ANNUAL GENERAL MEETING APRIL 26, 2018

Transcription

1 ANNUAL GENERAL MEETING APRIL 26, 2018

2 AGENDA Q Highlights and Review Spartan Energy Corp. Acquisition ( Spartan ) Outlook for Combined Entity ESG Performance 2

3 Q HIGHLIGHTS Q Q % Change Announced an acquisition of a private company with approximately 1,000 bbl/d of light oil producing assets straddling the Saskatchewan and Manitoba border, near Vermilion's existing operations in southeast Saskatchewan. Approved a 7% increase to the monthly dividend to $0.23 per share from $0.215, effective with the April 2018 dividend to be paid on May 15, Drilled and tested our first exploratory well (100% working interest) in Hungary on our South Battonya concession. The natural gas well tested at a rate of 5.8 mmcf/d and is expected to be brought on production mid Q production increased 9% relative to Q Production was down slightly from the prior quarter, primarily due to the timing of new well tie-ins and planned and unplanned maintenance activities; however, we expect production to increase each quarter throughout the year and to achieve our full-year guidance. Subsequent to the quarter, we announced an agreement to acquire Spartan Energy for total consideration of approximately $1.40 billion. In conjunction with this acquisition, we increased our full year production guidance to 86,000 to 90,000 boe/d and increased our capital budget to $430 million. Announced the elimination of the 2% discount associated with our Dividend Reinvestment Plan, beginning with the June 2018 dividend payable on July 16, 2018 * Fund Flows from Operations (FFO) is a non-standardized measure (see Advisory). Average Production (boe/d) 70,167 64,537 9% Production per share (boe/d per million basic shares) % Fund Flows from Operations ($MM)* $157 $143 10% Fund Flows from Operations ($/basic share) $1.29 $1.21 7% Operating Netback ($/boe) $31.05 $31.62 (2%) Capital Expenditures ($MM) $129 $96 34% Net Debt ($MM) $1,515 $1,378 10% Net Debt to Annualized Fund Flows from Operations 2.4x 2.4x 3

4 CAPITAL MARKETS SUMMARY Market Summary Trading Price (April 25, 2018) Ticker Symbol (TSX & NYSE) Shares Outstanding Average Daily Trading Volume (shares) Monthly Dividend * $45.53 (TSX), $35.47 (NYSE) VET million 0.7 million $0.23/share Dividend Yield 6.0% Director and Employee Ownership ** 6.5% Capital Structure Market Capitalization Enterprise Value Net Debt (including net working capital) Net Debt to Annualized Fund Flows from Operations Ratio $5.6 billion $7.1 billion $1.5 billion 2.4 x VERMILION REPRESENTS A DEFENSIVE ISSUE IN A VOLATILE MARKET * Announced 7% dividend increase to $0.23/share per month on March 1, 2018 effective with the April 2018 dividend. ** Based on fully-diluted shares. 4

5 SPARTAN ENERGY ACQUISITION 5

6 ACQUISITION OF SPARTAN Vermilion to acquire Spartan for total consideration of $1.4 billion, comprised of $1.2 billion in Vermilion shares at a exchange ratio, plus the assumption of approximately $175 million in debt Value-adding, accretive southeast Saskatchewan acquisition that meets our disciplined M&A criteria Adds 23,000 boe/d (91% oil) of high netback, low decline oil producing assets with significant free cash flow and future growth potential Increases Vermilion s oil-weighted production from 46% to 57% ACQUISITION OF HIGH NETBACK, LOW DECLINE, FCF POSITIVE OIL ASSETS ALIGNS WITH OUR STRATEGY 6

7 KEY TRANSACTION METRICS Purchase Price ($MM) EV/FFO Multiple (annualized) TRANSACTION METRICS $1.40 billion 4.7 x FFO per Share Accretion (annualized) 15% 2018E Production (annualized) 23,000 boe/d EV per Flowing Boe (annualized) $60,900 Production per Share Accretion (annualized) 7% 2P Reserves (92% oil and NGLs) mmboe * 2P Reserves Acquisition Cost $12.33 per boe 2P Reserves per Share Accretion 13% 2018E Operating Netback $38.42 per boe ** 2P FD&A Cost 2P Operating Recycle Ratio $19.48 per boe 2.0 x VET CURRENT PRO FORMA Shares Outstanding (March 31, 2018) million million Market Capitalization (April 25, 2018) $5.6 billion $6.9 billion Enterprise Value (April 25, 2018) $7.1 billion $8.4 billion 2018E Net Debt (incl. net WC) $1.4 billion $1.5 billion 2018E Net Debt-to-FFO Ratio ** 2.0 x 1.7 x Q4 2018E Net Debt-to-FFO (annualized) 2.0 x 1.4 x 2018E Payout Ratio 84% 83% 2018 Production Guidance 75,000 to 77,500 boe/d 86,000 to 90,000 boe/d 2018 Capital Expenditure Guidance $325 million $430 million ACQUISITION OF SPARTAN ENERGY IS SIGNIFICANTLY ACCRETIVE * Estimated total proved plus probable ( 2P ) reserves attributable to the Assets as evaluated by Sproule Associates Limited in a report dated February 20, 2018 with an effective date of December 31, 2017, in accordance with National Instrument Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators, using the Sproule December 31, 2017 price forecast. **Based on April 13, 2018 strip pricing. *** Net debt to fund flows from operations (FFO) is a non-gaap financial measure. See the Non-GAAP Financial Measures section of Vermilion s 2017 Management s Discussion and Analysis. 7

8 EXPANSION OF SE SASKATCHEWAN POSITION Approximately 480,000 net acres (750 net sections) ~457,000 net acres, 714 net sections in Sask ~20,000 net acres, 17 net sections in AB ~3,000 net acres, 4 net sections in MB SE Sask position grows by 400,000 net acres to over 500,000 net acres 1P reserves of 73 mmboe* and 2P reserves of mmboe* OUR LAND POSITION IN SASKATCHEWAN PROVIDES ACCESS TO SIGNIFICANT LIGHT OIL RESERVES * Estimated total proved ( 1P ) and proved plus probable ( 2P ) reserves attributable to the Assets as evaluated by Sproule Associates Limited in a report dated February 20, 2018 with an effective date of December 31, 2017, in accordance with National Instrument Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators, using the Sproule December 31, 2017 price forecast 8

9 Woodenhouse ** Ellerslie ** Frobisher/Alida Montney Eagle Ford Woodford Marcellus Eagle Ford Woodford Lloydminster Eagle Ford Wasatch Meramec Bakken Montney Montney Shaunavon Austin Chalk Provost Viking Duvernay Midale Turner Sand Kakwa Montney Upper Mannville Montney Bakken Spirit River Spirit River Marcellus Viking Montney Midale Montney Montney Marcellus Spirit River Eagle Ford Utica Utica Woodford Gething Montney Eagle Ford Cardium Cardium Torquay Duvernay Niobara Cardium Woodford Mannville Viking Utica Deep Basin Bakken Dunvegan Cardium Eagle Ford Montney Montney Cotton Valley Codell Barnett Shale Duvernay Marcellus Woodford Mississippian Lime Bakken Cleveland SAGD - Heavy Oil Bakken Swan Hills Bakken Bakken Duvernay Haynesville Eagle Ford SAGD - Oil Sands Fayetteville Marcellus Granite Wash ATAX IRR NORTH AMERICAN PROJECT RANKING 100% 80% 60% Mannville Ellerslie Frobisher/ Alida SE Sask Bakken Ratcliffe/ Midale SW Sask Viking WY Turner Sand PROJECT RANKING BY AFTER TAX (ATAX) IRR Upper Mannville Cardium SE Sask Frac d Midale SE Sask Torquay 40% 20% 0% ROBUST RETURNS AMONGST NORTH AMERICAN PROJECTS VET SPE *** Oil/Liquids Gas * Scotia Capital research, April Price assumptions: WTI US$60/bbl, HH Natural Gas US$3.50/mcf, AECO $3.15/mcf, USD/CAD ** Woodenhouse Heavy Oil Play IRR 299%; Deep Basin/West Central AB Ellerslie Liquids-Rich Gas Play IRR 120%. *** SPE assets to be acquired as announced on April 16, 2018 with an expected closing date of June 15,

10 PRO FORMA COMBINED ENTITY 10

11 CORE OPERATING AREAS NORTH AMERICA 2018E PRE-SPARTAN ACQUISITION PRODUCTION* EUR 47% N.A. 46% 2018E POST-SPARTAN ACQUISITION (ANNUALIZED) PRODUCTION* EUR 35% N.A. 60% EUROPE FFO* AUS 7% AUS 5% FFO* AUSTRALIA EUR 59% FCF* N.A. 32% AUS 9% AUS 7% EUR 41% N.A. 52% FCF* EUR 70% N.A. 19% AUS 11% EUR 52% N.A. 40% AUS 8% VERMILION IS FOCUSED IN THREE STABLE REGIONS * Company 2018 estimates as at April 23, FFO estimate based on 3 months of actuals, remainder of year at strip as at April 23, 2018: Brent (US$/bbl) $72.37; WTI (US$/bbl) $66.91; MSW = WTI less US$5.95; TTF ($/mmbtu) $9.21; AECO ($/mmbtu) $1.39; CAD/USD 1.28; CAD/EUR 1.58 and CAD/AUD Includes existing hedges plus additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of June 15, FFO is a non-standardized measure (see Advisory). 11

12 E* MBOE / D $ MM PRODUCTION GROWTH AND CAPEX ANNUAL PRODUCTION VS E&D CAPITAL EXPENDITURES RUN-RATE WITH SPARTAN 17% CAGR % CAGR GUIDANCE PPS Growth** -12% 7% 5% 11% -1% -8% -11% 0% 0% 5% 16% 7% 10% 3% 10% PRODUCTION E&D CAPEX Production guidance of 86,000 to 90,000 boe/d and capital expenditure guidance of $430 million results in year-over-year production growth of 29%** and production per share growth of 10%** CONTINUED PRODUCTION PER SHARE GROWTH AT A SIGNIFICANTLY LOWER CAPITAL INTENSITY * Reflects additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of June 15, ** Production and production per share growth (PPS) for 2018 is calculated based on the mid-point of guidance range. 12

13 E* E* FFO ($MM) FFO LESS E&D CAPEX* ($MM) PRODUCTION (BOE/D) FFO / FCF FFO FCF (CORPORATE ERA) $1,200 $1,000 $800 $600 RUN-RATE WITH SPARTAN $600 $500 $400 $300 RUN-RATE WITH SPARTAN 100,000 80,000 60,000 $400 $200 $200 $100 $0 40,000 20,000 $0 -$100 0 LONG-TERM FFO AND FREE CASH FLOW GROWTH DESPITE VOLATILE COMMODITY PRICES * Company estimates as at April 23, FFO estimate based on 3 months of actuals, remainder of year at strip strip at April 23, 2018: Brent (US$/bbl) $72.37; WTI (US$/bbl) $66.91; MSW = WTI less US$5.95; TTF ($/mmbtu) $9.21; AECO ($/mmbtu) $1.39; CAD/USD 1.28; CAD/EUR 1.58 and CAD/AUD Includes existing hedges. FFO is a non-standardized measure (see Advisory). Reflects additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of June 15,

14 TOTAL EXPENDITURES / FFO* SUSTAINABILITY RATIO 200% 175% 150% 162% 125% 100% 121% 108% 117% 140% 111% 109% 111% 121% 75% 50% 81% 74% 73% 59% 70% 88% 82% 25% 0% E** Cash Dividends Base E&D Capex (Excludes Corrib) New Venture Land Corrib Capex DRIP PDRIP HIGH MARGINS + LOW DECLINE + STRONG CAPITAL EFFICIENCY = SUSTAINABILITY * VET reported under Canadian GAAP. As of 2011, VET reports in accordance with IFRS. FFO is a non-standardized measure (see Advisory). Base E&D CAPEX includes abandonment & reclamation costs. Includes existing hedges FFO estimate based on 3 months of actuals, remainder of year at strip strip at April 23, 2018: Brent (US$/bbl) $72.37; WTI (US$/bbl) $66.91; MSW = WTI less US$5.95; TTF ($/mmbtu) $9.21; AECO ($/mmbtu) $1.39; CAD/USD 1.28; CAD/EUR 1.58 and CAD/AUD PDRIP terminated with July 2017 payment. ** Includes impact of $0.23/sh per month dividend announced Mar 1, 2018 beginning with Apr 2018 div. plus additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of June 15,

15 E CONSERVATIVE BALANCE SHEET CREDIT CAPACITY C$1.8 BILLION AS AT MARCH 31, NET DEBT-TO-FFO RATIO* $0.4 B 3.0 $0.4 B 2.0 $1.0 B REVOLVING CREDIT FACILITY Bank Debt Unutilized Capacity US$ Senior Notes Moody s: B2 S&P: Watch (Positive) Q4 2018E ANNUALIZED AMPLE LIQUIDITY TO EXECUTE OUR BUSINESS PLAN * Net Debt and FFO are non-standardized measures (see Advisory). Reflects year-end Net Debt FFO estimate based on 3 months of actuals, remainder of year at strip strip at April 23, 2018: Brent (US$/bbl) $72.37; WTI (US$/bbl) $66.91; MSW = WTI less US$5.95; TTF ($/mmbtu) $9.21; AECO ($/mmbtu) $1.39; CAD/USD 1.28; CAD/EUR 1.58 and CAD/AUD Includes existing hedges plus additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of June 15,

16 QUARTERLY COMMODITY HEDGE POSITION Q Q Q Q Q Q Q Q $69.83 $78.65 $69.24 OIL HEDGES $62.32-$70.23 ($/bbl) $69.46 $75.17 $ $ $69.79 $72.50 $69.24 $ $ $70.53 $71.55 $74.51 $ $ $69.24 $70.53 $71.55 $74.51 $ $73.36 $77.03 $ $74.79 $ $72.50 $69.16 $62.87-$72.50 $69.16 $ $77.37 $ $74.12 $52.53 WTI Swaps $73.34 Q $7.72 $7.56-$8.68 Q $2.65-$3.05 WTI Collars Brent Swaps Brent Collars Q Q Q Q Q Q Q $7.72 $7.72 $7.72 European Gas $7.64 $7.74 $7.59 $7.59 $7.27-$8.27 $7.27-$8.27 $7.15-$8.65 $7.56-$8.94 $7.56-$8.68 $7.56-$8.68 $7.21-$8.47 NATURAL GAS HEDGES ($/mmbtu) Swaps Collars Q Q Q Q Q Q Q $2.65 $2.76 $2.76 $2.76 North American Gas $2.67-$3.06 $2.70-$3.11 $2.70-$3.11 $2.70-$3.11 $2.53-$3.11 Swaps Collars Basis Swap** 0% 10% 20% 30% 40% 50% 60% 70% % of Production Hedged 0% 10% 20% 30% 40% 50% 60% 70% % of Production Hedged 0% 10% 20% 30% 40% 50% 60% 70% % of Production Hedged GLOBAL COMMODITY EXPOSURE PROVIDES MORE HEDGING ALTERNATIVES * Company estimate as at April 5, All prices in Canadian dollars. Hedges converted at 1.57 CAD/EUR, 1.28 CAD/USD, 1.79 CAD/GBP where applicable. Does not reflect unexercised sold put for 3-way collars. Includes pro forma Spartan hedges and production based on an expected June 15, 2018 closing date. See website for more detailed hedging information ** Basis swaps include 2,500 mmbtu/d of AECO basis ($1.18) and 10,000 mmbtu/d of basis at SOCAL border less fixed basis ($1.27). 16

17 BOE/D EUROPEAN PRODUCTION 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 E&D CAPEX AS % OF FFO** * 2010* 2011* 2012* 2013* 2014* 2015* E n/a 43% 51% 101% 45% 73% 111% 56% 23% 46% 26% 86% 84% 65% 43% 71% 93% 70% 31% 33% 29% France Netherlands Germany Ireland CEE BUILDING OUR EUROPEAN FRANCHISE FOR TWO DECADES * : Includes E&D Capex of $496MM and negative FFO of $46MM associated with the Corrib project in Ireland, which produced first gas on December 30, ** 2018 FFO estimate based on 3 months of actuals, remainder of year at strip. April 23, 2018 strip: Brent (US$/bbl) $72.37; TTF ($/mmbtu) $9.21; NBP ($/mmbtu) $9.41; CAD/EUR 1.58; CAD/USD Estimates includes existing hedges and excludes interest. 17

18 BOE/D NORTH AMERICAN PRODUCTION 50,000 40,000 30,000 20,000 10, E* E&D CAPEX AS % OF FFO* 21% 36% 67% 58% 31% 76% 247% 225% 165% 101% 92% 127% 57% 74% 63% Crude Oil & NGL Gas 2018 CAPEX PROGRAM DELIVERS PRODUCTION GROWTH WITH FREE CASH FLOW * 2018 FFO estimate based on 3 months of actuals, remainder of year at strip. April 23, 2018 strip: WTI (US$/bbl) $66.91; MSW = WTI less US$5.95; AECO ($/mmbtu) $1.39; HH natural gas (US$/mmbtu) $2.82; CAD/USD Includes existing hedges and excludes interest. Reflects additional contribution from acquisition of Spartan Energy, announced on April 16, 2018, with an expected closing date of 18

19 BOE/D AUSTRALIA PRODUCTION 12,000 10,000 8,000 6,000 4,000 2, E E&D CAPEX AS % OF FFO* 19% 15% 43% 7% 48% 16% 40% 51% 34% 75% 81% 42% 29% Crude Oil MANAGING FOR STABLE PRODUCTION WHILE GENERATING POSITIVE FREE CASH FLOW * Economics assume wells produced continuously. Actual production may be temporarily curtailed to meet overall field targets. ** 2018 FFO estimate based on 3 months of actuals, remainder of year at strip. April 23, 2018 strip: Brent (US$/bbl) $72.37; CAD/USD 1.28; CAD/AUD Includes existing hedges and excludes interest. 19

20 AVERAGE ROCE (%) RETURN ON CAPITAL EMPLOYED 25% 10 YEAR TOTAL RETURN VERSUS 10 YEAR AVERAGE ROCE 20% IMO 15% 10% 5% 0% BTE ECA AAV ERF CPG BIR SU ARX CNQ PEY FRU VET -5% -10% PGF NVA CR OBE SPE POU -15% -100% -50% 0% 50% 100% 150% TOTAL RETURN (%) TRANSLATING STRONG CAPITAL EFFICIENCIES INTO LEADING SHAREHOLDER RETURNS * Source: National Bank, January ROCE = EBIT / Capital Employed. Capital Employed = Net fixed assets + Net other intangible assets + Net working capital ROCE data based on Bloomberg data; 2017E based on NBF estimate. Returns to YE 2017 based on Bloomberg data. 20

21 ESG PERFORMANCE 21

22 APPROACH TO SUSTAINABILITY Playing a meaningful role in the energy transition that is unfolding globally Unwavering commitment to our priorities of health and safety, environmental protection, and economic prosperity Demonstrated that delivering shareholder value goes hand-in-hand with delivering sustainability Aligned work and measuring impact according to the Global Goals for Sustainable Development (SDGs) Contributing to the SDGs through our business strategy Focused on the importance of our people, the environment and our communities in our pursuit of long-term, sustainable and inclusive growth VALUES MATTER: VERMILION S ACHIEVEMENTS ARE OUTLINED IN OUR SUSTAINABILITY REPORT View our Sustainability Report online at 22

23 ESG REPORTING SCORES MSCI ESG Research Inc. Between 2016 and 2017, Vermilion's MSCI ESG (environment, social and governance) rating increased from BBB to A MSCI's Governance Metrics Report ranks Vermilion at 7.7/10 top decile performance globally MSCI s research-based indexes and analytics help investors build and manage portfolios RobecoSAM and S&P Dow Jones Sustainability Indices Review Vermilion received a top quartile ranking for 2017 for our industry sector in RobecoSAM s annual Corporate Sustainability Assessment (CSA) The CSA analyzes sustainability performance across economic, environmental, governance and social criteria, and is the basis of the Dow Jones Sustainability Indices Institutional Shareholder Services (ISS) QualityScore Recognized for excellence in managing risk by ISS QualityScore with a decile rating of 1 for Environment practices, 2 for Social practices and 3 for Governance practices ISS provides corporate governance and responsible investment solutions Sustainalytics Rank In 2018, Vermilion scored 57.7, ranking in the top quartile for our peer group* (peer group scores ranged from 12.4 to 57.7) Sustainalytics rates the sustainability of listed companies based on their environmental, social and corporate governance performance Bloomberg ESG Disclosure Score In 2017, Vermilion scored 50.2, and was the top ranked company in our peer group*, (peer group scores ranged from 9.5 to 50.2) Bloomberg ESG Disclosure Scores rate companies based on their disclosure of quantitative and policy-related ESG data VERMILION IS RECOGNIZED AS A LEADER IN ESG * Peer group includes; ARX, BIR, BNE, BNP, BTE, CPG, CR, ERF, GTE, MEG, NVA, OBE, PEY, PGF, POU, PXT, RRX, SGY, SPE, TOG, TOU, VII, WCP 23

24 CLIMATE CHANGE Vermilion participates annually in CDP, formerly the Carbon Disclosure Project, a global disclosure system that enables companies to measure and manage their environmental impacts Demonstrates focus on understanding and managing the impact our operations have on climate change Reflects the efforts from our HSE and Operations teams worldwide to increase energy efficiency and decrease greenhouse gas emissions, and to develop and implement renewable energy projects that support a sustainable economy During the energy transition, SRI and government stakeholders can have the greatest impact by turning to best-in-class companies like Vermilion 2017 Leadership Level rating of A- Only Canadian energy sector company, one of two in North America, and 18 globally to achieve this level (Top 4%) 2016 "A list" level (highest ranking possible) One of 193 companies globally, one of five energy companies in the world, and the only North American company to make the list 2015 Leading energy company on the Canadian Climate Disclosure Leadership Index (CLDI) First Canadian energy company to achieve the top score of 100 VERMILION IS RECOGNIZED AS A CLIMATE LEADER IN THE ENERGY SECTOR 24

25 DECREASING EMISSIONS INTENSITY Even as Vermilion increases production, we are decreasing the greenhouse gas emissions of each barrel of oil equivalent that we produce EMISSIONS INTENSITY PROVIDES AN IMPORTANT BENCHMARK FOR ENVIRONMENTAL PERFORMANCE 25

26 STRATEGIC COMMUNITY INVESTMENT Vermilion is committed to giving back to the communities in which we operate We assess the critical needs in each community, and determine where our financial resources and volunteer time can make a difference We focus our flagship programs on: Homelessness and poverty reduction Health and safety promotion Environmental stewardship We have invested over $5.1 million and 44,000 hours of volunteer time in these programs over the past five years Canada France Netherlands Australia Our Community Partners VERMILION S STRATEGIC INVESTMENT ENHANCES THE COMMUNITIES WHERE WE OPERATE 26

27 GLOBAL RESPONDER PROGRAM In 2017, Vermilion established our Global Emergency Responder Program to support critical equipment and training needs for emergency medevac and similar services in all of our business units Donations help fund equipment and other high-priority needs for nonprofit and charitable organizations, which are dedicated to keeping our communities and our workforce safe: Canada STARS Air Ambulance The Netherlands KNRM Rescue and Help on Water Australia Royal Flying Doctor Service France SNSM Les Sauveteurs en Mer United States Weston and Niobrara County Fire Protection District Germany Brainermoor Fire Brigade Croatia Croatian Mine Action Centre The Netherlands Rescue and Help on Water Australia Royal Flying Doctor Service VERMILION INVESTS IN THE COMMUNITIES WHERE WE OPERATE 27

28 GOVERNANCE Finance and Sustainability Initiative (FSI) Award for Best Sustainability Report Vermilion s 2016 Sustainability Report won the FSI s Competition for Best Sustainability Report in the Non-Renewable Resources (Oil and Gas) category FSI is a non-profit organization dedicated to promoting responsible investment to many financial institutions, companies and universities The award recognizes our commitment to transparency, balance, reliability, stakeholder engagement and the inclusion of key performance metrics we strive to improve every year The Globe and Mail, Report on Business, Board Games In 2017, Vermilion ranked 4 th within the oil and gas sector, and among the top quartile of companies in the S&P/TSX composite index The evaluation uses a rigorous set of governance criteria that goes beyond minimum mandatory rules imposed by regulators Canadian Coalition for Good Governance (CCGG) Vermilion listed in 2017 Best Practices for our Proxy Circular Disclosure report (Benefits and Perquisites) Vermilion received the 2014 Governance Gavel Award for Best Disclosure of Governance Practices and Approach to Executive Compensation CCGG represents the interests of institutional investors Corporate Knights Vermilion ranked 11 th out of 40 on the 2018 Corporate Knights Future 40 Responsible Corporate Leaders in Canada, and was the highest rated oil and gas company Corporate Knights promotes an economic system where prices fully incorporate social, economic and ecological costs and benefits, and market participants are clearly aware of the consequences of their actions VERMILION HAS CONSISTENTLY BEEN RECOGNIZED FOR STRONG CORPORATE GOVERNANCE 28

29 2017 CDP Score 2017 RobecoSAM Score 2017 Sustainalytics Score ESG AND SHAREHOLDER RETURNS Sustainability performance is integral to our business and is positively correlated to our strong shareholder returns 8 5-Year Total Return vs. CDP Score VET Year Total Return vs. RobecoSAM Score Year Total Return vs. Sustainalytics Score BTE CPG ERF 4 PGF ARX 3 ECA Year Total Return (%) VET ARX ECA 30 CPG PEY WCP 0 TOU Year Total Return (%) OBE MEG BTE PGF CPG POU TOU ARX PEY ERF VET Year Total Return (%) VERMILION S STRONG ESG RANKINGS TRANSLATE TO STRONG SHAREHOLDER RETURNS Source: Bloomberg, where data reported and available. Peer group includes ARX, BTE, CPG, ECA, ERF, MEG, OBE, PEY, PGF, POU, TOU, WCP 29

30 TO OUR EMPLOYEES AND SHAREHOLDERS... Go raibh maith agat Vielen Dank Ta Merci Köszönöm Thank you Hvala ti Dank je 30

31 ADVISORY This presentation is for information purposes only and is not intended to, and should not be construed to constitute, an offer to sell or the solicitation of an offer to buy, securities of Vermilion. This presentation and its contents should not be construed, under any circumstances, as investment, tax or legal advice. Any person accepting delivery of this presentation acknowledges the need to conduct their own thorough investigation into Vermilion and its activities before considering any investment in its securities. Forward-Looking Statements. In the interest of providing information regarding Vermilion, including management's assessment of Vermilion's future plans and operations, certain statements made by the presenter and contained in these presentation materials (collectively, this "presentation") are "forward-looking statements" or "forward-looking information" within the meaning of applicable Canadian and United States securities laws (collectively, "forward-looking statements"). Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target", "seek", "budget", "predict", "might" and similar words suggesting future events or future performance. All statements other than statements of historical fact may be forward-looking statements. In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. The net present value of future net revenue of reserves and resources does not represent the fair market value. The forward-looking statements contained in this presentation speak only as of the date of this presentation and are expressly qualified by this cautionary statement. Specifically, this presentation contains forward-looking financial and operational information including information relating to our business strategies, plans and objectives; our growth strategies over the near, medium and long-term including targeted production (including timing to reach peak production from the Corrib field), production mix and related growth rates, composition and quantity of estimated reserves, reserve-life index, and the related current and future costs of finding, developing and producing estimated reserves and resources; fund flows from operations (FFO) and related growth rates; the sensitivity of our 2018 FFO to changes in West Texas Intermediate (WTI) oil prices, Dated Brent (Brent) oil prices and Title Transfer Facility (TTF) prices based assumptions for natural gas prices and oil pricing differentials in Canada relative to WTI as well as Canada-United States and Canada-Euro foreign exchange rates; compound annual growth rate (CAGR); commodity pricing expectations and anticipated commodity mix and suitability to a dividend growth and growth and income model; net debt levels and net debt to FFO ratios; cash flow and related growth rates and stability; potential free cash flow; dividends and related growth, sustainability and rate of return; anticipated netbacks; planned capital expenditures and our plans for developing our assets and funding our capital expenditures and dividends on our common shares; capital expenditure projections and the allocation of our capital expenditures to various projects and geographic regions; drilling plans; drilling prospects; the existence, operation and strategy of our risk management program, including the portion of future exposures that have been hedged; targeted total returns; anticipated benefits of acquisitions; our business strategy for future growth. Cash dividends on our common shares are paid at the discretion of our Board of Directors and can fluctuate. In establishing the level of cash dividends, the Board of Directors considers all factors that it deems relevant, including, without limitation, the outlook for commodity prices, our operational execution, the amount of funds from operations and capital expenditures and our prevailing financial circumstances at the time. This information is based on Vermilion s current expectations and is subject to a number of risks and uncertainties that could materially affect future results. These risks include, but are not limited to, general economic risks and uncertainties, future commodity prices, exchange rates, interest rates, geological risk, political risk, regulatory approval risk, production demand, transportation restrictions, risks associated with changes in tax, royalty and regulatory regimes and risks associated with international activities. Additional risks and uncertainties are described in Vermilion s Annual Information Form, as well as Vermilion s Management s Discussion and Analysis ( MD&A ) which are filed on SEDAR at and on the SEC s EDGAR system at Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in the Company's securities should not place undue reliance on these forward-looking statements. Forward looking statements contained in this document are made as of the date hereof and are subject to change. The Company assumes no obligation to revise or update forward looking statements to reflect new circumstances, except as required by applicable securities laws. All references are to Canadian dollars unless otherwise specified. This presentation contains certain non-standardized financial measures including net debt and fund flows from operations as well as non-gaap measures including netbacks that are not determined in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board. These measures as presented do not have any standardized meaning prescribed by IFRS and therefore may not be comparable with calculations of similar measures by other companies. Reference is made to Vermilion's publicly filed documents, including our most recently filed MD&A, for a discussion of these measures, including a reconciliation of fund flows from operations to cash flow from operating activities and net debt to long-term debt. Management believes that, in conjunction with results presented in accordance with IFRS, these measures assist in providing a more complete understanding of certain aspects of Vermilion s results of operations and financial performance. Investors are cautioned, however, that these measures should not be construed as an alternative to measures determined in accordance with IFRS as an indication of our performance. Net debt to fund flows from operations (FFO) is a non-gaap financial measure. See the Non- GAAP Financial Measures section of Vermilion s 2017 Management s Discussion and Analysis. Certain natural gas volumes have been converted on the basis of six thousand cubic feet of gas to one barrel equivalent of oil. Barrels of oil equivalent (boe s) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 31

32 ADVISORY ON RESERVES AND RESOURCE DISCLOSURE Reserves & Resource Definitions All Vermilion reserves and resources estimates in this presentation are derived from evaluation reports (dated February 1, 2018 with an effective date of December 31, 2017) prepared by GLJ Petroleum Consultants Ltd. ( GLJ ), an independent qualified reserves evaluator, in accordance with the Canadian Oil and Gas Evaluation Handbook (the "COGEH") and National Instrument Standards of Disclosure for Oil and Gas Activities. The following provides the definitions of the various reserves and resource categories used in this presentation as set out in the COGEH. Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows: 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 ( 1P ) reserves. 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 ( 2P ) reserves. "Contingent resource" and prospective resource are not, and should not be confused with, petroleum and natural gas reserves. Contingent resource is defined in the 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. Prospective resources are defined in the COGEH as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from unknown accumulations by application of future development projects. Prospective resources have both an associated chance of discovery (CoDis) and a chance of development (CoDev). A range of contingent and prospective resource estimates (low, best and high) were prepared by GLJ for each property using deterministic principles and methods. A low estimate is considered to be a conservative estimate of the quantity of the resource that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. Those resources at the low end of the estimate range have the highest degree of certainty (a 90% confidence level) that the actual quantities recovered will be equal or exceed the estimate. A best estimate is considered to be the best estimate of the quantity of the resource that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. Those resources that fall within the best estimate have a 50% confidence level that the actual quantities recovered will be equal or exceed the estimate. A high estimate is considered to be an optimistic estimate of the quantity of the resource that will actually be recovered. It is unlikely that the actual remaining quantities of resource recovered will meet or exceed the high estimate. Those resources at the high end of the estimate range have a lower degree of certainty (a 10% confidence level) that the actual quantities recovered will equal or exceed the estimate. The primary contingencies which currently prevent the classification of the contingent resource as reserves include but are not limited to: preparation of firm development plans, including determination of the specific scope and timing of the project; project sanction; access to capital markets; stakeholder 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; corporate commitment; 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 any portion of the prospective resources will be discovered. There is no certainty that it will be commercially viable to produce any portion of the contingent resources or prospective resources or that Vermilion will produce any portion of the volumes currently classified as contingent resources or prospective resources. All contingent resources and prospective resources evaluated by GLJ were deemed economic at the effective date of December 31, The estimates of contingent resources and prospective resources involve implied assessment, based on certain estimates and assumptions, that the resources described exist in the quantities predicted or estimated and that the resources can be profitably produced in the future. The risked net present value of the future net revenue from the contingent resources and prospective resources does not represent the fair market value. Actual contingent resources and prospective 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. For more detail, including the forecast price and cost assumptions used by GLJ in preparing their evaluation reports, the chance of development, the chance of discovery, and other country specific contingencies, please refer to Vermilion s Annual Information Form for the year ended December 31, 2017 available under the Company profile at 32