Canada

Operations in Canada will focus on Cardium light oil and liquids-rich natural gas development.  Vermilion plans to drill 15 net Cardium light oil horizontal wells in 2010, and has an inventory of more than 400 net locations in the prime Cardium fairway.  The drilling program is expected to increase to between 25 to 30 wells in 2011.  These wells are expected to add approximately 150 boe/d average first year production and an estimated 200 mboe of reserves per well.  The liquids-rich gas well program will see nine wells (6 net) drilled in 2010 including four horizontal wells (2.5 net).  These wells are targeting formations that deliver between 45 and 55 barrels of high value liquids per million cubic feet of gas production supporting economic drilling at current gas prices levels.  However, considering the general weakness in natural gas prices in North America, and Vermilion's strong exposure to other higher return opportunities, the program for the current year will remain fairly modest.  With an inventory of more than 120 net locations identified for horizontal drilling, development of these opportunities will be paced to take advantage of periods of strength in natural gas prices in North America.

Vermilion participated in the drilling of 23 wells (19.9 net) during the first quarter of 2010.  Activities included the drilling of five gas wells (3 net) with two coming on production late in the quarter.  Five Cardium oil wells (5 net) were drilled during the quarter of which three were completed and subsequently tied-in after the end of the first quarter.  The remaining two Cardium oil wells were awaiting completion following spring break-up.  The remaining 13 wells (12 net) were CBM wells that were drilled to take advantage of drilling credits available during the period.