Vermilion Energy Inc. Announces Results for the Year Ended December 31, 2016

CALGARY, Feb. 27, 2017

The audited financial statements and management discussion and analysis for the three months and year ended December 31, 2016, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml, and on Vermilion's website at www.vermilionenergy.com.

HIGHLIGHTS

• Vermilion's 2016 annual production volumes increased by 16%, or 10% on a per-share-basis, to 63,526 boe/d, above the upper-end of our guidance range of 62,500-63,500 boe/d.  This annual production performance was achieved while reducing exploration and development ("E&D") capital spending by 50% as compared to 2015.  Production volumes for Q4 2016 decreased by 4% as compared to the prior quarter, due to natural declines, timing of capital projects and actively managed production in Canada, Netherlands and Australia. 
• Fund flows from operations in 2016 were $510.8 million ($4.41/basic share⁽¹⁾) as compared to $516.2 million ($4.71/basic share) in 2015.  Fund flows were negatively impacted by weaker commodity prices in 2016 but were largely offset by higher production.  Q4 2016 fund flows from operations of $149.6 million ($1.27/basic share) increased 6% from $141.0 million ($1.21/basic share) in Q3 2016 as a result of higher commodity prices, partially offset by lower sales volumes.  
• E&D capital expenditures totaled $242.4 million in 2016, slightly above our guidance of $240 million. 
• On a per-unit basis, annual operating and administrative ("G&A") expenses decreased by 16% and 15% respectively, year-over-year.  Profitability Enhancement Plan ("PEP") initiatives continue to deliver cost savings across our business units.  Full-year PEP savings related to capital, operating and G&A expenditures exceeded $70 million in 2016.   
• Total proved ("1P") reserves increased 9% to 175.8⁽²⁾ mmboe in 2016, while total proved plus probable ("2P") reserves increased 11% to 290.1⁽²⁾ mmboe.  This represents year-over-year 1P and 2P per share reserves growth of 4% and 5%, respectively.
• Finding and Development ("F&D")⁽³⁾ and Finding, Development and Acquisition ("FD&A")⁽³⁾ costs, including Future Development Capital ("FDC")⁽³⁾ for 2016 on a 2P basis decreased 38% to $5.57/boe and 34% to $6.62/boe, respectively.  Our three-year F&D and FD&A costs, including FDC, on a 2P basis were $10.76/boe and $14.22/boe, respectively.  
• Operating recycle ratio⁽⁴⁾ (including FDC) increased to 4.9x in 2016, compared to 3.6x in 2015, as lower F&D costs more than offset the effect of lower commodity prices on netbacks.
• Our independent GLJ 2016 Resource Assessment⁽⁵⁾ indicates risked low, best, and high estimates for contingent resources in the Development Pending category of 120.4⁽⁵⁾ mmboe, 198.5⁽⁵⁾ mmboe, and 309.4⁽⁵⁾ mmboe, representing increases of 27%, 24% and 21%, respectively, compared to our GLJ 2015 Resource Assessment⁽⁶⁾.  The GLJ 2016 Resource Assessment also indicates risked low, best, and high estimates for contingent resources in the Development Unclarified category of 9.9⁽⁵⁾ mmboe, 19.5⁽⁵⁾ mmboe, and 28.7⁽⁵⁾ mmboe.  Over 90% of our risked contingent resources reside in the Development Pending category, reflecting the high quality nature of our contingent resource base.  Prospective resources were assessed at risked low, best and high estimates of 45.2⁽⁵⁾ mmboe, 89.5⁽⁵⁾ mmboe, and 147.9⁽⁵⁾ mmboe.
• In France, we successfully executed our four-well Champotran drilling program and commenced drilling of a horizontal sidetrack well in the Vulaines field during Q4 2016, with completion and tie-in activities planned for Q1 2017.  This is our fourth successive drilling campaign at Champotran since 2013.
• On December 19, 2016, Vermilion closed the acquisition of operated and non-operated interests in five oil and three gas producing fields from Engie E&P Deutschland GmbH, for total consideration of €32.5 million ($45.6 million), net of acquired product inventory and after closing adjustments.  Vermilion has assumed operatorship of six of the eight producing fields, representing our first operated producing properties in Germany.  The acquisition advances our objective of developing a material business unit in the country, and is complementary to the assets in our existing European portfolio.
• In the Netherlands, we completed the Langezwaag-3 well (42% working interest) in Q4 2016 and brought it on production at a restricted rate of 7.5 mmcf/d.  During Q4 2016, we also acquired an incremental 30% working interest in the Drenthe VI production license for $28.3 million. This acquisition adds 30,000 net acres of land, including 26,000 net acres of undeveloped land and a 30% after payout interest in one well.
• Production from Corrib averaged 62.9 mmcf/d (10,486 boe/d), net to Vermilion, in Q4 2016, representing 97% of rated plant capacity.  All six wells are available for production and demonstrating lower downtime with better-than-expected well deliverability. 
• Vermilion entered into a farm-in agreement in Slovakia with NAFTA, Slovakia's dominant exploration and production company.  The farm-in agreement grants Vermilion a 50% working interest to jointly explore 183,000 acres on an existing license.  The Slovakia farm-in offers access to a promising land position through modest seismic and well commitments over a five-year primary agreement term. 
• During Q4 2016, we began prorating the Premium Dividend^TM Component of our Premium Dividend^TM and Dividend Reinvestment Plan by 25%, and announced a further 25% proration starting with the January 2017 dividend payment.  We plan to increase the proration factor by a further 25% beginning with the April 2017 dividend payment, so that eligible shareholders who have elected to participate in the Premium Dividend^TM Component will receive a 1.5% premium on 25% of their participating shares, and the regular cash dividend on the remaining 75% of their shares.  Subject to unexpected changes in the commodity price outlook, we plan to discontinue the Premium Dividend^TM Component of our Premium Dividend^TM  and Dividend Reinvestment Plan beginning with the July 2017 dividend payment, such that there would be no further equity issuance under this program.  We also reduced the discount associated with the traditional component of our Premium Dividend^TM and Dividend Reinvestment Plan from 3% to 2% beginning with the January 2017 dividend.
• Vermilion continued to be recognized for its environmental, social and governance ("ESG") initiatives in 2016.  Vermilion was one of only five oil and gas companies in the world, and the only energy company in North America, to be awarded a position on CDP's Climate "A" List.  We were also ranked 9^th by Corporate Knights on the Future 40 Responsible Leaders in Canada list, the highest rated oil and gas company on the list of sustainable performers.  For more information on our ESG initiatives and performance, please see our Sustainability Report at: http://sustainability.vermilionenergy.com