Exhibit 99.3










Vermilion Energy Inc.2013 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 (1992)” 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, 2013. The effectiveness of Vermilion’s internal control over financial reporting
as of December 31, 2013 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, 2013.









|(“Lorenzo Donadeo”)     | (“Curtis W. Hicks”)                               
|----------------------- | --------------------------------------------------
|                        |                                                   
|                        |                                                   
|Lorenzo Donadeo         | Curtis W. Hicks                                   
|Chief Executive Officer | Executive Vice President & Chief Financial Officer
|February 27, 2014       |                                                   





2


Vermilion Energy Inc.2013 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, 2013, based on the criteria established in Internal Control - Integrated Framework (1992)
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. 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,
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, 2013, based on the criteria established
in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated
financial statements as at and for the year ended December 31, 2013 of the Company and our report dated February 27, 2014 expressed
an unqualified opinion on those financial statements.





(“Deloitte LLP”)



Chartered Accountants



February 27, 2014

Calgary, Canada



3


Vermilion Energy Inc.2013 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 consolidatedfinancial statements of Vermilion Energy Inc. and subsidiaries (the “Company”), which comprise the consolidatedbalance sheets as at December 31, 2013and2012,
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 notes to the consolidated financial statements.



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 audit 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 Vermilion Energy Inc. and subsidiaries as at December
31, 2013and2012, and their financial performance and
their 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, 2013, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2014expressed an unqualified opinion on the Company’s internal control over financial reporting.





(“Deloitte LLP”)



Chartered Accountants



February 27, 2014

Calgary, Canada

4


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






CONSOLIDATED BALANCE SHEETS(THOUSANDS OF CANADIAN DOLLARS)



|                                              |      | December 31, | December 31,
|--------------------------------------------- | ---- | ------------ | ------------
|                                              | Note |              | 2013        
|ASSETS                                        |      |              |             
|Current                                       |      |              |             
|Cash and cash equivalents                     | 17   |              | 389,559     
|Accounts receivable                           |      |              | 167,618     
|Crude oil inventory                           |      |              | 17,143      
|Derivative instruments                        | 13   |              | 2,285       
|Prepaid expenses                              |      |              | 11,178      
|                                              |      |              | 587,783     
|                                              |      |              |             
|Deferred taxes                                | 9    |              | 184,832     
|Exploration and evaluation assets             | 6    |              | 136,259     
|Capital assets                                | 5    |              | 2,799,845   
|                                              |      |              | 3,708,719   
|                                              |      |              |             
|LIABILITIES                                   |      |              |             
|Current                                       |      |              |             
|Accounts payable and accrued liabilities      |      |              | 267,832     
|Dividends payable                             | 10   |              | 20,425      
|Derivative instruments                        | 13   |              | 3,572       
|Income taxes payable                          | 9    |              | 55,615      
|                                              |      |              | 347,444     
|                                              |      |              |             
|Long-term debt                                | 8    |              | 990,024     
|Asset retirement obligations                  | 7    |              | 326,162     
|Deferred taxes                                | 9    |              | 328,714     
|                                              |      |              | 1,992,344   
|                                              |      |              |             
|SHAREHOLDERS’ EQUITY                          |      |              |             
|Shareholders’ capital                         | 10   |              | 1,618,443   
|Contributed surplus                           |      |              | 75,427      
|Accumulated other comprehensive income (loss) |      |              | 47,142      
|Deficit                                       |      |              | (24,637)    
|                                              |      |              | 1,716,375   
|                                              |      |              | 3,708,719   



APPROVED BY THE BOARD





|(“Kenneth Davidson”)          |  | (“Lorenzo Donadeo”)      
|----------------------------- |  | -------------------------
|                              |  |                          
|W. Kenneth Davidson, Director |  | Lorenzo Donadeo, Director









5


Vermilion Energy Inc.2013 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 |  | 2013        
|REVENUE                                     |      |  |             
|Petroleum and natural gas sales             |      |  | 1,273,835   
|Royalties                                   |      |  | (67,936)    
|Petroleum and natural gas revenue           |      |  | 1,205,899   
|                                            |      |  |             
|EXPENSES                                    |      |  |             
|Operating                                   | 21   |  | 195,043     
|Transportation                              |      |  | 28,924      
|Equity based compensation                   | 11   |  | 60,845      
|Loss on derivative instruments              | 13   |  | 1,971       
|Interest expense                            |      |  | 38,183      
|General and administration                  | 21   |  | 49,910      
|Foreign exchange (gain) loss                |      |  | (50,162)    
|Other expense                               | 4    |  | 457         
|Accretion                                   | 7    |  | 24,565      
|Depletion and depreciation                  | 5, 6 |  | 322,386     
|Impairment (recovery)                       | 5    |  | (47,400)    
|Gain on acquisition                         | 4    |  | -           
|                                            |      |  | 624,722     
|EARNINGS BEFORE INCOME TAXES                |      |  | 581,177     
|                                            |      |  |             
|INCOME TAXES                                | 9    |  |             
|Deferred                                    |      |  | 35,177      
|Current                                     |      |  | 218,359     
|                                            |      |  | 253,536     
|                                            |      |  |             
|NET EARNINGS                                |      |  | 327,641     
|                                            |      |  |             
|OTHER COMPREHENSIVE INCOME                  |      |  |             
|Currency translation adjustments            |      |  | 79,551      
|COMPREHENSIVE INCOME                        |      |  | 407,192     
|                                            |      |  |             
|NET EARNINGS PER SHARE                      | 12   |  |             
|Basic                                       |      |  | 3.24        
|Diluted                                     |      |  | 3.20        
|                                            |      |  |             
|WEIGHTED AVERAGE SHARES OUTSTANDING ('000s) | 12   |  |             
|Basic                                       |      |  | 100,969     
|Diluted                                     |      |  | 102,467     





6


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3




CONSOLIDATED STATEMENTS OF
CASH FLOWS(THOUSANDS OF CANADIAN DOLLARS)



|                                                                   |      |  | Year Ended  
|------------------------------------------------------------------ | ---- |  | ------------
|                                                                   |      |  | December 31,
|                                                                   | Note |  | 2013        
|OPERATING                                                          |      |  |             
|Net earnings                                                       |      |  | 327,641     
|Adjustments:                                                       |      |  |             
|Accretion                                                          | 7    |  | 24,565      
|Depletion and depreciation                                         | 5, 6 |  | 322,386     
|Impairment (recovery)                                              | 5    |  | (47,400)    
|Gain on acquisition                                                | 4    |  | -           
|Unrealized gain on derivative instruments                          | 13   |  | (5,111)     
|Equity based compensation                                          | 11   |  | 60,845      
|Unrealized foreign exchange (gain) loss                            |      |  | (52,028)    
|Unrealized other expense                                           |      |  | 1,451       
|Deferred taxes                                                     | 9    |  | 35,177      
|Asset retirement obligations settled                               | 7    |  | (11,922)    
|Changes in non-cash operating working capital                      | 14   |  | 49,421      
|Cash flows from operating activities                               |      |  | 705,025     
|                                                                   |      |  |             
|INVESTING                                                          |      |  |             
|Drilling and development                                           | 5    |  | (537,564)   
|Exploration and evaluation                                         | 6    |  | (13,789)    
|Property acquisitions                                              | 4, 6 |  | (9,189)     
|Dispositions                                                       | 5    |  | 8,627       
|Corporate acquisitions, net of cash acquired                       | 4    |  | (24,124)    
|Payment of amount due pursuant to acquisition                      |      |  | -           
|Changes in non-cash investing working capital                      | 14   |  | (41,691)    
|Cash flows used in investing activities                            |      |  | (617,730)   
|                                                                   |      |  |             
|FINANCING                                                          |      |  |             
|Increase in long-term debt                                         | 8    |  | 347,284     
|Issuance of shares pursuant to the dividend reinvestment plan      | 10   |  | -           
|Cash dividends                                                     | 10   |  | (168,719)   
|Cash flows from financing activities                               |      |  | 178,565     
|Foreign exchange gain (loss) on cash held in foreign currencies    |      |  | 21,574      
|                                                                   |      |  |             
|Net change in cash and cash equivalents                            |      |  | 287,434     
|Cash and cash equivalents, beginning of year                       |      |  | 102,125     
|Cash and cash equivalents, end of year                             | 17   |  | 389,559     
|                                                                   |      |  |             
|Supplementary information for operating activities - cash payments |      |  |             
|Interest paid                                                      |      |  | 37,562      
|Income taxes paid                                                  |      |  | 192,865     





7


Vermilion Energy Inc.2013 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     |               | Loss     | Deficit       | Equity  
|Balances as at January 1, 2012           |        |               | 1,368,145   |               | 56,468   |               | (33,387) |  | (59,625) 
|Net earnings                             |        |               | -           |               | -        |               | -        |  | 190,622  
|Currency translation adjustments         |        |               | -           |               | -        |               | 978      |  | -        
|Equity based compensation expense        | 11     |               | -           |               | 46,468   |               | -        |  | -        
|Dividends declared                       | 10     |               | -           |               | -        |               | -        |  | (223,717)
|Issuance of shares pursuant to the       |        |               |             |               |          |               |          |  |          
|dividend reinvestment plan               | 10     |               | 72,058      |               | -        |               | -        |  | -        
|Vesting of equity based awards           | 10, 11 |               | 33,355      |               | (33,355) |               | -        |  | -        
|Share-settled dividends                  |        |               |             |               |          |               |          |  |          
|on vested equity based awards            | 10, 11 |               | 7,151       |               | -        |               | -        |  | (7,151)  
|Shares issued pursuant to the bonus plan | 10     |               | 636         |               | -        |               | -        |  | -        
|Balances as at December 31, 2012         |        |               | 1,481,345   |               | 69,581   |               | (32,409) |  | (99,871) 
|                                         |        |               |             |               |          |               |          |  |          
|                                         |        |               |             |               |          | 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)
|Issuance of shares 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) 





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
(loss)

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.2013 Audited Annual Financial Statements - Exhibit 99.3






notes
to the Consolidated Financial Statements

For
the year ended December 31, 2013 and 2012

(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, 2014.



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.2013 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 (“CGU’s”) attributable to the
jurisdiction in which the exploration area resides.



PNG depletion units are aggregated into CGUs
for impairment testing.  The determination of CGU’s is based on managements’ 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.2013 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 (loss) 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.2013 Audited Annual Financial Statements - Exhibit 99.3








2. SIGNIFICANT ACCOUNTING POLICIES (Continued)



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



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 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 was 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.



3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS



On January 1, 2013, 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.



IFRS 10 “Consolidated Financial Statements”

IFRS 10 replaced Standing Interpretations Committee
12, “Consolidation - Special Purpose Entities” and the consolidation requirements of IAS 27 “Consolidated and
Separate Financial Statements”. The new standard replaces the existing risk and rewards based approaches and establishes
control as the determining factor when determining whether an interest in another entity should be included in the consolidated
financial statements.



IFRS 11 “Joint Arrangements”

IFRS 11 replaced IAS 31 “Interests in
Joint Ventures”. The new standard focuses on the rights and obligations of an arrangement, rather than its legal form. The
standard redefines joint operations and joint ventures and requires joint operations to be proportionately consolidated and joint
ventures to be equity accounted.

12


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3








3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
(Continued)



IFRS 12 “Disclosure of Interests in
Other Entities”

IFRS 12 provides comprehensive disclosure requirements
for interests in other entities, including joint arrangements, associates, and special purpose entities. The new disclosures are
intended to assist financial statement users in evaluating the nature, risks and financial effects of an entity’s interest
in subsidiaries and joint arrangements.



IFRS 13 "Fair Value Measurement"

IFRS 13 provides a common definition of fair
value within IFRS. The new standard provides measurement and disclosure guidance and applies when another IFRS requires or permits
an item to be measured at fair value, with limited exceptions.



Accounting pronouncements not yet
adopted



The impact of the adoption of the following
pronouncements are currently being evaluated, but are not expected to have a material impact on Vermilion’s consolidated
financial statements:



IFRIC 21 “Levies”

On May 20, 2013, IASB issued guidance
on IFRIC 21, which provides guidance 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 is 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
is effective for annual periods beginning on or after January 1, 2014.



IFRS 9 “Financial Instruments”

The IASB has undertaken a three-phase
project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. The new standard replaces the current
multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification
categories: amortized cost and fair value. In February of 2014, the IASB confirmed that the mandatory effective date of IFRS 9
shall be January 1, 2018.



4. BUSINESS COMBINATIONS



Property acquisition:



France



On January 19, 2012, Vermilion acquired, through
its wholly owned subsidiaries, working interests in six producing fields located in the Paris and Aquitaine Basins in France, for
total consideration of $106.1 million before closing adjustments. The acquired working interests expanded Vermilion's existing
interests and was a natural addition to the Company’s existing France asset base.



The acquired assets include land, wells, facilities,
and inventory located in the Company’s core producing basins in France. The fair value of the acquired identifiable assets
and liabilities assumed at the date of acquisition was $151.4 million. A gain of $45.3 million was recognized as a result of an
increase in the fair value of the acquired petroleum and natural gas reserves from the time when the acquisition was negotiated
to the acquisition date. The increase resulted from a change in the underlying commodity price forecasts used to determine the
fair value of the acquired reserves.

13


Vermilion Energy Inc.2013 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                |                            
|Asset retirement obligations assumed            |                            
|Deferred tax liabilities                        |                            
|Acquired non-cash working capital deficiencies  |                            
|Net assets acquired                             |                            
|Gain on acquisition                             |                            
|Net assets acquired, net of gain on acquisition |                            



Transfer taxes associated with this acquisition
totalling $8.5 million have been excluded from the consideration and have been recognized as an expense in the year ended December
31, 2012 within “Other expense” in the consolidated statements of net earnings and comprehensive income.



Corporate acquisitions:



| | a) | 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 is 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 increase
to net earnings from the acquired working interests as operations were immediately merged with Vermilion’s operations.

14


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






4. BUSINESS COMBINATIONS (Continued)



| | b) | France
| | -- | ------



On December 21, 2012, Vermilion acquired, through
its wholly owned subsidiaries, 100% of the shares of ZaZa Energy France S.A.S for total consideration of $74.9 million. The acquired
company holds operating interests covering approximately 24,300 acres with 100% working interests in the Saint Firmin, Chateaurenard,
Courtenay, Chuelles, and Charmottes fields in the Paris Basin. The acquired company expands Vermilion’s existing operations
in France and is aligned with Vermilion’s objective to consolidate assets within the Company’s core operating areas.



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                  |                            



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, 2012                           |                    | 2,016,611        |  | 15,071        
|Additions                                            |                    | 407,973          |  | 5,248         
|Transfers from exploration and evaluation assets     |                    | 10,528           |  | -             
|Property acquisitions                                |                    | 206,260          |  | -             
|Corporate acquisitions                               |                    | 136,297          |  | -             
|Borrowing costs capitalized                          |                    | 9,994            |  | -             
|Changes in estimate for asset retirement obligations |                    | 1,334            |  | -             
|Depletion and depreciation                           |                    | (289,194)        |  | (5,165)       
|Impairments                                          |                    | (65,800)         |  | -             
|Effect of movements in foreign exchange rates        |                    | (3,882)          |  | (35)          
|Balance at December 31, 2012                         |                    | 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        
|                                                     |                    |                  |  |               
|Cost                                                 |                    | 3,260,772        |  | 35,268        
|Accumulated depletion and depreciation               |                    | (830,651)        |  | (20,149)      
|Carrying amount at December 31, 2012                 |                    | 2,430,121        |  | 15,119        
|                                                     |                    |                  |  |               
|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        







15


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






5. CAPITAL ASSETS (Continued)



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, 2013, Vermilion
capitalized $8.5 million (2012 - $4.8 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. When indicators of impairment 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.



During the years ended December 31, 2013 and
2012, Vermilion performed assessments as to whether any cash generating units (“CGU”) had indicators of impairment
or recovery of previous impairment.  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 natural gas liquids,
due primarily to the successful application of horizontal drilling and multi-stage fracturing technology to the previously impaired
cash generating unit.



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 | March 31, 2012 | December 31, 2011
|--------------------------- | ----------------- | -------------- | -----------------
|2014                        | 42.09             | 35.78          | 37.12            
|2015                        | 44.18             | 38.23          | 39.52            
|2016                        | 45.39             | 40.68          | 41.95            
|2017                        | 45.41             | 43.13          | 44.34            
|2018                        | 45.43             | 45.61          | 45.82            
|2019                        | 45.50             | 46.53          | 46.79            
|2020                        | 45.86             | 47.51          | 47.72            
|2021                        | 46.78             | 48.44          | 48.71            
|Average increase thereafter | 2.0%              | 2.0%           | 2.0%             





16


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






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, 2012                    |                                  
|Additions                                     |                                  
|Transfers to petroleum and natural gas assets |                                  
|Depreciation                                  |                                  
|Effect of movements in foreign exchange rates |                                  
|Balance at December 31, 2012                  |                                  
|Additions                                     |                                  
|Property acquisitions                         |                                  
|Transfers to petroleum and natural gas assets |                                  
|Depreciation                                  |                                  
|Effect of movements in foreign exchange rates |                                  
|Balance at December 31, 2013                  |                                  
|                                              |                                  
|Cost                                          |                                  
|Accumulated depreciation                      |                                  
|Carrying amount at December 31, 2012          |                                  
|                                              |                                  
|Cost                                          |                                  
|Accumulated depreciation                      |                                  
|Carrying amount at December 31, 2013          |                                  



7. ASSET RETIREMENT OBLIGATIONS



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



|($M)                                          | Asset Retirement Obligations
|--------------------------------------------- | ----------------------------
|Balance at January 1, 2012                    |                             
|Additional obligations recognized             |                             
|Changes in estimates for existing obligations |                             
|Obligations settled                           |                             
|Accretion                                     |                             
|Changes in discount rates                     |                             
|Effect of movements in foreign exchange rates |                             
|Balance at December 31, 2012                  |                             
|Additional obligations recognized             |                             
|Changes in estimates for existing obligations |                             
|Obligations settled                           |                             
|Accretion                                     |                             
|Changes in discount rates                     |                             
|Effect of movements in foreign exchange rates |                             
|Balance at December 31, 2013                  |                             



Vermilion has estimated the net present value
of its asset retirement obligations to be $326.2 million as at December 31, 2013 (2012 - $371.1 million) based on a total undiscounted
future liability, after inflation adjustment, of $1.3 billion (2012 - $1.3 billion). These payments are expected to be made between
2014 and 2063. Vermilion calculated the present value of the obligations using discount rates between 6.4% and 8.3% (2012 - between
5.8% and 7.5%) 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 1.1% and
2.5% (2012 - between 1.4% 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 significant changes in the liability for the year ended December
31, 2013 primarily resulted from an overall decrease in the inflation rates applied to the abandonment obligations.





17


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






8. LONG-TERM
DEBT



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





|                          |  | As At       
|------------------------- |  | ------------
|($M)                      |  | Dec 31, 2013
|Revolving credit facility |  | 766,898     
|Senior unsecured notes    |  | 223,126     
|Long-term debt            |  | 990,024     





Revolving Credit Facility



At December 31, 2013, Vermilion had in place
a bank revolving credit facility totalling $1.2 billion, of which approximately $766.9 million was drawn. The facility, which matures
on May 31, 2016, 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 repayable on the maturity date. This
facility bears interest at a rate applicable to demand loans plus applicable margins. For the year ended December 31, 2013, the
interest rate on the revolving credit facility was approximately 3.3% (2012 – 3.3%).



The amount available to Vermilion under this
facility is reduced by certain outstanding letters of credit associated with Vermilion’s operations totalling $8.1 million
as at December 31, 2013 (2012 - $49.2 million).



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. In addition, Vermilion must
maintain 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.



As at December 31, 2013, Vermilion was in compliance
with its financial covenants.



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.



Vermilion may, at its option, prior to February
10, 2014, redeem up to 35% of the notes with net proceeds of equity offerings by the Company at a redemption price equal to 106.5%
of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to the applicable redemption date.
Subsequently, Vermilion may, on or after February 10, 2014, redeem all or part of the notes at fixed redemption prices, plus, in
each case, accrued and unpaid interest, if any, to the applicable redemption date. 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%.



18


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






9. INCOME TAXES



Deferred taxes



The net deferred income tax liability at December 31, 2013
and 2012 is comprised of the following:





|                                  |                                 | Year Ended  
|--------------------------------- | ------------------------------- | ------------
|($M)                              |                                 | Dec 31, 2013
|Deferred income tax liabilities:  |                                 |             
|                                  | 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    |             
|                                  | Other                           |             
|Net deferred income tax liability |                                 | (143,882)   
|Comprised of:                     |                                 |             
|                                  | Deferred income tax assets      |             
|                                  | Deferred income tax liability   |             
|Net deferred income tax liability |                                 | (143,882)   





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 25.0% (2012 - 25.0%),
as follows:





|                                             |                                                                                                       | Year Ended  
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------
|($M)                                         |                                                                                                       | Dec 31, 2013
|Earnings before income taxes                 |                                                                                                       | 581,177     
|Canadian corporate tax rate                  |                                                                                                       | 25.0%       
|Expected tax expense                         |                                                                                                       | 145,294     
|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 |             
|                                             | Gain on acquisition                                                                                   |             
|                                             | Other non-deductible items                                                                            |             
|Provision for income taxes                   |                                                                                                       | 253,536     





| | (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 effective corporate tax rate was 38.0%
in France, 46.0% in the Netherlands and 25.0% in Ireland.



Tax assessments

As at December 31, 2013, Income Taxes
Payable includes a provision relating to tax assessments from tax authorities for prior period tax positions. Vermilion has determined
the provision based on management’s best estimate of the amount required to settle the tax assessments and has classified
the provision as a current liability. The amounts ultimately paid and the timing of settlement could differ from our best estimate
and, therefore, could have an impact on future net earnings and cash flows.



19


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






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, 2012                                 |                          | 96,430  |            
|Issuance of shares pursuant to the dividend reinvestment plan |                          | 1,631   |            
|Vesting of equity based awards                                |                          | 904     |            
|Share-settled dividends on vested equity based awards         |                          | 157     |            
|Shares issued pursuant to the bonus plan                      |                          | 13      |            
|Balance as at December 31, 2012                               |                          | 99,135  |            
|Issuance of shares 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 |            



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, 2013 were $242.6 million (2012 - $223.7 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 5% 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, 2014, Vermilion declared dividends totalling $44.0 million or $0.215
per share for each of January and February of 2014.



11. EQUITY BASED COMPENSATION



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



|Number of Awards ('000s) | 2013  |  | 2012 
|------------------------ | ----- |  | -----
|Opening balance          | 1,690 |  | 1,750
|Granted                  | 832   |  | 681  
|Vested                   | (749) |  | (596)
|Forfeited                | (108) |  | (145)
|Closing balance          | 1,665 |  | 1,690



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, 2013, the awards granted had a
weighted average fair value of $80.79 (2012 - $61.08).



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, 2013, Vermilion incorporated an estimated forfeiture rate of 6.61% (2012 - 5.37%). Equity based compensation expense
of $60.2 million was recorded during the year ended December 31, 2013 (2012 - $46.5 million) related to the VIP.





20


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






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, 2013
|Net earnings [1]                                | 327,641     
|Basic weighted average shares outstanding [2]   | 100,969     
|Dilutive impact of equity based award plans     | 1,498       
|Diluted weighted average shares outstanding [3] | 102,467     
|Basic earnings per share ([1] ÷ [2])            | 3.24        
|Diluted earnings per share ([1] ÷ [3])          | 3.20        









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.



The following tables summarize Vermilion’s outstanding risk
management positions as at December 31, 2013:



|                                  | Note | Daily Volume | Strike Price(s)      
|--------------------------------- | ---- | ------------ | ---------------------
|Crude Oil                         |      |              |                      
|WTI - Collar                      |      |              |                      
|January 2014 - March 2014         |      | 1,000 bbl/d  | 97.50 - 104.69 USD $ 
|WTI - Swap                        |      |              |                      
|January 2014 - March 2014         |      | 500 bbl/d    | 101.22 USD $         
|January 2014 - March 2014         | (1)  | 250 bbl/d    | 105.45 USD $         
|January 2014 - June 2014          |      | 250 bbl/d    | 100.05 USD $         
|January 2014 - June 2014          | (2)  | 1,000 bbl/d  | 100.07 USD $         
|Dated Brent - Collar              |      |              |                      
|January 2014 - March 2014         |      | 2,500 bbl/d  | 104.00 - 110.46 USD $
|January 2014 - June 2014          |      | 1,250 bbl/d  | 103.20 - 110.24 USD $
|April 2014 - June 2014            |      | 1,000 bbl/d  | 105.00 - 115.00 USD $
|April 2014 - September 2014       |      | 1,000 bbl/d  | 105.00 - 112.00 USD $
|April 2014 - December 2014        |      | 1,000 bbl/d  | 106.00 - 110.73 USD $
|Dated Brent - Swap                |      |              |                      
|January 2014 - March 2014         |      | 2,000 bbl/d  | 107.80 USD $         
|January 2014 - June 2014          |      | 1,000 bbl/d  | 107.25 USD $         
|January 2014 - June 2014          | (2)  | 1,500 bbl/d  | 110.32 USD $         
|April 2014 - June 2014            |      | 1,250 bbl/d  | 109.74 USD $         
|January 2014 - December 2014      |      | 500 bbl/d    | 108.28 USD $         
|MSW - Fixed Price Sale (Physical) |      |              |                      
|January 2014 - March 2014         |      | 1,000 bbl/d  | 93.37 CAD $          
|April 2014 - June 2014            |      | 1,000 bbl/d  | 92.85 CAD $          





21


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






13. DERIVATIVE INSTRUMENTS (Continued)



|Canadian Natural Gas         |     |             |                  
|---------------------------- | --- | ----------- | -----------------
|AECO - Collar                |     |             |                  
|January 2014 - December 2014 |     | 10,000 GJ/d | 3.18 - 3.81 CAD $
|AECO - Swap                  |     |             |                  
|January 2014 - December 2014 |     | 5,000 GJ/d  | 3.71 CAD $       
|AECO - Collar (Physical)     | (3) |             |                  
|April 2012 - March 2014      |     | 5,500 GJ/d  | 2.60 - 3.78 CAD $
|June 2012 - March 2014       |     | 3,000 GJ/d  | 2.30 - 3.75 CAD $
|European Natural Gas         |     |             |                  
|TTF - Swap                   |     |             |                  
|January 2014 - March 2014    |     | 16,200 GJ/d | 7.88 EUR €       
|Electricity                  |     |             |                  
|AESO - Swap                  |     |             |                  
|January 2014 - December 2014 |     | 7.2 MWh/d   | 54.75 CAD $      
|AESO - Swap (Physical)       |     |             |                  
|January 2013 - December 2015 |     | 72.0 MWh/d  | 53.17 CAD $      



(1)	Prior to the expiration
of this swap, the counterparty has the option to extend the swap to June 30, 2014 at the contracted volume and price.

(2)	Prior to the expiration
of this swap, the counterparty has the option to extend the swap to December 31, 2014 at the contracted volume and price.

(3)	Physical AECO collars
have a funded cost of $0.10/GJ.



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



|                                                                                |                              |              | Year ended
|------------------------------------------------------------------------------- | ---------------------------- | ------------ | ----------
|($M)                                                                            | Dec 31, 2013                 | Dec 31, 2012
|Fair value of contracts, beginning of year                                      |                              | (6,398)      |           
|Reversal of opening contracts settled during the year                           |                              | 6,398        |           
|Realized loss on contracts settled during the year                              |                              | (7,082)      |           
|Unrealized loss during the year on contracts outstanding at the end of the year |                              | (1,287)      |           
|Net payment to counterparties on contract settlements during the year           |                              | 7,082        |           
|Fair value of contracts, end of year                                            |                              | (1,287)      |           
|Comprised of:                                                                   |                              |              |           
|                                                                                | Current derivative asset     |              | 2,285     
|                                                                                | Current derivative liability |              | (3,572)   
|Fair value of contracts, end of year                                            |                              | (1,287)      |           



The loss on derivative instruments for 2013 and 2012 are comprised
of the following:





|                                                                                |  | Year Ended  
|------------------------------------------------------------------------------- |  | ------------
|($M)                                                                            |  | Dec 31, 2013
|Realized loss on contracts settled during the year                              |  | 7,082       
|Reversal of opening contracts settled during the year                           |  | (6,398)     
|Unrealized loss during the year on contracts outstanding at the end of the year |  | 1,287       
|Loss on derivative instruments                                                  |  | 1,971       







22


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






14. SUPPLEMENTAL CASH FLOW INFORMATION



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



|                                              | Year Ended                                                       
|--------------------------------------------- | -----------------------------------------------------------------
|($M)                                          | Dec 31, 2013                                                     
|Changes in:                                   |                                                                  
|                                              | Accounts receivable                                              
|                                              | Crude oil inventory                                              
|                                              | Prepaid expenses                                                 
|                                              | Accounts payable and accrued liabilities and income taxes payable
|                                              | Movements in foreign exchange rates                              
|Changes in non-cash working capital           | 7,730                                                            
|Changes in non-cash operating working capital | 49,421                                                           
|Changes in non-cash investing working capital | (41,691)                                                         
|Changes in non-cash working capital           | 7,730                                                            



15. SEGMENTED INFORMATION



Vermilion has operations principally in Canada,
France, the Netherlands, Australia and Ireland. 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 Calgary, Alberta. Costs
incurred in the Corporate segment relate to our 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.



Prior to the year ended December 31, 2013, Vermilion’s
segmented disclosure provided a breakdown by country of operating income, which excluded general and administration expense, current
income taxes, interest expense, realized foreign exchange, and realized other income. In addition, the prior year disclosure presented
the results of the Canada and Corporate segments as a combined segment. The 2013 presentation is now expanded to reflect all of
the directly attributable revenue and expenditures for each of Vermilion’s business units in addition to the newly segregated
corporate segment.



|                                        | 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)                    
|Corporate income taxes                  | -                           
|PRRT                                    | -                           
|Interest expense                        | -                           
|Realized loss on derivative instruments | -                           
|Realized foreign exchange loss          | -                           
|Realized other income                   | -                           
|Fund flows from operations              | 260,077                     





23


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






15. SEGMENTED INFORMATION (Continued)



|                                        | Year Ended December 31, 2012
|--------------------------------------- | ----------------------------
|($M)                                    | Canada                      
|Total assets                            | 1,112,335                   
|Drilling and development                | 232,903                     
|Exploration and evaluation              | 38,871                      
|Oil and gas sales to external customers | 304,202                     
|Royalties                               | (31,667)                    
|Revenue from external customers         | 272,535                     
|Transportation expense                  | (8,321)                     
|Operating expense                       | (55,418)                    
|General and administration              | (12,344)                    
|Corporate income taxes                  | -                           
|PRRT                                    | -                           
|Interest expense                        | -                           
|Realized loss on derivative instruments | -                           
|Realized foreign exchange gain          | -                           
|Realized other expense                  | -                           
|Fund flows from operations              | 196,452                     



Reconciliation of fund flows from operations to net earnings



|                                          |  | Year Ended  
|----------------------------------------- |  | ------------
|($M)                                      |  | Dec 31, 2013
|Fund flows from operations                |  | 667,526     
|Equity based compensation                 |  | (60,845)    
|Unrealized gain on derivative instruments |  | 5,111       
|Unrealized foreign exchange gain (loss)   |  | 52,028      
|Unrealized other expense                  |  | (1,451)     
|Accretion                                 |  | (24,565)    
|Depletion and depreciation                |  | (322,386)   
|Deferred taxes                            |  | (35,177)    
|Impairment (recovery)                     |  | 47,400      
|Gain on acquisition                       |  | -           
|Net earnings                              |  | 327,641     



Vermilion has two major customers with revenues
in excess of 10% within the France and Netherlands segments. Sales to the major customer in the France segment for year ended December
31, 2013 were $453.3 million (2012 - $380.6 million). All sales in the Netherlands segment were to one customer.



16. COMMITMENTS



Vermilion had the following future commitments associated with its
operating leases as at December 31, 2013:



|($M)               | Less than 1 year | 1 - 3 years | 4 - 5 years | After 5 years | Total  
|------------------ | ---------------- | ----------- | ----------- | ------------- | -------
|Payments by period | 19,038           | 29,489      | 23,919      | 62,211        | 134,657



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.



24


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






17. CASH AND CASH EQUIVALENTS



Cash and cash equivalents was comprised of the following:



|($M)                                         | Dec 31, 2013 | Dec 31, 2012
|-------------------------------------------- | ------------ | ------------
|Money on deposit with financial institutions |              | 379,936     
|Short-term investments                       |              | 9,623       
|Cash and cash equivalents                    |              | 389,559     



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 a ratio of net debt to fund flows from operations
near 1.0. In a 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)                                    |  | Dec 31, 2013
|Long-term debt                                              |  | 990,024     
|Current liabilities                                         |  | 347,444     
|Current assets                                              |  | (587,783)   
|Net debt [1]                                                |  | 749,685     
|Cash flows from operating activities                        |  | 705,025     
|Changes in non-cash operating working capital               |  | (49,421)    
|Asset retirement obligations settled                        |  | 11,922      
|Fund flows from operations [2]                              |  | 667,526     
|Ratio of net debt to fund flows from operations ([1] ÷ [2]) |  | 1.1         



The ratio of net debt to fund flows from operations
for the year ended December 31, 2013 was relatively consistent with same period in 2012 as fund flows from operations increased
proportionately with net debt. The increase in net debt was the result of the Northern acquisition in the fourth quarter of 2013
and current year capital expenditures pertaining to the Ireland assets, which are currently under development.





25


Vermilion Energy Inc.2013 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, 2013 and December 31, 2012:



|                              |                                          |                        |                                                                                                                                                        |  |  |                     | As at Dec 31, 2013 |           |  | As at Dec 31, 2012  |           |                 |          
|----------------------------- | ---------------------------------------- | ---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------------------- | ------------------ | --------- |  | ------------------- | --------- | --------------- | ---------
|Class of financial instrument | Consolidated balance sheet caption       | Accounting designation | Related caption on Statement of Net Earnings                                                                                                           |  |  | Carrying value ($M) | Fair value ($M)    |           |  | Carrying value ($M) |           | Fair value ($M) |          
|Cash                          | Cash and cash equivalents                | HFT                    | Gains and losses on foreign exchange are included in foreign exchange (gain) loss                                                                      |  |  | 389,559             |                    | 389,559   |  |                     | 102,125   |                 | 102,125  
|Receivables                   | Accounts receivable                      | LAR                    | Gains and losses on foreign exchange are included in foreign exchange (gain) loss and impairments are recognized as general and administration expense |  |  | 167,618             |                    | 167,618   |  |                     | 180,064   |                 | 180,064  
|Derivative assets             | Derivative instruments                   | HFT                    | Loss on derivative instruments                                                                                                                         |  |  | 2,285               |                    | 2,285     |  |                     | 2,086     |                 | 2,086    
|Derivative liabilities        | Derivative instruments                   | HFT                    | Loss on derivative instruments                                                                                                                         |  |  | (3,572)             |                    | (3,572)   |  |                     | (8,484)   |                 | (8,484)  
|Payables                      | Accounts payable and accrued liabilities | OTH                    | Gains and losses on foreign exchange are included in foreign exchange (gain) loss                                                                      |  |  | (288,257)           |                    | (288,257) |  |                     | (319,518) |                 | (319,518)
|                              |                                          | Dividends payable      |                                                                                                                                                        |  |  |                     |                    |           |  |                     |           |                 |          
|Long-term debt                | Long-term debt                           | OTH                    | Interest expense                                                                                                                                       |  |  | (990,024)           |                    | (998,648) |  |                     | (642,022) |                 | (656,315)



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.

26


Vermilion Energy Inc.2013 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, 2013, Vermilion’s maximum
exposure to receivable credit risk was $169.9 million (December 31, 2012 - $182.2 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.



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.



27


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






19. FINANCIAL INSTRUMENTS (Continued)



The following table summarizes Vermilion’s undiscounted non-derivative
financial liabilities and their contractual maturities as at December 31, 2013 and December 31, 2012:



|                  |           | 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, 2013 | 154,176   | 118,764        | 15,317           | 991,898       
|December 31, 2012 | 109,312   | 209,783        | 423              | 644,784       



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, 2013 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                                                 | Dec
    31, 2013                      
|Currency
    risk - Euro to Canadian | Increasein strength of the Canadian dollar against the                                     | (14,276)                              
|                                     | Euro
    by 5% over the relevant closing rates                                             |                                       
|                                     | Decreasein strength of the Canadian dollar against the                                     | 14,276                                
|                                     | Euro
    by 5% over the relevant closing rates                                             |                                       
|Currency
    risk - US $ to Canadian | Increasein strength of the Canadian dollar against the                                     | (4,420)                               
|                                     | US$
    by 5% over the relevant closing rates                                              |                                       
|                                     | Decreasein strength of the Canadian dollar against the                                     | 4,420                                 
|                                     | US$
    by 5% over the relevant closing rates                                              |                                       
|Commodity
    price risk             | Increasein relevant oil reference price within option pricing models used to determine     | (12,291)                              
|                                     | 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     | 11,376                                
|                                     | the
    fair value of financial derivatives by US$5.00/bbl at the relevant valuation dates |                                       
|Interest
    rate risk               | Increasein average Canadian prime interest rate                                            | (4,945)                               
|                                     | by
    100 basis points during the relevant periods                                        |                                       
|                                     | Decreasein average Canadian prime interest rate                                            | 4,945                                 
|                                     | 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, 2013 and 2012.



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, 2013 and December 31, 2012:



|                                                    |              | Year Ended  
|--------------------------------------------------- | ------------ | ------------
|($M)                                                | Dec 31, 2013 | Dec 31, 2012
|Short-term benefits                                 |              | 6,308       
|Share-based payments                                |              | 19,302      
|                                                    |              | 25,610      
|Number of individuals included in the above amounts |              | 17          





28


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






21. WAGES AND BENEFITS



Included in operating expenses and general
and administrative expenses for the year ended December 31, 2013 were $53.2 million and $45.9 million of wages and benefits, respectively
(2012 – $45.3 million and $30.9 million, respectively).



22. SUBSEQUENT EVENTS



Purchase and Sale Agreement with GDF Suez E&P Deutschland
GmbH

On November 6, 2013, Vermilion announced that it entered into a definitive purchase and sale agreement
with GDF Suez E&P Deutschland GmbH (“GDF”) whereby Vermilion, through its wholly-owned subsidiary, will acquire
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. In addition, the acquisition also includes
the purchase of 0.4% of the equity of Ergas Munster GmbH (“EGM”), a joint venture created in 1959 to jointly transport,
process, and market gas in northwest Germany. 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 approximately $172.0 million plus customary working capital adjustments.



Given the recent timing of the acquisition,
the Company has not yet completed the accounting for the acquisition and accordingly not all relevant disclosures are available
for the business combination. The Company will report the purchase price allocation in the Company’s consolidated financial
statements for the three months ended March 31, 2014.

29


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3






|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
        
        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 2, 2014
        10:00 AM MST
        The Ballroom
        Metropolitan Centre
        333 – 4th Avenue S.W.
        Calgary, Alberta | OFFICERS AND KEY PERSONNELCANADALorenzo Donadeo, P.Eng.Chief Executive Officer
        
        Anthony Marino, P.Eng.
        President & COO
        John D. Donovan, FCA
        Executive Vice President Business Development
        
        Curtis W. Hicks, CA
        Executive Vice President & CFO
        
        Mona Jasinski, M.B.A., C.H.R.P.
        Executive Vice President People
        Terry Hergott, CMA
        Vice President Marketing
        
        Daniel Goulet, P.Eng.
        Director Corporate HSE
        
        Michael Kaluza, P.Eng.
        Director Canada Business Unit
        
        Dean N. Morrison, CFA
        Director Investor Relations
        
        Mike Prinz
        Director Information Technology
        
        Jenson Tan, P.Eng.
        Director New Ventures
        Robert (Bob) J. Engbloom, LL.B
        Corporate Secretary
        
        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
        
        AUSTRALIA
        
        Bruce D. Lake, P.Eng.
        Managing Director
        Australia Business Unit | AUDITORS
        Deloitte LLP
        Calgary, Alberta
        
        BANKERS
        Bank of Montreal
        Calgary, Alberta
        Canadian Imperial Bank of Commerce
        Calgary, Alberta
        Royal Bank of Canada
        Calgary, Alberta
        
        The Bank of Nova Scotia
        Calgary, Alberta
        
        The Toronto-Dominion Bank
        Calgary, Alberta
        National Bank of Canada
        Calgary, Alberta 
        Alberta Treasury Branches
        Calgary, Alberta
        Wells Fargo Bank N.A., London Branch
        London, England
        HSBC Bank Canada
        Calgary, Alberta
        JPMorgan Chase Bank, N.A., Toronto Branch
        Toronto, Ontario
        
        La Caisse Centrale Desjardins du Québec
        Montréal, Quebec
        Citibank N.A., Canadian Branch
        Citibank Canada
        Calgary, Alberta
        EVALUATION ENGINEERS
        GLJ Petroleum Consultants Ltd.
        Calgary, Alberta
        
        LEGAL COUNSEL
        Norton Rose Fullbright 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”)
        
        INVESTOR RELATIONS
        Dean Morrison, Director Investor Relations
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







30


Vermilion Energy Inc.2013 Audited Annual Financial Statements - Exhibit 99.3