In France, production was impacted by higher well downtime associated with a much higher than expected well repair frequency and a number of pipeline failures in the Chaunoy field. Volumes in the latter part of the second quarter rebounded significantly as the well repair queue was reduced and pipelines in Chaunoy were repaired. The pace of workovers increased late in the second quarter of 2008 and should offset any further declines from the France properties over the balance of the year. Drilling activities, originally scheduled for the third quarter have been delayed until the fourth quarter due to rig availability.

Operational Activities

In France, activity focused on a significant number of well repairs (mainly pump replacements) related to several causes including extended shut-in periods, summer electrical storm activity and waterflood optimization efforts. This activity tied up the workover rigs, limiting other workover and recompletion activity during the quarter. Well work during the second half of the year will focus primarily on workovers, stimulations and recompletions, which should offset production declines.

A 43 square kilometre 3D seismic program at Cazaux was completed during the quarter. This information is expected to improve the number and quality of drillable prospects available to Vermilion in this field. Vermilion continues to refurbish the main storage tanks at the Ambès terminal and expects to complete this work by year-end.