EXHIBIT 99.3










Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






MANAGEMENT’S REPORT TO SHAREHOLDERS



Management’s Responsibility for Financial Statements



The accompanying consolidated financial
statements of Vermilion Energy Inc. are the responsibility of management and have been approved by the Board of Directors of Vermilion
Energy Inc. The consolidated financial statements have been prepared in accordance with the accounting policies detailed in the
notes to the consolidated financial statements and are prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board. Where necessary, management has made informed judgements and estimates
of transactions that were not yet completed at the balance sheet date. Financial information throughout the Annual Report is consistent
with the consolidated financial statements.



Management ensures the integrity of the
consolidated financial statements by maintaining high-quality systems of internal control. Procedures and policies are designed
to provide reasonable assurance that assets are safeguarded and transactions are properly recorded, and that the financial records
are reliable for preparation of the consolidated financial statements. Deloitte LLP, Vermilion’s external auditors, have
conducted an audit of the consolidated financial statements in accordance with Canadian generally accepted auditing standards and
the standards of the Public Company Accounting Oversight Board (United States) and have provided their report.



The Board of Directors is responsible for
ensuring that management fulfills its responsibility for financial reporting and internal control. The Board carries out this responsibility
principally through the Audit Committee, which is appointed by the Board and is comprised entirely of independent Directors. The
Committee meets periodically with management and Deloitte LLP to satisfy itself that each party is properly discharging its responsibilities
and to review the consolidated financial statements, the Management’s Discussion and Analysis and the external Auditor’s
Report before they are presented to the Board of Directors.



Management’s Report on Internal Control Over Financial
Reporting



Management is responsible for establishing
and maintaining an adequate system of internal control over financial reporting. Management conducted an evaluation of the effectiveness
of the system of internal control over financial reporting based on the criteria established in “Internal Control –
Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management has assessed the effectiveness of Vermilion’s internal control over financial reporting as defined
in Rule 13a-15 under the US Securities Exchange Act of 1934 and as defined in Canada by National Instrument 52-109, Certification
of Disclosure in Issuers’ Annual and Interim Filings. Management concluded that Vermilion’s internal control over financial
reporting was effective as of December 31, 2014. The effectiveness of Vermilion’s internal control over financial reporting
as of December 31, 2014 has been audited by Deloitte LLP, the Company’s Independent Registered Public Accounting Firm, who
also audited the Company’s consolidated financial statements for the year ended December 31, 2014.



|(“Lorenzo Donadeo”)     | (“Curtis W. Hicks”)                               
|----------------------- | --------------------------------------------------
|                        |                                                   
|                        |                                                   
|Lorenzo Donadeo         | Curtis W. Hicks                                   
|Chief Executive Officer | Executive Vice President & Chief Financial Officer
|February 27, 2015       |                                                   



2


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders
of Vermilion Energy Inc.



We have audited the internal control over
financial reporting of Vermilion Energy Inc. and subsidiaries (the “Company”) as of December 31, 2014, based on the
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.



A company's internal control over financial
reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers,
or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.



Because of the inherent limitations of internal
control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with
the Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements as of and for the year ended December 31, 2014 of the Company and our report dated February
27, 2015 expressed an unqualified opinion on those financial statements.



(“Deloitte LLP”)



Chartered Accountants

February 27, 2015

Calgary, Canada



3


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




Report of Independent Registered Public Accounting
Firm



To the Board of Directors and Shareholders
of Vermilion Energy Inc.



We have audited the accompanying consolidated
financial statements of Vermilion Energy Inc. and subsidiaries (the “Company”), which comprise the consolidated balance
sheets as at December 31, 2014 and 2013, and the consolidated statements of net earnings and comprehensive income, consolidated
statements of changes in shareholders’ equity and consolidated statements of cash flows for the years then ended, and a summary
of significant accounting policies and other explanatory information.



Management's Responsibility for the Consolidated
Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.



Auditor's Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as at December 31, 2014 and 2013, and
its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board.



Other Matter



We have also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2015 expressed an unqualified
opinion on the Company’s internal control over financial reporting.



(“Deloitte LLP”)



Chartered Accountants

February 27, 2015

Calgary, Canada



4


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




|CONSOLIDATED BALANCE SHEETS    
|-------------------------------
|(THOUSANDS OF CANADIAN DOLLARS)



|                                         |      | December 31, | December 31,
|---------------------------------------- | ---- | ------------ | ------------
|                                         | Note |              | 2014        
|ASSETS                                   |      |              |             
|Current                                  |      |              |             
|Cash and cash equivalents                | 17   |              | 120,405     
|Accounts receivable                      |      |              | 171,820     
|Crude oil inventory                      |      |              | 9,510       
|Derivative instruments                   | 13   |              | 23,391      
|Prepaid expenses                         |      |              | 13,033      
|                                         |      |              | 338,159     
|                                         |      |              |             
|Derivative instruments                   | 13   |              | 1,403       
|Deferred taxes                           | 9    |              | 154,816     
|Exploration and evaluation assets        | 6    |              | 380,621     
|Capital assets                           | 5    |              | 3,511,092   
|                                         |      |              | 4,386,091   
|                                         |      |              |             
|LIABILITIES                              |      |              |             
|Current                                  |      |              |             
|Accounts payable and accrued liabilities |      |              | 298,196     
|Dividends payable                        | 10   |              | 23,070      
|Derivative instruments                   | 13   |              | -           
|Income taxes payable                     | 9    |              | 44,463      
|                                         |      |              | 365,729     
|                                         |      |              |             
|Long-term debt                           | 8    |              | 1,238,080   
|Asset retirement obligations             | 7    |              | 350,753     
|Deferred taxes                           | 9    |              | 410,183     
|                                         |      |              | 2,364,745   
|                                         |      |              |             
|SHAREHOLDERS’ EQUITY                     |      |              |             
|Shareholders’ capital                    | 10   |              | 1,959,021   
|Contributed surplus                      |      |              | 92,188      
|Accumulated other comprehensive income   |      |              | 5,722       
|Deficit                                  |      |              | (35,585)    
|                                         |      |              | 2,021,346   
|                                         |      |              | 4,386,091   



APPROVED BY THE BOARD



|(“Joseph F. Killi”)       | (“Lorenzo Donadeo”)      
|------------------------- | -------------------------
|                          |                          
|Joseph F. Killi, Director | Lorenzo Donadeo, Director



5


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




CONSOLIDATED STATEMENTS OF NET EARNINGS AND COMPREHENSIVE
INCOME
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)



|                                            |      |              | Year Ended
|------------------------------------------- | ---- | ------------ | ----------
|                                            |      | December 31, |           
|Note                                        | 2014 |              | 2013      
|REVENUE                                     |      |              |           
|Petroleum and natural gas sales             |      |              | 1,419,628 
|Royalties                                   |      |              | (108,000) 
|Petroleum and natural gas revenue           |      |              | 1,311,628 
|                                            |      |              |           
|EXPENSES                                    |      |              |           
|Operating                                   | 21   |              | 232,307   
|Transportation                              |      |              | 42,361    
|Equity based compensation                   | 11   |              | 67,802    
|(Gain) loss on derivative instruments       | 13   |              | (64,083)  
|Interest expense                            |      |              | 49,655    
|General and administration                  | 21   |              | 61,727    
|Foreign exchange loss (gain)                |      |              | 18,420    
|Other expense                               |      |              | 760       
|Accretion                                   | 7    |              | 23,913    
|Depletion and depreciation                  | 5, 6 |              | 425,694   
|Impairment (recovery)                       | 5    |              | -         
|                                            |      |              | 858,556   
|EARNINGS BEFORE INCOME TAXES                |      |              | 453,072   
|                                            |      |              |           
|INCOME TAXES                                | 9    |              |           
|Deferred                                    |      |              | 26,410    
|Current                                     |      |              | 157,336   
|                                            |      |              | 183,746   
|                                            |      |              |           
|NET EARNINGS                                |      |              | 269,326   
|                                            |      |              |           
|OTHER COMPREHENSIVE (LOSS) INCOME           |      |              |           
|Currency translation adjustments            |      |              | (41,420)  
|COMPREHENSIVE INCOME                        |      |              | 227,906   
|                                            |      |              |           
|NET EARNINGS PER SHARE                      | 12   |              |           
|Basic                                       |      |              | 2.55      
|Diluted                                     |      |              | 2.51      
|                                            |      |              |           
|WEIGHTED AVERAGE SHARES OUTSTANDING ('000s) | 12   |              |           
|Basic                                       |      |              | 105,448   
|Diluted                                     |      |              | 107,187   



6


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF CANADIAN DOLLARS)



|                                                                   |         |  | Year Ended  
|------------------------------------------------------------------ | ------- |  | ------------
|                                                                   |         |  | December 31,
|                                                                   | Note    |  | 2014        
|OPERATING                                                          |         |  |             
|Net earnings                                                       |         |  | 269,326     
|Adjustments:                                                       |         |  |             
|Accretion                                                          | 7       |  | 23,913      
|Depletion and depreciation                                         | 5, 6    |  | 425,694     
|Impairment (recovery)                                              | 5       |  | -           
|Unrealized gain on derivative instruments                          | 13      |  | (27,371)    
|Equity based compensation                                          | 11      |  | 67,802      
|Unrealized foreign exchange loss (gain)                            |         |  | 17,599      
|Unrealized other expense                                           |         |  | 1,492       
|Deferred taxes                                                     | 9       |  | 26,410      
|Asset retirement obligations settled                               | 7       |  | (15,956)    
|Changes in non-cash operating working capital                      | 14      |  | 3,077       
|Cash flows from operating activities                               |         |  | 791,986     
|                                                                   |         |  |             
|INVESTING                                                          |         |  |             
|Drilling and development                                           | 5       |  | (618,689)   
|Exploration and evaluation                                         | 6       |  | (69,035)    
|Property acquisitions                                              | 4, 5, 6 |  | (220,726)   
|Dispositions                                                       | 5       |  | -           
|Corporate acquisitions, net of cash acquired                       | 4       |  | (176,179)   
|Changes in non-cash investing working capital                      | 14      |  | 12,365      
|Cash flows used in investing activities                            |         |  | (1,072,264) 
|                                                                   |         |  |             
|FINANCING                                                          |         |  |             
|Increase in long-term debt                                         | 8       |  | 196,387     
|Cash dividends                                                     | 10      |  | (190,657)   
|Cash flows from financing activities                               |         |  | 5,730       
|Foreign exchange gain on cash held in foreign currencies           |         |  | 5,394       
|                                                                   |         |  |             
|Net change in cash and cash equivalents                            |         |  | (269,154)   
|Cash and cash equivalents, beginning of year                       |         |  | 389,559     
|Cash and cash equivalents, end of year                             | 17      |  | 120,405     
|                                                                   |         |  |             
|Supplementary information for operating activities - cash payments |         |  |             
|Interest paid                                                      |         |  | 50,801      
|Income taxes paid                                                  |         |  | 166,993     



7


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
(THOUSANDS OF CANADIAN DOLLARS)



|                                                         |        |               |             |               |          | Accumulated   |          |  |          
|-------------------------------------------------------- | ------ | ------------- | ----------- | ------------- | -------- | ------------- | -------- |  | ---------
|                                                         |        |               |             |               |          |               | Other    |  | Total    
|                                                         |        | Shareholders' | Contributed | Comprehensive |          | Shareholders’
|                                                         | Note   | Capital       | Surplus     |               | Income   | Deficit       | Equity  
|Balances as at January 1, 2013                           |        |               | 1,481,345   |               | 69,581   |               | (32,409) |  | (99,871) 
|Net earnings                                             |        |               | -           |               | -        |               | -        |  | 327,641  
|Currency translation adjustments                         |        |               | -           |               | -        |               | 79,551   |  | -        
|Equity based compensation expense                        | 11     |               | -           |               | 60,216   |               | -        |  | -        
|Dividends declared                                       | 10     |               | -           |               | -        |               | -        |  | (242,599)
|Shares issued pursuant to the dividend reinvestment plan | 10     |               | 72,291      |               | -        |               | -        |  | -        
|Vesting of equity based awards                           | 10, 11 |               | 54,370      |               | (54,370) |               | -        |  | -        
|Share-settled dividends on vested equity based awards    | 10, 11 |               | 9,808       |               | -        |               | -        |  | (9,808)  
|Shares issued pursuant to the bonus plan                 | 10     |               | 629         |               | -        |               | -        |  | -        
|Balances as at December 31, 2013                         |        |               | 1,618,443   |               | 75,427   |               | 47,142   |  | (24,637) 



|                                                         |               |             |               |        |               | Accumulated |          |       |          
|-------------------------------------------------------- | ------------- | ----------- | ------------- | ------ | ------------- | ----------- | -------- | ----- | ---------
|                                                         |               |             |               |        |               | Other       |          | Total
|                                                         | Shareholders’ | Contributed | Comprehensive |        | Shareholders’
|Note                                                     | Capital       | Surplus     |               | Income | Deficit       | Equity     
|Balances as at January 1, 2014                           |               |             | 1,618,443     |        | 75,427        |             | 47,142   |       | (24,637) 
|Net earnings                                             |               |             | -             |        | -             |             | -        |       | 269,326  
|Currency translation adjustments                         |               |             | -             |        | -             |             | (41,420) |       | -        
|Equity based compensation expense                        | 11            |             | -             |        | 67,081        |             | -        |       | -        
|Dividends declared                                       | 10            |             | -             |        | -             |             | -        |       | (272,732)
|Shares issued pursuant to the dividend reinvestment plan | 10            |             | 79,430        |        | -             |             | -        |       | -        
|Shares issued pursuant to corporate acquisition          | 4, 10         |             | 204,960       |        | -             |             | -        |       | -        
|Modification of equity based awards                      | 11            |             | -             |        | (2,395)       |             |          |       |          
|Vesting of equity based awards                           | 10, 11        |             | 47,925        |        | (47,925)      |             | -        |       | -        
|Share-settled dividends on vested equity based awards    | 10, 11        |             | 7,542         |        | -             |             | -        |       | (7,542)  
|Shares issued pursuant to the bonus plan                 | 10            |             | 721           |        | -             |             | -        |       | -        
|Balances as at December 31, 2014                         |               |             | 1,959,021     |        | 92,188        |             | 5,722    |       | (35,585) 



Description
of equity reserves



Shareholders’ capital

Represents the recognized amount for common
shares when issued, net of equity issuance costs and deferred taxes.



Contributed surplus

Represents the recognized value of employee
awards which are settled in shares. Once vested, the value of the awards is transferred to shareholders’ capital.



Accumulated other comprehensive income

Represents the cumulative income and expenses
which are not recorded immediately in net earnings and are accumulated until an event triggers recognition in net earnings. The
current balance consists of currency translation adjustments resulting from translating financial statements of subsidiaries with
a foreign functional currency to Canadian dollars at period-end rates.



Deficit

Represents the cumulative net earnings less
distributed earnings of Vermilion Energy Inc.



8


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






notes
to the Consolidated Financial Statements

For
the year ended December 31, 2014 and 2013

(Tabular
amounts in thousands of Canadian dollars, except share and per share amounts)



1. BASIS OF PRESENTATION



Vermilion Energy Inc. (the “Company”
or “Vermilion”) is a corporation governed by the laws of the Province of Alberta and is actively engaged in the business
of crude oil and natural gas exploration, development, acquisition and production.



These consolidated financial statements
were approved and authorized for issuance by the Board of Directors of Vermilion on February 27, 2015.



2. SIGNIFICANT ACCOUNTING POLICIES



Accounting Framework

The consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”).



Principles of Consolidation

Subsidiaries that are directly controlled
by the parent company or indirectly controlled through other consolidated subsidiaries are fully consolidated. Vermilion accounts
for joint operations by recognizing its share of assets, liabilities, income and expenses. All significant intercompany balances,
transactions, income and expenses are eliminated upon consolidation.



Vermilion currently has no special purpose
entities of which it retains control and accordingly the consolidated financial statements do not include the accounts of any such
entities.



Exploration and Evaluation Assets

Vermilion accounts for exploration and evaluation
of petroleum and natural gas property (“E&E”) costs in accordance with IFRS 6 “Exploration for and Evaluation
of Mineral Resources”. Costs incurred are classified as E&E costs when they relate to exploring and evaluating a property
for which the Company has the licence or right to explore and extract resources.



E&E costs related to each license or
prospect area are initially capitalized within E&E assets. E&E costs that are capitalized may include costs of licence
acquisitions, technical services and studies, seismic acquisitions, exploration drilling and testing, directly attributable overhead
and administration expenses and, if applicable, the estimated costs of retiring the assets. Any costs incurred prior to the acquisition
of the legal rights to explore an area are expensed as incurred.



E&E assets are not initially depleted
and are carried at cost until technical feasibility and commercial viability of the area can be determined. The technical feasibility
and commercial viability of extracting the reserves is considered to be determinable when proven and probable reserves are identified.
If proven and probable reserves are identified as recoverable, the related E&E costs are reclassified to Petroleum and Natural
Gas (“PNG”) assets pending an impairment test. If reserves are not found within the license area or the area is abandoned,
the related E&E costs are amortized over a period not greater than five years.



Petroleum and Natural Gas Assets

Vermilion recognizes PNG assets at cost
less accumulated depletion, depreciation and impairment losses. Directly attributable costs incurred for the drilling of development
wells and for the construction of production facilities are capitalized together with the discounted value of estimated future
costs of asset retirement obligations. When components of PNG assets are replaced, disposed of, or no longer in use, they are derecognized.



Gains and losses on disposal of a component
of PNG assets, including oil and gas interests, are determined by comparing the proceeds of disposal with the carrying amount of
the component, and are recognized in net earnings.



Depletion and Depreciation

Vermilion classifies its assets into PNG
depletion units, which are groups of assets or properties that are within a specific production area and have similar economic
lives. The PNG depletion units represent the lowest level of disaggregation for which Vermilion accumulates costs for the purposes
of calculating and recording depletion and depreciation.



The net carrying value of each PNG depletion
unit is depleted using the unit of production method by reference to the ratio of production in the period to the total proven
and probable reserves, taking into account the future development costs necessary to bring the applicable reserves into production.
The reserve estimates are reviewed annually by management or when material changes occur to the underlying assumptions.



For the purposes of the depletion calculations,
oil and gas reserves are converted to a common unit of measure on the basis of their relative energy content based on a conversion
ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent.



9


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






2. SIGNIFICANT ACCOUNTING POLICIES (Continued)



Furniture and office equipment are recorded
at cost and are depreciated on a declining-balance basis.



Impairment of Long-Lived Assets

E&E assets are tested for impairment
when reclassified to PNG assets or when indicators of impairment are identified.  If indicators of impairment are identified,
E&E assets are tested for impairment as part of the group of Cash Generating Units (“CGUs”) attributable to the
jurisdiction in which the exploration area resides.



PNG depletion units are aggregated into
CGUs for impairment testing.  The determination of CGUs is based on management’s judgement and represents the lowest
level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets or
properties. CGUs are reviewed for indicators that the carrying value of the CGU may exceed its recoverable amount.  If an
indication of impairment exists, the CGU’s recoverable amount is then estimated.  A CGU’s recoverable amount is
defined as the higher of the fair value less costs to sell and its value in use.  If the carrying amount exceeds its recoverable
amount, an impairment loss is recorded to net earnings in the period to reduce the carrying value of the CGU to its recoverable
amount.



For PNG assets and E&E assets, when
there has been an impairment loss recognized, at each reporting date an assessment is performed as to whether the circumstances
which led to the impairment loss have reversed. If the change in circumstances leads to the recoverable amount being higher than
the carrying value after recognition of an impairment, that impairment loss is reversed, with such reversal not to exceed the depreciated
value of the asset had no impairment loss been previously recognized.



Cash and Cash Equivalents

Cash and cash equivalents include monies
on deposit and short-term investments, which are comprised primarily of guaranteed investment certificates.



Crude Oil Inventory

Inventories of crude oil, consisting of
production for which title has not yet transferred to the buyer, are valued at the lower of cost or net realizable value. Cost
is determined on a weighted-average basis and includes related operating expenses, royalties, and depletion.



Provisions and Asset Retirement Obligations

Vermilion recognizes a provision or asset
retirement obligation in the consolidated financial statements when an event gives rise to an obligation of uncertain timing or
amount.



The estimated present value of the asset
retirement obligation is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related
asset. This increase is depleted with the related depletion unit and is allocated to a CGU for impairment testing. The liability
recorded is increased each reporting period due to the passage of time and this change is charged to net earnings in the period
as accretion expense. The asset retirement obligation can also increase or decrease due to changes in the estimated timing of cash
flows, changes in the discount rate and/or changes in the original estimated undiscounted costs. Increases or decreases in the
obligation will result in a corresponding change in the carrying amount of the related asset. Actual costs incurred upon settlement
of the asset retirement obligation are charged against the asset retirement obligation to the extent of the liability recorded.
Vermilion discounts the costs related to asset retirement obligations using the discount rate that reflects current market assessment
of time value of money and risks specific to the liabilities that have not been reflected in the cash flow estimates. Vermilion
applies discount rates applicable to each of the jurisdictions in which it has future asset retirement obligations. Asset retirement
obligations are remeasured at each reporting period in order to reflect the discount rates in effect at that time.



A provision for onerous contracts is recognized
when the expected benefits to be derived by Vermilion from a contract are lower than the unavoidable cost of meeting the obligations
under the contract. The provision is measured at the lower of the expected cost of terminating the contract and the present value
of the expected net cost of the remaining term of the contract. Before a provision is established, Vermilion first recognizes any
impairment loss on assets associated with the onerous contract. For the periods presented in the consolidated financial statements
there were no onerous contracts recognized.



Revenue Recognition

Revenues associated with the sale of crude
oil, natural gas and natural gas liquids are recorded when title passes to the customer. For the majority of Canadian oil and natural
gas production, legal title transfers upon delivery to major pipelines. In Australia, oil is sold at the Wandoo B Platform. In
the Netherlands, natural gas is sold at the plant gate. In France, oil is sold either when delivered to the refinery by pipeline
or when delivered to the refinery via tanker.



10


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






2. SIGNIFICANT ACCOUNTING POLICIES (Continued)



Financial Instruments

Cash and cash equivalents are classified
as held for trading and are measured at fair value. A gain or loss arising from a change in the fair value is recognized in net
earnings in the period in which it occurs.



Accounts receivable are classified as loans
and receivables and are initially measured at fair value and are then subsequently measured at amortized cost. The carrying value
of accounts receivable approximates the fair value due to the short-term nature of these instruments.



Accounts payable and accrued liabilities,
dividends payable, and long-term debt have been classified as other financial liabilities and are initially recognized at fair
value and are subsequently measured at amortized cost.  Transaction costs and discounts are recorded against the fair value
of long-term debt on initial recognition.



All derivative instruments have been classified
as held for trading and are measured at fair value.  A gain or loss arising from a change in the fair value is recognized
in net earnings in the period in which it occurs.



Equity Based Compensation

Vermilion has long-term equity based compensation
plans for directors, officers and employees of Vermilion and its subsidiaries. Equity based compensation expense is recognized
in net earnings over the vesting period of the awards with a corresponding adjustment to contributed surplus. Upon vesting, the
amount previously recognized in contributed surplus is reclassified to shareholders’ capital.



The expense recognized is based on the grant
date fair value of the awards and incorporates an estimate of the forfeiture rate based on historical vesting data. The grant date
fair value of the awards is determined as the grant date closing price of Vermilion’s common shares on the Toronto Stock
Exchange, adjusted by the Company’s estimate of the performance factor that will ultimately be achieved.



Per Share Amounts

Net earnings per share is calculated using
the weighted-average number of shares outstanding during the period. Diluted net earnings per share is calculated using the diluted
weighted-average number of shares outstanding during the period. The diluted weighted-average number of shares is determined by
considering whether equity based compensation plans, if converted during the year, would result in reduced net earnings per share.



The treasury stock method is used to determine
the dilutive effect of equity based compensation plans. The treasury stock method assumes that the deemed proceeds related to unrecognized
equity based compensation expense are used to repurchase shares at the average market price during the period. Equity based awards
outstanding are included in the calculation of diluted net earnings per share based on estimated performance factors.



Foreign Currency Translation

The consolidated financial statements are
presented in Canadian dollars, which is Vermilion’s reporting currency. As several of Vermilion’s subsidiaries transact
and operate primarily in countries other than Canada, they accordingly have functional currencies other than the Canadian dollar.



Transactions denominated in currencies other
than the functional currency of the subsidiary are translated to the functional currency at the prevailing rates on the date of
the transaction. Non-monetary assets or liabilities that result from such transactions are held at the prevailing rate on the date
of the transaction. Monetary items denominated in non-functional currencies are translated to the functional currency of the subsidiary
at the prevailing rate at the balance sheet date. All translations associated with currencies other than the respective functional
currencies are recorded in net earnings.



Translation of all assets and liabilities
from the respective functional currencies to the reporting currency are performed using the rates prevailing at the balance sheet
date. The differences arising upon translation from the functional currency to the reporting currency are recorded as currency
translation adjustments in other comprehensive income (loss) and are held within accumulated other comprehensive income until a
disposal or partial disposal of a subsidiary. A disposal or partial disposal may give rise to a realized gain or loss, which is
recorded in net earnings.



Within the consolidated group there are
outstanding intercompany loans which in substance represent investments in certain subsidiaries. When these loans are identified
as part of the net investment in a foreign subsidiary, any exchange differences arising on those loans are recorded to currency
translation adjustments within other comprehensive income (loss) until the disposal or partial disposal of the subsidiary.



Income Taxes

Deferred taxes are calculated using the
liability method of accounting. Under this method, deferred tax is recognized for the estimated effect of any temporary differences
between the amounts recognized on Vermilion’s consolidated balance sheets and respective tax basis. This calculation uses
enacted or substantively enacted tax rates that will be in effect when the temporary differences are expected to reverse. The effect
of a change in tax rates on deferred taxes is recognized in net earnings in the period in which the related legislation is substantively
enacted.



11


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






Vermilion is subject to current income taxes
based on the tax legislation of each respective country in which Vermilion conducts business.



12


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






2. SIGNIFICANT ACCOUNTING POLICIES (Continued)



Borrowing Costs

Borrowing costs that are directly attributable
to the acquisition or construction of an asset that necessarily takes a substantial period of time to prepare for its intended
use are capitalized as part of the cost of that asset. Borrowing costs are capitalized by applying interest rates attributable
to the project being financed and could include both general and/or specific borrowings. Interest rates applied from general borrowings
are computed using the weighted average borrowing rate for the period.



Measurement Uncertainty

The preparation of the consolidated financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities; disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses for the periods presented.



Key areas where management has made complex
or subjective judgements include asset retirement obligations, assessment of impairment or recovery of impairment of long-lived
assets and income taxes. Actual results could differ significantly from these and other estimates.



Asset Retirement Obligations

Vermilion’s asset retirement obligations
are based on the expected cost of adherence to environmental regulations and estimates of the amount and timing of future expenditures.
Changes in environmental regulations, the estimated costs associated with reclamation activities, the discount rate applied and
the timing of expenditures could materially impact Vermilion’s measurement of the obligations and, correspondingly, impact
Vermilion’s financial position and net earnings.



Assessment of Impairments or Recovery
of Previous Impairments

Impairment tests are performed at a CGU
level. CGUs are determined based on management’s judgment of the lowest level at which there is identifiable cash inflows
that are largely independent of the cash inflows of other groups of assets or properties. The factors used by Vermilion to determine
CGUs may vary by country due to the unique operating and geographic circumstances in each country. However, in general, Vermilion
will assess the following factors in determining whether a group of assets generate largely independent cash inflows: geographic
proximity of the assets within a group to one another, geographic proximity of the group of assets to other groups of assets, homogeneity
of the production from the group of assets and the sharing of infrastructure used to process and/or transport production.



The calculation of the recoverable amount
of the CGUs is based on market factors, estimates of PNG reserves and future costs required to develop reserves. Vermilion’s
reserve estimates and the related future cash flows are subject to measurement uncertainty, and the impact on the consolidated
financial statements of future periods could be material. Considerable management judgment is used in determining the recoverable
amount of PNG assets, including determining the quantity of reserves, the time horizon to develop and produce such reserves and
the estimated revenues and expenditures of such production.



Income Taxes

Tax interpretations, regulations, and legislation
in the various jurisdictions in which Vermilion and its subsidiaries operate are subject to change and interpretation. Such changes
can affect the timing of the reversal of temporary tax differences, the tax rates in effect when such differences reverse and Vermilion’s
ability to use tax losses and other tax pools in the future. The Company’s income tax filings are subject to audit by taxation
authorities in numerous jurisdictions and the results of such audits may increase or decrease our tax liability.The determination
of current and deferred tax amounts recognized in the consolidated financial statements are based on management’s assessment
of the tax positions, which includes consideration of their technical merits, communications with tax authorities and management’s
view of the most likely outcome.



13


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






3. CHANGES TO ACCOUNTING PRONOUNCEMENTS



On January 1, 2014, Vermilion adopted the
following pronouncements as issued by the IASB. The adoption of these standards did not have a material impact on Vermilion’s
consolidated financial statements.



IFRIC 21 “Levies”

On May 20, 2013, the IASB issued guidance
under IFRIC 21, which provides clarification on accounting for levies in accordance with the requirements of IAS 37 “Provisions,
Contingent Liabilities and Contingent Assets”. The interpretation defines a levy as an outflow from an entity imposed by
a government in accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event
specified in the legislation occurs. The interpretation was effective for annual periods beginning on or after January 1, 2014.



IAS 36 “Impairment of Assets”

On May 29, 2013, the IASB issued amendments
to IAS 36 "Impairment of Assets" which reduce the circumstances in which the recoverable amount of CGUs is required to
be disclosed and clarify the disclosures required when an impairment loss has been recognized or reversed in the period. This amendment
was effective for annual periods beginning on or after January 1, 2014.



Accounting pronouncements not yet adopted



The impacts of the adoption of the following
pronouncements are currently being evaluated.



IFRS 9 “Financial Instruments”

On July 24, 2014, the IASB issued the final
element of its comprehensive response to the financial crisis by issuing IFRS 9 “Financial Instruments”. The improvements
introduced by IFRS 9 includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’
impairment model and a substantially-reformed approach to hedge accounting. Vermilion will adopt the standard for reporting periods
beginning January 1, 2018.



IFRS 15 “Revenue from Contracts
with Customers”

On May 28, 2014, the IASB issued IFRS 15
“Revenue from Contracts with Customers”, a new standard that specifies recognition requirements for revenue as well
as requiring entities to provide the users of financial statements with more informative and relevant disclosures. The standard
replaces IAS 11 “Construction Contracts” and IAS 18 “Revenue” as well as a number of revenue-related interpretations.
Vermilion will adopt the standard for reporting periods beginning January 1, 2017.



4. BUSINESS COMBINATIONS



Property acquisition:



Germany



In February of 2014, Vermilion acquired,
through a wholly-owned subsidiary, GDF's 25% interest in four producing natural gas fields and a surrounding exploration license
located in northwest Germany. GDF is an affiliate of GDF Suez S.A., a publicly traded, French multinational utility. The acquisition
represents Vermilion's entry into the German E&P business, a producing region with a long history of oil and gas development
activity, low political risk and strong marketing fundamentals. The acquisition is well aligned with Vermilion's European focus,
and will increase its exposure to the strong fundamentals and pricing of the European natural gas markets. The acquisition closed
in February of 2014 for cash proceeds of $172.9 million. Vermilion funded this acquisition with existing credit facilities.



The acquired assets comprise of four gas
producing fields across eleven production licenses and include both exploration and production licenses that comprise a total of
207,000 gross acres, of which 85% is in the exploration license.



14


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






4. BUSINESS COMBINATIONS (Continued)



The acquisition has been accounted for as
a business combination with the fair value of the assets acquired and liabilities assumed at the date of acquisition summarized
as follows:



|($M)                                 | Consideration              
|------------------------------------ | ---------------------------
|Cash paid to vendor                  |                            
|Total consideration                  |                            
|                                     |                            
|($M)                                 | Allocation of Consideration
|Petroleum and natural gas assets     |                            
|Exploration and evaluation           |                            
|Asset retirement obligations assumed |                            
|Deferred tax liabilities             |                            
|Net assets acquired                  |                            



The results of operations from the assets
acquired have been included in Vermilion's consolidated financial statements beginning February of 2014 and have contributed net
revenues of $33.3 million and a net loss of $0.3 million for the year ended December 31, 2014.



Had the acquisition occurred on January 1, 2014, management estimates
that consolidated revenues would have increased by an additional $4.6 million and consolidated net earnings would have increased
by $0.9 million for the year ended December 31, 2014.



Corporate acquisitions:



a) 	Elkhorn Resources Inc.



On April 29, 2014, Vermilion acquired Elkhorn
Resources Inc., a private southeast Saskatchewan producer. The acquisition created a new core area for Vermilion in the Williston
Basin.



The acquired assets include approximately
57,000 net acres of land (approximately 80% undeveloped), seven oil batteries, and preferential access to a minimum of 50% of capacity
at a solution gas facility.



Total consideration was comprised of $180.4
million of cash, which was funded with existing credit facilities, and the issuance of 2.8 million Vermilion common shares valued
at approximately $205.0 million (based on the closing price per Vermilion common share of $72.50 on the Toronto Stock Exchange
on April 29, 2014).



The acquisition has been accounted for as
a business combination with the fair value of the assets acquired and liabilities assumed at the date of acquisition summarized
as follows:



|($M)                                                | Consideration              
|--------------------------------------------------- | ---------------------------
|Cash paid to shareholders of Elkhorn Resources Inc. |                            
|Shares issued pursuant to corporate acquisition     |                            
|Total consideration                                 |                            
|                                                    |                            
|($M)                                                | Allocation of Consideration
|Petroleum and natural gas assets                    |                            
|Exploration and evaluation                          |                            
|Asset retirement obligations assumed                |                            
|Deferred tax liabilities                            |                            
|Long-term debt assumed                              |                            
|Cash acquired                                       |                            
|Acquired non-cash working capital deficiency        |                            
|Net assets acquired                                 |                            



The results of operations from the assets
acquired have been included in Vermilion's consolidated financial statements beginning April 29, 2014 and have contributed revenues
of $50.6 million and operating income of $39.8 million for the year ended December 31, 2014.



15


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






4. BUSINESS COMBINATIONS (Continued)



Had the acquisition occurred on January
1, 2014, management estimates that consolidated revenues would have increased by an additional $8.8 million and consolidated operating
income would have increased by $7.0 million for the year ended December 31, 2014. In determining the pro-forma amounts, management
has assumed that the fair value adjustments, determined provisionally, that arose at the date of acquisition would have been the
same if the acquisition had occurred on January 1, 2014. It is impracticable to derive all amounts necessary to determine the impact
on net earnings from the acquisition as the acquired company was immediately merged with Vermilion’s operations.



| | b) | Netherlands
| | -- | -----------



On October 10, 2013, Vermilion acquired,
through its wholly-owned subsidiary, 100% of the shares of Northern Petroleum Nederland B.V., a subsidiary of UK-based Northern
Petroleum Plc. (“Northern”) for total consideration of $27.5 million. The acquisition represented a complementary addition
to the existing Netherlands asset base, including interests in six onshore licences in production or development, three onshore
exploration licenses, and one offshore production license in the Netherlands. Vermilion funded this acquisition from cash on hand.



The acquisition has been accounted for as
a business combination with the fair value of the assets acquired and liabilities assumed at the date of acquisition summarized
as follows:



|($M)                                 | Consideration              
|------------------------------------ | ---------------------------
|Cash paid to vendor                  |                            
|Total consideration                  |                            
|                                     |                            
|($M)                                 | Allocation of Consideration
|Petroleum and natural gas assets     |                            
|Asset retirement obligations assumed |                            
|Deferred tax liabilities             |                            
|Cash acquired                        |                            
|Acquired non-cash working capital    |                            
|Net assets acquired                  |                            



The results of operations from the assets
acquired have been included in Vermilion's consolidated financial statements beginning October 10, 2013 and have contributed revenues
of $2.7 million and operating income of $1.0 million for the year ended December 31, 2013.



Had the acquisition occurred on January
1, 2013, management estimates that consolidated revenues would have increased by an additional $13.5 million and consolidated operating
income would have increased by $6.3 million for the year ended December 31, 2013. In determining the pro-forma amounts, management
has assumed that the fair value adjustments, determined provisionally, that arose at the date of acquisition would have been the
same if the acquisition had occurred on January 1, 2013. It is impracticable to derive all amounts necessary to determine the impact
on net earnings from the acquired working interests as operations were immediately merged with Vermilion’s operations.



16


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




5. CAPITAL ASSETS



The following table reconciles the change in Vermilion's capital
assets:



|                                                     | Petroleum and      | Furniture and    |  | Total         
|---------------------------------------------------- | ------------------ | ---------------- |  | --------------
|($M)                                                 | Natural Gas Assets | Office Equipment |  | Capital Assets
|Balance at January 1, 2013                           |                    | 2,430,121        |  | 15,119        
|Additions                                            |                    | 531,760          |  | 5,804         
|Transfers from exploration and evaluation assets     |                    | 1,508            |  | -             
|Corporate acquisitions                               |                    | 47,743           |  | -             
|Dispositions                                         |                    | (8,627)          |  | -             
|Changes in estimate for asset retirement obligations |                    | (91,527)         |  | -             
|Depletion and depreciation                           |                    | (310,370)        |  | (6,138)       
|Impairment recovery                                  |                    | 47,400           |  | -             
|Effect of movements in foreign exchange rates        |                    | 136,626          |  | 426           
|Balance at December 31, 2013                         |                    | 2,784,634        |  | 15,211        
|Additions                                            |                    | 608,709          |  | 9,980         
|Property acquisitions                                |                    | 176,625          |  | -             
|Corporate acquisitions                               |                    | 390,523          |  | -             
|Changes in estimate for asset retirement obligations |                    | 19,107           |  | -             
|Depletion and depreciation                           |                    | (412,768)        |  | (5,072)       
|Effect of movements in foreign exchange rates        |                    | (75,635)         |  | (222)         
|Balance at December 31, 2014                         |                    | 3,491,195        |  | 19,897        
|                                                     |                    |                  |  |               
|Cost                                                 |                    | 3,938,986        |  | 43,932        
|Accumulated depletion and depreciation               |                    | (1,154,352)      |  | (28,721)      
|Carrying amount at December 31, 2013                 |                    | 2,784,634        |  | 15,211        
|                                                     |                    |                  |  |               
|Cost                                                 |                    | 5,114,188        |  | 54,723        
|Accumulated depletion and depreciation               |                    | (1,622,993)      |  | (34,826)      
|Carrying amount at December 31, 2014                 |                    | 3,491,195        |  | 19,897        



Depletion and depreciation rates

PNG assets (unit of production method)

Furniture and office equipment (declining
balance at rates of 5% to 25%)



Capitalized overhead

During the year ended December 31, 2014,
Vermilion capitalized $7.7 million (2013 - $8.5 million) of overhead costs directly attributable to PNG activities.



Impairments and recovery of previous
impairments

On a quarterly basis, Vermilion performs
an assessment as to whether any CGUs have indicators of impairment or recovery of previous impairments. When indicators of impairment
or recovery of previous impairments are identified, Vermilion assesses the recoverable amount of the applicable CGU based on the
estimated fair value less costs to sell as at the reporting date. The estimated fair value takes into account the most recent commodity
price forecasts, expected production and estimated costs of development.



In the fourth quarter of 2013, Vermilion
identified indicators of impairment recovery for a Canadian CGU where impairment charges were previously recorded for the three
months ended December 31, 2011 and March 31, 2012.  The impairment recovery resulted from increased proved and probable reserves
of natural gas and NGLs, due primarily to the successful application of horizontal drilling and multi-stage fracturing technology
to the previously impaired cash generating unit.



17


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






5. CAPITAL ASSETS (Continued)



Benchmark prices used in the calculations
of recoverable amounts were determined by multiplying the mix of oil, natural gas and NGLs inherent in the reserves of the conventional
deep natural gas and shallow coal bed methane CGUs by the price forecasts for each year. The blended price per barrel of oil equivalent
(BOE) forecasts were:



|$/BOE                       | December 31, 2013
|--------------------------- | -----------------
|2014                        | 42.09            
|2015                        | 44.18            
|2016                        | 45.39            
|2017                        | 45.41            
|2018                        | 45.43            
|2019                        | 45.50            
|2020                        | 45.86            
|2021                        | 46.78            
|Average increase thereafter | 2.0%             



6. EXPLORATION AND EVALUATION ASSETS



The following table reconciles the change in Vermilion's exploration
and evaluation assets:



|($M)                                                 | Exploration and Evaluation Assets
|---------------------------------------------------- | ---------------------------------
|Balance at January 1, 2013                           |                                  
|Additions                                            |                                  
|Property acquisitions                                |                                  
|Transfers to petroleum and natural gas assets        |                                  
|Depreciation                                         |                                  
|Effect of movements in foreign exchange rates        |                                  
|Balance at December 31, 2013                         |                                  
|Additions                                            |                                  
|Changes in estimate for asset retirement obligations |                                  
|Property acquisitions                                |                                  
|Corporate acquisitions                               |                                  
|Depreciation                                         |                                  
|Effect of movements in foreign exchange rates        |                                  
|Balance at December 31, 2014                         |                                  
|                                                     |                                  
|Cost                                                 |                                  
|Accumulated depreciation                             |                                  
|Carrying amount at December 31, 2013                 |                                  
|                                                     |                                  
|Cost                                                 |                                  
|Accumulated depreciation                             |                                  
|Carrying amount at December 31, 2014                 |                                  



18


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






7. ASSET RETIREMENT OBLIGATIONS



The following table reconciles the change
in Vermilion’s asset retirement obligations:



|($M)                                                  | Asset Retirement Obligations
|----------------------------------------------------- | ----------------------------
|Balance at January 1, 2013                            |                             
|Additional obligations recognized                     |                             
|Changes in estimates for asset retirement obligations |                             
|Obligations settled                                   |                             
|Accretion                                             |                             
|Changes in discount rates                             |                             
|Effect of movements in foreign exchange rates         |                             
|Balance at December 31, 2013                          |                             
|Additional obligations recognized                     |                             
|Changes in estimates for asset retirement obligations |                             
|Obligations settled                                   |                             
|Accretion                                             |                             
|Changes in discount rates                             |                             
|Effect of movements in foreign exchange rates         |                             
|Balance at December 31, 2014                          |                             



Vermilion has estimated the net present
value of its asset retirement obligations to be $350.8 million as at December 31, 2014 (2013 - $326.2 million) based on a total
undiscounted future liability, after inflation adjustment, of $1.3 billion (2013 - $1.3 billion). These payments are expected to
be made between 2014 and 2064. Vermilion calculated the present value of the obligations using discount rates between 5.7% and
7.9% (2013 - between 6.4% and 8.3%) to reflect the market assessment of the time value of money as well as risks specific to the
liabilities that have not been included in the cash flow estimates. Inflation rates used in determining the cash flow estimates
were between 0.8% and 2.4% (2013 - between 1.1% and 2.5%).



Vermilion reviews annually its estimates
of the expected costs to reclaim the net interest in its wells and facilities. The resulting changes are categorized as changes
in estimates for existing obligations in the preceding table. The increase in the liability for the year ended December 31, 2014
primarily resulted from an overall decrease in the discount rates applied to the abandonment obligations, accretion, and additions
from new wells drilled during the year and abandonment obligations associated with the assets acquired in Germany and Canada.



8. LONG-TERM
DEBT



The following
table summarizes Vermilion’s outstanding long-term debt:



|                          | As At       
|------------------------- | ------------
|($M)                      | Dec 31, 2014
|Revolving credit facility |             
|Senior unsecured notes    |             
|Long-term debt            |             



Revolving Credit Facility



At December 31, 2014, Vermilion had in place
a bank revolving credit facility totalling $1.5 billion, of which approximately $1.01 billion was drawn. In addition, Vermilion
may, by adding lenders or seeking an increase to an existing lender’s commitment, increase the total committed facility amount
to no more than $1.75 billion. The facility, which matures on May 31, 2017, is fully revolving up to the date of maturity.



The facility is extendable from time to
time, but not more than once per year, for a period not longer than three years, at the option of the lenders and upon notice from
Vermilion. If no extension is granted by the lenders, the amounts owing pursuant to the facility are due at the maturity date.
This facility bears interest at a rate applicable to demand loans plus applicable margins. For the year ended December 31, 2014,
the interest rate on the revolving credit facility was approximately 3.1% (2013 – 3.3%).



The amount available to Vermilion under
this facility is reduced by certain outstanding letters of credit associated with Vermilion’s operations totalling $8.6 million
as at December 31, 2014 (December 31, 2013 - $8.1 million).



19


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






8. LONG-TERM
DEBT (Continued)



The facility is secured by various fixed
and floating charges against the subsidiaries of Vermilion. Under the terms of the facility, Vermilion must maintain:



| | - | A ratio of total bank borrowings (defined as consolidated total debt), to consolidated net earnings
before interest, income taxes, depreciation, accretion and other certain non-cash items (defined as consolidated EBITDA) of not
greater than 4.0.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | A ratio of consolidated total senior debt (defined as consolidated total debt excluding unsecured
and subordinated debt) to consolidated EBITDA of not greater than 3.0.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | A ratio of consolidated total senior debt to total capitalization (defined as amounts classified
as “Long-term debt” and “Shareholders’ Equity” on the balance sheet) of less than 50%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As at December 31, 2014, Vermilion was in
compliance with all financial covenants.



On January 30, 2015, Vermilion exercised
its option to increase its credit facility to $1.75 billion.



Senior Unsecured Notes



On February 10, 2011, Vermilion issued $225.0
million of senior unsecured notes at par. The notes bear interest at a rate of 6.5% per annum and will mature on February 10, 2016.
As direct senior unsecured obligations of Vermilion, the notes rank pari passu with all other present and future unsecured and
unsubordinated indebtedness of the Company.



Subsequent to February 10, 2015, Vermilion
may redeem all or part of the senior unsecured notes at 100% of their principal amount plus any accrued and unpaid interest. The
notes were initially recognized at fair value net of transaction costs and are subsequently measured at amortized cost using an
effective interest rate of 7.1%.



9. INCOME TAXES



Deferred taxes



The net deferred income tax liability at December 31, 2014 and
2013 is comprised of the following:



|                                  |                                 | Year Ended  
|--------------------------------- | ------------------------------- | ------------
|($M)                              | Dec 31, 2014                    | Dec 31, 2013
|Deferred income tax liabilities:  |                                 |             
|                                  | Derivative contracts            |             
|                                  | Capital assets                  |             
|                                  | Asset retirement obligations    |             
|                                  | Basis difference of investments |             
|                                  | Unrealized foreign exchange     |             
|                                  | Other                           |             
|Deferred income tax assets:       |                                 |             
|                                  | Derivative contracts            |             
|                                  | Capital assets                  |             
|                                  | Non-capital losses              |             
|                                  | Asset retirement obligations    |             
|                                  | Unrealized foreign exchange     |             
|                                  | Other                           |             
|Net deferred income tax liability |                                 | (255,367)   
|Comprised of:                     |                                 |             
|                                  | Deferred income tax assets      |             
|                                  | Deferred income tax liability   |             
|Net deferred income tax liability |                                 | (255,367)   



20


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






9. INCOME TAXES (Continued)



Income tax expense differs from the amount that would have been
expected if the reported earnings had been subject only to the statutory Canadian income tax rate of 25.5% (2013 - 25.0%), as follows:



|                                             |                                                                                                       | Year Ended  
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------
|($M)                                         | Dec 31, 2014                                                                                          | Dec 31, 2013
|Earnings before income taxes                 |                                                                                                       | 453,072     
|Canadian corporate tax rate                  |                                                                                                       | 25.5%       
|Expected tax expense                         |                                                                                                       | 115,533     
|Increase (decrease) in taxes resulting from: |                                                                                                       |             
|                                             | Petroleum resource rent tax rate (PRRT) differential(1)                                               |             
|                                             | Foreign tax rate differentials(1), (2)                                                                |             
|                                             | Equity based compensation expense                                                                     |             
|                                             | Amended returns and changes to estimated tax pools and tax positions                                  |             
|                                             | Changes in statutory tax rates and the estimated reversal rates associated with temporary differences |             
|                                             | Other non-deductible items                                                                            |             
|Provision for income taxes                   |                                                                                                       | 183,746     



| | (1) | In Australia, current taxes included both corporate income tax rates and PRRT. Corporate income
tax rates were applied at a rate of 30% and PRRT was applied at a rate of 40%.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(2)The
combined tax rate was 34.4% in France, 46.0% in the Netherlands, 22.8% in Germany and 25% in Ireland.



10. SHAREHOLDERS’ CAPITAL



The following table reconciles the change
in Vermilion’s shareholders’ capital:



|Shareholders’ Capital                                    | Number of Shares ('000s) |         | Amount ($M)
|-------------------------------------------------------- | ------------------------ | ------- | -----------
|Balance as at January 1, 2013                            |                          | 99,135  |            
|Shares issued pursuant to the dividend reinvestment plan |                          | 1,402   |            
|Vesting of equity based awards                           |                          | 1,372   |            
|Share-settled dividends on vested equity based awards    |                          | 202     |            
|Shares issued pursuant to the bonus plan                 |                          | 12      |            
|Balance as at December 31, 2013                          |                          | 102,123 |            
|Shares issued pursuant to corporate acquisition          |                          | 2,827   |            
|Shares issued pursuant to the dividend reinvestment plan |                          | 1,279   |            
|Vesting of equity based awards                           |                          | 955     |            
|Share-settled dividends on vested equity based awards    |                          | 108     |            
|Shares issued pursuant to the bonus plan                 |                          | 11      |            
|Balance as at December 31, 2014                          |                          | 107,303 |            



Vermilion is authorized to issue an unlimited
number of common shares with no par value.



Dividends



Dividends declared to shareholders for the
year ended December 31, 2014 were $272.7 million (2013 - $242.6 million). Dividends are approved by the Board of Directors and
are paid monthly. Vermilion has a dividend reinvestment plan which allows eligible holders of common shares to purchase additional
common shares at a 3% discount to market by reinvesting their cash dividends. Subsequent to the end of the period and prior to
the consolidated financial statements being authorized for issue on February 27, 2015, Vermilion declared dividends totalling $46.2
million or $0.215 per share for each of January and February of 2015.



21


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






11. EQUITY BASED COMPENSATION



The following table summarizes the number
of awards outstanding under the Vermilion Incentive Plan (“VIP”):



|Number of Awards ('000s) | 2014  |  | 2013 
|------------------------ | ----- |  | -----
|Opening balance          | 1,665 |  | 1,690
|Granted                  | 707   |  | 832  
|Vested                   | (515) |  | (749)
|Modified                 | (21)  |  | -    
|Forfeited                | (61)  |  | (108)
|Closing balance          | 1,775 |  | 1,665



The fair value of a VIP award is determined
on the grant date at the closing price of Vermilion’s common shares on the Toronto Stock Exchange, adjusted by the estimated
performance factor that will ultimately be achieved. Dividends, which notionally accrue to the awards during the vesting period,
are not included in the determination of grant date fair values. For the year ended December 31, 2014, the awards granted had a
weighted average fair value of $101.63 (2013 - $80.79).



The performance factor is determined by
the Board of Directors after consideration of a number of key corporate performance measures including, but not limited to, shareholder
return, capital efficiency metrics, production and reserves growth and health, safety and environment performance.



The expense recognized is based on the grant
date fair value of the awards and incorporates an estimate of forfeiture rate based on historical vesting data. For the year ended
December 31, 2014, Vermilion incorporated an estimated forfeiture rate of 5.8% (2013 - 6.6%). Equity based compensation expense
of $67.1 million was recorded during the year ended December 31, 2014 (2013 - $60.2 million) related to the VIP.



12. PER SHARE AMOUNTS



Basic and diluted net earnings per share have been determined
based on the following:



|                                                |              | Year Ended  
|----------------------------------------------- | ------------ | ------------
|($M except per share amounts)                   | Dec 31, 2014 | Dec 31, 2013
|Net earnings [1]                                | 269,326      |             
|Basic weighted average shares outstanding [2]   | 105,448      |             
|Dilutive impact of equity based awards          | 1,739        |             
|Diluted weighted average shares outstanding [3] | 107,187      |             
|Basic earnings per share ([1] ÷ [2])            | 2.55         |             
|Diluted earnings per share ([1] ÷ [3])          | 2.51         |             



13. DERIVATIVE INSTRUMENTS



The nature of Vermilion’s operations
results in exposure to fluctuations in commodity prices, interest rates and foreign currency exchange rates. Vermilion monitors
and, when appropriate, uses derivative financial instruments to manage its exposure to these fluctuations. All transactions of
this nature entered into by Vermilion are related to an underlying financial position or to future crude oil and natural gas production.
Vermilion does not use derivative financial instruments for speculative purposes. Vermilion has elected not to designate any of
its derivative financial instruments as accounting hedges and thus accounts for changes in fair value in net earnings at each reporting
period. Vermilion has not obtained collateral or other security to support its financial derivatives as management reviews the
creditworthiness of its counterparties prior to entering into derivative contracts.



During the normal course of business, Vermilion
may enter into fixed price arrangements to sell a portion of its production or purchase commodities for operational use. Vermilion
does not apply fair value accounting on these contracts as they were entered into and continue to be held for the sale of production
or operational use in accordance with the Company’s expected requirements.



22


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






13. DERIVATIVE INSTRUMENTS (Continued)



The following tables summarize Vermilion’s
outstanding risk management positions as at December 31, 2014:



|                                          | Note | Volume      | Strike Price(s)    
|----------------------------------------- | ---- | ----------- | -------------------
|Crude Oil                                 |      |             |                    
|WTI - Collar                              |      |             |                    
|January 2015 - March 2015                 |      | 500 bbl/d   | 76.25 - 92.15 US $ 
|January 2015 - June 2015                  | 1    | 250 bbl/d   | 75.00 - 82.75 US $ 
|Dated Brent - Collar                      |      |             |                    
|January 2015 - March 2015                 |      | 500 bbl/d   | 78.75 - 89.63 US $ 
|Dated Brent - Swap                        |      |             |                    
|January 2015                              | 2    | 500 bbl/d   | 101.55 US $        
|January 2015 - March 2015                 | 3    | 250 bbl/d   | 91.95 US $         
|February 2015                             | 4    | 500 bbl/d   | 103.80 US $        
|March 2015                                | 5    | 250 bbl/d   | 110.40 US $        
|MSW - Fixed Price Differential (Physical) |      |             |                    
|November 2014 - March 2015                |      | 1,042 bbl/d | WTI less 6.85 US $ 
|January 2015 - March 2015                 |      | 2,098 bbl/d | WTI less 7.39 US $ 
|LSB - Fixed Price Differential (Physical) |      |             |                    
|October 2014 - March 2015                 |      | 830 bbl/d   | WTI less 10.00 US $
|January 2015 - March 2015                 |      | 524 bbl/d   | WTI less 8.60 US $ 



| | (1) | The contracted volumes increase to 750 boe/d for any monthly settlement periods above the contracted
ceiling price.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (2) | On March 31, 2015, the counterparty has the option to extend the swap for the period of April to
June 2015 for 1,000 boe/d at the contracted price.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On March 31, 2015, the counterparty has the option to extend the swap for the period of April to
June 2015 for 500 boe/d at the contracted price.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | On June 30, 2015, the counterparty has the option to extend the swap for the period of July to
September 2015 for 1,000 boe/d at the contracted price.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | On September 30, 2015, the counterparty has the option to extend the swap for the period of October
to December 2015 for 500 boe/d at the contracted price.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|North American Natural Gas            |  |                |  |                        
|------------------------------------- |  | -------------- |  | -----------------------
|AECO - Collar                         |  |                |  |                        
|April 2014 - March 2015               |  | 2,500 GJ/d     |  | 3.60 - 4.08 CAD $      
|November 2014 - March 2015            |  | 2,500 GJ/d     |  | 3.60 - 4.27 CAD $      
|April 2015 - October 2015             |  | 2,500 GJ/d     |  | 2.75 - 3.52 CAD $      
|April 2015 - December 2015            |  | 2,500 GJ/d     |  | 2.75 - 3.52 CAD $      
|AECO Basis - Fixed Price Differential |  |                |  |                        
|January 2015 - December 2015          |  | 5,000 mmbtu/d  |  | Nymex HH less 0.68 US $
|Nymex HH - Collar                     |  |                |  |                        
|November 2014 - March 2015            |  | 10,000 mmbtu/d |  | 3.50 - 5.00 US $       
|January 2015 - March 2015             |  | 10,000 mmbtu/d |  | 3.70 - 5.10 US $       
|April 2015 - October 2015             |  | 10,000 mmbtu/d |  | 3.36 - 4.01 US $       
|April 2015 - December 2015            |  | 2,500 mmbtu/d  |  | 3.50 - 4.11 US $       
|Nymex HH - Swap                       |  |                |  |                        
|January 2015                          |  | 2,500 mmbtu/d  |  | 4.53 US $              
|January 2015 - March 2015             |  | 5,000 mmbtu/d  |  | 4.38 US $              
|                                      |  |                |  |                        
|European Natural Gas                  |  |                |  |                        
|TTF - Collar                          |  |                |  |                        
|January 2015 - December 2015          |  | 2,592 GJ/d     |  | 6.11 - 6.83 EUR €      
|TTF - Swap                            |  |                |  |                        
|January 2015 - March 2015             |  | 4,392 GJ/d     |  | 6.47 EUR €             
|January 2015 - December 2015          |  | 11,664 GJ/d    |  | 6.45 EUR €             
|January 2015 - March 2016             |  | 5,184 GJ/d     |  | 6.40 EUR €             
|January 2015 - June 2016              |  | 2,592 GJ/d     |  | 6.07 EUR €             
|February 2015                         |  | 2,592 GJ/d     |  | 6.46 EUR €             
|February 2015 - March 2016            |  | 5,184 GJ/d     |  | 6.24 EUR €             
|April 2015 - December 2015            |  | 2,592 GJ/d     |  | 6.30 EUR €             
|April 2015 - March 2016               |  | 5,832 GJ/d     |  | 6.18 EUR €             



23


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






13. DERIVATIVE INSTRUMENTS (Continued)



|                             | Note | Volume                | Strike Price(s)    
|---------------------------- | ---- | --------------------- | -------------------
|Electricity                  |      |                       |                    
|AESO - Swap (Physical)       |      |                       |                    
|January 2013 - December 2015 |      | 72.0 MWh/d            | 53.17 CAD $        
|                             |      |                       |                    
|US Dollar                    |      |                       |                    
|USD - Collar                 |      |                       |                    
|January 2015 - March 2015    |      | 7,000,000 US $/month  | 1.140 - 1.184 CAD $
|January 2015 - March 2015    | 1    | 15,500,000 US $/month | 1.140 - 1.157 CAD $



(1)	Vermilion
has upside participation on this hedge up to the limit price of 1.222 CAD; above which, settlement will occur at the conditional
call level of 1.157 CAD.



The following table reconciles the change in the fair value of
Vermilion’s derivative instruments:





|                                                                                       | Year ended   |             
|-------------------------------------------------------------------------------------- | ------------ | ------------
|($M)                                                                                   | Dec 31, 2014 | Dec 31, 2013
|Fair value of contracts, beginning of year                                             | (1,287)      |             
|Reversal of opening contracts settled during the year                                  | 1,287        |             
|Acquired Derivative Contracts                                                          | (1,290)      |             
|Realized gain (loss) on contracts settled during the year                              | 36,712       |             
|Unrealized gain (loss) during the year on contracts outstanding at the end of the year | 26,084       |             
|Net payment to counterparties on contract settlements during the year                  | (36,712)     |             
|Fair value of contracts, end of year                                                   | 24,794       |             
|Comprised of:                                                                          |              |             
|Current derivative asset                                                               | 23,391       |             
|Current derivative liability                                                           | -            |             
|Non-current derivative asset                                                           | 1,403        |             
|Fair value of contracts, end of year                                                   | 24,794       |             



The (gain) loss on derivative instruments for 2014
and 2013 are comprised of the following:



|                                                                                       | Year Ended  
|-------------------------------------------------------------------------------------- | ------------
|($M)                                                                                   | Dec 31, 2014
|Realized (gain) loss on contracts settled during the year                              | (36,712)    
|Reversal of opening contracts settled during the year                                  | (1,287)     
|Unrealized (gain) loss during the year on contracts outstanding at the end of the year | (26,084)    
|(Gain) loss on derivative instruments                                                  | (64,083)    



14. SUPPLEMENTAL CASH FLOW INFORMATION



Changes in non-cash working capital is comprised of the following:



|                                                                  | Year Ended  
|----------------------------------------------------------------- | ------------
|($M)                                                              | Dec 31, 2014
|Changes in:                                                       |             
|Accounts receivable                                               | (4,202)     
|Crude oil inventory                                               | 7,633       
|Prepaid expenses                                                  | 1,400       
|Accounts payable and accrued liabilities and income taxes payable | 19,212      
|Movements in foreign exchange rates                               | (8,601)     
|Changes in non-cash working capital                               | 15,442      
|Changes in non-cash operating working capital                     | 3,077       
|Changes in non-cash investing working capital                     | 12,365      
|Changes in non-cash working capital                               | 15,442      



24


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3




15. SEGMENTED INFORMATION



Vermilion has operations in three core areas
North America, Europe, and Australia. Vermilion’s operating activities in each country relate solely to the exploration,
development and production of petroleum and natural gas. Vermilion has a Corporate head office located in Calgary, Alberta. Costs
incurred in the Corporate segment relate to Vermilion’s global hedging program and expenses incurred in financing and managing
our operating business units.



Vermilion’s chief operating decision
maker reviews the financial performance of the Company by assessing the fund flows from operations of each country individually.
Fund flows from operations provides a measure of each business unit’s ability to generate cash (that is not subject to short-term
movements in non-cash operating working capital) necessary to pay dividends, fund asset retirement obligations, and make capital
investments.





|                                            | Year
    Ended December 31, 2014
|------------------------------------------- | --------------------------------
|($M)                                        | Canada                          
|Total
    assets                            | 1,865,942                       
|Drilling
    and development                | 291,046                         
|Exploration
    and evaluation              | 43,696                          
|Oil and gas sales
    to external customers | 537,788                         
|Royalties                                   | (65,563)                        
|Revenue from external
    customers         | 472,225                         
|Transportation expense                      | (14,625)                        
|Operating expense                           | (76,178)                        
|General and administration                  | (16,791)                        
|PRRT                                        | -                               
|Corporate income
    taxes                  | -                               
|Interest expense                            | -                               
|Realized gain on
    derivative instruments | -                               
|Realized foreign
    exchange loss          | -                               
|Realized
    other income                   | -                               
|Fund
    flows from operations              | 364,631                         





|                                            | Year
    Ended December 31, 2013
|------------------------------------------- | --------------------------------
|($M)                                        | Canada                          
|Total
    assets                            | 1,212,056                       
|Drilling
    and development                | 232,858                         
|Exploration
    and evaluation              | 8,339                           
|Oil and gas sales
    to external customers | 382,005                         
|Royalties                                   | (40,891)                        
|Revenue from external
    customers         | 341,114                         
|Transportation expense                      | (12,254)                        
|Operating expense                           | (55,804)                        
|General and administration                  | (12,979)                        
|PRRT                                        | -                               
|Corporate income
    taxes                  | -                               
|Interest expense                            | -                               
|Realized loss on
    derivative instruments | -                               
|Realized foreign
    exchange loss          | -                               
|Realized
    other income                   | -                               
|Fund
    flows from operations              | 260,077                         



25


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






15. SEGMENTED INFORMATION (Continued)



Reconciliation of fund flows from operations to net earnings



|                                          | Year Ended
|----------------------------------------- | ----------
|                                          | Dec 31,   
|($M)                                      | 2014      
|Fund flows from operations                | 804,865   
|Equity based compensation                 | (67,802)  
|Unrealized gain on derivative instruments | 27,371    
|Unrealized foreign exchange (loss) gain   | (17,599)  
|Unrealized other expense                  | (1,492)   
|Accretion                                 | (23,913)  
|Depletion and depreciation                | (425,694) 
|Deferred taxes                            | (26,410)  
|Impairment (recovery)                     | -         
|Net earnings                              | 269,326   



Vermilion has two major customers with revenues
in excess of 10% within the France and Netherlands segments. All sales in the France and Netherlands segments for the years ended
December 31, 2014 and 2013 were to one customer in each respective segment.



16. COMMITMENTS



Vermilion had the following future commitments associated with
its operating leases as at December 31, 2014:



|($M)               | Less than 1 year | 1 - 3 years | 4 - 5 years | After 5 years | Total  
|------------------ | ---------------- | ----------- | ----------- | ------------- | -------
|Payments by period | 21,589           | 28,158      | 23,789      | 58,701        | 132,237



In addition, Vermilion has various other
commitments associated with its business operations; none of which, in management’s view, are significant in relation to
Vermilion’s financial position.



17. CASH AND CASH EQUIVALENTS



Cash and cash equivalents was comprised of the following:



|($M)                                         | Dec 31, 2014 | Dec 31, 2013
|-------------------------------------------- | ------------ | ------------
|Money on deposit with financial institutions |              | 116,643     
|Short-term investments                       |              | 3,762       
|Cash and cash equivalents                    |              | 120,405     



26


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






18. CAPITAL DISCLOSURES



Vermilion defines capital as net debt (a
non-standardized measure, which is defined by management as long-term debt as shown on the consolidated balance sheets plus net
working capital) and shareholders’ capital.



In managing capital, Vermilion reviews whether
fund flows from operations (a non-standardized measure, defined by management as cash flows from operating activities before changes
in non-cash operating working capital and asset retirement obligations settled), is sufficient to pay for all capital expenditures,
dividends and abandonment and reclamation expenditures. To the extent that the forecasted fund flows from operations is not expected
to be sufficient in relation to these expenditures, Vermilion will evaluate its ability to finance any excess with debt, an issuance
of equity or by reducing some or all categories of expenditures to ensure that total expenditures do not exceed available funds.



Additionally, Vermilion monitors the ratio
of net debt to fund flows from operations. Vermilion typically strives to maintain an internally targeted ratio of net debt to
fund flows from operations of 1.0 to 1.3 in a normalized commodity price environment. Where prices trend higher, Vermilion may
target a lower ratio and conversely, in a lower commodity price environment, the acceptable ratio may be higher. At times, Vermilion
will use its balance sheet to finance acquisitions and, in these situations, Vermilion is prepared to accept a higher ratio in
the short term but will implement a plan to reduce the ratio to acceptable levels within a reasonable period of time, usually considered
to be no more than 12 to 18 months. This plan could potentially include an increase in hedging activities, a reduction in capital
expenditures, an issuance of equity or the utilization of excess fund flows from operations to reduce outstanding indebtedness.



The following table calculates Vermilion’s
ratio of net debt to fund flows from operations:



|                                                            | Year Ended       
|----------------------------------------------------------- | -----------------
|($M except as indicated)                                    | December 31, 2014
|Long-term debt                                              | 1,238,080        
|Current liabilities                                         | 365,729          
|Current assets                                              | (338,159)        
|Net debt [1]                                                | 1,265,650        
|Cash flows from operating activities                        | 791,986          
|Changes in non-cash operating working capital               | (3,077)          
|Asset retirement obligations settled                        | 15,956           
|Fund flows from operations [2]                              | 804,865          
|Ratio of net debt to fund flows from operations ([1] ÷ [2]) | 1.6              



Long-term debt as at December 31, 2014 increased
to $1.2 billion from $990.0 million as at December 31, 2013 as a result of draws on the revolving credit facility during the current
year to fund the acquisitions in Germany and Saskatchewan coupled with the assumption of $47.5 million of long-term debt pursuant
to the Elkhorn acquisition. This increase in long-term debt resulted in an increase to net debt from $749.7 million to $1.3 billion.



As year-to-date fund flows does not include
a full year of fund flows from the acquisitions in Germany and Saskatchewan, the ratio of net debt to fund flows increased to 1.6.



27


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






19. FINANCIAL INSTRUMENTS



Classification of Financial Instruments



The following table summarizes information relating to Vermilion’s
financial instruments as at December 31, 2014 and December 31, 2013:





|                                   |                                          |                             |                                                                                                                                                                |  |  | As
    at Dec 31, 2014 |                    |             | As
    at Dec 31, 2013 |                    |           |                   
|---------------------------------- | ---------------------------------------- | --------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------------------- | ------------------ | ----------- | ---------------------- | ------------------ | --------- | ------------------
|Class
    of financial
 instrument | Consolidated
    balance 
sheet caption  | Accounting

    designation | Related
caption on Statement of Net 
Earnings                                                                                                                  |  |  | Carryingvalue ($M)     | Fair
    value($M) |             |                        | Carryingvalue ($M) |           | Fair
    value($M)
|Cash                               | Cash
    and cash equivalents            | HFT                         | Gains
    and losses on foreign exchange are included in foreign exchange loss (gain)                                                                          |  |  | 120,405                |                    | 120,405     |                        |                    | 389,559   |                   
|Receivables                        | Accounts
    receivable                  | LAR                         | Gains
    and losses on foreign exchange are included in foreign exchange loss (gain) and impairments are recognized as general and
    administration expense |  |  | 171,820                |                    | 171,820     |                        |                    | 167,618   |                   
|Derivative
    assets              | Derivative
    instruments               | HFT                         | (Gain)
    loss on derivative instruments                                                                                                                      |  |  | 24,794                 |                    | 24,794      |                        |                    | 2,285     |                   
|Derivative
    liabilities         | Derivative
    instruments               | HFT                         | (Gain)
    loss on derivative instruments                                                                                                                      |  |  | -                      |                    | -           |                        |                    | (3,572)   |                   
|Payables                           | Accounts payable and accrued liabilities | OTH                         | Gains and losses on foreign exchange
    are included in foreign exchange loss (gain)                                                                          |  |  | (321,266)              |                    | (321,266)   |                        |                    | (288,257) |                   
|                                   | Dividends
    payable                    |                             |                                                                                                                                                                |  |  |                        |                    |             |                        |                    |           |                   
|Long-term
    debt                 | Long-term
    debt                       | OTH                         | Interest
    expense                                                                                                                                           |  |  | (1,238,080)            |                    | (1,238,505) |                        |                    | (990,024) |                   



The accounting designations used in the
above table refer to the following:



HFT – Classified as “Held for
trading” in accordance with International Accounting Standard 39 “Financial Instruments: Recognition and Measurement”.
These financial assets and liabilities are carried at fair value on the consolidated balance sheets with associated gains and losses
reflected in net earnings.



LAR – “Loans and receivables”
are initially recognized at fair value and are subsequently measured at amortized cost. Impairments and foreign exchange gains
and losses are recognized in net earnings.



OTH – “Other financial liabilities”
are initially recognized at fair value net of transaction costs directly attributable to the issuance of the instrument and subsequently
are measured at amortized cost. Interest is recognized in net earnings using the effective interest method. Foreign exchange gains
and losses are recognized in net earnings.



Level 1 – Fair value measurement is
determined by reference to unadjusted quoted prices in active markets for identical assets or liabilities.



Level 2 – Fair value measurement is
determined based on inputs other than unadjusted quoted prices that are observable, either directly or indirectly.

Level 3 – Fair value measurement is
based on inputs for the asset or liability that are not based on observable market data.



Determination of Fair Values



The level in the fair value hierarchy into
which the fair value measurements are categorized is determined on the basis of the lowest level input that is significant to the
fair value measurement. Transfers between levels on the fair value hierarchy are deemed to have occurred at the end of the reporting
period.



Fair values for derivative assets and derivative
liabilities are determined using pricing models incorporating future prices that are based on assumptions which are supported by
prices from observable market transactions and are adjusted for credit risk.



The carrying value of receivables approximate
their fair value due to their short maturities.



The carrying value of long-term debt outstanding
on the revolving credit facility approximates its fair value due to the use of short-term borrowing instruments at market rates
of interest.



The fair value of the senior unsecured notes
changes in response to changes in the market rates of interest payable on similar instruments and was determined with reference
to prevailing market rates for such instruments.



28


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






19. FINANCIAL INSTRUMENTS (Continued)



Nature and Extent of Risks Arising
from Financial Instruments



Vermilion is exposed to the following types
of risks in relation to its financial instruments:



Credit risk:

Vermilion extends credit to customers and
may, from time-to-time, be due amounts from counterparties in relation to derivative instruments. Accordingly, there is a risk
of financial loss in the event that a counterparty fails to discharge its obligation. For transactions that are financially significant,
Vermilion reviews third-party credit ratings and may require additional forms of security. Cash held on behalf of the Company by
financial institutions is also subject to credit risk.



Liquidity risk:

Liquidity risk is the risk that Vermilion
will encounter difficulty in meeting obligations associated with its financial liabilities. Vermilion does not consider this to
be a significant risk as its financial position and available committed borrowing facility provide significant financial flexibility
and allow Vermilion to meet its obligations as they come due.



Currency risk:

Vermilion conducts business in foreign currencies
in addition to Canadian dollars and accordingly is subject to currency risk associated with changes in foreign exchange rates in
relation to cash and cash equivalents, receivables, payables and derivative assets and liabilities. The impact related to working
capital is somewhat mitigated as a result of the offsetting effects of foreign exchange fluctuations on assets and liabilities.
Vermilion monitors its exposure to currency risk and reviews whether the use of derivative financial instruments is appropriate
to manage potential fluctuations in foreign exchange rates. During the period covered by these consolidated financial statements,
Vermilion did not use derivative financial instruments to manage potential fluctuations in foreign exchange rates.



Commodity price risk:

Vermilion uses derivative financial instruments
as part of its risk management program to mitigate the effects of changes in commodity prices on future cash flows. Changes in
the underlying commodity prices impact the fair value and future cash flows related to these derivatives.



Interest rate risk:

Vermilion’s long-term debt is comprised
of borrowings under the revolving credit facility and the Company’s senior unsecured notes. Borrowings under the revolving
credit facility bear interest at market rates plus applicable margins and as such changes in interest rates could result in an
increase or decrease in the amount Vermilion pays to service this debt. The senior unsecured notes bear interest at a fixed 6.5%
interest rate and as such, changes in prevailing interest rates would affect the fair value of these notes. However, as Vermilion
does not intend to settle this debt prior to maturity, the notes are carried at amortized cost and changes in fair value do not
affect net earnings.



The nature of these risks and Vermilion’s
strategy for managing these risks has not changed significantly from the prior period.



Summarized Quantitative Data Associated
with the Risks Arising from Financial Instruments



Credit risk:

As at December 31, 2014, Vermilion’s
maximum exposure to receivable credit risk was $196.6 million (December 31, 2013 - $169.9 million) which is the aggregate value
of receivables and derivative assets at the balance sheet date. Vermilion’s receivables are primarily due from counterparties
that have investment grade third party credit ratings or, in the absence of the availability of such ratings, have been satisfactorily
reviewed by Vermilion for creditworthiness. Additionally, cash and cash equivalents consist of moneys on deposit and short-term
investments which may be subject to counterparty credit risk. Vermilion mitigates this risk by transacting with North American
institutions with high third party credit ratings.



29


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






19. FINANCIAL INSTRUMENTS (Continued)



As at the balance sheet date the amount
of financial assets that were past due or impaired was not material.



Liquidity risk:

Vermilion’s derivative financial instruments
settle on a monthly basis.



The following table summarizes Vermilion’s undiscounted
non-derivative financial liabilities and their contractual maturities as at December 31, 2014 and December 31, 2013:



|                  |           | Later than     | Later than       | Later than    
|----------------- | --------- | -------------- | ---------------- | --------------
|                  |           | one month and  | three months and | one year and  
|                  | Due in    | not later than | not later than   | not later than
|($M)              | one month | three months   | one year         | five years    
|December 31, 2014 | 162,127   | 138,823        | 20,314           | 1,239,067     
|December 31, 2013 | 154,176   | 118,764        | 15,317           | 991,898       



Market risk:

Vermilion’s financial instruments
are exposed to currency risk related to changes in foreign currency denominated financial instruments and commodity price risk
related to outstanding derivative positions. The following table summarizes what the impact on comprehensive income before tax
would be for the year ended December 31, 2014 given changes in the relevant risk variables that Vermilion considers were reasonably
possible at the balance sheet date. The impact on comprehensive income before tax associated with changes in these risk variables
for assets and liabilities that are not considered financial instruments are excluded from this analysis. This analysis does not
attempt to reflect any interdependencies between the relevant risk variables.



|                                     | Before
    tax effect on comprehensive                                                           
|------------------------------------ | -------------------------------------------------------------------------------------------------
|                                     | income
    - increase (decrease)                                                                 
|Risk
    ($M)                        | Description
    of change in risk variable                                                       
|Currency
    risk - Euro to Canadian | Increasein strength of the Canadian dollar against the Euro by 5% over the relevant closing rates
|                                     |                                                                                                  
|                                     | Decreasein strength of the Canadian dollar against the Euro by 5% over the relevant closing rates
|                                     |                                                                                                  
|Currency
    risk - US $ to Canadian | Increasein strength of the Canadian dollar against the US $ by 5% over the relevant closing rates
|                                     |                                                                                                  
|                                     | Decreasein strength of the Canadian dollar against the US $ by 5% over the relevant closing rates
|                                     |                                                                                                  
|Commodity price
    risk             | Increasein relevant oil reference price within option pricing models used to determine           
|                                     | the fair
    value of financial derivatives by US $5.00/bbl at the relevant valuation dates      
|                                     |                                                                                                  
|                                     | Decreasein relevant oil reference price within option pricing models used to determine           
|                                     | the fair
    value of financial derivatives by US $5.00/bbl at the relevant valuation dates      
|                                     |                                                                                                  
|                                     | Increasein relevant TTF reference price within option pricing models used to determine           
|                                     | the fair
    value of financial derivatives by € 0.5/GJ at the relevant valuation dates          
|                                     |                                                                                                  
|                                     | Decreasein relevant TTF reference price within option pricing models used to determine           
|                                     | the fair
    value of financial derivatives by € 0.5/GJ at the relevant valuation dates          
|                                     |                                                                                                  
|Interest
    rate risk               | Increasein average Canadian prime interest rate by 100 basis points during the relevant periods  
|                                     |                                                                                                  
|                                     | Decreasein average Canadian prime interest rate by 100 basis points during the relevant periods  



Reasonably
possible changes in natural gas prices would not have had a material impact on comprehensive income for the years ended December
31, 2014 and 2013.



30


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






20. RELATED PARTY DISCLOSURES



The compensation of directors and management are reviewed annually
by the independent Governance and Human Resources Committee against industry practices for oil and gas companies of similar size
and scope.



The following table summarizes the compensation of directors
and other members of key management personnel during the years ended December 31, 2014 and December 31, 2013:



|                                                    |              | Year Ended  
|--------------------------------------------------- | ------------ | ------------
|($M)                                                | Dec 31, 2014 | Dec 31, 2013
|Short-term benefits                                 |              | 5,684       
|Share-based payments                                |              | 16,414      
|                                                    |              | 22,098      
|Number of individuals included in the above amounts |              | 18          



21. WAGES AND BENEFITS



Included in operating expenses and general and administrative
expenses for the year ended December 31, 2014 were $56.2 million and $47.2 million of wages and benefits, respectively (2013 –
$53.2 million and $45.9 million, respectively).



22. SUBSEQUENT EVENTS



Subsequent to December 31, 2014, Vermilion
was awarded a recovery of costs resulting from an oil spill at the Ambès oil terminal in France that occurred in 2007. The
French court awarded Vermilion approximately €25 million (before taxes), of which 50% is due now with the remainder due upon
conclusion of the appeal process. Based on the recent court decision and the  conclusions of an expert engaged by the French
court, Vermilion’s assessment is that the decision to award Vermilion its recovery of costs incurred will be upheld.



31


Vermilion Energy Inc.2014 Audited Annual Financial Statements – Exhibit 99.3






CORPORATE INFORMATION



|DIRECTORS
        
        Larry J. Macdonald 1, 2, 3, 4, 5
        Chairman & CEO, Point Energy Ltd.
        Calgary, Alberta
        
        W. Kenneth Davidson 2, 3
        Toronto, Ontario
        
        Lorenzo Donadeo
        Calgary, Alberta
        
        Claudio A. Ghersinich 2, 5
        Executive Director, Carrera Investments Corp.
        Calgary, Alberta
        
        Joseph F. Killi 2, 3
        Chairman, Parkbridge Lifestyle Communities Inc.
        Vice Chairman, Realex Properties Corp.
        Calgary, Alberta
        Loren M. Leiker 5
        Houston, Texas
        William F. Madison 2, 4, 5
        Sugar Land, Texas
        Timothy R. Marchant 3, 4, 5
        Calgary, Alberta
        
        Sarah E. Raiss 3
        Calgary, Alberta
        
        Kevin J. Reinhart
        Calgary, Alberta
        
        Catherine L. Williams
        Calgary, Alberta
        1Chairman of the Board
        2 	Audit Committee
        3 	Governance and Human Resources
        Committee
        4 	Health, Safety and Environment
        Committee
        5 	Independent Reserves Committee
        
        ANNUAL GENERAL MEETING
        
        May 8, 2015
        10:00 AM MST
        The Ballroom
        Metropolitan Centre
        333 – 4th Avenue S.W.
        Calgary, Alberta | OFFICERS AND KEY PERSONNELCANADA
        Lorenzo Donadeo, P.Eng.
        Chief Executive Officer
        
        Anthony Marino, P.Eng.
        President & Chief Operating Officer
        John D. Donovan, FCA
        Executive Vice President Business Development
        
        Curtis W. Hicks, CA
        Executive Vice President & Chief Financial Officer
        
        Mona Jasinski, M.B.A., C.H.R.P.
        Executive Vice President, People and Culture
        Terry Hergott, CMA
        Vice President Marketing
        
        Michael Kaluza, P.Eng.
        Vice President Canada Business Unit
        
        Daniel Goulet, P.Eng.
        Director Corporate HSE
        
        Dion Hatcher, P.Eng.
        Director Alberta Foothills – Canada
        Business Unit
        
        Bryce Kremnica, P.Eng.
        Director Field Operations – Canada
        Business Unit
        
        Dean N. Morrison, CFA
        Director Investor Relations
        
        Mike Prinz
        Director Information Technology & Information
        Systems
        
        Jenson Tan, P.Eng.
        Director New Ventures
        Robert (Bob) J. Engbloom, LL.B
        Corporate Secretary
        
        UNITED STATES
        Daniel G. Anderson
        Managing Director – U.S. Business
        Unit
        
        Timothy R. Morris
        Director, U.S. Business Development –
        U.S. Business Unit
        
        EUROPE
        Gerard Schut, P.Eng.
        Vice President European Operations
        
        Darcy Kerwin, P.Eng.
        Managing Director - France Business Unit
        
        Neil Wallace
        Managing Director - Netherlands Business
        Unit
        
        Albrecht Moehring
        Managing Director - Germany Business Unit
        
        AUSTRALIA
        Bruce D. Lake, P.Eng.
        Managing Director
        Australia Business Unit | AUDITORS
        Deloitte LLP
        Calgary, Alberta
        
        BANKERS
        The Toronto-Dominion Bank
        Bank of Montreal
        Canadian Imperial Bank of Commerce
        
        Royal Bank of Canada
        
        The Bank of Nova Scotia
        
        National Bank of Canada
        Alberta Treasury Branches
        HSBC Bank Canada
        La Caisse Centrale Desjardins du Québec
        Wells Fargo Bank N.A., Canadian Branch
        Bank of America N.A., Canada Branch
        BNP Paribas, Canada Branch
        Citibank N.A., Canadian Branch - Citibank Canada
        JPMorgan Chase Bank, N.A., Toronto Branch
        Union Bank, Canada Branch
        Canadian Western Bank
        
        Goldman Sachs Lending Partners LLC
        
        EVALUATION ENGINEERS
        GLJ Petroleum Consultants Ltd.
        Calgary, Alberta
        
        LEGAL COUNSEL
        Norton Rose Fulbright Canada LLP
        Calgary, Alberta
        
        TRANSFER AGENT
        Computershare Trust Company of Canada
        
        STOCK EXCHANGE LISTINGS
        The Toronto Stock Exchange (“VET”)
        The New York Stock Exchange (“VET”)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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