EXHIBIT
99.1



VERMILION
ENERGY INC.



ANNUAL
INFORMATION FORM



For the
Year Ended December 31, 2011



Dated
March 12, 2012















|Vermilion
    Energy Inc. | AIF
    for the year ended December 31, 2011
|------------------------- | --------------------------------------------



TABLE OF CONTENTS



|GLOSSARY
    OF TERMS                                               | 4 
|------------------------------------------------------------------- | --
|Conventions                                                         | 6 
|Abbreviations                                                       | 6 
|Conversion                                                          | 6 
|SPECIAL
    NOTE REGARDING FORWARD LOOKING STATEMENTS               | 7 
|PRESENTATION
    OF OIL AND GAS RESERVES AND PRODUCTION INFORMATION | 8 
|NON-GAAP
    MEASURES                                               | 8 
|VERMILION
    ENERGY inc.                                           | 9 
|General                                                             | 9 
|Organizational
    Structure of the Company                         | 9 
|Summary Description
    of the Business                             | 10
|History of Vermilion                                                | 10
|NARRATIVE
    DESCRIPTION OF THE BUSINESS                           | 11
|Stated Business
    Objectives                                      | 11
|Description of
    Properties                                       | 11
|STATEMENT
    OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION    | 13
|Reserves and Future
    Net Revenue                                 | 13
|Reconciliations
    of Changes in Reserves                          | 16
|Undeveloped Reserves                                                | 20
|Timing of Initial
    Undeveloped Reserves Assignment               | 20
|Future Development
    Costs                                        | 21
|Oil and Gas Properties
    and Wells                                | 22
|Costs Incurred                                                      | 22
|Exploration and
    Development Activities                          | 23
|Properties with
    No Attributed Reserves                          | 24
|Abandonment and
    Reclamation Costs                               | 24
|Tax Information                                                     | 25
|Production Estimates                                                | 25
|Production History                                                  | 26
|Marketing                                                           | 28
|ADDITIONAL
    INFORMATION RESPECTING VERMILION ENERGY INC.         | 29
|Management                                                          | 29
|Common Shares                                                       | 30
|Cash Dividends                                                      | 30
|Dividend Reinvestment
    Plan                                      | 31
|Shareholder Rights
    Plan                                         | 32
|AUDIT
    COMMITTEE MATTERS                                         | 35
|Audit Committee
    Charter                                         | 35
|Composition of
    the Audit Committee                              | 35
|External Audit
    Service Fees                                     | 36
|MARKET
    FOR PRICE RANGE AND TRADING VOLUME OF SECURITIES         | 36
|CREDIT
    RATINGs                                                  | 36
|CONFLICTS
    OF INTEREST                                           | 37
|INTEREST
    OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS      | 37
|LEGAL
    PROCEEDINGS                                               | 37
|MATERIAL
    CONTRACTS                                              | 37
|INTERESTS
    OF EXPERTS                                            | 38
|TRANSFER
    AGENT AND REGISTRAR                                    | 38



2







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



|RISK
    FACTORS                                                                                                   | 38
|------------------------------------------------------------------------------------------------------------------ | --
|Reserve Estimates                                                                                                  | 38
|Volatility of
    Oil and Natural Gas Prices                                                                       | 38
|Changes in Legislation                                                                                             | 39
|Government Regulations                                                                                             | 39
|Competition                                                                                                        | 39
|Operational Matters                                                                                                | 39
|Environmental
    Concerns                                                                                         | 40
|Kyoto Protocol                                                                                                     | 40
|Discretionary
    Nature of Dividends                                                                              | 40
|Debt Service                                                                                                       | 40
|Changes in Income
    Tax Laws                                                                                     | 40
|Depletion of Reserves                                                                                              | 40
|Net Asset Value                                                                                                    | 41
|Volatility of
    Market Price of Common Shares                                                                    | 41
|Variations in
    Interest Rates and Foreign Exchange Rates                                                        | 41
|Increase in Operating
    Costs or Decline in Production Level                                                     | 41
|Acquisition Assumptions                                                                                            | 41
|Failure to Realize
    Anticipated Benefits of Prior Acquisitions                                                  | 41
|Additional Financing                                                                                               | 42
|Potential Conflicts
    of Interest                                                                                | 42
|GAAP Adjustments                                                                                                   | 42
|Market Accessibility                                                                                               | 42
|ADDITIONAL
    INFORMATION                                                                                         | 42
|SCHEDULE "A" REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED
    RESERVES EVALUATOR OR AUDITOR 43 (FORM 51-101F2) | 43
|SCHEDULE "B" REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND
    GAS DISCLOSURE (FORM 51-101F3)                      | 44
|SCHEDULE "C" AUDIT COMMITTEE TERMS OF REFERENCE                                                                    | 45



3







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



GLOSSARY OF TERMS



The following are
defined terms used in this annual information form:



“2003 Arrangement”means the plan of arrangement under the ABCA involving the Trust, Vermilion Resources Ltd., Clear Energy Inc. and Vermilion
Acquisition Ltd., which was completed on January 22, 2003;



“ABCA”means the Business Corporations Act(Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated
thereunder;



“AGCA”means Alberta Gas Cost Allowance;



“affiliate”when used to indicate a relationship with a person or company, has the same meaning as set forth in the Securities Act(Alberta);



“board
of directors” or “board” means the board of directors of Vermilion;



“CGU’s”means cash generating units and based on managements’ judgement, represents 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;



“common
shares” means a common share in the capital of the Company;



“control”means, with respect to control of a body corporate by a person, the holding (other than by way of security) by or for the
benefit of that person of securities of that body corporate to which are attached more than 50% of the votes that may be cast
to elect directors of the body corporate (whether or not securities of any other class or classes shall or might be entitled to
vote upon the happening of any event or contingency) provided that such votes, if exercised, are sufficient to elect a majority
of the board of directors of the body corporate;



“Conversion
Arrangement” means the plan of arrangement effected on September 1, 2010 under section 193 of the ABCA pursuant to which
the Trust converted from an income trust to a corporate structure;



“Depletion
units” means groups of assets or properties that are within a specific production area and have similar economic lives.
Depletion units represent the lowest level of disaggregation for which Vermilion accumulates costs for the purposes of calculating
and recording depletion;



“dividend”means a dividend paid by Vermilion in respect of the common shares, expressed as an amount per common share;



“Dividend
Payment Date”means any date that Dividends are distributed to Shareholders, generally being the 15th day of the calendar
month following the determination of a Dividend Record Date;



“Dividend
Record Date”means the last day of each calendar month or such other date as may be determined from time to time by
the Company;



“DRIP Plan”means the Dividend Reinvestment Plan adopted by the Company;



“GAAP”means Canadian Generally Accepted Accounting Principles, or alternatively IFRS;



“GLJ”means GLJ Petroleum Consultants Ltd., independent petroleum engineering consultants of Calgary, Alberta;



“GLJ Report”means the independent engineering evaluation of certain oil, NGL and natural gas interests of the Company prepared by GLJ
dated February 3, 2012 and effective December 31, 2011;



“IFRS”means International Financial Reporting Standards;



“Income
Tax Act” or “Tax Act” means the Income Tax Act (Canada), R.S.C. 1985, c. 1. (5th Supp.), as
amended, including the regulations promulgated thereunder;



“Meeting”means the annual meeting of Shareholders of the Company to be held on May 4, 2012 (or, if adjourned, such other date on which
the meeting is held);



“PNG”means Petroleum and Natural Gas properties and equipment;

“PRRT” means Petroleum Resource Rent Tax, a profit based tax levied on petroleum
projects in Australia;



4







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



“Rights
Plan” means the Shareholder rights plan of the Company;



“Senior
Unsecured Notes” means the senior unsecured notes of the Company issued February 10, 2011;



“Shareholders”means holders from time to time of the Company’s common shares;



“Shareholder
Rights Plan Agreement” means the Shareholder Rights Plan Agreement dated September 1, 2010 between the Company and Computershare
Trust Company of Canada establishing the Rights Plan;



“Special
Resolution” means a resolution proposed to be passed as a special resolution at a meeting of Shareholders and passed
by the affirmative votes of the holders of not less than 66 2/3% of the common shares represented at the meeting and voted on
a poll upon such resolution;



“Subsidiary”means, in relation to any person, any body corporate, partnership, joint venture, association or other entity of which more
than 50% of the total voting power of common shares or units of ownership or beneficial interest entitled to vote in the election
of directors (or members of a comparable governing body) is owned or controlled, directly or indirectly, by such person;



“TSX”means the Toronto Stock Exchange;



“Trust”means Vermilion Energy Trust, an unincorporated open-ended investment trust governed by the laws of the Province of Alberta
that was terminated pursuant to the Conversion Arrangement;



“Trust
Unit” means units in the capital of the Trust;



“Unitholders”means former unitholders of the Trust;



“Vermilion”or the“Company” means Vermilion Energy Inc. and where context allows, its consolidated business enterprise,
except that a reference to “Vermilion” prior to the date of the Conversion Arrangement means the consolidated business
enterprise of the Trust, unless otherwise indicated; and



“VRL”means Vermilion Resources Ltd.



5







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Conventions



Unless otherwise
indicated, references herein to "$" or "dollars" are to Canadian dollars. All financial information herein
has been presented in Canadian dollars in accordance with GAAP.



Abbreviations



|Oil
    and Natural Gas Liquids
|-------------------------------
|bbl                            
|Mbbl                           
|bbl/d                          
|NGLs                           
|Natural
    Gas                
|Mcf                            
|MMcf                           
|Mcf/d                          
|MMcf/d                         
|MMBtu                          
|Other                          
|API                            
|°API                           
|                               
|boe                            
|M$                             
|MM$                            
|Mboe                           
|MMboe                          
|WTI                            
|                               



Conversion



The following table
sets forth certain standard conversions from Standard Imperial Units to the International System of Units (or metric units).



|To
    Convert From |  | To           |  | Multiply
    By
|------------------- |  | ------------ |  | ---------------
|Mcf                 |  | Cubic metres |  | 28.174         
|Cubic metres        |  | Cubic feet   |  | 35.494         
|bbls                |  | Cubic metres |  | 0.159          
|Cubic metres        |  | bbls oil     |  | 6.290          
|Feet                |  | Metres       |  | 0.305          
|Metres              |  | Feet         |  | 3.281          
|Miles               |  | Kilometres   |  | 1.609          
|Kilometres          |  | Miles        |  | 0.621          
|Acres               |  | Hectares     |  | 0.405          
|Hectares            |  | Acres        |  | 2.471          



6







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



SPECIAL NOTE REGARDING
FORWARD LOOKING STATEMENTS



Certain statements
included or incorporated by reference in this annual information form may constitute forward-looking statements under applicable
securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose", or similar
words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this annual
information form may include, but are not limited to:



| | · | capital
                                                                                                          expenditures;
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | business
                                                                                                          strategy and objectives;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

| | · | reserve
                                                                                                          quantities and the discounted
                                                                                                          present value of future
                                                                                                          net cash flows from
                                                                                                          such reserves;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | revenue;
| | - | --------

| | · | future
                                                                                                          production levels and
                                                                                                          rates of average annual
                                                                                                          production growth;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | exploration
                                                                                                          plans;
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | · | development
                                                                                                          plans;
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | · | acquisition
                                                                                                          and disposition plans
                                                                                                          and the timing thereof;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | operating
                                                                                                          and other costs;
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | · | royalty
                                                                                                          rates;
| | - | ------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          timing of regulatory
                                                                                                          proceedings and approvals;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          timing of first commercial
                                                                                                          gas from the Corrib
                                                                                                          field; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | estimate
                                                                                                          of Vermilion’s
                                                                                                          share of the expected
                                                                                                          gas rates from the Corrib
                                                                                                          field.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Such forward-looking
statements or information are based on a number of assumptions all or any of which may prove to be incorrect. In addition to any
other assumptions identified in this document, assumptions have been made regarding, among other things:



| | · | the
                                                                                                          ability of the Company
                                                                                                          to obtain equipment,
                                                                                                          services and supplies
                                                                                                          in a timely manner to
                                                                                                          carry out its activities
                                                                                                          in Canada and internationally;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          ability of the Company
                                                                                                          to market oil and natural
                                                                                                          gas successfully to
                                                                                                          current and new customers;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          timing and costs of
                                                                                                          pipeline and storage
                                                                                                          facility construction
                                                                                                          and expansion and the
                                                                                                          ability to secure adequate
                                                                                                          product transportation;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          timely receipt of required
                                                                                                          regulatory approvals;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          ability of the Company
                                                                                                          to obtain financing
                                                                                                          on acceptable terms;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | foreign
                                                                                                          currency exchange rates
                                                                                                          and interest rates;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | future
                                                                                                          oil and natural gas
                                                                                                          prices; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Management’s
                                                                                                          expectations relating
                                                                                                          to the timing and results
                                                                                                          of development activities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Although the Company
believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should
not be placed on forward looking statements because the Company can give no assurance that such expectations will prove to be
correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a
number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company
and described in the forward looking statements or information.



These risks and
uncertainties include but are not limited to:



| | · | the
                                                                                                          ability of management
                                                                                                          to execute its business
                                                                                                          plan;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          risks of the oil and
                                                                                                          gas industry, both domestically
                                                                                                          and internationally,
                                                                                                          such as operational
                                                                                                          risks in exploring for,
                                                                                                          developing and producing
                                                                                                          crude oil and natural
                                                                                                          gas and market demand;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | risks
                                                                                                          and uncertainties involving
                                                                                                          geology of oil and gas
                                                                                                          deposits;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | risks
                                                                                                          inherent in the Company's
                                                                                                          marketing operations,
                                                                                                          including credit risk;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          uncertainty of reserves
                                                                                                          estimates and reserves
                                                                                                          life;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          uncertainty of estimates
                                                                                                          and projections relating
                                                                                                          to production, costs
                                                                                                          and expenses;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | potential
                                                                                                          delays or changes in
                                                                                                          plans with respect to
                                                                                                          exploration or development
                                                                                                          projects or capital
                                                                                                          expenditures;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          Company's ability to
                                                                                                          enter into or renew
                                                                                                          leases;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | fluctuations
                                                                                                          in oil and gas prices,
                                                                                                          foreign currency exchange
                                                                                                          rates and interest rates;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | health,
                                                                                                          safety and environmental
                                                                                                          risks;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | uncertainties
                                                                                                          as to the availability
                                                                                                          and cost of financing;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          ability of the Company
                                                                                                          to add production and
                                                                                                          reserves through development
                                                                                                          and exploration activities;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | general
                                                                                                          economic and business
                                                                                                          conditions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                          possibility that government
                                                                                                          policies or laws may
                                                                                                          change or governmental
                                                                                                          approvals may be delayed
                                                                                                          or withheld;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | uncertainty
                                                                                                          in amounts and timing
                                                                                                          of royalty payments;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | risks
                                                                                                          associated with existing
                                                                                                          and potential future
                                                                                                          law suits and regulatory
                                                                                                          actions against the
                                                                                                          Company; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | other
                                                                                                          risks and uncertainties
                                                                                                          described elsewhere
                                                                                                          in this annual information
                                                                                                          form or in the Company's
                                                                                                          other filings with Canadian
                                                                                                          securities authorities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



The forward-looking
statements or information contained in this annual information form are made as of the date hereof and the Company undertakes
no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information,
future events or otherwise, unless required by applicable securities laws.



Natural gas volumes
have been converted on the basis of six thousand cubic feet of natural gas to one barrel equivalent of oil. Barrels of oil equivalent
(boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of
oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.



PRESENTATION OF
OIL AND GAS RESERVES AND PRODUCTION INFORMATION



All oil and natural
gas reserve information contained in this annual information form has been prepared and presented in accordance with National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). The actual oil and natural
gas reserves and future production will be greater than or less than the estimates provided in this annual information form. The
estimated future net revenue from the production of the disclosed oil and natural gas reserves does not represent the fair market
value of these reserves. The Company has adopted the standard of 6 Mcf:1 bbl when converting natural gas to barrels of oil equivalent.
Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.



NON-GAAP MEASURES



This annual information
form includes non-GAAP measures as further described herein. Management of the Company believes these non-GAAP measures are a
useful tool in analyzing operating performance. These measures do not have standardized meanings prescribed by GAAP and, therefore,
may not be comparable with the calculations of similar measures for other entities.



“Cash dividends
per share” represents actual cash dividends paid per share by the Company during the relevant periods.



“Netbacks”
are per unit of production measures used in operational and capital allocation decisions.



“Net dividends”
is calculated as dividends declared for a given period less proceeds received by Vermilion pursuant to the dividend reinvestment
plan. Dividends both before and after the dividend reinvestment plan are reviewed by management and are also assessed as a percentage
of fund flows from operations to analyze how much of the cash that is generated by Vermilion is being used to fund dividends.



8







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



VERMILION ENERGY
INC.



General

Vermilion Energy Inc. is the successor to the Trust, following the completion of the conversion of
the Trust from an income trust to a corporate structure by way of a court approved plan of arrangement under the ABCA on September
1, 2010. Pursuant to the Conversion Arrangement, Unitholders exchanged their Trust Units for common shares of the Company on a
one-for-one basis and holders of exchangeable shares of VRL received 1.89344 common shares for each exchangeable share held.



References to “Vermilion”
prior to the date of the Conversion Arrangement are generally references to the consolidated business enterprise of the Trust
prior to the date of the Conversion Arrangement, whose business the Company is a successor to as a result of the Conversion Arrangement,
as accounted for by “continuity-of-interest” accounting.



Vermilion Energy
Inc. was incorporated on July 21, 2010 pursuant to the provisions of the ABCA for the purpose of facilitating the Conversion Arrangement.
The registered and head office of Vermilion Energy Inc. is located at Suite 3500, 520 – 3rd Avenue S.W., Calgary,
Alberta, T2P 0R3.



Organizational
Structure of the Company



The following diagram
describes the intercorporate relationships among the Company and each of its material subsidiaries as at December 31, 2011, where
each principal subsidiary was incorporated or formed and the percentage of votes attaching to all voting securities of each subsidiary
beneficially owned directly or indirectly by Vermilion. Reference should be made to the appropriate sections of this annual information
form for a complete description of the structure of the Company.







Notes:

| | (1) | Vermilion
                                                            Energy Ireland Limited is the Irish Branch of a Cayman Islands incorporated
                                                            company.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Summary Description
of the Business

Vermilion Energy Inc.



The Company is actively
engaged in the business of oil and natural gas exploitation, development, acquisition and production in Australia, Canada, France,
Ireland and the Netherlands. The Company’s business plan is to expands its portfolio of organic growth opportunities and
revitalize its strategic plan that targets average annual production growth of 10% while maintaining a stable dividend. Vermilion
continues to develop New Growth Initiatives which target the identification and capture of meaningful unconventional resource
related exploration exposure in Canada, Europe and Australia. Where possible, the Company will seek to expand its reserve base
through the selective addition of high-quality, long-life reserves with low risk development opportunities.



Shareholders receive
monthly dividends of the cash flow generated by Vermilion as declared payable by the board of directors of the Company. The Company
currently employs a strategy which: (i) provides Shareholders with a competitive annual cash-on-cash yield through monthly
cash dividends, (ii) ensures that Vermilion's existing assets are maintained at a level that provides sustainable ongoing
cash flow, and (iii) continues to expand the business of the Company through the development of growth opportunities that
are intended to provide long-term stable cash flows and be accretive to the existing Shareholders. The Company intends to finance
acquisitions through bank financing and, when necessary, the issuance of additional common shares from treasury, while maintaining
prudent leverage.



Vermilion
Resources Ltd.



Vermilion Energy
Inc. is the sole holder of VRL common shares.



The head office
of VRL is located at Suite 3500, 520 – 3rd Avenue S.W., Calgary, Alberta, T2P 0R3 and its registered office
is located at Suite 3700, 400 – 3rd Avenue S.W., Calgary, Alberta, T2P 4H2.



History of Vermilion



The following describes
the development of Vermilion's business over the last three completed financial years.



On July 30, 2009,
Vermilion completed the acquisition of an 18.5% non-operated interest in the Corrib field located approximately 83 kilometres
off the northwest coast of Ireland for an aggregate purchase price comprised of US$100 million paid on closing and an obligation
for an additional future payment, the amount of which will vary from an estimated US$300 million to US$135 million, depending
on the date when first commercial gas from the Corrib field is achieved. Pursuant to the acquisition agreement governing the Corrib
acquisition, Vermilion assumed its share of future capital expenditure obligations in order to reach first commercial gas. On
September 29, 2009, Vermilion filed a business acquisition report in connection with the Corrib acquisition, which may be found
on SEDAR at www.sedar.com.



On October 30, 2009,
Vermilion closed an equity financing of 7,282,000 Trust Units at a price $30.90 per Trust Unit for gross proceeds of $225 million.
Subsequently, on December 1, 2009, Vermilion announced that the underwriters had exercised the over-allotment option in connection
with the offering and Vermilion issued an additional 809,000 Trust Units at a price of $30.90 per Trust Unit for gross proceeds
of approximately $25 million. As a result of exercise of the over-allotment option, the aggregate gross proceeds to Vermilion
of the equity offering were approximately $250 million.



On December 21,
2009, Verenex Energy Inc., a company in which Vermilion held 18,760,540 common shares representing a 41.9% equity ownership position,
was sold to a subsidiary of the Libyan Investment Authority for cash consideration of $7.09 per share plus an additional amount
per common share of $0.1976 for aggregate consideration of $7.2876 per share representing gross proceeds to Vermilion of approximately
$136.7 million. The proceeds were used to pay down debt.



On September 1,
2010, Vermilion converted from an income trust to a dividend paying corporation. Approval was granted from the Trust’s Unitholders
to the Conversion Arrangement at a special meeting of Unitholders of the Trust held on August 31, 2010.



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.



10







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



On November 28,
2011, Vermilion completed an equity financing of 5,370,000 common shares at a price of $49.00 per common share for gross proceeds
of approximately $263 million including the partial exercise of the underwriters’ over-allotment option. The net proceeds
were used to reduce a certain amount of outstanding indebtedness under the Company’s credit facility, partially fund the
Company's development capital program and prospective acquisitions and for general purposes.



During the year
Vermilion completed property acquisitions of various strategic properties that complement existing assets within Vermilion’s
portfolio. In 2011, the cost of these property acquisitions to Vermilion was approximately $50.9 million, of which $38.8 million
was from Canada and $12.1 million was from the Netherlands. None of the property acquisitions constituted a “significant
acquisition” within the meaning of applicable securities laws.



On January 24, 2012,
Vermilion, through its wholly-owned subsidiaries, acquired certain working interests in six producing fields located in the Paris
and Aquitaine basins in France. Taking into consideration an effective date of January 1, 2011 and customary closing adjustments,
Vermilion paid approximately $107 million cash at closing. Vermilion financed this acquisition through proceeds received from
the November 2011 equity issuance. The acquisition did not constitute a “significant acquisition” within the meaning
of applicable securities laws.



As at January 31,
2012, Vermilion had 350 full time employees of which 170 employees were located in its head office, 32 employees in its Canadian
field offices, 101 employees in France, 16 employees in the Netherlands and 31 employees in Australia.



NARRATIVE DESCRIPTION
OF THE BUSINESS



Stated Business
Objectives



The Company is actively
engaged in the business of oil and natural gas exploitation, development, acquisition and production in Australia, Canada, France,
Ireland and the Netherlands. The Company’s business plan is to expands its portfolio of organic growth opportunities and
revitalize its strategic plan that targets average annual production growth of 10% while maintaining a stable dividend. Vermilion
continues to develop New Growth Initiatives which target the identification and capture of meaningful unconventional resource
related exploration exposure in Canada, Europe and Australia. Where possible, the Company will seek to expand its reserve base
through the selective addition of high-quality, long-life reserves with low risk development opportunities.



In reviewing potential
participations or acquisitions, Vermilion will consider a number of factors, including: (a) the present value of the future
revenue from such properties from the proved producing, total proved and proved plus probable reserves; (b) the amount of
potential for additional reservoir development; (c) whether sufficient infrastructure exists in the prospect to provide for
increased activity; (d) the cost of any potential development; (e) investments in properties that exhibit medium to
long life reserves and stable production base; and (f) the ability of Vermilion to enhance the value of acquired properties
through additional exploitation efforts and additional development drilling. The board of directors of Vermilion may, in its discretion,
approve asset or corporate acquisitions or investments that do not conform to these guidelines based upon the board's consideration
of the qualitative aspects of the subject properties including risk profile, technical upside, reserve life, asset quality and
the Company's business prospects.



Description of
Properties



The following is
a description of the oil and natural gas properties, plants, facilities and installations in which Vermilion has an interest and
that are material to Vermilion's operations and exploration activities. The production numbers stated refer to Vermilion's working
interest share before deduction of Crown, freehold and other royalties. Reserve amounts are stated, before deduction of royalties,
as at December 31, 2011, based on forecasted costs and price assumptions as evaluated in the GLJ Report.



Canada
Assets



Vermilion’s
production in Canada is located primarily in three areas, all in Alberta: Drayton Valley, Slave Lake and Central Alberta. Vermilion’s
main gas producing areas are Drayton Valley and Central Alberta, while Slave Lake and the new Cardium light oil play in Drayton
Valley are the main oil producing areas.



In Canada, Vermilion
holds an average working interest of 68.5% in 395,616 (271,067 net) acres of developed land, 582 (396 net) producing natural gas
wells and 319 (198 net) producing oil wells as at December 31, 2011. Vermilion operates five natural gas plants and has an ownership
interest in five additional plants, resulting in combined gross processing capacity of over 89 MMcf/d. Vermilion has capacity
of over 20,500 bbl/d of oil in five operated oil batteries, including a battery constructed to handle 15,000 bbl/d of Cardium
production which was completed in 2011 on time and on budget. The new battery commenced operations August 1, 2011 and as of December,
2011, was processing approximately 6,170 bbl/d of oil which represents 71% of Vermilion’s total Cardium production.



11







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Vermilion sold its
interests in the Mitsue field resulting in a decrease in the Canadian well count of 202 (8 net) producing oil wells.



Risks and uncertainties
associated with weather conditions can shorten the winter drilling season and can impact the spring and summer drilling programs,
potentially resulting in increased costs or reduced production.



For a discussion
of the competitive conditions affecting Vermilion’s business, refer to “Competition” in the Risk Factors section
of this AIF.



For the year ended
December 31, 2011, production in Canada averaged approximately 43 MMcf/d of natural gas and 5,998 bbl/d of oil and NGLs. Revenues
from the sale of natural gas were $60.6 million in the year (2010 - $72.7 million) and $199.2 million from oil and NGLs (2010
- $112.5 million).



The GLJ Report assigned
38,732 Mboe of total proved reserves and 64,187 Mboe of proved plus probable reserves to Vermilion's properties located in Canada
as at December 31, 2011.



France
Assets



Vermilion's main
producing areas in France are located in the Aquitaine Basin which is southwest of Bordeaux, France and in the Paris Basin, located
just east of Paris. Vermilion's assets in France are primarily oil producing properties. The two major fields in the Paris Basin
area are Champotran and Chaunoy. The two major fields in the Aquitaine Basin are Parentis and Cazaux. Vermilion operates eight
oil batteries with current producing capacities of 8,100 bbl/d, however, expansion above this, could be easily accommodated. Vermilion
holds an 83.6% working interest in 193,017 acres of developed land in the Aquitaine and Paris Basins. Vermilion had 220 (193 net)
producing oil wells in France as at December 31, 2011.



Risks and uncertainties
associated with well approvals can impact the drilling programs, potentially resulting in delays or reduced production.



For a discussion
of the competitive conditions affecting Vermilion’s business, refer to “Competition” in the Risk Factors section
of this AIF.



For the year ended
December 31, 2011, production in France averaged approximately 8,110 bbl/d of oil and 1.0 MMcf/d of natural gas. Revenues from
oil sales were $319.9 million in the year (2010 - $245.7 million) and $4.2 million from the sale of natural gas (2010 - $3.3 million).



The GLJ Report assigned
24,226 Mboe of total proved reserves and 36,030 Mboe of proved plus probable reserves to Vermilion's properties located in France.



On January 24, 2012,
Vermilion, through its wholly-owned subsidiaries, acquired from Total E&P France, certain working interests in six producing
fields located in the Paris and Aquitaine basins in France. The assets are expected to average approximately 2,200 boe per day
of production in 2012. Vermilion acquired the remaining working interest in three existing fields; Itteville, Vert Le Grand and
Vic Bihl. Three new fields were acquired; Vert Le Petit and La Croix Blanche at 100% working interest and Dommartin-Lettrée
at 56% working interest.



Netherlands
Assets



Vermilion's Netherlands
assets consist of eight onshore concessions and one offshore concession located in the northern part of the country. Production
consists solely of natural gas with a small amount of related condensate. The assets include three operated gas treatment centres
that have a combined total capacity of 240 MMcf/d. Vermilion holds an approximate 63.4% working interest over the nine concessions
in 49,272 (36,485 net) acres of developed land and 53 (40 net) producing gas wells as at December 31, 2011.



Risks and uncertainties
associated with drilling and production permits can impact drilling programs and production timing, potentially resulting in increased
costs or reduced production.



For a discussion
of the competitive conditions affecting Vermilion’s business, refer to “Competition” in the Risk Factors section
of this AIF.



For the year ended
December 31, 2011, Vermilion's production in the Netherlands averaged 58 bbl/d of NGLs and 33 MMcf/d of natural gas. Revenues
from the sale of natural gas were $114.2 million in the year (2010 - $72.8 million) and $2.0 million from NGL sales (2010 - $1.0
million).



The GLJ Report assigned
5,512 Mboe of total proved reserves and 11,025 Mboe of proved plus probable reserves to Vermilion's properties located in the
Netherlands.



12







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Australia
Assets



Vermilion's Australia
assets consist of a 100% operated interest in an offshore oil field located on Western Australia's northwest shelf. The platform
has a current capacity of 162,000 bbl/d of total fluid. Vermilion holds a 100% working interest in the Wandoo block, which is
comprised of 59,553 acres and is considered a production license. All acreage therefore is classified as producing.



The northwest shelf
of Australia is subject to seasonal disruptions caused by cyclones. During cyclone season (December to March) the Company may
have to reduce production rates at its offshore facilities as a result of the inability to offload to tankers due to bad weather.
Cyclones may also cause production shut-ins due to the evacuation of staff or damage to the equipment on the platform.



For a discussion
of the competitive conditions affecting Vermilion’s business, refer to “Competition” in the Risk Factors section
of this AIF.



For the year ended
December 31, 2011, Vermilion's production in the Australia averaged 8,168 bbl/d of oil. Revenues from oil sales were $331.4 million
in the year (2010 - $219.7 million).



The GLJ Report assigned
12,697 Mboe of total proved reserves and 17,497 Mboe of proved plus probable reserves to Vermilion's properties located in Australia.



Ireland
Assets



Vermilion holds
an 18.5% non-operating interest in the offshore Corrib gas field located off the northwest coast of Ireland. Production from Corrib
is expected to increase Vermilion’s volumes by approximately 54 MMcf (9,000 boe/d) once the field reaches peak production.
Vermilion acquired its 18.5% working interest in the project on July 30, 2009, which comprised of seven offshore wells, both offshore
and onshore pipeline segments as well as a significant natural gas processing facility. At the time of the acquisition most of
the key components of the project, with the exception of the onshore pipeline, were either complete or in the latter stages of
development. In 2011, approvals and permissions were granted for the onshore gas pipeline and construction has commenced with
tunnelling expected to begin in the fourth quarter of 2012. Vermilion expects to continue significant capital investment on this
project over the next two years and currently expects to achieve initial gas production from this field in late 2014.



The GLJ Report assigned
15,332 Mboe of total proved reserves and 17,493 Mboe of proved plus probable reserves to Vermilion’s property in Ireland.



STATEMENT OF RESERVES
DATA AND OTHER OIL AND GAS INFORMATION



Reserves and
Future Net Revenue



The following is
a summary of the oil and natural gas reserves and the value of future net revenue of Vermilion as evaluated by GLJ in a report
dated February 3, 2012. Pricing used in the forecast price evaluations is set forth in the notes to the tables.



Information contained
in this section is effective December 31, 2011 unless otherwise stated.



All evaluations
of future net production revenue set forth in the tables below are stated after overriding and lessor royalties, Crown royalties,
freehold royalties, mineral taxes, direct lifting costs, normal allocated overhead and future capital investments, including abandonment
and reclamation obligations. It should not be assumed that the discounted future net production revenue estimated by the GLJ
Report represents the fair market value of the reserves. Other assumptions relating to the costs, prices for future production
and other matters are included in the GLJ Report. There is no assurance that the future price and cost assumptions used in the
GLJ Report will prove accurate and variances could be material.



Reserves for Australia,
Canada, France, Ireland and the Netherlands are established using deterministic methodology. Total proved reserves are established
at the 90 percent probability (P90) level. There is a 90 percent probability that the actual reserves recovered will be equal
to or greater than the P90 reserves. Total proved plus probable reserves are established at the 50 percent probability (P50) level.
There is a 50 percent probability that the actual reserves recovered will be equal to or greater than the P50 reserves.



The Report on Reserves
Data by Independent Qualified Reserves Evaluator in Form 51-101F2 and the Report of Management and Directors on Oil and Gas Disclosure
in Form 51-101F3 are contained in Schedules "A" and "B", respectively.



The following tables
provide reserves data and a breakdown of future net revenue by component and production group using forecast prices and costs.
For Canada, the tables following include AGCA.



13







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



The following tables
may not total due to rounding.



Oil and Gas Reserves
- Based on Forecast Prices and Costs(8)





|                                     |  | Light and Medium Oil |        |  | Heavy Oil |  |        | Natural Gas |  |  | Natural Gas Liquids |  |  | BOE      |   
|------------------------------------ |  | -------------------- | ------ |  | --------- |  | ------ | ----------- |  |  | ------------------- |  |  | -------- | --
|                                     |  | Gross(1)             |        |  | Net(1)    |  |        | Gross(1)    |  |  | Net(1)              |  |  | Gross(1) |   
|                                     |  | (Mbbl)               |        |  | (Mbbl)    |  |        | (Mbbl)      |  |  | (Mbbl)              |  |  | (MMcf)   |   
|Proved Developed Producing(2)(5)     |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | 12,697 |  |           |  | 12,697 |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 8,343  |  |           |  | 6,874  |             |  |  | 19                  |  |  |          | 18
|France                               |  |                      | 22,748 |  |           |  | 21,020 |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Proved Developed Producing     |  |                      | 43,789 |  |           |  | 40,590 |             |  |  | 19                  |  |  |          | 18
|Proved Developed Non-Producing(2)(6) |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 526    |  |           |  | 454    |             |  |  | -                   |  |  |          | - 
|France                               |  |                      | 335    |  |           |  | 300    |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Proved Developed Non-Producing |  |                      | 861    |  |           |  | 753    |             |  |  | -                   |  |  |          | - 
|Proved Undeveloped(2)(7)             |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 7,083  |  |           |  | 6,216  |             |  |  | -                   |  |  |          | - 
|France                               |  |                      | 1,043  |  |           |  | 1,006  |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Proved Undeveloped             |  |                      | 8,127  |  |           |  | 7,221  |             |  |  | -                   |  |  |          | - 
|Proved(2)                            |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | 12,697 |  |           |  | 12,697 |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 15,953 |  |           |  | 13,543 |             |  |  | 19                  |  |  |          | 18
|France                               |  |                      | 24,127 |  |           |  | 22,325 |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Proved                         |  |                      | 52,777 |  |           |  | 48,565 |             |  |  | 19                  |  |  |          | 18
|Probable(3)                          |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | 4,800  |  |           |  | 4,800  |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 14,035 |  |           |  | 11,759 |             |  |  | 3                   |  |  |          | 3 
|France                               |  |                      | 11,801 |  |           |  | 11,581 |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Probable                       |  |                      | 30,636 |  |           |  | 28,140 |             |  |  | 3                   |  |  |          | 3 
|Proved Plus Probable(2)(3)           |  |                      |        |  |           |  |        |             |  |  |                     |  |  |          |   
|Australia                            |  |                      | 17,497 |  |           |  | 17,497 |             |  |  | -                   |  |  |          | - 
|Canada                               |  |                      | 29,988 |  |           |  | 25,302 |             |  |  | 22                  |  |  |          | 21
|France                               |  |                      | 35,928 |  |           |  | 33,906 |             |  |  | -                   |  |  |          | - 
|Ireland                              |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Netherlands                          |  |                      | -      |  |           |  | -      |             |  |  | -                   |  |  |          | - 
|Total Proved Plus Probable           |  |                      | 83,413 |  |           |  | 76,705 |             |  |  | 22                  |  |  |          | 21



14







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Net Present Values
of Future Net Revenue - Based on Forecast Prices and Costs(8)



|                                         |  | Before
    Deducting Future Income Taxes Discounted At |           |  | After
    Deducting Future Income Taxes Discounted At | 
|---------------------------------------- |  | ------------------------------------------------------ | --------- |  | ----------------------------------------------------- | 
|(M$)                                     |  | 0%                                                     |           |  | 5%                                                    | 
|Proved Developed
    Producing(2)(5)     |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | 839,270   |  |                                                       | 
|Canada                                   |  |                                                        | 662,170   |  |                                                       | 
|France                                   |  |                                                        | 1,355,615 |  |                                                       | 
|Ireland                                  |  |                                                        | -         |  |                                                       | 
|Netherlands                              |  |                                                        | 128,327   |  |                                                       | 
|Total Proved Developed Producing         |  |                                                        | 2,985,382 |  |                                                       | 
|Proved Developed
    Non-Producing(2)(6) |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | -         |  |                                                       | 
|Canada                                   |  |                                                        | 44,983    |  |                                                       | 
|France                                   |  |                                                        | 15,689    |  |                                                       | 
|Ireland                                  |  |                                                        | -         |  |                                                       | 
|Netherlands                              |  |                                                        | 89,596    |  |                                                       | 
|Total Proved Developed Non-Producing     |  |                                                        | 150,267   |  |                                                       | 
|Proved Undeveloped(2)(7)                 |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | -         |  |                                                       | 
|Canada                                   |  |                                                        | 319,009   |  |                                                       | 
|France                                   |  |                                                        | 64,858    |  |                                                       | 
|Ireland                                  |  |                                                        | 568,171   |  |                                                       | 
|Netherlands                              |  |                                                        | -         |  |                                                       | 
|Total Proved Undeveloped                 |  |                                                        | 952,038   |  |                                                       | 
|Proved(2)                                |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | 839,270   |  |                                                       | 
|Canada                                   |  |                                                        | 1,026,162 |  |                                                       | 
|France                                   |  |                                                        | 1,436,161 |  |                                                       | 
|Ireland                                  |  |                                                        | 568,171   |  |                                                       | 
|Netherlands                              |  |                                                        | 217,923   |  |                                                       | 
|Total Proved                             |  |                                                        | 4,087,687 |  |                                                       | 
|Probable(3)                              |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | 309,824   |  |                                                       | 
|Canada                                   |  |                                                        | 829,395   |  |                                                       | 
|France                                   |  |                                                        | 901,599   |  |                                                       | 
|Ireland                                  |  |                                                        | 120,336   |  |                                                       | 
|Netherlands                              |  |                                                        | 299,235   |  |                                                       | 
|Total Probable                           |  |                                                        | 2,460,389 |  |                                                       | 
|Proved Plus
    Probable(2)(3)           |  |                                                        |           |  |                                                       | 
|Australia                                |  |                                                        | 1,149,094 |  |                                                       | 
|Canada                                   |  |                                                        | 1,855,558 |  |                                                       | 
|France                                   |  |                                                        | 2,337,761 |  |                                                       | 
|Ireland                                  |  |                                                        | 688,507   |  |                                                       | 
|Netherlands                              |  |                                                        | 517,158   |  |                                                       | 
|Total Proved Plus Probable               |  |                                                        | 6,548,076 |  |                                                       | 



Total Future
Net Revenue (Undiscounted) Based on Forecast Prices and Costs(8)



|(M$)                       |  | Revenue |            |  | Royalties |  |         | Operating Costs |  |  | Capital Development Costs |  |  | Abandonment Costs |           |  | Future Net Revenue Before Income Taxes |  |         | Future
                                                                                                             Income Taxes |  |  | Future Net Revenue After Income Taxes | 
|-------------------------- |  | ------- | ---------- |  | --------- |  | ------- | --------------- |  |  | ------------------------- |  |  | ----------------- | --------- |  | -------------------------------------- |  | ------- | -------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------- | 
|Proved(2)                  |  |         |            |  |           |  |         |                 |  |  |                           |  |  |                   |           |  |                                        |  |         |                                                                                                                                  |  |  |                                       | 
|Australia                  |  |         | 1,337,692  |  |           |  | -       |                 |  |  | 437,203                   |  |  |                   | 24,602    |  |                                        |  | 36,618  |                                                                                                                                  |  |  | 839,270                               | 
|Canada                     |  |         | 2,628,213  |  |           |  | 364,823 |                 |  |  | 867,576                   |  |  |                   | 335,511   |  |                                        |  | 34,140  |                                                                                                                                  |  |  | 1,026,162                             | 
|France                     |  |         | 2,517,926  |  |           |  | 187,241 |                 |  |  | 725,903                   |  |  |                   | 98,820    |  |                                        |  | 69,800  |                                                                                                                                  |  |  | 1,436,161                             | 
|Ireland                    |  |         | 1,002,775  |  |           |  | -       |                 |  |  | 185,936                   |  |  |                   | 239,901   |  |                                        |  | 8,766   |                                                                                                                                  |  |  | 568,171                               | 
|Netherlands                |  |         | 352,826    |  |           |  | -       |                 |  |  | 110,522                   |  |  |                   | 11,532    |  |                                        |  | 12,850  |                                                                                                                                  |  |  | 217,923                               | 
|Total Proved               |  |         | 7,839,432  |  |           |  | 552,064 |                 |  |  | 2,327,141                 |  |  |                   | 710,366   |  |                                        |  | 162,175 |                                                                                                                                  |  |  | 4,087,687                             | 
|Proved Plus Probable(2)(3) |  |         |            |  |           |  |         |                 |  |  |                           |  |  |                   |           |  |                                        |  |         |                                                                                                                                  |  |  |                                       | 
|Australia                  |  |         | 1,877,536  |  |           |  | -       |                 |  |  | 655,870                   |  |  |                   | 32,602    |  |                                        |  | 39,970  |                                                                                                                                  |  |  | 1,149,094                             | 
|Canada                     |  |         | 4,707,012  |  |           |  | 666,874 |                 |  |  | 1,463,176                 |  |  |                   | 675,286   |  |                                        |  | 46,117  |                                                                                                                                  |  |  | 1,855,558                             | 
|France                     |  |         | 3,836,836  |  |           |  | 212,280 |                 |  |  | 1,000,304                 |  |  |                   | 198,738   |  |                                        |  | 87,753  |                                                                                                                                  |  |  | 2,337,761                             | 
|Ireland                    |  |         | 1,150,073  |  |           |  | -       |                 |  |  | 211,152                   |  |  |                   | 241,472   |  |                                        |  | 8,942   |                                                                                                                                  |  |  | 688,507                               | 
|Netherlands                |  |         | 731,337    |  |           |  | -       |                 |  |  | 175,111                   |  |  |                   | 24,372    |  |                                        |  | 14,696  |                                                                                                                                  |  |  | 517,158                               | 
|Total Proved Plus Probable |  |         | 12,302,792 |  |           |  | 879,154 |                 |  |  | 3,505,613                 |  |  |                   | 1,172,470 |  |                                        |  | 197,479 |                                                                                                                                  |  |  | 6,548,076                             | 



15







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Future Net Revenue
by Production Group Based on Forecast Prices and Costs(8)



|                                        |  | Net Present Value of Future  Net Revenue Before Income Taxes (Discounted at 10% Per Year) |           |  | Unit Value | 
|--------------------------------------- |  | ----------------------------------------------------------------------------------------- | --------- |  | ---------- | 
|                                        |  | (M$)                                                                                      |           |  | ($/boe)    | 
|Proved(2)                               |  |                                                                                           |           |  |            | 
|Light and medium oil                    |  |                                                                                           | 1,941,451 |  |            | 
|Heavy oil                               |  |                                                                                           | 826       |  |            | 
|Associated gas and non-associated gas   |  |                                                                                           | 566,144   |  |            | 
|Non-conventional oil and gas activities |  |                                                                                           | 17,114    |  |            | 
|Total Proved                            |  |                                                                                           | 2,525,536 |  |            | 
|Proved Plus Probable(2)(3)              |  |                                                                                           |           |  |            | 
|Light and medium oil                    |  |                                                                                           | 2,714,643 |  |            | 
|Heavy oil                               |  |                                                                                           | 921       |  |            | 
|Associated gas and non-associated gas   |  |                                                                                           | 822,449   |  |            | 
|Non-conventional oil and gas activities |  |                                                                                           | 25,150    |  |            | 
|Total Proved Plus Probable              |  |                                                                                           | 3,563,163 |  |            | 



Forecast Prices
used in Estimates(8)



|           |  | Light and Medium Crude Oil                                                                                                                  |        |   | Crude Oil                             |  |        | Natural Gas                        |  |  | Natural Gas Netherlands             |   |  | Natural Gas Liquids         |        |   | Inflation Rate           |  |      | Exchange Rate             | 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- | ------ | - | ------------------------------------- |  | ------ | ---------------------------------- |  |  | ----------------------------------- | - |  | --------------------------- | ------ | - | ------------------------ |  | ---- | ------------------------- | 
|Year       |  | WTI
                                                                                                             Cushing Oklahoma ($US/bbl) |        |   | Edmonton Par Price 40o API ($Cdn/bbl) |  |        | Cromer Medium 29.3o API ($Cdn/bbl) |  |  | Brent Blend FOB North Sea ($US/bbl) |   |  | AECO Gas Price ($Cdn/MMBtu) |        |   | TTF Gas Price ($Cdn/Mcf) |  |      | FOB Field Gate ($Cdn/bbl) | 
|2011       |  |                                                                                                                                             | 94.83  |   |                                       |  | 95.15  |                                    |  |  | 87.57                               |   |  |                             | 110.63 |   |                          |  | 3.68 |                           | 
|Forecast   |  |                                                                                                                                             |        |   |                                       |  |        |                                    |  |  |                                     |   |  |                             |        |   |                          |  |      |                           | 
|2012       |  |                                                                                                                                             | 97.00  |   |                                       |  | 97.96  |                                    |  |  | 90.12                               |   |  |                             | 105.00 |   |                          |  | 3.49 |                           | 
|2013       |  |                                                                                                                                             | 100.00 |   |                                       |  | 101.02 |                                    |  |  | 92.94                               |   |  |                             | 105.00 |   |                          |  | 4.13 |                           | 
|2014       |  |                                                                                                                                             | 100.00 |   |                                       |  | 101.02 |                                    |  |  | 91.93                               |   |  |                             | 102.00 |   |                          |  | 4.59 |                           | 
|2015       |  |                                                                                                                                             | 100.00 |   |                                       |  | 101.02 |                                    |  |  | 91.93                               |   |  |                             | 100.00 |   |                          |  | 5.05 |                           | 
|2016       |  |                                                                                                                                             | 100.00 |   |                                       |  | 101.02 |                                    |  |  | 91.93                               |   |  |                             | 100.00 |   |                          |  | 5.51 |                           | 
|Thereafter |  |                                                                                                                                             | 2.0    | % |                                       |  | 2.0    | %                                  |  |  | 2.0                                 | % |  |                             | 2.0    | % |                          |  | 2.0  | %                         | 

* All prices above
from GLJ except Netherlands 2011 which is Vermilion’s realized price.



Reconciliations
of Changes in Reserves

The following tables set forth a reconciliation of the changes in Vermilion's company gross light and
medium crude oil, associated and non-associated gas (combined) reserves as at December 31, 2011 against such reserves as at December
31, 2010 based on the forecast price and cost assumptions set forth in note 8 under the heading "Statement of Reserves Data
and Other Oil and Gas Information - Future Net Revenue by Production Based on Forecast Prices and Costs".





16









|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Reconciliation
of Company Gross Reserves by Principal Product Type - Based on Forecast Prices and Costs



|AUSTRALIA                                 |  | Total Oil     |        |   | Light and Medium Oil |  |        | Heavy Oil                   |  |  | Natural Gas Liquids |  
|----------------------------------------- |  | ------------- | ------ | - | -------------------- |  | ------ | --------------------------- |  |  | ------------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |        |   | Probable
    (Mbbl)  |  |        | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       |  
|At December 31, 2010                      |  |               | 13,198 |   |                      |  | 6,500  |                             |  |  | 19,698              |  
|Discoveries                               |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Extensions & Improved Recovery            |  |               | 100    |   |                      |  | (100   | )                           |  |  | -                   |  
|Technical Revisions                       |  |               | 2,380  |   |                      |  | (1,600 | )                           |  |  | 780                 |  
|Acquisitions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Dispositions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Economic Factors                          |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Production                                |  |               | (2,981 | ) |                      |  | -      |                             |  |  | (2,981              | )
|At December 31, 2011                      |  |               | 12,697 |   |                      |  | 4,800  |                             |  |  | 17,497              |  



|                                          |  | Total Gas     |   |  | Conventional Natural Gas |  |   | Coal Bed Methane            |  |  | BOE           | 
|----------------------------------------- |  | ------------- | - |  | ------------------------ |  | - | --------------------------- |  |  | ------------- | 
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |   |  | Probable (MMcf)          |  |   | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) | 
|At December 31, 2010                      |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Discoveries                               |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Extensions & Improved Recovery            |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Technical Revisions                       |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Acquisitions                              |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Dispositions                              |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Economic Factors                          |  |               | - |  |                          |  | - |                             |  |  | -             | 
|Production                                |  |               | - |  |                          |  | - |                             |  |  | -             | 
|At December 31, 2011                      |  |               | - |  |                          |  | - |                             |  |  | -             | 



|CANADA                                    |  | Total Oil     |        |   | Light and Medium Oil |  |        | Heavy Oil                   |  |  | Natural Gas Liquids |  
|----------------------------------------- |  | ------------- | ------ | - | -------------------- |  | ------ | --------------------------- |  |  | ------------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |        |   | Probable
    (Mbbl)  |  |        | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       |  
|At December 31, 2010                      |  |               | 11,876 |   |                      |  | 8,703  |                             |  |  | 20,579              |  
|Discoveries                               |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Extensions & Improved Recovery            |  |               | 5,960  |   |                      |  | 5,394  |                             |  |  | 11,354              |  
|Technical Revisions                       |  |               | (18    | ) |                      |  | 23     |                             |  |  | 5                   |  
|Acquisitions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Dispositions                              |  |               | (130   | ) |                      |  | (82    | )                           |  |  | (212                | )
|Economic Factors                          |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Production                                |  |               | (1,716 | ) |                      |  | -      |                             |  |  | (1,716              | )
|At December 31, 2011                      |  |               | 15,972 |   |                      |  | 14,038 |                             |  |  | 30,010              |  



|                                          |  | Total Gas     |         |   | Conventional Natural Gas |  |        | Coal Bed Methane            |  |  | BOE           |  
|----------------------------------------- |  | ------------- | ------- | - | ------------------------ |  | ------ | --------------------------- |  |  | ------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |         |   | Probable (MMcf)          |  |        | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) |  
|At December 31, 2010                      |  |               | 114,766 |   |                          |  | 49,826 |                             |  |  | 164,592       |  
|Discoveries                               |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Extensions & Improved Recovery            |  |               | 12,140  |   |                          |  | 9,353  |                             |  |  | 21,493        |  
|Technical Revisions                       |  |               | 8,888   |   |                          |  | 1,576  |                             |  |  | 10,464        |  
|Acquisitions                              |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Dispositions                              |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Economic Factors                          |  |               | (3,550  | ) |                          |  | (2,230 | )                           |  |  | (5,780        | )
|Production                                |  |               | (15,833 | ) |                          |  | -      |                             |  |  | (15,833       | )
|At December 31, 2011                      |  |               | 116,411 |   |                          |  | 58,525 |                             |  |  | 174,936       |  



17







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



|FRANCE                                    |  | Total Oil     |        |   | Light and Medium Oil |  |        | Heavy Oil                   |  |  | Natural Gas Liquids |  
|----------------------------------------- |  | ------------- | ------ | - | -------------------- |  | ------ | --------------------------- |  |  | ------------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |        |   | Probable
    (Mbbl)  |  |        | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       |  
|At December 31, 2010                      |  |               | 26,310 |   |                      |  | 12,992 |                             |  |  | 39,302              |  
|Discoveries                               |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Extensions & Improved Recovery            |  |               | 243    |   |                      |  | 241    |                             |  |  | 484                 |  
|Technical Revisions                       |  |               | 534    |   |                      |  | (1,432 | )                           |  |  | (898                | )
|Acquisitions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Dispositions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Economic Factors                          |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Production                                |  |               | (2,960 | ) |                      |  | -      |                             |  |  | (2,960              | )
|At December 31, 2011                      |  |               | 24,127 |   |                      |  | 11,801 |                             |  |  | 35,928              |  



|                                          |  | Total Gas     |        |   | Conventional Natural Gas |  |     | Coal Bed Methane            |  |  | BOE           |  
|----------------------------------------- |  | ------------- | ------ | - | ------------------------ |  | --- | --------------------------- |  |  | ------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |        |   | Probable (MMcf)          |  |     | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) |  
|At December 31, 2010                      |  |               | 2,481  |   |                          |  | 74  |                             |  |  | 2,555         |  
|Discoveries                               |  |               | -      |   |                          |  | -   |                             |  |  | -             |  
|Extensions & Improved Recovery            |  |               | -      |   |                          |  | -   |                             |  |  | -             |  
|Technical Revisions                       |  |               | (1,537 | ) |                          |  | (55 | )                           |  |  | (1,592        | )
|Acquisitions                              |  |               | -      |   |                          |  | -   |                             |  |  | -             |  
|Dispositions                              |  |               | -      |   |                          |  | -   |                             |  |  | -             |  
|Economic Factors                          |  |               | -      |   |                          |  | -   |                             |  |  | -             |  
|Production                                |  |               | (348   | ) |                          |  | -   |                             |  |  | (348          | )
|At December 31, 2011                      |  |               | 596    |   |                          |  | 19  |                             |  |  | 615           |  



|IRELAND                                   |  | Total Oil     |   |  | Light and Medium Oil |  |   | Heavy Oil                   |  |  | Natural Gas Liquids | 
|----------------------------------------- |  | ------------- | - |  | -------------------- |  | - | --------------------------- |  |  | ------------------- | 
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |   |  | Probable
    (Mbbl)  |  |   | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       | 
|At December 31, 2010                      |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Discoveries                               |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Extensions & Improved Recovery            |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Technical Revisions                       |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Acquisitions                              |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Dispositions                              |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Economic Factors                          |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Production                                |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|At December 31, 2011                      |  |               | - |  |                      |  | - |                             |  |  | -                   | 



|                                          |  | Total Gas     |        |   | Conventional Natural Gas |  |        | Coal Bed Methane            |  |  | BOE           |  
|----------------------------------------- |  | ------------- | ------ | - | ------------------------ |  | ------ | --------------------------- |  |  | ------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |        |   | Probable (MMcf)          |  |        | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) |  
|At December 31, 2010                      |  |               | 91,997 |   |                          |  | 12,965 |                             |  |  | 104,962       |  
|Discoveries                               |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|Extensions & Improved Recovery            |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|Technical Revisions                       |  |               | (6     | ) |                          |  | 3      |                             |  |  | (3            | )
|Acquisitions                              |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|Dispositions                              |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|Economic Factors                          |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|Production                                |  |               | -      |   |                          |  | -      |                             |  |  | -             |  
|At December 31, 2011                      |  |               | 91,991 |   |                          |  | 12,968 |                             |  |  | 104,959       |  



18







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



|NETHERLANDS                               |  | Total Oil     |   |  | Light and Medium Oil |  |   | Heavy Oil                   |  |  | Natural Gas Liquids | 
|----------------------------------------- |  | ------------- | - |  | -------------------- |  | - | --------------------------- |  |  | ------------------- | 
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |   |  | Probable
    (Mbbl)  |  |   | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       | 
|At December 31, 2010                      |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Discoveries                               |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Extensions & Improved Recovery            |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Technical Revisions                       |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Acquisitions                              |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Dispositions                              |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Economic Factors                          |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|Production                                |  |               | - |  |                      |  | - |                             |  |  | -                   | 
|At December 31, 2011                      |  |               |   |  |                      |  |   |                             |  |  |                     | 



|                                          |  | Total Gas     |         |   | Conventional Natural Gas |  |        | Coal Bed Methane            |  |  | BOE           |  
|----------------------------------------- |  | ------------- | ------- | - | ------------------------ |  | ------ | --------------------------- |  |  | ------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |         |   | Probable (MMcf)          |  |        | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) |  
|At December 31, 2010                      |  |               | 38,954  |   |                          |  | 33,025 |                             |  |  | 71,979        |  
|Discoveries                               |  |               | 501     |   |                          |  | 510    |                             |  |  | 1,011         |  
|Extensions & Improved Recovery            |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Technical Revisions                       |  |               | 5,313   |   |                          |  | (795   | )                           |  |  | 4,518         |  
|Acquisitions                              |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Dispositions                              |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Economic Factors                          |  |               | -       |   |                          |  | -      |                             |  |  | -             |  
|Production                                |  |               | (12,000 | ) |                          |  | -      |                             |  |  | (12,000       | )
|At December 31, 2011                      |  |               | 32,768  |   |                          |  | 32,740 |                             |  |  | 65,508        |  



|TOTAL COMPANY                             |  | Total Oil     |        |   | Light and Medium Oil |  |        | Heavy Oil                   |  |  | Natural Gas Liquids |  
|----------------------------------------- |  | ------------- | ------ | - | -------------------- |  | ------ | --------------------------- |  |  | ------------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (Mbbl) |        |   | Probable
    (Mbbl)  |  |        | Proved Plus Probable (Mbbl) |  |  | Proved (Mbbl)       |  
|At December 31, 2010                      |  |               | 51,384 |   |                      |  | 28,195 |                             |  |  | 79,579              |  
|Discoveries                               |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Extensions & Improved Recovery            |  |               | 6,303  |   |                      |  | 5,535  |                             |  |  | 11,838              |  
|Technical Revisions                       |  |               | 2,896  |   |                      |  | (3,009 | )                           |  |  | (113                | )
|Acquisitions                              |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Dispositions                              |  |               | (130   | ) |                      |  | (82    | )                           |  |  | (212                | )
|Economic Factors                          |  |               | -      |   |                      |  | -      |                             |  |  | -                   |  
|Production                                |  |               | (7,657 | ) |                      |  | -      |                             |  |  | (7,657              | )
|At December 31, 2011                      |  |               | 52,796 |   |                      |  | 30,639 |                             |  |  | 83,435              |  



|                                          |  | Total Gas     |         |   | Conventional Natural Gas |  |         | Coal Bed Methane            |  |  | BOE           |  
|----------------------------------------- |  | ------------- | ------- | - | ------------------------ |  | ------- | --------------------------- |  |  | ------------- | -
|Proved (2) Probable (3) P+P (2)(3)Factors |  | Proved (MMcf) |         |   | Probable (MMcf)          |  |         | Proved Plus Probable (MMcf) |  |  | Proved (MMcf) |  
|At December 31, 2010                      |  |               | 248,198 |   |                          |  | 95,890  |                             |  |  | 344,088       |  
|Discoveries                               |  |               | 501     |   |                          |  | 510     |                             |  |  | 1,011         |  
|Extensions & Improved Recovery            |  |               | 12,140  |   |                          |  | 9,353   |                             |  |  | 21,493        |  
|Technical Revisions                       |  |               | 12,658  |   |                          |  | 729     |                             |  |  | 13,387        |  
|Acquisitions                              |  |               | -       |   |                          |  | -       |                             |  |  | -             |  
|Dispositions                              |  |               | -       |   |                          |  | -       |                             |  |  | -             |  
|Economic Factors                          |  |               | (3,550  | ) |                          |  | (2,230  | )                           |  |  | (5,780        | )
|Production                                |  |               | (28,181 | ) |                          |  | -       |                             |  |  | (28,181       | )
|At December 31, 2011                      |  |               | 241,766 |   |                          |  | 104,252 |                             |  |  | 346,018       |  



19







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Notes:

| | (1) | "Gross
                                                                                                            Reserves" are
                                                                                                            Vermilion's working
                                                                                                            interest (operating
                                                                                                            or non-operating)
                                                                                                            share before deducting
                                                                                                            of royalties and without
                                                                                                            including any royalty
                                                                                                            interests of Vermilion.
                                                                                                            "Net Reserves"
                                                                                                            are Vermilion's working
                                                                                                            interest (operating
                                                                                                            or non-operating)
                                                                                                            share after deduction
                                                                                                            of royalty obligations,
                                                                                                            plus Vermilion's royalty
                                                                                                            interests in reserves.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | "Proved"
                                                                                                            reserves are those
                                                                                                            reserves that can
                                                                                                            be estimated with
                                                                                                            a high degree of certainty
                                                                                                            to be recoverable.
                                                                                                            It is likely that
                                                                                                            the actual remaining
                                                                                                            quantities recovered
                                                                                                            will exceed the estimated
                                                                                                            proved reserves.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | "Probable"
                                                                                                            reserves are those
                                                                                                            additional reserves
                                                                                                            that are less certain
                                                                                                            to be recovered than
                                                                                                            proved reserves. It
                                                                                                            is equally likely
                                                                                                            that the actual remaining
                                                                                                            quantities recovered
                                                                                                            will be greater or
                                                                                                            less than the sum
                                                                                                            of the estimated proved
                                                                                                            plus probable reserves.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | "Developed"
                                                                                                            reserves are those
                                                                                                            reserves that are
                                                                                                            expected to be recovered
                                                                                                            from existing wells
                                                                                                            and installed facilities
                                                                                                            or, if facilities
                                                                                                            have not been installed,
                                                                                                            that would involve
                                                                                                            a low expenditure
                                                                                                            (e.g. when compared
                                                                                                            to the cost of drilling
                                                                                                            a well) to put the
                                                                                                            reserves on production.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | "Developed
                                                                                                            Producing" reserves
                                                                                                            are those reserves
                                                                                                            that are expected
                                                                                                            to be recovered from
                                                                                                            completion intervals
                                                                                                            open at the time of
                                                                                                            the estimate. These
                                                                                                            reserves may be currently
                                                                                                            producing or, if shut-in,
                                                                                                            they must have previously
                                                                                                            been on production,
                                                                                                            and the date of resumption
                                                                                                            of production must
                                                                                                            be known with reasonable
                                                                                                            certainty.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | "Developed
                                                                                                            Non-Producing"
                                                                                                            reserves are those
                                                                                                            reserves that either
                                                                                                            have not been on production,
                                                                                                            or have previously
                                                                                                            been on production,
                                                                                                            but are shut in, and
                                                                                                            the date of resumption
                                                                                                            of production is unknown.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | "Undeveloped"
                                                                                                            reserves are those
                                                                                                            reserves expected
                                                                                                            to be recovered from
                                                                                                            known accumulations
                                                                                                            where a significant
                                                                                                            expenditure (for example,
                                                                                                            when compared to the
                                                                                                            cost of drilling a
                                                                                                            well) is required
                                                                                                            to render them capable
                                                                                                            of production. They
                                                                                                            must fully meet the
                                                                                                            requirements of the
                                                                                                            reserves classification
                                                                                                            (proved, probable,
                                                                                                            possible) to which
                                                                                                            they are assigned.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | The
                                                                                                            pricing assumptions
                                                                                                            used in the GLJ Report
                                                                                                            with respect to net
                                                                                                            values of future net
                                                                                                            revenue (forecast)
                                                                                                            as well as the inflation
                                                                                                            rates used for operating
                                                                                                            and capital costs
                                                                                                            are set forth above.
                                                                                                            See “Reserves
                                                                                                            and Future Net Revenue
                                                                                                            – Forecast Prices
                                                                                                            used in Estimates”.
                                                                                                            The NGL price is an
                                                                                                            aggregate of the individual
                                                                                                            natural gas liquids
                                                                                                            prices used in the
                                                                                                            Total Proved plus
                                                                                                            Probable evaluation.
                                                                                                            GLJ is an independent
                                                                                                            qualified reserves
                                                                                                            evaluator appointed
                                                                                                            pursuant to NI 51-101.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Undeveloped Reserves



Proved undeveloped
reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when
compared to the cost of drilling a well) is required to render them capable of production. These reserves have a 90% probability
of being recovered. Vermilion's current plan is to develop these reserves in the following two years. This timetable may be altered
depending on outside market forces, changes in capital allocations and impact of future acquisitions and dispositions.



Probable undeveloped
reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when
compared to the cost of drilling a well) is required to render them capable of production. These reserves have a 50% probability
of being recovered. Vermilion's current plan is to develop these reserves over the next five years. In general, development of
these reserves requires additional evaluation data to increase the probability of success to an acceptable level for Vermilion.
This increases the timeline for the development of these reserves. This timetable may be altered depending on outside market forces,
changes in capital allocations and impact of future acquisitions and dispositions.



Timing of Initial
Undeveloped Reserves Assignment



Undeveloped
Reserves Attributed in Current Year



|              |  | Light & Medium Oil (Mbbl) |       |  | Natural Gas
    (MMcf) |  |        | Coalbed Methane Gas (MMcf) |  |  | Natural Gas Liquids (Mbbl) |  |  | Total Oil Equivalent (Mboe) |        
|------------- |  | ------------------------- | ----- |  | ---------------------- |  | ------ | -------------------------- |  |  | -------------------------- |  |  | --------------------------- | -------
|              |  | First
    Attributed (1)  |       |  | Booked                 |  |        | First
    Attributed (1)   |  |  | Booked                     |  |  | First
    Attributed (1)    |        
|Proved        |  |                           |       |  |                        |  |        |                            |  |  |                            |  |  |                             |        
|Prior to 2009 |  |                           | 2,678 |  |                        |  | 2,678  |                            |  |  | 2,289                      |  |  |                             | 2,289  
|2009          |  |                           | 1,090 |  |                        |  | 2,034  |                            |  |  | 99,026                     |  |  |                             | 100,928
|2010          |  |                           | 4,627 |  |                        |  | 6,588  |                            |  |  | 6,454                      |  |  |                             | 107,633
|2011          |  |                           | 3,365 |  |                        |  | 8,127  |                            |  |  | 6,246                      |  |  |                             | 114,422
|Probable      |  |                           |       |  |                        |  |        |                            |  |  |                            |  |  |                             |        
|Prior to 2009 |  |                           | 8,120 |  |                        |  | 8,120  |                            |  |  | 25,466                     |  |  |                             | 25,466 
|2009          |  |                           | 2,184 |  |                        |  | 8,047  |                            |  |  | 19,348                     |  |  |                             | 34,566 
|2010          |  |                           | 6,306 |  |                        |  | 12,417 |                            |  |  | 8,106                      |  |  |                             | 38,296 
|2011          |  |                           | 5,707 |  |                        |  | 15,734 |                            |  |  | 11,191                     |  |  |                             | 47,687 



Note:

(1) “First Attributed” refers to reserves first attributed at year-end of the corresponding fiscal year



20







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Future Development
Costs



The table below
sets out the future development costs deducted in estimation of future net revenue attributable to proved reserves and proved
plus probable reserves (using forecast prices and undiscounted cost).



|(M$)                             |  | Total Proved
    Estimated Using Forecast Prices and Costs |         |  | Total Proved Plus Probable
    Estimated Using Forecast Prices and Costs | 
|-------------------------------- |  | ---------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------ | 
|Australia                        |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 3,900   |  |                                                                          | 
|2013                             |  |                                                            | 3,978   |  |                                                                          | 
|2014                             |  |                                                            | 4,058   |  |                                                                          | 
|2015                             |  |                                                            | 4,139   |  |                                                                          | 
|2016                             |  |                                                            | 4,221   |  |                                                                          | 
|Remainder                        |  |                                                            | 4,306   |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 24,602  |  |                                                                          | 
|Canada                           |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 147,897 |  |                                                                          | 
|2013                             |  |                                                            | 121,248 |  |                                                                          | 
|2014                             |  |                                                            | 45,198  |  |                                                                          | 
|2015                             |  |                                                            | 4,801   |  |                                                                          | 
|2016                             |  |                                                            | 3,973   |  |                                                                          | 
|Remainder                        |  |                                                            | 12,393  |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 335,511 |  |                                                                          | 
|France                           |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 10,226  |  |                                                                          | 
|2013                             |  |                                                            | 27,029  |  |                                                                          | 
|2014                             |  |                                                            | 17,771  |  |                                                                          | 
|2015                             |  |                                                            | 6,125   |  |                                                                          | 
|2016                             |  |                                                            | 6,090   |  |                                                                          | 
|Remainder                        |  |                                                            | 31,580  |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 98,820  |  |                                                                          | 
|Ireland                          |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 92,811  |  |                                                                          | 
|2013                             |  |                                                            | 80,594  |  |                                                                          | 
|2014                             |  |                                                            | 49,772  |  |                                                                          | 
|2015                             |  |                                                            | 5,232   |  |                                                                          | 
|2016                             |  |                                                            | 1,342   |  |                                                                          | 
|Remainder                        |  |                                                            | 10,151  |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 239,901 |  |                                                                          | 
|Netherlands                      |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 5,755   |  |                                                                          | 
|2013                             |  |                                                            | 1,849   |  |                                                                          | 
|2014                             |  |                                                            | 755     |  |                                                                          | 
|2015                             |  |                                                            | 770     |  |                                                                          | 
|2016                             |  |                                                            | 785     |  |                                                                          | 
|Remainder                        |  |                                                            | 1,618   |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 11,532  |  |                                                                          | 
|Total Company                    |  |                                                            |         |  |                                                                          | 
|2012                             |  |                                                            | 260,588 |  |                                                                          | 
|2013                             |  |                                                            | 234,698 |  |                                                                          | 
|2014                             |  |                                                            | 117,553 |  |                                                                          | 
|2015                             |  |                                                            | 21,066  |  |                                                                          | 
|2016                             |  |                                                            | 16,412  |  |                                                                          | 
|Remainder                        |  |                                                            | 60,048  |  |                                                                          | 
|Total for all years undiscounted |  |                                                            | 710,366 |  |                                                                          | 



Vermilion expects
to source its capital expenditure requirements from internally generated cash flow and, as appropriate, from debt or equity financing.
It is anticipated that costs of funding the future development costs will not impact development of its properties or Vermilion’s
reserves or future net revenue.



21







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Oil and Gas Properties
and Wells



The following table
sets forth the number of wells in which Vermilion held a working interest as at December 31, 2011:



|                    |  | Oil                |     |  | Oil              |  |     | Natural Gas        |  |  | Natural Gas      | 
|------------------- |  | ------------------ | --- |  | ---------------- |  | --- | ------------------ |  |  | ---------------- | 
|                    |  | Gross
    Wells(1) |     |  | Net
    Wells(2) |  |     | Gross
    Wells(1) |  |  | Net
    Wells(2) | 
|Australia           |  |                    |     |  |                  |  |     |                    |  |  |                  | 
|Producing           |  |                    | 19  |  |                  |  | 19  |                    |  |  | 0                | 
|Non-producing       |  |                    | 0   |  |                  |  | 0   |                    |  |  | 0                | 
|Canada              |  |                    |     |  |                  |  |     |                    |  |  |                  | 
|Producing           |  |                    | 319 |  |                  |  | 198 |                    |  |  | 582              | 
|Non-producing       |  |                    | 89  |  |                  |  | 49  |                    |  |  | 95               | 
|France              |  |                    |     |  |                  |  |     |                    |  |  |                  | 
|Producing           |  |                    | 220 |  |                  |  | 193 |                    |  |  | 0                | 
|Non-producing       |  |                    | 151 |  |                  |  | 132 |                    |  |  | 0                | 
|Ireland             |  |                    |     |  |                  |  |     |                    |  |  |                  | 
|Producing           |  |                    | 0   |  |                  |  | 0   |                    |  |  | 0                | 
|Non-producing       |  |                    | 0   |  |                  |  | 0   |                    |  |  | 6                | 
|Netherlands         |  |                    |     |  |                  |  |     |                    |  |  |                  | 
|Producing           |  |                    | 0   |  |                  |  | 0   |                    |  |  | 53               | 
|Non-producing       |  |                    | 0   |  |                  |  | 0   |                    |  |  | 19               | 
|Total Producing     |  |                    | 558 |  |                  |  | 410 |                    |  |  | 635              | 
|Total Non-producing |  |                    | 240 |  |                  |  | 181 |                    |  |  | 120              | 



Notes:

| | (1) | "Gross"
refers to the total wells in which Vermilion has an interest, directly or indirectly.
| | --- | ---------------------------------------------------------------------------------------------

| | (2) | "Net"
                                                                                                         refers to the total wells
                                                                                                         in which Vermilion has
                                                                                                         an interest, directly
                                                                                                         or indirectly, multiplied
                                                                                                         by the percentage working
                                                                                                         interest owned by Vermilion,
                                                                                                         directly or indirectly,
                                                                                                         therein.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Well
                                                                                                         counts are based on wellbores.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



Costs Incurred



The following table
summarizes the capital expenditures made by Vermilion on oil and natural gas properties for the year ended December 31, 2011:



|            |  | Property Acquisition
    Costs |        |  |                         | 
|----------- |  | ------------------------------ | ------ |  | ----------------------- | 
|(M$)        |  | Proved
    Properties          |        |  | Unproved
    Properties | 
|Australia   |  |                                | -      |  |                         | 
|Canada      |  |                                | 38,755 |  |                         | 
|France      |  |                                | -      |  |                         | 
|Ireland     |  |                                | -      |  |                         | 
|Netherlands |  |                                | 12,123 |  |                         | 
|Total       |  |                                | 50,878 |  |                         | 



22







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Exploration and
Development Activities



The following table
sets forth the number of development and exploration wells which Vermilion completed during its 2011 financial year:



|                |  | Exploration Wells |     |  | Development Wells | 
|--------------- |  | ----------------- | --- |  | ----------------- | 
|                |  | Gross(1)          |     |  | Net(2)            | 
|Australia       |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Standing        |  |                   | -   |  |                   | 
|Dry Holes       |  |                   | -   |  |                   | 
|Total Completed |  |                   | -   |  |                   | 
|Canada          |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Standing        |  |                   | -   |  |                   | 
|Dry Holes       |  |                   | -   |  |                   | 
|Total Completed |  |                   | -   |  |                   | 
|France          |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Service         |  |                   | -   |  |                   | 
|Standing        |  |                   | -   |  |                   | 
|Dry Holes       |  |                   | -   |  |                   | 
|Total Completed |  |                   | -   |  |                   | 
|Ireland         |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Standing        |  |                   | -   |  |                   | 
|Dry Holes       |  |                   | -   |  |                   | 
|Total Completed |  |                   | -   |  |                   | 
|Netherlands     |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Standing        |  |                   | 2.0 |  |                   | 
|Dry Holes       |  |                   | 2.0 |  |                   | 
|Total Completed |  |                   | 4.0 |  |                   | 
|Total Company   |  |                   |     |  |                   | 
|Oil             |  |                   | -   |  |                   | 
|Gas             |  |                   | -   |  |                   | 
|Service         |  |                   | -   |  |                   | 
|Standing        |  |                   | 2.0 |  |                   | 
|Dry Holes       |  |                   | 2.0 |  |                   | 
|Total Completed |  |                   | 4.0 |  |                   | 



Notes:

| | (1) | "Gross"
refers to the total wells in which Vermilion has an interest, directly or indirectly.
| | --- | ---------------------------------------------------------------------------------------------

| | (2) | "Net"
                                                                                                         refers to the total wells
                                                                                                         in which Vermilion has
                                                                                                         an interest, directly
                                                                                                         or indirectly, multiplied
                                                                                                         by the percentage working
                                                                                                         interest owned by Vermilion,
                                                                                                         directly or indirectly
                                                                                                         therein.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Vermilion has currently
budgeted $375 million for its 2012 capital program in Australia, Canada, France, Ireland and the Netherlands. The funds will be
used to drill wells to develop reserves in its Canadian key area, the Cardium play in Drayton Valley, Central Alberta, and in
Australia, France, Ireland and the Netherlands. A portion of the capital will be allocated to workovers, production optimization,
and maintenance capital in each country.



23







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Properties with
No Attributed Reserves



The following table
sets out Vermilion's undeveloped land as at December 31, 2011:



|            |  | Undeveloped Land   |          
|----------- |  | ------------------ | ---------
|Country     |  | Gross
    Acres(1) |          
|Australia   |  |                    | -        
|Canada      |  |                    | 357,474  
|France      |  |                    | 754,880  
|Ireland     |  |                    | 57,531   
|Netherlands |  |                    | 430,222  
|Total       |  |                    | 1,600,107



Notes:

| | (1) | "Gross"
refers to the total acres in which Vermilion has an interest, directly or indirectly.
| | --- | ---------------------------------------------------------------------------------------------

| | (2) | "Net"
                                                                                                         refers to the total acres
                                                                                                         in which Vermilion has
                                                                                                         an interest, directly
                                                                                                         or indirectly, multiplied
                                                                                                         by the percentage working
                                                                                                         interest owned by Vermilion,
                                                                                                         directly or indirectly
                                                                                                         therein.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Vermilion expects
its rights to explore, develop and exploit approximately 16,531 net acres in Canada and 228,564 net acres in France which expire
within one year. In the Netherlands, Ireland and Australia, no such rights expire within one year.



Abandonment and
Reclamation Costs



Vermilion has estimated
its abandonment costs by determining amounts for facility decommissioning and reclamation costs (including salvage) by area in
Australia, Canada, France, Ireland and the Netherlands. As well, Vermilion has determined abandonment costs (including salvage)
and reclamation costs per well, by area and applied this amount to its net wells in each of the countries. The number of net wells
to be abandoned is 1,079 in Canada, 384 in France, 58 in the Netherlands, 20 in Australia and one in Ireland.



The total amount
of costs including future drilling locations, net of salvage, as estimated in the GLJ Report, is set forth in the following table:



|Country     |  | Undiscounted (M$) |         |  | Discounted 10% (M$) | 
|----------- |  | ----------------- | ------- |  | ------------------- | 
|Australia   |  |                   | 36,618  |  |                     | 
|Canada      |  |                   | 34,140  |  |                     | 
|France      |  |                   | 69,800  |  |                     | 
|Ireland     |  |                   | 8,766   |  |                     | 
|Netherlands |  |                   | 12,850  |  |                     | 
|Total       |  |                   | 162,174 |  |                     | 



In estimating the
future net revenue, it is important to note that future costs associated with abandonment of surface facilities, well site reclamation,
pipeline abandonments, non-producing wells and reclamation costs, not including downhole costs listed above, are estimated by
management of the Company as:



|Country     |  | Facilities Undiscounted (M$) |         |  | Discounted 10% (M$) | 
|----------- |  | ---------------------------- | ------- |  | ------------------- | 
|Australia   |  |                              | 138,513 |  |                     | 
|Canada      |  |                              | 79,322  |  |                     | 
|France      |  |                              | 57,073  |  |                     | 
|Ireland     |  |                              | 20,216  |  |                     | 
|Netherlands |  |                              | 93,924  |  |                     | 
|Total       |  |                              | 389,048 |  |                     | 



In the next three
years, as estimated in the GLJ Report, Vermilion expects to pay abandonment and reclamation costs of:



|Country     |  | Undiscounted (M$) |       |  | Discounted 10% (M$) | 
|----------- |  | ----------------- | ----- |  | ------------------- | 
|Australia   |  |                   | -     |  |                     | 
|Canada      |  |                   | 1,848 |  |                     | 
|France      |  |                   | 3,439 |  |                     | 
|Ireland     |  |                   | -     |  |                     | 
|Netherlands |  |                   | 3,485 |  |                     | 
|Total       |  |                   | 8,772 |  |                     | 



24







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Tax Information



In Canada, the Company
is subject to normal corporate tax rates on its taxable income.  It is not expected to have Canadian taxes payable in the
immediate future as there are sufficient tax pools available to reduce future taxable income, subject to changes in the business
model or significant increases to commodity prices.



In France, the Company
is currently subject to an approximate 34% corporate tax rate after eligible deductions. In the Netherlands, the Company is currently
subject to an approximate 46% corporate tax rate after eligible deductions. In Australia, the Company is currently subject to
an approximate 30% corporate tax rate after eligible deductions in addition to PRRT which is approximately 40%. Ireland is subject
to tax at 25% after eligible deductions.



Production Estimates

The following table sets forth the volume of production estimated for the year 2012 as reflected in
the estimates of gross proved reserves and gross proved plus probable reserves:



|                           |  | Light and Medium Oil |        |  | Heavy Oil |  |    | Natural Gas |  |  | Natural Gas Liquids |  |  | BOE     |      
|-------------------------- |  | -------------------- | ------ |  | --------- |  | -- | ----------- |  |  | ------------------- |  |  | ------- | -----
|                           |  | (bbl/d)              |        |  | (bbl/d)   |  |    | (Mcf/d)     |  |  | (bbl/d)             |  |  | (boe/d) |      
|Australia                  |  |                      |        |  |           |  |    |             |  |  |                     |  |  |         |      
|Proved                     |  |                      | 6,860  |  |           |  | -  |             |  |  | -                   |  |  |         | -    
|Proved Plus Probable       |  |                      | 7,123  |  |           |  | -  |             |  |  | -                   |  |  |         | -    
|Canada                     |  |                      |        |  |           |  |    |             |  |  |                     |  |  |         |      
|Proved                     |  |                      | 6,134  |  |           |  | 10 |             |  |  | 39,202              |  |  |         | 1,237
|Proved Plus Probable       |  |                      | 7,060  |  |           |  | 10 |             |  |  | 40,988              |  |  |         | 1,290
|France                     |  |                      |        |  |           |  |    |             |  |  |                     |  |  |         |      
|Proved                     |  |                      | 7,631  |  |           |  | -  |             |  |  | 880                 |  |  |         | -    
|Proved Plus Probable       |  |                      | 7,959  |  |           |  | -  |             |  |  | 900                 |  |  |         | -    
|Ireland                    |  |                      |        |  |           |  |    |             |  |  |                     |  |  |         |      
|Proved                     |  |                      | -      |  |           |  | -  |             |  |  | -                   |  |  |         | -    
|Proved Plus Probable       |  |                      | -      |  |           |  | -  |             |  |  | -                   |  |  |         | -    
|Netherlands                |  |                      |        |  |           |  |    |             |  |  |                     |  |  |         |      
|Proved                     |  |                      | -      |  |           |  | -  |             |  |  | 22,748              |  |  |         | 32   
|Proved Plus Probable       |  |                      | -      |  |           |  | -  |             |  |  | 31,905              |  |  |         | 47   
|Total Proved               |  |                      | 20,625 |  |           |  | 10 |             |  |  | 62,830              |  |  |         | 1,269
|Total Proved Plus Probable |  |                      | 22,142 |  |           |  | 10 |             |  |  | 73,793              |  |  |         | 1,337



25







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Production History



The following table
sets forth certain information in respect of production, product prices received, royalties, production costs and netbacks received
by Vermilion for each quarter of its most recently completed financial year. Vermilion had no production from its Ireland assets
in 2011. Light and medium oil in the following table includes any amounts generated by the sale of heavy oil and is deemed to
be immaterial by Vermilion.



|                                 |  | Three Months
    Ended |       |  | Three Months
    Ended |  |        | Three Months
    Ended |  |  | Three Months
    Ended | 
|-------------------------------- |  | ---------------------- | ----- |  | ---------------------- |  | ------ | ---------------------- |  |  | ---------------------- | 
|                                 |  | March
    31, 2011     |       |  | June
    30, 2011      |  |        | September
    30, 2011 |  |  | December
    31, 2011  | 
|Australia                        |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Average Daily Production         |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil
    (bbl/d) |  |                        | 8,309 |  |                        |  | 8,692  |                        |  |  | 7,992                  | 
|Natural Gas (MMcf/d)             |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas
    Liquids (bbl/d)  |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Average Net Prices Received      |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 99.23 |  |                        |  | 132.87 |                        |  |  | 102.98                 | 
|Natural Gas ($/Mcf)              |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Royalties(1)                     |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas ($/Mcf)              |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Production Costs                 |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 14.90 |  |                        |  | 14.91  |                        |  |  | 15.70                  | 
|Natural Gas ($/Mcf)              |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Netback Received                 |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 84.33 |  |                        |  | 117.96 |                        |  |  | 87.28                  | 
|Natural Gas ($/Mcf)              |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | -     |  |                        |  | -      |                        |  |  | -                      | 
|Canada                           |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Average Daily Production         |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil (bbl/d)     |  |                        | 3,801 |  |                        |  | 3,856  |                        |  |  | 4,527                  | 
|Natural Gas (MMcf/d)             |  |                        | 43.31 |  |                        |  | 43.30  |                        |  |  | 42.94                  | 
|Natural Gas
    Liquids (bbl/d)  |  |                        | 1,285 |  |                        |  | 1,353  |                        |  |  | 1,304                  | 
|Average Net Prices Received      |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 87.88 |  |                        |  | 100.39 |                        |  |  | 89.42                  | 
|Natural Gas ($/Mcf)              |  |                        | 4.00  |  |                        |  | 4.00   |                        |  |  | 3.95                   | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | 76.35 |  |                        |  | 82.33  |                        |  |  | 75.42                  | 
|Royalties                        |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 13.77 |  |                        |  | 13.74  |                        |  |  | 11.81                  | 
|Natural Gas ($/Mcf)              |  |                        | 0.37  |  |                        |  | 0.06   |                        |  |  | 0.20                   | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | 12.52 |  |                        |  | 1.80   |                        |  |  | 6.49                   | 
|Transportation                   |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 1.56  |  |                        |  | 1.43   |                        |  |  | 1.68                   | 
|Natural Gas ($/Mcf)              |  |                        | 0.20  |  |                        |  | 0.18   |                        |  |  | 0.18                   | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | 1.79  |  |                        |  | 2.04   |                        |  |  | 1.91                   | 
|Production Costs                 |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 16.98 |  |                        |  | 18.42  |                        |  |  | 12.82                  | 
|Natural Gas ($/Mcf)              |  |                        | 1.48  |  |                        |  | 1.49   |                        |  |  | 1.73                   | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | 8.73  |  |                        |  | 8.94   |                        |  |  | 10.73                  | 
|Netback Received                 |  |                        |       |  |                        |  |        |                        |  |  |                        | 
|Light and Medium Oil ($/bbl)     |  |                        | 55.57 |  |                        |  | 66.80  |                        |  |  | 63.11                  | 
|Natural Gas ($/Mcf)              |  |                        | 1.95  |  |                        |  | 2.27   |                        |  |  | 1.84                   | 
|Natural Gas
    Liquids ($/bbl)  |  |                        | 53.31 |  |                        |  | 69.55  |                        |  |  | 56.29                  | 

Note:

| | (1) | As
                                                                                                         a result of Vermilion’s
                                                                                                         adoption of IFRS, Vermilion
                                                                                                         no longer includes PRRT
                                                                                                         within royalties. Under
                                                                                                         IFRS, Vermilion accounts
                                                                                                         for PRRT as an income
                                                                                                         tax and accordingly,
                                                                                                         royalty netbacks exclude
                                                                                                         PRRT.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



|France                           |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|-------------------------------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Average Daily Production         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil
    (bbl/d) |  |  | 8,411  |  |  |  | 8,273  |  |  |  | 7,946  |  |  |  | 7,819  | 
|Natural Gas (MMcf/d)             |  |  | 1.02   |  |  |  | 0.88   |  |  |  | 0.97   |  |  |  | 0.94   | 
|Natural Gas
    Liquids (bbl/d)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Average Net Prices Received      |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 101.58 |  |  |  | 108.58 |  |  |  | 109.06 |  |  |  | 113.39 | 
|Natural Gas ($/Mcf)              |  |  | 10.64  |  |  |  | 11.53  |  |  |  | 12.66  |  |  |  | 13.15  | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Royalties                        |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 5.96   |  |  |  | 6.30   |  |  |  | 6.98   |  |  |  | 6.68   | 
|Natural Gas ($/Mcf)              |  |  | 0.21   |  |  |  | 0.26   |  |  |  | 0.33   |  |  |  | 0.27   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Transportation                   |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 3.13   |  |  |  | 2.96   |  |  |  | 3.51   |  |  |  | 4.11   | 
|Natural Gas ($/Mcf)              |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Production Costs                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 12.44  |  |  |  | 14.97  |  |  |  | 19.18  |  |  |  | 15.33  | 
|Natural Gas ($/Mcf)              |  |  | 3.34   |  |  |  | 3.30   |  |  |  | 2.94   |  |  |  | 4.07   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Netback Received                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 80.05  |  |  |  | 84.35  |  |  |  | 79.39  |  |  |  | 87.27  | 
|Natural Gas ($/Mcf)              |  |  | 7.09   |  |  |  | 7.97   |  |  |  | 9.39   |  |  |  | 8.81   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Netherlands                      |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Average Daily Production         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil (bbl/d)     |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Natural Gas (MMcf/d)             |  |  | 29.96  |  |  |  | 33.77  |  |  |  | 33.15  |  |  |  | 34.58  | 
|Natural Gas
    Liquids (bbl/d)  |  |  | 46     |  |  |  | 54     |  |  |  | 64     |  |  |  | 66     | 
|Average Net Prices Received      |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Natural Gas ($/Mcf)              |  |  | 8.45   |  |  |  | 9.42   |  |  |  | 9.61   |  |  |  | 10.43  | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 91.81  |  |  |  | 97.30  |  |  |  | 95.41  |  |  |  | 92.59  | 
|Production Costs                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Natural Gas ($/Mcf)              |  |  | 1.63   |  |  |  | 1.29   |  |  |  | 1.31   |  |  |  | 1.62   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Netback Received                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | -      |  |  |  | -      |  |  |  | -      |  |  |  | -      | 
|Natural Gas ($/Mcf)              |  |  | 6.82   |  |  |  | 8.13   |  |  |  | 8.30   |  |  |  | 8.81   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 91.81  |  |  |  | 97.30  |  |  |  | 95.41  |  |  |  | 92.59  | 
|Total                            |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Average Daily Production         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil (bbl/d)     |  |  | 20,521 |  |  |  | 20,821 |  |  |  | 20,465 |  |  |  | 22,096 | 
|Natural Gas (MMcf/d)             |  |  | 74.29  |  |  |  | 77.95  |  |  |  | 77.06  |  |  |  | 79.48  | 
|Natural Gas
    Liquids (bbl/d)  |  |  | 1,331  |  |  |  | 1,407  |  |  |  | 1,368  |  |  |  | 1,312  | 
|Average Net Prices Received      |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 98.09  |  |  |  | 117.21 |  |  |  | 102.34 |  |  |  | 106.95 | 
|Natural Gas ($/Mcf)              |  |  | 5.89   |  |  |  | 6.43   |  |  |  | 6.50   |  |  |  | 6.57   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 76.88  |  |  |  | 82.90  |  |  |  | 76.36  |  |  |  | 80.77  | 
|Royalties                        |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 4.99   |  |  |  | 5.05   |  |  |  | 5.32   |  |  |  | 5.75   | 
|Natural Gas ($/Mcf)              |  |  | 0.22   |  |  |  | 0.03   |  |  |  | 0.11   |  |  |  | 0.11   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 22.01  |  |  |  | 21.36  |  |  |  | 21.08  |  |  |  | 21.02  | 
|Transportation Costs             |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 1.57   |  |  |  | 1.44   |  |  |  | 1.73   |  |  |  | 1.97   | 
|Natural Gas ($/Mcf)              |  |  | 0.12   |  |  |  | 0.10   |  |  |  | 0.10   |  |  |  | 0.10   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 1.73   |  |  |  | 1.96   |  |  |  | 1.82   |  |  |  | 1.69   | 
|Production Costs                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 14.28  |  |  |  | 15.59  |  |  |  | 16.41  |  |  |  | 14.04  | 
|Natural Gas ($/Mcf)              |  |  | 1.57   |  |  |  | 1.42   |  |  |  | 1.57   |  |  |  | 1.54   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 8.43   |  |  |  | 8.60   |  |  |  | 10.22  |  |  |  | 5.94   | 
|Netback Received                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|Light and Medium Oil ($/bbl)     |  |  | 77.25  |  |  |  | 95.13  |  |  |  | 78.88  |  |  |  | 85.19  | 
|Natural Gas ($/Mcf)              |  |  | 3.98   |  |  |  | 4.88   |  |  |  | 4.72   |  |  |  | 4.82   | 
|Natural Gas
    Liquids ($/bbl)  |  |  | 44.71  |  |  |  | 50.98  |  |  |  | 43.24  |  |  |  | 52.12  | 



27







|Vermilion Energy
    Inc. | AIF for the year
    ended December 31, 2011
|------------------------- | --------------------------------------------



Marketing



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 petroleum and natural gas
production. Vermilion does not use derivative financial instruments for speculative purposes. Vermilion has elected not to designate
any of its price risk management activities as accounting hedges and thus accounts for changes in fair value in net earnings at
each reporting period. 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. Vermilion does not obtain collateral or other security to support its financial derivatives as management
reviews the creditworthiness of its counterparties prior to entering into derivative contracts.



The following table summarizes Vermilion’s
outstanding financial derivative positions as at December 31, 2011:



|Risk
    Management           |  | Funded
    Cost |  | bbls/d |  | US
    $/bbl    | 
|----------------------------- |  | --------------- |  | ------ |  | --------------- | 
|Collar - WTI                  |  |                 |  |        |  |                 | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 500    |  | 78.00 -   97.25 | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 500    |  | 78.00 - 101.80  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 500    |  | 82.00 - 116.20  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 500    |  | 82.00 - 116.25  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 350    |  | 82.00 - 121.75  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 250    |  | 82.00 - 124.05  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 250    |  | 82.00 - 123.00  | 
|January 2012 to December 2012 |  | US $1.00/bbl    |  | 250    |  | 82.00 - 119.45  | 
|July 2012 to December 2012    |  | US $1.00/bbl    |  | 500    |  | 78.00 - 104.15  | 
|July 2012 to December 2012    |  | US $1.00/bbl    |  | 500    |  | 82.00 -   99.35 | 
|July 2012 to December 2012    |  | US $1.00/bbl    |  | 500    |  | 82.00 - 115.10  | 
|Collar - DATED BRENT          |  |                 |  |        |  |                 | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 750    |  | 82.00 - 105.60  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 750    |  | 82.00 - 104.80  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 750    |  | 82.00 - 106.10  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 500    |  | 95.00 - 120.65  | 
|January 2012 to June 2012     |  | US $1.00/bbl    |  | 350    |  | 95.00 - 123.05  | 
|January 2012 to December 2012 |  | US $1.00/bbl    |  | 1,000  |  | 82.00 - 113.40  | 
|January 2012 to December 2012 |  | US $1.00/bbl    |  | 500    |  | 82.00 - 115.50  | 
|January 2012 to December 2012 |  | US $1.00/bbl    |  | 500    |  | 82.00 - 130.75  | 
|July 2012 to December 2012    |  | US $1.00/bbl    |  | 1,000  |  | 82.00 - 126.55  | 
|July 2012 to December 2012    |  | US $1.00/bbl    |  | 1,000  |  | 82.00 - 126.05  | 
|Put - DATED BRENT             |  |                 |  |        |  |                 | 
|January 2012 to December 2012 |  | US $4.46/bbl    |  | 600    |  | 83.00           | 
|January 2012 to December 2012 |  | US $4.90/bbl    |  | 600    |  | 83.00           | 
|January 2012 to December 2012 |  | US $4.49/bbl    |  | 600    |  | 83.00           | 
|January 2012 to December 2012 |  | US $4.39/bbl    |  | 600    |  | 83.00           | 
|January 2012 to December 2012 |  | US $3.65/bbl    |  | 500    |  | 83.00           | 



28







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



ADDITIONAL INFORMATION RESPECTING VERMILION
ENERGY INC.



Management



Vermilion has a board of directors currently
consisting of seven individuals. The directors are elected by the Company at the direction of Shareholders by ordinary resolution,
and hold office until the Meeting. As at March 5, 2012, the directors and officers of Vermilion, as a group, beneficially owned,
or controlled or directed, directly or indirectly, 4,753,495 common shares representing approximately 4.9% of the issued and outstanding
common shares.



The following table sets forth certain information
respecting the current directors and officers of Vermilion. References to Vermilion in the following table for dates prior to the
Conversion Arrangement refer to VRL and to the Company following the date of the Conversion Arrangement.



|Directors
        Name and
        Municipality of
        Residence   |  | Office Held                                        |  | Year First
        Elected or
        Appointed
        as Director |  | Principal Occupation During the Past Five Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------- |  | -------------------------------------------------- |  | ------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Lorenzo Donadeo
        Calgary, Alberta,
        Canada               |  | President and Chief Executive Officer and Director |  | 1994                                                                |  | Since 2003, President and Chief Executive
Officer of Vermilion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|W. Kenneth Davidson
        (2)(3)
        Oakville, Ontario, Canada   |  | Director                                           |  | 2005                                                                |  | Since 2000, Director of Millar Western Forest Products
        Ltd., a private forest products company
        
        From 2009 to February 2011, Director of Realex
        Properties Corp., a public real estate company                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Claudio A. Ghersinich (2)(4)(5)
        Calgary, Alberta, Canada       |  | Director                                           |  | 1994                                                                |  | Since 2005, President of Carrera Investments
Corp., a private investment company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Joseph F. Killi
        (2)(3)
        Calgary, Alberta, Canada        |  | Director                                           |  | 1999                                                                |  | Since 2008, President and Chief Executive Officer
        and director of Wilmington Capital Management Inc., a public investment company.
        
        From January 2011 to December 2011, Executive Chairman
        of Parkbridge Lifestyle Communities Inc., a private real estate company
        
        From 2005 to January 2011, Executive Chairman of
        Parkbridge Lifestyle Communities Inc., a public real estate company
        
        From 2005 to February 2011, Vice Chairman of Realex
        Properties Corp., a public real estate company
        
        Since 1993, President of Rosebridge Capital Corp.
        Inc., a private real estate investment company
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Larry J. Macdonald (1)(2)(3)(4)(5)
        Okotoks, Alberta, Canada    |  | Director and Chairman of the Board                 |  | 2002                                                                |  | Since 2003, Chairman & Chief Executive Officer
        and a director of Point Energy Ltd., a private oil and gas company
        
        Since 2003, Managing Director of Northpoint Energy
        Ltd., a private oil and gas company                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|William F. Madison
        (2)(4)(5)
        Sugar Land, Texas, USA    |  | Director                                           |  | 2004                                                                |  | From 1999 to 2006, a director of Montana Tech Foundation
        of the University of Montana System, serving as Chairman during 2004 and 2005
        
        Since 2007, Director of Canadian Oil Recovery and
        Remediation Enterprise, Inc., a public oil recovery and remediation company                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                       |  |                                                    |  |                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Timothy R. Marchant
        (3)(4)(5)
        Calgary, Alberta, Canada |  | Director                                           |  | 2010                                                                |  | 2009 to present, Adjunct Professor of Strategy
        and Energy Geopolitics, Haskayne School of Business
        
        Since December, 2011, Executive Chair or Anatolia
        Energy Corp., a public oil and gas company
        
        2007 to 2009, Vice President, Middle East Business
        Development for BP International
        
        2004 to 2007, President, BP Kuwait                                                                                                                                                                                                                                                                                                     



29







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------








Notes:

(1) Chairman of the Board

(2) Member of the Audit Committee

(3) Member of the Governance and Human Resources
Committee

(4) Member of the Health, Safety and Environment
Committee

(5) Member of the Independent Reserves Committee



|Officers
        Name and
        Municipality of Residence |  | Office Held                                          |  | Principal Occupation During the Past Five Years                                                                                                                                                                                                                                        
|----------------------------------------------------------- |  | ---------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|John D. Donovan
        Calgary, Alberta, Canada            |  | Executive Vice President Business Development        |  | Since 2005, Executive Vice President, Business
        Development of Vermilion                                                                                                                                                                                                        
|Curtis W. Hicks
        Calgary, Alberta, Canada            |  | Executive Vice President and Chief Financial Officer |  | Since 2004, Executive Vice President and Chief
        Financial Officer of Vermilion                                                                                                                                                                                                  
|G.R. (Bob) Mac Dougall
        Calgary, Alberta, Canada     |  | Executive Vice President and Chief Operating Officer |  | Since 2006, Executive Vice President and Chief
        Operating Officer of Vermilion                                                                                                                                                                                                  
|Mona Jasinski
        Calgary, Alberta, Canada              |  | Executive Vice President People                      |  | Since 2011, Executive Vice President People of
        Vermilion
        
        2009 to 2011, Vice President People of Vermilion
        
        2004 to 2009, HR Manager, Shell Onshore Production,
        North America                                                          
|                                                            |  |                                                      |  |                                                                                                                                                                                                                                                                                        
|Raj C. Patel
        Calgary, Alberta, Canada               |  | Vice President Marketing                             |  | Since 2001, Vice President, Marketing of Vermilion                                                                                                                                                                                                                                     
|                                                            |  |                                                      |  |                                                                                                                                                                                                                                                                                        
|Peter Sider
        Biscarrosse, France                     |  | Vice President European Operations                   |  | Since July 2009, Vice President European Operations
        
        March 2008 to July 2009, Regional General Manager,
        European Operations
        
        2006 to March 2008, Managing Director of Vermilion
        Oil & Gas Netherlands B.V., a subsidiary of the Company
|                                                            |  |                                                      |  |                                                                                                                                                                                                                                                                                        
|Robert J. Engbloom, Q.C.
        Calgary, Alberta, Canada   |  | Corporate Secretary                                  |  | Since January 1, 2012, partner with and Deputy
        Chair of Norton Rose Canada LLP, a law firm
        
        1999 to 2011, partner with Macleod Dixon LLP,
        a law firm                                                                                                   



Common Shares



Each common share entitles the holder to receive
notice of and to attend all meetings of the shareholders of the Company and to one vote at such meetings. The holders of common
shares will be, at the discretion of the board and subject to applicable legal restrictions, entitled to receive any dividends
declared by the board on the common shares. The holders of common shares will be entitled to share equally in any distribution
of the assets of the Company upon the liquidation, dissolution, bankruptcy or winding-up of the Company or other distribution of
its assets among the Shareholders for the purpose of winding-up its affairs.



Cash Dividends



The Company expects to pay dividends on a monthly
basis in a manner similar to the former approach of the Trust relating to distributions. However, all decisions with respect to
the declaration of dividends on the common shares will be made by the board on the basis of the Company's earnings, financial requirements
and other conditions existing at such future time, planned acquisitions, income tax payable by the Company, crude oil and natural
gas prices and access to capital markets, as well as the satisfaction of solvency tests imposed by the ABCA on corporations for
the declaration and payment of dividends. It is expected that the dividends will be "eligible dividends" for income tax
purposes and thus qualify for the enhanced gross-up and tax credit regime for certain shareholders of the Company.



30







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Record of Cash Dividends



The following table sets forth the amount of
per period cash distributions per Unit declared by the Trust since the completion of the 2003 Arrangement on January 22, 2003 and
the per period cash dividends per common share declared by the Company since the completion of the Conversion Arrangement on September
1, 2010. Dividends are generally paid on the 15th day of the month following the month of declaration. Until the December 14, 2007
distribution announcement, Vermilion had paid distributions of $0.17 per Trust Unit per month. Starting with the January 15, 2008
payment date, Vermilion has paid distributions/dividends of $0.19 per Trust Unit /common share per month.



|Period                           |  | Distribution Amount for Period per Trust Unit |     
|-------------------------------- |  | --------------------------------------------- | ----
|As Vermilion Energy Trust        |  |                                               |     
|2003 – January 22 to December 31 |  | $                                             | 1.87
|2004 – January to December       |  | $                                             | 2.04
|2005 – January to December       |  | $                                             | 2.04
|2006 – January to December       |  | $                                             | 2.04
|2007 – January to December       |  | $                                             | 2.06
|2008 – January to December       |  | $                                             | 2.28
|2009 – January to December       |  | $                                             | 2.28
|2010 – January to September (1)  |  | $                                             | 1.71



|Period                                      |  | Dividend Amount for Period per Common Share |      
|------------------------------------------- |  | ------------------------------------------- | -----
|As Vermilion Energy Inc.                    |  |                                             |      
|2010 – September to December (1)            |  | $                                           | 0.57 
|2011 – January to December                  |  | $                                           | 2.28 
|2012 – January to February                  |  | $                                           | 0.38 
|Total cash dividends since January 22, 2003 |  | $                                           | 19.55



Notes:

| | (1) | Total cash dividends paid out in 2010 by Vermilion and the Trust to a holder of a common share
who was a former holder of a Trust Unit equals $2.28.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------



Dividend Reinvestment Plan



The Company has established a DRIP Plan. The
DRIP Plan is only available to registered Shareholders who are residents of Canada.



Under the DRIP Plan, registered Shareholders
may, at their option, reinvest their cash dividends to purchase additional common shares (the "DRIP common shares") by
directing the Plan Agent (as defined below) to apply dividends on their existing common shares to the purchase of DRIP common shares.
Computershare Trust Company of Canada in its capacity as plan agent (the "Plan Agent") will apply cash dividends towards
the purchase of DRIP common shares from the Company, subject to certain limitations either from treasury or at the discretion of
Vermilion through the facilities of the TSX. DRIP common shares will be acquired either at the average market price at which DRIP
common shares are acquired through the facilities of the TSX or from treasury based on the weighted average of the previous 10 days
of trading prior to the applicable dividend. Participants in the DRIP Plan will also receive additional dividends of common shares
equal to 5% of the DRIP common shares purchased with their dividends. Participants will not have to pay any brokerage fees or service
charges in connection with the purchase of DRIP common shares.



Registered Shareholders may, after electing
to participate in the DRIP Plan, terminate their participation in the DRIP Plan by written notice to the Plan Agent. That notice,
if actually received no later than five (5) business days prior to a Dividend Record Date, will have effect for the dividend to
be made on the following Dividend Payment Date. Thereafter, dividends to those Shareholders will be in cash. The Company may amend,
suspend or terminate the DRIP Plan in its sole discretion provided that any amendment to the DRIP Plan must be approved by the
TSX and that any amendment, modification or suspension shall have no retroactive effect if it would prejudice the interests of
the participants. The Company is not required to issue common shares into any jurisdiction where the issuance would be illegal.



31







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Shareholder Rights Plan



A unitholder rights plan was first implemented
in 2003 in conjunction with the 2003 Arrangement. At each of the annual and special meetings of holders of Trust Units held in
2006 and 2009, the unitholders rights plan was renewed and approved by holders of the Trust Units. In conjunction with the Conversion
Arrangement, the Rights Plan for the Company was approved. The objectives of the Rights Plan are to ensure, to the extent possible,
that all Shareholders are treated equally and fairly in connection with any takeover bid for the Company. Takeover bids may be
structured to be coercive or may be initiated at a time when the board of directors of Vermilion will have a difficult time preparing
an adequate response to the offer. Accordingly, such offers do not always result in Shareholders receiving equal or fair treatment
or full or maximum value for their investment. Under current Canadian securities legislation, a takeover bid is required to remain
open for 35 days, a period of time which may be insufficient for the directors to:



| | (a) | evaluate a takeover bid (particularly if it includes
share or trust unit consideration);
| | --- | ----------------------------------------------------------------------------------------





| | (b) | explore, develop and pursue alternatives which are superior to the takeover bid and which could
maximize Shareholder value; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------



| | (c) | make reasoned recommendations to the Shareholders.
| | --- | --------------------------------------------------



The Rights Plan discourages discriminatory,
coercive or unfair takeovers of the Company and gives the board of directors of Vermilion time if, in the circumstances, the board
of directors determines it is appropriate to take such time, to pursue alternatives to maximize Shareholder value in the event
an unsolicited takeover bid is made for all or a portion of the outstanding common shares of the Company. As set forth in detail
below, the Rights Plan discourages coercive hostile takeover bids by creating the potential that any common shares which may be
acquired or held by such a bidder will be significantly diluted. The potential for significant dilution to the holdings of such
a bidder can occur as the Rights Plan provides that all holders of common shares who are not related to the bidder will be entitled
to exercise rights issued to them under the Rights Plan and to acquire common shares at a substantial discount to prevailing market
prices. The bidder or the persons related to the bidder will not be entitled to exercise any Rights under the Rights Plan. Accordingly,
the Rights Plan will encourage potential bidders to make takeover bids by means of a Permitted Bid (as defined below) or to approach
the board of directors of Vermilion to negotiate a mutually acceptable transaction. The Permitted Bid provisions of the Rights
Plan are designed to ensure that in any takeover bid for outstanding common shares of the Company all Shareholders are treated
equally and are given adequate time to properly assess such takeover bid on a fully-informed basis.



The Rights Plan was not proposed in response
to, or in anticipation of, any pending, threatened or proposed acquisition or takeover bid. The board of directors did not adopt
the Rights Plan to prevent a takeover of the Company, to secure the continuance of management or the directors of the Company in
their respective offices or to deter fair offers for the Common Shares of the Company.



Summary of the Plan



The following summary of terms of the Rights
Plan is qualified in its entirety by reference to the text of the Shareholder Rights Plan Agreement. A copy of the Shareholder
Rights Plan Agreement will be available in its entirety upon request at the head office of Vermilion during normal business hours.



Term



The Rights Plan will remain in effect until
termination of the annual meeting of Shareholders of the Company in 2013 unless the term of the Shareholder Rights Plan Agreement
is extended beyond such date by resolution of Shareholders.



Issue of Rights



One right (a "Right") has been issued
by the Company pursuant to the Shareholder Rights Plan Agreement in respect of each common share of the Company outstanding at
the close of business on September 1, 2010 (the "Record Time"). One Right will also be issued for each additional common
share issued after the Record Time and prior to the earlier of the Separation Time (as defined below) or the Expiration Time (as
defined below).



32







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Rights Exercise Privilege



The Rights will separate from the voting common
shares to which they are attached and become exercisable at the time (the "Separation Time") which is 10 trading days
following the date a person becomes an Acquiring Person (as defined below) or announces an intention to make a takeover bid that
is not an acquisition pursuant to a takeover bid permitted by the Rights Plan (a "Permitted Bid").



Any transaction or event in which a person (an
"Acquiring Person"), including associates and affiliates and others acting in concert, acquires (other than pursuant
to an exemption available under the Rights Plan or a Permitted Bid) Beneficial Ownership (as defined in the Rights Plan) of 20%
or more of the voting securities of the Company is referred to as a "Flip-in Event". Any Rights held by an Acquiring
Person on or after the earlier of the Separation Time or the first date of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such, will become void and the Rights (other than those held by the Acquiring Person) will
permit the holder to purchase common shares at a substantial discount to their prevailing market price at the time.



The issuance of the Rights is not dilutive and
will not affect reported earnings or cash flow per common share until the Rights separate from the underlying common shares and
become exercisable or until the exercise of the Rights. The issuance of the Rights will not change the manner in which Shareholders
currently trade their common shares.



Permitted Lock-Up Agreement



A person will not become an Acquiring Person
by virtue of having entered into an agreement (a "Permitted Lock-Up Agreement") with a Shareholder whereby the Shareholder
agrees to deposit or tender voting common shares to a takeover bid made by such person, provided that the agreement meets certain
requirements including:



| | (a) | the terms of the agreement are publicly disclosed and a copy of the agreement is publicly available;
| | --- | ----------------------------------------------------------------------------------------------------



| | (b) | the Shareholder who has agreed to tender voting common shares to the takeover bid (the "Lock-Up
Bid") made by the other party to the agreement is permitted to terminate its obligation under the agreement in order to tender
voting common shares to another takeover bid or transaction where: (i) the offer price or value of the consideration payable under
the other takeover bid or transaction is greater than the price or value of the consideration per common share at which the Shareholder
has agreed to deposit or tender voting common shares to the Lock-Up Bid or is equal to or greater than a specified minimum which
is not more than 7% higher than the offer price under the Lock-Up Bid; and (ii) if the number of voting common shares offered to
be purchased under the Lock-Up Bid is less than all of the voting common shares held by Shareholders (excluding common shares held
by the offeror), the number of voting common shares offered to be purchased under the other takeover bid or transaction (at an
offer price not lower than in the Lock-Up Bid) is greater than the number of voting common shares offered to be purchased under
the Lock-Up Bid or is equal to or greater than a specified number which is not more than 7% higher than the number of voting common
shares offered to be purchased under the Lock-Up Bid; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | no break-up fees or other penalties that exceed in the aggregate the greater of 2.5% of the price
or value of the consideration payable under the Lock-Up Bid and 50% of the increase in consideration resulting from another takeover
bid or transaction shall be payable by the Shareholder if the Shareholder fails to deposit or tender voting common shares to the
Lock-Up Bid.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certificates and Transferability



Prior to the Separation Time, the Rights will
be evidenced by a legend imprinted on certificates for common shares issued from and after the effective date (the "Effective
Date") of the Shareholder Rights Plan Agreement (being the later of the date of the Shareholder Rights Plan Agreement and
the receipt by the Company of all regulatory approvals with respect to the Shareholder Rights Plan Agreement). Rights are also
attached to common shares outstanding on the Effective Date, although certificates issued prior to the Effective Date will not
bear such a legend. Shareholders are not required to return their certificates in order to have the benefit of the Rights. Prior
to the Separation Time, Rights will trade together with the Company common shares and will not be exercisable or transferable separately
from the common shares. From and after the Separation Time, the Rights will become exercisable, will be evidenced by Rights Certificates
and will be transferable separately from the common shares.



33







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Permitted Bid Requirements



The requirements of a "Permitted Bid"
include the following:



| | (a) | the takeover bid must be made by means of a takeover bid circular;
| | --- | ------------------------------------------------------------------



| | (b) | the takeover bid is made to all holders of voting common shares as registered on the books of the
Company, other than the offeror;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



| | (c) | the takeover bid contains, and the take-up and payment for securities tendered or deposited is
subject to, an irrevocable and unqualified provision that no voting common shares will be taken up or paid for pursuant to the
takeover bid prior to the close of business on the date which is not less than 45 days following the date of the takeover bid and
only if at such date more than 50% of the voting common shares held by independent Shareholders shall have been deposited or tendered
pursuant to the takeover bid and not withdrawn;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | the takeover bid contains an irrevocable and unqualified provision that unless the takeover bid
is withdrawn, voting common shares may be deposited pursuant to such takeover bid at any time during the period of time between
the date of the takeover bid and the date on which voting common shares may be taken up and paid for and that any voting common
shares deposited pursuant to the takeover bid may be withdrawn until taken up and paid for; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | the takeover bid contains an irrevocable and unqualified provision that if, on the date on which
voting common shares may be taken up and paid for, more than 50% of the voting common shares held by independent Shareholders shall
have been deposited pursuant to the takeover bid and not withdrawn, the offeror will make a public announcement of that fact and
the takeover bid will remain open for deposits and tenders of voting common shares for not less than ten business days from the
date of such public announcement.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Rights Plan allows for a competing Permitted
Bid (a "Competing Permitted Bid") to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy
all of the requirements of a Permitted Bid except that it may expire on the same date as the Permitted Bid, subject to the requirement
that it be outstanding for a minimum period of 35 days.



Waiver and Redemption



If a potential offeror does not desire to make
a Permitted Bid, it can negotiate with, and obtain the prior approval of, the board of directors to make a takeover bid by way
of a takeover bid circular sent to all holders of voting common shares on terms which the board of directors considers fair to
all Shareholders. In such circumstances, the board of directors may waive the application of the Rights Plan thereby allowing such
bid to proceed without dilution to the offeror. Any waiver of the application of the Rights Plan in respect of a particular takeover
bid shall also constitute a waiver of any other takeover bid which is made by means of a takeover bid circular to all holders of
voting common shares while the initial takeover bid is outstanding. The board of directors may also waive the application of the
Rights Plan in respect of a particular Flip-in Event that has occurred through inadvertence, provided that the Acquiring Person
that inadvertently triggered such Flip-in Event reduces its beneficial holdings to less than 20% of the outstanding voting common
shares of the Company within 14 days or such earlier or later date as may be specified by the board. With the prior consent of
the holders of voting common shares, the board of directors may, prior to the occurrence of a Flip-in Event that would occur by
reason of an acquisition of voting common shares otherwise than pursuant to the foregoing, waive the application of the Rights
Plan to such Flip-in Event.



The board of directors may, with the prior consent
of the holders of voting common shares, at any time prior to the occurrence of a Flip-in Event, elect to redeem all but not less
than all of the then outstanding Rights at a redemption price of $0.00001 per Right. Rights are deemed to be redeemed following
completion of a Permitted Bid, a Competing Permitted Bid or a takeover bid in respect of which the board of directors has waived
the application of the Rights Plan.



Exemptions for Investment Advisors



Investment advisors (for client accounts), trust
companies (acting in their capacity as trustees or administrators), statutory bodies whose business includes the management of
funds (for employee benefit plans, pension plans, or insurance plans of various public bodies) and administrators or trustees of
registered pension plans or funds acquiring greater than 20% of the voting common shares are exempted from triggering a Flip-in
Event, provided they are not making, either alone or jointly or in concert with any other person, a takeover bid.



Board of Directors



The adoption of the Rights Plan does not in
any way lessen or affect the duty of the board of directors to act honestly and in good faith with a view to the best interests
of the Company. The board of directors, when a takeover bid or similar offer is made, will continue to have the duty and power
to take such actions and make such recommendations to Shareholders as are considered appropriate.

34







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Amendment



The Company may, with the prior approval of
Shareholders (or the holders of Rights if the Separation Time has occurred), supplement amend, vary or delete any of the provisions
of the Shareholder Rights Plan Agreement. The Company may make amendments to the Shareholder Rights Plan Agreement at any time
to correct any clerical or typographical error or, subject to confirmation at the next meeting of Shareholders, make amendments
which are required to maintain the validity of the Shareholder Rights Plan Agreement due to changes in any applicable legislation,
regulations or rules.



AUDIT COMMITTEE MATTERS



Audit Committee Charter



Vermilion has established an audit committee
(the "Audit Committee") to assist the board of directors in carrying out its oversight responsibilities with respect
to, among other things, financial reporting, internal controls and the external audit process of the Company. The Audit Committee
Terms of Reference are set out in Schedule "C" to this annual information form.



Composition of the Audit Committee



The following table sets forth the name of each
current member of the Audit Committee, whether pursuant to applicable securities legislation, such member is considered independent,
whether pursuant to applicable securities legislation, such member is considered financially literate and the relevant education
and experience of such member.



|Name                        |  | Independent |  | Financially
        Literate |  | Relevant Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------------------------- |  | ----------- |  | ---------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|W. Kenneth Davidson (Chair) |  | Yes         |  | Yes                          |  | Mr. Davidson holds Bachelor of Science degrees in Mathematics and Business and a Masters in Business Administration degree. Mr. Davidson has obtained significant financial experience and exposure to accounting including internal controls and procedures for financial reporting and complex financial issues as a director, officer or consultant to a number of companies involved in the banking and securities areas of the financial services sector.                                                                                                                                                                                                                                                                                                                                                                                               
|                            |  |             |  |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Claudio A. Ghersinich       |  | Yes         |  | Yes                          |  | Mr. Ghersinich holds a B.Sc. Civil Engineering degree from the University of Manitoba. Mr. Ghersinich has obtained financial experience and exposure to accounting and financial issues in a role as a founder of Vermilion Resources Ltd. in 1994 and as an audit committee member of other public companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                            |  |             |  |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Joseph F. Killi             |  | Yes         |  | Yes                          |  | Mr. Killi holds a Bachelor of Science degree in Biochemistry, a Bachelor of Commerce degree and a Chartered Accountant designation. As a Chartered Accountant, Mr. Killi attained experience in preparing, auditing, analyzing and evaluating financial statements including internal controls and procedures for financial reporting. Mr. Killi has an understanding of the accounting principles used by the Company as well as the implications of those accounting principles on the Company's financial results. Mr. Killi has also obtained significant financial experience and exposure to accounting and financial issues in a number of senior positions with Parkbridge Lifestyle Communities Inc., Realex Properties Corp. and Trizec Corporation and in his role as a director and audit committee member of other public and private companies.
|                            |  |             |  |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Larry J. Macdonald          |  | Yes         |  | Yes                          |  | Mr. Macdonald holds a Bachelor of Science degree in Geology. In 2005, Mr. Macdonald attended a financial literacy course at the University of Toronto's Rotman's School of Management in conjunction with the Institute of Corporate Directors. In addition, Mr. Macdonald has obtained financial experience and exposure to accounting and financial issues in a number of senior officer positions with Point Energy Ltd., Pointwest Energy Inc., Westpoint Energy Inc. and Anderson Exploration Ltd. and as a director, audit committee member and officer of a number of other public and private companies as well as not-for-profit organizations.                                                                                                                                                                                                     
|                            |  |             |  |                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|William F. Madison          |  | Yes         |  | Yes                          |  | Mr. Madison holds a Bachelor of Science in Petroleum Engineering. Mr. Madison has completed the Harvard Program for Management Development. Mr. Madison has obtained financial experience and exposure to accounting and financial issues as the Chairman of Montana Tech Foundation of the University of Montana System and as a senior executive of Marathon Oil Company and as a director, audit committee member and officer of other public and private companies.                                                                                                                                                                                                                                                                                                                                                                                      



35







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



External Audit Service Fees



Prior to the commencement of any work, fees
for all audit and non-audit services provided by the Company’s auditors must be approved by the Audit Committee.



During the years ended December 31, 2011 and
2010, Deloitte & Touche LLP, the auditors of the Company, received the following fees from the Company:



|Item                  |  | 2011 |         |  | 2010 |  
|--------------------- |  | ---- | ------- |  | ---- | -
|Audit fees(1)         |  | $    | 962,898 |  |      | $
|Audit-related fees(2) |  | $    | 107,500 |  |      | $
|Tax fees(3)           |  | $    | 21,665  |  |      | $
|All other fees(4)     |  | $    | 27,342  |  |      | $



Notes:

| | (1) | Audit fees consisted of professional services rendered by Deloitte & Touche LLPfor the audit of the Company's financial statements for the years ended December 31, 2011 and 2010, fees for the review
of the quarterly financial statements and services provided in connection with statutory and regulatory filings or engagements.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Audit-related fees consist of fees for review services related to non-routine regulatory filings
such as short-form prospectus and business acquisition reports. Fees also include services related to review of accounting research
in regards to the adoption of IFRS.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Tax fees consist of fees for tax compliance services, tax advice and tax planning.
| | --- | ----------------------------------------------------------------------------------

| | (4) | All other fees consist of fees related to translation services.
| | --- | ---------------------------------------------------------------



MARKET FOR PRICE RANGE AND TRADING VOLUME
OF SECURITIES



The outstanding Common Shares of the Company
are listed and posted for trading on the TSX under the symbol VET. The following table sets forth the closing price range and trading
volume of the Common Shares for the periods indicated:



|2011      |  | High |       |  | Low |   |       | Close |  |   | Volume (‘000s) | 
|--------- |  | ---- | ----- |  | --- | - | ----- | ----- |  | - | -------------- | 
|January   |  | $    | 47.80 |  |     | $ | 44.60 |       |  | $ | 47.36          | 
|February  |  | $    | 52.45 |  |     | $ | 45.87 |       |  | $ | 51.05          | 
|March     |  | $    | 51.45 |  |     | $ | 45.64 |       |  | $ | 50.53          | 
|April     |  | $    | 51.45 |  |     | $ | 48.77 |       |  | $ | 50.80          | 
|May       |  | $    | 51.50 |  |     | $ | 46.28 |       |  | $ | 50.89          | 
|June      |  | $    | 51.13 |  |     | $ | 47.56 |       |  | $ | 51.00          | 
|July      |  | $    | 51.01 |  |     | $ | 47.51 |       |  | $ | 47.91          | 
|August    |  | $    | 48.48 |  |     | $ | 40.38 |       |  | $ | 45.78          | 
|September |  | $    | 46.47 |  |     | $ | 40.30 |       |  | $ | 44.04          | 
|October   |  | $    | 49.30 |  |     | $ | 38.62 |       |  | $ | 46.96          | 
|November  |  | $    | 50.90 |  |     | $ | 43.92 |       |  | $ | 47.66          | 
|December  |  | $    | 48.34 |  |     | $ | 42.88 |       |  | $ | 45.37          | 



|2012     |  | High |       |  | Low |   |       | Close |  |   | Volume (‘000s) | 
|-------- |  | ---- | ----- |  | --- | - | ----- | ----- |  | - | -------------- | 
|January  |  | $    | 47.86 |  |     | $ | 44.26 |       |  | $ | 46.00          | 
|February |  | $    | 49.47 |  |     | $ | 44.64 |       |  | $ | 48.65          | 



CREDIT RATINGS



The following information relating to the Company's
credit ratings is provided as it relates to the Company's financing costs, liquidity and operations.  Specifically, credit
ratings affect the Company's ability to obtain short-term and long-term financing and the cost of such financing.  Additionally,
the ability of the Company to engage in certain collateralized business activities on a cost effective basis depends on the Company's
credit ratings.  A reduction in the current rating on the Company's debt by its rating agencies, particularly a downgrade
below current ratings, or a negative change in the Company's ratings outlook could adversely affect the Company's cost of financing
and its access to sources of liquidity and capital.  In addition, changes in credit ratings may affect the Company's ability
to, and the associated costs of, (i) entering into ordinary course derivative or hedging transactions and may require the Company
to post additional collateral under certain of its contracts, and (ii) entering into and maintaining ordinary course contracts
with customers and suppliers on acceptable terms.



The Company's $225 million of Senior Unsecured
Notes have a rating of BB (low)/Stable from DBRS Limited ("DBRS") and BB- from Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies (Canada) Corporation ("S&P").



36







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



DBRS rates long-term debt instruments by rating
categories ranging from a high of "AAA" to a low of "D". All rating categories other than AAA and D also contain
subcategories "(high)" and "(low)". The absence of either a "(high)" or "(low)" designation
indicates the rating is in the middle of the category. A rating of "BB" is characterized by DBRS to be speculative, non
investment-grade credit quality. The capacity for the payment of financial obligations is uncertain and vulnerable to future events.
The "BB" category is the fifth highest of the ten available categories.



S&P rates long-term debt instruments by
rating categories ranging from a high of "AAA" to a low of "D". The ratings from AA to CCC may be modified
by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. An obligation rated
"BB" is characterized as less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation. The "BB" category is the fifth highest of the ten available
categories.



Vermilion Rating



DBRS Limited has provided a corporate credit
rating of Vermilion of “BB (low”). A rating of “BB” is characterized by DBRS Limited to be speculative,
non investment-grade credit quality. The capacity for the payment of financial obligations is uncertain and vulnerable to future
events.



S&P has assigned a corporate credit rating
of Vermilion of “BB-” with a stable outlook. An obligor rated “BB” is characterized by S&P as less
vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse
business, financial or economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitments.
The plus (+) or minus (-) modifiers indicate the relative standing within the assigned category. In addition, S&P may add a
rating outlook of “positive”, “negative” or “stable” which assesses the potential direction
of a long-term credit rating over the intermediate term (typically six months to two years).



Credit ratings are intended to provide investors
with an independent measure of the credit quality of an issuer of securities. The credit ratings accorded to the Senior Unsecured
Notes and the Company are not recommendations to purchase, hold or sell such securities and are not a comment upon the market price
of the Company's securities or their suitability for a particular investor. There is no assurance that any rating will remain in
effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future
if, in its judgment, circumstances so warrant. A revision or withdrawal of a credit rating could have a material adverse effect
on the pricing or liquidity of the Senior Unsecured Notes or the Common Shares in any secondary markets. Vermilion does not undertake
any obligation to maintain the ratings or to advise holders of the Senior Unsecured Notes or the Common Shares of any change in
ratings. Each agency's rating should be evaluated independently of any other agency's rating.



CONFLICTS OF INTEREST



The directors and officers of Vermilion are
engaged in and will continue to engage in other activities in the oil and natural gas industry and, as a result of these and other
activities, the directors and officers of Vermilion may become subject to conflicts of interest. The ABCA provides that in the
event that a director has an interest in a contract or proposed contract or agreement, the director shall disclose his interest
in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement unless otherwise
provided under the ABCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the
provisions of the ABCA.



As at the date hereof, Vermilion is not aware
of any existing or potential material conflicts of interest between Vermilion and a director or officer of Vermilion.



INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
TRANSACTIONS



No director or officer of the Company, nor any
other insider of the Company, nor their associates or affiliates has or has had, at any time within the three most recently completed
financial years ending December 31, 2011, any material interest, direct or indirect, in any transaction or proposed transaction
that has materially affected or would materially affect the Company.



LEGAL PROCEEDINGS



The Company is not party to any significant
legal proceedings as of March 12, 2012.



MATERIAL CONTRACTS



The Company has not entered into any material
contracts outside its normal course of business.



37







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



INTERESTS OF EXPERTS



As at the date hereof, principals of GLJ,
the independent engineers for the Company, personally disclosed in certificates of qualification that they neither had nor
expect to receive any common shares. The principals of GLJ and their employees (as a group) beneficially own less than one
percent of any of the Company’s securities. Deloitte & Touche LLP is the auditor of the Company and is independent
within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Alberta and the
standards of the Public Company Accounting Oversight Board (United States) and securities laws and regulations administered
by the SEC.



TRANSFER AGENT AND REGISTRAR



The transfer agent and registrar for the Company’s
common shares is Computershare Trust Company of Canada at its principal offices in Calgary, Alberta and Toronto, Ontario.



RISK FACTORS



The following is a summary of certain risk factors
relating to the business of the Company. The following information is a summary only of certain risk factors and is qualified in
its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this annual
information form. Shareholders and potential Shareholders should consider carefully the information contained herein and, in particular,
the following risk factors.



Reserve Estimates



There are numerous uncertainties inherent in
estimating quantities of proved and probable reserves and future net revenues to be derived therefrom, including many factors beyond
the Company's control. The reserve and future net revenue information set forth in this annual information form represents estimates
only. The reserves and estimated future net cash flow from the Company's properties have been independently evaluation by GLJ with
an effective date of December 31, 2011. These evaluations include a number of assumptions relating to factors such as initial production
rates, production decline rates, ultimate recovery of reserves, timing and amount of capital expenditures, marketability of production,
future prices of crude oil and natural gas, operating costs, well abandonment and salvage values, royalties and other government
levies that may be imposed over the producing life of the reserves. These assumptions were based on prices in use at the date the
GLJ Report was prepared, and many of these assumptions are subject to change and are beyond the Company's control. Actual production
and cash flow derived therefrom will vary from these evaluations, and such variations could be material.



Estimates with respect to reserves that may
be developed and produced in the future are often based upon volumetric calculations, probabilistic methods and upon analogy to
similar types of reserves, rather than upon actual production history. Estimates based on these methods generally are less reliable
than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result
in variations, which may be material, in the estimated reserves.



Reserve estimates may require revision based
on actual production experience. Such figures have been determined based upon assumed commodity prices and operating costs.



The present value of estimated future net revenue
referred to in this annual information form should not be construed as the fair market value of estimated crude oil and natural
gas reserves attributable to the Company's properties. The estimated discounted future revenue from reserves are based upon price
and cost estimates which may vary from actual prices and costs and such variance could be material. Actual future net revenue will
also be affected by factors such as the amount and timing of actual production, supply and demand for crude oil and natural gas,
curtailments or increases in consumption by purchasers and changes in governmental regulations and taxation.



Volatility of Oil and Natural Gas Prices



The Company's operational results and financial
condition will be dependent on the prices received for oil and natural gas production. Oil and natural gas prices have fluctuated
widely during recent years and are determined by supply and demand factors, including weather and general economic conditions as
well as conditions in other oil and natural gas regions. Any decline in oil and natural gas prices could have an adverse effect
on Vermilion's cash flow which could have the effect of decreasing dividends.



38







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Changes in Legislation



There can be no assurance that income tax laws
and government incentive programs relating to the oil and gas industry in Canada and the foreign jurisdictions in which the Company
operates, will not be changed in a manner which adversely affects the Company.



The Government of Alberta receives royalties
on production of natural resources from lands in which it owns the mineral rights. A change in the royalty regime resulting in
an increase in royalties would reduce Vermilion's earnings and could make future capital expenditures or Vermilion's
operations uneconomic and could, in the event of a material increase in royalties, make it more difficult to service and repay
outstanding debt. Any material increase in royalties would also significantly reduce the value of the Company's associated
assets.



Government Regulations



Vermilion's operations are governed by many
levels of government, including municipal, state, provincial and federal governments in Canada, France, the Netherlands, Australia
and Ireland. Vermilion is subject to laws and regulations regarding health and safety issues, lease interests, taxes and royalties,
among others. Failure to comply with the applicable laws can result in significant increases in costs, penalties and even losses
of operating licences. The regulatory process involved in each of the countries in which Vermilion operates is not uniform and
regulatory regimes vary as to complexity, timeliness of access to, and response from, regulatory bodies and other matters specific
to each jurisdiction. If regulatory approvals or permits are delayed or not obtained, there can also be delays or abandonment of
projects, decreases in production and increases in costs, and Vermilion may not be able to fully execute its strategy. Governments
may also amend or create new legislation and regulatory bodies may also amend regulations or impose additional requirements which
could result in increased capital, operating and compliance costs.



Competition



Vermilion actively competes for reserve acquisitions,
exploration leases, licences and concessions and skilled industry personnel with a substantial number of other oil and gas companies,
some of which have significantly greater financial resources than Vermilion. Vermilion's competitors include major integrated oil
and natural gas companies and numerous other independent oil and natural gas companies and individual producers and operators.



Vermilion's ability to successfully bid on and
acquire additional property rights, to discover reserves, to participate in drilling opportunities and to identify and enter into
commercial arrangements with customers will be dependent upon developing and maintaining close working relationships with its future
industry partners and joint operators and its ability to select and evaluate suitable properties and to consummate transactions
in a highly competitive environment.



Operational Matters



The operation of oil and gas wells and facilities
involves a number of operating and natural hazards which may result in blowouts, environmental damage and other unexpected or dangerous
conditions resulting in damage to Vermilion and possible liability to third parties. Vermilion will maintain liability insurance,
where available, in amounts consistent with industry standards. Business interruption insurance may also be purchased for selected
operations, to the extent that such insurance is commercially viable. Vermilion may become liable for damages arising from such
events against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons.
Costs incurred to repair such damage or pay such liabilities may impair Vermilion's ability to satisfy its debt obligations or
declare dividends.



Continuing production from a property, and to
some extent the marketing of production, are largely dependent upon the ability of the operator of the property. To the extent
the operator fails to perform these functions properly, revenue may be reduced. Payments from production generally flow through
the operator and there is a risk of delay and additional expense in receiving such revenues if the operator becomes insolvent.
Although satisfactory title reviews are generally conducted in accordance with industry standards, such reviews do not guarantee
or certify that a defect in the chain of title may not arise to defeat the claim of Vermilion or its subsidiaries to certain properties.
Such circumstances could impair Vermilion's ability to satisfy its debt obligations or declare dividends.



In addition to the usual delays in payment by
purchasers of oil and natural gas to the operators of the properties, and by the operator to Vermilion, payments between any of
such parties may also be delayed by restrictions imposed by lenders, delays in the sale or delivery of products, delays in the
connection of wells to a gathering system, blowouts or other accidents, recovery by the operator of expenses incurred in the operation
of the properties or the establishment by the operator of reserves for such expenses.



39







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Environmental Concerns



The oil and natural gas industry is subject
to environmental regulation pursuant to local, provincial and federal legislation. A breach of such legislation may result in the
imposition of fines or issuance of clean up orders in respect of Vermilion or its assets. Such legislation may be changed to impose
higher standards and potentially more costly obligations on Vermilion. There can be no assurance that the Company will be able
to satisfy its actual future environmental and reclamation obligations.



Kyoto Protocol



Australia, Canada, France, Ireland and the Netherlands
are signatories to the United Nations Framework Convention on Climate Change and all have ratified the Kyoto Protocol established
thereunder. Australia, Canada, France, Ireland and the Netherlands, as Annex B parties to the Kyoto Protocol, and France and Netherlands
as a party to the European Union Regional Integration Organization, are required to set legally binding targets to reduce nation-wide
emissions of carbon dioxide, methane, nitrous oxide and other so-called "greenhouse gases". Canada has provided formal
notice of its intent to withdraw from the Kyoto Protocol.



Vermilion's exploration and production facilities
and other operations and activities in Australia, Canada, France, Ireland and the Netherlands will emit a small amount of greenhouse
gasses which may subject Vermilion to legislation regulating emissions of greenhouse gases and which may include a requirement
to reduce emissions or emissions intensity from Vermilion's operations and facilities. The direct or indirect costs of complying
with emissions regulations may adversely affect the business of Vermilion in Australia, Canada, France, Ireland and the Netherlands.



Discretionary Nature of Dividends



The declaration and payment (including the amount
thereof) of future cash dividends, if any, is subject to the discretion of the board of directors of the Company and may vary depending
on a variety of factors and conditions existing from time to time, including fluctuations in commodity prices, production levels,
capital expenditure requirements, debt service requirements, operating costs, royalty burdens, foreign exchange rates and the satisfaction
of the liquidity and solvency tests under the ABCA for the declaration and payment of dividends. Depending on these and other factors
considered relevant to the declaration and payment of dividends by the board of directors and management of the Company (some or
all of which may be beyond the control of the board of directors and management of the Company), the Company may change its dividend
policy from time to time. Any reduction of dividends may adversely affect the market price or value of Common Shares.



Debt Service



Vermilion may, from time to time, finance a
significant portion of its operations through debt. Amounts paid in respect of interest and principal on debt incurred by Vermilion
may impair Vermilion's ability to satisfy its other obligations. Variations in interest rates and scheduled principal repayments
could result in significant changes in the amount required to be applied to debt service before payment by Vermilion of its debt
obligations. Ultimately, this may result in lower levels of cash flow for the Company.



Lenders may be provided with security over substantially
all of the assets of Vermilion and its Subsidiaries. If Vermilion becomes unable to pay its debt service charges or otherwise commits
an event of default such as bankruptcy, a lender may be able to foreclose on or sell the assets of Vermilion and/or its Subsidiaries.



Changes in Income Tax Laws



Income tax laws and administrative policies
may be changed in a manner which adversely affects the Company and/or Shareholders.



Depletion of Reserves



The Company has certain unique attributes which
differentiate it from other oil and gas industry participants. Dividends paid from cash flow generated in respect of properties,
absent commodity price increases or cost effective acquisition and development activities, may decline over time in a manner consistent
with declining production from typical oil, natural gas and natural gas liquids reserves. Accordingly, absent capital expenditures
or acquisitions of additional oil and gas properties, Vermilion's current production levels and reserves will decline.



Vermilion's future oil and natural gas reserves
and production, and therefore its cash flows, will be highly dependent on Vermilion's success in exploiting its reserve base and
acquiring additional reserves. Without reserve additions through acquisition or development activities, Vermilion's reserves and
production will decline over time as reserves are exploited.



40







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Net Asset Value



The net asset value of the assets of the Company
from time to time will vary dependent upon a number of factors beyond the control of management, including oil and gas prices.
The trading prices of the common shares from time to time is also determined by a number of factors which are beyond the control
of management and such trading prices may be greater than the net asset value of the Company's assets.



Volatility of Market Price of Common Shares



The market price of the Common Shares may be
volatile. The volatility may affect the ability of Shareholders to sell the Common Shares at an advantageous price. Market price
fluctuations in the Common Shares may be due to the Company’s operating results failing to meet the expectations of securities
analysts or investors in any quarter, downward revision in securities analysts’ estimates, governmental regulatory action,
adverse change in general market conditions or economic trends, acquisitions, dispositions or other material public announcements
by the Corporation or its competitors, along with a variety of additional factors, including, without limitation, those set forth
under “Forward-Looking Statements” in this annual information form. In addition, the market price for securities in
the stock markets, including the TSX, has experienced significant price and trading fluctuations in recent years. These fluctuations
have resulted in volatility in the market prices of securities that often has been unrelated or disproportionate to changes in
operating performance. These broad market fluctuations may adversely affect the market price of the Common Shares.



Variations in Interest Rates and Foreign
Exchange Rates



An increase in interest rates could result in
a significant increase in the amount the Company pays to service debt, potentially impacting dividends to shareholders.



In addition, an increase in the exchange rate
for the Canadian dollar versus the U.S. dollar would result in the receipt by the Company of fewer Canadian dollars for its production
which may affect future dividends. The Company monitors and, when appropriate, uses derivative financial instruments to manage
its exposure to currency exchange rate risks. The increase in the exchange rate for the Canadian dollar and future Canadian/United
States exchange rates may impact future dividends and the future value of the Company's reserves as determined by independent evaluators.



Increase in Operating Costs or Decline in
Production Level



An increase in operating costs or a decline
in Vermilion’s production level could have an adverse effect on Vermilion’s cash flow and, therefore, could reduce
dividends to Shareholders and affect the market price of the common shares. The level of production may decline at rates greater
than anticipated due to unforeseen circumstances, many of which are beyond Vermilion's control. A significant decline in production
could result in materially lower revenues and cash flow and, therefore, could reduce dividends to Shareholders and affect the market
price of the common shares.



Acquisition Assumptions



When making acquisitions, Vermilion estimates
future performance of the assets to be acquired that may prove to be inaccurate.



Acquired assets are subject to inherent risks
associated with predicting the future performance of those assets. Vermilion makes certain estimates and assumptions respecting
the economic potential of the assets it acquires which may not be realized over time. As such, assets acquired may not possess
the value Vermilion attributed to them, which could adversely impact cash flow.



Failure to Realize Anticipated Benefits of
Prior Acquisitions



Vermilion has completed several acquisitions
since December 31, 2009 that were completed to strengthen its position in the oil and natural gas industry and to create the opportunity
to realize certain benefits, including, among other things, potential cost savings. In order to achieve the benefits of these and
future acquisitions, Vermilion will be dependent upon its ability to successfully consolidate functions and integrate operations,
procedures and personnel in a timely and efficient manner and to realize the anticipated growth opportunities and synergies from
combining the acquired assets and operations with those of the Company. The integration of acquired assets and operations requires
the dedication of management effort, time and resources, which may divert management's focus and resources from other strategic
opportunities and from operational matters during the process. The integration process may result in the disruption of ongoing
business and customer relationships that may adversely affect Vermilion's ability to achieve the anticipated benefits of such prior
acquisitions.



41







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



Additional Financing



Vermilion’s credit facility and any replacement
credit facility may not provide sufficient liquidity. The amounts available under Vermilion's credit facility may not be sufficient
for future operations, or Vermilion may not be able to obtain additional financing on attractive economic terms, if at all. Any
failure to obtain financing may have a material adverse effect on Vermilion's business, and dividends to Shareholders may be reduced,
suspended or eliminated.



To the extent that external sources of capital,
including the issuance of additional common shares, become limited or unavailable, Vermilion's ability to make the necessary capital
investments to maintain or expand its oil and natural gas reserves will be impaired. To the extent the Company is required to use
cash flow to finance capital expenditures or property acquisitions, the level of cash available that may be declared payable as
dividends will be reduced.



Potential Conflicts of Interest



Circumstances may arise where members of the
board of directors or officers of Vermilion are directors or officers of corporations which are in competition to the interests
of Vermilion. No assurances can be given that opportunities identified by such persons will be provided to Vermilion.



GAAP Adjustments



GAAP requires that management apply certain
accounting policies and make certain estimates and assumptions which affect reported amounts in Vermilion’s consolidated
financial statements. The accounting policies may result in non-cash charges to net income and write-downs of net assets in the
financial statements. Such non-cash charges and write-downs may be viewed unfavourably by the market and may result in an inability
to borrow funds and/or may result in a decline in the Common Share price.



Lower oil and gas prices increase the risk of
write-downs of Vermilion’s oil and gas property investments. Under IFRS, PNG depletion units are aggregated into groups known
as CGU’s for impairment testing.  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. While these impairment losses would not affect cash flow, the charge to earnings could
be viewed unfavourably in the market.



Market Accessibility



A decline in Vermilion’s ability to market
oil and natural gas production could have a material adverse effect on its production levels or on the price that Vermilion receives
for production which, in turn, could reduce Dividends to its Shareholders and the trading price of the common shares.



Vermilion’s business depends in part upon
the availability, proximity and capacity of natural gas gathering systems, pipelines and processing facilities. Canadian federal
and provincial, as well as United States federal and state, regulation of oil and gas production, processing and transportation,
tax and energy policies, general economic conditions, and changes in supply and demand could adversely affect Vermilion’s
ability to produce and market oil and natural gas. If market factors change and inhibit the marketing of Vermilion production,
overall production or realized prices may decline, which could reduce dividends to Shareholders.



ADDITIONAL INFORMATION



Additional information
relating to the Company may be found on SEDAR atwww.sedar.com. Additional information
related to the remuneration and indebtedness of the directors and officers of the Company, and the principal holders of Common
Shares and Rights to purchase Common Shares and securities authorized for issuance under the Company's equity compensation plans,
where applicable, are contained in the information circular of the Company in respect of its most recent annual meeting of Shareholders
involving the election of directors. Additional financial information is provided in the Company's audited financial statements
and management's discussion and analysis for the year ended December 31, 2011.



42







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



SCHEDULE "A"

REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED
RESERVES EVALUATOR OR AUDITOR (FORM 51-101F2)



To the Board
of Directors of Vermilion Energy Inc. (the "Company"):



| | 1. | We have evaluated the Company’s reserves data as at December 31, 2011. The reserves data
are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2011, estimated using
forecast prices and costs.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The reserves data are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the reserves data based on our evaluation.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



We carried out our evaluation in
accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") prepared jointly
by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum
(Petroleum Society).



| | 3. | Those standards require that we plan and perform an evaluation to obtain reasonable assurance as
to whether the reserves data are free of material misstatement. An evaluation also includes assessing whether the reserves data
are in accordance with principles and definitions presented in the COGE Handbook.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The following table sets forth the estimated future net revenue (before deduction of income taxes)
attributed to proved plus probable reserves, estimated using forecast prices and costs and calculated using a discount rate of
10 percent, included in the reserves data of the Company evaluated by us for the year ended December 31, 2011, and identifies the
respective portions thereof that we have audited, evaluated and reviewed and reported on to the Company's board of directors:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Independent Qualified     |  |  | Description and Preparation |                  |  | Location of Reserves (Country or Foreign |             | Net Present Value of Future Net Revenue(before income taxes, 10% discount rate - M$) | 
|------------------------- |  |  | --------------------------- | ---------------- |  | ---------------------------------------- | ----------- | ------------------------------------------------------------------------------------ | 
|Reserves Evaluator        |  |  | Date of Evaluation Report   |                  |  | Geographic Area)                         |             | Audited                                                                              | 
|GLJ Petroleum Consultants |  |  |                             | February 3, 2012 |  |                                          | Australia   |                                                                                      | 
|GLJ Petroleum Consultants |  |  |                             | February 3, 2012 |  |                                          | Canada      |                                                                                      | 
|GLJ Petroleum Consultants |  |  |                             | February 3, 2012 |  |                                          | France      |                                                                                      | 
|GLJ Petroleum Consultants |  |  |                             | February 3, 2012 |  |                                          | Ireland     |                                                                                      | 
|GLJ Petroleum Consultants |  |  |                             | February 3, 2012 |  |                                          | Netherlands |                                                                                      | 
|TOTAL                     |  |  |                             |                  |  |                                          |             |                                                                                      | 



| | 5. | In our opinion, the reserves data respectively evaluated by us have, in all material respects,
been determined and are in accordance with the COGE Handbook, consistently applied.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | We have no responsibility to update our reports referred to in paragraph 4 for events and circumstances
occurring after their respective preparation dates.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | Because the reserves data are based on judgements regarding future events, actual results will
vary and the variations may be material.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



EXECUTED as to our reports referred to above:



GLJ Petroleum Consultants Ltd., Calgary, Alberta,
Canada, February 3, 2012



|“Jodi L. Anhorn”               | 
|------------------------------ | 
|Jodi L. Anhorn, M.Sc., P.Eng. 
|Executive Vice President & COO



43







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



SCHEDULE "B"

REPORT OF MANAGEMENT AND DIRECTORS ON OIL
AND GAS DISCLOSURE (FORM 51-101F3)



Terms to which a meaning is ascribed in National
Instrument 51-101 have the same meaning herein.



Management of Vermilion Energy Inc. (the "Company")
are responsible for the preparation and disclosure, or arranging for the preparation and disclosure of information with respect
to the Company's oil and gas activities in accordance with securities regulatory requirements. This information includes reserves
data, which are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2011, estimated
using forecast prices and costs.



Independent qualified reserves evaluators have
evaluated the Company's reserves data. The report of the independent qualified reserves evaluators is presented in Schedule A to
the Annual Information Form of the Company for the year ended December 31, 2011.



The Independent Reserves Committee of the Board
of Directors of the Company has:



| | (a) | reviewed the Company's procedures for providing information to the independent qualified reserves
evaluators;
| | --- | -------------------------------------------------------------------------------------------------------------



| | (b) | met with the independent qualified reserves evaluators to determine whether any restrictions affected
the ability of the independent qualified reserves evaluators to report without reservation; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | reviewed the reserves data with Management and the independent qualified reserves evaluators.
| | --- | ---------------------------------------------------------------------------------------------



The Independent Reserves Committee of the Board
of Directors has reviewed the Company's procedures for assembling and reporting other information associated with oil and gas activities
and has reviewed that information with Management. The Board of Directors has, on the recommendation of the Audit and Independent
Reserves Committees, approved:



| | (a) | the content and filing with securities regulatory authorities of Form 51-101F1 containing reserves
data and other oil and gas information;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the filing of Form 51-101F2 which is the report of the independent qualified reserves evaluators
on the reserves data; and
| | --- | --------------------------------------------------------------------------------------------------------------------------



| | (c) | the content and filing of this report.
| | --- | --------------------------------------



Because the reserves data
are based on judgements regarding future events, actual results will vary and the variations may be material. However, any variations
should be consistent with the fact that reserves are categorized according to the probability of their recovery.



|“Lorenzo Donadeo”                                                     | 
|--------------------------------------------------------------------- | 
|Lorenzo Donadeo, President and Chief Executive Officer                | 
|                                                                      | 
|“Curtis Hicks”                                                        | 
|Curtis W. Hicks, Executive Vice President and Chief Financial Officer | 
|                                                                      | 
|“Larry J. Macdonald”                                                  | 
|Larry J. Macdonald, Director and Chairman of the Board                | 
|                                                                      | 
|“Claudio A. Ghersinich”                                               | 
|Claudio A. Ghersinich, Director                                       | 



44







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



SCHEDULE "C"

TERMS OF REFERENCE FOR THE AUDIT COMMITTEE



| | I. | PURPOSE
| | -- | -------



The primary function of the Audit
Committee (the “Committee”) is to assist the Board in fulfilling its oversight responsibilities by reviewing:



| | A. | The financial information that will be provided to the Shareholders and others;
| | -- | -------------------------------------------------------------------------------



| | B. | The systems of internal controls, management and the Board of Directors have established;
| | -- | -----------------------------------------------------------------------------------------



| | C. | All audit processes;
| | -- | --------------------



Primary responsibility for the financial
reporting, information systems, risk management and internal controls of Vermilion Energy Inc. (“Vermilion”) is vested
in management and is overseen by the Board.



| | II. | COMPOSITION AND OPERATIONS
| | --- | --------------------------



| | A. | The Committee shall be composed of not fewer than three directors and not more than five directors,
all of whom are independent1 directors
of Vermilion.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | All Committee members shall be “financially literate”2 and at least one member shall have "accounting or related financial expertise". The Committee may include a member
who is not financially literate, provided he or she attains this status within a reasonable period of time following his or her
appointment and providing the Board has determined that including such member will not materially adversely affect the ability
of the Committee to act independently.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | The Committee shall operate in a manner that is consistent with the Committee Guidelines outlined
in Tab 8 of the Board Manual.
| | -- | -------------------------------------------------------------------------------------------------------------------------------



| | D. | Vermilion’s auditors shall be advised of the names of the Committee members and will receive
notice of and be invited to attend meetings of the Committee, and to be heard at those meetings on matters relating to the Auditor's
duties.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | E. | The Committee has the authority to communicate with the external auditors as it deems appropriate
to consider any matter that the Committee or auditors determine should be brought to the attention of the Board or Shareholders.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F. | The Committee shall meet at least four times each year.
| | -- | -------------------------------------------------------



| | III. | Duties and Responsibilities
| | ---- | ---------------------------



Subject to the powers and duties
of the Board, the Committee will perform the following duties:



| | A. | Financial Statements and Other Financial Information
| | -- | ----------------------------------------------------



The Committee will review
and recommend for approval to the Board financial information that will be made publicly available. This includes:



| | i) | Review and recommend approval of Vermilion’s annual financial statements, MD&A and press
release and report to the Board of Directors before the statements are approved by the Board of Directors;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ii) | Review and recommend approve for release Vermilion’s quarterly financial statements, MD&A
and press release;
| | --- | ------------------------------------------------------------------------------------------------------------

| | iii) | Satisfy itself that adequate procedures are in place for the review of the public disclosure of
financial information extracted or derived from Vermilion’s financial statements, other than the public disclosure referred
to in items (i) and (ii) above, and periodically assess the adequacy of those procedures; and
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iv) | Review the Annual Information Form and any Prospectus/Private Placement Memorandums.
| | --- | ------------------------------------------------------------------------------------








| | 1 | Independence requirements, including those specifically for Audit Committee members, are described
in the Appendix to Tab 6, Board Operating Guidelines.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | The Board has adopted the NI 52-110 definition of “financial literacy”, which is an
individual who is financially literate if he or she has the ability to read and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

understand a
set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to
the breadth and

complexity of the
issues that can reasonably be expected to be raised by the issuer's financial statements.





45







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



SCHEDULE "C"

TERMS OF REFERENCE FOR THE AUDIT COMMITTEE
(CONTINUED)



Review and discuss:



| | v) | The appropriateness of accounting policies and financial reporting practices used by Vermilion;
| | -- | -----------------------------------------------------------------------------------------------

| | vi) | Any significant proposed changes in financial reporting and accounting policies and practices to
be adopted by Vermilion;
| | --- | -------------------------------------------------------------------------------------------------------------------------

| | vii) | Any new or pending developments in accounting and reporting standards that may affect Vermilion;
| | ---- | ------------------------------------------------------------------------------------------------

| | viii) | With management, the external auditor and, if necessary, legal counsel, any litigation, claim or
contingency, including tax assessments, that could have a material effect upon the financial position of the Corporation, and the
manner in which these matters may be, or have been, disclosed in the financial statements; and
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ix) | Accounting, tax and financial aspects of the operations of the Corporation as the Committee considers
appropriate.
| | --- | ------------------------------------------------------------------------------------------------------------------



| | B. | Risk Management, Internal Control and Information
Systems
| | -- | ---------------------------------------------------------



The Audit Committee will review and
obtain reasonable assurance that the risk management, internal control and information systems are operating effectively to produce
accurate, appropriate and timely management and financial information. This includes:



| | i) | Review Vermilion’s risk management controls and policies;
| | -- | ---------------------------------------------------------

| | ii) | Obtain reasonable assurance that the information systems are reliable and the systems of internal
controls are properly designed and effectively implemented through discussions with and reports from management, the internal auditor
and external auditor; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii) | Review management steps to implement and maintain appropriate internal control procedures including
a review of policies.
| | ---- | -------------------------------------------------------------------------------------------------------------------------



| | C. | External Audit
| | -- | --------------



The External Auditor is required to
report directly to the Committee, which will review the planning and results of external audit activities and the ongoing relationship
with the external auditor. This includes:

| | i) | Review and recommend to the Board, for Shareholder approval, engagement and compensation of the
external auditor;
| | -- | -----------------------------------------------------------------------------------------------------------------

| | ii) | Review the annual external audit plan, including but not limited to the following:
| | --- | ----------------------------------------------------------------------------------

| | a) | engagement letter;
| | -- | ------------------

| | b) | objectives and scope of the external audit work;
| | -- | ------------------------------------------------

| | c) | procedures for quarterly review of financial statements;
| | -- | --------------------------------------------------------

| | d) | materiality limit;
| | -- | ------------------

| | e) | areas of audit risk;
| | -- | --------------------

| | f) | staffing;
| | -- | ---------

| | g) | timetable; and
| | -- | --------------

| | h) | proposed fees.
| | -- | --------------

| | iii) | Meet with the external auditor to discuss Vermilion’s quarterly and annual financial statements
and the auditor's report including the appropriateness of accounting policies and underlying estimates;
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iv) | Maintain oversight the External Auditor’s work and advise the Board, including but not limited
to:
| | --- | --------------------------------------------------------------------------------------------------

| | a) | The resolution of any disagreements between management and the External Auditor regarding financial
reporting;
| | -- | --------------------------------------------------------------------------------------------------------------

| | b) | Any significant accounting or financial reporting issue;
| | -- | --------------------------------------------------------

| | c) | The auditors' evaluation of Vermilion's system of internal controls, procedures and documentation;
| | -- | --------------------------------------------------------------------------------------------------

| | d) | The post audit or management letter containing any findings or recommendation of the external auditor,
including management’s response thereto and the subsequent follow-up to any identified internal control weaknesses;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e) | Any other matters the external auditor brings to the Committee’s attention; and
| | -- | -------------------------------------------------------------------------------

| | f) | Assess the performance and consider the annual appointment of external auditors for recommendation
to the Board ensuring that such auditors are participants in good standing pursuant to applicable regulatory laws.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | v) | Review the auditor’s report on all material subsidiaries; and
| | -- | -------------------------------------------------------------

| | vi) | Review and discuss with the external auditors all significant relationships that the external auditors
and their affiliates have with Vermilion and its affiliates in order to determine the external auditors’ independence, including,
without limitation:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | Requesting, receiving and reviewing, on a periodic basis, a formal written statement from the external
auditors delineating all relationships that may reasonably be thought to bear on the independence of the external auditors with
respect to Vermilion;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | Discussing with the external auditors any disclosed relationships or services that the external
auditors believe may affect the objectivity and independence of the external auditors; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | Recommending that the Board take appropriate action in response to the external auditors’
report to satisfy itself of the external auditors’ independence.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | vii) | Review and pre-approve any non-audit services to be provided by the external auditor's firm or
its affiliates (including estimated fees), and consider the impact on the independence of the external audit; and
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | viii) | Meet periodically, and at least annually, with the external auditor without management present.
| | ----- | -----------------------------------------------------------------------------------------------



46







|Vermilion Energy Inc. | AIF for the year ended December 31, 2011
|--------------------- | ----------------------------------------



SCHEDULE "C"

TERMS OF REFERENCE FOR THE AUDIT COMMITTEE
(CONTINUED)



| | D. | Compliance
| | -- | ----------



The Committee shall:



| | i) | Ensure that the External Auditor’s fees are disclosed by category in the Annual Information
Form in compliance with regulatory requirements;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------

| | ii) | Disclose any specific policies or procedures has adopted for pre-approving non-audit services by
the External Auditor including affirmation that they meet regulatory requirements;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii) | Assist the Governance and Human Resources Committee with preparing Vermilion’s governance
disclosure by ensuring it has current and accurate information on:
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | The independence of each Committee member relative to regulatory requirements for audit committees;
| | -- | ---------------------------------------------------------------------------------------------------

| | b) | The state of financial literacy of each Committee member, including the name of any member(s) currently
in the process of acquiring financial literacy and when they are expected to attain this status; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | The education and experience of each Committee member relevant to his or her responsibilities as
Committee member.
| | -- | ------------------------------------------------------------------------------------------------------------------

| | iv) | Disclose if Vermilion has relied upon any exemptions to the requirements
for Audit Committees under regulatory requirements.
| | --- | ----------------------------------------------------------------------------------------------------------------------------



| | E. | Other
| | -- | -----



The Committee shall:



| | i) | Establish and periodically review implementation of procedures for:
| | -- | -------------------------------------------------------------------

| | a) | The receipt, retention and treatment of complaints received by Vermilion regarding accounting,
internal accounting controls, or auditing matters; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | The confidential, anonymous submission by employees of concerns regarding questionable accounting
or auditing matters;
| | -- | ----------------------------------------------------------------------------------------------------------------------

| | ii) | Review and approve Vermilion hiring policies regarding partners, employees and former partners
and employees of the present and former External Auditor;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii) | Review insurance coverage of significant business risks and uncertainties;
| | ---- | --------------------------------------------------------------------------

| | iv) | Review material litigation and its impact on financial reporting;
| | --- | -----------------------------------------------------------------

| | v) | Review policies and procedures for the review and approval of officers’ expenses and perquisites;
and
| | -- | -----------------------------------------------------------------------------------------------------

| | vi) | Review the policies and practices concerning the expenses and perquisites of the Chairman, including
the use of the assets of Vermilion;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

| | vii) | Review with external auditors any corporate transactions in which directors or officers of Vermilion
have a personal interest; and
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------

| | viii) | Review the terms of reference for the Committee annually and make recommendations to the Board
as required.
| | ----- | -----------------------------------------------------------------------------------------------------------



| | IV. | ACCOUNTABILITY
| | --- | --------------



| | A. | The Committee Chair has the responsibility to make periodic reports to the Board, as requested,
on financial matters relative to Vermilion.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | B. | The Committee shall report its discussions to the Board by maintaining minutes of its meetings
and providing an oral report at the next Board meeting.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------



47