Exhibit 99.1

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 2024 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 2024; 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; the impact of Vermilion’s dividend policy on its future cash flows; credit ratings; hedging program; expected earnings/(loss) and adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows and free cash flow and expected future cash flow and free cash flow per share; estimated future dividends; financial strength and flexibility; debt and equity market conditions; general economic and competitive conditions; ability of management to execute key priorities; and the effectiveness of various actions resulting from the Vermilion's strategic priorities.

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; 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.

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.

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 metrics commonly used in the oil and gas industry. These oil and gas metrics do not have any standardized meaning or standard methods of calculation and therefore may not be comparable to similar measures presented by other companies where similar terminology is used and should therefore not be used to make comparisons. 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.

Abbreviations

Highlights

Message to Shareholders

The first quarter of 2024 was another strong quarter for Vermilion with continued operational momentum, achievement of our debt target, increased return of capital and advancement of our key growth projects that will underpin our long-term free cash flow (“FCF”). Production during Q1 2024 averaged 85,505 boe/d(1), above the upper end of our Q1 2024 guidance range primarily due to strong operating performance from our Germany and United States assets. We generated $431 million of fund flows from operations (“FFO”) and invested $190 million of E&D capital in Q1 2024, resulting in $241 million of FCF for the quarter. We returned $56 million of FCF to shareholders in Q1 2024 through dividends and share buybacks and reduced net debt by $134 million to $944 million. With the achievement of our $1 billion net debt target, we increased our return of capital target to 50% of excess FCF on an annual basis and significantly increased our pace of share buybacks during the quarter, repurchasing and cancelling 2.4 million shares, including 1.0 million shares during the month of March. We continued this pace subsequent to the quarter, and have repurchased an additional 1.0 million shares during the month of April. We plan to maintain a robust share buyback program in the months ahead as we manage towards an annual return of capital target of 50% of excess FCF, with the ultimate goal of increasing FCF per share.

Our 2024 capital program is progressing as planned, including advancements of all key growth projects including our Montney liquids-rich gas development, Germany deep gas exploration and Croatia gas development. In BC, construction of the 8-33 Montney battery is nearing completion. This battery will more than double our Montney infrastructure capacity to approximately 20,000 boe/d, which we intend to fill over the coming years as we build out our BC Montney asset, and lays the groundwork for future expansion to 28,000 boe/d. The successful completion and initial flowback results from our first Montney pad of 2024 continues to validate the quality of our BC Mica Montney asset, while continued optimization of our drilling and completion methods resulted in cost savings of approximately 15% compared to the previous BC drilling program. In Croatia, construction of the gas plant on the SA-10 block in Croatia is nearing completion which will add over 2,000 boe/d of European gas currently behind pipe. We expect our Croatia gas production from the SA-10 block to generate an operating netback over $50 per boe in 2024 due to having direct exposure to premium European gas prices.

Our European gas exploration program is off to a strong start. In Germany, we successfully drilled the first of two planned deep gas exploration wells and are pleased to report that we discovered gas within the target zone. This well was drilled to a total depth of approximately 5,000 metres, representing the deepest well we have ever drilled in Europe. We plan to test the well during the second quarter and prepare for tie-in operations with an anticipated on-stream date of early 2025. These initial results are very encouraging as it helps validate our geological model and sets the stage for a multi-year drilling campaign, which could provide Vermilion with years of organic production growth of high valued European gas. In Croatia, we successfully completed drilling two of the four planned exploration wells on the SA-7 block, and completed drilling a third well subsequent to the quarter. We discovered hydrocarbon in multiple zones from all three wells, which is very encouraging.

Vermilion is well positioned for the future, with a strong balance sheet and continued operational momentum which will support our recently enhanced return of capital framework. Our return of capital framework provides investors with a growing base dividend and meaningful share buyback program which we expect to augment with modest organic production growth in the future as we develop our growth assets. We will continue to focus on operational excellence and executing our 2024 plan while maintaining financial discipline, which will set the foundation for future profitable growth. We look forward to providing further updates on our key growth projects in the months ahead.

Q1 2024 Operations Review

North America

Production from our North American operations averaged 52,959 boe/d(1) in Q1 2024, a decrease of 2% from the previous quarter due to natural declines in Canada, partially offset by strong performance from non-operated Parkman wells in the United States that were brought on production in the quarter.

In the Deep Basin, we drilled three (3.0 net), completed three (3.0 net), and brought on production five (5.0 net) Mannville liquids-rich conventional natural gas wells. At Mica, we drilled and completed six (6.0 net) BC Montney liquids-rich shale gas wells in advance of the expected start-up of our 8-33 BC battery in late Q2 2024. In Saskatchewan, we drilled four (4.0 net), completed four (4.0 net), and brought on production four (4.0 net) light and medium crude oil wells, while in the United States, six (2.0 net) non-operated light and medium crude oil wells drilled in the prior quarter were completed and brought on production.

Construction of the 16,000 boe/d Mica Montney battery is nearing completion and remains scheduled for startup in late Q2 2024. We successfully completed the first six (6.0 net) BC Montney wells of our 2024 program and initial flowback results are in line with the strong performance seen on the first two wells on our 16-28 pad that were brought on production in 2023. These results are very positive as it continues to validate the quality of our BC Mica Montney asset. We continued to optimize our drilling and completion processes throughout our 2024 BC program, which resulted in cost savings of approximately 15% compared to the previous BC program. Our 2024 BC program used 17% less water than previous programs, reducing both costs and our environmental impact, and we saw further optimization through improved well design as well as design and execution on completion processes. A pilot program testing higher intensity completions aims to further improve the efficiency with which we develop our Montney asset.

International

Production from our International operations averaged 32,546 boe/d(1) in Q1 2024, a decrease of 3% over the previous quarter primarily due to natural declines in Ireland and Australia, partially offset by higher production in Germany on strong asset performance.

In Germany, we successfully drilled our first deep gas exploration well and are pleased to report that we discovered gas within the targeted zone. This well was drilled to a total depth of approximately 5,000 metres, representing the deepest well we have ever drilled in Europe. We plan to test the well during the second quarter and prepare for tie-in operations with an anticipated on-stream date of early 2025. We also plan to commence drilling on the second well (0.6 net) of our inaugural deep gas program in Q2 2024, which is a higher risk prospect targeting a very large structure that is expected to take three to four months to drill.

In Croatia, construction of the gas plant on the SA-10 block is nearing completion, with testing and pre-commissioning activities currently underway. The gas plant remains on schedule for start-up mid-year, which will add over 2,000 boe/d of European gas currently behind pipe. In addition, we successfully completed drilling two (1.2 net) of the four (2.4 net) planned exploration wells on the SA-7 block, and completed drilling an additional one (0.6 net) well subsequent to the quarter. All three wells drilled to date have discovered hydrocarbons in multiple zones which we expect will contribute to FCF in the years ahead. Testing operations are planned for the second quarter, along with drilling the fourth well of the program.

Our Australia operations saw strong performance for a second consecutive quarter. Production of 4,264 bbls/d and a draw on inventory resulted in sales of over 570,000 bbls of oil, including a lifting that sold for more than $130/bbl. The premium realized pricing in Australia drives outsized netbacks and FCF.

Outlook and Guidance Update

Our Q2 2024 capital program includes completing the BC Mica Montney battery and Croatia SA-10 gas plant and tying in the behind pipe production in each of those areas. Drilling operations will continue on the remaining BC Mica Montney wells in Canada, the second exploration well in Germany and the fourth exploration well on the SA-7 block in Croatia while we also conduct further evaluation and testing of the successful exploration wells in Germany and Croatia. Most of the production from activity in the first half of 2024 will not be on stream until mid-year or later, and as a result we expect Q2 2024 production to be in the range of 83,000 to 85,000 boe/d.

Organizational Update

Mr. Jenson Tan has stepped down from his position as Vice President, Business Development. We would like to thank Mr. Tan for his many contributions to Vermilion over the past 13 years. Mr. Todd Keenan has been promoted to Director, Business Development. Mr. Keenan is an experienced Business Development professional and joined Vermilion in 2017. He has worked on many material deals for Vermilion in North America and International, and has led our corporate reserves process. Prior to joining Vermilion, he worked in engineering and A&D roles at Prairie Sky Royalty, Talisman Energy and Tristone Capital / Macquarie Tristone. Mr. Keenan has a Masters of Engineering degree in Petroleum Engineering and holds the Chartered Financial Analyst® designation.

Commodity Hedging

Vermilion hedges to manage commodity price exposures and increase the stability of our cash flows. In aggregate, as of May 1, 2024, we have 36% of our expected net-of-royalty production hedged for the remainder of 2024. With respect to individual commodity products, we have hedged 46% of our European natural gas production, 35% of our crude oil production, and 31% of our North American natural gas volumes, 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.

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 less royalties, transportation, operating, G&A, corporate income tax, PRRT, windfall taxes, interest expense, realized gain (loss) on derivatives, realized foreign exchange gain (loss), and realized other income (expense). 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.

Non-GAAP Financial Measures and Non-GAAP Ratios

Free cash flow (FCF) and excess free cash flow (EFCF): 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 cost and EFCF is comprised of FCF less payments on lease obligations and asset retirement obligations settled. 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. EFCF is used to determine the funding available to return to shareholders after costs attributable to normal business operations.

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.

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.

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).

Acquisitions: The sum of acquisitions and acquisitions of securities 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, and net 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 and is most directly comparable to cash flows used in investing activities. A reconciliation to the acquisitions line items in the Consolidated Statements of Cash Flows can be found below.

Capital Management Measure

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.

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.

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.

Management's Discussion and Analysis

The following is Management’s Discussion and Analysis (“MD&A”), dated May 1, 2024, of Vermilion Energy Inc.’s (“Vermilion”, “we”, “our”, “us” or the “Company”) operating and financial results as at and for the three months ended March 31, 2024 compared with the corresponding period in the prior year.

This discussion should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2024 and the audited consolidated financial statements for the years ended December 31, 2023 and 2022, together with the accompanying notes. Additional information relating to Vermilion, including its Annual Information Form, is available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

The unaudited condensed consolidated interim financial statements for the three months ended March 31, 2024 and comparative information have been prepared in Canadian dollars, except where another currency has been indicated, and in accordance with IAS 34, "Interim Financial Reporting", as issued by the International Accounting Standards Board ("IASB").

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.

Guidance

On December 12, 2023, we released our 2024 capital budget and associated production guidance, which assumed a mid-year startup of the new BC Montney battery and Croatia gas plant. On May 1, 2024, we increased 2024 guidance for royalty rate and cash taxes to reflect the impact of higher forward pricing for crude oil on these items. The Company’s guidance for 2024 is as follows:

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.

Consolidated Results Overview

Q1 2024 vs. Q1 2023

Free cash flow

Long-term debt and net debt

Benchmark Commodity Prices

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.

North America

Production from our North American operations averaged 52,959 boe/d in Q1 2024, a decrease of 2% from the previous quarter due to natural declines in Canada, partially offset by strong performance from non-operated Parkman wells in the United States that were brought on production in the quarter.

In the Deep Basin, we drilled three (3.0 net), completed three (3.0 net), and brought on production five (5.0 net) Mannville liquids-rich conventional natural gas wells. At Mica, we drilled and completed six (6.0 net) BC Montney liquids-rich shale gas wells in advance of the expected start-up of our 8-33 BC battery in late Q2 2024. In Saskatchewan, we drilled four (4.0 net), completed four (4.0 net), and brought on production four (4.0 net) light and medium crude oil wells, while in the United States, six (2.0 net) non-operated light and medium crude oil wells drilled in the prior quarter were completed and brought on production.

Sales in North America decreased for the three months ended March 31, 2024 versus the prior year primarily due to lower realized commodity prices and lower production volumes in Canada after the sale of non-core southeast Saskatchewan assets in 2023.

Royalties in North America decreased on a dollar and per unit basis for the three months ended March 31, 2024 versus the prior year primarily due to decreased sliding scale royalties on lower benchmark commodity prices and lower production, partially offset by higher crude oil royalties in the United States primarily due to higher production. Royalties as a percentage of sales for the three months ended March 31, 2024 were 15.9% compared to 14.0% in the prior year.

Transportation expense in North America decreased on a dollar and per boe basis for the three months ended March 31, 2024 versus the prior year, primarily due to lower pipeline tariffs on natural gas.

Operating expenses in North America decreased on a dollar basis (flat on a per boe basis) for the three months ended March 31, 2024 compared to the prior year period primarily due to the disposition of the properties in southeast Saskatchewan at the end of Q1 2023 and lower fuel and electricity costs in Canada.

International

Production from our International operations averaged 32,546 boe/d in Q1 2024, a decrease of 3% over the previous quarter primarily due to natural declines in Ireland and Australia, partially offset by higher production in Germany on strong asset performance.

In Germany, we successfully drilled our first deep gas exploration well and are pleased to report that we discovered gas within the targeted zone. This well was drilled to a total depth of approximately 5,000 metres, representing the deepest well we have ever drilled in Europe. We plan to test the well during the second quarter and prepare for tie-in operations with an anticipated on-stream date of early 2025. We also plan to commence drilling on the second well (0.6 net) of our inaugural deep gas program in Q2 2024, which is a higher risk prospect targeting a very large structure that is expected to take three to four months to drill.

In Croatia, construction of the gas plant on the SA-10 block is nearing completion, with testing and pre-commissioning activities currently underway. The gas plant remains on schedule for start-up mid-year, which will add over 2,000 boe/d of European gas currently behind pipe. In addition, we successfully completed drilling two (1.2 net) of the four (2.4 net) planned exploration wells on the SA-7 block, and completed drilling an additional one (0.6 net) well subsequent to the quarter. All three wells drilled to date have discovered hydrocarbons in multiple zones which we expect will contribute to FCF in the years ahead. Testing operations are planned for the second quarter, along with drilling the fourth well of the program.

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.

Sales increased on a dollar basis for the three months ended March 31, 2024 versus the prior year primarily due to downtime in Australia in the prior year, the Corrib acquisition in Ireland, and timing of transportation in France. On a per boe basis, sales decreased primarily due to lower realized gas prices.

Royalties in our International core region are primarily incurred in France, Germany and the Netherlands, 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 decreased on a dollar and per unit basis for the three months ended March 31, 2024 versus the prior year primarily due to lower gas pricing, partially offset by increased oil pricing and increased production in France.

Transportation expense increased on a dollar basis for the three months ended March 31, 2024 versus the prior year primarily due to increased volumes in Ireland from acquired production at the end of Q1 2023. Transportation expense decreased on a per boe basis primarily due to lower vessel costs in France, partially offset by increases in tariffs in Germany.

Our production in Australia and Netherlands is not subject to transportation expense.

Operating expenses increased on a dollar basis for the three months ended March 31, 2024 primarily due to restart of production in Australia and associated liftings, increased sales in France, and increased working interest acquired in Ireland, partially offset by decreased power costs in the Netherlands.

Operating expenses decreased on a per boe basis for the year ended March 31, 2024 versus the prior year primarily attributable to the shut-in of our Wandoo platform in Australia for maintenance in 2023 resulting in the absence of production and sales.

Consolidated Financial Performance Review

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

PRRT and corporate income taxes

Windfall taxes

Interest expense

Realized gain or loss on derivatives

Realized other income or expense

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 March 31, 2024 versus the prior year primarily due to the cash settlement of previously share-based settled expenses and the lower value of LTIP awards outstanding in the current period.

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.

For the three months ended March 31, 2024, we recognized a net unrealized loss on derivative instruments of $188.7 million. This consists of unrealized losses of $151.6 million on our European natural gas commodity derivative instruments, $34.8 million on our crude oil derivative instruments, $2.6 million on our North American gas commodity derivative instruments, and $3.0 million on our USD-to-CAD foreign exchange swaps, partially offset by losses of $3.3 million on our equity 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 2024, unrealized foreign exchange gains and losses primarily resulted from:

For the three months ended March 31, 2024, we recognized a net unrealized foreign exchange loss of $21.6 million, primarily driven by the effects of the US dollar strengthening 2% against the Canadian dollar on our USD senior notes.

Accretion

Accretion expense is recognized to update the present value of the asset retirement obligation balance. For the three months ended March 31, 2024, accretion expense decreased versus the prior year primarily due to the weakening of the Euro against the Canadian dollar, partially offset by a higher asset retirement obligation balance.

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.

Depletion and depreciation on a per boe basis for the three months ended March 31, 2024 of $22.29 increased from $20.20 in the prior year primarily due to higher future development costs increasing the depletable base and lower reserve estimates, partially offset by decreases to the depletable base related to the impairments and dispositions recorded in 2023, and the weakening of the Euro against the Canadian dollar.

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 ended March 31, 2024, the Company recorded deferred tax expense of $16.6 million compared to a deferred tax recovery of $36.5 million in the prior year period. The expense recorded in the current year is primarily attributable to the derecognition of deferred tax assets in Ireland driven by the decrease in European gas prices. In Q1 2023, the deferred tax recovery was driven by the disposition of assets in southeast Saskatchewan.

Financial Position Review

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 maintaining a ratio of net debt to four quarter trailing fund flows from operations of approximately 1.0.

As at March 31, 2024, we have a ratio of net debt to four quarter trailing fund flows from operations of 0.7. 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.

Net debt is reconciled to long-term debt, as follows: 

As at March 31, 2024, net debt decreased to $944.5 million (December 31, 2023 - $1.1 billion) primarily due to strong free cash flow generation. The ratio of net debt to four quarter trailing fund flows from operations as at March 31, 2024 decreased to 0.7 (December 31, 2023 - 0.9) due to higher four quarter trailing fund flows from operations.

The balances recognized on our balance sheet are as follows:

Revolving Credit Facility

As at March 31, 2024, Vermilion had in place a bank revolving credit facility maturing May 29, 2027 with terms and outstanding positions as follows:

As at March 31, 2024, there was no draw on the facility.

As at March 31, 2024, the revolving credit facility was subject to the following financial covenants: 

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:

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 March 31, 2024, 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 March 31, 2024 and December 31, 2023, 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.

Subsequent to March 15, 2023, Vermilion may redeem some or all of the senior unsecured notes at a 100.00% redemption price plus any accrued and unpaid interest.

During the first quarter of 2024, Vermilion purchased $4.0 million of senior unsecured notes on the open market which were subsequently cancelled.

The Company has the right to roll over the senior unsecured notes under the existing revolving credit facility which matures May 29, 2027 thus has continued to classify the senior unsecured notes as non-current.

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:

The following table outlines our dividend payment history:

The following table reconciles the change in shareholders’ capital:

As at March 31, 2024, there were approximately 4.5 million equity based compensation awards outstanding. As at May 1, 2024, there were approximately 160.1 million common shares issued and outstanding.

On July 10, 2023, the Toronto Stock Exchange approved our notice of intention to renew our normal course issuer bid ("the NCIB"). The NCIB renewal allows Vermilion to purchase up to 16,308,587 common shares (representing approximately 10% of outstanding common shares) beginning July 12, 2023 and ending July 11, 2024. Common shares purchased under the NCIB will be cancelled.

In the first quarter of 2024, Vermilion purchased 2.4 million common shares under the NCIB for total consideration of $36.4 million. The common shares purchased under the NCIB were cancelled.

Subsequent to March 31, 2024, Vermilion purchased and cancelled 0.8 million shares under the NCIB for total consideration of $14.0 million.

Asset Retirement Obligations

As at March 31, 2024, asset retirement obligations were $1,209.7 million compared to $1,159.1 million as at December 31, 2023. The increase in asset retirement obligations is primarily attributable to the Company's lower credit spread at March 31, 2024 compared to December 31, 2023 and accretion expense recognized. The credit spread decreased to 3.1% at March 31, 2024 compared to 3.6% at December 31, 2023 due to higher interest rates on government bonds and a lower expected cost of borrowing.

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:

Current cost estimates are inflated to the estimated time of abandonment using inflation rates of between 1.3% and 5.5% (as at December 31, 2023 - between 1.3% and 5.5%).

Risks and Uncertainties

Vermilion is exposed to various market and operational risks. For a discussion of these risks, please see Vermilion's MD&A and Annual Information Form, each for the year ended December 31, 2023 available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

Critical Accounting Estimates

The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and assumptions that affect reported assets, liabilities, revenues and expenses, gains and losses, and disclosures of any possible contingencies. These estimates and assumptions are developed based on the best available information which management believed to be reasonable at the time such estimates and assumptions were made. As such, these assumptions are uncertain at the time estimates are made and could change, resulting in a material impact on Vermilion’s consolidated financial statements. Estimates are reviewed by management on an ongoing basis and as a result may change from period to period due to the availability of new information or changes in circumstances. Additionally, as a result of the unique circumstances of each jurisdiction that Vermilion operates in, the critical accounting estimates may affect one or more jurisdictions. There have been no material changes to our critical accounting estimates used in applying accounting policies for the three months ended March 31, 2024. Further information, including a discussion of critical accounting estimates, can be found in the notes to the Consolidated Financial Statements and annual MD&A for the year ended December 31, 2023, available on SEDAR+ at www.sedarplus.ca or on Vermilion’s website at www.vermilionenergy.com.

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.

Internal Control Over Financial Reporting

There has been no change in Vermilion’s internal control over financial reporting ("ICFR") during the period covered by this MD&A that materially affected, or is reasonably likely to materially affect, our internal control 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 Equinor Energy Ireland Limited, which was acquired on March 31, 2023. 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 tables below present the summary financial information of Equinor Energy Ireland Limited included in Vermilion's financial statements as at and for the three months ended March 31, 2024:

Equinor Energy Ireland Limited:

Recently Adopted Accounting Pronouncements

Vermilion did not adopt any new accounting pronouncements as at March 31, 2024 that would have a material impact on the Consolidated Interim Financial Statements.

Regulatory Pronouncements Not Yet Adopted

Issuance of IFRS Sustainability Standards - IFRS S1 "General Requirements for Disclosure of Sustainability-related Financial Information" and IFRS S2 "Climate-related Disclosures"

In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural standards - IFRS S1 and IFRS S2. The ISSB was formed as a new standard-setting board within the IFRS Foundation to issue standards that deliver a comprehensive global baseline of sustainability-related financial disclosures, operating alongside the International Accounting Standards Board.

IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, as long as both standards are applied. IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities, while IFRS S2 sets out specific climate-related disclosures and is designed to be used in conjunction with IFRS S1. Canadian regulators have not yet mandated these standards; however, Vermilion is continuing to review the impact of the standards on its financial reporting.

IFRS 18 “Presentation and Disclosure in Financial Statements issued”

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements issued which will replace IAS 1 Presentation of Financial Statements. Retrospective application of the standard is mandatory for annual reporting periods starting from January 1, 2027 onwards with earlier application is permitted. Vermilion is assessing the impacts of the standard on its financial reporting.

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 March 31, 2024, 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.

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.

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 March 31, 2024:

The following sold option instruments allow the counterparties, at the specified date, to enter into a derivative instrument contract with Vermilion at the detailed terms:

Supplemental Table 3: Capital Expenditures and Acquisitions

Supplemental Table 4: Production

Supplemental Table 5: Operational and Financial Data by Core Region

Production volumes (1)

Sales volumes

Financial results