Mr. Dion Hatcher reports

VERMILION ENERGY INC. ANNOUNCES RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

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

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

Highlights

• Q3 2023 fund flows from operations (FFO)(1) was $270-million ($1.65/basic share)(2) and exploration and development (E&D) capital expenditures (3) were $126-million, resulting in free cash flow (FCF)(4) of $144-million (88 cents/basic share)(5).
• Year-to-date net earnings of $566-million ($3.45/basic share) driven by strong price realization and acquisition and disposition activity.
• The TTF natural gas benchmark price in Europe averaged $14.11 per mcf (thousand cubic feet) in Q3 2023, which was over five times higher than the average AECO benchmark index price for the quarter. Approximately 35 per cent of Vermilion's Q3 2023 gas production had direct exposure to European gas pricing.
• Net debt (6) decreased to $1.2-billion, representing a trailing net debt-to-FFO ratio (7) of 1.2 times.
• In conjunction with the company's Q3 2023 release, it announced a quarterly cash dividend of 10 cents per share, payable on Jan. 15, 2024, to shareholders of record on Dec. 29, 2023.
• Given the improving FCF profile of the business, the company is now targeting to return 30 per cent of FCF to shareholders in 2023, compared with the prior range of 25 to 30 per cent, until the company achieves its net debt target of $1-billion. Under current strip pricing, the company anticipates achieving this debt target in Q1 2024 at which time it intends to increase the amount of capital returned to shareholders via the base dividend and share repurchases. The company plans to communicate an update to its return of capital framework with its 2024 budget release.
• Production during the third quarter of 2023 averaged 82,727 boe/d (barrels of oil equivalent per day)(8), which was at the top end of its Q3 2023 guidance range, primarily due to the successful restart of the Wandoo facility in Australia in early September, 2023, and the accelerated maintenance turnaround at Corrib, which was completed five days ahead of schedule.
• In Australia, the company's wells continue to produce at strong rates following the restart of the Wandoo facility, and the business is forecasted to contribute approximately 4,000 bbl/d in Q4 2023.
• In Ireland, Corrib is forecasted to produce approximately 10,000 boe/d (net to Vermilion) of premium-priced European gas in Q4 2023.
• As a result of strong operational execution and performance across our portfolio, the company is maintaining its 2023 annual production guidance of 82,000 to 86,000 boe/d.
• The company has completed the site preparation and awarded all major contracts for the 16,000 boe/d Mica Montney battery. The majority of construction is scheduled to occur in the first half of 2024 with the battery expected to be operational by mid-2024.
• The company continued to advance its deep gas exploration and development plans in Germany, and commenced drilling on the first well of its two well winter drilling program in October, 2023. In addition, the company has started site preparation for the gas plant in Croatia, which is scheduled for start-up in mid-2024, subject to continuing regulatory approvals processes, and will facilitate production from the SA-10 block where the company has previous gas discoveries.

Message to shareholders

Production during the third quarter of 2023 averaged 82,727 boe/d (1), which was at the top end of the company's Q3 2023 guidance range, primarily due to the successful restart of the Wandoo facility in Australia in early September, 2023, and the accelerated maintenance turnaround at Corrib, which was completed five days ahead of schedule. The company would like to thank all of its staff in Australia and Ireland for the safe and efficient execution of these large-scale maintenance programs. Health, safety and the environment is the company's No. 1 priority and it takes great pride in these accomplishments. With all production back on line, the company remains on target to achieve its Q4 2023 guidance range of 86,000 to 89,000 boe/d and full year guidance range of 82,000 to 86,000 boe/d.

The company generated $270-million of fund flows from operations (FFO) in Q3 2023 and invested $126-million of E&D capital, resulting in $144-million of free cash flow (FCF) -- an 80-per-cent increase over the prior quarter. This level of FCF allowed the company to finance its current asset retirement obligations, lease payments and the base dividend, with the excess FCF allocated to debt reduction and share repurchases. Net debt at the end of Q3 2023 decreased 6 per cent to $1.2-billion, representing a trailing-net-debt-to-FFO ratio of 1.2 times.

The company's Q4 2023 capital program is well under way as the company embarks on exciting new growth projects in North America and Europe. The company broke ground on the Mica Montney B.C. battery construction in August, 2023, and will continue to progress this project over the next several months. This key piece of infrastructure will underpin the future development and growth of the company's Mica Montney asset. In Germany, the company recently commenced drilling on its first of two planned exploration gas wells, which is a natural extension of the successful drilling campaigns the company has executed over the past two decades in neighbouring Netherlands. With success from the company's Germany exploration drilling program, the company believes its land base of approximately 700,000 net acres can support a multiyear drilling campaign, providing Vermilion with years of organic production growth of high-valued European gas. In Croatia, the company started site preparation for the gas plant, which is scheduled for start-up in 2024 and will facilitate production from the SA-10 block where the company has previous gas discoveries.

The company continues to provide its investors with a diversified commodity exposure, of which approximately 20 per cent is European gas. Both prompt and forward European gas prices have stabilized in recent months in the low $20 per mmbtu (million British thermal unit) range. This is well below the prices seen at this time last year, during the height of the Russian invasion of Ukraine, which prompted the European Union to take the extraordinary measure of levying a windfall tax for 2022 and 2023. To date, there has been no extension of the windfall tax by the EU into 2024, which is in line with the EU's statement that the measure was exceptional and strictly temporary. Given the stability of European gas prices and a more constructive outlook on European regulatory policy, the company has been actively hedging more European gas to support its future investment in this region. The company has hedged 38 per cent of its 2024 European gas production at an average floor price of $33 per mmbtu and 20 per cent of its 2025 European gas production at an average floor price of $22 per mmbtu. These hedges enable the company to lock in future FFO, providing greater certainty on achieving the company's near-term debt targets while enhancing its future return of capital to shareholders.

It is an exciting time for Vermilion and its shareholders. The company is gaining operational momentum with Australia now back on line, Mica B.C. battery and Croatia gas plant construction under way ,and spudding of the company's first Germany gas exploration well. Second, the company has direct exposure to premium priced European gas, which remains in extremely tight supply. The company is pleased with its current hedge levels and will continue to lock in these strong prices. Third, the company is seeing the benefits of the strategic asset high-grade and focus on debt reduction. Vermilion is well positioned to deliver a significant increase in 2024 FCF. With this, the company is on track to achieve its debt target in Q1 2024 and intend to increase its return of capital to shareholders.

Q3 2023 operations review

North America

Production from the company's North American operations averaged 56,758 boe/d (1) in Q3 2023, an increase of 5 per cent from the prior quarter primarily due to the strong recovery following fire-related downtime in the Deep basin and new production from the company's recent drilling program in the United States.

In the Deep basin, the company drilled two (2.0 net) and completed one (1.0 net) Mannville liquids rich conventional natural gas wells. At Mica the company brought on production four (4.0 net) Montney-liquids-rich shale gas wells drilled on the company's Alberta lands earlier in the year. Production from these wells allows the company to fill existing throughput capacity in Alberta while it focuses on expanding infrastructure on its British Columbia lands. In Saskatchewan, the company drilled 10 (9.3 net), completed nine (8.3 net) and brought on production eight (7.3 net) light and medium crude oil wells.

In the United States, the company brought on production five (2.7 net) light and medium crude oil wells in Wyoming, driving a 21-per-cent increase in production relative to the prior quarter.

The company continues to advance the buildout of its Mica Montney B.C. asset. The company has completed the site preparation and awarded all major contracts for the 16,000 boe/d battery, and the facility modules are currently being fabricated. The majority of construction is scheduled to occur in the first half of 2024 with the battery expected to be operational by mid-2024. With the additional capacity provided by this battery, the company is able to move forward with the growth phase of its Mica Montney asset, and plan to drill 11 wells on or offsetting the company's recent 16-28 B.C. pad as part of the company's upcoming winter drilling program.

International

Production from the company's international operations averaged 25,969 boe/d (1) in Q3 2023, a decrease of 11 per cent from the prior quarter, primarily due to a 30-day planned turnaround at the Corrib facility in Ireland and natural declines, partially offset by the resumption of production in Australia following the restart of the Wandoo facility.

In Australia, the company successfully completed the remaining inspection and repair work on its Wandoo facility and restarted production in early September, 2023. The wells continue to produce at strong rates with Australia forecasted to contribute approximately 4,000 bbl/d in Q4 2023. In Ireland, the company successfully completed the planned major turnaround at Corrib five days ahead of schedule in August, 2023. Corrib is forecasted to produce approximately 10,000 boe/d (net to Vermilion) of premium-priced European gas in Q4 2023.

The company continued to advance its deep gas exploration and development plans in Germany, and commenced drilling on the first well of its two-well winter drilling program in October, 2023. In addition, the company has started site preparation for the gas plant in Croatia, which is scheduled for start-up in mid-2024 and will facilitate production from the SA-10 block where the company has previous gas discoveries.

Outlook and guidance update

With the resumption of production at the Wandoo platform in Australia, as well as the successful completion of the planned turnaround at the Corrib facility in Ireland, Q4 2023 volumes are expected to be in the range of 86,000 to 89,000 boe/d. The company is maintaining its 2023 annual production guidance of 82,000 to 86,000 boe/d, and expects to maintain similar production levels in 2024 as the company focuses on building out its Mica Montney infrastructure to support future growth. The company increased its 2023 capital expenditure guidance by $20-million to $590-million to accommodate accelerated B.C. Montney drilling into Q4. This ensures the company secures a high-performing rig and drill some of the wells before winter which helps reduce costs. In addition, it also gives the company production behind pipe to be ready for a potential early start-up of the new B.C. battery should construction go better than planned. The company will provide formal 2024 production and capital expenditure guidance as part of its upcoming budget release.

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.

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