Vermilion Energy (VET) 6-KCurrent report (foreign)

Exhibit 99.1

Disclaimer

Certain statements included or incorporated by reference in this document may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this document may include, but are not limited to: capital expenditures, including Vermilion’s 2024 guidance, and Vermilion’s ability to fund such expenditures; the flexibility of Vermilion’s capital program and operations; business strategies and objectives; operational and financial performance; wells expected to be drilled and the timing thereof; exploration and development plans and the timing thereof; future drilling prospects; the ability of our asset base to deliver modest production growth; the evaluation of international acquisition opportunities; statements regarding the return of capital; our asset petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion’s 2024 guidance, and rates of average annual production growth; the effect of changes in crude oil and natural gas prices, changes in exchange and inflation rates; the payment and amount of future dividends; the effect of possible changes in critical accounting estimates; the Company’s review of the impact of potential changes to financial reporting standards; the potential financial impact of climate-related risks; Vermilion’s goals regarding its debt levels, including maintenance of a ratio of net debt to four quarter trailing funds flow from operations; statements regarding Vermilion’s hedging program and the stability of our cash flows; operating and other expenses; royalty and income tax rates and Vermilion’s expectations regarding future taxes and taxability; the timing of regulatory proceedings and approvals; and the release of our 2025 budget and the timing thereof.

Such forward-looking statements or information are based on a number of assumptions, all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of Vermilion to obtain equipment, services and supplies in a timely manner to carry out its activities in Canada and internationally; the ability of Vermilion to market crude oil, natural gas liquids, and natural gas successfully to current and new customers; the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate product transportation; the timely receipt of required regulatory approvals; the ability of Vermilion to obtain financing on acceptable terms; foreign currency exchange rates and interest rates; future crude oil, natural gas liquids, and natural gas prices; management’s expectations relating to the timing and results of exploration and development activities; the impact of Vermilion’s dividend policy on its future cash flows; credit ratings; hedging program; expected earnings/(loss) and adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows and free cash flow and expected future cash flow and free cash flow per share; estimated future dividends; financial strength and flexibility; debt and equity market conditions; general economic and competitive conditions; ability of management to execute key priorities; and the effectiveness of various actions resulting from the Vermilion's strategic priorities.

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

This document contains references to sustainability/ESG data and performance that reflect metrics and concepts that are commonly used in such frameworks as the Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures, and the Sustainability Accounting Standards Board. Vermilion has used best efforts to align with the most commonly accepted methodologies for ESG reporting, including with respect to climate data and information on potential future risks and opportunities, in order to provide a fuller context for our current and future operations. However, these methodologies are not yet standardized, are frequently based on calculation factors that change over time, and continue to evolve rapidly. Readers are particularly cautioned to evaluate the underlying definitions and measures used by other companies, as these may not be comparable to Vermilion’s. While Vermilion will continue to monitor and adapt its reporting accordingly, the Company is not under any duty to update or revise the related sustainability/ESG data or statements except as required by applicable securities laws.

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

This document discloses certain oil and gas metrics, including DCET costs, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included in this MD&A to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the Company's future performance and future performance may not compare to the Company's performance in previous periods and therefore such metrics should not be unduly relied upon. DCET costs includes all capital spent to drill, complete, equip and tie-in a well. Additional oil and gas metrics in this document may include, but are not limited to:

Boe Equivalency: Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, as the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Estimates of Drilling Locations: Unbooked drilling locations are the internal estimates of Vermilion based on Vermilion's prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources (including contingent and prospective). Unbooked locations have been identified by Vermilion's management as an estimation of Vermilion's multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that Vermilion will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and natural gas reserves, resources or production. The drilling locations on which Vermilion will actually drill wells, including the number and timing thereof is ultimately dependent upon the availability of funding, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While a certain number of the unbooked drilling locations have been de-risked by Vermilion drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management of Vermilion has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.

Initial Production Rates and Short-Term Test Rates: This document discloses test rates of production for certain wells over short periods of time (i.e. 24 hours, IP30, IP60, IP90, etc.), which are preliminary and not determinative of the rates at which those or any other wells will commence production and thereafter decline. Short-term test rates are not necessarily indicative of long-term well or reservoir performance or of ultimate recovery. Although such rates are useful in confirming the presence of hydrocarbons, they are preliminary in nature, are subject to a high degree of predictive uncertainty as a result of limited data availability and may not be representative of stabilized on-stream production rates. A pressure transient analysis or well-test interpretation has not been carried out in respect of all wells. Production over a longer period will also experience natural decline rates, which can be high in certain plays in which the Company operates, and may not be consistent over the longer term with the decline experienced over an initial production period. Initial production or test rates may also include recovered "load" fluids used in well completion stimulation operations. Actual results will differ from those realized during an initial production period or short-term test period, and the difference may be material.

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

Abbreviations

Highlights

Message to Shareholders

The third quarter of 2024 highlighted the strength of our diversified portfolio and the compounding impact of our share buyback program. Production during the third quarter averaged 84,173 boe/d⁽¹⁾ including the impact from a planned turnaround in Australia and the partial shut-in of some Canadian gas production due to weak AECO pricing. Our Q3 2024 production represents an increase of 2% year-over-year, or 7% on a per share basis reflecting the positive impact from our share repurchase program. We generated $275 million of fund flows from operations ("FFO") during the third quarter, representing a 16% increase over the prior quarter, primarily due to stronger European gas prices. Benchmark TTF Day Ahead pricing increased 14% over the prior quarter, averaging $15.52/mmbtu in Q3 2024, and European gas was the only commodity in our portfolio that increased quarter-over-quarter and year-over-year. European natural gas comprises 40% of our natural gas production and 22% of our total corporate production. The forward price for European natural gas benchmarks, TTF and NBP, remain strong, with 2025 forward pricing over $17/mmcf, or approximately eight times higher than AECO. This pricing dynamic supports strong cash flow and netbacks across our European business units, with 2024 operating netbacks of approximately $60/boe⁽⁴⁾ from our European natural gas operations.

We invested $121 million of E&D capital during the third quarter, resulting in free cash flow ("FCF") of $154 million, of which $59 million was returned to shareholders, including $19 million in dividends and $40 million of share buybacks. Year-to-date, we have returned $180 million ($1.13/basic share) to shareholders through dividends and share buybacks, representing 38% of EFCF, including the repurchase and cancellation of 8.0 million shares, which has reduced our outstanding common shares to 155.3 million as at September 30, 2024. The balance of our free cash flow was used primarily for debt reduction, resulting in net debt decreasing by $73 million to $833 million at the end of Q3 2024 and representing a net debt to trailing FFO ratio of 0.6 times, the lowest in 15 years.

Our primary operational focus during the third quarter was on completing and testing the remaining European exploration wells drilled earlier in the year, ramping up production from the new gas plant on the SA-10 block in Croatia and ramping up production on the new battery at our Mica Montney asset in British Columbia, Canada. Subsequent to the quarter, we successfully completed drilling operations on the second deep gas exploration well in Germany and are pleased to report that we discovered gas in the reservoir and we are now proceeding with completion and testing operations. In total, we have drilled six exploration wells in Europe so far this year, all of which were successful, and we are currently in the process of drilling a third deep gas exploration well in Germany to finish out our 2024 European drilling campaign. This year was the largest exploration drilling campaign we have ever executed in Europe and the results to date help validate our geological model while providing valuable information for assessing future drilling prospects. Our team has identified numerous exploration and development prospects across our 1.7 million net acre undeveloped land base in Europe, representing well over a decade of drilling inventory with the potential to provide meaningful organic growth opportunities.

As previously disclosed, the first deep gas exploration well in Germany (100% WI) was completed in the Rotliegend zone at a depth of approximately 5,000 metres and flow tested at a restricted rate of 17 mmcf/d⁽²⁾ of natural gas with a wellhead pressure of 4,625 psi. We also tested the third well on the SA-7 block in Croatia, at a reservoir depth of 885 metres which flow tested at 5.6 mmcf/d⁽³⁾ of natural gas. We are very encouraged with the exploration results in Croatia, which have proven up multiple producing zones and de-risked future development and exploration targets across four discrete areas. Europe continues to be our most profitable operating region and is an area where we expect to grow organically in the years ahead as we tie in these successful wells and continue with future exploration and development drilling. Our European gas production has increased by over 40% in the last two years and we are excited about the potential for future organic growth in Germany, Croatia, and the Netherlands.

Following the start-up of the Montney battery and the Croatia SA-10 gas plant late in the second quarter, both facilities contributed to results during the third quarter. Production from both facilities increased to capacity levels by the end of the quarter, and we continue to see strong performance from these assets. This production growth was partially offset by planned maintenance at our Wandoo facility in Australia. The turnaround activity in Australia was executed as planned and production resumed late in the third quarter. Our internationally diversified asset base continues to provide strategic advantages to Vermilion by providing exposure to premium global commodity prices along with capital and operational flexibility, as evidenced by our ability to adjust the timing of the Australia turnaround to offset a delay in a third-party turnaround in Canada.

We remain on track to achieve our 2024 production and capital guidance and are in the process of finalizing our 2025 budget which will target modest production growth on a similar level of capital budget as 2024, while maintaining our return of capital payout target. We are on track to return 50% of EFCF to shareholders in 2024 through our fixed dividend and variable share buybacks, representing approximately 10% of our market capitalization, and expect to continue providing ratable dividend increases and repurchasing shares in future periods. We believe Vermilion is well positioned to execute on this plan given our robust asset base and strong balance sheet, which is at the lowest leverage in well over a decade. We plan to release our 2025 budget later in the year and look forward to providing further details on our capital investment and shareholder return plans for 2025.

Q3 2024 Operations Review

North America

Production from our North American operations averaged 53,936 boe/d⁽¹⁾ in Q3 2024, a decrease of 2% from the previous quarter due to declines in our Deep Basin and United States assets and some Canadian gas production shut-in due to weak AECO pricing, partially offset by new production from our recent BC Mica Montney wells.

At Mica, we completed and brought on production five (5.0 net) BC Montney liquids-rich shale gas wells. In the Deep Basin, we drilled three (2.3 net), completed three (2.3 net), and brought on production one (1.0 net) Mannville liquids-rich conventional natural gas wells. In Saskatchewan, we drilled, completed, and brought on production five (5.0 net) light and medium crude oil wells, while in the United States, five (0.2 net) non-operated light and medium crude oil wells were brought on production.

In Canada, the five (5.0 net) Montney wells from the 9-21 pad that were brought on production during the third quarter have produced at an average IP90 rate of over 1,000 boe/d⁽⁵⁾ per well (43% liquids)⁽⁵⁾, which is in line with expectations. These 9-21 wells were flowed preferentially through our new 8-33 BC Montney battery to maximize liquids recovery during a period of low natural gas prices. The gas stream from our BC Montney wells was also partially restricted due to capacity constraints on the sales gas line from the 8-33 BC Montney battery. We plan to increase takeaway capacity by de-bottlenecking as part of our infrastructure expansion scheduled for 2025. The total drill, complete, equip and tie-in ("DCET") cost for the 9-21 pad was approximately $9.6 million per well as we continue to make progress towards our normalized targeted cost range of $9.0 to $9.5 million per well. The new battery and water infrastructure have achieved 99% run time since starting up and are contributing to these cost savings.

International

Production from our International operations averaged 30,237 boe/d⁽¹⁾ in Q3 2024, an increase of 1% from the previous quarter primarily due to new production from our SA-10 block in Croatia and higher runtime in Germany and Ireland, partially offset by planned maintenance downtime in Australia.

In Germany, we successfully completed testing operations for our first deep gas exploration well drilled earlier this year. The well flow tested at a restricted rate of 17 mmcf/d⁽²⁾ of natural gas with a wellhead pressure of 4,625 psi, which supports our expectation that deliverability would have been higher without testing equipment limitations. Tie-in operations are progressing to bring the well on production in the first half of 2025. We commenced drilling on our second deep gas exploration well (0.3 net) in August 2024 and successfully completed drilling operations at the end of October 2024. We are pleased to report that we discovered gas within the reservoir and are now proceeding with completion and testing operations. Subsequent to the quarter, we commenced drilling on our third deep gas exploration well (1.0 net) in October 2024. We anticipate results from the second well test and third well drilling operations in the first half of 2025.

In Croatia, we successfully increased production on the SA-10 block after commissioning the gas plant in late June 2024. Production in Q3 2024 averaged 1,855 boe/d (100% European natural gas) and currently exceeds 2,000 boe/d. On the SA-7 block, we completed testing on the third well of our four-well program, which flow tested at 5.6 mmcf/d⁽³⁾ of natural gas.

During Q3 2024 we achieved a major safety milestone in Ireland, where we celebrated two years and one million man-hours without a lost time incident. We have successfully completed many complex projects over the past two years, including the refrigeration project and major turnarounds, while upholding our high standard for safety. The Corrib facility has maintained steady-state operations with an exceptional plant uptime record, and continues to be a major contributor to our operational and financial success.

In Australia, planned maintenance at our Wandoo facility was executed during Q3 2024. Production resumed late in the quarter and continues to perform well.

Outlook and Guidance Update

We have tightened our 2024 production guidance range to 84,000 to 85,000 boe/d to reflect increased certainty on annual production levels. Our Q4 2024 production will be impacted by planned third-party turnaround activity in Alberta and partial shut-in of some Canadian gas production in response to weak AECO prices, totaling approximately 2,000 boe/d combined. Our 2024 capital budget of $600 to $625 million remains unchanged, with Q4 2024 representing an active capital program in the Deep Basin, Saskatchewan, and the Montney in Canada, along with participating in several non-operated wells in the United States and continuing with drilling operations on the two deep gas exploration wells in Germany.

Commodity Hedging

Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, as of November 6, 2024, we have 38% of our expected net-of-royalty production hedged for the remainder of 2024. With respect to individual commodity products, we have hedged 53% of our European natural gas production, 41% of our crude oil production, and 23% of our North American natural gas volumes, respectively. Please refer to the Hedging section of our website under Invest With Us for further details using the following link:

https://www.vermilionenergy.com/invest-with-us/hedging.

Board of Directors

Mr. Robert Michaleski has stepped down as Chair of the Board of the Directors of the Company effective November 1, 2024 and has advised of his intention to retire from Vermilion’s Board of Directors, effective at the Company’s next Annual General Meeting, currently scheduled for May 7, 2025. Mr. Michaleski joined Vermilion’s Board of Directors in 2016 as an Independent Director and assumed the role of Chair of the Board on September 1, 2022. We want to thank Mr. Michaleski for his efforts and invaluable contributions to the Company, including providing leadership and guidance during his tenure as Chair and serving on the Audit Committee and Governance and Human Resources Committee.

As part of our planned board succession, Vermilion is pleased to announce that Mr. Myron Stadnyk has been chosen and has assumed the role of Chair of the Board effective November 1, 2024. Mr. Stadnyk was appointed to Vermilion’s Board of Directors in 2022 and has been a valuable contributor to the Company as a member of the Health, Safety and Environment Committee and Technical Committee. He has also provided insightful guidance and vision in helping to shape Vermilion’s strategy, along with sharing his in-depth technical knowledge as Vermilion advanced several new growth projects. Mr. Stadnyk has over 39 years of business and industry knowledge, with extensive experience in executive leadership, operational excellence, governance, health, safety, and environment. He most recently served as the President and Chief Executive Officer of ARC Resources Ltd. where he led ARC’s transformation to a top-tier Montney producer, demonstrating outstanding strategic leadership. For Mr. Stadnyk’s full biography as well as further information on the Board, please visit https:// www.vermilionenergy.com/about-us/our-directors/.

Non-GAAP and Other Specified Financial Measures

This report and other materials released by Vermilion includes financial measures that are not standardized, specified, defined, or determined under IFRS and are therefore considered non-GAAP or other specified financial measures and may not be comparable to similar measures presented by other issuers. These financial measures include:

Total of Segments Measures

Fund flows from operations (FFO): Most directly comparable to net earnings (loss), FFO is a total of segments measure comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, equity based compensation settled in cash, realized gain (loss) on derivatives, realized foreign exchange gain (loss), and realized other income (expense). The measure is used to assess the contribution of each business unit to Vermilion's ability to generate income necessary to pay dividends, repay debt, fund asset retirement obligations and make capital investments. Reconciliation to the primary financial statement measures can be found below.

Non-GAAP Financial Measures and Non-GAAP Ratios

Free cash flow (FCF) and excess free cash flow (EFCF): Most directly comparable to cash flows from operating activities, FCF is a non-GAAP measure calculated as fund flows from operations less drilling and development costs and exploration and evaluation costs and EFCF is comprised of FCF less payments on lease obligations and asset retirement obligations settled. FCF is used by management to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. EFCF is used by management to determine the funding available to return to shareholders after costs attributable to normal business operations. Reconciliation to the primary financial statement measures can be found in the following table.

Capital expenditures: Most directly comparable to cash flows used in investing activities, capital expenditures is a non-GAAP measure calculated as the sum of drilling and development costs and exploration and evaluation costs as derived from the Consolidated Statements of Cash Flows. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital. Reconciliation to the primary financial statement measures can be found below.

Payout and payout % of FFO: Payout and payout % of FFO are, respectively, a non-GAAP financial measure and non-GAAP ratio, most directly comparable to dividends declared. Payout is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled, and payout % of FFO is calculated as payout divided by FFO (total of segments measure). The measure is used by management to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining production and organic growth. Payout as a percentage of FFO is also referred to as the payout ratio or sustainability ratio. The reconciliation of the measure to the primary financial statement measure can be found below.

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

Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used by management to calculate net debt, a capital management measure disclosed below.

Acquisitions: The sum of acquisitions, net of cash acquired and acquisitions of securities from the Consolidated Statements of Cash Flows, Vermilion common shares issued as consideration, the estimated value of contingent consideration, the amount of acquiree's outstanding long-term debt assumed, and net acquired working capital deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions line items in the Consolidated Statements of Cash Flows can be found below.

Capital Management Measure

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

Supplementary Financial Measures

Diluted shares outstanding: The sum of shares outstanding at the period end plus outstanding awards under the Long-term Incentive Plan (“LTIP"), based on current estimates of future performance factors and forfeiture rates.

Fund flows from operations per basic and diluted share: Management assesses fund flows from operations on a per share basis as we believe this provides a measure of our operating performance after taking into account the issuance and potential future issuance of Vermilion common shares. Fund flows from operations per basic share is calculated by dividing fund flows from operations (total of segments measure) by the basic weighted average shares outstanding as defined under IFRS. Fund flows from operations per diluted share is calculated by dividing fund flows from operations by the sum of basic weighted average shares outstanding and incremental shares issuable under the equity based compensation plans as determined using the treasury stock method.

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

Fund flows from operations per boe: Management uses fund flows from operations per boe to assess the profitability of our business units and Vermilion as a whole. Fund flows from operations per boe is calculated by dividing fund flows from operations (total of segments measure) by boe production.

Net debt to four quarter trailing fund flows from operations: Management uses net debt to four quarter trailing fund flows from operations to assess the Company's ability to repay debt. Net debt to four quarter trailing fund flows from operations is calculated as net debt (capital management measure) divided by fund flows from operations (total of segments measure) from the preceding four quarters.

Management's Discussion and Analysis

The following is Management’s Discussion and Analysis (“MD&A”), dated November 6, 2024, of Vermilion Energy Inc.’s (“Vermilion”, “we”, “our”, “us” or the “Company”) operating and financial results as at and for the three and nine months ended September 30, 2024 compared with the corresponding period in the prior year.

This discussion should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and the audited consolidated financial statements for the years ended December 31, 2023 and 2022, together with the accompanying notes. Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

The unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and comparative information have been prepared in Canadian dollars, except where another currency has been indicated, and in accordance with IAS 34, "Interim Financial Reporting", as issued by the International Accounting Standards Board ("IASB").

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

Product Type Disclosure

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

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

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

Guidance

On December 12, 2023, we released our 2024 capital budget and associated production guidance, which assumed a mid-year startup of the new BC Montney battery and Croatia gas plant. On May 1, 2024, we increased 2024 guidance for royalty rate and cash taxes to reflect the impact of higher forward pricing for crude oil on these items. On July 31, 2024, we increased 2024 production guidance to reflect consistently strong operational performance across our asset base over the first half of 2024. On November 6, 2024, we tightened our 2024 production guidance range to reflect increased certainty on annual production levels. The Company’s guidance for 2024 is as follows:

Vermilion's Business

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

Consolidated Results Overview

Q3 2024 vs. Q3 2023

2024 vs. 2023

Q3 2024 vs. Q3 2023

2024 vs. 2023

For the three months ended September 30, 2024, capital expenditures were $121.3 million.

Free cash flow

Long-term debt and net debt

Benchmark Commodity Prices

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

North America

Production from our North American operations averaged 53,936 boe/d in Q3 2024, a decrease of 2% from Q2 2024 due to declines in our Deep Basin and United States assets and some Canadian gas production shut-in due to weak AECO pricing, partially offset by new production from our recent BC Mica Montney wells.

At Mica, we completed and brought on production five (5.0 net) BC Montney liquids-rich shale gas wells. In the Deep Basin, we drilled three (2.3 net), completed three (2.3 net), and brought on production one (1.0 net) Mannville liquids-rich conventional natural gas wells. In Saskatchewan, we drilled, completed, and brought on production five (5.0 net) light and medium crude oil wells, while in the United States, five (0.2 net) non-operated light and medium crude oil wells were brought on production.

Sales in North America decreased for the three and nine months ended September 30, 2024 compared to the prior year primarily due to lower realized pricing combined with lower production volumes following the sale of non-core southeast Saskatchewan assets and sale of Wyoming assets in 2023.

Royalties in North America decreased on a dollar and per unit basis for the three months ended September 30, 2024 compared to the prior year primarily due to lower realized pricing. Royalties decreased on a dollar basis and per unit basis for the nine months ended September 30, 2024 compared to the prior year primarily due to reduced pricing and partially offset by new wells drilled in Mica and the United States with higher royalty rates.

Transportation expense in North America increased on a dollar and per boe basis for the three and nine months ended September 30, 2024 compared to the prior year comparable periods primarily due to increased trucking expenses related to new activity on our Mica assets and higher pipeline fees.

Operating expense in North America decreased on a dollar and per boe basis for the three months ended September 30, 2024 compared to the prior year comparable period primarily due to timing of maintenance activities. For the nine months ended September 30, 2024, operating expense increased on a per boe basis primarily due to gas processing fees in the Mica region, and decreased on a dollar basis on lower production due to the disposition of properties in southeast Saskatchewan and Wyoming in 2023.

International

Production from our International operations averaged 30,237 boe/d in Q3 2024, an increase of 1% from Q2 2024 primarily due to new production from our SA-10 block in Croatia and higher runtime in Germany and Ireland, partially offset by planned maintenance downtime in Australia.

In Germany, we successfully completed testing operations for our first deep gas exploration well drilled earlier this year. The well flow tested at a restricted rate of 17 mmcf/d of natural gas with a wellhead pressure of 4,625 psi, which supports our expectation that deliverability would have been higher without testing equipment limitations. Tie-in operations are progressing to bring the well on production in the first half of 2025.

In Croatia, we successfully increased production on the SA-10 block after commissioning the gas plant in late June 2024. Production in Q3 2024 averaged 1,855 boe/d (100% European natural gas) and currently exceeds 2,000 boe/d. On the SA-7 block, we completed testing on the third well of our four-well program, which flow tested at 5.6 mmcf/d of natural gas.

In Australia, planned maintenance at our Wandoo facility was executed during Q3 2024. Production resumed late in the quarter and continues to perform well.

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

Sales increased on a dollar basis for the three months ended September 30, 2024 compared to the prior year primarily due to production in Australia coming back online after downtime in 2023 and production starting on the SA-10 block in Croatia. On a per boe basis, sales increased due to the impact of realized prices on our Australian and Croatian production partially offset by lower realized commodity prices.

Sales increased on a dollar basis for the nine months ended September 30, 2024 compared to the prior year primarily due to production starting on the SA-10 block in Croatia, downtime in Australia in 2023, incremental volumes related to the Corrib acquisition in Ireland, and timing of transportation in France. On a per boe basis, sales decreased due to lower realized gas prices, partially offset by the impact of realized prices on our Australian production.

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

Royalties increased on a dollar and per unit basis for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to adjustments for prior period royalties in Netherlands and Germany recorded in 2023. Royalties decreased on a per unit basis for the nine months ended September 30, 2024 primarily due to higher production volumes in Croatia, which is subject to lower royalties.

Transportation expense decreased on a per boe basis for the three and nine months ended September 30, 2024 compared to the prior year primarily due to prior period tariff adjustments in Germany recorded in 2023 and the impact of vessel cost and sales volume timing in France.

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

Operating expenses increased on a dollar and per boe basis for the three months ended September 30, 2024 primarily due to the resumption of production in Australia and associated liftings, partially offset by decreased fuel and electricity costs in France in the current year combined with higher sales volumes in the prior year.

For the nine months ended September 30, 2024, operating expenses increased on a dollar basis primarily due to the resumption of production in Australia and associated liftings, combined with an increased working interest acquired in Ireland at Q1 2023, and higher facility maintenance and turnaround costs for planned downtime in Q2 2024. This increase was partially offset by decreased power costs in France in the current year combined with higher sales volumes in the prior year.

Operating expenses decreased on a per boe basis for the nine months ended September 30, 2024 compared to the prior year primarily attributable to lower power costs in France and Netherlands, partially offset by planned downtime in Germany and Ireland resulting in lower volumes.

Consolidated Financial Performance Review

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

General and administration

Equity based compensation

PRRT and corporate income taxes

Windfall taxes

Interest expense

Realized gain or loss on derivatives

Realized other income or expense

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

Equity based compensation

Equity based compensation expense relates primarily to non-cash compensation expense attributable to long-term incentives granted to directors, officers, and employees under security-based arrangements. Equity based compensation expense for the three months ended September 30, 2024 remained relatively flat compared to the same period in the prior year. Equity based compensation expense for the nine months ended September 30, 2024 decreased compared to the same period in the prior year primarily due to the cash settlement of previously share-based settled expenses and the lower value of LTIP awards settled in the current year.

Unrealized gain or loss on derivative instruments

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

For the three months ended September 30, 2024, we recognized a net unrealized loss on derivative instruments of $1.1 million. This consists of unrealized losses of $21.9 million on our European natural gas commodity derivative instruments and $7.0 million on our equity swaps, partially offset by unrealized gains of $22.4 million on our crude oil commodity derivative instruments, $4.5 million on our North American gas commodity derivative instruments and $0.9 million on our USD-to-CAD foreign exchange swaps.

For the nine months ended September 30, 2024, we recognized a net unrealized loss on derivative instruments of $315.6 million. This consists of unrealized losses of $294.4 million on our European natural gas commodity derivative instruments, $10.3 million on our equity swaps, $9.7 million on our crude oil commodity derivative instruments and $3.6 million on our USD-to-CAD foreign exchange swaps, partially offset by a $2.4 million gain on our North American gas commodity derivative instruments.

Unrealized foreign exchange gains or losses

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

In 2024, unrealized foreign exchange gains and losses primarily resulted from:

For the three months ended September 30, 2024, we recognized a net unrealized foreign exchange loss of $11.4 million, primarily driven by the effects of the Euro strengthening 2.8% on our Euro denominated loans and the US dollar weakening 1.4% on our US dollar denominated loans. This loss was partially offset by the US dollar weakening 1.4% against the Canadian dollar on our USD senior notes. For the nine months ended September 30, 2024, we recognized an unrealized foreign exchange loss of $30.0 million, primarily driven by the effects of the US dollar strengthening 2.1% against the Canadian dollar on our USD senior notes combined with losses on our Euro denominated intercompany loans, partially offset by gains on our USD denominated intercompany loans.

Accretion

Accretion expense is recognized to update the present value of the asset retirement obligation balance. For the three months ended September 30, 2024, compared to the three months ended September 30, 2023, accretion remained relatively flat. For the nine months ended September 30, 2024, accretion expense decreased versus the prior year primarily due to lower North American asset retirement balance related to dispositions completed in 2023 and changes in discount rates, partially offset by the Corrib acquisition completed in 2023.

Depletion and depreciation

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

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

Depletion and depreciation on a per boe basis for the three and nine months ended September 30, 2024 of $22.78 and $22.04 increased from $19.99 and $20.14 in the same periods of the prior year, respectively, primarily due to higher future development costs increasing the depletable base, decreased reserve estimates, and the weakening of the Canadian dollar on European assets. The increase was partially offset by decreases to the depletable base from the impairments and dispositions recorded in 2023.

Deferred tax

Deferred tax assets arise when the tax basis of an asset exceeds its accounting basis (known as a deductible temporary difference). Conversely, deferred tax liabilities arise when the tax basis of an asset is less than its accounting basis (known as a taxable temporary difference). Deferred tax assets are recognized only to the extent that it is probable that there are future taxable profits against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are measured at the enacted or substantively enacted tax rate that is expected to apply when the asset is realized, or the liability is settled.

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

For the three and nine months ended September 30, 2024, the Company recorded deferred tax expense of $4.7 million and $42.0 million, respectively, compared to a deferred tax recovery of $42.5 million and $79.4 million, respectively, in the comparative periods in the prior year. The expense recorded in the current year is primarily attributable to the derecognition of deferred tax assets in Ireland driven by the decrease in European gas prices. In 2023, the deferred tax recovery was driven primarily by the disposition of assets in southeast Saskatchewan.

Financial Position Review

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

As at September 30, 2024, we have a ratio of net debt to four quarter trailing fund flows from operations of 0.6. We will continue to monitor for changes in forecasted fund flows from operations and, as appropriate, will adjust our exploration, development capital plans (and associated production targets), and return of capital plans to target optimal debt levels.

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

As at September 30, 2024, net debt decreased to $833.3 million (December 31, 2023 - $1.1 billion) primarily due to repurchases of senior notes and strong free cash flow generation. The ratio of net debt to four quarter trailing fund flows from operations as at September 30, 2024 decreased to 0.6 (December 31, 2023 - 0.9) due to lower net debt and higher four quarter trailing fund flows from operations.

The balances recognized on our balance sheet are as follows:

Revolving Credit Facility

As at September 30, 2024, Vermilion had in place a bank revolving credit facility maturing May 26, 2028 with terms and outstanding positions as follows:

On May 17, 2024, the maturity date of the facility was extended to May 26, 2028 (previously May 28, 2027) and the total facility amount of $1.6 billion

was reduced to $1.35 billion, with an accordion feature to increase the aggregate amount available under the facility to $1.6 billion. As at September 30, 2024, the revolving credit facility was undrawn.

As at September 30, 2024, the revolving credit facility was subject to the following financial covenants: 

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

In addition, our revolving credit facility has provisions relating to our liability management ratings in Alberta and Saskatchewan whereby if our security adjusted liability management ratings fall below specified limits in a province, a portion of the asset retirement obligations are included in the definitions of consolidated total debt and consolidated total senior debt. An event of default occurs if our security adjusted liability management ratings breach additional lower limits for a period greater than 90 days. As of September 30, 2024, Vermilion's liability management ratings were higher than the specified levels, and as such, no amounts relating to asset retirement obligations were included in the calculation of consolidated total debt and consolidated total senior debt.

As at September 30, 2024 and December 31, 2023, Vermilion was in compliance with the above covenants.

2025 senior unsecured notes

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

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

Subsequent to March 15, 2023, Vermilion may redeem some or all of the senior unsecured notes at a 100.00% redemption price plus any accrued and unpaid interest.

During the nine months ended September 30, 2024, Vermilion purchased $31.6 million of senior unsecured notes on the open market which were subsequently cancelled.

The Company has the right to roll over the senior unsecured notes under the existing revolving credit facility which matures May 26, 2028 and thus has continued to classify the senior unsecured notes as non-current.

2030 senior unsecured notes

On April 26, 2022, Vermilion closed a private offering of US $400.0 million 8-year senior unsecured notes. The notes were priced at 99.241% of par, mature on May 1, 2030, and bear interest at a rate of 6.875% per annum. Interest is paid semi-annually on May 1 and November 1, commencing on November 1, 2022. The notes are senior unsecured obligations of Vermilion and rank equally with existing and future senior unsecured indebtedness.

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

Vermilion may, at its option, redeem the notes prior to maturity as follows:

The following table outlines our dividend payment history:

The following table reconciles the change in shareholders’ capital:

As at September 30, 2024, there were approximately 4.5 million equity based compensation awards outstanding. As at November 6, 2024, there were approximately 155.1 million common shares issued and outstanding.

On July 8, 2024, the Toronto Stock Exchange approved our notice of intention to renew our normal course issuer bid ("the NCIB"). The NCIB renewal allows Vermilion to purchase up to 15,689,839 common shares (representing approximately 10% of outstanding common shares) beginning July 12, 2024 and ending July 11, 2025. Common shares purchased under the NCIB will be cancelled.

In the third quarter of 2024, Vermilion purchased 2.8 million common shares under the NCIB for total consideration of $40.1 million. Year-to-date, Vermilion purchased 8.0 million common shares under the NCIB for total consideration of 123.1 million. The common shares purchased under the NCIB were cancelled.

Subsequent to September 30, 2024, Vermilion purchased and cancelled 0.4 million shares under the NCIB for total consideration of $5.9 million.

Contractual Obligations and Commitments

Further information regarding the Company's contractual obligations and commitments can be found in the annual MD&A for the year ended December 31, 2023, available on SEDAR+ at www.sedarplus.ca or on Vermilion's website at www.vermilionenergy.com.

Asset Retirement Obligations

As at September 30, 2024, asset retirement obligations were $1,221.3 million compared to $1,159.1 million as at December 31, 2023. The increase in asset retirement obligations is primarily attributable to accretion expense recognized and unfavourable foreign exchange impacts. The credit spread decreased to 3.3% at September 30, 2024 compared to 3.6% at December 31, 2023 primarily due to a lower expected cost of borrowing.

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

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

Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.3% and 5.5% (as at December 31, 2023 - between 1.3% and 5.5%).

Risks and Uncertainties

Vermilion is exposed to various market and operational risks. For a discussion of these risks, please see Vermilion's MD&A and Annual Information Form, each for the year ended December 31, 2023 available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

Critical Accounting Estimates

The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and assumptions that affect reported assets, liabilities, revenues and expenses, gains and losses, and disclosures of any possible contingencies. These estimates and assumptions are developed based on the best available information which management believed to be reasonable at the time such estimates and assumptions were made. As such, these assumptions are uncertain at the time estimates are made and could change, resulting in a material impact on Vermilion’s consolidated financial statements. Estimates are reviewed by management on an ongoing basis and as a result may change from period to period due to the availability of new information or changes in circumstances. Additionally, as a result of the unique circumstances of each jurisdiction that Vermilion operates in, the critical accounting estimates may affect one or more jurisdictions. There have been no material changes to our critical accounting estimates used in applying accounting policies for the nine months ended September 30, 2024. Further information, including a discussion of critical accounting estimates, can be found in the notes to the Consolidated Financial Statements and annual MD&A for the year ended December 31, 2023, available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

Off Balance Sheet Arrangements

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

Internal Control Over Financial Reporting

There has been no change in Vermilion’s internal control over financial reporting ("ICFR") during the period covered by this MD&A that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Recently Adopted Accounting Pronouncements

Vermilion did not adopt any new accounting pronouncements as at September 30, 2024 that would have a material impact on the Consolidated Interim Financial Statements.

Regulatory Pronouncements Not Yet Adopted

Issuance of IFRS Sustainability Standards - IFRS S1 "General Requirements for Disclosure of Sustainability-related Financial Information" and IFRS S2 "Climate-related Disclosures"

In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural standards - IFRS S1 and IFRS S2. The ISSB was formed as a new standard-setting board within the IFRS Foundation to issue standards that deliver a comprehensive global baseline of sustainability-related financial disclosures, operating alongside the International Accounting Standards Board.

IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, as long as both standards are applied. IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities, while IFRS S2 sets out specific climate-related disclosures and is designed to be used in conjunction with IFRS S1. Canadian regulators have not yet mandated these standards; however, Vermilion is continuing to review the impact of the standards on its financial reporting.

IFRS 18 “Presentation and Disclosure in Financial Statements issued”

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements which will replace IAS 1 Presentation of Financial Statements. Retrospective application of the standard is mandatory for annual reporting periods starting from January 1, 2027 onwards with earlier application is permitted. Vermilion is assessing the impacts of the standard on its financial reporting.

Disclosure Controls and Procedures

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

As of September 30, 2024, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded and certified that our disclosure controls and procedures are effective.

Supplemental Table 1: Netbacks

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