Asset retirement obligations

12 Months Ended

Dec. 31, 2018

Disclosure Of Asset Retirement Obligations [Abstract]

Disclosure of other provisions, contingent liabilities and contingent assets [text block]

8. Asset retirement obligations

The following table reconciles the change in Vermilion’s asset retirement obligations:

($M)	2018		2017
Balance at January 1	517,180		525,022
Additional obligations recognized	211,580		3,273
Changes in estimated abandonment timing and costs	(98,158	)	(48,904	)
Obligations settled	(15,765	)	(9,334	)
Accretion	31,219		26,971
Changes in discount rates	(6,646	)	(2,586	)
Foreign exchange	10,754		22,738
Balance at December 31	650,164		517,180

Vermilion has estimated the asset retirement obligations based on a total undiscounted future liability of $2.6 billion (2017 - $1.6 billion). These payments are expected to be made between 2020 and 2078, with the majority of spending occurring between 2029 and 2036 ($0.6 billion), 2047 to 2055 ($0.6 billion), and 2063 and 2068 ($0.9 billion). Inflation rates used in determining the cash flow estimates were between 0.5% and 2.9% (2017 - between 0.6% and 2.2%). Vermilion calculated the present value of the obligations using a credit-adjusted risk-free rate, calculated using a credit spread of 4.0% (2017 - 3.8%) added to risk-free rates based on long-term, risk-free government bonds.

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

	Dec 31, 2018		Dec 31, 2017
Canada	2.2	%	2.3	%
France	1.6	%	1.8	%
Netherlands	0.4	%	0.5	%
Germany	0.9	%	1.0	%
Ireland	1.6	%	0.4	%
Australia	2.6	%	2.9	%
USA	2.7	%	2.4	%

A 0.5% increase/decrease in the discount rate applied to asset retirement obligations would decrease/increase asset retirement obligations by approximately $55.0 million. A one-year increase/decrease in the expected timing of abandonment spend would decrease/increase asset retirement obligations by approximately $25.0 million.