Operations | Hedging Program
    Risk Management Strategy for Commodity and Exchange Rate
   

The key objective of a hedging program is to manage fluctuations in the prices of crude oil and natural gas, and also in U.S./Canadian dollar exchange rates to provide a measure of certainty in distributions to unitholders. Vermilion continues to manage it's risk exposure through prudent commodity and currency economic hedging strategies.

Vermilion has the following financial collars and puts in place as June 30, 2008.

Vermilion’s board governs and approves the hedging program.

   
Risk Management: Oil
Collar - WTI
Funded Cost
bbls/d
US$/bbl
Q3 2008
US$0.28/bbl
250
$70.00 - $90.00
Q4 2008
US$0.50/bbl
250
$69.00 - $90.00
Collar - BRENT
Funded Cost
bbls/d
US$/bbl
Q3 2008
US$0.25/bbl
500
$66.40 - $82.00
Q3 2008
US$0.25/bbl
500
$66.60 - $82.00
Q3 2008
US$0.19/bbl
250
$65.00 - $90.00
Q4 2008
-
500
$68.20 - $81.00
2009
US$1.00/bbl
500
$100.50 - $200.00
Call Spread - BRENT
Funded Cost
bbls/d
US$/bbl
2009 - 2011
US$5.73/bbl
700
$65.00 - $85.00

The impact of Vermilion’s economic hedging program in the second quarter of 2008 decreased fund flows netbacks by $1.34 per boe as the price of oil exceeded the ceiling of the Trust's collars. This compares to a hedging gain of $0.09 per boe in the first six months of 2007.