245,532
Canada    
2015  166,244  200,656
2016  192,500  269,800
2017  98,904  265,047
2018  55,131  156,202
2019  11,784  25,639
Remainder  9,543  14,173
Total for all years undiscounted  534,106  931,517
France    
2015  31,772  67,540
2016  32,483  73,283
2017  10,032  83,687
2018  19,018  52,090
2019  6,395  41,807
Remainder  24,321  24,321
Total for all years undiscounted  124,021  342,728
Germany    
2015  653  4,778
2016  6,887  6,887
2017  384  384
2018  65  65
2019  67  67
Remainder  -     (1)
Total for all years undiscounted  8,056  12,180
Ireland    
2015  60,029  60,029
2016  9,450  9,450
2017  -     -   
2018  -     -   
2019  1,882  1,882
Remainder  17,681  17,681
Total for all years undiscounted  89,042  89,042

 

27
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Netherlands    
2015  6,920  7,795
2016  1,871  6,934
2017  416  18,628
2018  28,678  35,767
2019  433  11,479
Remainder  6,575  6,574
Total for all years undiscounted  44,893  87,177
United States    
2015  8,190  10,920
2016  -     23,669
2017  -     -   
2018  -     -   
2019  -     -   
Remainder  -     -   
Total for all years undiscounted  8,190  34,589
Total Company    
2015  355,508  433,418
2016  321,629  468,461
2017  130,856  388,866
2018  139,398  280,630
2019  34,308  94,621
Remainder  72,141  76,769
Total for all years undiscounted 1,053,840 1,742,765

 

Note:

(1)The pricing assumptions used in the GLJ Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth above. See “Forecast Prices used in Estimates”. The NGL price is an aggregate of the individual natural gas liquids prices used in the Total Proved plus Probable evaluation. GLJ is an independent qualified reserves evaluator appointed pursuant to NI 51-101.

 

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

 

Oil and Gas Properties and Wells (1) (2)

 

The following table sets forth the number of wells in which Vermilion held a working interest as at December 31, 2014:

 

  Oil   Natural Gas
  Producing   Non-Producing   Producing   Non-Producing
  Gross Wells (3) Net Wells (4)   Gross Wells (3) Net Wells (4)   Gross Wells (3) Net Wells (4)   Gross Wells (3) Net Wells
Canada                      
Alberta  492  339    147  90    635  443    267  190
Saskatchewan  127  108    11  11    -     -       -     -   
Total Canada  619  447    158  101    635  443    267  190
Australia  18  18    -     -       -     -       -     -   
France  333  322    90  85    -     -       2  2
Germany  -     -       -     -       16  4    1  -   
Ireland  -     -       -     -       -     -       6  1
Netherlands  -     -       -     -       50  34    16  13
United States 6 3    -     -       -     -       -     -   
Total Vermilion  976  790    248  186    701  481    292  206

 

Notes:

(1)Well counts are based on wellbores.
(2)Wells for Australia and Ireland are located offshore.

(3) "Gross" refers to the total wells in which Vermilion has an interest, directly or indirectly.

(4)"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.

 

28
Vermilion Energy Inc.AIF for the year ended December 31, 2014 – Exhibit 99.1

Costs Incurred

 

The following table summarizes the capital expenditures made by Vermilion on oil and natural gas properties for the year ended December 31, 2014:

 

<
  Acquisition Costs  
  Proved Unproved Exploration Development Total
(M$)