About Vermilion

Vermilion's value creation strategy continues to deliver strong rewards for investors.  In 2009 we generated a total return of 38% and over the past five years have generated a compound average annual return of 16.5%.  We believe Vermilion is well positioned to maintain our track record of outstanding performance and are excited about the many opportunities that lie ahead.

2010 will be a significant year for Vermilion as we convert from the income trust model back to the corporate model, a transition we are targeting to complete by September 2010.  Our rich portfolio of properties will enable Vermilion to organically deliver at least 5% growth per unit on a debt adjusted basis while maintaining stable distribution/dividend payments to investors.  For taxable Canadian investors, the value of the distribution on an after-tax basis will climb by 25% to 40%, as dividends are treated more favourably than the current distributions. 

In Canada, we have identified over 426 net drilling locations in the prime Cardium fairway where we are targeting light oil development using horizontal, multi-stage completions to unlock this rich resource.  These wells are expected to deliver first year production rates of more than 150 boe/d and reserves between 150 and 200 mboe.  Vermilion also holds 120 net liquids-rich natural gas targets that provide strong returns even in a low natural gas price environment.

In the Netherlands, we launched a successful exploration and development drilling program in 2009.  The first four wells are expected to add initial production of approximately 4,000 boe/d, half of which is on stream today with the balance expected to begin producing in mid-2011.  Over 30 additional prospects of similar risk and size have been identified, and we currently expect to drill four to six wells per year beginning in 2011.

In Australia, we will be drilling three wells this fall as we continue to capture incremental reserves in the Wandoo field.  Vermilion has identified 18 development prospects, and we intend to drill 2-3 wells every other year to maintain stable production levels and significantly extend the life of this field.

Our properties in France are expected to provide stable production through an active workover program while we continue to optimize our waterfloods, review a potential enhanced oil recovery project using CO2 injection and explore future resource play development opportunities including an emerging shale oil play in the Paris basin.

Our 18.5% interest in the Corrib natural gas project in Ireland will provide an estimated 30% increase to Vermilion's total production and an even larger boost to financial performance when it comes on stream, expected in late 2012.

Vermilion's exceptional employees contribute strong technical skills and creative vision in a highly collaborative and dynamic environment. Our success is founded on strong core values and supported by a spirited corporate culture. The combination of outstanding people managing strong assets has been a proven recipe for success.

Vermilion is committed to the environmentally responsible development of all our assets and equally committed to those communities where our staff live and work.

I thank all of our Vermilion unitholders for continuing to put your trust in our hands, and look forward to a bright future.

Lorenzo Donadeo, President & Chief Executive Officer