Vermilion Energy
Annual Report 2022

Plain-text annual report

2022 A N N UA L R E P O R T EXCELLENCE. TRUST. RESPECT. RESPONSIBILITY.INTERNATIONALLY DIVERSIFIED | FREE CASH FLOW FOCUSEDTable of Contents Message to Shareholders Management’s Discussion and Analysis Consolidated Financial Statements Notes to the Consolidated Financial Statements Corporate Information Annual General Meeting 8 15 68 78 100 May 3, 2023 3:00 PM MT Our annual general meeting will be held as a virtual shareholder meeting with electronic participation as explained in our 2023 Proxy Statement and Information Circular, which will be available in March 2023. Details of the meeting will be included in the Information Circular and posted on our website at https://www.vermilionenergy.com/invest-with-us/annual-general-meeting when available. Vermilion Energy Inc. ■ Page 1 ■ 2022 Annual Report 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 and Vermilion’s ability to fund such expenditures; Vermilion’s additional debt capacity providing it with additional working capital; statements regarding the return of capital, the flexibility of Vermilion’s capital program and operations; business strategies and objectives; operational and financial performance; estimated volumes of reserves and resources; petroleum and natural gas sales; future production levels and the timing thereof, including Vermilion’s 2023 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; significant declines in production or sales volumes due to unforeseen circumstances; the effect of possible changes in critical accounting estimates; statements regarding the growth and size of Vermilion’s future project inventory wells expected to be drilled in 2023; exploration and development plans and the timing thereof; Vermilion’s ability to reduce its debt; statements regarding Vermilion’s hedging program, its plans to add to its hedging positions, and the anticipated impact of Vermilion’s hedging program on project economics and free cash flows; the potential financial impact of climate-related risks; acquisition and disposition plans and the timing thereof; operating and other expenses, including the payment and amount of future dividends; royalty and income tax rates and Vermilion’s expectations regarding future taxes and taxability; and the timing of regulatory proceedings and approvals. 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; and management’s expectations relating to the timing and results of exploration and development activities. 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 rates; 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. 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 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. Vermilion Energy Inc. ■ Page 2 ■ 2022 Annual Report All crude oil and natural gas reserve and resource information contained in this document has been prepared and presented in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. Reserves estimates have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of funding required for such development. The actual crude oil and natural gas reserves and future production will be greater than or less than the estimates provided in this document. Natural gas volumes have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil equivalent (boe) 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. Financial data contained within this document are reported in Canadian dollars unless otherwise stated. Vermilion Energy Inc. ■ Page 3 ■ 2022 Annual Report Abbreviations $M $MM AECO bbl(s) bbls/d boe boe/d GJ LSB mbbls mcf mmcf/d NBP NGLs PRRT tCO2e TTF WTI thousand dollars million dollars the daily average benchmark price for natural gas at the AECO ‘C’ hub in Alberta barrel(s) barrels per day barrel of oil equivalent, including: crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe for six mcf of natural gas) barrel of oil equivalent per day gigajoules light sour blend crude oil reference price thousand barrels thousand cubic feet million cubic feet per day the reference price paid for natural gas in the United Kingdom at the National Balancing Point Virtual Trading Point natural gas liquids, which includes butane, propane, and ethane Petroleum Resource Rent Tax, a profit based tax levied on petroleum projects in Australia tonnes of carbon dioxide equivalent the price for natural gas in the Netherlands, quoted in megawatt hours of natural gas, at the Title Transfer Facility Virtual Trading Point West Texas Intermediate, the reference price paid for crude oil of standard grade in US dollars at Cushing, Oklahoma Vermilion Energy Inc. ■ Page 4 ■ 2022 Annual Report Highlights Year-end 2022 Results • • • • • • • • • 2022 fund flows from operations (“FFO”)(1) was a record $1.6 billion ($10.00/basic share)(2), representing a year-over year increase of 78%, including the impact of $406 million of realized hedging losses and $223 million of temporary European windfall taxes. 2022 exploration and development (“E&D”) capital expenditures(3) were $552 million, resulting in record free cash flow (“FCF”)(4) of $1.1 billion ($6.62/basic share)(5), representing a year-over-year increase of 99%, including the impact of hedging losses and temporary windfall taxes. Record FCF in 2022 allowed us to fund over $500 million of strategic acquisitions, reduce net debt by over $300 million and return over $100 million to our shareholders through dividends and share buybacks. We exited the year with net debt(6) of $1.3 billion, resulting in a net debt to trailing FFO ratio(7) of 0.8 times at December 31, 2022. Following the reinstatement of our quarterly dividend in Q1 2022 and the approval of a normal course issuer bid (“NCIB”) in Q3 2022, we declared $46 million in dividends and repurchased $72 million of Vermilion shares in 2022, representing 11% of FCF. Net earnings were $1.3 billion ($8.03/basic share) for 2022, representing a 14% increase over the prior year. Production in 2022 averaged 85,187 boe/d(8) which is consistent with 2021 production levels. Total proved plus probable (“2P”) reserves increased 9% from the prior year to 523 mmboe(9). Including acquisitions, we replaced 234% of production on a proved plus probable basis and increased our total proved plus probable reserve life index to 16.8 years. The after-tax net present value of 2P reserves(9), discounted at 10%, increased 36% from the prior year to $8.9 billion ($54.72/basic share), with proved developed producing ("PDP") reserves making up more than 50% of this value. 2P finding, development and acquisition (“FD&A”) costs, including changes in future development costs (“FDC”) were $19.22/boe, resulting in a 2022 2P FD&A Operating Recycle Ratio of 4.4 times. Fourth Quarter 2022 Results • • • • • Q4 2022 FFO was $284 million ($1.74/basic share)(2), including the full year impact of the temporary European windfall tax of $223 million. Without the temporary windfall tax, FFO would have been $507 million ($3.11/basic share), in line with the prior quarter. Q4 2022 E&D capital expenditures(3) were $169 million, resulting in FCF of $115 million ($0.70/basic share)(5), including the full year impact of the temporary European windfall tax noted above. Without the impact of the temporary windfall tax, FCF would have been $338 million ($2.07/ basic share), an increase of 4% over the prior quarter. Q4 2022 production averaged 85,450 boe/d(8) an increase of 1% from the previous quarter. During the fourth quarter, production was impacted by unplanned downtime in Australia, cold weather and third-party downtime in North America and the delayed startup of our six-well Montney pad in Alberta. Production from our North American operations averaged 58,499 boe/d(8) in Q4 2022, an increase of 2% from the prior quarter primarily due to new production from our Montney assets in Canada and a full quarter contribution from our 2022 drilling program in the United States. Production from our International operations averaged 26,953 boe/d(8) in Q4 2022, a decrease of 1% from the prior quarter, primarily due to natural decline in Netherlands and Germany, as well as lower than anticipated production in Australia due to unplanned downtime. Outlook • • • • The Corrib acquisition has a planned close on March 31, 2023. This acquisition is expected to add approximately 7,000 boe/d of European gas production which was incorporated from March 31, 2023 onwards in our original production guidance of 87,000 to 91,000 boe/d. Subsequent to year-end, we signed an agreement to sell approximately 5,500 boe/d of non-core light oil production in southeast Saskatchewan for total cash consideration of $225 million, before closing adjustments. The transaction has an effective date of September 1, 2022 and is expected to close in March 2023. The net proceeds will be used to pay down debt. Taking into account the southeast Saskatchewan asset sale and Australia downtime, we are revising our 2023 production guidance to 82,000 to 86,000 boe/d. Our 2023 capital budget remains unchanged at $570 million. In conjunction with our Q4 2022 release, we declared a quarterly cash dividend of $0.10 CDN per share for Q1 2023, representing a 25% increase over the prior quarterly dividend. In addition, we resumed share buybacks in early January 2023, and have repurchased 1.1 million shares in 2023 to date. Vermilion Energy Inc. ■ Page 5 ■ 2022 Annual Report ($M except as indicated) Financial Petroleum and natural gas sales Cash flows from operating activities Fund flows from operations (1) Fund flows from operations ($/basic share) (2) Fund flows from operations ($/diluted share) (2) Net earnings Net earnings ($/basic share) Cash flows used in investing activities Capital expenditures (3) Acquisitions Asset retirement obligations settled Repurchase of shares Cash dividends ($/share) Dividends declared % of fund flows from operations (10) Payout (11) % of fund flows from operations (11) Free cash flow (4) Long-term debt Net debt (6) Net debt to four quarter trailing fund flows from operations (7) Operational Production (8) Crude oil and condensate (bbls/d) NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) Average realized prices Crude oil and condensate ($/bbl) NGLs ($/bbl) Natural gas ($/mcf) Production mix (% of production) % priced with reference to WTI % priced with reference to Dated Brent % priced with reference to AECO % priced with reference to TTF and NBP Netbacks ($/boe) Operating netback (12) Fund flows from operations ($/boe) (13) Operating expenses General and administration expenses Average reference prices WTI (US $/bbl) Dated Brent (US $/bbl) AECO ($/mcf) TTF ($/mcf) Share information ('000s) Shares outstanding - basic Shares outstanding - diluted (14) Weighted average shares outstanding - basic Weighted average shares outstanding - diluted (14) (1) Q4 2022 Q3 2022 Q4 2021 2022 2021 842,693 495,195 284,220 1.74 1.70 395,408 2.42 168,053 169,305 4,558 16,508 — 0.08 13,058 964,678 447,608 507,876 3.10 3.01 271,079 1.65 168,275 184,015 6,220 10,386 71,659 0.08 13,031 5 % 3 % 198,871 207,432 70 % 41 % 114,915 1,081,351 1,344,586 0.8 323,861 1,409,507 1,412,052 0.8 38,915 7,497 234.23 85,450 115.02 39.93 17.43 38 % 18 % 30 % 14 % 70.00 35.08 16.81 1.65 82.65 88.71 4.64 38.36 163,227 168,616 163,105 167,397 37,315 7,901 234.12 84,237 123.02 44.64 24.68 38 % 17 % 30 % 15 % 78.42 67.07 16.64 1.90 91.56 100.85 4.16 75.56 162,883 168,574 163,947 168,494 765,915 250,352 322,173 1.99 1.93 344,588 2.12 134,873 145,807 23,633 13,039 — — — — % 158,846 49 % 176,366 1,651,569 1,644,786 1.8 36,264 8,461 238.16 84,417 96.88 47.27 17.89 38 % 16 % 28 % 18 % 48.07 40.73 14.24 2.20 77.19 79.73 4.66 38.86 162,261 168,746 162,247 166,519 3,476,394 1,814,220 1,634,865 10.00 9.71 1,313,062 8.03 1,059,292 551,817 539,713 37,514 71,659 0.28 45,769 3 % 635,100 39 % 1,083,048 1,081,351 1,344,586 0.8 37,530 7,961 238.18 85,187 123.89 45.95 18.99 38 % 16 % 30 % 16 % 70.15 52.65 15.75 1.86 94.23 101.19 5.25 48.35 163,227 168,616 163,489 168,426 2,079,761 834,453 919,862 5.71 5.58 1,148,696 7.13 469,700 374,796 130,965 28,525 — — — — % 403,321 44 % 545,066 1,651,569 1,644,786 1.8 38,143 8,325 233.64 85,408 83.78 34.44 9.53 38 % 17 % 29 % 16 % 34.06 29.54 13.27 1.70 67.92 70.73 3.62 19.86 162,261 168,746 161,172 164,765 Fund flows from operations (FFO) is a total of segments measure comparable to net earnings that is comprised of sales less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized loss on derivatives, realized foreign exchange gain (loss), and realized other income. 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. FFO does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. Vermilion Energy Inc. ■ Page 6 ■ 2022 Annual Report (2) (3) (4) (5) (6) (7) (8) (9) Fund flows from operations per share (basic and diluted) are supplementary financial measures and are not a standardized financial measures under IFRS, and therefore may not be comparable to similar measures disclosed by other issuers. They are calculated using FFO (a total of segments measure) and basic/ diluted shares outstanding. The measure is used to assess the contribution per share of each business unit. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. Capital expenditures is a non-GAAP financial measure that is the sum of drilling and development costs and exploration and evaluation costs from the Consolidated Statements of Cash Flows. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. Free cash flow (FCF) is a non-GAAP financial measure comparable to cash flows from operating activities and is comprised of FFO less drilling and development and exploration and evaluation expenditures. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. Free cash flow per basic share is a non-GAAP supplementary financial measure and is not a standardized financial measure under IFRS and may not be comparable to similar measures disclosed by other issuers. It is calculated using FCF and basic shares outstanding. Net debt is a capital management measure comparable to long-term debt and 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). More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. Net debt to trailing FFO is a supplementary financial measure and is not a standardized financial measure under IFRS. It may not be comparable to similar measures disclosed by other issuers and is calculated using net debt (capital management measure) and FFO (total of segment measure). The measure is used to assess the ability to repay debt. Information in this document is included by reference; refer to the "Non-GAAP and Other Specified Financial Measures" section of this document. Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. Estimated gross proved, developed and producing, total proved, and total proved plus probable reserves as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”) in a report dated February 14, 2023 with an effective date of December 31, 2022 (the “2022 GLJ Reserves Report”). Net present value of discounted cash flows as provided in the 2022 GLJ Reserves Report. (10) Dividends % of FFO is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers, calculated as dividends divided by FFO. The ratio is used by management as a metric to assess the cash distributed to shareholders. Reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. (11) Payout and payout % of FFO are a non-GAAP financial measure and a non-GAAP ratio, respectively, that are not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers. Payout is comparable to dividends declared and is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled, while the ratio is calculated as payout divided by FFO. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. (12) Operating netback is a non-GAAP financial measure comparable to net earnings and is comprised of sales less royalties, operating expense, transportation costs, PRRT, and realized hedging gains and losses. More information and a reconciliation to primary financial statement measures can be found in the “Non- GAAP and Other Specified Financial Measures” section of this document. (13) Fund flows from operations per boe is a supplementary financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers, calculated as FFO by boe production. Fund flows from operations per boe is used by management to assess the profitability of our business units and Vermilion as a whole. More information and a reconciliation to primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. (14) Diluted shares outstanding represent 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. Vermilion Energy Inc. ■ Page 7 ■ 2022 Annual Report Message to Shareholders In 2022, we delivered on our strategic priorities and continued to re-position Vermilion for long term success. Due to the robust free cash flow generation of our international and diversified assets, we reduced net debt by $300 million and completed $500 million of strategic acquisitions, despite incurring $406 million of realized hedging losses and $223 million of temporary windfall taxes. To increase our exposure to premium priced European gas, we progressed the high rate of return Irish Corrib consolidation deal, which we plan to close on March 31, 2023. In Canada, our Montney acquisition increased the depth and quality of our North American inventory. With lower debt and an even stronger asset base, we announced our return of capital framework and returned over $100 million to our shareholders with the reinstatement of a quarterly dividend in Q1 2022 and commencement of a share buyback program in Q3 2022. We exited the year with net debt of $1.3 billion, or 0.8 times trailing FFO, which is less than half the leverage ratio from the prior year. These results translated into a total shareholder return in excess of 50% including share price appreciation and dividends. We remain committed to reducing debt even further, which will allow for increasing return of capital to our shareholders in the future. Our next debt target remains $1.0 billion of net debt, which we anticipate achieving by the end of 2023 or early 2024, depending on commodity prices. Production in Q4 2022 averaged 85,450 boe/d, representing a 1% increase over Q3 2022. Annual average production was 85,187 boe/d, which is consistent with 2021 production levels. During the fourth quarter, production was impacted by unplanned downtime in Australia, cold weather and third-party downtime in North America, and the delayed startup of our six-well Montney pad in Alberta. We generated $284 million of FFO and $115 million of FCF in Q4 2022, which includes the $223 million full year impact of temporary windfall taxes. The temporary windfall tax was approved by the European Union on September 30, 2022, and was applied retroactively for 2022 in the countries where we operate, therefore we have reflected the full amount in our Q4 2022 financial results. Our exposure to global commodity prices is a key driver of our strong financial results and remains a strategic advantage for Vermilion. European gas prices were particularly strong in 2022, averaging nearly $50/mmbtu (TTF) for the year and reaching over $120/mmbtu (TTF) during the summer. While European gas prices have moderated in recent months due to a much warmer than average winter in Europe, the forward price for the balance of 2023 and 2024 is approximately $20/mmbtu, which is six to seven times higher than forward Canadian AECO prices and four to five times higher than forward NYMEX prices. We completed the strategic acquisition of Leucrotta Exploration in 2022, marking Vermilion’s entry into the prolific Montney resource play. This acquisition has significantly enhanced the depth and quality of Vermilion’s drilling inventory as reflected by the 9% increase in our 2022 proved plus probable reserve life index of 16.8 years. We are in the early stages of developing this long-life asset as we focus on optimizing the existing infrastructure in both Alberta and British Columbia in 2023 and further plans for the build out of the necessary infrastructure to support our future expansion plans. Subsequent to the end of the year, the British Columbia government announced agreements with Blueberry River First Nations and other Treaty 8 First Nations, outlining guidelines pertaining to future resource development in the region. We view this as a positive development. Our British Columbia assets are located outside of Blueberry River First Nations' High Value Areas and are on predominantly private freehold land where we continue to receive permits. We believe this will help facilitate the timely approval of future permits required to expand our Montney development in British Columbia. Asset Disposition Subsequent to year-end, we signed an agreement to sell certain assets in southeast Saskatchewan. The assets are comprised of approximately 5,500 boe/d of non-core light oil production spread across the greater Arcola and Queensdale areas of southeast Saskatchewan. Total cash consideration is $225 million, before closing adjustments. Following our entry into the Montney, these mature assets were unlikely to attract capital. The divestment was part of our strategy to re-position Vermilion for long term success by high-grading our North American inventory, reducing unit cost and accelerating the timeline of achieving our debt reduction targets. The transaction has an effective date of September 1, 2022 and is expected to close in March 2023. The net proceeds will be used to pay down our revolving credit facility. Outlook and Guidance Update The Corrib acquisition has a planned close on March 31, 2023. We estimate a net cash payment of approximately $200 million at close and expect the acquisition to payout in approximately one year, based on forward commodity prices. This acquisition is expected to add approximately 7,000 boe/d of European gas production, which was reflected from March 31, 2023 onwards in our original production guidance of 87,000 to 91,000 boe/d. Taking into account the southeast Saskatchewan asset sale and Australia downtime, we are revising our 2023 production guidance to 82,000 to 86,000 boe/d. Our 2023 capital budget remains unchanged at $570 million as there was minimal capital allocated to the assets being sold. Our Q1 2023 drilling program is off to a strong start and is expected to deliver higher production in Canada during the first quarter, however extended maintenance downtime in Australia will result in lower corporate production in Q1 2023. Production from the Wandoo field in Australia was temporarily shut-in during December 2022 for maintenance. We have identified additional maintenance requirements and, as a precautionary Vermilion Energy Inc. ■ Page 8 ■ 2022 Annual Report measure, have elected to complete a detailed inspection of the entire facility and conduct all necessary repairs at this time. These actions are expected to minimize future downtime. We expect Australia production to be offline for all of Q1 2023 and to restart in Q2 2023. As a result of the Australia downtime and the southeast Saskatchewan asset sale, Q1 2023 corporate production is expected to be in the range of 80,000 to 82,000 boe/d. We continue to deleverage our balance sheet and prioritize profitability, debt reduction and return of capital over production growth. As announced with our 2023 budget, we expect to allocate up to 25% of FCF to shareholder returns through the base dividend and share repurchases, which recommenced in early January 2023. To date, we have repurchased 1.1 million shares in 2023 and 3.5 million shares in total under our existing NCIB. In addition, we announced a 25% increase to the Q1 2023 base dividend to $0.10 per share which will be payable on April 17, 2023. We look forward to providing further updates on our return of capital strategy as we make progress towards our next debt target. Q4 2022 Operations Review North America Production from our North American operations averaged 58,499 boe/d in Q4 2022, an increase of 2% from the prior quarter primarily due to new well production from our Montney assets in Canada and a full quarter contribution from our 2022 drilling program in the United States. In Alberta, we drilled twelve (10.6 net), completed ten (8.2 net), and brought on production seven (6.9 net) Mannville liquids rich gas wells, while at Mica we drilled one (1.0 net) well and brought on production the six (6.0 net) wells from our first Montney pad. The six well Montney pad was brought on production in late November and saw rates increase through the balance of the year as the wells cleaned up. Total production from our Montney assets averaged 7,500 boe/d during the month of December. In December, drilling commenced on a follow up three-well pad in Alberta which is expected to be completed and tied in during the first half of 2023. During the fourth quarter of 2022 we received three permits in British Columbia, including one of the permits to construct a 16,000 boe/d battery and to drill a multi-well pad in British Columbia. We also signed agreements to acquire 11 sections of adjacent land at Mica, further consolidating our contiguous land base and increasing our Tier 1 inventory. In Saskatchewan, we drilled seven (5.5 net) wells, completed ten (6.9 net) wells, and brought on production twelve (6.7 net) wells in southeast Saskatchewan. No drilling or completion activity occurred in the United States in the fourth quarter as the team focused on preparation for the 2023 drilling program which will commence in Q2 2023. International Production from our International operations averaged 26,953 boe/d in Q4 2022, a decrease of 1% from the prior quarter, primarily due to natural decline in Netherlands and Germany, as well as lower than anticipated production in Australia due to unplanned downtime. This was largely offset by higher production in France and Ireland. Production from the fire-related downtime in France was gradually restored through the fourth quarter of 2022 and has been fully restored subsequent to year end. Ireland production increased 1% in Q4 2022 compared to the previous quarter as the Corrib facility experienced strong operational run time during the quarter. During the fourth quarter we drilled one (1.0 net) oil well in Germany, which was brought on production in Q1 2023. We also continued to advance our deep well gas exploration and development plans in Germany as we prepare for our first well to be drilled in the fourth quarter of 2023. In the Netherlands, we drilled one (0.5 net) gas well which encountered a 19 metre gas column and is expected to be brought on production in the first half of 2023. We drilled two (2.0 net) exploratory wells in Croatia, however, neither of the wells encountered commercial hydrocarbons. 2022 Reserve Report Our 2022 total proved plus probable reserves increased 9% from the prior year to 523 mmboe(2). The after-tax net present value of proved plus probable reserves(2), discounted at 10%, increased 36% from the prior year to $8.9 billion ($54.72/basic share) at December 31, 2022, with proved developed producing reserves making up more than 50% of this value. The increase is primarily due to the acquisition of Leucrotta and positive economic revisions resulting from stronger commodity prices. Including acquisitions, we replaced 234% of production on a proved plus probable basis at an FD&A cost (including future development costs) of $19.22/boe, resulting in a 2022 total proved plus probable FD&A Operating Recycle Ratio of 4.4 times. On an organic basis, we added proved plus probable reserves at an F&D cost (including future development costs) of $22.66/boe, resulting in a 2022 total proved plus probable F&D Operating Recycle Ratio of 3.7 times. Our total proved plus probable reserve life index increased by 9% in 2022 to 16.8 years, reflecting our continuous focus on enhancing the asset base. Over the past decade we have successfully increased our reserve life index by approximately 40% through the combination of organic development and strategic acquisitions. Given the early stage of our Montney development, we expect further recognition of Montney reserves in the coming years as we progress development of this play. Vermilion Energy Inc. ■ Page 9 ■ 2022 Annual Report The following table provides a summary of company interest reserves by reserve category and region on an oil equivalent basis. Please refer to Vermilion's 2022 Annual Information Form for the year ending December 31, 2022 ("2022 Annual Information Form") for detailed information by country and product type. BOE (mboe) North America International Vermilion Proved Developed Producing Proved Developed Non-Producing Proved Undeveloped Proved Probable 133,879 54,738 188,617 6,882 7,220 14,101 103,909 6,501 110,411 244,670 68,459 313,129 167,375 42,286 209,661 Proved Plus Probable 412,045 110,745 522,790 The following table summarizes the finding and development costs and associated operating recycle ratios by reserve category for the three-year period ending December 31, 2022: Finding and Development Costs, including FDC (F&D) ($/boe) (3) Finding, Development and Acquisition Costs, including FDC (FD&A) ($/boe) (3) F&D Operating Recycle Ratio (x) (4) FD&A Operating Recycle Ratio (x) (4) PDP $22.93 $35.10 2022 1P $24.47 $29.09 3-Year Average 2P $22.66 $19.22 PDP $16.64 $21.76 1P $18.51 $21.08 2P $23.65 $18.78 3.65 2.39 3.42 2.88 3.70 4.36 2.80 2.14 2.52 2.21 1.97 2.48 The following table provides a reconciliation of changes in company interest reserves by reserve category and region. Please refer to Vermilion's 2022 Annual Information Form for detailed information by country and product type. 1P (mboe) December 31, 2021 Discoveries Extensions & Improved Recovery Technical Revisions Acquisitions Dispositions Economic Factors Production December 31, 2022 2P (mboe) December 31, 2021 Discoveries Extensions & Improved Recovery Technical Revisions Acquisitions Dispositions Economic Factors Production December 31, 2022 North America International 223,478 — 26,614 (6,536) 18,895 (61) 3,292 (21,013) 244,669 78,574 — 717 (3,101) — (17) 2,367 (10,080) 68,459 North America International 357,780 — 47,369 (24,889) 48,113 (143) 4,827 (21,013) 412,045 123,227 — 3,223 (8,054) — (26) 2,456 (10,080) 110,745 Vermilion 302,052 — 27,330 (9,637) 18,895 (78) 5,659 (31,093) 313,128 Vermilion 481,007 — 50,592 (32,943) 48,113 (169) 7,283 (31,093) 522,790 Additional information about our 2022 GLJ Reserves Report can be found in our 2022 Annual Information Form on our website at www.vermilionenergy.com and on SEDAR at www.sedar.com. Vermilion Energy Inc. ■ Page 10 ■ 2022 Annual Report Commodity Hedging Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, as of March 8, 2023, we have 15% of our expected net-of-royalty production hedged for the remainder of 2023. With respect to individual commodity products, we have hedged 50% of our European natural gas production, 0% of our crude oil production, and 13% of our North American natural gas volumes for the remainder of 2023, 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. Organizational Update Mr. Dion Hatcher has been promoted to the role of President and Chief Executive Officer, and appointed as a member of the Board of Directors of the Company, effective March 7, 2023. Mr. Hatcher was promoted to President on January 1, 2022 and previously held the positions of Vice President, North America, Vice President of Canadian Business Unit, and various other roles of increasing responsibility during his 17 year tenure with the company. The Executive Committee structure will remain in place and will continue to be used by the organization to review and approve key organizational, financial, operational and strategic decisions for the Company. This leadership structure has proven to be a highly collaborative decision-making model that draws upon the collective knowledge, experience, business acumen and skills of the senior management team. "On behalf of the Board, I would like to congratulate Dion on his promotion to President and Chief Executive Officer. Since taking on the role of President in January 2022, Dion has demonstrated strong leadership skills with the vision to lead Vermilion into the future. He is fully aligned with Vermilion's conservative business principles, its focus on long term value creation, and its values and corporate culture. We look forward to his contribution to the Board" said Robert Michaleski, Vermilion's Chairman. (Signed “Dion Hatcher”) Dion Hatcher President & Chief Executive Officer March 8, 2023 (1) (2) (3) (4) Please refer to Supplemental Table 4 "Production" of the accompanying Management's Discussion and Analysis for disclosure by product type. Estimated gross proved, developed and producing, total proved, and total proved plus probable reserves as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”) in a report dated February 14, 2023 with an effective date of December 31, 2022 (the “2022 GLJ Reserves Report”). Net present value of discounted cash flows as provided in the 2022 GLJ Reserves Report. F&D (finding and development) and FD&A (finding, development and acquisition) costs are used as a measure of capital efficiency and are calculated by dividing the applicable capital expenditures for the period, including the change in undiscounted FDC (future development capital), by the change in the reserves, incorporating revisions and production, for the same period. Operating Recycle Ratio is a non-GAAP ratio that is calculated by dividing the Operating Netback (non-GAAP measure), excluding realized hedging gain (loss) and PRRT, by the cost of adding reserves (F&D and FD&A cost). For the purposes of calculating 2022 Operating Recycle Ratios, this netback number was $83.81. More information can be found in the “Non-GAAP Financial Measures and Other Specified Financial Measures” section of this document. Vermilion Energy Inc. ■ Page 11 ■ 2022 Annual Report 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, FFO is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized loss on derivatives, realized foreign exchange gain (loss), and realized other income. 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. Sales Royalties Transportation Operating General and administration Corporate income tax expense Windfall taxes PRRT Interest expense Realized loss on derivatives Realized foreign exchange gain (loss) Realized other (expense) income Fund flows from operations Equity based compensation Unrealized gain (loss) on derivative instruments (1) Unrealized foreign exchange (loss) gain (1) Accretion Depletion and depreciation Deferred tax expense Gain on business combinations Impairment reversal Unrealized other expense Net earnings (1) $/boe 66.81 (5.98) (2.48) (13.27) (1.70) (0.97) — (0.50) (2.35) (10.52) (0.21) 0.71 29.54 $/boe 103.99 (8.43) (2.71) (16.81) (1.65) (5.18) (27.50) (0.62) (2.78) (5.42) 2.33 (0.14) 35.08 Q4 2022 $M 842,693 (68,303) (21,976) (136,247) (13,344) (41,958) (222,859) (5,045) (22,506) (43,940) 18,845 (1,140) 284,220 (5,377) 549,693 (47,405) (16,501) (171,926) (196,733) — — (563) 395,408 Q4 2021 $M 765,915 (58,785) (19,033) (112,680) (17,374) (32,234) — (5,544) (16,279) (189,598) (2,395) 10,180 322,173 (6,666) 172,265 7,122 (10,983) (148,216) (14,834) — 23,922 (195) 344,588 2022 $M $/boe 96.82 3,476,394 (7.43) (306,017) (2.41) (78,896) (14.24) (489,034) (2.20) (57,677) (4.07) (208,153) — (222,859) (18,318) (0.70) (2.06) (82,858) (23.97) (405,894) 15,195 (0.30) 1.29 12,982 40.73 1,634,865 (44,390) 540,801 (84,464) (58,170) (577,134) (288,707) — 192,094 (1,833) 1,313,062 2021 $M $/boe 111.95 2,079,761 (9.85) (186,122) (2.54) (77,161) (15.75) (413,013) (52,877) (1.86) (30,166) (6.70) — (7.18) (15,688) (0.59) (2.67) (73,075) (13.07) (327,384) (6,613) 0.49 0.42 22,200 52.65 919,862 (41,565) (181,094) (64,963) (43,552) (571,688) (187,343) 17,198 1,302,619 (778) 1,148,696 Unrealized gain (loss) on derivative instruments, Unrealized foreign exchange (loss) gain, and Unrealized other expense are line items from the respective Consolidated Statements of Cash Flows. Non-GAAP Financial Measures and Non-GAAP Ratios Free cash flow (FCF): Most directly comparable to cash flows from operating activities, FCF is comprised of fund flows from operations less drilling and development costs and exploration and evaluation costs. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. Vermilion Energy Inc. ■ Page 12 ■ 2022 Annual Report ($M) Cash flows from operating activities Changes in non-cash operating working capital Asset retirement obligations settled Fund flows from operations Drilling and development Exploration and evaluation Free cash flow Q4 2022 495,195 (227,483) 16,508 284,220 (157,849) (11,456) 114,915 Q4 2021 250,352 58,782 13,039 322,173 (119,002) (26,805) 176,366 2022 1,814,220 (216,869) 37,514 1,634,865 (528,056) (23,761) 1,083,048 2021 834,453 56,884 28,525 919,862 (339,390) (35,406) 545,066 Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, a capital measure disclosed above. ($M) Current assets Current derivative asset Current liabilities Current lease liability Current derivative liability Adjusted working capital As at Dec 31, 2022 714,446 (162,843) (892,045) 19,486 55,845 (265,111) Dec 31, 2021 472,845 (19,321) (746,813) 15,032 268,973 (9,284) Capital expenditures: Calculated as the sum of drilling and development costs and exploration and evaluation costs from the Consolidated Statements of Cash Flows and most directly comparable to cash flows used in investing activities. We consider capital expenditures to be a useful measure of our investment in our existing asset base. Capital expenditures are also referred to as E&D capital. ($M) Drilling and development Exploration and evaluation Capital expenditures Q4 2022 157,849 11,456 169,305 Q4 2021 119,002 26,805 145,807 2022 528,056 23,761 551,817 2021 339,390 35,406 374,796 Operating netback: Most directly comparable to net earnings and 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. Payout and payout % of FFO: A non-GAAP financial measure and non-GAAP ratio respectively 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. The measure is used to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining production and organic growth. The reconciliation of the measure to primary financial statement measure can be found below. Management uses payout and payout as a percentage of FFO (also referred to as the payout or sustainability ratio). ($M) Dividends Declared % of fund flows from operations Drilling and development Exploration and evaluation Asset retirement obligations settled Payout % of fund flows from operations Capital Management Measure Q4 2022 13,058 5 % 157,849 11,456 16,508 198,871 70 % Q4 2021 — — % 119,002 26,805 13,039 158,846 2022 45,769 3 % 528,056 23,761 37,514 635,100 2021 — — % 339,390 35,406 28,525 403,321 49 % 39 % 44 % Net debt: Is in accordance with IAS 1 "Presentation of Financial Statements" and is most directly comparable to long-term debt. Net debt is comprised of long-term debt (excluding unrealized foreign exchange on swapped USD borrowings) plus adjusted working capital and represents Vermilion's net financing obligations after adjusting for the timing of working capital fluctuations. Vermilion Energy Inc. ■ Page 13 ■ 2022 Annual Report ($M) Long-term debt Adjusted working capital Unrealized FX on swapped USD borrowings Net debt As at Dec 31, 2022 1,081,351 265,111 (1,876) 1,344,586 Dec 31, 2021 1,651,569 9,284 (16,067) 1,644,786 Ratio of net debt to four quarter trailing fund flows from operations 0.8 1.8 Supplementary Financial Measures Net debt to four quarter trailing fund flows from operations: Calculated as net debt (capital management measure) over the FFO (total of segments measure) from the preceding four quarters. The measure is used to assess the ability to repay debt. Dividends % of FFO: Calculated as dividends declared divided by FFO (total of segments measure). The measure is used by management as a metric to assess the cash distributed to shareholders. ($M) Dividends Declared % of fund flows from operations Drilling and development Exploration and evaluation Asset retirement obligations settled Payout % of fund flows from operations Q4 2022 13,058 5 % 157,849 11,456 16,508 198,871 70 % Q4 2021 — — % 119,002 26,805 13,039 158,846 2022 45,769 3 % 528,056 23,761 37,514 635,100 2021 — — % 339,390 35,406 28,525 403,321 49 % 39 % 44 % Fund flows from operations per boe: Calculated as FFO (total of segments measure) by boe production. Fund flows from operations per boe is used by management to assess the profitability of our business units and Vermilion as a whole. Vermilion Energy Inc. ■ Page 14 ■ 2022 Annual Report Management's Discussion and Analysis The following is Management’s Discussion and Analysis (“MD&A”), dated March 8, 2023, of Vermilion Energy Inc.’s (“Vermilion”, “we”, “our”, “us” or the “Company”) operating and financial results as at and for the three months and year ended December 31, 2022 compared with the corresponding periods in the prior year. This discussion should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022 and 2021, together with the accompanying notes. Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR at www.sedar.com or on Vermilion’s website at www.vermilionenergy.com. The audited consolidated financial statements for the year ended December 31, 2022 and comparative information have been prepared in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS” or, alternatively, “GAAP”) as issued by the International Accounting Standards Board ("IASB"). This MD&A includes references to certain financial and performance measures which do not have standardized meanings prescribed by IFRS. These measures include: • • • • • Fund flows from operations: Fund flows from operations (FFO) is a total of segments measure most directly comparable to net earnings and is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized loss on derivatives, realized foreign exchange gain (loss), and realized other income. 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. A reconciliation to Net Earnings can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A. Free cash flow: Free cash flow (FCF) is a non-GAAP financial measure most directly comparable to Cash flows used in investing activities and is comprised of FFO less drilling and development costs and exploration and evaluation costs. The measure is used 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. A reconciliation to Cash flows used in investing activities can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A. Net debt: Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and 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. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. A reconciliation to long term-debt can be found within the "Financial Position Review" section of this MD&A. Operating Netbacks: Operating Netbacks is a non-GAAP financial measure most directly comparable to net earnings and 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. A reconciliation to the primary financial statement measures can be found within "Supplemental Table 1: Netbacks" of this MD&A. Fund flows from operations per boe: Fund flows from operations per boe includes general and administration expense. Fund flows from operations netback is used by management to assess the profitability of our business units and Vermilion as a whole. A reconciliation to the primary financial statement measures can be found within "Supplemental Table 1: Netbacks" of this MD&A. In addition, 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. Vermilion Energy Inc. ■ Page 15 ■ 2022 Annual Report Guidance On November 29, 2021, we released our 2022 capital budget and associated production guidance. On March 28, 2022, we increased our 2022 capital expenditure guidance to $500 million and our 2022 annual production guidance to 86,000 to 88,000 boe/d to reflect the post-closing impact of the acquisition of Leucrotta Exploration Inc. On August 11, 2022, as a result of forest fire related downtime in France and offshore drilling delays in Australia, combined with inflationary pressure, we increased our 2022 budget by $50 million to $550 million. The following table summarizes our 2022 guidance: Date Capital Expenditures ($MM) Production (boe/d) 2022 Guidance 2022 Guidance 2022 Guidance 2022 Guidance 2022 Actual Results November 29, 2021 March 28, 2022 August 11, 2022 March 8, 2023 425 500 550 552 83,000 - 85,000 86,000 - 88,000 86,000 - 88,000 85,187 On January 6, 2023, we released our 2023 capital budget and associated production guidance. Our 2023 guidance assumes the Corrib acquisition will close on March 31, 2023. On March 8, 2023, we decreased annual production guidance to 82,000 to 86,000 boe/d to reflect the southeast Saskatchewan asset sale and unplanned downtime in Australia, and decreased operating expense guidance to reflect the southeast Saskatchewan asset sale and lower European gas prices. Revisions to other guidance items reflect the assumptions used in management's most recent forecast. The Company's guidance for 2023 is as follows: Category Production (boe/d) E&D Capital Expenditures ($MM) Royalty rate (%) (2) Operating ($/boe) Transportation ($/boe) General and administration ($/boe) Cash taxes (% of pre-tax FFO) Windfall tax (% of pre-tax FFO) (3) Prior (1) 87,000 - 91,000 570 8 - 10% $17.50 - 18.50 $2.75 - 3.25 $2.00 - 2.50 11 - 13% 14 - 16% Revised (1) 82,000 - 86,000 570 9 - 11% $16.50 - 17.50 $3.00 - 3.50 $2.00 - 2.50 7 - 9% 12 - 14% (1) Revised 2023 guidance reflects foreign exchange assumptions of CAD/USD 1.35, CAD/EUR 1.45, and CAD/AUD 0.92. Prior 2023 guidance reflected foreign exchange assumptions of CAD/USD 1.36, CAD/EUR 1.46, and CAD/AUD 0.92. Royalty rate guidance excludes windfall royalties paid as part of the European Solidarity Contribution. (2) (3) Windfall tax guidance is based on forward prices as at February 27, 2023 (prior as at December 30, 2022), and incorporates all forms of solidarity payments including windfall taxes and windfall royalties net of tax. Vermilion Energy Inc. ■ Page 16 ■ 2022 Annual Report 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. Vermilion Energy Inc. ■ Page 17 ■ 2022 Annual Report 2022 production of 85,187 boe/dNorth America: 68%International: 32%2022 capital expenditures of $551.8MMNorth America: 61%International: 39%2022 fund flows from operations of $1,634.9MMNorth America: 40%International: 60%Consolidated Results Overview Production (1) Crude oil and condensate (bbls/d) NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) (Draw) build in inventory (mbbls) Financial metrics Fund flows from operations ($M) (2) Per share ($/basic share) Net earnings ($M) Per share ($/basic share) Cash flows from operating activities ($M) Free cash flow ($M) (3) Long-term debt ($M) Net debt ($M) (4) Activity Capital expenditures ($M) (5) Acquisitions ($M) (6) Q4 2022 Q4 2021 Q4/22 vs. Q4/21 2022 2021 2022 vs. 2021 38,915 7,497 234.23 85,450 (242) 36,264 8,461 238.16 84,417 (144) 7% (11)% (2)% 1% 37,530 7,961 238.18 85,187 39 38,143 8,325 233.64 85,408 44 284,220 1.74 395,408 2.42 495,195 114,915 322,173 1.99 344,588 2.12 250,352 176,366 1,081,351 1,651,569 1,344,586 1,644,786 919,862 (12)% 1,634,865 5.71 (13)% 10.00 1,313,062 1,148,696 15% 7.13 8.03 14% 834,453 98% 1,814,220 (35)% 1,083,048 545,066 (35)% 1,081,351 1,651,569 (18)% 1,344,586 1,644,786 169,305 4,558 145,807 23,633 16% 551,817 539,713 374,796 130,965 (2)% (4)% 2% —% 78% 75% 14% 13% 117% 99% (35)% (18)% 47% (1) (2) (3) (4) (5) (6) Please refer to Supplemental Table 4 "Production" for disclosure by product type. Fund flows from operations (FFO) and FFO per share are a total of segments measure and supplementary financial measure respectively most directly comparable to net earnings and net earnings per share, respectively. The measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. FFO is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, and realized loss (gain) on derivatives, plus realized gain (loss) on foreign exchange and realized other income. 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. A reconciliation to the primary financial statement measures can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A. Free cash flow (FCF) is a non-GAAP financial measure most directly comparable to cash flows from operating activities; it does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. FCF is comprised of fund flows from operations less drilling and development costs and exploration and evaluation costs. The measure is used 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. A reconciliation to primary financial statement measures can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A. Net debt is a capital management measure in accordance with IAS 1 "Presentation of Financial Statements" and 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. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. A reconciliation to the primary financial statement measures can be found within the "Financial Position Review" section of this MD&A. Capital expenditures is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The measure is calculated as the sum of drilling and development costs and exploration and evaluation costs 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. A reconciliation to the primary financial statement measures can be found within the "Non-GAAP and Other Specified Financial Measures" section of this MD&A. Acquisitions is a non-GAAP financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The measure is calculated as the sum of acquisitions 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 plus or net of 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. A reconciliation to the acquisitions line item in the Consolidated Statements of Cash Flows can be found in "Supplemental Table 3: Capital Expenditures and Acquisitions" section of this MD&A. Vermilion Energy Inc. ■ Page 18 ■ 2022 Annual Report Financial performance review Q4 2022 vs. Q4 2021 • We recorded net earnings of $395.4 million ($2.42/basic share) for Q4 2022 compared to $344.6 million ($2.12/basic share) in Q4 2021. The increase in net earnings was primarily due to a change in the position of unrealized derivative loss in Q4 2022 by $377.4 million driven by changes in our mark-to-market position and settlements. This was partially offset by deferred taxes resulting from increased taxable income and lower fund flows from operations as the full year impact of 2022 windfall taxes ($222.9 million) was accrued in Q4, 2022. Vermilion Energy Inc. ■ Page 19 ■ 2022 Annual Report "Other" contains equity based compensation, accretion, depletion & depreciation, and unrealized other$MMNet earnings of $395.4MM in Q4 2022 compared to $344.6MM in Q4 2021$344.6$322.9$(181.9)$(38.0)$(23.9)$(23.7)$(4.6)$395.4Q4 2021Unrealized derivatives, foreign exchangeDeferred taxFund flows from operationsImpairment reversalDepletion and depreciationOtherQ4 2022300400500600700• We generated cash flows from operating activities of $495.2 million in Q4 2022 compared to $250.4 million in Q4 2021 and fund flows from operations of $284.2 million in Q4 2022 compared to $322.2 million in Q4 2021. The decrease in fund flows from operations was primarily due to the recognition of the full year impact of 2022 windfall taxes ($222.9 million) in Q4 2022. These decreases were partially offset by higher commodity prices. The variance between cash flows from operating activities and fund flows from operations is primarily due to non-cash working capital impacts of the windfall taxes payable. 2022 vs. 2021 Vermilion Energy Inc. ■ Page 20 ■ 2022 Annual Report "Pricing net of derivatives" contains pricing variance on sales volumes (WTI, AECO, Dated Brent & TTF and NBP) and realized derivatives. "Sales volume" is the sum of sales volume variance in all regions. "Other" contains general and administration, interest, realized foreign exchange, and other realized income.$MMIncreased cash flows from operating activities on working capital timing and decreased FFO driven by windfall taxes$322.2$252.2$7.6$(222.9)$(36.0)$(29.7)$(9.2)$284.2$250.4$495.2Cash flows from operating activitiesQ4 2021 - FFOPricing net of derivativesOtherWindfall taxesRoyalties, transportation and operating expenseSales volumeTaxesQ4 2022 - FFO100200300400500600700"Other" contains equity based compensation, depletion and depreciation, and unrealized other$MMNet earnings of $1,313.1MM in 2022 compared to $1,148.7MM in 2021$1,148.7$715.0$702.4$(1,110.5)$(101.4)$(17.2)$(14.6)$(9.3)$1,313.12021Fund flows from operationsUnrealized derivatives, foreign exchangeImpairment reversalDeferred taxGain on business combinationsAccretionOther20221,0001,2001,4001,6001,8002,0002,2002,4002,600• For the year ended December 31, 2022, we recorded net earnings of $1,313.1 million compared $1,148.7 million for the comparable period in 2021. The increase in net earnings was primarily due to higher fund flows from operations driven by increased consolidated realized pricing and changes in our unrealized derivative position of $721.9 million driven by changes in the mark-to-market position. The increases were partially offset by lower impairment reversals recorded in 2022 of $144.4 million (net of $47.7 million deferred income tax expense), compared to impairment reversals recorded in 2021 of $987.1 million (net of $315.5 million deferred income tax expense). • For the year ended December 31, 2022 as compared to 2021, cash flows from operating activities increased by $979.8 million to $1,814.2 million and fund flows from operations increased by $715.0 million to $1,634.9 million. The increase in fund flows from operations were primarily driven by a 68% increase in our consolidated realized price from $66.81/boe to $111.95/boe and were partially offset by increased contributions to the jurisdictions we operate in the form of windfall taxes, increased current taxes, and increased royalties. The variance between cash flows from operating activities and fund flows from operations is primarily driven by non-cash working capital impact of the windfall taxes payable. Production review Q4 2022 vs. Q4 2021 • Consolidated average production of 85,450 boe/d in Q4 2022 increased slightly compared to Q4 2021 production of 84,417 boe/d. Production increased in Germany and Canada due to acquisitions in 2021 and 2022, respectively, as well as in Australia primarily due to new wells coming online in 2022. The increases were partially offset by natural decline in the Netherlands, France, and Ireland. 2022 vs. 2021 • Consolidated average production of 85,187 boe/d in the year ended December 31, 2022 decreased slightly from 85,408 boe/d in the prior year comparative period. Production decreased in the Netherlands, France, and Ireland primarily due to natural decline. This was partially offset by an increase in Canada, Germany and the United States primarily due to acquisition activity in 2021 and 2022. Activity review • • For the three months ended December 31, 2022, capital expenditures of $169.3 million were incurred. In our North America core region, we incurred capital expenditures of $113.9 million. In Canada, capital expenditures totaled $111.5 million as we drilled seven (5.5 net) wells, completed ten (6.9 net) wells, and brought on production twelve (6.7 net) wells in southeast Saskatchewan, and Vermilion Energy Inc. ■ Page 21 ■ 2022 Annual Report "Pricing net of derivatives" contains pricing variance on sales volumes (WTI, AECO, Dated Brent & TTF and NBP) and realized derivatives. "Sales volume" is the sum of sales volume variance in all regions. "Other" contains general and administration, interest, realized foreign exchange, and other realized income.$MMCash flows from operating activities and funds flow from operations increased on stronger commodity prices$919.9$1,346.4$(222.9)$(197.7)$(180.6)$(28.2)$(2.0)$1,634.9$834.5$1,814.2Cash flows from operating activities2021 - FFOPricing net of derivativesWindfall taxesRoyalties, transportation, operating expenseTaxesSales volumeOther2022 - FFO8001,0001,2001,4001,6001,8002,0002,200• drilled twelve (10.6 net), completed ten (8.2 net), and brought on production seven (6.9 net) Mannville liquids-rich gas wells, we drilled one (1.0 net) Mica well, and brought on production the wells on our first 6.0 (6.0 net) well Montney pad in Alberta. In the United States, $2.4 million was incurred primarily related to preparation for the 2023 drilling program which will commence in Q2 2023. In our International core region, capital expenditures of $55.4 million were incurred during Q4 2022. Our activities included $15.7 million incurred in France primarily on facilities and subsurface maintenance activities, $14.2 million incurred in the Netherlands primarily on drilling activities, and $10.1 million incurred in Germany primarily on drilling and facilities activity along with various other costs associated with support work for our Q4 2022 drilling campaign in Europe. Financial sustainability review Free cash flow • Free cash flow of $1,083.0 million increased by $538.0 million for the year ended December 31, 2022 compared to the prior year period which was primarily driven by increased fund flows from operations on higher realized prices, partially offset by higher expenditure on drilling and development activities. Long-term debt and net debt • Long-term debt decreased to $1.1 billion as at December 31, 2022 from $1.7 billion as at December 31, 2021 as a result of net repayments of $622.8 million, partially offset by unrealized foreign exchange losses of $50.8 million due to the US dollar strengthening. Net debt as at December 31, 2022 decreased to $1.3 billion from $1.6 billion at December 31, 2021 primarily due to decreases in long-term debt, partially offset by increases in income taxes payable as a result of $222.9 million of windfall taxes in Q4 2022. The ratio of net debt to four quarter trailing fund flows from operations(1) decreased to 0.8 as at December 31, 2022 (December 31, 2021 - 1.8) primarily due to higher four quarter trailing fund flows from operations. • • (1) Net debt to four quarter trailing fund flows from operations is a supplementary financial measure that does not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. It is calculated as net debt (capital measure) over the FFO from the preceding 4 quarters (total of segments measure). The measure is used to assess our ability to repay debt. Vermilion Energy Inc. ■ Page 22 ■ 2022 Annual Report Benchmark Commodity Prices Crude oil WTI ($/bbl) WTI (US $/bbl) Edmonton Sweet index ($/bbl) Edmonton Sweet index (US $/bbl) Saskatchewan LSB index ($/bbl) Saskatchewan LSB index (US $/bbl) Canadian C5+ Condensate index ($/bbl) Canadian C5+ Condensate index (US $/bbl) Dated Brent ($/bbl) Dated Brent (US $/bbl) Natural gas North America AECO 5A ($/mcf) Henry Hub ($/mcf) Henry Hub (US $/mcf) Europe(1) NBP Day Ahead ($/mmbtu) NBP Month Ahead ($/mmbtu) NBP Day Ahead (€/mmbtu) NBP Month Ahead (€/mmbtu) TTF Day Ahead ($/mmbtu) TTF Month Ahead ($/mmbtu) TTF Day Ahead (€/mmbtu) TTF Month Ahead (€/mmbtu) Average exchange rates CDN $/US $ CDN $/Euro Realized prices Crude oil and condensate ($/bbl) NGLs ($/bbl) Natural gas ($/mcf) Total ($/boe) (1) Q4 2022 Q4 2021 Q4/22 vs. Q4/21 2022 2021 2022 vs. 2021 112.24 82.65 109.85 80.89 106.05 78.09 113.19 83.35 120.47 88.71 4.64 8.50 6.26 26.09 43.51 18.82 31.38 38.36 49.98 27.67 36.05 97.21 77.19 93.30 74.09 92.90 73.77 99.65 79.13 100.40 79.73 4.66 7.34 5.83 37.76 41.00 26.21 28.46 38.86 40.25 26.97 27.94 16% 7% 18% 9% 14% 6% 14% 5% 20% 11% —% 16% 7% (31)% 6% (28)% 10% (1)% 24% 3% 29% 1.36 1.39 1.26 1.44 8% (4)% 122.62 94.23 120.25 92.41 118.22 90.85 121.96 93.72 131.68 101.19 5.25 8.67 6.66 31.78 41.44 23.21 30.26 48.35 52.59 35.30 38.40 1.30 1.37 115.02 39.93 17.43 103.99 96.88 47.27 17.89 96.82 19% (16)% (3)% 7% 123.89 45.95 18.99 111.95 85.14 67.92 80.27 64.03 80.12 63.91 85.50 68.20 88.67 70.73 3.62 4.82 3.85 19.62 20.61 13.22 13.89 19.86 20.35 13.39 13.72 1.25 1.48 83.78 34.44 9.53 66.81 44% 39% 50% 44% 48% 42% 43% 37% 49% 43% 45% 80% 73% 62% 101% 76% 118% 144% 158% 164% 180% 4% (7)% 48% 33% 99% 68% NBP and TTF pricing can occur on a day-ahead ("DA") or month-ahead ("MA") basis. DA prices in a period reflect the average current day settled price on the next days' delivery and MA prices in a period represent daily one month futures contract prices which are determined at the end of each month. In a rising price environment, the DA price will tend to be greater than the MA price and vice versa. Natural gas in the Netherlands and Germany is benchmarked to the TTF and production is generally equally split between DA and MA contracts. Natural gas in Ireland is benchmarked to the NBP and is sold on DA contracts. 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. Vermilion Energy Inc. ■ Page 23 ■ 2022 Annual Report • • • • • • Crude oil prices increased in Q4 2022 relative to Q4 2021 as reduced spare capacity and increased geopolitical supply risks outweighed the incremental demand concerns regarding tighter monetary policies and global recession risks. Canadian dollar WTI and Brent prices rose 16% and 20%, respectively in Q4 2022 relative to Q4 2021. In Canadian dollar terms, year-over-year, the Edmonton Sweet differential narrowed by $1.42/bbl to a discount of $2.49/bbl against WTI, and the Saskatchewan LSB differential widened by $1.88/bbl to a discount of $6.19/bbl against WTI. Approximately 39% of Vermilion’s Q4 2022 crude oil and condensate production was priced at the Dated Brent index, which averaged a premium to WTI of US$6.06/bbl, while the remainder of our crude oil and condensate production was priced at the Saskatchewan LSB, Canadian C5+, Edmonton Sweet, and WTI indices. In Canadian dollar terms, year-over-year, prices for European natural gas linked to NBP and TTF decreased by 31% and 1% respectively on a day-ahead basis. On a month ahead basis, NBP and TTF rose by 6% and 24% respectively. While prices were off their Q3 2022 highs, they remained slightly elevated compared to historical trends due to Russian pipeline supply decreases, elevated winter risk premium, and requirement to attract increased LNG imports. Natural gas prices in Canadian dollar terms at NYMEX HH increased by 16% while AECO remained flat. NYMEX HH prices benefited from temporary weather related demand increases and limited production growth in the second half of 2022. AECO year-over-year price changes were limited compared to NYMEX as basis widened on high WCSB production growth and storage levels returning to within their 5 year range levels. For Q4 2022, average European natural gas prices represented a $34.85/mcf premium to AECO. Approximately 34% of our natural gas production in Q4 2022 benefited from this premium European pricing. Vermilion Energy Inc. ■ Page 24 ■ 2022 Annual Report $/bblQ4 2022 realized crude oil and condensate price was a $5.17/bbl premium to Edmonton Sweet IndexDated Brent (39% of Q4 2022 sales volumes)WTI (8% of Q4 2022 sales volumes)Canadian C5+ (11% of Q4 2022 sales volumes)Crude oil and condensate realized priceSaskatchewan LSB (34% of Q4 2022 sales volumes)Edmonton Sweet index (8% of Q4 2022 sales volumes)Q4 2021Q1 2022Q2 2022Q3 2022Q4 202270.0080.0090.00100.00110.00120.00130.00140.00150.00$/mcfQ4 2022 realized natural gas price was a $12.79/mcf premium to AECONBP DA (11% of Q4 2022 sales volumes)TTF DA (23% of Q4 2022 sales volumes)Natural gas realized priceHenry Hub (3% of Q4 2022 sales volumes)AECO (5A) (63% of Q4 2022 sales volumes)Q4 2021Q1 2022Q2 2022Q3 2022Q4 20220.0010.0020.0030.0040.0050.0060.0070.0080.00• • For the three months ended December 31, 2022, the Canadian dollar strengthened 4% against the Euro compared to Q4 2021. For the three months ended December 31, 2022, the Canadian dollar weakened 8% against the US Dollar compared to Q4 2021. Vermilion Energy Inc. ■ Page 25 ■ 2022 Annual Report CDN $/FXThe Canadian dollar strengthened slightly versus the Euro and weakened slightly versus the US Dollar in Q4 2022 compared to Q4 2021CDN $/EuroCDN $/US $Q4 2021Q1 2022Q2 2022Q3 2022Q4 20221.201.301.401.501.60North America Production (1) Crude oil and condensate (bbls/d) NGLs (bbls/d) Natural gas (mmcf/d) Total production volume (boe/d) (1) Q4 2022 Q4 2021 2022 2021 25,291 7,497 154.26 58,499 23,846 8,461 137.93 55,295 24,393 7,961 151.30 57,571 24,390 8,325 144.87 56,858 Please refer to Supplemental Table 4 "Production" for disclosure by product type. Sales Royalties Transportation Operating General and administration (1) Corporate income tax expense (1) Fund flows from operations Drilling and development Free cash flow (1) Includes amounts from Corporate segment. Q4 2022 $M 360,295 (50,945) (13,014) (72,694) 513 (712) 223,443 (113,892) 109,551 $/boe 66.95 (9.47) (2.42) (13.51) 0.10 (0.13) 41.52 Q4 2021 $M 305,054 (47,119) (9,447) (59,425) (10,224) 2,140 180,979 (89,643) 91,336 2022 $M $/boe 59.97 1,510,517 (240,432) (9.26) (45,467) (1.86) (268,271) (11.68) (20,651) (2.01) (1,011) 0.42 934,685 35.58 (338,556) 596,129 2021 $M $/boe 71.88 1,014,190 (144,398) (11.44) (2.16) (40,100) (232,370) (12.77) (27,887) (0.98) 1,451 (0.05) 570,886 44.48 (222,782) 348,104 $/boe 48.87 (6.96) (1.93) (11.20) (1.34) 0.07 27.51 Production from our North American operations averaged 58,499 boe/d in Q4 2022, an increase of 2% from the prior quarter primarily due to new well production from our Montney assets in Canada and a full quarter contribution from our 2022 drilling program in the United States. In Alberta, we drilled twelve (10.6 net), completed ten (8.2 net), and brought on production seven (6.9 net) Mannville liquids rich gas wells, while at Mica we drilled one (1.0 net) well and brought on production the six (6.0 net) wells from our first Montney pad. The six well Montney pad was brought on production in late November and saw rates increase through the balance of the year as the wells cleaned up. Total production from our Montney assets averaged 7,500 boe/d during the month of December. In December, drilling commenced on a follow up three-well pad in Alberta which is expected to be completed and tied in during the first half of 2023. During the fourth quarter we received three permits in British Columbia, including one of the permits to construct a 16,000 boe/d battery and drill a multi-well pad in British Columbia. We also signed agreements to acquire 11 sections of adjacent land at Mica, further consolidating our contiguous land base and increasing our Tier 1 inventory. In Saskatchewan, we drilled seven (5.5 net) wells, completed ten (6.9 net) wells, and brought on production twelve (6.7 net) wells in southeast Saskatchewan. No drilling or completion activity occurred in the United States in the fourth quarter as the team focused on preparation for the 2023 drilling program which will commence in Q2 2023. Sales Canada United States North America Q4 2022 $M 315,897 44,398 360,295 $/boe 65.13 83.51 66.95 Q4 2021 $M 270,600 34,454 305,054 2022 $M $/boe 59.16 1,344,284 67.18 166,233 59.97 1,510,517 2021 $M $/boe 901,775 70.33 87.46 112,415 71.88 1,014,190 $/boe 47.54 62.98 48.87 Sales in North America increased on a dollar and per unit basis for the three months and year ended December 31, 2022 versus the comparable prior periods due to significantly higher realized prices across all products coupled with slightly higher production primarily related to acquisition activity. Vermilion Energy Inc. ■ Page 26 ■ 2022 Annual Report Royalties Canada United States North America Q4 2022 $M (38,747) (12,198) (50,945) $/boe (7.99) (22.94) (9.47) Q4 2021 $M (37,064) (10,055) (47,119) $/boe (8.10) (19.60) (9.26) 2022 $M (196,005) (44,427) (240,432) $/boe (10.26) (23.38) (11.44) 2021 $M (113,651) (30,747) (144,398) $/boe (5.99) (17.23) (6.96) Royalties in North America increased on a dollar and per unit basis for the three months and year ended December 31, 2022 versus the comparable prior periods primarily due to increased sliding scale royalties driven by higher commodity prices. Royalties as a percentage of sales for the three months and year ended December 31, 2022 were 14.1% and 15.9%, respectively, compared to the prior year comparative periods of 15.4% and 14.2% respectively. Transportation Canada United States North America Q4 2022 $M (12,919) (95) (13,014) $/boe (2.66) (0.18) (2.42) Q4 2021 $M (9,134) (313) (9,447) $/boe (2.00) (0.61) (1.86) 2022 $M (44,849) (618) (45,467) $/boe (2.35) (0.33) (2.16) 2021 $M (38,764) (1,336) (40,100) $/boe (2.04) (0.75) (1.93) Transportation expense in North America increased on a dollar and per boe basis for the three months and year ended December 31, 2022 versus the comparable prior period primarily due to increased tariffs in Saskatchewan beginning in mid-2022. Operating expense Canada United States North America Q4 2022 $M (63,305) (9,389) (72,694) $/boe (13.05) (17.66) (13.51) Q4 2021 $M (54,695) (4,730) (59,425) $/boe (11.96) (9.22) (11.68) 2022 $M (240,899) (27,372) (268,271) $/boe (12.60) (14.40) (12.77) 2021 $M (215,378) (16,992) (232,370) $/boe (11.35) (9.52) (11.20) Operating expenses in North America increased on a dollar basis and per boe basis for the three months and year ended December 31, 2022 versus the comparable prior periods. In Canada, increases during the three months ended December 31, 2022 were primarily the result of an increase in downhole, trucking and project expenses related to our Mica assets, as well as processing fees due to higher plant rates in Saskatchewan. Increases during the year ended December 31, 2022 were primarily the result of acquisition activity, planned maintenance, and downhole costs. In the United States, increases during the three months and year ended December 31, 2022 were primarily downhole costs and inflationary pressures. Vermilion Energy Inc. ■ Page 27 ■ 2022 Annual Report International Production (1) Crude oil and condensate (bbls/d) Natural gas (mmcf/d) Total production volume (boe/d) Total sales volume (boe/d) (1) Q4 2022 Q4 2021 2022 2021 13,624 79.97 26,953 29,585 12,419 100.22 29,123 30,689 13,135 86.88 27,616 27,506 13,753 88.77 28,548 28,430 Please refer to Supplemental Table 4 "Production" for disclosure by product type. Sales Royalties Transportation Operating General and administration Corporate income tax expense PRRT Fund flows from operations Drilling and development Exploration and evaluation Free cash flow $/boe 177.23 (6.38) (3.29) (23.35) (5.09) (15.15) (1.85) 122.12 Q4 2022 $M 482,398 (17,358) (8,962) (63,553) (13,857) (41,246) (5,045) 332,377 (43,957) (11,456) 276,964 Q4 2021 $M $/boe 2022 $M 460,861 (11,666) (9,586) (53,255) (7,150) (34,374) (5,544) 339,286 (29,359) (26,805) 283,122 (4.13) (3.40) (18.86) (2.53) (12.17) (1.96) 163.23 1,965,877 (65,585) (33,429) (220,763) (37,026) (207,142) (18,318) 120.18 1,383,614 (189,500) (23,761) 1,170,353 2021 $M (6.53) (3.33) (21.99) (3.69) (20.63) (1.82) 137.82 $/boe 195.81 1,065,571 (41,724) (37,061) (180,643) (24,990) (31,617) (15,688) 733,848 (116,608) (35,406) 581,834 $/boe 102.69 (4.02) (3.57) (17.41) (2.41) (3.05) (1.51) 70.72 Production from our International operations averaged 26,953 boe/d in Q4 2022, a decrease of 1% from the prior quarter, primarily due to natural decline in Netherlands and Germany, as well as lower than anticipated production in Australia due to unplanned downtime. This was largely offset by higher production in France and Ireland. Production from the fire-related downtime in France was gradually restored through the fourth quarter of 2022 and has been fully restored subsequent to year end. Ireland production increased 1% in Q4 2022 compared to the previous quarter as the Corrib facility experienced strong operational run time during the quarter. During the fourth quarter we drilled one (1.0 net) oil well in Germany, which was brought on production in Q1 2023. We also continued to advance our deep well gas exploration and development plans in Germany as we prepare for our first well to be drilled in the fourth quarter of 2023. In the Netherlands, we drilled one (0.5 net) gas well which encountered a 19 metre gas column and is expected to be brought on production in the first half of 2023. We drilled two (2.0 net) exploratory wells in Croatia, however, neither of the wells encountered commercial hydrocarbons. Sales Australia France Netherlands Germany Ireland Central and Eastern Europe International Q4 2022 $M 95,420 77,910 119,668 121,011 64,753 3,636 482,398 $/boe 139.95 119.68 281.75 218.13 162.16 356.05 177.23 Q4 2021 $M 40,332 79,809 165,370 65,623 109,352 375 460,861 $/boe 112.26 100.18 205.17 164.96 236.78 203.80 163.23 2022 $M 221,187 365,431 562,857 481,260 324,345 10,797 1,965,877 $/boe 148.15 132.90 279.87 231.34 194.05 313.02 195.81 2021 $M 143,014 279,263 295,723 131,935 214,425 1,211 1,065,571 $/boe 103.01 88.15 110.47 98.06 120.51 65.06 102.69 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. Vermilion Energy Inc. ■ Page 28 ■ 2022 Annual Report Crude oil sales volumes (bbls/d) Australia France Germany International Q4 2022 7,411 7,076 1,721 16,208 Q4 2021 3,905 8,659 1,324 13,888 2022 4,090 7,533 1,337 12,960 2021 3,804 8,680 1,051 13,535 Sales increased on a dollar and per boe basis for the three months and year ended December 31, 2022 versus the comparable prior periods due to higher realized prices across Australia, France, Netherlands, Germany and Central and Eastern Europe business units and higher sales volume in Australia and Germany due to new wells coming online and acquisition activity. These increases were partially offset by lower realized price for the three month period in Ireland and lower sales volumes in France, Netherlands, and Ireland, due to natural decline combined with the timing of liftings in France. Royalties France Netherlands Germany Central and Eastern Europe International Q4 2022 $M (9,294) (512) (6,403) (1,149) (17,358) $/boe (14.28) (1.21) (11.54) (112.51) (6.38) Q4 2021 $M (10,174) (419) (909) (164) (11,666) $/boe (12.77) (0.52) (2.29) (89.13) (4.13) 2022 $M (40,353) (512) (21,232) (3,488) (65,585) $/boe (14.68) (0.25) (10.21) (101.12) (6.53) 2021 $M (37,666) (873) (2,847) (338) (41,724) $/boe (11.89) (0.33) (2.12) (18.16) (4.02) Royalties in our International core region are primarily incurred in France and Germany, where royalties 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 and year ended December 31, 2022 versus the comparable prior periods primarily due to higher sales prices. Royalties as a percentage of sales for the three months ended December 31, 2022 of 3.6% increased versus the comparable prior period of 2.5% primarily due to an increase in royalty rate in Germany. Royalties as a percentage of sales for the year ended December 31, 2022 of 3.3% decreased versus the prior year comparable period of 3.9% primarily due to higher sales in business units that are not subject to royalties. Transportation France Germany Ireland International Q4 2022 $M (4,589) (3,621) (752) (8,962) $/boe (7.05) (6.53) (1.88) (3.29) Q4 2021 $M (6,574) (2,076) (936) (9,586) $/boe (8.25) (5.22) (2.03) (3.40) 2022 $M (20,100) (9,751) (3,578) (33,429) $/boe (7.31) (4.69) (2.14) (3.33) 2021 $M (26,497) (6,359) (4,205) (37,061) $/boe (8.36) (4.73) (2.36) (3.57) Transportation expense decreased for the three months and year ended December 31, 2022 versus the comparable prior periods. This was primarily due to the lower volume of liftings in France, partially offset by increased volumes in Germany. On a per unit basis, transportation expense remained relatively flat versus prior year comparable periods. Our production in Australia, Netherlands and Central and Eastern Europe is not subject to transportation expense. Vermilion Energy Inc. ■ Page 29 ■ 2022 Annual Report Operating expense Australia France Netherlands Germany Ireland Central and Eastern Europe International Q4 2022 $M (21,291) (12,638) (11,229) (13,292) (4,687) (416) (63,553) $/boe (31.23) (19.41) (26.44) (23.96) (11.74) (40.74) (23.35) Q4 2021 $M (15,918) (14,242) (11,449) (7,323) (4,107) (216) (53,255) $/boe (44.31) (17.88) (14.20) (18.41) (8.89) (117.39) (18.86) 2022 $M (57,478) (57,588) (45,903) (41,523) (16,580) (1,691) (220,763) $/boe (38.50) (20.94) (22.82) (19.96) (9.92) (49.03) (21.99) 2021 $M (50,748) (52,147) (35,269) (27,149) (14,889) (441) (180,643) $/boe (36.55) (16.46) (13.17) (20.18) (8.37) (23.69) (17.41) For the three months ended December 31, 2022 versus the prior comparable period, operating expense increased on a dollar and per boe basis primarily due to asset integrity costs in Australia, increased maintenance activity and electricity charges in Germany, partially offset by a decrease in France due to a rate recovery on previous period electricity charges. Operating expense increased on a dollar and per boe basis for the year ended December 31, 2022 versus the prior year comparable period primarily due to the impact of higher fuel and electricity prices in Europe and increased costs in Germany due to 2021 acquisition activity. Vermilion Energy Inc. ■ Page 30 ■ 2022 Annual Report Consolidated Financial Performance Review ($M except per share) Total assets Long-term debt Petroleum and natural gas sales Net earnings (loss) Net earnings (loss) per share Basic Diluted Cash dividends ($/share) Financial performance Dec 31, 2022 Dec 31, 2021 6,991,058 1,081,351 3,476,394 1,313,062 5,905,323 1,651,569 2,079,761 1,148,696 Dec 31, 2020 4,109,139 1,933,848 1,119,545 (1,517,427) 8.03 7.80 0.28 7.13 6.97 — (9.61) (9.61) 0.58 Sales Royalties Transportation Operating General and administration Corporate income tax expense Windfall taxes PRRT Interest expense Realized loss on derivatives Realized foreign exchange gain (loss) Realized other (expense) income Fund flows from operations Equity based compensation Unrealized gain (loss) on derivative instruments (1) Unrealized foreign exchange (loss) gain (1) Accretion Depletion and depreciation Deferred tax expense Gain on business combinations Impairment reversal Unrealized other expense (1) Net earnings (1) $/boe 103.99 (8.43) (2.71) (16.81) (1.65) (5.18) (27.50) (0.62) (2.78) (5.42) 2.33 (0.14) 35.08 Q4 2022 $M 842,693 (68,303) (21,976) (136,247) (13,344) (41,958) (222,859) (5,045) (22,506) (43,940) 18,845 (1,140) 284,220 (5,377) 549,693 (47,405) (16,501) (171,926) (196,733) — — (563) 395,408 Q4 2021 $M 765,915 (58,785) (19,033) (112,680) (17,374) (32,234) — (5,544) (16,279) (189,598) (2,395) 10,180 322,173 (6,666) 172,265 7,122 (10,983) (148,216) (14,834) — 23,922 (195) 344,588 2022 $M $/boe 96.82 3,476,394 (306,017) (7.43) (78,896) (2.41) (489,034) (14.24) (57,677) (2.20) (208,153) (4.07) (222,859) — (18,318) (0.70) (82,858) (2.06) (405,894) (23.97) 15,195 (0.30) 1.29 12,982 40.73 1,634,865 (44,390) 540,801 (84,464) (58,170) (577,134) (288,707) — 192,094 (1,833) 1,313,062 2021 $M $/boe 111.95 2,079,761 (186,122) (77,161) (413,013) (52,877) (30,166) — (15,688) (73,075) (327,384) (6,613) 22,200 919,862 (41,565) (9.85) (2.54) (15.75) (1.86) (6.70) (7.18) (0.59) (2.67) (13.07) 0.49 0.42 52.65 $/boe 66.81 (5.98) (2.48) (13.27) (1.70) (0.97) — (0.50) (2.35) (10.52) (0.21) 0.71 29.54 (181,094) (64,963) (43,552) (571,688) (187,343) 17,198 1,302,619 (778) 1,148,696 Unrealized gain (loss) on derivative instruments, Unrealized foreign exchange (loss) gain, and Unrealized other expense are line items from the respective Consolidated Statements of Cash Flows. 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 • • General and administration expense decreased in Q4 2022 versus Q4 2021 primarily due to lower discretionary headcount costs. General and administration expense increased for the year ended December 31, 2022 versus the prior year comparable period primarily due to higher legal, tax, and financial advisory costs. Vermilion Energy Inc. ■ Page 31 ■ 2022 Annual Report PRRT and corporate income taxes • • PRRT remained relatively consistent for the three months ended December 31, 2022 versus the comparable prior period. PRRT increased for the year ended December 31, 2022 versus the prior year comparable period due to higher sales partially offset by higher capital expenditures in the current period. Corporate income taxes for the three months and year ended December 31, 2022 increased versus the comparable prior periods primarily due to higher taxable income as a result of increased commodity prices in 2022. Windfall taxes • On September 30, 2022 the Council of the European Union and member states agreed to a set mandatory temporary solidarity contribution on the profits of oil and gas producers. The contribution set out minimum amounts to be calculated on taxable profits starting in 2022 and/or 2023, which are above a 20% increase of the average yearly taxable profits for 2018 to 2021. Legislation became substantively enacted during the fourth quarter of 2022 resulting in a full year of windfall taxes being booked during the fourth quarter. • Windfall taxes recorded in 2022 are based on the rates legislated or, in the case of Ireland, announced as of December 31, 2022. In Netherlands, Germany, and France, a rate of 33% has been legislated on excess profits and a rate of 75% has been announced by the Irish Government. For the three months ended and year ended December 31, 2022, windfall tax expense was $222.9 million. Interest expense • Interest expense increased for the three months and year ended December 31, 2022 compared to the comparable prior periods despite lower debt levels. This was due to higher variable interest rates and an increase in the percentage of our debt with fixed interest rates following the issuance of the 2030 senior unsecured notes. Realized gain or loss on derivatives • • For the three months and year ended December 31, 2022, we recorded realized losses on our crude oil and natural gas hedges due to higher commodity pricing compared to the strike prices on our hedges. A listing of derivative positions as at December 31, 2022 is included in “Supplemental Table 2” of this MD&A. Realized other income • Realized other income for the three months and year ended December 31, 2022 decreased versus the comparable prior periods primarily due to amounts for funding under the Saskatchewan Accelerated Site Closure program to complete abandonment and reclamation on inactive oil and gas wells and facilities. Net earnings Fluctuations in net earnings 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 resulting from business combinations 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 decreased for the three months ended December 31, 2022 versus the comparable prior period primarily due to the lower value of LTIP awards outstanding in the current period. For the year ended December 31, 2022 versus the prior year comparable period, equity based compensation expense increased primarily due to higher bonuses under the employee bonus plan during 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. USD-to-CAD cross currency interest rate swaps and foreign exchange swaps may be entered into to hedge the foreign exchange movements on USD borrowings on our revolving credit facility. As such, unrealized gains and losses on our cross currency interest swaps are offset by unrealized losses and gains on foreign exchange relating to the underlying USD borrowings from our revolving credit facility. Vermilion Energy Inc. ■ Page 32 ■ 2022 Annual Report For the three months ended December 31, 2022, we recognized a net unrealized gain on derivative instruments of $549.7 million. This consists of unrealized gains of $573.4 million on our European natural gas commodity derivative instruments, $10.9 million on our North American natural gas commodity derivative instruments, and $4.2 million on our crude oil commodity derivative instruments, partially offset by unrealized losses of $21.0 million on our equity swaps and $17.8 million on our USD-to-CAD foreign exchange swaps. For the year ended December 31, 2022, we recognized a net unrealized gain on derivative instruments of $540.8 million. This consists of unrealized gains of $509.1 million on our European natural gas commodity derivative instruments, $30.4 million on our equity swaps, $9.9 million on our crude oil commodity derivative instruments, and $5.6 million on our North American natural gas commodity derivative instruments, partially offset by unrealized losses of $14.2 million on our USD-to-CAD foreign exchange swaps. 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 2022, unrealized foreign exchange gains and losses primarily resulted from: • The translation of Euro denominated intercompany loans from our international subsidiaries to Vermilion Energy Inc. An appreciation in the Euro against the Canadian dollar will result in an unrealized foreign exchange loss (and vice-versa). Under IFRS, the offsetting foreign exchange loss or gain is recorded as a currency translation adjustment within other comprehensive income. As a result, consolidated comprehensive income reflects the offsetting of these translation adjustments while net earnings reflects only the parent company's side of the translation. The translation of USD borrowings on our revolving credit facility. The unrealized foreign exchange gains or losses on these borrowings are offset by unrealized derivative gains or losses on associated USD-to-CAD cross currency interest rate swaps (discussed further below). The translation of our USD denominated 2025 senior unsecured notes and USD denominated 2030 senior unsecured notes. During the period between June 12, 2019 and May 5, 2020 the USD 2025 senior unsecured notes were hedged by a USD-to-CAD cross currency interest rate swap. Subsequent to the termination of these instruments, amounts previously recognized in the hedge accounting reserve will be recognized into earnings through unrealized foreign exchange loss over the period of the hedged cash flows. • • For the three months ended December 31, 2022, we recognized a net unrealized foreign exchange loss of $47.4 million, driven by an unrealized loss of $73.1 million on intercompany loans due to the Euro strengthening 8.0% against the Canadian dollar in Q4 2022. This was partially offset by an unrealized gain of $15.6 million on our USD borrowings from our revolving credit facility as well as an unrealized gain of $11.2 million on our senior unsecured notes resulting from the US dollar weakening 1.2% against the Canadian dollar in Q4 2022. For the year ended December 31, 2022, we recognized a net unrealized foreign exchange loss of $84.5 million, driven by an unrealized loss of $55.0 million on our senior unsecured notes resulting from the US dollar strengthening 6.8% against the Canadian dollar in 2022, as well as unrealized losses of $27.0 million on intercompany loans due to the Euro strengthening 0.5% against the Canadian dollar in 2022, with the majority of the unrealized loss driven by the significant Q4 strengthening of the Euro. This was partially offset by unrealized gains of $4.3 million on our USD borrowings from our revolving credit facility. As at December 31, 2022, a $0.01 appreciation of the Euro against the Canadian dollar would result in a $5.6 million decrease to net earnings as a result of an unrealized loss on foreign exchange, while a $0.01 appreciation of the US dollar against the Canadian dollar would result in a $5.4 million decrease to net earnings as a result of an unrealized loss on foreign exchange. Accretion Accretion expense is recognized to update the present value of the asset retirement obligation balance. For the three months and year ended December 31, 2022, accretion expense increased versus the comparable prior periods primarily due to the impact of a higher asset retirement obligation balance at the end of 2022 compared to 2021 and slight strengthening of the Euro against the Canadian dollar. 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. Vermilion Energy Inc. ■ Page 33 ■ 2022 Annual Report Depletion and depreciation on a per boe basis for the three months and year ended December 31, 2022 of $21.22 and $18.59, respectively increased from $18.74 and $18.36 in the comparable prior periods primarily due to a higher depletable base due to impairment reversals in 2021 and 2022, acquisitions, and the strengthening of the Euro against the Canadian dollar in Q4 2022. 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 months and year ended December 31, 2022, the Company recorded deferred tax expense of $196.7 million and $288.7 million, respectively, compared to deferred tax expense of $14.8 million and $187.3 million, respectively, for the comparable prior periods. The deferred tax expense for the three months ended and year ended December 31, 2022 was primarily due to loss utilization on increased taxable income, as well as the tax impact on unrealized derivative movement. Impairment Impairment losses or reversals of losses are recognized when indicators of impairment or impairment reversal arise and the carrying amount of a cash generating unit ("CGU") is greater than (impairment) or less than (impairment reversal) its recoverable amount, determined as the higher of fair value less costs of disposal or value-in-use. Subsequent to the first quarter of 2022 there were no indicators of impairment and no amounts relating to previous impairments remaining to be reversed. In the first quarter of 2022, indicators of impairment reversal were present in our Canada - Saskatchewan and France - Neocomian CGUs due to an increase in forecast oil prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $144.4 million (net of $47.7 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy. Vermilion Energy Inc. ■ Page 34 ■ 2022 Annual Report Taxes Current income tax rates Vermilion typically pays corporate income taxes in France, Netherlands, Australia and Germany. In addition, Vermilion pays PRRT in Australia which is a profit based tax applied at a rate of 40% on sales less operating expenses, capital expenditures, and other eligible expenditures. PRRT is deductible in the calculation of taxable income in Australia. For 2022 and 2021, taxable income was subject to corporate income tax at the following statutory rates: Jurisdiction Canada United States France Netherlands (1) Germany Ireland Australia (1) 2022 24.6 % 21.0 % 25.8 % 50.0 % 31.3 % 25.0 % 30.0 % 2021 24.6 % 21.0 % 27.4 % 50.0 % 31.4 % 25.0 % 30.0 % In the Netherlands, an additional 10% uplift deduction is allowed against taxable income that is applied to operating expenses, eligible general and administration expenses, and tax deductions for depletion and abandonment retirement obligations. Windfall Taxes On September 30, 2022 the Council of the European Union and member states agreed to a set mandatory temporary solidarity contribution on the profits of oil and gas producers. The contribution set out minimum amounts to be calculated on taxable profits starting in 2022 and/or 2023, which are above a 20% increase of the average yearly taxable profits for 2018 to 2021 period. Legislation became substantively enacted during the fourth quarter of 2022 resulting in a full year of windfall taxes being booked during the fourth quarter. Windfall tax rates apply to taxable profits which are above a 20% increase of the average yearly profits for the 2018 to 2021 period. The following rates have been legislated as of December 31, 2022: Jurisdiction France Netherlands (1) Germany Ireland (2) 2023 N/A N/A 33.0 % N/A 2022 33.0 % 33.0 % 33.0 % N/A (1) (2) For 2023 and 2024, Netherlands has implemented a windfall royalty. This royalty applies if annual realized pricing (net of hedges) exceeds €0.50/Nm3. This royalty is assessed annually at a rate of 65% on realized pricing (net of hedges) less €0.50/Nm3 and payments on this royalty are deductible in calculating current income taxes. As at December 31, 2022, Ireland has not legislated a windfall tax rate. A rate of 75% was announced in November 2022. Tax legislation changes On December 21, 2021, the Dutch Senate approved the 2022 Tax Plan that included an increase to the Dutch corporate tax rate from 25.0% in 2021 to 25.8% in 2022. Due to the tax regime applicable to natural gas producers in the Netherlands, the increase to the corporate tax rate is not expected to have a material impact to Vermilion taxes in the Netherlands. On December 28, 2019, the French Parliament approved the Finance Bill for 2020. The Finance Bill for 2020 provides for a progressive decrease of the French corporate income tax rate for companies with sales below €250 million from 32.0% to 25.8% by 2022. In 2021, 136 countries and jurisdictions, including Canada, agreed to implement the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two rules, effective in 2023. The proposed Pillar Two rules are designed to ensure that large multinational enterprises pay a minimum level of tax (currently agreed upon at 15%) on the income arising in each jurisdiction where they operate. The proposed rules remain subject to approval and ratification in multiple countries and jurisdictions. We are monitoring developments relating to the Pillar Two rules and implementation to assess potential impacts on Vermilion. Vermilion Energy Inc. ■ Page 35 ■ 2022 Annual Report Tax pools As at December 31, 2022, we had the following tax pools: (1) ($M) Canada United States France Netherlands Germany Ireland Australia Total (1) Deduction calculated using various declining balance rates. (2) Deduction calculated using a combination of straight-line over the assets life and unit of production method. (3) Deduction calculated using a unit of production method. (4) Tax Losses 1,374,896 208,272 — — — 803,763 15,431 2,402,362 Oil & Gas Assets 1,778,803 265,091 293,484 48,138 198,444 — 175,126 2,759,086 (2) (4) (5) (4) (1) (3) (2) (3) (4) Other 27,359 57,941 — — 16,513 — — 101,813 Total 3,181,058 531,304 293,484 48,138 214,957 803,763 190,557 5,263,261 (5) Tax losses can be carried forward and applied at 100% against taxable income. Tax losses of $47 million created prior to January 1, 2018 are carried forward and applied at 100% against taxable income, tax losses of $161 million created after January 1, 2018 are carried forward and applied to 80% of taxable income in each taxation year. Vermilion Energy Inc. ■ Page 36 ■ 2022 Annual Report Financial Position Review Balance sheet strategy We regularly review whether our forecast of fund flows from operations is sufficient to finance planned capital expenditures, dividends, share buy- backs, and abandonment and reclamation expenditures. To the extent that fund flows from operations forecasts are not expected to be sufficient to fulfill such expenditures, we will evaluate our ability to finance any shortfall by reducing some or all categories of expenditures, with issuances of equity, and/or with debt (including borrowing using the unutilized capacity of our existing revolving credit facility). We have a long-term goal of achieving and maintaining a ratio of net debt to four quarter trailing fund flows from operations of approximately 1.0. As at December 31, 2022, we have a ratio of net debt to four quarter trailing fund flows from operations of 0.8. We will continue to monitor for changes in forecasted fund flows from operations and, as appropriate, will adjust our exploration, development capital plans (and associated production targets), and return of capital plans to target optimal debt levels. Maintaining a strong balance sheet is a core principle of Vermilion and will remain a focus going forward. As debt reduction continues, we will plan to increase the amount of free cash flow that is available for the return of capital, while taking into account other capital requirements. Net debt Net debt is reconciled to long-term debt, as follows: ($M) Long-term debt Adjusted working capital deficit (1) Unrealized FX on swapped USD borrowings Net debt As at Dec 31, 2022 1,081,351 265,111 (1,876) 1,344,586 Dec 31, 2021 1,651,569 9,284 (16,067) 1,644,786 0.8 1.8 Ratio of net debt to four quarter trailing fund flows from operations (1) Adjusted working capital is a non-GAAP financial measure that is not standardized under IFRS and may not be comparable to similar measures disclosed by other issuers. It is defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, a capital measure disclosed above. Reconciliation to the primary financial statement measures can be found in the “Non-GAAP and Other Specified Financial Measures” section of this document. As at December 31, 2022, net debt decreased to $1.3 billion (December 31, 2021 - $1.6 billion), primarily as a result of debt repayments of $1,121.9 million, funded by the $1,083.0 million of free cash flow generated during 2022. This was partially offset by borrowings made to fund the Leucrotta acquisition, unrealized foreign exchange losses of $50.8 million on our senior unsecured notes due to the US dollar strengthening, and working capital movements. The ratio of net debt to four quarter trailing fund flows from operations decreased to 0.8 (December 31, 2021 - 1.8) due to higher four quarter trailing fund flows from operations, driven by strong commodity prices. Long-term debt The balances recognized on our balance sheet are as follows: Revolving credit facility 2025 senior unsecured notes 2030 senior unsecured notes Long-term debt As at Dec 31, 2022 147,666 404,463 529,222 1,081,351 Dec 31, 2021 1,273,755 377,814 — 1,651,569 Vermilion Energy Inc. ■ Page 37 ■ 2022 Annual Report Revolving Credit Facility As at December 31, 2022, Vermilion had in place a bank revolving credit facility maturing May 29, 2026 with terms and outstanding positions as follows: ($M) Total facility amount Amount drawn Letters of credit outstanding Unutilized capacity As at Dec 31, 2022 1,600,000 (147,666) (13,527) 1,438,807 Dec 31, 2021 2,100,000 (1,273,755) (11,035) 815,210 On April 26, 2022, contemporaneous with the issuance of the 2030 senior unsecured notes and at Vermilion's election, the maturity date of the facility was extended to May 29, 2026 (previously May 31, 2024) and the total facility amount was reduced to $1.6 billion (previously $2.1 billion). As at December 31, 2022, the revolving credit facility was subject to the following financial covenants: Financial covenant Consolidated total debt to consolidated EBITDA Consolidated total senior debt to consolidated EBITDA Consolidated EBITDA to consolidated interest expense Limit Dec 31, 2022 As at Less than 4.0 Less than 3.5 Greater than 2.5 0.51 0.07 27.10 Dec 31, 2021 1.61 1.24 14.78 total debt: Includes all amounts classified as “Long-term debt”, “Current portion of 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: • Consolidated long-term debt”, and “Lease obligations” (including the current portion included within "Accounts payable and accrued liabilities" but excluding operating leases as defined under IAS 17) on our consolidated balance sheet. Consolidated total senior debt: Consolidated total debt excluding unsecured and subordinated debt. Consolidated EBITDA: Consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items, adjusted for the impact of the acquisition of a material subsidiary. Total interest expense: Includes all amounts classified as "Interest expense", but excludes interest on operating leases as defined under IAS 17. • • • 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 December 31, 2022, 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 December 31, 2022 and December 31, 2021, 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. Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table plus any accrued and unpaid interest, if redeemed during the twelve-month period beginning on March 15 of each of the years indicated below: Year 2022 2023 and thereafter Redemption price 101.406 % 100.000 % Vermilion Energy Inc. ■ Page 38 ■ 2022 Annual Report 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: • • • On or after May 1, 2025, Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth below, together with accrued and unpaid interest. Prior to May 1, 2025, Vermilion may redeem up to 35% of the original principal amount of the notes with an amount of cash not greater than the net cash proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the notes, together with accrued and unpaid interest. Prior to May 1, 2025, Vermilion may also redeem some or all of the notes at a price equal to 100% of the principal amount of the notes, plus a “make-whole premium,” together with applicable premium, accrued and unpaid interest. Year 2025 2026 2027 2028 and thereafter Shareholders' capital The following table outlines our dividend payment history: Date January 2003 to December 2007 January 2008 to December 2012 January 2013 to December 2013 January 2014 to March 2018 April 2018 to February 2020 March 2020 April 2022 to July 2022 August 2022 onwards Redemption price 103.438 % 102.292 % 101.146 % 100.000 % Frequency Monthly Monthly Monthly Monthly Monthly Monthly Quarterly Quarterly Dividend per unit or share $0.170 $0.190 $0.200 $0.215 $0.230 $0.115 $0.060 $0.080 In the first quarter of 2022, we announced our plan to distribute a fixed quarterly dividend due to stronger commodity prices and a strengthened balance sheet. In August 2022, we announced a 33% increase to our quarterly cash dividend effective for the Q3 2022 distribution. In January 2023, we announced our plan to increase the quarterly dividend by 25% to $0.10 per share effective for the planned Q1 2023 distribution. The following table reconciles the change in shareholders’ capital: Shareholders’ Capital Balance at January 1 Vesting of equity based awards Shares issued for equity based compensation Share-settled dividends on vested equity based awards Repurchase of shares Balance at December 31 Shares ('000s) 162,261 2,578 549 178 (2,339) 163,227 Amount 4,241,773 44,811 13,699 4,377 (60,866) 4,243,794 As at December 31, 2022, there were approximately 5.5 million equity based compensation awards outstanding. As at March 8, 2023, there were approximately 162.1 million common shares issued and outstanding. On July 4, 2022, the Toronto Stock Exchange approved our notice of intention to commence a normal course issuer bid ("the NCIB"). The NCIB allows Vermilion to purchase up to 16,076,666 common shares representing approximately 10% of its public float as at June 22, 2022 beginning July 6, 2022 and ending July 5, 2023. Vermilion Energy Inc. ■ Page 39 ■ 2022 Annual Report In 2022, Vermilion purchased and cancelled 2.34 million common shares under the NCIB for total consideration of $71.7 million. Subsequent to year end 2022 and as at March 8, 2023, Vermilion purchased and cancelled 1.14 million common shares under the NCIB for total consideration of $22.4 million. Contractual Obligations and Commitments As at December 31, 2022, we had the following contractual obligations and commitments: ($M) Long-term debt (1) Lease obligations Processing and transportation agreements Purchase obligations Drilling and service agreements Total contractual obligations and commitments (1) Less than 1 year 1 - 3 years 3 - 5 years After 5 years 69,235 46,245 40,267 27,481 5,051 188,279 533,362 49,730 52,786 4,907 58,122 698,907 225,861 29,062 23,133 444 — 278,500 634,875 8,597 101,629 285 — 745,386 Total 1,463,333 133,634 217,815 33,117 63,173 1,911,072 (2) Interest on revolving credit facility calculated assuming an annual interest rate of 6.19%. Commitments denominated in foreign currencies have been translated using the related spot rates on December 31, 2022. Asset Retirement Obligations As at December 31, 2022, asset retirement obligations were $1,087.8 million compared to $1,000.6 million as at December 31, 2021. The increase in asset retirement obligations is primarily attributable to increases in inflationary market pressures and increases in estimated abandonment costs in Netherlands, France and Canada. This increase was partially offset by higher country specific risk-free rates. 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: Credit spread added to below noted risk-free rates Country specific risk-free rate Canada United States France Netherlands Germany Ireland Australia Dec 31, 2022 4.5 % Dec 31, 2021 4.9 % Change (0.4) % 3.3 % 4.1 % 3.4 % 2.7 % 2.5 % 3.2 % 4.2 % 1.8 % 1.9 % 0.8 % (0.3) % 0.1 % 0.5 % 1.9 % 1.5 % 2.2 % 2.6 % 3.0 % 2.4 % 2.7 % 2.3 % Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.6% and 4.2% (as at December 31, 2021 - between 1.1% and 3.1%). Vermilion Energy Inc. ■ Page 40 ■ 2022 Annual Report Risks and Uncertainties Crude oil and natural gas exploration, production, acquisition and marketing operations involve a number of risks and uncertainties that have affected the financial statements and are reasonably likely to affect them in the future. These risks and uncertainties are discussed further below. Commodity prices Crude oil and natural gas prices have fluctuated significantly in recent years due to supply and demand factors. Changes in crude oil and natural gas prices affect the level of revenue we generate, the amount of proceeds we receive and payments we make on our commodity derivative instruments, and the level of taxes that we pay. In addition, lower crude oil and natural gas prices would reduce the recoverable amount of our capital assets and could result in impairments or impairment reversals. Exchange rates Exchange rate changes impact the Canadian dollar equivalent revenue and costs that we recognize. The majority of our crude oil and condensate revenue stream is priced in US dollars and as such an increase in the strength of the Canadian dollar relative to the US dollar would result in the receipt of fewer Canadian dollars for our revenue. We also incur expenses and capital costs in US dollars, Euros and Australian dollars and thus a decrease in strength of the Canadian dollar relative to those currencies may result in the payment of more Canadian dollars for our expenditures. In addition, exchange rate changes impact the Canadian equivalent carrying balances for our assets and liabilities. For foreign currency denominated monetary assets (such as cash and cash equivalents, long-term debt, and intercompany loans), the impact of changes in exchange rates is recorded in net earnings as a foreign exchange gain or loss. Production and sales volumes Our production and sales volumes affect the level of revenue we generate and correspondingly the royalties and taxes that we pay. In addition, significant declines in production or sales volumes due to unforeseen circumstances may also result in an indicator of impairment and potential impairment charges. Interest rates Changes in interest rates impact the amount of interest expense we pay on our variable rate debt and also our ability to obtain fixed rate financing in the future. Tax and royalty rates Changes in tax and royalty rates in the jurisdictions that we operate in would impact the amount of current taxes and royalties that we pay. In addition, changes to substantively enacted tax rates would impact the carrying balance of deferred tax assets and liabilities, potentially resulting in a deferred tax recovery or incremental deferred tax expense. Windfall taxes and royalties Vermilion is exposed to increased taxation and royalties due to windfall taxes on profits. Windfall taxes have been substantively enacted within the European Union for oil and gas companies for 2022 and/or 2023 at a minimum rate of 33% calculated on taxable profits above a 20% increase in the average yearly taxable profits as compared to 2018 to 2021. Windfall tax rates have been legislated or, in the case of Ireland, announced as described in the preceding section “Taxes”. There remains uncertainty on whether the announced windfall tax rate in Ireland of 75% will change upon legislation. In addition, there is uncertainty on whether windfall taxes will continue beyond 2023 or whether similar legislation could be enacted in other jurisdictions that Vermilion operates in. Ukraine War During 2022, Russian military forces invaded Ukraine resulting in a war between the two countries. The ongoing conflict between countries has impacted the supply of oil and gas from the region and has resulted in countries throughout the world imposing financial and trade sanctions against Russia which have had macroeconomic effects. The risks disclosed in our Annual Information Form for the year ended December 31, 2022 may be exacerbated as a result of the Ukraine war, including: market risks including volatility of oil and gas prices, volatility of foreign exchange rates, volatility of market price of common shares, hedging arrangements; regulatory and political risks including tax, royalty, and other government legislation; financing risks including additional financing, debt service, variations in interest rates and foreign exchange rates; acquisition and expansion risks including international operations and future geographical/industry expansion, acquisition assumptions, failure to realize anticipated benefits of prior acquisitions. Vermilion Energy Inc. ■ Page 41 ■ 2022 Annual Report   COVID-19 The extent of the risks surrounding the severity and timing of the COVID-19 pandemic is continually evolving; therefore, there is significant risk and uncertainty which may have a material and adverse effect on our operations. The following risks disclosed in our Annual Information Form for the year ended December 31, 2022 may be exacerbated as a result of the continued COVID-19 pandemic: market risks related to the volatility of oil and gas prices, volatility of foreign exchange rates, volatility of the market price of common shares, and hedging arrangements; operational risks related to increasing operating costs or declines in production levels, operator performance and payment delays, and government regulations; financing risks related to the ability to obtain additional financing, ability to service debt, and variations in interest rates and foreign exchanges rates; and other risks related to cyber-security as parts of our workforce continue to work through remote connections, accounting adjustments, effectiveness of internal controls, and reliance on key personnel, management, and labour. In addition to the above, we are exposed to risk factors that impact our company and business. For further information on these risk factors, please refer to our Annual Information Form, available on SEDAR at www.sedar.com or on our website at www.vermilionenergy.com. There has been no change in Vermilion’s internal control over financial reporting during the period covered by this MD&A that materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. Financial Risk Management To mitigate the risks affecting our business whenever possible, we seek to hire personnel with experience in specific areas. In addition, we provide continued training and development to staff to further develop their skills. When appropriate, we use third party consultants with relevant experience to augment our internal capabilities with respect to certain risks. We consider our commodity price risk management program as a form of insurance that protects our cash flow and rate of return. The primary objective of the risk management program is to support our return of capital and internal capital development programs. The level of commodity price risk management that occurs is dependent on the amount of debt that is carried. When debt levels are higher, we will be more active in protecting our cash flow stream through our commodity price risk management strategy. When executing our commodity price risk management programs, we use derivative financial instruments encompassing over-the-counter financial structures as well as fixed and collar structures to economically hedge a part of our physical crude oil and natural gas production. We have strict controls and guidelines in relation to these activities and contract principally with counterparties that have investment grade credit ratings. Critical Accounting Estimates The preparation of financial statements in accordance with IFRS requires us to make estimates. Critical accounting estimates are those accounting estimates that require us to make assumptions about matters that are highly uncertain at the time the estimate is made and a different estimate could have been made in the current period or the estimate could change period-to-period. The carrying amount of asset retirement obligations The carrying amount of asset retirement obligations ($1,087.8 million as at December 31, 2022) is the present value of estimated future costs, discounted from the estimated abandonment date using a credit-adjusted risk-free rate. Estimated future costs are based on our assessment of regulatory requirements and the present condition of our assets. The estimated abandonment date is based on the reserve life of the associated assets. The credit-adjusted risk-free rate is based on prevailing interest rates for the appropriate term, risk-free government bonds adjusted for our estimated credit spread (determined by reference to the trading prices for debt issued by similarly rated independent oil and gas producers). Changes in these estimates would result in a change in the carrying amount of asset retirement obligations and capital assets and, to a significantly lesser degree, future accretion and depletion expense. The estimated abandonment date may change from period to period as the estimated abandonment date changes in response to new information, such as changes in reserve life assumptions or regulations. A one year increase or decrease in the estimated abandonment date would decrease or increase asset retirement obligations (with an offsetting increase to capital assets) by approximately $54.0 million. The estimated credit-adjusted risk-free rate may change from period to period in response to market conditions in Canada and the international jurisdictions that we operate in. A 0.5% increase or decrease in the credit-adjusted risk-free rate would decrease or increase asset retirement obligations by approximately $64.8 million. The fair value of capital assets acquired in business combinations In preparing the purchase price allocation for the business combinations completed in 2022, we estimate the fair value of assets acquired. Assets acquired in an acquisition primarily relates to the crude oil and natural gas reserves. The estimated fair value of the crude oil and natural gas Vermilion Energy Inc. ■ Page 42 ■ 2022 Annual Report reserves acquired is based on the present value of proved plus probable reserves and forecast commodity prices. Changes in these assumptions, including the discount rate used, would change the amount of capital assets recognized and as a result may cause rise to goodwill or gains recognized on the acquisition and future depletion and depreciation expense. The recognition of deferred tax assets The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on estimated future commodity prices and estimates of reserves. As at December 31, 2022, the deferred tax asset balance of $125.5 million relates to Ireland. In Ireland, we are projected to use all tax pools based on forecasted reserves and pricing and have not recognized any contra valuation allowances against deferred tax assets. A 10% decrease in pricing or volumes would continue to result in no contra valuation allowance being recognized. Depletion and depreciation Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives. Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and depreciation. The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production. Key judgments that are made to reserve estimates such as revisions in reserves, changes in forecast commodity prices, foreign exchange rates, capital or operating costs would impact the amount of depletion and depreciation recorded in a period. The estimated recoverable amount of cash generating units Each reporting period, we assess our CGUs for indicators of impairment or impairment reversal. If an indicator of impairment or impairment reversal is identified, we estimate the recoverable amount of the CGU. Judgment is required when determining whether indicators of impairment or impairment reversal exist, as well as judgments made when determining the recoverable amount of a CGU. Changes in any of the key judgments, such as a revision in reserves, changes in forecast commodity prices, foreign exchange rates, capital or operating costs would impact the estimated recoverable amount. In the first quarter of 2022, indicators of impairment reversal were present in our Canada - Saskatchewan and France - Neocomian CGUs due to an increase in forecast oil prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $144.4 million (net of $47.7 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in a lower impairment reversal of $123.0 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $220.4 million. In the fourth quarter of 2021, indicators of impairment reversal were present in our France - Neocomian CGU due to increases and stabilization of commodity prices resulting in increased cash flow estimates. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGU and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGU tested and $17.7 million (net of $6.2 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in a lower impairment reversal of $6.4 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $12.9 million. In the third quarter of 2021, indicators of impairment reversal were present in our Ireland CGU due to an increase and stabilization in forecast gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the Ireland CGU and the recoverable amount was determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, the recoverable amount was determined to be greater than the carrying value and $16.7 million (net of $5.5 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in an impairment of $5.6 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in an impairment of $24.8 million. A 1% increase in the assumed after-tax discount rate or a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would not affect the amount of impairment reversal recorded. Vermilion Energy Inc. ■ Page 43 ■ 2022 Annual Report In the second quarter of 2021, indicators of impairment reversal were present in our Alberta, Saskatchewan, Germany, Ireland and United States CGUs due to an increase and stabilization in forecast oil and gas prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $460.4 million (net of $133.2 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in a lower impairment reversal of $116.8 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $254.9 million. In the first quarter of 2021, indicators of impairment reversal were present in our Australia, Alberta, Saskatchewan, and United States CGUs due to an increase and stabilization in forecast crude oil prices versus 2020 when impairment charges were taken. As a result of the indicators of impairment reversal, the Company performed impairment reversal tests on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $492.2 million (net of $170.7 million deferred income tax expense) of impairment reversal was recorded. A 1% increase in the assumed after-tax discount rate would reduce the estimated recoverable amount of assets tested and result in a lower impairment reversal of $146.4 million while a 5% decrease in revenues (due to a decrease in commodity price forecasts or reserve estimates) would reduce the estimated recoverable amount of assets tested and result in lower impairment reversal of $285.6 million. 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. Cybersecurity Vermilion has an information security training and compliance program that is completed at least annually. We have not experienced a cybersecurity breach in the last three years. Recently Adopted Accounting Pronouncements Vermilion did not adopt any new accounting pronouncements as at December 31, 2022. Health, Safety and Environment We are committed to ensuring we conduct our activities in a manner that protects the health and safety of our employees, our contractors and the public. Our HSE Vision is to consistently apply our core values of Excellence, Trust, Respect and Responsibility. Our goal is to create a workplace free of incidents by ensuring our proactive culture and behaviours create a high-reliability organization where HSE is fully integrated into our business – it is our way of life. Our mantra is HSE: Everyone. Everywhere. Everyday. Vermilion seeks to maintain health, safety and environmental practices and procedures that comply with or exceed regulatory requirements and industry standards. All of our personnel are expected to work safely and in accordance with established regulations and procedures, and we seek to reduce impacts to land, water and air. During 2022 we: • • • Maintained clear priorities around 5 key focus areas of HSE Culture, Communication and Knowledge Management, Management Systems, Environmental & Operational Stewardship, and Health; Completed ongoing HSE performance monitoring through key performance indicator development, analysis and reporting; Continued comprehensive investigations of our incidents and near misses to ensure root causes were identified and corrective actions effectively implemented; • Worked towards fulfilling our updated HSE Strategy and further enhanced our Visible Active Leadership program; • • • • Completed a comprehensive HSE Management System Assessment across the organization; Completed a gap assessment and action plan as part of our Process Safety Management System implementation; Completed our 4th HSE Perception Survey, analyzed the results and developed action plans; Continued reinforcement of the “Vermilion High 5”, an individual safety awareness initiative aimed at keeping front-line workers safe; Vermilion Energy Inc. ■ Page 44 ■ 2022 Annual Report • • • • • • • Advanced our Energy Safety Canada and International Oil and Gas Producers Life-Saving Rules implementation and competency development; Submitted our CDP Water and Climate reports; Managed our waste products by reducing, recycling and recovering; Reduced long-term environmental liabilities through decommissioning, abandoning and reclaiming well leases and facilities; Continued the development of a robust hazard identification and risk mitigation program specific to environmentally sensitive areas; Performed auditing, management inspections and workforce observations to measure compliance and identify potential hazards and apply risk reduction measures; and Assessed the effectiveness of our performance management standards across multiple business units. We are a member of several organizations concerned with environment, health and safety, including numerous regional co-operatives and synergy groups. In the area of stakeholder relations, we work to build long-term relationships with environmental stakeholders and communities. Task Force on Climate-related Financial Disclosure (TCFD) Environmental, Social and Governance (ESG) As an international company, Vermilion responsibly produces essential energy while delivering long-term value to our stakeholders. We believe that integrating sustainability principles into our business increases shareholder returns, enhances development opportunities, reduces long-term risks, and supports the well-being of key stakeholders including the communities in which we operate. Vermilion has established a leadership position in sustainability performance and disclosure, launching our first CDP Climate submission and Sustainability Report in 2014, with data to 2012, aligned with the Global Reporting Initiative (GRI). We have since adopted recommendations from the Task Force on Climate-related Financial Disclosure (TCFD), the Sustainability Accounting Standards Board (SASB), and the International Sustainability Standards Board (ISSB). In particular, we have applied the TCFD framework in the management of climate- and other sustainability-related risks and opportunities. This recognizes the importance of climate-specific disclosure while reflecting its intersection with other environment-related risks and opportunities, social factors such as safety and community engagement, and governance issues. Our Index follows: • • • • • Governance Strategy Risk Management Metrics and Targets Consolidated Climate (TCFD) Report www.vermilionenergy.com/sustainability/reports/ Information Circular Annual Report MD&A Annual Report MD&A Annual Report MD&A Vermilion Energy Inc. ■ Page 45 ■ 2022 Annual Report Sustainability and Climate-Related Strategy Vermilion understands our stakeholders’ expectations that we deliver strong financial results in a responsible and ethical way. As a result, we align our strategic priorities in the following order: • • • the safety and health of our staff and those involved directly or indirectly in our operations; our responsibility to protect the environment. We follow the Precautionary Principle introduced in 1992 by the United Nations "Rio Declaration on Environment and Development" by using environmental risk as part of our development decision criteria, and by continually seeking improved environmental performance in our operations; and economic success through a focus on operational excellence across our business, which includes technical and process excellence, efficiency, expertise, stakeholder relations, and respectful and fair treatment of staff, contractors, partners and suppliers. Reflecting these priorities, we have positioned Vermilion purposefully within the energy transition. Our scenario analysis has consistently demonstrated that Vermilion can best contribute by focusing on producing energy responsibly: safely, reliably and cost-effectively. Our Sustainability Report provides further details at: www.vermilionenergy.com/sustainability. Description of Sustainability- and Climate-related Risks and Opportunities, and Impacts Given the intersection of environmental and social issues, and their impact over varying timeframes, we have identified climate-related risks and opportunities within short-term (0-3 years), medium-term (3-6 years) and long-term (6-50 years) horizons. We describe these below, along with their potential company and financial impact (assessed using processes such as scenario analysis, cost projections and our Emissions Long-Range Planning tool), and our resulting management approach, including operations such as equipment upgrade, and capital allocation. Our annual CDP Climate Change and Water Security submissions provide additional information, including where in the value chain these risks and opportunities occur: see www.vermilionenergy.com/sustainability/reports/. Category / Issue Policy and Legal: Increased Pricing of GHG Emissions e.g. Carbon Tax Policy and Legal: Enhanced Emissions & Other ESG Reporting Obligations Description of Impacts Potential Financial Impact Management Approach Short-term Transition Risks (0-3 Years) Short-term impact is primarily in Canada and Ireland. Canadian Federal Greenhouse Gas Pollution Pricing Act has set carbon tax rates at $50 per tCO2e in 2022, rising to $170 by 2030. Our exposure is mitigated by provincial responses to the Act, including Alberta's Technology Innovation and Emissions Reduction (TIER) regulation and Saskatchewan’s Output-Based Pricing System (OBPS). Our Ireland operations are subject to the EU ETS and Ireland Carbon Tax systems. Longer-term impact rests on carbon pricing’s vulnerability to changes in government policy. We note the political focus in the EU, Canada and USA on a COVID-19 economic recovery that is both climate-focused and responsive to social justice issues such as labour practices. Climate and other ESG reporting obligations are evolving rapidly, with Vermilion potentially subject to European Sustainability Reporting Standards, U.S. Securities and Exchange Commission Climate- Related Disclosure Rules, and Canadian Securities Administrators Climate-Related Disclosure Rule, much of which is founded on the work of TCFD, SASB and the International Sustainability Standards Board. Although Vermilion's existing sustainability- related disclosure provides a sound foundation for compliance with these proposed rules, there are costs to monitor developments and respond to the final versions, particularly potential requirements for increased levels of audit. The impact to Vermilion would be a decreased netback per BOE, due to increased expenses for staff time and system development and implementation. With our recent Montney acquisition, our Canadian carbon tax liability increased to approximately $0.7MM in 2022, and is forecasted to exceed $1MM/ year in the near term. Our Ireland EU ETS liability is forecast to be approximately $0.8MM in 2022, increasing to approximately $2.6MM in 2025 and $3.5MM in 2030. The Ireland Carbon Tax liability is expected to be an additional approximately $0.1MM/ year over this period. All of the liability estimates are net Vermilion. We voluntarily opted into Alberta’s TIER regulation, which provides tax exemptions contingent on emissions reduction activities that Vermilion is in the process of implementing. Our ongoing efforts to reduce the energy and emissions intensity of our operations are integral to managing this risk, including our announcement of two emission reduction targets in 2021. Vermilion continues to monitor and comply with taxation requirements, engaging external subject matter experts and in- house experts in engineering, asset integrity, optimization, health safety & environment, and sustainability that assess our operations. The financial impact is an increase in operational cost associated with the management and quantification of emissions to meet new reporting requirements, and the administrative costs associated with reporting and audit obligations. This is built into Vermilion's budgeting and is currently estimated at $0.5MM annually. Regulations in all of our business units are monitored on an ongoing basis, and assumptions/ scenario planning is used annually to assess risk. In Canada, we implemented an external emission data gathering software in 2021 to support the evolving regulatory landscape. Vermilion also engages stakeholders relating to emissions reporting obligations. Management of this risk is built into Vermilion's operations and our ERM. In addition, we expect to automate our emissions data gathering, aggregation and calculation processes in 2023-2024, while ensuring audit-ready processes for all ESG data points to align with proposed regulatory requirements. Vermilion Energy Inc. ■ Page 46 ■ 2022 Annual Report Vermilion is closely monitoring regulatory and market changes to ensure its approach to resilience under evolving conditions remains appropriate. We provide feedback to governments on proposed regulations, as per our lobbying disclosures, and allocate resources, including staff and capital, to ensure that required operational changes can be effectively actioned. In the short term, tying in vented equipment to flaring infrastructure in Canada is an example of projects to address this risk; in Netherlands we have used NOx scrubbers and purchased NOx certificates to comply with new regulations. Our ongoing efforts to proactively reduce the energy and emissions intensity of our operations are integral to managing this risk, including our announcement of two emission reduction targets in 2021, and our work in 2022-2023 to establish a clear net zero to 2050 plan and 2030 emissions reduction target. We are also working with external partners to further implement and develop emission reduction technologies that are economic to the Company, in part due to the potential generation of carbon credits. Based on stakeholder engagement, Vermilion believes that independent assessments of our operations by third parties are an important tool to demonstrate our responsible approach to production of essential energy. As a result, we have sought and achieved Equitable Origin responsible gas producer certification for 3 of our Canadian sites, the AFNOR CSR Committed label in France, and the Business Working Responsibly mark in Ireland. Vermilion maintains insurance as a mitigative measure to reduce the financial impact associated with damage to our assets due to severe weather events. We also have a robust asset integrity program that maintains our offshore facilities to their original design specifications of CAT 5 hurricane force. We also have protocols for monitoring and preparing for cyclones, and have invested in our emergency response capabilities in the event of damage to our assets due to severe weather. Based on our scenario analysis, we identified the need to explore new and evolving technologies and processes to identify synergistic fits for our business in both traditional and renewable energy production. We are pursuing this via our established track record in geothermal energy from produced water, for which our internal expertise in engineering, geoscience and drilling is particularly well suited. We are also investing in early R&D in other areas, such as biogas and the conversion of traditional oil and gas assets to geothermal and hydrogen production, to better understand the long-term potential. Description of Impacts Potential Financial Impact Management Approach Category / Issue Policy and Legal and Technology: Mandates on and Regulation of Existing Products and Service, and Changes in Emissions Regulations; and Market and Reputational: Changing Customer Behaviour Operational changes to comply with existing methane reduction regulations is expected at approx. $1.5MM in the short term, with those associated with eliminating routine flaring in France subject to continuing review in 2023. The cost of compliance with proposed regulations, such as Canada's proposed regulatory framework for reducing oil and gas methane emissions to achieve a 75% reduction by 2030 is not yet established, and will depend on the final version of the framework. Vermilion's operations are subject to regional regulatory changes that result in changes to equipment requirements such as engineering and equipment modifications to reduce carbon emissions and / or emissions of criteria air contaminants. The most likely short-term impact is regulations in Canada to reduce methane emissions, in France to reduce flaring and in Netherlands to reduce NOx. From a macro perspective, geopolitical impacts (e.g. war in Ukraine) have escalated diverging government and consumer viewpoints on the need for energy security vs energy transition. We expect that demand for oil and natural gas to remain strong in the short term, while safety and environmental regulations governing its production will increase. We have identified these risks as interconnected and existing in the short-term; however, they should be seen as medium- to long-term risks as well. Medium-term Physical Risks (3-6 Years) Acute: Increased Severity of Extreme Weather Events such as Cyclones and Floods Vermilion owns and operates an offshore platform in the Wandoo field off northwestern Australia, co-owns and operates the Corrib project off the Irish coast, and owns and operates oil fields in the coastal area of SW France. Extreme weather events have the potential to directly impact our offshore operations resulting in down time or damage to infrastructure, and can impact the downstream handling capacity of our partners, resulting in a limitation to the distribution and sale of our products. Based on the value of the Wandoo Platform and a 1- in-10,000-year cyclonic event, the financial implications associated with damage due to a severe weather event is estimated at $274MM (total impact before insurance). The third-party costs associated with potential damages from extreme weather events are not tracked. Long-term Transition Risks (6-50 Years) Technology: Substitution of existing products and services with lower emissions options Although we see demand for oil and natural gas remaining robust in the short- to mid-term, it is likely that demand for oil and, to a lesser degree, natural gas will eventually fall as the energy transition evolves and various alternatives for renewable energy options become technologically and economically available. This could impact the need for our products in the longer term, post 2030 for oil and even further out for natural gas. As 2021 and 2022 have demonstrated, it will be critical to maintain adequate supplies of both oil and natural gas during the energy transition, to provide both accessibility and affordability. Given the uncertain timeline and progression of the energy transition, and supply-demand dynamics, we are not using a financial forecast for impact. We are, however, using our scenario analysis to identify potential opportunities that would mitigate the risk to our products. Long-term Physical Risks (6-50 Years) Chronic: Changes in Temperature Extremes, Including Rising Mean Temperatures A decrease or increase in the temperature extremes experienced in winter/summer months (i.e. lower seasonal lows, higher seasonal highs) could result in an increase in fuel gas for a variety of equipment essential for safe production, along with additional equipment (e.g. building heaters, line heaters). This would require additional resources (infrastructure) as well as increase our carbon footprint. Temperature extremes also have the potential to increase capital costs associated with drilling, completion and workover operations due to increased timelines, decreased productivity, equipment breakdown, etc. For example, an overall increase in seasonal lows (warmer winters) would have a direct impact on Vermilion's more northern onshore operations, via a decreased ability to access lands and an increase in construction capital requirements. The financial implications on an annual basis are difficult to quantify; however, based on Vermilion's experience, the most significant financial implications would result from shutdowns in drilling or completions locations. The estimated cost of this would be $0.5MM per day of delay. As weather extremes cannot be controlled, Vermilion uses our Management Systems and processes to protect the health and safety of our workers, contractors and the public, and to protect the environment from adverse effect. For example, we have reduced the potential impact related to access in remote assets by using multi-well pads wherever possible. This would significantly decrease capital considerations in the event that limited frost days occurred. Each risk associated with weather is assessed on a case-by-case basis. Vermilion Energy Inc. ■ Page 47 ■ 2022 Annual Report Description of Impacts Potential Financial Impact Management Approach Category / Issue Chronic: Changes In Precipitation Patterns and Extreme Variability in Weather Patterns Chronic: Rising Sea Levels Vermilion holds assets inland, in coastal regions, and offshore, where a change in precipitation could negatively impact on operations due to drought or flooding. Flooding could result in limited access to locations / facilities, and poses a risk to our corporate headquarters. Alternatively, drought conditions could impact the availability of surface and / or groundwater, which Vermilion, in part, relies on for drilling and completion activities. This could negatively impact forecasted growth by increasing the timelines and capital costs to bring new infrastructure onto production. Vermilion owns and operates assets in the Netherlands, where we have assessed the potential risk associated with rising sea levels. This could physically impact our operations due to issues such as flooding, transportation difficulties and supply chain interruptions. Rising sea levels also pose a threat related to the salinization of groundwater. The financial implications of a single time event (i.e. wildfire) have been assessed on a case-specific basis, and are believed to be substantive (impact > $10.0MM). Vermilion maintains insurance to mitigate the potential impact of precipitation-related extreme events (i.e. Wildfire, Flooding). We have estimated that a rise in sea level could have a financial impact of $571MM before insurance at our main gas processing facility Garijp (GTC) in the Netherlands, caused by an extreme 1-in-10000- years tide/extreme wind event. Short-term Opportunities (0-3 Years) As this opportunity is in the early stage of assessment, it is difficult to quantify the financial impact, but it is estimated at up to $2.0MM per year in revenue and returns on investment. Potential also exists for significant cost adjustments, as assets slated for abandonment would be repurposed to enable them to continue to generate energy. Vermilion conservatively foresees achieving a premium of $10/bbl for its Wandoo production over the next three years for cumulative incremental revenue of $49.3MM. Products and Services, and Resilience: Development of New Products and Services through R&D and Innovation; participation in renewable energy programs Products and Services: Access to New Markets Products and Services: Ability to Diversify Business Activities; Shift in Consumer Preferences Directly related to the long-term transitional risk associated with the substitution of low-carbon products, we have the opportunity to participate in the development of those products. This has the potential to reuse our current infrastructure to provide alternative products, such as biogas or hydrogen, or to develop new products such as geothermal energy, creating new revenue streams. An example of this opportunity is the geothermal heat we are providing heat from the produced water in our oil operations to develop sustainable agriculture and residential projects near our operations. More stringent global measures to reduce emissions from individual ships by 30% by 2030, established through amendments to MARPOL Annex VI, came into force on Jan 1 2020, limiting the sulphur content of bunker fuel to a maximum of 0.5%. Vermilion’s Australian Wando facility produces 4500 bbl/d of low sulphur crude oil that meets the needs of refineries in the short term to meet IMO regulations. Vermilion maintains a diverse, stable global portfolio of oil and gas assets. Our strong record of safe and socially conscious development of energy resources has provided opportunities to access and develop these resources. We see our commitment to sustainability as core to our business, which has provided important organizational focus on emissions quantification and management. As consumers become more aware of and involved in the selection of their energy sources and associated carbon intensity, we believe that Vermilion will continue to be a top quartile choice, providing us with opportunities not available to peer organizations. As these incidents are out of Vermilion's control, we take all measures possible to ensure effective emergency response to extreme weather events, to ensure the protection of the health and safety of our workers, contractors and the public, the protection of the environment and limiting the financial impact of the event. In the case of a longer term extreme precipitation event or drought, Vermilion would implement water management programs to reduce our reliance on fresh water sources to limit the potential impact on operations. Other than conventional berm protection, there is no measure available to protect Vermilion's assets in the Netherlands if water levels rise to a level resulting in one of our main facilities being temporarily invaded by sea water. Based on Vermilion's assessment of the probability of these events occurring over the next 5 years being less than 0.05%, Vermilion has accepted this level of risk exposure. Vermilion currently includes a review of this risk in our annual risk management process. We are leveraging our technical experts and partnerships to provide input into alternative and renewable energy projects as they are identified. An example of the development of low emission goods/ services is our France-based industry partnership with Avenia to expand the use of geothermal energy production in oil production, and a geothermal association in Germany. We have also developed criteria for approving the move of these ideas into our Vermilion Opportunity Development Process, which provides clear gates and criteria for considering and implementing such projects. Vermilion continues to access local markets for our low sulphur production, while exploring regions to expand our operations. Our Marketing group ensures that Vermilion meets its contractual obligation with our buyers in terms of volumes, delivery dates and crude quality. The financial impact of changing consumer preferences in difficult to quantify. We foresee revenue opportunities in two distinct areas. (1) In consumers selecting premium energy products, with these products demanding a higher price than other energy sources on the market; currently we estimate the potential impact of premium pricing in the long- term to be $1-5 per BOE, or $31.1MM/year based on $1 at 2022 production levels. (2) Access to more stringent markets, supported by our environmental and sustainability performance. Vermilion has entered into German, Hungarian, Croatian and Slovak oil and gas operations, which our sustainability performance has supported. Based on stakeholder engagement, Vermilion believes that independent assessments of our operations by third parties are an important tool to demonstrate our responsible approach to production of essential energy, and generate premium. As a result, we have sought and achieved Equitable Origin responsible gas producer certification for 3 of our Canadian sites, the AFNOR CSR Committed label in France, and the Business Working Responsibly mark in Ireland. We are currently assessing the potential to expand these certifications. Vermilion Energy Inc. ■ Page 48 ■ 2022 Annual Report Category / Issue Energy Source: Participation in Carbon Market Description of Impacts Potential Financial Impact Management Approach Medium-term Opportunities (3-6 Years) Vermilion is not accounting for any short term financial impact due to the volatility in current markets. We will continue to evaluate the benefit that certified offset credits from various emission reduction projects across our operations could provide. Under the revised EU ETS Directive in effect 2021-2030, it is anticipated that there will be an active market and consumers for the offset credits generated at some of Vermilion's sustainability initiatives around the world. This shift in the cap and trade scheme may provide opportunities for Vermilion to generate certified energy reduction / offset credits through our geothermal cogeneration projects in France; however, current carbon markets are experiencing significant volatility, including reputational impacts to voluntary markets. Long-term Opportunities (6-50 Years) Products and Services: Shift in Consumer Preferences Under the Canadian Environmental Protection Act and based on commitments made by the Canadian and Alberta governments and energy utilities relating to COP21, there is a commitment to reduce emissions for coal-fired power generation. Based on this and with a number of power generating facilities in Alberta nearing the end of their service life, the demand for natural gas is likely to increase due to increased use of combined cycle gas turbine (CCGT) power generation. The short term impact of this regulatory change on gas pricing is anticipated to be low and increase to medium in the mid- to long-term. Once the regulations have come into effect and the implementation period has occurred, there is a potential to see an impact on the marketable price and demand for natural gas. As a natural gas and oil producer, Vermilion would benefit from an increase in marketable prices for natural gas in our Canadian operations. Energy Source: Shift Toward Decentralized Energy Generation The carbon intensity of energy used around the world has a direct relationship to where the energy product was generated. Vermilion’s business unit structure supports production and distribution of energy products into local markets. This strategy results in the significant reduction of the carbon footprint of our energy when compared to non-local sources. The long-term financial impact of decentralized energy generation will depend on the speed of the energy transition balanced against the need for energy security. As such, we believe it is not possible to predict the financial impact at this time. Examples of projects that have the potential to generate credits include four geothermal co- production projects in France. Vermilion's project assessment framework is applied to each identified opportunity, including considerations associated with emissions offset. As we move further into the energy transition, we foresee natural gas playing an impactful role as a less carbon intense fuel than other options (i.e. coal). Vermilion continues to focus on the identification of resources and assets where we have the opportunity to apply our industry leading expertise to optimize production while reducing emissions. An example of our strategy to realize this opportunity is our asset base in Alberta, which currently includes a large liquids rich gas play. Vermilion's marketing team is also actively pursuing options for our natural gas production that will enable Vermilion to achieve the best netbacks on production. Vermilion continues to assess where we can access local markets for our production, while exploring regions to expand our operations. The actions taken in the past several years to realize this opportunity include alterations to our structure, our strategic objectives and our operational development plans to support Vermilion as a distributed energy provider, and exploration and development programs in regions with relatively low energy production as compared to consumption (i.e. Hungary). Resilience of the Company’s Strategy Countries in all of our operating regions have implemented policies to support a low-carbon future for the world’s economy, consistent with a 1.5-2C or lower scenario. As a global energy producer, we contribute to the supply of safe, reliable and affordable energy during this transition; our strategy is therefore based on our risk and opportunity identification, which in turn contributes to our materiality analysis. This analysis is based on double materiality, considering issues based on both external and internal impacts. The Board of Directors and senior leadership used these analyses in our scenario analysis. Vermilion uses two energy transition scenarios from the World Economic Forum. These compare a Gradual versus Rapid low- carbon transition based on inputs that include the International Energy Agency’s New Policies Scenario (Gradual) and Sustainable Development Scenario (Rapid), which meets the Paris Agreement’s goal to limit global temperature increases to 1.5 to 2ºC. Vermilion examines key factors impacting the speed of the transition – including the influence of new energy technologies; potential speed of their adoption; anticipated changes in policy and regulation; and emerging market pathways such as India – and resulting factors that could impact the Company, including economics (demand, supply, consumer behaviour, and costs of energy); technological advancement; capital availability; government policy; and Company reputation. Among these, government policy is seen as most influential in the near to mid-term. We applied these findings to Vermilion’s strategy to 2050 and beyond, described below. In particular, the scenario analysis led us to develop two emission-related targets that were announced in 2021: an aspirational commitment to net zero emissions in our own operations, including Scope 1 and Scope 2 emissions, by 2050, and a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a baseline year of 2019. See Metrics and Targets, below, for more information. In 2022, we furthered this commitment by establishing high-level approaches to net zero, including: reducing emissions; converting production by replacing end-of-life fields with lower intensity production; adapting to new technology such as carbon capture and storage and renewable energy; and — when no other options exist — a careful approach to offsetting. We are building out this plan in 2023, including establishing our next emissions reduction target, for 2030. Vermilion Energy Inc. ■ Page 49 ■ 2022 Annual Report Overall, our strategy to ensure our resilience under various scenarios rests on three strategic activities: • Focusing on efficient and responsible production of oil and natural gas, viewing emissions as potential energy sources: ◦ ◦ ◦ Lower carbon fuels. Since 2012, we have shifted our production mix towards natural gas as a cleaner burning fuel than other fossil fuels. We also sell our fuels within the country of production wherever possible, reducing the carbon footprint associated with transportation of the fuel to consumers while increasing national energy security. Socially responsible fuels. We are committed to ensuring that our products are produced in an environmentally and socially responsible manner, respecting worker rights and community engagement. We operate in regions noted for their stable, well- developed fiscal and regulatory policies related to oil and gas exploration and development, and for their robust health, safety, environmental and human rights legislation. Transparency and reporting. We have established a strong record of reporting on greenhouse gas emissions, energy usage and other key environmental metrics, which has supported our emission reduction targets. • • Implementing technically and economically feasible options for emission reduction, covering combustion, flaring, venting and fugitive emissions: ◦ ◦ Greater energy efficiency. Many energy and operational efficiency initiatives go hand-in-hand, which in turn helps us minimize our carbon footprint and reduce greenhouse gas emissions. Lower greenhouse gas emission intensity. We are committed to reducing the greenhouse gas emissions associated with our production, with particular focus on methane. Exploring new and evolving technologies and processes to identify synergistic fits for our business in both traditional and renewable energy production: ◦ Alternative energy. We are continuing to develop our knowledge and use of alternative energy sources, including geothermal energy, for which our internal expertise in engineering, geoscience and drilling is particularly well suited. This work has begun with the geothermal potential of our produced water, supporting a circular economy model that conserves, reuses and recycles resources to better protect our environment. It is also expanding into areas such as biogas and the conversion of traditional oil and gas assets to geothermal and hydrogen production. In addition, we identified two further pillars of our sustainability strategy that are integral to managing sustainability- and climate-related issues: Conservation We are committed to reducing the impact our operations have, beginning with regulatory compliance across all business units. Our conservation efforts are further focused in three areas: • Water: We recognize water as a basic human right, and as a vital resource that is shared among many stakeholders in our communities. We are therefore committed to protecting both the supply and the quality of water sources in our areas of operation by: ◦ ◦ ◦ Proactively preventing harm and supporting healthy surface and groundwater bodies Reducing potable and freshwater usage to the lowest level practical, and Taking a lifecycle and circular economy approach to water, exploring opportunities to reuse and recycle products such as produced water • • Asset Retirement Obligations: We are adapting our long-term Asset Retirement Obligation management to include revitalizing or reusing assets to benefit our environment and our communities. Biodiversity: We are focusing on protecting the species and habitats around us by proactively identifying biodiversity risks and opportunities, and implementing associated plans. Community Our communities comprise a wide diversity of people and organizations, but they have one key thing in common: they care deeply about the safety, environmental stewardship and corporate citizenship that we bring to our local operations. In addition, our people care deeply about their communities - whether we work there or live there, these are the places we call home. We therefore steward our operations and relationships to demonstrate our commitment to being a responsible producer and a valued and trusted neighbor and business partner, including: • • • Transparency with respect to safe and environmentally responsible operations, including our potential impacts on local communities Maintaining strong, genuine relationships with our communities, with engagement based on respect, listening and openness, and Creating a shared value focused on local economic and social development Vermilion Energy Inc. ■ Page 50 ■ 2022 Annual Report Sustainability and Climate-Related Risk Management Process for Identifying, Assessing and Managing Sustainability- and Climate-related Risks, and Integration into the Company’s Enterprise Risk Management (ERM) System Sustainability-related risks and opportunities, including those related to climate, are integrated into multi-disciplinary Company-wide risk identification, assessment, and management processes as part of our ERM system, based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. This provides an integrated approach to managing risk as it impacts strategy and performance, and includes Operational, Market & Financial, Credit, Organizational, Political, Regulatory Compliance, Strategic and Reputational, and Sustainability categories. Our sustainability materiality analysis, which assesses issues with impact for both the Company and our key stakeholders, is integrated into our ERM system using the Corporate Risk Register through a collaboration between our Finance, HSE and Sustainability teams. Overall, risk management is the responsibility of the Board and the Executive Committee based on a Top-Down, Bottom-Up approach to engage all staff. Top-Down begins with our Board and its committees with clear terms of reference, including oversight for identification and management of specific allocations of risk type. This is translated into action by our Executive Committee, which reviews and manages the ERM process through implementation of associated policies and procedures. Our staff help develop systems, standards and procedures. Bottom-Up is how staff implement, maintain and improve risk management processes, applying the hazard-risk-mitigation process in every part of our business. Risks are identified by key staff across our Company, including our Operations, Finance, Health, Safety and Environment, Economics, Government and Public Relations, and Sustainability teams at corporate, business unit and asset levels. These employees have significant experience, and use a wide array of inputs, including operational and facility assessments, technical and research reports, external stakeholder organizations, government policy and regulation changes, industry initiatives, communities and landowners, and non-governmental entities. The results are incorporated into our Corporate Risk Register, which provides a consistent framework to ensure the effective tracking and communication of our material risks. Using our Risk Matrix as a prioritization tool, Teams assess severity, likelihood, speed of onset, and vulnerability using scales from 1 to 5 for each factor, described in terms of human, environment, financial, social license and cybersecurity impacts. Every risk case has also been assessed to determine where sustainability- or climate-related risk is a contributing factor. The results are provided annually at minimum to senior management, the Executive Committee and the Board and its Committees as appropriate, who further assess the risks including interdependencies. Our risk management approach focuses on reducing the risk to a level as low as reasonably practicable, accepting the risk, and/or controlling it (such as insuring it). For example, if direct mitigation is not possible (e.g. changes in temperature extremes), we would adapt our business processes to reduce the potential impact (e.g. changing work hours to avoid extreme mid-day heat). In other situations (e.g. increasing risk of flood), we may take measures to protect against the risk (e.g. flood controls) while also insuring our operations. To support climate risk identification and management, we developed a Carbon Liability Assessment Tool, with Scope 1 emissions quantification and regulatory information for each business unit. We assessed the price of carbon on both a realized cost and shadow pricing basis, and have identified likely carbon pricing scenarios for all our operating areas. The Tool provides the basis for developing carbon liability risk cases for all business units, supports ongoing identification of carbon opportunities, and supports activities such as business development, taxation review and marginal abatement cost curve preparation. In 2022, we built on this approach by developing our Emissions Long-Range Planning Tool. This is based on our long-range planning tool for production, and allows us to forecast emissions, carbon taxes and the impact of various emission reduction projects. This supports our decision-making on production, capital allocation, and mergers and acquisitions. Sustainability and Climate-Related Metrics and Targets Metrics Used to Assess Sustainability- and Climate-Related Risks and Opportunities Our sustainability reporting (www.vermilionenergy.com/sustainability) continues to describe significant economic, environmental, social and governance measures, which are reported with reference to TCFD, SASB and GRI. These include but are not limited to: • • • • Climate: energy consumption and intensity; investment in and generation of renewable energy; greenhouse gas emission and intensity, including flaring and venting, and avoided emissions; and water withdrawal, including from areas of high baseline water stress, and discharge. Environment: Waste generation and management; Asset integrity and spills; and Environmental investment Social: Health and Safety; People; and Community investment Governance: Ethics Vermilion Energy Inc. ■ Page 51 ■ 2022 Annual Report These metrics contribute to our performance for CDP Climate, and S&P Global Corporate Sustainability Assessment and Sustainalytics, which comprise 10% of the Corporate Performance Scorecard for our Long-term Incentive Plan. In addition, HSE metrics comprise 25% of the scorecard for our Short-Term Incentive Plan. These plans apply to all employees, including our executive team. We also track carbon pricing, and have identified actual and likely pricing scenarios for all of our operations based on current government policies and published research relating to the Paris Agreement. For example, in Canada, the 2022 carbon tax was $50 per tCO2e, and in Ireland, carbon pricing was 41 € per tCO2e. Further information is available in our CDP Climate submission, available at vermilionenergy.com/sustainability/reports/. In addition, we benchmark our performance via third-party ESG rating agencies, including: • • • • CDP Climate Change and Water Security: Climate Score of A- and Water score of “B” in 2022. ISS ESG QualityScore: Decile rating of “1” for Environmental and Social practices as of March 2023. MSCI ESG Rating: AAA in 2022. S&P Global Corporate Sustainability Assessment: Top of our peer group in 2022. Scope 1, 2 and 3 GHG Emissions Disclosure We report Scopes 1, 2 and 3 emissions, which are externally verified under ISO 14064-3. Historical, corporate and business unit data can be found in the Energy and Emissions Performance Metric document available at www.vermilionenergy.com/sustainability/, summarized in the charts below. The 2018 increase in emissions was associated with the acquisition of southeast Saskatchewan assets. Our Scope 1 and 2 emissions intensity and methane emissions intensity decreased in 2019 and 2020, primarily related to our first full year of operatorship for the Corrib gas asset in Ireland, and our focus on reducing post-acquisition emissions over time through superior operations, as we did in 2014 to 2017 following the acquisition of previous Saskatchewan assets. This has been achieved through a variety of gas conservation and recovery initiatives including construction of new infrastructure, operational changes and increased infrastructure runtimes. Additional decreases have been achieved through improved measurement and methodologies, projects such as replacing diesel or propane with compressed natural gas for boilers and water heating for the drilling program in Alberta, converting pneumatic devices from high- to low-bleed, installing solar-powered chemical injection pumps, and the purchase of renewable energy certificates for electricity use in Netherlands and Ireland. Related Targets and Performance Vermilion has committed to two emission-related targets: • • • Net zero emissions in our own operations, including Scope 1 and Scope 2 emissions, by 2050. We are transparent that this is an aspirational goal, and that we will continue building the plan to achieve this target over time. As a first step, we set a near-term target to reduce Scope 1 emissions intensity from our operations by 15 to 20% by 2025, using a baseline year of 2019. We will set new targets every five years at minimum, building on this foundation while exploring broader options, including the potential to reduce Scope 3 emissions. In 2022, we furthered this commitment by establishing high-level approaches to net zero, including: reducing emissions; converting production by replacing end-of-life fields with lower intensity production; adapting to new technology such as carbon capture and storage and renewable energy; and — when no other options exist — a careful approach to offsetting. We continue to build out this plan in 2023, including establishing our next emissions reduction target, for 2030. We are tracking our performance using Scope 1 and 2 absolute and intensity emission metrics, and were on track as of end of year 2021 with a 5% decrease in Scope 1 emissions intensity. Fiscal year 2022 environmental reporting will be available in mid-2022 at https://www.vermilionenergy.com/ sustainability/, where additional targets to reduce emissions and methane in our southeast Saskatchewan assets, reduce Scope 2 emissions in our Netherlands and Ireland Business Units, and generate renewable energy in our France Business Unit can also be found. Vermilion Energy Inc. ■ Page 52 ■ 2022 Annual Report tCO2e per BOEEmissions Intensity Scope 1&2 tCO2e per BOE201420152016201720182019202020210.0150.0200.0250.0300.035tCO2e per BOEMethane Intensity tCO2e per BOE201420152016201720182019202020210.0000.0020.0040.0060.0080.0100.012 For more information on our sustainability- and climate-related performance, please see our 2023 Proxy Statement and Information Circular, online sustainability reporting, particularly the Index and Performance Metrics sections, and 2022 CDP Responses. Corporate Governance We are committed to a high standard of corporate governance practices, a dedication that begins at the Board level and extends throughout the Company. We believe good corporate governance is in the best interest of our shareholders, and that successful companies are those that deliver growth and a competitive return along with a commitment to the environment, to the communities where they operate, and to their employees. We comply with the objectives and guidelines relating to corporate governance adopted by the Canadian Securities Administrators and the Toronto Stock Exchange ("TSX"). In addition, the Board monitors and considers the implementation of corporate governance standards proposed by various regulatory and non-regulatory authorities in Canada. A discussion of corporate governance policies is included each year in our proxy materials for our annual general meeting of shareholders, copies of which are available on SEDAR (www.sedar.com). As a Canadian reporting issuer with securities listed on the TSX and the New York Stock Exchange (“NYSE”), Vermilion is required to comply with all applicable Canadian requirements adopted by the Canadian Securities Administrators and the TSX, and applicable rules for foreign private issuers adopted by the U.S. Securities and Exchange Commission that give effect to the provisions of the Sarbanes-Oxley Act of 2002. Our corporate governance practices also incorporate many “best practices” derived from those required to be followed by US domestic companies under the NYSE listing standards. We are required by Section 303A.11 of the NYSE Listed Company Manual to identify any significant ways in which our corporate governance practices differ from those required to be followed by US domestic companies under NYSE listing standards. We believe that there are no such significant differences in our corporate governance practices, except as follows: • Shareholder Approval of Equity Compensation Plans. Section 303A.8 of the NYSE Listed Company Manual requires shareholder approval of all “equity compensation plans” and material revisions to those plans. The definition of “equity compensation plans” covers plans that provide for the delivery of newly issued securities, and also plans which rely on securities reacquired on the market by the issuing company for the purpose of redistribution to employees and directors. The TSX rules provide that equity compensation plans and material amendments thereto require shareholder approval only if they involve newly issued securities and the amendments are not otherwise addressed in the plan’s amendment procedures. In addition, the TSX rules require that every three years after institution, all unallocated options, rights or other entitlements under equity compensation plans which do not have a fixed maximum aggregate of securities issuable must be approved by shareholders. Vermilion follows the TSX rules with respect to shareholder approval of equity compensation plans and material revisions to those plans. 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 December 31, 2022, 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. Vermilion Energy Inc. ■ Page 53 ■ 2022 Annual Report Internal Control Over Financial Reporting A company's internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. The Chief Executive Officer and the Chief Financial Officer of Vermilion have assessed the effectiveness of Vermilion’s internal control over financial reporting as defined in Rule 13a-15 under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. The assessment was based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Chief Executive Officer and the Chief Financial Officer of Vermilion have concluded that Vermilion’s internal control over financial reporting was effective as of December 31, 2022. The effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2022 has been audited by Deloitte LLP, as reflected in their report included in the 2022 audited annual financial statements filed with the US Securities and Exchange Commission. No changes were made to Vermilion’s internal control over financial reporting during the year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting. Vermilion has limited the scope of design controls and procedures ("DC&P") and internal controls over financial reporting to exclude controls, policies and procedures of Leucrotta Exploration Inc., which was acquired on May 31, 2022. The scope limitation is in accordance with section 3.3(1)(b) of NI 52-109 which allows an issuer to limit the design of DC&P and ICFR to exclude controls, policies, and procedures of a business that the issuer acquired not more than 365 days before the end of the fiscal period. The table below presents the summary financial information of Leucrotta Exploration Inc. included in Vermilion's financial statements as at and for the year ended December 31, 2022: ($M) Non-current assets Non-current liabilities Net assets ($M) Revenue net of royalties Net earnings As at Dec 31, 2022 659,047 100,697 558,350 Year Ended Dec 31, 2022 55,696 17,055 Vermilion Energy Inc. ■ Page 54 ■ 2022 Annual Report Supplemental Table 1: Netbacks The following table includes financial statement information on a per unit basis by business unit. Liquids includes crude oil, condensate, and NGLs. Natural gas sales volumes have been converted on a basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Canada Sales Royalties Transportation Operating Operating netback General and administration Fund flows from operations ($/boe) United States Sales Royalties Transportation Operating Operating netback General and administration Fund flows from operations ($/boe) France Sales Royalties Transportation Operating Operating netback General and administration Current income taxes Fund flows from operations ($/boe) Netherlands Sales Royalties Operating Operating netback General and administration Current income taxes Fund flows from operations ($/boe) Germany Sales Royalties Transportation Operating Operating netback General and administration Current income taxes Fund flows from operations ($/boe) Liquids $/bbl 90.58 (14.09) (3.10) (17.05) 56.34 96.51 (26.18) (0.23) (17.98) 52.12 119.68 (14.27) (7.05) (19.41) 78.95 (6.47) — — (6.47) 114.67 (2.64) (13.67) (17.53) 80.83 Q4 2022 Natural Gas $/mcf 5.96 (0.16) (0.36) (1.41) 4.03 6.00 (1.85) — (2.75) 1.40 — — — — — 47.47 (0.20) (4.45) 42.82 43.24 (2.52) (0.61) (4.42) 35.69 Total $/boe 65.13 (7.99) (2.66) (13.05) 41.43 (1.37) 40.06 83.51 (22.94) (0.18) (17.66) 42.73 (4.28) 38.45 119.68 (14.28) (7.05) (19.41) 78.94 (7.73) (7.69) 63.52 281.75 (1.21) (26.44) 254.10 (4.75) (86.02) 163.33 218.13 (11.54) (6.53) (23.96) 176.10 (5.36) (3.53) 167.21 Liquids $/bbl 99.07 (16.56) (2.92) (16.30) 63.29 102.22 (27.00) (0.42) (14.59) 60.21 132.90 (14.67) (7.31) (20.94) 89.98 87.13 — — 87.13 128.00 (2.66) (10.69) (19.57) 95.08 2022 Natural Gas $/mcf 6.07 (0.47) (0.28) (1.37) 3.95 6.36 (1.88) — (2.29) 2.19 — — — — — 47.04 (0.04) (3.85) 43.15 43.84 (2.09) (0.47) (3.35) 37.93 Total $/boe 70.33 (10.26) (2.35) (12.60) 45.12 (1.50) 43.62 87.46 (23.38) (0.33) (14.40) 49.35 (3.08) 46.27 132.90 (14.68) (7.31) (20.94) 89.97 (5.98) (10.87) 73.12 279.87 (0.25) (22.82) 256.80 (2.12) (74.91) 179.77 231.34 (10.21) (4.69) (19.96) 196.48 (3.34) (15.15) 177.99 Q4 2021 Total $/boe 2021 Total $/boe 59.16 (8.10) (2.00) 47.54 (5.99) (2.04) (11.96) (11.35) 37.10 (0.71) 36.39 67.18 (19.60) (0.61) (9.22) 37.75 (3.10) 34.65 100.18 (12.77) (8.25) (17.88) 61.28 (3.02) (4.12) 54.14 28.16 (0.97) 27.19 62.98 (17.23) (0.75) (9.52) 35.48 (2.56) 32.92 88.15 (11.89) (8.36) (16.46) 51.44 (3.46) 2.88 50.86 205.17 110.47 (0.52) (14.20) 190.45 (0.88) (41.66) 147.91 164.96 (2.29) (5.22) (18.41) 139.04 (3.80) — 135.24 (0.33) (13.17) 96.97 (0.46) (17.40) 79.11 98.06 (2.12) (4.73) (20.18) 71.03 (3.91) — 67.12 Vermilion Energy Inc. ■ Page 55 ■ 2022 Annual Report   Ireland Sales Transportation Operating Operating netback General and administration Fund flows from operations ($/boe) Australia Sales Operating PRRT (1) Operating netback General and administration Current income taxes Fund flows from operations ($/boe) Total Company Sales Realized hedging (loss) gain Royalties Transportation Operating PRRT (1) Operating netback General and administration Interest expense Realized foreign exchange Other income Corporate income taxes Windfall taxes Fund flows from operations ($/boe) Liquids $/bbl — — — — 139.95 (31.23) (7.40) 101.32 103.54 (0.68) (12.69) (3.30) (19.62) (1.12) 66.13 Q4 2022 Natural Gas $/mcf 27.02 (0.31) (1.96) 24.75 — — — — 17.43 (1.90) (0.51) (0.33) (2.21) — 12.48 Total $/boe 162.16 (1.88) (11.74) 148.54 (0.78) 147.76 139.95 (31.23) (7.40) 101.32 (2.93) 3.47 101.86 103.99 (5.42) (8.43) (2.71) (16.81) (0.62) 70.00 (1.65) (2.78) 2.33 (0.14) (5.18) (27.50) 35.08 Liquids $/bbl — — — — 148.15 (38.50) (12.27) 97.38 110.22 (5.82) (15.24) (3.39) (18.99) (1.11) 65.67 2022 Natural Gas $/mcf 32.34 (0.36) (1.65) 30.33 — — — — 18.99 (3.56) (0.62) (0.26) (2.01) — 12.54 Total $/boe 194.05 (2.14) (9.92) 181.99 0.07 182.06 148.15 (38.50) (12.27) 97.38 (3.32) 3.36 97.42 111.95 (13.07) (9.85) (2.54) (15.75) (0.59) 70.15 (1.86) (2.67) 0.49 0.42 (6.70) (7.18) 52.65 Q4 2021 Total $/boe 2021 Total $/boe 236.78 120.51 (2.03) (8.89) 225.86 (0.81) 225.05 112.26 (44.31) (15.43) 52.52 (3.07) 6.73 56.18 96.82 (23.97) (7.43) (2.41) (14.24) (0.70) 48.07 (2.20) (2.06) (0.30) 1.29 (4.07) — 40.73 (2.36) (8.37) 109.78 0.01 109.79 103.01 (36.55) (11.30) 55.16 (2.49) 4.15 56.82 66.81 (10.52) (5.98) (2.48) (13.27) (0.50) 34.06 (1.70) (2.35) (0.21) 0.71 (0.97) — 29.54 (1) Vermilion considers Australian PRRT to be an operating item and, accordingly, has included PRRT in the calculation of operating netbacks. Current income taxes presented above excludes PRRT. Vermilion Energy Inc. ■ Page 56 ■ 2022 Annual Report Supplemental Table 2: Hedges The prices in these tables may represent the weighted averages for several contracts with foreign currency amounts translated to the disclosure currency using forward rates as at the month-end date. The weighted average price for the portfolio of options listed below may not have the same payoff profile as the individual contracts. As such, the presentation of the weighted average prices is purely for indicative purposes. The following tables outline Vermilion’s outstanding risk management positions as at December 31, 2022: AECO Q1 2023 Q2 2023 Q3 2023 Q4 2023 Unit Currency mcf mcf mcf mcf CAD CAD CAD CAD AECO Basis (AECO less NYMEX Henry Hub) Daily Bought Put Volume Weighted Average Bought Put Price Daily Sold Call Volume Weighted Average Sold Call Price Daily Sold Put Volume Weighted Average Sold Put Price Daily Sold Swap Volume Weighted Average Sold Swap Price Daily Bought Swap Volume Weighted Average Bought Swap Price 4,739 3.69 4,739 7.70 — — — — — — 24,000 5,000 5,000 1,685 — — — — — — 4.00 4.00 4.00 4.00 — — — — — — 24,000 5,000 5,000 1,685 — — — — — — 8.44 8.75 8.75 8.75 — — — — — — — — — — — — — — — — — — — — — — 28,435 14,217 14,217 4,791 23,000 23,000 7,750 — — — — 4.95 4.19 4.19 4.19 (1.13) (1.13) (1.13) — — — — — — — — — — — — — — — — — — — — — — — — — — mcf mcf mcf mcf mcf mcf mcf USD USD USD USD USD USD USD Daily Bought Put Volume Weighted Average Bought Put Price Daily Sold Call Volume Weighted Average Sold Call Price Daily Sold Put Volume Weighted Average Sold Put Price Daily Sold Swap Volume Weighted Average Sold Swap Price Daily Bought Swap Volume Weighted Average Bought Swap Price Unit Currency mcf mcf mcf mcf mcf mcf mcf mcf mcf mcf mcf EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR 18,426 7,370 2,457 4,913 14,740 19,654 19,654 12,284 31,938 3,593 3,593 11.76 11.48 22.71 41.03 24.01 34.53 34.53 44.84 40.69 37.56 37.56 18,426 7,370 2,457 4,913 14,740 19,654 19,654 12,284 31,938 3,593 3,593 19.54 17.46 35.90 84.26 46.12 53.21 53.21 84.99 78.00 74.66 74.66 14,740 4,913 — — 4.10 4.40 — — 2,457 3.52 — — — — — — — — — — — — — — — — — — — — — — — — — — 3,685 3,685 — — 67.41 67.41 — — — — — — — — — — — — — — — — — — — — — — — — Q2 2023 Q3 2023 Q4 2023 NYMEX Henry Hub Q1 2023 Q2 2023 Q3 2023 Q4 2023 NBP Q1 2023 Q2 2023 Q3 2023 Q1 2024 TTF Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 VET Equity Swaps Swap Swap Jan 2020 - Apr 2023 Jan 2020 - Jul 2024 Initial Share Price Share Volume 20.9788 CAD 22.4587 CAD 2,250,000 1,500,000 Cross Currency Interest Rate Receive Notional Amount Receive Rate Pay Notional Amount Pay Rate Swap January 2023 111,600,000 USD SOFR + 1.35% 150,000,000 CAD CDOR + 0.88% Vermilion Energy Inc. ■ Page 57 ■ 2022 Annual Report Supplemental Table 3: Capital Expenditures and Acquisitions By classification ($M) Drilling and development Exploration and evaluation Capital expenditures Acquisitions Acquisition of securities Contingent consideration Working capital assumed Acquisitions By category ($M) Drilling, completion, new well equip and tie-in, workovers and recompletions Production equipment and facilities Seismic, studies, land and other Capital expenditures Acquisitions Total capital expenditures and acquisitions Capital expenditures by country ($M) Canada United States France Netherlands Germany Ireland Australia Central and Eastern Europe Total capital expenditures Acquisitions by country ($M) Canada United States Netherlands Germany Ireland Total acquisitions Q4 2022 157,849 11,456 169,305 Q4 2021 119,002 26,805 145,807 2022 528,056 23,761 551,817 2021 339,390 35,406 374,796 3,594 964 — — 4,558 26,848 — — (3,215) 23,633 510,309 23,282 — 6,122 539,713 131,628 — 330 (993) 130,965 Q4 2021 2022 418,284 97,833 105,722 30,919 27,811 17,055 551,817 145,807 539,713 23,633 169,440 1,091,530 Q4 2022 112,755 49,286 7,264 169,305 4,558 173,863 Q4 2022 111,483 2,409 15,704 14,232 10,089 1,323 5,753 8,312 169,305 Q4 2021 86,051 3,592 15,030 12,432 10,883 105 8,755 8,959 145,807 Q4 2022 Q4 2021 1,985 — — (11) 2,584 4,558 1,191 78 — 20,485 1,879 23,633 2022 275,203 63,353 44,252 21,652 26,157 3,030 95,173 22,997 551,817 2022 531,348 1,075 707 3,857 2,726 539,713 2021 252,734 93,901 28,161 374,796 130,965 505,761 2021 190,242 32,540 39,708 27,037 20,307 1,261 34,785 28,916 374,796 2021 1,699 94,248 — 33,139 1,879 130,965 Vermilion Energy Inc. ■ Page 58 ■ 2022 Annual Report Supplemental Table 4: Production Canada Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) United States Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) France Light and medium crude oil (bbls/d) Total (boe/d) Netherlands Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Germany Light and medium crude oil (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Ireland Conventional natural gas (mmcf/d) Total (boe/d) Australia Light and medium crude oil (bbls/d) Total (boe/d) Central and Eastern Europe Conventional natural gas (mmcf/d) Total (boe/d) Consolidated Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 17,448 16,835 17,042 15,980 16,388 16,809 16,868 17,767 19,301 19,847 22,545 22,767 4,525 6,279 10,804 146.81 52,720 4,204 6,870 11,074 145.04 52,080 4,873 7,155 12,028 143.94 53,060 4,892 7,286 12,178 140.55 51,584 4,785 7,073 11,858 128.85 49,720 4,426 6,862 5,558 7,767 4,556 7,016 4,662 7,334 5,200 8,350 5,047 8,248 4,634 6,943 11,288 13,325 11,572 11,996 13,550 13,295 11,577 138.42 146.55 138.41 135.27 155.15 164.08 151.16 51,168 54,618 52,407 53,840 59,256 63,187 59,537 3,282 2,824 2,846 2,675 2,647 3,520 1,888 2,322 2,495 3,243 3,971 2,481 36 1,218 1,254 7.45 5,779 7,247 7,247 — 49 49 27.41 4,617 1,481 25.86 5,791 26.04 4,340 4,847 4,847 0.67 111 35 1,031 1,066 7.03 5,062 6,818 6,818 — 74 74 29.15 4,933 1,764 26.54 6,187 25.74 4,290 4,763 4,763 0.63 104 40 958 998 6.74 4,967 8,126 8,126 1 60 60 35.22 5,930 1,331 25.36 5,558 27.93 4,655 2,465 2,465 0.64 106 24 1,056 1,080 7.56 5,014 8,389 8,389 1 83 83 39.03 6,589 1,158 26.95 5,650 30.26 5,043 3,888 3,888 0.34 57 26 1,388 1,414 9.09 5,575 8,453 8,453 — 97 97 51.98 8,761 1,127 18.00 4,127 30.12 5,020 2,742 2,742 0.12 20 2 1,206 1,208 6.75 2 928 930 5.51 — 1 6 6 6 1,058 1,294 1,158 1,340 1,079 1,058 1,295 1,164 1,346 1,085 5.95 6.87 7.94 8.35 6.72 5,854 3,736 4,373 4,934 5,730 6,708 4,685 8,677 9,013 9,062 9,255 9,347 7,046 9,957 8,677 9,013 9,062 9,255 9,347 7,046 9,957 6 104 104 1 95 95 6 92 92 1 99 99 — 83 83 1 86 86 3 84 84 42.48 37.59 41.45 42.95 46.09 47.31 48.33 7,190 6,362 7,006 7,257 7,764 7,972 8,143 1,043 1,093 911 960 964 1,039 909 16.19 15.60 13.40 11.50 11.25 13.23 14.64 3,741 3,694 3,144 2,876 2,839 3,244 3,349 22.67 30.19 34.14 34.76 35.12 38.57 41.38 3,778 5,031 5,690 5,793 5,853 6,428 6,896 4,190 3,835 4,489 3,781 4,549 5,299 4,041 4,190 3,835 4,489 3,781 4,549 5,299 4,041 0.22 36 0.28 46 0.63 104 0.67 111 0.80 132 2.89 483 3.27 546 34,305 33,003 31,811 32,091 31,356 34,245 32,698 34,556 35,793 37,951 39,899 40,157 4,610 7,497 12,107 234.23 85,450 4,312 7,901 12,213 234.12 84,237 4,973 8,113 13,086 239.83 84,868 4,999 8,342 13,341 244.69 86,213 4,908 8,461 13,369 238.16 84,417 4,532 5,656 4,648 4,762 5,289 5,142 4,724 8,068 8,695 8,074 8,627 9,509 9,588 8,022 12,600 14,351 12,722 13,389 14,798 14,730 12,746 226.73 235.72 233.98 232.00 256.34 274.42 265.51 84,633 86,335 86,276 87,848 95,471 100,366 97,154 Vermilion Energy Inc. ■ Page 59 ■ 2022 Annual Report Canada Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) United States Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) France Light and medium crude oil (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Netherlands Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Germany Light and medium crude oil (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) Ireland Conventional natural gas (mmcf/d) Total (boe/d) Australia Light and medium crude oil (bbls/d) Total (boe/d) Central and Eastern Europe Conventional natural gas (mmcf/d) Total (boe/d) Consolidated Light and medium crude oil (bbls/d) Condensate (1) (bbls/d) Other NGLs (1) (bbls/d) NGLs (bbls/d) Conventional natural gas (mmcf/d) Total (boe/d) 2022 2021 2020 2019 2018 2017 16,830 16,954 21,106 23,971 17,400 4,621 6,895 11,516 144.10 52,364 4,831 7,179 12,010 138.03 51,968 4,886 7,719 12,605 151.38 58,942 4,295 6,988 11,283 148.35 59,979 3,754 5,914 9,668 129.37 48,630 6,015 3,036 4,144 7,180 97.89 29,510 2,908 2,597 3,046 2,514 1,069 662 34 1,066 1,100 7.20 5,207 8 1,146 1,154 6.84 4,890 5 1,218 1,223 7.47 5,514 18 996 1,014 6.89 4,675 8 452 460 2.78 1,992 4 50 54 0.39 781 7,639 8,799 8,903 10,435 11,362 11,084 — — — 0.19 0.21 — 7,639 8,799 8,903 10,467 11,396 11,084 — 66 66 32.66 5,510 1,435 26.18 5,798 27.48 4,579 3,995 3,995 0.57 95 3 97 97 43.40 7,334 1,044 15.81 3,679 29.25 4,875 3,810 3,810 0.31 51 1 88 88 46.16 7,782 968 12.65 3,076 37.44 6,240 4,416 4,416 1.90 317 3 88 88 49.10 8,274 917 15.31 3,468 46.57 7,762 5,662 5,662 0.42 70 — 90 90 46.13 7,779 1,004 15.66 3,614 55.17 9,195 4,494 4,494 1.02 169 — 90 90 40.54 6,847 1,060 19.39 4,291 58.43 9,737 5,770 5,770 — — 32,809 33,208 38,441 43,502 35,329 24,591 4,721 7,961 12,682 238.18 85,187 4,936 8,325 13,261 233.64 85,408 4,980 8,937 13,917 256.99 4,400 7,984 12,384 266.82 95,190 100,357 3,853 6,366 10,219 250.33 87,270 3,130 4,194 7,324 216.64 68,021 (1) 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. This table provides a reconciliation from "crude oil and condensate", "NGLs" and "natural gas" to the product types. 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". Production volumes reported are based on quantities as measured at the first point of sale. Vermilion Energy Inc. ■ Page 60 ■ 2022 Annual Report Supplemental Table 5: Segmented Financial Results ($M) Drilling and development Exploration and evaluation Canada 111,483 — USA 2,409 — 15,704 — 13,897 335 9,844 245 Three Months Ended December 31, 2022 France Netherlands Germany Ireland Australia Corporate Total 1,323 — 15 — — — 5,753 — 95,420 — — — — (2,564) 157,849 10,876 11,456 — — 3,636 50,215 439,637 27,539 375,517 50,215 (1,149) (68,303) Crude oil and condensate sales 213,382 34,786 77,910 (29) 18,153 NGL sales Natural gas sales Sales of purchased commodities Royalties 22,043 80,472 — 5,496 4,116 — — — — 119,697 102,858 64,738 — — — — (38,747) (12,198) (9,294) (512) (6,403) Revenue from external customers 277,150 32,200 68,616 119,156 114,608 64,753 95,420 52,702 824,605 Purchased commodities Transportation Operating General and administration PRRT Corporate income taxes Windfall taxes Interest expense Realized loss on derivative instruments Realized foreign exchange gain Realized other expense — (12,919) (63,305) (6,661) — (10) — — — — — — (95) (9,389) (2,274) — — — — — — — — (4,589) — — — (3,621) — (752) — — (50,215) (50,215) — (21,976) (12,638) (11,229) (13,292) (4,687) (21,291) (416) (136,247) (5,033) (2,016) (2,972) (313) — — — (5,008) (36,536) (1,959) — — — — — — — — — — — — — — — — — — — — — — (2,000) (5,045) 2,366 — — — — — 7,925 — (13,344) (5,045) (811) (41,958) (222,859) (222,859) (22,506) (43,940) 18,845 (1,140) (22,506) (43,940) 18,845 (1,140) Fund flows from operations 194,255 20,442 41,348 69,375 92,764 59,001 69,450 (262,415) 284,220 USA France Netherlands Germany Ireland Australia Corporate Total Year Ended December 31, 2022 ($M) Total assets Drilling and development Exploration and evaluation Crude oil and condensate sales NGL sales Natural gas sales Sales of purchased commodities Canada 3,612,487 275,203 — 910,863 114,128 319,293 — 618,116 63,353 — 823,544 44,250 2 130,150 365,431 19,385 16,698 — — — — 240,276 21,629 23 2,119 — 398,612 465,643 25,087 1,070 62,464 — 3,030 — 15 — 560,738 418,796 324,330 — — — — 249,253 95,173 — 221,187 — — — — 583,127 6,991,058 331 22,666 528,056 23,761 — — 1,692,229 133,513 10,797 1,650,652 244,834 244,834 (3,488) (306,017) Royalties (196,005) (44,427) (40,353) (512) (21,232) Revenue from external customers 1,148,279 121,806 325,078 562,345 460,028 324,345 221,187 252,143 3,415,211 Purchased commodities Transportation Operating — — — (44,849) (618) (20,100) — — — — (9,751) (3,578) — — (244,834) (244,834) — (78,896) (240,899) (27,372) (57,588) (45,903) (41,523) (16,580) (57,478) (1,691) (489,034) General and administration (28,643) (5,863) (16,444) (4,255) (6,949) 122 PRRT Corporate income taxes Windfall taxes Interest expense Realized loss on derivative instruments Realized foreign exchange gain Realized other income — (10) — — — — — — — — — — — — — — — (29,889) (150,647) (31,513) — — — — — — — — — — — — — — — — — — — — — — (4,964) (18,318) 9,319 — (57,677) (18,318) 5,016 (1,110) (208,153) — — — — — (222,859) (222,859) (82,858) (82,858) (405,894) (405,894) 15,195 12,982 15,195 12,982 Fund flows from operations 833,878 87,953 201,057 361,540 370,292 304,309 145,443 (669,607) 1,634,865 Vermilion Energy Inc. ■ Page 61 ■ 2022 Annual Report Supplemental Table 6: Operational and Financial Data by Core Region Production volumes (1) North America Crude oil and condensate (bbls/d) 25,291 23,898 24,801 23,571 23,846 24,757 24,316 24,645 26,459 28,296 31,569 29,888 Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) International 7,497 7,901 8,113 8,342 8,461 8,068 8,695 8,074 8,628 9,508 9,588 8,022 154.26 152.07 150.68 148.11 137.93 145.18 152.06 144.36 142.13 163.09 172.43 157.88 58,499 57,142 58,027 56,598 55,295 57,022 58,354 56,780 58,774 64,986 69,895 64,222 Crude oil and condensate (bbls/d) 13,624 13,419 11,983 13,519 12,419 14,020 14,037 14,560 14,096 14,943 13,471 14,994 Natural gas (mmcf/d) Total (boe/d) Consolidated 79.97 82.05 89.15 96.58 100.22 81.55 83.66 89.62 89.86 93.25 101.99 107.63 26,953 27,095 26,840 29,616 29,123 27,612 27,981 29,495 29,073 30,484 30,472 32,932 Crude oil and condensate (bbls/d) 38,915 37,315 36,784 37,090 36,264 38,777 38,354 39,204 40,555 43,240 45,041 44,881 NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) 7,497 7,901 8,113 8,342 8,461 8,068 8,695 8,074 8,627 9,509 9,588 8,022 234.23 234.12 239.83 244.69 238.16 226.73 235.72 233.98 232.00 256.34 274.42 265.51 85,450 84,237 84,868 86,213 84,417 84,633 86,335 86,276 87,848 95,471 100,366 97,154 (1) Please refer to Supplemental Table 4 "Production" for disclosure by product type. Sales volumes North America Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Crude oil and condensate (bbls/d) 25,291 23,897 24,801 23,571 23,845 24,757 24,316 24,645 26,459 28,297 31,569 29,888 NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) International 7,497 7,901 8,113 8,342 8,461 8,068 8,695 8,074 8,628 9,508 9,588 8,022 154.26 152.07 150.68 148.11 137.93 145.18 152.06 144.36 142.13 163.09 172.43 157.88 58,499 57,142 58,027 56,598 55,295 57,022 58,354 56,780 58,774 64,986 69,895 64,222 Crude oil and condensate (bbls/d) 16,257 11,493 11,720 12,615 13,985 15,227 13,859 11,421 15,359 15,689 12,202 17,090 Natural gas (mmcf/d) Total (boe/d) Consolidated 79.97 82.05 89.15 96.58 100.22 81.55 83.66 89.62 89.86 93.25 101.99 107.63 29,585 25,169 26,578 28,712 30,689 28,820 27,802 26,357 30,336 31,229 29,201 35,028 Crude oil and condensate (bbls/d) 41,547 35,391 36,522 36,186 37,830 39,985 38,174 36,066 41,818 43,985 43,771 46,977 NGLs (bbls/d) Natural gas (mmcf/d) Total (boe/d) 7,497 7,901 8,113 8,342 8,461 8,068 8,695 8,074 8,627 9,509 9,588 8,022 234.23 234.12 239.83 244.69 238.16 226.73 235.72 233.98 232.00 256.34 274.42 265.51 88,083 82,312 84,607 85,310 85,984 85,841 86,156 83,138 89,111 96,217 99,096 99,250 Vermilion Energy Inc. ■ Page 62 ■ 2022 Annual Report Financial results North America Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Crude oil and condensate sales ($/bbl) 106.66 114.82 134.72 111.42 NGL sales ($/bbl) Natural gas sales ($/mcf) Sales ($/boe) Royalties ($/boe) Transportation ($/boe) Operating ($/boe) 39.93 5.96 66.95 44.64 6.41 71.24 51.86 7.13 83.34 46.94 4.80 65.88 92.99 47.26 5.07 59.97 82.23 35.55 3.80 50.40 75.43 25.43 2.72 42.30 66.31 29.39 3.98 43.08 51.06 19.20 2.77 32.51 (9.47) (12.58) (12.51) (11.24) (2.42) (2.16) (2.15) (1.91) (9.26) (1.86) (7.14) (1.92) (5.98) (1.90) (5.49) (2.05) (3.64) (1.92) (13.51) (14.00) (11.58) (11.95) (11.68) (11.02) (10.89) (11.21) (10.94) General and administration ($/boe) Corporate income taxes ($/boe) 0.10 (0.13) (1.27) (0.03) (1.52) — (1.26) (0.02) Fund flows from operations ($/boe) 41.52 41.20 55.58 39.50 (2.01) 0.42 35.58 (1.14) (0.05) (0.91) (0.04) (1.34) (0.04) 29.13 22.58 22.95 (1.94) 0.04 14.11 49.79 15.04 2.02 28.94 (3.58) (1.74) (7.82) (0.78) (0.02) 15.00 28.94 50.25 8.94 1.60 18.24 (1.67) (1.72) 8.92 1.92 29.22 (3.54) (1.91) (9.60) (11.93) (1.52) (0.02) 3.71 (0.84) (0.04) 10.96 Fund flows from operations Drilling and development Free cash flow International 223,443 216,579 293,470 201,193 180,979 152,764 119,916 117,227 76,375 89,635 23,639 64,048 (113,892) (112,238) (54,913) (57,513) (89,643) (35,179) (38,847) (59,113) (33,781) (9,575) (23,979) (197,926) 109,551 104,341 238,557 143,680 91,336 117,585 81,069 58,114 42,594 80,060 (340) (133,878) Crude oil and condensate sales ($/bbl) 128.02 140.09 146.67 136.69 103.53 Natural gas sales ($/mcf) 39.54 58.55 32.33 36.75 35.54 94.91 18.82 177.23 254.86 173.14 183.66 163.23 103.39 85.41 9.83 72.16 81.40 7.98 62.39 62.65 6.27 50.30 58.19 2.91 37.94 50.27 2.28 28.98 (6.38) (3.29) (7.21) (3.51) (7.23) (3.64) (5.43) (2.91) (4.13) (3.40) (4.52) (3.47) (3.83) (4.64) (3.53) (2.76) (3.02) (2.40) (3.32) (2.28) (2.16) (2.04) (23.35) (22.63) (22.11) (19.86) (18.86) (17.55) (16.56) (16.42) (16.99) (15.18) (14.35) (16.13) Sales ($/boe) Royalties ($/boe) Transportation ($/boe) Operating ($/boe) 73.35 4.44 49.42 (3.27) (1.94) General and administration ($/boe) (5.09) (3.34) (3.16) (3.02) (2.53) (2.40) Corporate income taxes ($/boe) (15.15) (21.97) (28.73) (17.63) (12.17) 0.64 PRRT ($/boe) (1.85) (1.96) (0.83) (2.60) (1.96) (2.74) (2.61) (0.19) (0.58) (2.06) (2.92) (2.53) 0.66 2.25 0.04 (0.60) (1.45) (1.27) (2.72) (0.02) (1.21) (2.63) (0.11) (2.90) Fund flows from operations ($/boe) 122.12 194.24 107.44 132.21 120.18 73.35 43.75 37.68 25.77 13.40 6.48 22.44 Fund flows from operations Drilling and development Exploration and evaluation Free cash flow Consolidated 332,377 449,771 259,840 341,626 339,286 194,505 110,654 89,403 71,934 38,498 17,193 71,526 (43,957) (65,640) (54,575) (25,328) (29,359) (27,994) (38,856) (20,399) (19,122) (20,187) (18,404) (29,507) (11,456) (6,137) (3,665) (2,503) (26,805) (3,277) (1,473) (3,851) (6,991) (1,568) 109 (6,271) 276,964 377,994 201,600 313,795 283,122 163,234 70,325 65,153 45,821 16,743 (1,102) 35,748 Q4/22 Q3/22 Q2/22 Q1/22 Q4/21 Q3/21 Q2/21 Q1/21 Q4/20 Q3/20 Q2/20 Q1/20 Crude oil and condensate sales ($/bbl) 115.02 123.02 138.55 120.23 NGL sales ($/bbl) Natural gas sales ($/mcf) Sales ($/boe) Royalties ($/boe) Transportation ($/boe) Operating ($/boe) 39.93 17.43 44.64 24.68 51.86 16.50 46.94 17.41 103.99 127.39 111.55 105.52 96.88 47.26 17.89 96.82 87.05 35.55 9.20 68.19 79.06 25.43 5.24 51.93 71.09 29.39 5.51 49.20 55.31 19.20 4.13 38.57 52.79 15.04 2.34 31.86 8.94 1.85 21.40 34.89 58.66 (8.43) (10.94) (10.85) (2.71) (2.57) (2.62) (9.29) (2.25) (7.43) (2.41) (6.26) (2.44) (5.29) (2.78) (4.87) (2.27) (3.43) (2.08) (3.50) (1.92) (1.81) (1.81) (16.81) (16.64) (14.89) (14.61) (14.24) (13.21) (12.72) (12.86) (13.00) (10.21) (11.00) (13.41) 8.92 2.94 36.35 (3.45) (1.92) General and administration ($/boe) Corporate income taxes ($/boe) Windfall taxes ($/boe) PRRT ($/boe) Interest ($/boe) (1.65) (5.18) (1.90) (6.74) (27.50) — (0.62) (2.78) (0.60) (3.23) (2.04) (9.03) — (0.26) (2.74) (1.85) (5.95) — (0.87) (1.93) (2.20) (4.07) — (0.70) (2.06) Realized derivatives ($/boe) (5.42) (18.22) (10.36) (18.78) (23.97) (1.56) 0.18 — (0.92) (2.37) (9.19) Realized foreign exchange ($/boe) 2.33 (0.28) (0.30) Realized other ($/boe) Fund flows from operations ($/boe) (0.14) 35.08 0.80 67.07 0.36 58.82 0.10 0.70 50.79 (0.30) 1.29 40.73 0.37 0.48 33.27 (1.46) (0.09) — (0.19) (2.41) (5.05) (0.25) 0.35 22.04 (1.57) (2.27) (1.35) 0.18 — (0.19) (2.57) (3.43) (0.69) 0.73 21.66 0.80 — (0.49) (2.42) 0.10 0.16 0.56 16.50 — — (0.41) (1.97) 0.47 (0.31) 0.29 12.95 (1.88) (0.02) — (0.36) (1.98) 6.07 0.44 0.03 9.08 (1.47) (0.06) — (1.02) (2.21) 5.47 0.94 (0.37) 18.85 Fund flows from operations Drilling and development Exploration and evaluation Free cash flow 284,220 507,876 452,901 389,868 322,173 262,696 172,942 162,051 135,212 114,776 81,852 170,225 (157,849) (177,878) (109,488) (82,841) (119,002) (63,173) (77,703) (79,512) (52,903) (29,762) (42,383) (227,433) (11,456) (6,137) (3,665) (2,503) (26,805) (3,277) (1,473) (3,851) (6,991) (1,568) 109 (6,271) 114,915 323,861 339,748 304,524 176,366 196,246 93,766 78,688 75,318 83,446 39,578 (63,479) Vermilion Energy Inc. ■ Page 63 ■ 2022 Annual Report Non-GAAP and Other Specified Financial Measures This MD&A includes references to certain financial measures which do not have standardized meanings and may not be comparable to similar measures presented by other issuers. These financial measures include fund flows from operations, a total of segments measure of profit or loss in accordance with IFRS 8 “Operating Segments” (please see Segmented Information in the Notes to the condensed Consolidated Financial Statements) and net debt, a capital management measure in accordance with IAS 1 “Presentation of Financial Statements” (please see Capital Disclosures in the Notes to the condensed Consolidated Financial Statements). In addition, this MD&A includes financial measures which are not specified, defined, or determined under IFRS and are therefore considered non- GAAP financial measures and may not be comparable to similar measures presented by other issuers. These non-GAAP financial measures include: Total of Segments Measure Fund flows from operations (FFO): Most directly comparable to net earnings, FFO is comprised of sales excluding royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized loss on derivatives, realized foreign exchange gain (loss), and realized other income. 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. Sales Royalties Transportation Operating General and administration Corporate income tax expense Windfall taxes PRRT Interest expense Realized loss on derivatives Realized foreign exchange gain (loss) Realized other (expense) income Fund flows from operations Equity based compensation Unrealized gain (loss) on derivative instruments (1) Unrealized foreign exchange (loss) gain (1) Accretion Depletion and depreciation Deferred tax expense Gain on business combinations Impairment reversal Unrealized other expense (1) Net earnings (1) $/boe 103.99 (8.43) (2.71) (16.81) (1.65) (5.18) (27.50) (0.62) (2.78) (5.42) 2.33 (0.14) 35.08 Q4 2022 $M 842,693 (68,303) (21,976) (136,247) (13,344) (41,958) (222,859) (5,045) (22,506) (43,940) 18,845 (1,140) 284,220 (5,377) 549,693 (47,405) (16,501) (171,926) (196,733) — — (563) 395,408 Q4 2021 $M 765,915 (58,785) (19,033) (112,680) (17,374) (32,234) — (5,544) (16,279) (189,598) (2,395) 10,180 322,173 (6,666) 172,265 7,122 (10,983) (148,216) (14,834) — 23,922 (195) 344,588 2022 $M $/boe 96.82 3,476,394 (306,017) (7.43) (78,896) (2.41) (489,034) (14.24) (57,677) (2.20) (208,153) (4.07) (222,859) — (18,318) (0.70) (82,858) (2.06) (405,894) (23.97) 15,195 (0.30) 1.29 12,982 40.73 1,634,865 (44,390) 540,801 (84,464) (58,170) (577,134) (288,707) — 192,094 (1,833) 1,313,062 2021 $M $/boe 111.95 2,079,761 (186,122) (77,161) (413,013) (52,877) (30,166) — (15,688) (73,075) (327,384) (6,613) 22,200 919,862 (41,565) (9.85) (2.54) (15.75) (1.86) (6.70) (7.18) (0.59) (2.67) (13.07) 0.49 0.42 52.65 $/boe 66.81 (5.98) (2.48) (13.27) (1.70) (0.97) — (0.50) (2.35) (10.52) (0.21) 0.71 29.54 (181,094) (64,963) (43,552) (571,688) (187,343) 17,198 1,302,619 (778) 1,148,696 Unrealized gain (loss) on derivative instruments, Unrealized foreign exchange (loss) gain, and Unrealized other expense are line items from the respective Consolidated Statements of Cash Flows. Non-GAAP Financial Measures and Non-GAAP Ratios Free cash flow: Most directly comparable to cash flows from operating activities and is comprised of fund flows from operations less drilling and development costs and exploration and evaluation costs. The measure is used to determine the funding available for investing and financing activities including payment of dividends, repayment of long-term debt, reallocation into existing business units and deployment into new ventures. Reconciliation to the primary financial statement measures can be found in the following table. Vermilion Energy Inc. ■ Page 64 ■ 2022 Annual Report   ($M) Cash flows from operating activities Changes in non-cash operating working capital Asset retirement obligations settled Fund flows from operations Drilling and development Exploration and evaluation Free cash flow Q4 2022 495,195 (227,483) 16,508 284,220 (157,849) (11,456) 114,915 Q4 2021 250,352 58,782 13,039 322,173 (119,002) (26,805) 176,366 2022 1,814,220 (216,869) 37,514 1,634,865 (528,056) (23,761) 1,083,048 2021 834,453 56,884 28,525 919,862 (339,390) (35,406) 545,066 Capital expenditures: Calculated as the sum of drilling and development costs and exploration and evaluation costs from the Consolidated Statements of Cash Flows that is most directly comparable to cash flows used in investing activities. 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. ($M) Drilling and development Exploration and evaluation Capital expenditures Q4 2022 157,849 11,456 169,305 Q4 2021 119,002 26,805 145,807 2022 528,056 23,761 551,817 2021 339,390 35,406 374,796 Payout and payout % of FFO: A non-GAAP financial measure and non-GAAP ratio respectively, most directly comparable to dividends declared. Payout is comprised of dividends declared plus drilling and development costs, exploration and evaluation costs, and asset retirement obligations settled, and payout % of FFO is calculated as payout over FFO (total of segments measure). The measure is used to assess the amount of cash distributed back to shareholders and reinvested in the business for maintaining production and organic growth. The reconciliation of the measure to the primary financial statement measure can be found below. ($M) Dividends declared Drilling and development Exploration and evaluation Asset retirement obligations settled Payout % of fund flows from operations Q4 2022 13,058 157,849 11,456 16,508 198,871 Q4 2021 — 119,002 26,805 13,039 158,846 2022 45,769 528,056 23,761 37,514 635,100 2021 — 339,390 35,406 28,525 403,321 70 % 49 % 39 % 44 % 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 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. ($M) Net earnings Taxes Interest expense EBIT Average capital employed Return on capital employed Twelve Months Ended Dec 31, 2022 1,313,062 738,037 82,858 2,133,957 5,628,762 Dec 31, 2021 1,148,696 233,197 73,075 1,454,968 4,417,260 38 % 33 % Adjusted working capital: Defined as current assets less current liabilities, excluding current derivatives and current lease liabilities. The measure is used to calculate net debt, a capital management measure disclosed below. Vermilion Energy Inc. ■ Page 65 ■ 2022 Annual Report ($M) Current assets Current derivative asset Current liabilities Current lease liability Current derivative liability Adjusted working capital Capital Management Measure As at Dec 31, 2022 714,446 (162,843) (892,045) 19,486 55,845 (265,111) Dec 31, 2021 472,845 (19,321) (746,813) 15,032 268,973 (9,284) Net debt: Is 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. Net debt excludes lease obligations which are secured by a corresponding right-of-use asset. ($M) Long-term debt Adjusted working capital Unrealized FX on swapped USD borrowings Net debt As at Dec 31, 2022 1,081,351 265,111 (1,876) 1,344,586 Dec 31, 2021 1,651,569 9,284 (16,067) 1,644,786 Ratio of net debt to four quarter trailing fund flows from operations 0.8 1.8 Supplementary Financial Measures Diluted shares outstanding: The sum of shares outstanding at the period end plus outstanding awards under the LTIP, based on current estimates of future performance factors and forfeiture rates. ('000s of shares) Shares outstanding Potential shares issuable pursuant to the LTIP Diluted shares outstanding Q4 2022 163,227 5,389 168,616 Q4 2021 162,261 6,485 168,746 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 that 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: Calculated as FFO (total of segments measure) by boe production. Fund flows from operations netback is used by management to assess the profitability of our business units and Vermilion as a whole. Net debt to four quarter trailing fund flows from operations: Calculated as net debt (capital management measure) over the FFO (total of segments measure) from the preceding four quarters. The measure is used to assess the ability to repay debt. Acquisitions: The sum of acquisitions 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 plus or net of acquired working capital Vermilion Energy Inc. ■ Page 66 ■ 2022 Annual Report deficit or surplus. We believe that including these components provides a useful measure of the economic investment associated with our acquisition activity. A reconciliation to the acquisitions line item in the Consolidated Statements of Cash Flows can be found in Supplemental Table 3 of this MD&A. Cash dividends per share: Represents cash dividends declared per share that is a useful measure of the dividends a common shareholder was entitled to during the period. Covenants: The financial covenants on our revolving credit facility contain non-GAAP measures. The definitions for these financial covenants are included in Financial Position Review. Vermilion Energy Inc. ■ Page 67 ■ 2022 Annual Report Management's Report to Shareholders Management's Responsibility for Financial Statements The accompanying consolidated financial statements of Vermilion Energy Inc. are the responsibility of management and have been approved by the Board of Directors of Vermilion Energy Inc. The consolidated financial statements have been prepared in accordance with the accounting policies detailed in the notes to the consolidated financial statements and are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Where necessary, management has made informed judgments and estimates of transactions that were not yet completed at the balance sheet date. Financial information throughout the Annual Report is consistent with the consolidated financial statements. Management ensures the integrity of the consolidated financial statements by maintaining high-quality systems of internal control. Procedures and policies are designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded, and that the financial records are reliable for preparation of the consolidated financial statements. Deloitte LLP, Vermilion’s Independent Registered Public Accounting Firm, have conducted an audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and have provided their report. The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control. The Board carries out this responsibility principally through the Audit Committee, which is appointed by the Board and is comprised entirely of independent Directors. The Committee meets periodically with management and Deloitte LLP to satisfy itself that each party is properly discharging its responsibilities and to review the consolidated financial statements, Management’s Discussion and Analysis and the Report of the Independent Registered Public Accounting Firm before they are presented to the Board of Directors. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management, under the supervision and with the participation of the principal executive officer and principle financial officer, conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the criteria established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has assessed the effectiveness of Vermilion’s internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. Management concluded that Vermilion’s internal control over financial reporting was effective as of December 31, 2022. Vermilion has limited the scope of design controls and procedures ("DC&P") and internal controls over financial reporting to exclude controls, policies and procedures of Leucrotta Exploration Inc., which was acquired on May 31, 2022. The scope limitation is in accordance with section 3.3(1)(b) of NI 52-109 which allows an issuer to limit the design of DC&P and ICFR to exclude controls, policies, and procedures of a business that the issuer acquired not more than 365 days before the end of the fiscal period. Total assets and revenues excluded from management's assessment of internal control over financial reporting represents 8% and 2%, respectively, of the related Consolidated Financial Statement amounts as at and for the year ended December 31, 2022. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even those systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation. The effectiveness of Vermilion’s internal control over financial reporting as of December 31, 2022 has been audited by Deloitte LLP, the Company’s Independent Registered Public Accounting Firm, who also audited the Company’s consolidated financial statements for the year ended December 31, 2022. (“Dion Hatcher”) (“Lars Glemser”) Dion Hatcher President & Chief Executive Officer March 8, 2023 Lars Glemser Vice President & Chief Financial Officer Vermilion Energy Inc. ■ Page 68 ■ 2022 Annual Report   Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Vermilion Energy Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Vermilion Energy Inc. and subsidiaries (the “Company") as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 8, 2023, expressed an unqualified opinion on those financial statements. As described in Management’s Report to Shareholders, management excluded from its assessment the internal control over financial reporting at Leucrotta Exploration Inc., which was acquired on May 31, 2022, and whose financial statements constitute 8% of total assets and 2% of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2022. Accordingly, our audit did not include the internal control over financial reporting at Leucrotta Exploration Inc. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report to Shareholders. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte LLP Chartered Professional Accountants Calgary, Canada March 8, 2023 Vermilion Energy Inc. ■ Page 69 ■ 2022 Annual Report Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Vermilion Energy Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Vermilion Energy Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of net earnings and comprehensive income, consolidated statements of cash flows and consolidated statements of changes in shareholders' equity for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of capital assets acquired from Leucrotta Exploration Inc. - Refer to Notes 2 and 4 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Leucrotta Exploration Inc. for $500 million on May 31, 2022. The Company accounted for the acquisition as a business combination, which required that assets acquired, and liabilities assumed to be measured at fair value on the acquisition date. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including capital assets of $559 million. The fair value of capital assets is estimated based on the future after-tax cash flows of the underlying proved and probable oil, natural gas liquids and natural gas reserves. The Company engages an independent reservoir engineer to estimate oil and natural gas reserves using estimates, assumptions, and engineering data. The development of the Company’s reserves and the related future after-tax cash flows used to evaluate the fair value requires management to make significant estimates and assumptions related to future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs. Given the significant judgments made by management related to future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs, these estimates and assumptions are subject to a high degree of estimation uncertainty. Auditing these estimates and assumptions required a high degree of auditor judgment in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists. Vermilion Energy Inc. ■ Page 70 ■ 2022 Annual Report How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to future oil, natural gas liquids and natural gas prices, discount rate, reserves and future operating and development costs used to determine the fair value of capital assets included the following, among others: • • • • Evaluated the effectiveness of the relevant controls, including those over the determination of the future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs. Evaluated the Company’s independent reservoir engineer by: ◦ ◦ Examining reports and assessing their scope of work and findings; and Assessing the competence, capability, and objectivity by evaluating their relevant professional qualifications and experience. Evaluated the reasonableness of reserves by testing the source financial information underlying the reserves and comparing the reserve volumes to historical production volumes. Evaluated the reasonableness of future operating and development costs by testing the source financial information underlying the estimate as of December 31, 2022 and performing rollback procedures to May 31, 2022 to assess any significant changes in assumptions, comparing future operating and development costs to historical results, and evaluating whether they are consistent with evidence obtained in other areas of the audit. • With the assistance of fair value specialists: ◦ ◦ Evaluated the future oil, natural gas liquids and natural gas prices by independently developing a reasonable range of forecasts based on reputable third-party forecasts and market data and comparing those to the future prices selected by management; and Evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount rate and developing a range of independent estimates and comparing to the discount rate determined by management. Capital asset impairment reversal – Refer to Note 2 and 6 to the financial statements Critical Audit Matter Description The Company reviews all Cash Generating Units (“CGUs”) for indicators of potential impairment or reversal of impairment at each reporting date. As a result of increasing commodity price forecasts during the year, indicators of impairment reversal were identified for those CGUs where impairment loss was recognized in prior years. An impairment reversal is recognized if the carrying amount of the CGU is less than its recoverable amount. The recoverable amount of a CGU is estimated based on the higher of its fair value less cost of disposal and its value-in-use, using future after-tax cash flows of the underlying proved and probable oil and natural gas reserves. The Company engages an independent reservoir engineer to estimate oil and natural gas reserves using estimates, assumptions, and engineering data. The development of the Company’s reserves and the related future after-tax cash flows used to evaluate the impairment reversal requires management to make significant estimates and assumptions related to future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs. Impairment reversals totaling $192 million were recorded for the year ended December 31, 2022. Given the significant judgments made by management related to future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs, these estimates and assumptions are subject to a high degree of estimation uncertainty. Auditing these estimates and assumptions are subject to a high degree of auditor judgment in applying audit procedures and in evaluation of the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs used to determine the recoverable amount of the CGUs included the following, among others: • • • • • Evaluate management’s assessment and independently assess petroleum natural gas assets for indicators of impairment or impairment reversal. Evaluated the effectiveness of the relevant controls, including those over the determination of the future oil, natural gas liquids and natural gas prices, discount rate, reserves, and future operating and development costs. Evaluated the Company’s independent reservoir engineer by: ◦ ◦ Examining reports and assessing their scope of work and findings; and Assessing the competence, capability, and objectivity by evaluating their relevant professional qualifications and experience. Evaluated the reasonableness of reserves by testing the source financial information underlying the reserves and comparing the reserve volumes to historical production volumes. Evaluated the reasonableness of future operating and development costs by testing the source financial information underlying the estimate, comparing future operating and development costs to historical results, and evaluating whether they are consistent with evidence obtained in other areas of the audit. • With the assistance of fair value specialists: ◦ Evaluated the future oil, natural gas liquids and natural gas prices by independently developing a reasonable range of forecasts based on reputable third-party forecasts and market data and comparing those to the future prices selected by management; and Vermilion Energy Inc. ■ Page 71 ■ 2022 Annual Report ◦ Evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount rate and developing a range of independent estimates and comparing those to the discount rate determined by management. Valuation of deferred tax asset - Refer to Notes 2 and 11 to the financial statements Critical Audit Matter Description The Company recognizes deferred income taxes for differences between the financial statement and tax basis of assets and liabilities at substantively enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax assets are reduced to the amounts expected to be realized based on forecasts of future taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves). The Company recorded a deferred income tax asset for Ireland primarily arising from past taxable losses in this jurisdiction. To determine whether it is probable that the deferred income tax assets in Ireland will be realized, management makes assumptions related to the forecasts of future taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves). As such, auditing the probability of the deferred income tax assets being realized and management’s commodity price forecasts and forecasted reserves involved a high degree of auditor judgement as the estimations made by management contain significant measurement uncertainty. This resulted in an increased extent of audit effort, which included the need to involve income tax specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to assessing the probability of the deferred income tax assets being realized and management’s forecasts of taxable income, specifically forecasts of future revenue (commodity price forecasts and forecasted reserves) to evaluate the deferred income tax assets in Ireland included the following, among others: • • • Evaluated the effectiveness of relevant controls, including those over the determination of the forecasts of future revenue, specifically commodity price forecasts and forecasted reserves in Ireland. Evaluated management’s ability to accurately forecast future taxable income by comparing management’s assumptions to historical data and available market trends. Evaluated the reasonableness of management’s forecasts of future revenue by: ◦ ◦ Comparing the forecasts prepared by management’s expert to third party forecasts; and, Evaluating whether management’s estimates of commodity price forecasts and estimated reserves were consistent with the requirements of IAS 12 – Income taxes relating to the probability of forecasted future revenue and the length of the forecast period. /s/ Deloitte LLP Chartered Professional Accountants Calgary, Canada March 8, 2023 We have served as the Company's auditor since 2000. Vermilion Energy Inc. ■ Page 72 ■ 2022 Annual Report Consolidated Financial Statements Consolidated Balance Sheet thousands of Canadian dollars Note December 31, 2022 December 31, 2021 Assets Current Cash and cash equivalents Accounts receivable Crude oil inventory Derivative instruments Prepaid expenses Total current assets Derivative instruments Investment in securities Deferred taxes Exploration and evaluation assets Capital assets Total assets Liabilities Current Accounts payable and accrued liabilities Dividends payable Derivative instruments Income taxes payable Total current liabilities Derivative instruments Long-term debt Lease obligations Asset retirement obligations Deferred taxes Total liabilities Shareholders' Equity Shareholders' capital Contributed surplus Accumulated other comprehensive income Deficit Total shareholders' equity Total liabilities and shareholders' equity Approved by the Board (Signed "Robert Michaleski”) Robert Michaleski, Director 19 19 19 9 19 9 5 11 4, 7 4, 6 19 13 9 19 9 12 10 8 11 13 13,836 373,651 19,657 162,843 144,459 714,446 132,598 56,366 125,533 270,593 5,691,522 6,991,058 481,444 13,058 55,845 341,698 892,045 — 1,081,351 51,507 1,087,757 477,340 3,590,000 4,243,794 35,409 123,505 (1,001,650) 3,401,058 6,991,058 6,028 328,584 20,070 19,321 98,842 472,845 — — 374,993 233,290 4,824,195 5,905,323 440,658 — 268,973 37,182 746,813 51,213 1,651,569 60,190 1,000,554 328,839 3,839,178 4,241,773 49,529 28,467 (2,253,624) 2,066,145 5,905,323 (Signed “Manjit Sharma”) Manjit Sharma, Director Vermilion Energy Inc. ■ Page 73 ■ 2022 Annual Report Consolidated Statements of Net Earnings and Comprehensive Income thousands of Canadian dollars, except share and per share amounts Note Dec 31, 2022 Dec 31, 2021 Year Ended Revenue Petroleum and natural gas sales Royalties Sales of purchased commodities Petroleum and natural gas revenue Expenses Purchased commodities Operating Transportation Equity based compensation (Gain) loss on derivative instruments Interest expense General and administration Foreign exchange loss Other income Accretion Depletion and depreciation Impairment reversal Gain on business combinations Earnings before income taxes Income tax expense Deferred Current Windfall taxes Net earnings Other comprehensive income Currency translation adjustments Hedge accounting reserve Fair value adjustment on investment in securities, net of tax Comprehensive income Net earnings per share Basic Diluted Weighted average shares outstanding ('000s) Basic Diluted 3,476,394 (306,017) 244,834 3,415,211 244,834 489,034 78,896 44,390 (134,907) 82,858 57,677 69,269 (11,149) 58,170 577,134 (192,094) — 1,364,112 2,051,099 288,707 226,471 222,859 738,037 2,079,761 (186,122) 147,091 2,040,730 147,091 413,013 77,161 41,565 508,478 73,075 52,877 71,576 (21,422) 43,552 571,688 (1,302,619) (17,198) 658,837 1,381,893 187,343 45,854 — 233,197 1,313,062 1,148,696 60,543 5,599 28,896 1,408,100 (55,632) 6,113 — 1,099,177 8.03 7.80 7.13 6.97 163,489 168,426 161,172 164,765 19 15 9 19 8 6 6 11 11 5 16 16 Vermilion Energy Inc. ■ Page 74 ■ 2022 Annual Report Consolidated Statements of Cash Flows thousands of Canadian dollars Operating Net earnings Adjustments: Accretion Depletion and depreciation Impairment reversal Gain on business combinations Unrealized (gain) loss on derivative instruments Equity based compensation Unrealized foreign exchange loss Unrealized other expense Deferred tax expense Asset retirement obligations settled Changes in non-cash operating working capital Cash flows from operating activities Investing Drilling and development Exploration and evaluation Acquisitions, net of cash acquired Acquisition of securities Changes in non-cash investing working capital Cash flows used in investing activities Financing Repayments on the revolving credit facility Issuance of senior unsecured notes Payments on lease obligations Repurchase of shares Cash dividends Cash flows used in financing activities Foreign exchange gain (loss) on cash held in foreign currencies Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplementary information for cash flows from operating activities Interest paid Income taxes paid Note Dec 31, 2022 Dec 31, 2021 Year Ended 1,313,062 1,148,696 8 6, 7 6 9 15 11 8 19 6 7 3, 5 5 19 12 12 10 13 13 19 58,170 577,134 (192,094) — (540,801) 44,390 84,464 1,833 288,707 (37,514) 216,869 1,814,220 (528,056) (23,761) (510,309) (23,282) 26,116 (1,059,292) (1,121,868) 499,037 (21,168) (71,659) (32,711) (748,369) 1,249 7,808 6,028 13,836 75,042 144,814 43,552 571,688 (1,302,619) (17,198) 181,094 41,565 64,963 778 187,343 (28,525) (56,884) 834,453 (339,390) (35,406) (131,628) — 36,724 (469,700) (341,259) — (22,187) — — (363,446) (2,183) (876) 6,904 6,028 71,369 13,212 Vermilion Energy Inc. ■ Page 75 ■ 2022 Annual Report Consolidated Statements of Changes in Shareholders' Equity thousands of Canadian dollars Shareholders' capital Balance, beginning of year Vesting of equity based awards Equity based compensation Share-settled dividends on vested equity based awards Repurchase of shares Balance, end of year Contributed surplus Balance, beginning of year Equity based compensation Vesting of equity based awards Balance, end of year Accumulated other comprehensive income Balance, beginning of year Currency translation adjustments Hedge accounting reserve Fair value adjustment on investment in securities, net of tax Balance, end of year Deficit Balance, beginning of year Net earnings Dividends declared Share-settled dividends on vested equity based awards Repurchase of shares Balance, end of year Total shareholders' equity Note 13 13 5 13 Year Ended Dec 31, 2022 Dec 31, 2021 4,241,773 44,811 13,699 4,377 (60,866) 4,243,794 49,529 30,691 (44,811) 35,409 28,467 60,543 5,599 28,896 123,505 (2,253,624) 1,313,062 (45,769) (4,377) (10,942) (1,001,650) 3,401,058 4,181,160 49,922 8,365 2,326 — 4,241,773 66,250 33,201 (49,922) 49,529 77,986 (55,632) 6,113 — 28,467 (3,399,994) 1,148,696 — (2,326) — (2,253,624) 2,066,145 Vermilion Energy Inc. ■ Page 76 ■ 2022 Annual Report Description of equity reserves Shareholders’ capital Represents the recognized amount for common shares issued (net of equity issuance costs and deferred taxes) less the weighted-average carrying value of shares repurchased. If the price paid to repurchase common shares is less than the carrying value of the shares repurchased, the difference is recorded to contributed surplus. If the price paid to repurchase common shares exceeds the carrying value of the shares repurchased, the difference is recorded as an increase to deficit. Contributed surplus Represents the recognized value of unvested equity based awards that will be settled in shares. Once vested, the value of the awards are transferred to shareholders’ capital. Accumulated other comprehensive income Represents currency translation adjustments, hedge accounting reserve and fair value adjustments on investments. Currency translation adjustments result from translating the balance sheets of subsidiaries with a foreign functional currency to Canadian dollars at period-end rates. These amounts may be reclassified to net earnings if there is a disposal or partial disposal of a subsidiary. The hedge accounting reserve represents the effective portion of the change in fair value related to cash flow and net investment hedges recognized in other comprehensive income, net of tax and reclassified to the consolidated statement of net earnings in the same period in which the transaction associated with the hedged item occurs. For the year ended December 31, 2022, accumulated losses of $4.3 million and $1.3 million were recognized in the consolidated statement of net earnings on the cash flow hedges and net investment hedges, respectively, and will be recognized in net earnings through 2025 when the senior unsecured notes mature. Fair value adjustment on investment in securities, net of tax, are a result of changes in the fair value of investments that have been elected to be subsequently measured at fair value through other comprehensive income. Deficit Represents the cumulative net earnings less distributed earnings and surplus of the price paid to repurchase common shares of Vermilion Energy Inc. over the weighted-average carrying value of the shares repurchased. Vermilion Energy Inc. ■ Page 77 ■ 2022 Annual Report Notes to the Consolidated Financial Statements for the year ended December 31, 2022 and 2021 tabular amounts in thousands of Canadian dollars, except share and per share amounts 1. Basis of presentation Vermilion Energy Inc. and its subsidiaries (the “Company” or “Vermilion”) are engaged in the business of petroleum and natural gas exploration, development, acquisition, and production. Vermilion was incorporated in Canada and the Company’s registered office and principal place of business is located at 3500, 520, 3rd Avenue SW, Calgary, Alberta, Canada. These consolidated financial statements were approved and authorized for issuance by Vermilion’s Board of Directors on March 8, 2023. 2. Significant accounting policies Accounting framework The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Principles of consolidation The consolidated financial statements include the accounts of Vermilion Energy Inc. and its subsidiaries. Vermilion’s subsidiaries include entities in each of the jurisdictions that Vermilion operates as described in Note 3 (Segmented information) including: Canada, France, Netherlands, Germany, Ireland, Australia, the United States, and Central and Eastern Europe (Hungary, Slovakia, and Croatia). Vermilion Energy Inc. directly or indirectly through holding companies owns all of the voting securities of each material subsidiary. Transactions between Vermilion Energy Inc. and its subsidiaries have been eliminated. Vermilion accounts for joint operations by recognizing the Company’s share of assets, liabilities, income, and expenses. Exploration and evaluation assets Vermilion classifies costs as exploration and evaluation (“E&E”) assets when they relate to exploring and evaluating an area for which the Company has the license or right to explore and extract resources. E&E costs may include: geological and geophysical costs; land and license acquisition costs; and costs for the drilling, completion, and testing of exploration wells. E&E costs are reclassified to capital assets if the technical feasibility and commercial viability of the area can be determined. E&E assets are assessed for impairment prior to any reclassification. The technical feasibility and commercial viability of extracting the reserves is considered to be determinable when proved and probable reserves are identified. Costs incurred prior to the acquisition of the legal rights to explore an area are expensed as incurred. If reserves are not found within the license area or the area is abandoned, the related E&E costs are depreciated over a period not greater than five years. If an exploration license expires prior to the commencement of exploration activities, the cost of the exploration license is written off through depreciation in the year of expiration. Capital assets Vermilion recognizes capital assets at cost less accumulated depletion, depreciation, and impairment losses. Costs include directly attributable costs incurred for the drilling, completion, and tie-in of wells and the construction of production and processing facilities. When components of capital assets are replaced, disposed of, or no longer in use, they are derecognized. Gains and losses on disposal of capital assets are determined by comparing the proceeds of disposal compared to the carrying amount. Depletion and depreciation Capital assets are grouped into depletion units, which are groups of assets within a specific production area that have similar economic lives. Depletion units represent the lowest level of disaggregation for which costs are accumulated for the purposes of calculating depletion and depreciation. The net carrying value of each depletion unit is depleted using the unit of production method by reference to the ratio of production in the period to the total proved and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production. Vermilion Energy Inc. ■ Page 78 ■ 2022 Annual Report For the purposes of the depletion calculations, oil and gas reserves are converted to a common unit of measure on the basis of their relative energy content based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent. Impairment of capital assets and exploration and evaluation assets Depletion units are aggregated into cash generating units (“CGUs”) for impairment testing. CGUs are the lowest level for which there are identifiable cash inflows that are largely independent of cash inflows of other groups of assets. CGUs are reviewed for indicators of potential impairment at each reporting date. E&E assets are tested for impairment when reclassified to capital assets or when indicators of potential impairment are identified. E&E assets are reviewed for indicators of potential impairment at each reporting date. If indicators of potential impairment are identified, E&E assets are tested for impairment as part of the CGU attributable to the jurisdiction in which the exploration area resides. If an indicator of potential impairment exists, the CGU’s carrying value is compared to its recoverable amount. A CGU’s recoverable amount is the higher of its fair value less costs of disposal and its value-in-use. If the carrying amount of a CGU exceeds its recoverable amount, an impairment loss is recognized to reduce the carrying value of the CGU to its recoverable amount. If an impairment loss has been recognized in a prior period, an assessment is performed at each reporting date to determine if there are indicators that the circumstances which led to the impairment loss have reversed. If the change in circumstances results in the recoverable amount being higher than the carrying value after the impairment loss, then the impairment loss (net of depletion that would otherwise have been recorded) is reversed. Lease obligations and right-of-use assets A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the lease commencement date, a lease obligation is recognized at the present value of future lease payments, typically using the applicable incremental borrowing rate. A corresponding right-of-use asset is recognized at the amount of the lease obligation, adjusted for lease incentives received and initial direct costs. Vermilion does not recognize leases for short-term leases with a lease term of 12 months or less, or leases for low-value assets. Payments are applied against the lease obligation and interest expense is recognized on the lease obligations using the effective interest rate method. Depreciation is recognized on the right-of-use asset over the lease term. Cash and cash equivalents Cash and cash equivalents include cash on deposit with financial institutions and guaranteed investment certificates. Crude oil inventory Crude oil inventory is valued at the lower of cost or net realizable value. The cost of crude oil inventory produced includes related operating expense, royalties, and depletion determined on a weighted-average basis. Asset retirement obligations Vermilion recognizes a provision for asset retirement obligations when an event occurs giving rise to an obligation of uncertain timing or amount. Asset retirement obligations are recognized on the consolidated balance sheet as a long-term liability with a corresponding increase to E&E or capital assets. Asset retirement obligations reflect the present value of estimated future settlement costs. The discount rate used to calculate the present value is specific to the jurisdiction the obligation relates to and is reflective of current market assessment of the time value of money and risks specific to the liabilities that have not been reflected in the cash flow estimates. Asset retirement obligations are remeasured at each reporting period to reflect changes in market rates and estimated future settlement costs. Asset retirement obligations are increased each reporting period to reflect the passage of time with a corresponding charge to accretion expense. Revenue recognition Revenue associated with the sale of crude oil and condensate, natural gas, and natural gas liquids is measured based on the consideration specified in contracts with customers. Revenue from contracts with customers is recognized when or as Vermilion satisfies a performance obligation by transferring control of crude oil and condensate, natural gas, or natural gas liquids to a customer at contractually specified transfer points. This transfer coincides with title passing to the customer and the customer taking physical possession of the commodity. Vermilion principally satisfies its performance obligations at a point in time and the amounts of revenue recognized relating to performance obligations satisfied over time are not significant. Vermilion Energy Inc. ■ Page 79 ■ 2022 Annual Report Vermilion invoices customers for delivered products monthly and payment occurs shortly thereafter. Vermilion does not have any contracts where the period between the transfer of control of the commodity to the customer and payment by the customer exceeds one year. As a result, Vermilion does not adjust its revenue transactions to reflect significant financing components. Financial instruments On initial recognition, financial instruments are measured at fair value. Measurement in subsequent periods depends on the classification of the financial instrument as described below: • • • Fair value through profit or loss ("FVTPL"): Financial instruments under this classification include cash and cash equivalents and derivative assets and liabilities. Transaction costs under this classification are expensed as incurred. Fair value through other comprehensive income ("FVTOCI"): Financial instruments under this classification include derivative assets, investment in securities, and liabilities where hedge accounting is applied. Transaction costs under this classification are expensed as incurred. Amortized cost: Financial instruments under this classification include accounts receivable, accounts payable and accrued liabilities, dividends payable, lease obligations, and long-term debt. Transaction costs under this classification are included in the measurement of the financial instrument. Accounts receivable are measured net of a loss allowance equal to the lifetime expected credit loss. Hedge accounting Hedge accounting is applied to financial instruments designated as hedging instruments in qualifying hedging relationships. Qualifying hedge relationships may include cash flow hedges, fair value hedges, and hedges of net investments in foreign operations. The purpose of hedge accounting is to represent the effect of Vermilion's risk management activities to manage exposures arising from specific risks that affect net earnings such as foreign currency risk. In order to apply hedge accounting, the eligible hedging instrument must be highly effective in offsetting the exposure to changes in the eligible hedged item. This effectiveness is assessed at inception and at the end of each reporting period thereafter. At inception, formal designation and documentation of the hedging relationship, risk management objective and strategy is required for undertaking the hedge. For cash flow and net investment hedges, gains and losses on the hedging instrument are recognized in the consolidated statement of earnings in the same period in which the transaction associated with the hedged item occurs. Where the hedging instrument is a derivative instrument, a derivative asset or liability is recognized on the balance sheet at fair value (included in "Derivative instruments") with the effective portion of the gain or loss recorded to other comprehensive income. Any gain or loss associated with the ineffective portion of the hedging relationship is recognized in the consolidated statement of net earnings as other income or expense. If a hedging relationship no longer qualifies for hedge accounting, any gain or loss resulting from the discontinuation of hedge accounting is deferred in other comprehensive income until the forecasted transaction date. If the forecasted transaction is no longer expected to occur, any gain or loss resulting from the discontinuation of hedge accounting is immediately recognized in the consolidated statement of net earnings. Equity based compensation Equity based compensation expense results from equity-settled awards issued under Vermilion’s long-term share-based compensation plans as well as the grant date fair value of Vermilion common shares issued under the Company’s bonus and employee share savings plans. Vermilion's long-term share-based compensation plans consist of the Long-term Incentive Plan (“LTIP”) and the Deferred Share Unit Plan ("DSU"). Equity-settled awards issued under the LTIP vest over a period of one to three years and awards issued under the DSU vest immediately upon granting. Equity based compensation expense for equity-settled plans is recognized over the vesting period with a corresponding adjustment to contributed surplus. The expense recognized is based on the grant date fair value of the awards, an estimate of the performance factor that will be achieved (if applicable), and an estimate of forfeiture rates based on historical vesting data. Dividends notionally accrue to the LTIP and are excluded in the determination of grant date fair values. When the awards are converted to Vermilion common shares, the amount recognized in contributed surplus is reclassified to shareholders’ capital. The grant date fair value of awards or Vermilion common shares issued is determined as the closing price of Vermilion’s common shares on the Toronto Stock Exchange on the grant date. Vermilion Energy Inc. ■ Page 80 ■ 2022 Annual Report Per share amounts Basic net earnings per share is calculated by dividing net earnings by the weighted-average number of shares outstanding during the period. Diluted net earnings per share is calculated by dividing net earnings by the diluted weighted-average number of shares outstanding during the period. The diluted weighted-average number of shares outstanding is the sum of the basic weighted-average number of shares outstanding and (to the extent inclusion reduces diluted net earnings per share) the number of shares issuable for equity-settled awards determined using the treasury stock method. The treasury stock method assumes that the unrecognized equity based compensation expense are deemed proceeds used to repurchase Vermilion common shares at the average market price during the period. Foreign currency translation Vermilion Energy Inc.’s functional and presentation currency is the Canadian dollar. Vermilion has subsidiaries that transact and operate in countries other than Canada and have functional currencies other than the Canadian dollar. Foreign currency translation includes the translation of foreign currency transactions and the translation of foreign operations. Foreign currency transaction translation occurs when translating transactions and balances in foreign currencies to the applicable functional currency of Vermilion Energy Inc. and its subsidiaries. Gains and losses from foreign currency transactions are recorded as foreign exchange gains or losses in the statement of net earnings. Foreign currency transaction translation occurs as follows: • • • Income and expenses are translated at the prevailing rates on the date of the transaction. Non-monetary assets or liabilities are carried at the prevailing rates on the date of the transaction. Monetary items, including intercompany loans that are not deemed to represent net investments in a foreign subsidiary, are translated at the prevailing rates at the balance sheet date. Foreign operation translation occurs when translating the financial statements of non-Canadian functional currency subsidiaries to the Canadian dollar and when translating intercompany loans that are deemed to represent net investments in a foreign subsidiary. Gains and losses from foreign operation translations are recorded as currency translation adjustments in the statement of comprehensive income. Foreign operation translation occurs as follows: • • Income and expenses are translated at the average exchange rates for the period. Assets and liabilities are translated at the prevailing rates on the balance sheet date. Income taxes Deferred tax assets and liabilities are calculated using the balance sheet method. Deferred tax assets and liabilities are recognized for the estimated effect of any temporary differences between the amounts recognized on Vermilion’s consolidated balance sheet and the respective tax basis. This calculation uses enacted or substantively enacted tax rates that are expected to be in effect when the temporary differences are expected to reverse. The effect of a change in tax rates on deferred taxes is recognized in the period the related legislation is substantively enacted. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that the related tax benefit will be realized. Business combinations Acquisitions of corporations or groups of assets are accounted for as business combinations using the acquisition method if the acquired assets constitute a business. Under the acquisition method, assets acquired and liabilities assumed in a business combination (with the exception of deferred tax assets and liabilities) are measured at their fair values. Deferred tax assets or liabilities arising from the assets acquired and liabilities assumed are measured in accordance with the policies described in "Income taxes" above. If applicable, the excess or deficiency of the fair value of net assets acquired compared to consideration paid is recognized as a gain on business combination or as goodwill on the consolidated balance sheet. Acquisition-related costs incurred to effect a business combination are expensed in the period incurred. As part of the assessment to determine if the acquisition constitutes a business, Vermilion may elect to apply the concentration test on a transaction by transaction basis. The test is met if substantially all of the fair value related to the gross assets acquired is concentrated in a single identifiable asset (or group of similar assets) resulting in the acquisition not being deemed a business and recorded as an asset acquisition. Vermilion Energy Inc. ■ Page 81 ■ 2022 Annual Report Segmented information Vermilion has a decentralized business unit structure designed to manage assets in each country the Company operates. Each of Vermilion's operating segments derives its revenues solely from the production and sale of petroleum and natural gas. Vermilion’s Corporate segment aggregates costs incurred at the Company’s Corporate head office located in Calgary, Alberta, Canada as well as costs incurred relating to Vermilion’s exploration and production activities in Hungary, Slovakia, and Croatia (Central and Eastern Europe). These operating segments have similar economic characteristics as they do not currently generate material revenue. Vermilion’s chief operating decision maker regularly reviews fund flows from operations generated by each of Vermilion’s operating segments. Fund flows from operations is a measure of profit or loss that provides the chief operating decision maker with the ability to assess the profitability of each operating segment and, correspondingly, the ability of each operating segment to fund its share of dividends, asset retirement obligations, and capital investments. Management judgments and estimation uncertainty The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the reported amount of assets, liabilities, income, and expenses. Actual results could differ significantly from these estimates. Key areas where management has made judgments, estimates, and assumptions are described below. The determination of whether indicators of impairment or impairment reversals: • Determining whether there are indicators of impairment or impairment reversals are based on management's assessments of the changes in estimates for future commodity prices, costs, discount rates, or reserves. Changes in these estimates and assumptions can directly impact the calculated fair value of capital assets and therefore could be indicators of impairment or impairment reversals. In addition, change in the Vermilion's market capitalization relative to its book value could be an indicator of impairment. The measurement of the fair value of capital assets acquired in a business combination and the determination of the recoverable amount of cash generating units ("CGU"): • • Calculating the fair value of capital assets acquired in a business combination and the recoverable amount of CGUs (in the assessment of impairments or reversals of previous impairments if indicators of impairment or impairment reversal are identified) are based on estimated future commodity prices, discount rates and estimated reserves. Reserve estimates are based on: engineering data, estimated future commodity prices, expected future rates of production, and assumptions regarding the timing and amount of future expenditures. Changes in these estimates and assumptions can directly impact the calculated fair value of capital assets acquired (and thus the resulting goodwill or gain on business combination) and the recoverable amount of a CGU (and thus the resulting impairment loss or recovery). In addition, the recoverable amount of a CGU is impacted by the composition of CGUs, which are subject to management’s judgment of the lowest level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets. The factors used by Vermilion to determine CGUs vary by jurisdiction due to their unique operating and geographic conditions. In general, Vermilion will assess the following factors: geographic proximity of the assets within a group to one another, geographic proximity of the group of assets to other groups of assets, homogeneity of the production from the group of assets and the sharing of infrastructure used to process and/or transport production. Changes in these judgments can directly impact the calculated recoverable amount of a CGU (and thus the resulting impairment loss or recovery). The measurement of the carrying value of asset retirement obligations on the balance sheet, including the fair value and subsequent carrying value of asset retirement obligations assumed in a business combination: • Asset retirement obligations are based on judgments regarding regulatory requirements, estimates of future costs, assumptions on the expected timing of expenditures, and estimates of the underlying risk inherent to the obligation. The carrying balance of asset retirement obligations and accretion expense may differ due to changes in: laws and regulations, technology, the expected timing of expenditures, and market conditions affecting the discount rate applied. The recognition and measurement of deferred tax assets and liabilities: • • Tax interpretations, regulations, and legislation in the various jurisdictions in which Vermilion and its subsidiaries operate are subject to change and interpretation. Changes in laws and interpretations can affect the timing of the reversal of temporary tax differences, the tax rates in effect when such differences reverse and Vermilion’s ability to use tax losses and other tax pools in the future. The Company’s income tax filings are subject to audit by taxation authorities in numerous jurisdictions and the results of such audits may increase or decrease the tax liability. The determination of tax amounts recognized in the consolidated financial statements are based on management’s assessment of the tax positions, which includes consideration of their technical merits, communications with tax authorities and management’s view of the most likely outcome. The extent to which deferred tax assets are recognized are based on estimates of future profitability. These estimates are based on estimated future commodity prices and estimates of reserves. Judgments, estimates, and assumptions inherent in reserve estimates are described above. Vermilion Energy Inc. ■ Page 82 ■ 2022 Annual Report The measurement of lease obligations and corresponding right-of-use assets: • The measurement of lease obligations are subject to management's judgments of the applicable incremental borrowing rate and the expected lease term. The carrying balance of the right-of-use assets, lease obligations, and the resulting interest and depletion and depreciation expense, may differ due to changes in the market conditions and expected lease terms. Applicable incremental borrowing rates are based on judgments of the economic environment, term, currency, and the underlying risk inherent to the asset. Lease terms are based on assumptions regarding cancellation and extension terms that allow for operational flexibility based on future market conditions. Vermilion Energy Inc. ■ Page 83 ■ 2022 Annual Report 3. Segmented information Substantially all sales in the France and Netherlands operating segments for the years ended December 31, 2022 and December 31, 2021 were to one customer in each respective segment. In 2022 and 2021, France and the Netherlands each contributed more than 10% of Vermilion's consolidated revenues. USA France Netherlands Germany Ireland Australia Corporate Total Year Ended December 31, 2022 Total assets Drilling and development Exploration and evaluation Crude oil and condensate sales NGL sales Natural gas sales Sales of purchased commodities Canada 3,612,487 275,203 — 910,863 114,128 319,293 — 618,116 63,353 — 823,544 44,250 2 130,150 365,431 19,385 16,698 — — — — 240,276 21,629 23 2,119 — 398,612 465,643 25,087 1,070 62,464 — 3,030 — 15 — 560,738 418,796 324,330 — — — — 249,253 95,173 — 221,187 — — — — 583,127 6,991,058 331 22,666 528,056 23,761 — — 1,692,229 133,513 10,797 1,650,652 244,834 244,834 (3,488) (306,017) Royalties (196,005) (44,427) (40,353) (512) (21,232) Transportation Operating Revenue from external customers 1,148,279 121,806 325,078 562,345 460,028 324,345 221,187 252,143 3,415,211 Purchased commodities — — — (44,849) (618) (20,100) — — — — (9,751) (3,578) — — (244,834) (244,834) — (78,896) (240,899) (27,372) (57,588) (45,903) (41,523) (16,580) (57,478) (1,691) (489,034) General and administration (28,643) (5,863) (16,444) (4,255) (6,949) 122 PRRT Corporate income taxes Windfall taxes Interest expense Realized loss on derivative instruments Realized foreign exchange gain Realized other income — (10) — — — — — — — — — — — — — — — (29,889) (150,647) (31,513) — — — — — — — — — — — — — — — — — — — — — — (4,964) (18,318) 9,319 — (57,677) (18,318) 5,016 (1,110) (208,153) — — — — — (222,859) (222,859) (82,858) (82,858) (405,894) (405,894) 15,195 12,982 15,195 12,982 Fund flows from operations 833,878 87,953 201,057 361,540 370,292 304,309 145,443 (669,607) 1,634,865 USA France Netherlands Germany Ireland Australia Corporate Total Year Ended December 31, 2021 Total assets Drilling and development Exploration and evaluation Crude oil and condensate sales NGL sales Natural gas sales Sales of purchased commodities Canada 3,100,322 190,242 — 625,053 86,932 189,790 — 545,296 32,540 — 80,208 17,723 14,484 — 771,707 39,587 121 279,263 — — — 227,779 422,030 427,362 20,198 6,839 2,640 — 19,234 1,073 32,607 — 1,261 — 23 — 293,083 99,328 214,402 — — — — 217,852 34,785 — 143,014 — — — — 192,975 5,905,323 1,543 27,373 339,390 35,406 — — 1,211 147,091 1,162,808 104,655 812,298 147,091 (338) (186,122) Royalties (113,651) (30,747) (37,666) (873) (2,847) Transportation Operating Revenue from external customers 788,124 81,668 241,597 294,850 129,088 214,425 143,014 147,964 2,040,730 Purchased commodities — — — (38,764) (1,336) (26,497) — — — — (6,359) (4,205) — — (147,091) (147,091) — (77,161) (215,378) (16,992) (52,147) (35,269) (27,149) (14,889) (50,748) (441) (413,013) General and administration (18,380) (4,563) (10,954) (1,243) (5,257) PRRT Corporate income taxes Interest expense Realized loss on derivative instruments Realized foreign exchange loss Realized other income — — — — — — — — — — — — — 9,120 — (46,567) — — — — — — — — — — — — — — 9 — — — — — — (3,457) (9,032) (15,688) 5,759 — — — — — 1,522 (73,075) (52,877) (15,688) (30,166) (73,075) (327,384) (327,384) (6,613) 22,200 (6,613) 22,200 Fund flows from operations 515,602 58,777 161,119 211,771 90,323 195,340 78,880 (391,950) 919,862 Vermilion Energy Inc. ■ Page 84 ■ 2022 Annual Report Reconciliation of fund flows from operations to net earnings: Fund flows from operations Equity based compensation Unrealized gain (loss) on derivative instruments Unrealized foreign exchange (loss) gain Accretion Depletion and depreciation Deferred tax expense Gain on business combinations Impairment reversal Unrealized other expense Net earnings 4. Business combinations Year Ended Dec 31, 2022 1,634,865 (44,390) 540,801 (84,464) (58,170) (577,134) (288,707) — 192,094 (1,833) 1,313,062 Dec 31, 2021 919,862 (41,565) (181,094) (64,963) (43,552) (571,688) (187,343) 17,198 1,302,619 (778) 1,148,696 Leucrotta Exploration Inc. On May 31, 2022, Vermilion closed the acquisition of all outstanding common shares of Leucrotta Exploration Inc. (“Leucrotta”), a Canadian publicly listed, Montney-focused oil and natural gas exploration and development company. The primary asset acquired is the Mica property, comprised of 81,000 gross (77,000 net) contiguous acres of Montney mineral rights in the Peace River Arch straddling the Alberta and British Columbia borders. Prior to May 31, 2022, Vermilion controlled 7,536,800 common shares of Leucrotta. On May 31, 2022, Vermilion transferred consideration and assumed ownership of all remaining outstanding common shares of Leucrotta. The acquisition was funded through Vermilion’s revolving credit facility. The total consideration and the fair value of the assets acquired and liabilities assumed at the date of acquisition are detailed in the table below: Cash consideration paid Fair value of previously held equity interest Total consideration Cash acquired Capital assets Exploration and evaluation assets Deferred tax liabilities Asset retirement obligations Derivative liability Acquired working capital deficiency Net assets acquired Consideration 486,488 13,039 499,527 Allocation of consideration 2,659 559,094 43,227 (97,891) (1,440) (339) (5,783) 499,527 The results of operations from the assets acquired and liabilities assumed have been included in Vermilion’s consolidated financial statements beginning May 31, 2022 and have contributed revenues of $55.7 million and net earnings of $17.1 million. Had the acquisition occurred on January 1, 2022, consolidated petroleum and natural gas revenue would have been $3,444.7 million and consolidated net earnings would have been $1,322.0 million for the year ended December 31, 2022. Vermilion Energy Inc. ■ Page 85 ■ 2022 Annual Report 5. Investment in securities Vermilion holds investments in Coelacanth Energy Inc., a Montney-focused oil and natural gas exploration and development company listed on the TSX Venture exchange. Vermilion has acquired shares via a private placement concurrent with the closing of the purchase of Leucrotta and via open market purchases. Vermilion has made an optional election to subsequently measure the investment at fair value through other comprehensive income. The investment is classified as a level 1 instrument on the fair value hierarchy and therefore uses observable inputs when making fair value adjustments. The total consideration paid and the fair value of the investment acquired are detailed in the table below: Balance at January 1 Acquisition of securities Fair value adjustment Balance at December 31 6. Capital assets The following table reconciles the change in Vermilion's capital assets: Balance at January 1 Acquisitions Additions Increase in right-of-use assets Transfers from exploration and evaluation assets Impairment reversal Depletion and depreciation Changes in asset retirement obligations Foreign exchange Balance at December 31 Cost Accumulated depletion, depreciation, and impairment Carrying amount at December 31, 2022 Amount — 23,282 33,084 56,366 2021 3,107,104 180,806 339,390 551 11,495 1,302,619 (538,704) 528,714 (107,780) 4,824,195 10,849,047 (6,024,852) 4,824,195 2022 4,824,195 572,535 528,056 13,871 1,223 192,094 (546,381) 65,462 40,467 5,691,522 12,058,520 (6,366,998) 5,691,522 In the first quarter of 2022, indicators of impairment reversal were present in our Canada - Saskatchewan and France - Neocomian cash generating units ("CGUs") due to an increase and stabilization in forecast oil prices. As a result of the indicators of impairment reversal, the Company performed impairment reversal calculations on the identified CGUs and the recoverable amounts were determined using fair value less costs to sell, which considered future after-tax cash flows from proved plus probable reserves and an after-tax discount rate of 12.0%. Based on the results of the impairment reversal calculations completed, recoverable amounts were determined to be greater than the carrying values of the CGUs tested and $144.4 million (net of $47.7 million deferred income tax expense) of impairment reversal was recorded. Inputs used in the measurement of capital assets are not based on observable market data and fall within level 3 of the fair value hierarchy. The following benchmark price forecasts were used to calculate the recoverable amounts: Brent Crude ($ US/bbl) (1) WTI Crude ($ US/bbl) (1) 0.80 Exchange rate (CAD/USD) (1) The forecast benchmark prices listed are adjusted for quality differentials, heat content, transportation and marketing costs and other factors specific to the Company’s operations when determining recoverable amounts. 2030 2031 (2) 100.50 89.50 79.64 81.23 82.86 84.51 86.21 87.94 89.69 91.48 95.00 85.00 75.64 77.15 78.70 80.27 81.88 83.52 85.19 86.89 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 2024 2025 2027 2023 2022 2026 2028 2029 (2) In 2032 and beyond, commodity price forecasts are inflated at a rate of 2.0% per annum. In 2032 and beyond there is no escalation of exchange rates. Vermilion Energy Inc. ■ Page 86 ■ 2022 Annual Report The following are the results of tests completed, recoverable amounts, and sensitivity impacts which would decrease impairment reversals taken: Operating Segment Canada France Total (1) Impairment reversals are subject to the lower of the recoverable amount and the carrying value, which includes depletion and depreciation of the CGU had no impairment charges been previously taken. CGU Saskatchewan Neocomian 2,150,936 166,818 2,317,754 Impairment Reversal (1) Recoverable Amount 159,985 32,109 192,094 1% increase in discount rate — — — 5% decrease in pricing — — — Right-of-use assets The following table discloses the carrying balance and depreciation charge relating to right-of-use assets by class of underlying asset as at and for the year ended December 31, 2022: ($M) Office space Gas processing facilities Oil storage facilities Vehicles and equipment Total 7. Exploration and evaluation assets As at Dec 31, 2022 As at Dec 31, 2021 Depreciation Balance Depreciation 8,328 7,691 2,429 4,716 23,164 31,199 13,415 8,970 13,944 67,528 8,921 7,691 2,644 3,629 22,885 Balance 38,216 20,504 11,480 6,038 76,238 The following table reconciles the change in Vermilion's exploration and evaluation assets: Balance at January 1 Acquisitions Additions Changes in asset retirement obligations Transfers to capital assets Depreciation Foreign exchange Balance at December 31 Cost Accumulated depreciation Carrying amount at December 31 8. Asset retirement obligations The following table reconciles the change in Vermilion’s asset retirement obligations: Balance at January 1 Additional obligations recognized Changes in estimated abandonment timing and costs Obligations settled Accretion Changes in rates Foreign exchange Balance at December 31 Vermilion Energy Inc. ■ Page 87 ■ 2022 Annual Report 2022 233,290 43,227 23,761 646 (1,223) (30,503) 1,395 270,593 476,571 (205,978) 270,593 2022 1,000,554 5,184 207,919 (37,514) 58,170 (145,555) (1,001) 1,087,757 2021 254,094 — 35,406 110 (11,495) (35,549) (9,276) 233,290 408,494 (175,204) 233,290 2021 467,737 28,655 85,022 (28,525) 43,552 439,849 (35,736) 1,000,554 Vermilion calculated the present value of the obligations using a credit-adjusted risk-free rate, calculated using a credit spread of 4.5% as at December 31, 2022 (December 31, 2021 - 4.9%) 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 country-specific risk-free rates used as inputs to discount the obligations were as follows: Canada United States France Netherlands Germany Ireland Australia Dec 31, 2022 3.3 % 4.1 % 3.4 % 2.7 % 2.5 % 3.2 % 4.2 % Dec 31, 2021 1.8 % 1.9 % 0.8 % (0.3) % 0.1 % 0.5 % 1.9 % Vermilion has estimated the asset retirement obligations based on current cost estimates of $2.3 billion (2021 - $2.0 billion). Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.6% and 4.2% (2021 - between 1.1% and 3.1%), resulting in inflated cost estimates of $3.7 billion (2021 - $3.1 billion). These payments are expected to be made over the next 60 years, with the majority of the costs incurred in the first 40 years. A 0.5% increase/decrease in the discount rate applied to asset retirement obligations would decrease/increase asset retirement obligations by approximately $64.8 million. A one-year increase/decrease in the expected timing of abandonment spend would decrease/increase asset retirement obligations by approximately $54.0 million. Vermilion Energy Inc. ■ Page 88 ■ 2022 Annual Report 9. Derivative instruments The following table reconciles the change in the fair value of Vermilion’s derivative instruments: Fair value of contracts, beginning of year Reversal of opening contracts settled during the year Assumed in acquisitions Realized loss on contracts settled during the year Unrealized gain (loss) during the year on contracts outstanding at the end of the year Net receipt from counterparties on contract settlements during the year Fair value of contracts, end of year Comprised of: Current derivative asset Current derivative liability Non-current derivative asset Non-current derivative liability Fair value of contracts, end of year The (gain) loss on derivative instruments for 2022 and 2021 were comprised of the following: Realized loss on contracts settled during the year Reversal of opening contracts settled during the year Unrealized (gain) loss on contracts outstanding at the end of the year (Gain) loss on derivative instruments Year Ended Dec 31, 2022 (300,865) 164,208 (339) (405,894) 376,593 405,893 239,596 162,843 (55,845) 132,598 — 239,596 Dec 31, 2021 (119,772) 112,679 — (327,384) (293,773) 327,385 (300,865) 19,321 (268,973) — (51,213) (300,865) Year Ended Dec 31, 2022 405,894 (164,208) (376,593) (134,907) Dec 31, 2021 327,384 (112,679) 293,773 508,478 Vermilion executes derivative instruments where there is an underlying exposure to offset the position. Consistent with our accounting policy we do not match unrealized gains / losses on these contracts with the underlying exposure. Please refer to Note 19 (Supplemental information) for a listing of Vermilion's outstanding derivative instruments as at December 31, 2022. 10. Leases Vermilion had the following future commitments associated with its lease obligations: ($M) Less than 1 year 1 - 3 years 3 - 5 years After 5 years Total lease payments Amounts representing interest Present value of net lease payments Current portion of lease obligations Non-current portion of lease obligations Total cash outflow Interest on lease liabilities As at Dec 31, 2022 23,588 40,374 16,246 177 80,385 (9,392) 70,993 (19,486) 51,507 25,422 4,254 Dec 31, 2021 19,045 38,136 25,226 3,686 86,093 (10,871) 75,222 (15,032) 60,190 27,368 5,181 Vermilion Energy Inc. ■ Page 89 ■ 2022 Annual Report 11. Taxes  The following table reconciles Vermilion’s deferred tax asset and liability: Deferred tax assets: Non-capital losses Derivative contracts Other Stock based compensation Asset retirement obligations Capital assets Unrealized foreign exchange Deferred tax assets Deferred tax liabilities: Derivative contracts Asset retirement obligations Capital assets Stock based compensation Other Unrealized foreign exchange Non-capital losses Deferred tax liabilities As at Dec 31, 2022 Dec 31, 2021 200,781 — 39 — 5,818 (81,105) — 125,533 58,941 100,670 734,146 (5,805) (16,322) (4,282) (390,008) 477,340 477,903 74,043 2,879 8,651 83,461 (268,615) (3,329) 374,993 — 104,258 322,641 — (10,518) — (87,542) 328,839 Income tax expense differs from the amount that would have been expected if the reported earnings had been subject only to the statutory Canadian income tax rate as follows: Earnings before income taxes Canadian corporate tax rate Expected tax expense Increase (decrease) in taxes resulting from: Petroleum resource rent tax rate (PRRT) differential (1) Foreign tax rate differentials (2) (3) Equity based compensation expense Amended returns and changes to estimated tax pools and tax positions Statutory rate changes and the estimated reversal rates on temporary differences (3) Derecognition (recognition) of deferred tax assets Windfall taxes (3) Other non-deductible items Provision for income taxes (1) Year Ended Dec 31, 2022 2,051,099 24.60 % 504,570 Dec 31, 2021 1,381,893 24.61 % 340,084 13,729 101,701 (11,610) (5,691) 14,274 (118,304) 222,859 16,509 738,037 27,281 43,301 6,794 (14,391) 5,862 (190,423) — 14,689 233,197 (2) (3) In Australia, current taxes include both corporate income tax rates and PRRT. For both 2022 and 2021, corporate income tax rates were applied at a rate of 30% and PRRT was applied at a rate of 40%. The applicable tax rates for 2022 were: 25.8% in France, 50.0% in the Netherlands, 31.3% in Germany, 25.0% in Ireland, and 21.0% in the United States (2021: 27.4% in France, 50.0% in the Netherlands, 31.4% in Germany, 25.0% in Ireland, and 21.0% in the United States). On December 28, 2019, the French Parliament approved the Finance Bill for 2020. The Finance Bill for 2020 provides for a progressive decrease of the French corporate income tax rate for companies with sales below €250 million from 32.0% to 25.8% by 2022. On December 21, 2021, the Dutch Senate approved the 2022 Tax Plan that included an increase to the Dutch corporate tax rate from 25.0% in 2021 to 25.8% in 2022. Due to the tax regime applicable to natural gas producers in the Netherlands, the increase to the corporate tax rate is not expected to have a material impact to Vermilion taxes in the Netherlands. On September 30, 2022 the Council of the European Union agreed, by way of regulation, to the implementation of a temporary windfall tax on the profits of oil and gas producers resident in the European Union. This windfall tax is referred to as a temporary solidarity contribution and is calculated on the amount by which the taxable profits for the elected years exceeds the greater of zero and 120% of the average taxable profits for the 2018 to 2021 period. The regulation requires Member States to implement the temporary solidarity contribution at a minimum rate of 33% while providing Member States with the option to apply the temporary solidarity contribution to fiscal years beginning on or after January 1, 2022, January 1, 2023, or both. The temporary solidarity contribution is considered a tax pursuant to IAS 12 “Income Taxes”. The related legislation became substantively enacted during the fourth quarter of 2022 resulting in a full year of windfall taxes being recognized during the fourth quarter. Vermilion Energy Inc. ■ Page 90 ■ 2022 Annual Report The following table summarizes the manner of implementation of the temporary solidarity contribution by the Member States in which Vermilion operates: Jurisdiction France Netherlands (1) Germany Ireland (2) 2023 N/A N/A 33.0 % N/A 2022 33.0 % 33.0 % 33.0 % N/A (1) (2) For 2023 and 2024, Netherlands has implemented a windfall royalty. This royalty applies if annual realized pricing (net of hedges) exceeds €0.50/Nm3. This royalty is assessed annually at a rate of 65% on realized pricing (net of hedges) less €0.50/Nm3 and payments on this royalty are deductible in calculating current income taxes. As at December 31, 2022, Ireland has not legislated a windfall tax rate. A rate of 75% was announced in November 2022. At December 31, 2022, Vermilion had $2.4 billion (2021 - $2.7 billion) of unused tax losses of which $1.4 billion (2021 - $1.4 billion) relates to Vermilion's Canada segment and expire between 2025 and 2042. The majority of the remaining unused tax losses relate to Vermilion's Ireland segment and do not expire. At December 31, 2022, Vermilion recognized $118.3 million (2021 - recognized $190.4 million) of deferred income tax assets primarily relating to the aforementioned non-expiring tax loss in Ireland that are expected to be utilized due to an increase in forecasted commodity prices. The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities have not been recognized as at December 31, 2022 is approximately $0.7 billion (2021 – approximately $0.4 billion). 12. Long-term debt The following table summarizes Vermilion’s outstanding long-term debt: Revolving credit facility 2025 senior unsecured notes 2030 senior unsecured notes Long-term debt As at Dec 31, 2022 147,666 404,463 529,222 1,081,351 Dec 31, 2021 1,273,755 377,814 — 1,651,569 The fair value of the revolving credit facility is equal to its carrying value due to the use of short-term borrowing instruments at market rates of interest. The fair value of the 2025 senior unsecured notes as at December 31, 2022 was $391.3 million (December 31, 2021 - $387.0 million). The fair value of the 2030 senior unsecured notes as at December 31, 2022 was $496.8 million (December 31, 2021 - nil). The following table reconciles the change in Vermilion’s long-term debt: Balance at January 1 Repayments on the revolving credit facility Issuance of 2030 senior unsecured notes Amortization of transaction costs Foreign exchange Balance at December 31 2022 1,651,569 (1,121,868) 499,037 1,833 50,780 1,081,351 2021 1,933,848 (341,259) — 778 58,202 1,651,569 Vermilion Energy Inc. ■ Page 91 ■ 2022 Annual Report Revolving credit facility As at December 31, 2022, Vermilion had in place a bank revolving credit facility maturing May 29, 2026 with the following terms: Total facility amount Amount drawn Letters of credit outstanding Unutilized capacity As at Dec 31, 2022 1,600,000 (147,666) (13,527) 1,438,807 Dec 31, 2021 2,100,000 (1,273,755) (11,035) 815,210 The facility can be extended from time to time at the option of the lenders and upon notice from Vermilion. If no extension is granted by the lenders, the amounts owing pursuant to the facility are due at the maturity date. The facility is secured by various fixed and floating charges against the subsidiaries of Vermilion. On April 26, 2022, contemporaneous with the issuance of the 2030 senior unsecured notes and at Vermilion's election, the maturity date of the facility was extended to May 29, 2026 (previously May 31, 2024) and the total facility amount was reduced to $1.6 billion (previously $2.1 billion). The facility bears interest at a rate applicable to demand loans plus applicable margins. As at December 31, 2022, the revolving credit facility was subject to the following financial covenants: Financial covenant Consolidated total debt to consolidated EBITDA Consolidated total senior debt to consolidated EBITDA Consolidated EBITDA to consolidated interest expense Limit Dec 31, 2022 As at Less than 4.0 Less than 3.5 Greater than 2.5 0.51 0.07 27.10 Dec 31, 2021 1.61 1.24 14.78 The financial covenants include financial measures defined within the revolving credit facility agreement that are not defined under IFRS. These financial measures are defined by the revolving credit facility agreement as follows: • • • • Consolidated total debt: Includes all amounts classified as “Long-term debt” and “Lease obligations” (including the current portion included within "Accounts payable and accrued liabilities" but excluding operating leases as defined under IAS 17) on the consolidated balance sheet. Consolidated total senior debt: Consolidated total debt excluding unsecured and subordinated debt. Consolidated EBITDA: Consolidated net earnings before interest, income taxes, depreciation, accretion and certain other non-cash items, adjusted for the impact of the acquisition of a material subsidiary. Consolidated total interest expense: Includes all amounts classified as "Interest expense", but excludes interest on operating leases as defined under IAS 17. 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 December 31, 2022, 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 December 31, 2022 and December 31, 2021, 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, to be paid semi-annually on March 15 and September 15. The notes mature on March 15, 2025. As direct senior unsecured obligations of Vermilion, the notes rank equally with existing and future senior unsecured indebtedness of the Company. The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance. Vermilion Energy Inc. ■ Page 92 ■ 2022 Annual Report Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth in the following table plus any accrued and unpaid interest, if redeemed during the twelve-month period beginning on March 15 of each of the years indicated below: Year 2022 2023 and thereafter 2030 senior unsecured notes Redemption price 101.406 % 100.000 % On April 26, 2022, Vermilion closed a private offering of US $400.0 million 8-year senior unsecured notes. The notes were priced at 99.241% of par, mature on May 1, 2030, and bear interest at a rate of 6.875% per annum. Interest is paid semi-annually on May 1 and November 1, commencing on November 1, 2022. The notes are senior unsecured obligations of Vermilion and rank equally with existing and future senior unsecured indebtedness. The senior unsecured notes were recognized at amortized cost and include the transaction costs directly related to the issuance. Vermilion may, at its option, redeem the notes prior to maturity as follows: • • • On or after May 1, 2025, Vermilion may redeem some or all of the senior unsecured notes at the redemption prices set forth below, together with accrued and unpaid interest. Prior to May 1, 2025, Vermilion may redeem up to 35% of the original principal amount of the notes with an amount of cash not greater than the net cash proceeds of certain equity offerings at a redemption price of 106.875% of the principal amount of the notes, together with accrued and unpaid interest. Prior to May 1, 2025, Vermilion may also redeem some or all of the notes at a price equal to 100% of the principal amount of the notes, plus a “make-whole premium,” together with applicable premium, accrued and unpaid interest. Year 2025 2026 2027 2028 and thereafter Redemption price 103.438 % 102.292 % 101.146 % 100.000 % 13. Shareholders' capital The following table reconciles the change in Vermilion’s shareholders’ capital: Shareholders' capital Balance at January 1 Vesting of equity based awards Shares issued for equity based compensation Share-settled dividends on vested equity based awards Repurchase of shares Balance at December 31 2022 2021 Shares ('000s) Amount ($M) Shares ('000s) 162,261 2,578 549 178 (2,339) 163,227 4,241,773 44,811 13,699 4,377 (60,866) 4,243,794 158,724 2,385 911 241 — 162,261 Amount ($M) 4,181,160 49,922 8,365 2,326 — 4,241,773 Vermilion is authorized to issue an unlimited number of common shares with no par value. Dividends declared to shareholders for the year ended December 31, 2022 were $45.8 million or $0.28 per common share (2021 - nil). Subsequent to December 31, 2022 Vermilion declared a dividend of $0.10 per share to be paid April 17, 2023. On July 4, 2022, the Toronto Stock Exchange approved our notice of intention to commence a normal course issuer bid ("the NCIB"). The NCIB allows Vermilion to purchase up to 16,076,666 common shares representing approximately 10% of its public float as at June 22, 2022 beginning July 6, 2022 and ending July 5, 2023. In 2022, Vermilion purchased and cancelled 2.34 million common shares under the NCIB for total consideration of $71.7 million. The surplus between the total consideration and the carrying value of the shares repurchased was recorded as an increase to deficit. Subsequent to December 31, 2022 Vermilion purchased and cancelled 1.14 million common shares under the NCIB for total consideration of $22.4 million. Vermilion Energy Inc. ■ Page 93 ■ 2022 Annual Report 14. Capital disclosures Vermilion defines capital as net debt (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 shareholders’ capital. In managing capital, Vermilion reviews whether fund flows from operations is sufficient to fund capital expenditures, dividends, and asset retirement obligations. Vermilion monitors the ratio of net debt to fund flows from operations. As at December 31, 2022, our ratio of net debt to trailing fund flows from operations is 0.82 (2021 - 1.79). Vermilion manages the ratio of net debt to fund flows from operations (refer to Note 3 - Segmented information) by monitoring capital expenditures, dividends, and asset retirement obligations with expected fund flows from operations. Vermilion intends for the ratio of net debt to fund flows from operations to trend towards 1.0 over time. The following table calculates Vermilion’s ratio of net debt to fund flows from operations: Year Ended Dec 31, 2022 1,081,351 265,111 (1,876) 1,344,586 Dec 31, 2021 1,651,569 9,284 (16,067) 1,644,786 0.82 1.79 Long-term debt Adjusted working capital (1) Unrealized FX on swapped USD borrowings Net debt Ratio of net debt to four quarter trailing fund flows from operations (1) Adjusted working capital is defined as current assets (excluding current derivatives), less current liabilities (excluding current derivatives and current lease liabilities). 15. Equity based compensation The following table summarizes the number of awards outstanding under the LTIP: Number of LTIP and Five Year Compensation Awards ('000s) Opening balance Granted Vested Forfeited Closing balance 2022 6,405 1,108 (1,733) (277) 5,503 2021 6,244 2,745 (1,520) (1,064) 6,405 For the year ended December 31, 2022, the awards had a weighted average grant date fair value of $25.60 (2021 - $9.53). Equity based compensation expense for the awards is calculated based on the number of awards outstanding multiplied by the estimated performance factor that will be realized upon vesting (2022 - 1.0; 2021 - 1.1) adjusted by an estimated annual forfeiture rate (2022 - 3.8%; 2021 - 4.2%). Equity based compensation expense of $29.2 million was recorded during the year ended December 31, 2022 (2021 - $31.3 million) relating to the awards. As at December 31, 2022, there were 392,757 DSUs outstanding with a weighted average grant date fair value of $12.89. In 2022, there were 56,262 DSU grants with a weighted average grant date fair value of $26.70. Equity based compensation expense of $1.5 million was recorded during the year ended December 31, 2022 (2021 - $1.9 million) relating to the DSUs. Vermilion Energy Inc. ■ Page 94 ■ 2022 Annual Report 16. Per share amounts Basic and diluted net earnings per share have been determined based on the following: Net earnings Basic weighted average shares outstanding ('000s) Dilutive impact of equity based compensation ('000s) Diluted weighted average shares outstanding ('000s) Basic earnings per share Diluted earnings per share 17. Financial instruments Classification of financial instruments Year Ended Dec 31, 2022 1,313,062 Dec 31, 2021 1,148,696 163,489 4,937 168,426 8.03 7.80 161,172 3,593 164,765 7.13 6.97 The following table summarizes the carrying value relating to Vermilion’s financial instruments: ($M) As at Dec 31, 2022 FVTPL FVTOCI Amortized Cost As at Dec 31, 2021 Total FVTPL FVTOCI Amortized Cost Total Cash and cash equivalents Derivative assets Investment in securities Derivative liabilities Accounts receivable Accounts payable and accrued liabilities Dividends payable Lease obligations Long-term debt (1) 13,836 295,441 — (55,845) — — — — — 13,836 — 295,441 — 56,366 56,366 (55,845) — 373,651 — (481,444) — (13,058) — — (51,507) — (1,081,351) (1,081,351) — — — — 373,651 (481,444) (13,058) (51,507) 6,028 19,321 — (320,186) — — — — — — — — — 328,584 (440,658) — (60,190) 6,028 — 19,321 — — — (320,186) — 328,584 — (440,658) — — — — (60,190) — (1,651,569) (1,651,569) (1) The carrying value of the above equals fair value except for long-term debt. The fair value of long-term debt was $1,035,671 (2021 - $1,660,778). The carrying value of accounts receivable, accounts payable and accrued liabilities, dividends payable and lease obligations are a reasonable approximation of their fair value due to the short maturity of these financial instruments. The carrying value of long-term debt outstanding on the revolving credit facility approximates its fair value due to the use of short-term borrowing instruments at market rates of interest. Fair value measurements are categorized into a fair value hierarchy based on the lowest level input that is significant to the fair value measurement: • • • Level 1 inputs are determined by reference to unadjusted quoted prices in active markets for identical assets or liabilities. Inputs used in fair value measurement of cash and cash equivalents, investment in securities, the revolving credit facility, and the senior unsecured notes are categorized as Level 1. Level 2 inputs are determined based on inputs other than unadjusted quoted prices that are observable, either directly or indirectly. The fair value of Vermilion’s derivative assets and liabilities are determined using pricing models that incorporate future price forecasts (supported by prices from observable market transactions) and credit risk adjustments. Level 3 inputs are not based on observable market data. Vermilion does not have any financial instruments classified as Level 3. There were no transfers between levels in the hierarchy in the years ended December 31, 2022 and 2021. Nature and Extent of Risks Associated with Financial Instruments Vermilion is exposed to financial risks from its financial instruments. These financial risks include: market risk (includes commodity price risk, interest rate risk, and currency risk), credit risk, and liquidity risk. Vermilion Energy Inc. ■ Page 95 ■ 2022 Annual Report Commodity price risk Vermilion is exposed to commodity price risk on its derivative assets and liabilities which are used as part of the Company’s risk management program to mitigate the effects of changes in commodity prices on future cash flows. While transactions of this nature relate to future petroleum and natural gas production, Vermilion does not designate these derivative assets and liabilities as accounting hedges. As such, changes in commodity prices impact the fair value of derivative instruments and the corresponding gains or losses recognized on derivative instruments. Currency risk Vermilion is exposed to currency risk on its financial instruments denominated in foreign currencies. These financial instruments include cash and cash equivalents, accounts receivables, accounts payables, lease obligations, long-term debt, derivative assets and derivative liabilities. These financial instruments are primarily denominated in the US dollar and the Euro. Vermilion monitors its exposure to currency risk and reviews whether the use of derivative financial instruments is appropriate to manage potential fluctuations in foreign exchange rates. Interest rate risk Vermilion is exposed to interest rate risk on its revolving credit facility, which consists of short-term borrowing instruments that bear interest at market rates. Thus, changes in interest rates could result in an increase or decrease in the amount paid by Vermilion to service this debt. The following table summarizes the increase (positive values) or decrease (negative values) to net earnings before tax due to a change in the value of Vermilion’s financial instruments as a result of a change in the relevant market risk variable. This analysis does not attempt to reflect any interdependencies between the relevant risk variables. ($M) Currency risk - Euro to Canadian dollar $0.01 increase in strength of the Canadian dollar against the Euro $0.01 decrease in strength of the Canadian dollar against the Euro Currency risk - US dollar to Canadian dollar $0.01 increase in strength of the Canadian dollar against the US $ $0.01 decrease in strength of the Canadian dollar against the US $ Commodity price risk - Crude oil US $5.00/bbl increase in crude oil price used to determine the fair value of derivatives US $5.00/bbl decrease in crude oil price used to determine the fair value of derivatives Commodity price risk - European natural gas € 5.0/GJ increase in European natural gas price used to determine the fair value of derivatives € 5.0/GJ decrease in European natural gas price used to determine the fair value of derivatives Share price risk - Equity swaps $1.00 increase from initial share price of the equity swap $1.00 decrease from initial share price of the equity swap Dec 31, 2022 Dec 31, 2021 5,640 (5,640) 5,441 (5,441) — — (88,524) 91,828 3,750 (3,750) (273) 273 2,086 (2,086) (9,324) 1,636 (10,554) 10,554 3,750 (3,750) Credit risk Vermilion is exposed to credit risk on accounts receivable and derivative assets in the event that customers, joint operation partners, or counterparties fail to discharge their contractual obligations. As at December 31, 2022, Vermilion’s maximum exposure to receivable credit risk was $669.1 million (December 31, 2021 - $347.9 million) which is the value of accounts receivable and derivative assets on the balance sheet. Vermilion’s accounts receivable primarily relates to customers and joint operations partners in the petroleum and natural gas industry. These amounts are subject to normal industry payment terms and credit risks. Vermilion manages these risks by monitoring the creditworthiness of customers and joint operations partners and, where appropriate, obtaining assurances such as parental guarantees and letters of credit. Vermilion determines the lifetime expected credit losses recognized on accounts receivable using a provision matrix. In preparing the provision matrix, the Company takes into account historical credit loss experience based on the aging of accounts receivable, adjusted as necessary for current and future petroleum and natural gas prices to the extent that changes in pricing may negatively impact the Company's customers and joint operations partners. The lifetime expected credit losses on accounts receivable as at December 31, 2022 and 2021 is not material. As at the balance sheet date, approximately 0.5% (2021 - 0.8%) of the accounts receivable balance was outstanding for more than 90 days. Vermilion considers the balance of accounts receivable to be collectible. Vermilion Energy Inc. ■ Page 96 ■ 2022 Annual Report Vermilion’s derivative assets primarily relates to the fair value of financial instruments used as part of the Company’s risk management program to mitigate the effects of changes in commodity prices on future cash flows. Vermilion manages this risk by monitoring the creditworthiness of counterparties, transacting primarily with counterparties that have investment grade third party credit ratings, and by limiting the concentration of financial exposure to individual counterparties. As a result, Vermilion has not obtained collateral or other security to support its financial derivatives. Vermilion’s cash deposited in financial institutions and guaranteed investment certificates are also subject to counterparty credit risk. Vermilion mitigates this risk by transacting with financial institutions with high third party credit ratings. Liquidity risk Liquidity risk is the risk that Vermilion will encounter difficulty in meeting obligations associated with its financial liabilities. Vermilion does not consider this to be a significant risk as its financial position and available committed borrowing facility provide significant financial flexibility and allow Vermilion to meet its obligations as they come due. The following table summarizes Vermilion’s undiscounted non-derivative financial liabilities and their contractual maturities: 3 months to 1 year 23,412 25,475 ($M) December 31, 2022 December 31, 2021 1 month 192,572 191,297 1 month to 3 months 278,520 223,885 1 year to 5 years 607,796 1,718,475 18. Related party disclosures The compensation of directors and management is reviewed annually by the independent Governance and Human Resources Committee against industry practices for oil and gas companies of similar size and scope. The following table summarizes the compensation of directors and other members of key management personnel during the years ended December 31, 2022 and 2021: Short-term benefits Equity based compensation Number of individuals included in the above amounts Year Ended Dec 31, 2022 5,124 8,951 14,075 16 Dec 31, 2021 4,654 14,570 19,224 18 During the year ended December 31, 2022, Vermilion recorded $0.1 million of office rent recoveries (2021 - $0.2 million) relating to an office sub- lease to a company whose Managing Director was also a member of Vermilion's Board of Directors during the year, but is no longer as at December 31, 2022. This related party transaction is provided in the normal course of business under the same commercial terms and conditions as transactions with unrelated companies and is recorded at the exchange amount. Vermilion Energy Inc. ■ Page 97 ■ 2022 Annual Report 19. Supplemental information Changes in non-cash working capital was comprised of the following: Changes in: Accounts receivable Crude oil inventory Prepaid expenses Accounts payable and accrued liabilities Income taxes payable Foreign exchange Changes in non-cash working capital Changes in non-cash operating working capital Changes in non-cash investing working capital Changes in non-cash working capital Year Ended Dec 31, 2022 Dec 31, 2021 (45,067) 413 (45,617) 40,786 304,516 (12,046) 242,985 216,869 26,116 242,985 (132,507) (6,668) (71,156) 142,988 32,643 14,540 (20,160) (56,884) 36,724 (20,160) As at December 31, 2022, prepaid expenses includes a deposit of $68.5 million related to a previously announced transaction to acquire an additional working interest within the Corrib natural gas project and $23.0 million for a land acquisition. Cash and cash equivalents was comprised of the following: Cash on deposit with financial institutions Guaranteed investment certificates Cash and cash equivalents Wages and benefits included in operating expenses and general and administration expenses were: Operating expense General and administration expense Wages and benefits As at December 31, 2022, we had the following contractual obligations and commitments: As at Dec 31, 2022 13,701 135 13,836 Dec 31, 2021 5,901 127 6,028 Year Ended Dec 31, 2022 75,165 45,525 120,690 Dec 31, 2021 73,739 54,771 128,510 ($M) Long-term debt (1) Lease obligations Processing and transportation agreements Purchase obligations Drilling and service agreements Total contractual obligations and commitments (1) Less than 1 year 1 - 3 years 3 - 5 years After 5 years 69,235 46,245 40,267 27,481 5,051 188,279 533,362 49,730 52,786 4,907 58,122 698,907 225,861 29,062 23,133 444 — 278,500 634,875 8,597 101,629 285 — 745,386 Total 1,463,333 133,634 217,815 33,117 63,173 1,911,072 (2) Interest on revolving credit facility calculated assuming an annual interest rate of 6.19%. Commitments denominated in foreign currencies have been translated using the related spot rates on December 31, 2022. Vermilion Energy Inc. ■ Page 98 ■ 2022 Annual Report The following tables summarize Vermilion's outstanding risk management positions as at December 31, 2022: AECO Q1 2023 Q2 2023 Q3 2023 Q4 2023 Unit Currency mcf mcf mcf mcf CAD CAD CAD CAD AECO Basis (AECO less NYMEX Henry Hub) Daily Bought Put Volume Weighted Average Bought Put Price Daily Sold Call Volume Weighted Average Sold Call Price Daily Sold Put Volume Weighted Average Sold Put Price Daily Sold Swap Volume Weighted Average Sold Swap Price Daily Bought Swap Volume Weighted Average Bought Swap Price 4,739 3.69 4,739 7.70 — — — — — — 24,000 5,000 5,000 1,685 — — — — — — 4.00 4.00 4.00 4.00 — — — — — — 24,000 5,000 5,000 1,685 — — — — — — 8.44 8.75 8.75 8.75 — — — — — — — — — — — — — — — — — — — — — — 28,435 14,217 14,217 4,791 23,000 23,000 7,750 — — — — 4.95 4.19 4.19 4.19 (1.13) (1.13) (1.13) — — — — — — — — — — — — — — — — — — — — — — — — — — mcf mcf mcf mcf mcf mcf mcf USD USD USD USD USD USD USD Daily Bought Put Volume Weighted Average Bought Put Price Daily Sold Call Volume Weighted Average Sold Call Price Daily Sold Put Volume Weighted Average Sold Put Price Daily Sold Swap Volume Weighted Average Sold Swap Price Daily Bought Swap Volume Weighted Average Bought Swap Price Unit Currency mcf mcf mcf mcf mcf mcf mcf mcf mcf mcf mcf EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR 18,426 7,370 2,457 4,913 14,740 19,654 19,654 12,284 31,938 3,593 3,593 11.76 11.48 22.71 41.03 24.01 34.53 34.53 44.84 40.69 37.56 37.56 18,426 7,370 2,457 4,913 14,740 19,654 19,654 12,284 31,938 3,593 3,593 19.54 17.46 35.90 84.26 46.12 53.21 53.21 84.99 78.00 74.66 74.66 14,740 4,913 — — 4.10 4.40 — — 2,457 3.52 — — — — — — — — — — — — — — — — — — — — — — — — — — 3,685 3,685 — — 67.41 67.41 — — — — — — — — — — — — — — — — — — — — — — — — Q2 2023 Q3 2023 Q4 2023 NYMEX Henry Hub Q1 2023 Q2 2023 Q3 2023 Q4 2023 NBP Q1 2023 Q2 2023 Q3 2023 Q1 2024 TTF Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 VET Equity Swaps Swap Swap Jan 2020 - Apr 2023 Jan 2020 - Jul 2024 Initial Share Price Share Volume 20.9788 CAD 22.4587 CAD 2,250,000 1,500,000 Cross Currency Interest Rate Receive Notional Amount Receive Rate Pay Notional Amount Pay Rate Swap January 2023 111,600,000 USD SOFR + 1.35% 150,000,000 CAD CDOR + 0.88% 20. Subsequent events In the first quarter of 2022, we signed an agreement to sell an asset package in southeast Saskatchewan. The assets are comprised of approximately 5,500 boe/d of non-core light oil production in the greater Arcola and Queensdale areas of southeast Saskatchewan. Total cash consideration is $225 million, before closing adjustments. The transaction has an effective date of September 1, 2022 and is expected to close in March 2023. The net proceeds will be used to pay down our revolving credit facility. Vermilion Energy Inc. ■ Page 99 ■ 2022 Annual Report OFFICERS / CORPORATE SECRETARY Dion Hatcher * President & Chief Executive Officer Lars Glemser * Vice President & Chief Financial Officer Terry Hergott Vice President Marketing Yvonne Jeffery Vice President Sustainability Darcy Kerwin * Vice President International & HSE Bryce Kremnica * Vice President North America Geoff MacDonald Vice President Geosciences Kyle Preston Vice President Investor Relations Averyl Schraven Vice President People and Culture Jenson Tan * Vice President Business Development Gerard Schut * Vice President European Operations Robert (Bob) J. Engbloom Corporate Secretary * Executive Committee DIRECTORS Robert Michaleski 1,3,5 Calgary, Alberta Dion Hatcher Calgary, Alberta James J. Kleckner Jr. 7,9 Edwards, Colorado Carin Knickel 4,7,11 Golden, Colorado Stephen P. Larke 3,5,10 Calgary, Alberta Timothy R. Marchant 6,9,11 Calgary, Alberta William Roby 7,8,11 Katy, Texas Manjit Sharma 2,5 Toronto, Ontario Myron Stadnyk 7,9 Calgary, Alberta Judy Steele 3,5,11 Halifax, Nova Scotia 1 Chairman (Independent) 2 Audit Committee Chair (Independent) 3 Audit Committee Member (Independent) 4 Governance and Human Resources Committee Chair __(Independent) 5 Governance and Human Resources Committee Member __(Independent) 6 Health, Safety and Environment Committee Chair __(Independent) 7 Health, Safety and Environment Committee Member __(Independent) 8 Independent Reserves Committee Chair (Independent) 9 Independent Reserves Committee Member __(Independent) 10 Sustainability Committee Chair (Independent) 11 Sustainability Committee Member (Independent) AUDITORS Deloitte LLP Calgary, Alberta BANKERS The Toronto-Dominion Bank Alberta Treasury Branches Bank of America N.A., Canada Branch Canadian Imperial Bank of Commerce Export Development Canada National Bank of Canada Royal Bank of Canada The Bank of Nova Scotia Wells Fargo Bank N.A., Canadian Branch La Caisse Centrale Desjardins du Québec Citibank N.A., Canadian Branch - Citibank Canada Canadian Western Bank JPMorgan Chase Bank, N.A., Toronto Branch Goldman Sachs Lending Partners LLC EVALUATION ENGINEERS GLJ Petroleum Consultants Ltd. Calgary, Alberta LEGAL COUNSEL Norton Rose Fulbright Canada LLP Calgary, Alberta TRANSFER AGENT Odyssey Trust Company STOCK EXCHANGE LISTINGS The Toronto Stock Exchange (“VET”) The New York Stock Exchange (“VET”) INVESTOR RELATIONS Kyle Preston Vice President Investor Relations 403-476-8431 TEL 403-476-8100 FAX 1-866-895-8101 IR TOLL FREE investor_relations@vermilionenergy.com Vermilion Energy Inc. ■ Page 100 ■ 2022 Annual Report 

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