Mr. Dion Hatcher reports

VERMILION ENERGY INC. ANNOUNCES RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

Vermilion Energy Inc. has released its operating and condensed financial results for the three and six months ended June 30, 2023.

The unaudited interim financial statements and management discussion and analysis for the three and six months ended June 30, 2023, will be available on SEDAR+, on EDGAR and on Vermilion's website.

Highlights

• Q2 2023 fund flows from operations (FFO) (1) was $247-million ($1.51/basic share) (2) and exploration and development (E&D) capital expenditures (3) were $167-million, resulting in free cash flow (FCF) (4) of $80-million (49 cents/basic share) (5).
• Net earnings were $128-million (78 cents/basic share) for Q2 2023, primarily driven by strong price realization.
• The TTF natural gas benchmark price in Europe averaged $15.04 per mcf (thousand cubic feet) in Q2 2023, which was six times higher than the average AECO benchmark index price for the quarter. Approximately 41 per cent of Vermilion's Q2 2023 gas production had direct exposure to European gas pricing.
• Repurchased 1.5 million common shares for $24-million and paid cash dividends of $16-million, for a total of $40-million returned to shareholders in the quarter. In conjunction with the company's Q2 2023 release, the company announced a quarterly cash dividend of 10 cents per share, payable on Oct. 16, 2023, to shareholders of record on Sept. 29, 2023.
• In early July, 2023, the company announced the renewal of its normal course issuer bid (NCIB) with approval to purchase of up to 16,308,587 common shares, representing approximately 10 per cent of Vermilion's public float as at June 28, 2023.
• Net debt (6) decreased to $1.3-billion, representing a trailing net-debt-to-funds-from-operations ratio (7) of 1.0 times. The company was undrawn on its $1.6-billion covenant-based revolving credit facility at the end of Q2 2023 and extended the maturity date of this facility to May, 2027, during the quarter.
• Q2 2023 production averaged 83,152 boe/d (barrels of oil equivalent per day) (8) an increase of 1 per cent from the previous quarter due to the acquisition of additional working interest in the Corrib natural gas project in Ireland and new production from the company's Mica Montney, United States, and southeast Saskatchewan assets, partially offset by the disposition of higher-cost assets in southeast Saskatchewan and fire-related downtime in west-central Alberta.
• All production that was temporarily shut-in as a result of the wildfires in west-central Alberta has been restored thanks to the hard work of the company's employees, and the company confirms there was no major damage to its facilities or well sites.
• As a result of strong operational execution and performance across the company's portfolio, the company is maintaining its 2023 annual production guidance of 82,000 to 86,000 boe/d.
• Late in the second quarter the company received the final permit required to proceed with the construction of the 16,000 boe/d battery on its Montney Mica lands in British Columbia, which will facilitate the long-term development of the company's high-quality lands offsetting the strong British Columbia well results.
• The company released the annual update to the company's on-line sustainability report in July, 2023, marking the company's 10th year of ESG reporting. One notable highlight is the decrease in the company's 2022 Scope 1 emission intensity to 0.017 tCO2e per throughput operated boe, in line with the company's target to reduce its 2019 baseline of 0.019 tCO2e per throughput operated boe by 15 per cent to 20 per cent by 2025. The full report is available at the company's website.

Message to shareholders

Production during the second quarter of 2023 averaged 83,152 boe/d, which was at the top end of our Q2 2023 guidance range. We revised our Q2 2023 production guidance in mid-May to a range of 80,000 to 83,000 boe/d following the temporary shut-in of approximately 30,000 boe/d in west-central Alberta due to numerous fires in the region. There was no major damage to our facilities or well sites, and our team was able to safely restore all of the production within weeks of the initial shut-in thanks to the hard work of our employees. In addition, we achieved strong operational performance across many of our other assets which further mitigated the approximately 8,000 boe/d quarterly production impact from the fire-related shut-ins in west-central Alberta and downtime in Australia. This operational flexibility is one of the advantages of operating a geographically diverse portfolio of assets. Due to the stronger-than-anticipated asset performance, we are maintaining annual 2023 production guidance of 82,000 to 86,000 boe/d and we are well positioned to deliver Q4 2023 production of 86,000 to 89,000 boe/d.

We generated $247-million of fund flows from operations (FFO) in Q2 2023 and invested $167-million of E&D capital, resulting in $80-million of free cash flow (FCF). We returned a total of $40-million to shareholders in Q2 2023 via the base dividend and share buybacks. During the first half of 2023, we have declared $33-million in dividends and repurchased $54-million of our common shares, representing a total of $87-million returned to shareholders. We continue to target shareholder returns representing 25 to 30 per cent of FCF for 2023 with the majority of FCF being allocated to debt reduction until we achieve our next net debt target of $1-billion. Upon achieving this debt target we plan to increase the capital return to shareholders and will communicate the targeted payout range at that time. We anticipate share buybacks will remain the primary method for returning incremental capital beyond the base dividend, and, as such, we renewed our normal course issuer bid in early July, 2023. Net debt at the end of Q2 2023 decreased slightly to $1.3-billion, representing a trailing net debt-to-FFO ratio of 1.0 times.

The downtime in Australia continues to impact our 2023 results with the facility now expected to remain off-line until the end of Q3 to complete additional work. While these delays impact short-term production and cash flow, it is the right long-term decision as it enhances the safety and integrity of our asset while improving future operational run rates.

Late in the second quarter, we received the final permit required to proceed with the construction of the 16,000 boe/d battery on our Montney Mica lands in British Columbia. This is a key milestone that will facilitate the next leg of growth at Mica and underpin the long-term development of this asset. The results from our most recently drilled Montney wells are very encouraging as we continue to see flat production through the first 120 days on stream, with 40-per-cent liquids content on our B.C. pad. We are excited to move forward with the next expansion phase and look forward to providing further updates in the quarters ahead.

Our disciplined approach toward debt reduction, combined with our asset high-grading initiatives over the past two years, has made Vermilion a more resilient business today. By the end of this year we will have nearly cut our debt in half while significantly increasing our average annual FFO from pre-COVID levels. While strong commodity prices have contributed to this improvement, we believe the company is much better positioned. We believe our top-decile netbacks, low base decline and capital efficient asset base, combined with our modest base dividend payout ratio, translates to a very resilient business that can be managed through low commodity cycles and is well positioned for increased return of capital to shareholders. With our leverage at a decade low and 2023 on track to deliver the second highest annual FFO in corporate history, we look forward to providing an update on returns to shareholders as we achieve our debt targets.

Outlook and guidance update

As a result of the increased scope of repair work on the Wandoo platform in Australia, as well as the planned turnaround at the Corrib facility in Ireland, Q3 2023 volumes are expected to be consistent with Q2 2023 at 80,000 to 83,000 boe/d. As the company completes the Australia integrity work and Corrib turnaround it will be well positioned to deliver an expected Q4 2023 production rate of 86,000 to 89,000 boe/d. As a result of strong operational execution and performance across the company's portfolio, it is maintaining its 2023 annual production guidance of 82,000 to 86,000 boe/d.

Sustainability

The company released the annual update to its on-line sustainability report in July, 2023, marking the company's 10th year of ESG reporting. One notable highlight is the decrease in the company's 2022 Scope 1 emission intensity to 0.017 tCO2e per throughput operated boe, in line with the company's target to reduce its 2019 baseline of 0.019 tCO2e per throughput operated boe by 15 per cent to 20 per cent by 2025. The full report is available at the company's website.

About Vermilion Energy Inc.

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

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

Vermilion trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbol VET.

We seek Safe Harbor.