Vermilion Reports Q2 Results

Vermilion Energy Trust (TSX -VET.UN) reported unaudited interim operating and financial results for the period ended June 30, 2007.

Second Quarter Highlights:

Recorded production of 30,916 boe/d in the second quarter of 2007, an increase of 6.3% compared to 29,090 boe/d in the first quarter of 2007. Increased volumes in Australia, France and Canada more than offset seasonally curtailed production in the Netherlands.

Generated funds from operations of $85.1 million ($1.18 per unit)in the second quarter of 2007, compared to $75.9 million ($1.06 per unit) in the first quarter of 2007. Revenue, cash flow and operating netbacks in Australia appear lower as only a single shipment of crude from the Wandoo Field occurred in the quarter. Unsold inventories at Wandoo increased by approximately 245,000 bbls in the second quarter of 2007. Unsold production is recorded at cost until shipped, and the difference between the realized sales price and cost is reflected in future funds from operations.

Distributed $0.51 per unit during the quarter, bringing umulative distributions to $9.01 since conversion to a trust in 2003. Vermilion's cash payout ratio in the second quarter was 40% before impact of the DRIP compared to 44% in the first quarter of 2007. The total implied payout ratio, including distributions (net of the DRIP), capital expenditures, and contributions to the reclamation fund was 67% of funds from operations compared to 87% in the first quarter of 2007.

Closed the acquisition of a 40% interest in the Wandoo Field offshore Australia. Vermilion now holds a 100% operated interest in this field.

Successfully recompleted two wells in the Wandoo Field offshore Australia. Production from these two wells increased by approximately 825 boe/d. Completed preparations for the Phase 2 expansion of the Wandoo B Platform. Subsequent to the end of the quarter, the Wandoo B Platform was shut down for approximately one week to complete this expansion, which may result in a further modest increase to oil production.

Completed a successful tight gas drilling pilot program that commenced in July 2006, which resulted in 10 wells (100% success) in the Drayton Valley region in Alberta. Vermilion plans to continue with workovers and third party drilling programs in 2007 and will prepare for additional drilling in 2008. Continued completing and tying-in previously drilled coalbed methane (CBM) wells in central Alberta. Much of the Canadian operations, including the CBM drilling program experienced delays in the second quarter due to wet weather, which reduced access to many of these properties.

Completed all preparations to begin drilling two wells at Harlingen and one well at DeBlesse in the Netherlands.

Advanced preparations to drill the Orca 1 well on the Aquitaine Maritime prospect offshore France, including procurement of equipment and of service contracts required to service the well. As announced on July 19, 2007, French authorities have approved an extension of the drilling period to September 30, 2007 and issued a drilling permit for the Orca 1 well. The Byford Dolphin rig is expected to begin the two-week move to the location in the next few days.

Vermilion's net debt at the end of the second quarter increased by $100 million to approximately $446 million, equivalent to 1.3 times annualized second quarter cash flow, reflecting the acquisition of the Wandoo property exclusive of the impact of that acquisition on funds from operations.

Subsequent to the end of the quarter, Vermilion increased its investment in Verenex Energy Inc. ("Verenex") by $30 million through participation in a financing announced by Verenex on July 9, 2007. Vermilion owns approximately 18.5 mm shares of Verenex, representing approximately 41.8% of that company's outstanding shares.

Vermilion's production growth is expected to continue in the second half of 2007, boosted by the 3,000 boe/d Wandoo acquisition in Australia and a new gas contract in the Netherlands that will eliminate the seasonal curtailment of production in the spring and summer months.

In Canada, the first phase of the Drayton Valley tight gas development program launched last summer is nearing completion. Vermilion drilled 10 wells in this program resulting in nine gas wells and one oil well with average initial production rates exceeding 200 boe/d. This drilling program, combined with workovers, recompletions and participation in third party drills, increased Drayton Valley production by over 1,500 boe/d over the past year, net of declines. Vermilion is planning to continue this program in 2008. The Trust's 2007 CBM drilling program was delayed until the third quarter by wet weather and poor location access over the past few months. Vermilion plans to drill 14 CBM wells in the third quarter and will participate in an additional five partner-operated drills. All successful wells will be tied into the Morningside compressor station.

In France, Vermilion has completed and tied in two wells at Champotran and La Torche in the Paris Basin adding approximately 350 boe/d to production. Trucking of crude oil production from the Aquitaine Basin will continue for the balance of the year, but sufficient volumes are being moved to allow for normal well maintenance work to resume in southern France. Accordingly, Vermilion expects France production volumes to remain stable over the second half of the year.

The review of the failure of the storage vessel at the Ambes terminal is ongoing. Vermilion expects that a court-appointed expert will provide an opinion on the incident early in 2008 with a final judgement regarding the cause, responsibility and allocable costs likely not available for a few years. Meanwhile, the cleaning and inspection of other storage vessels at the terminal is ongoing, as is detailed engineering design work. Proposed changes to the system are being prepared for submission in late 2007, which, if accepted, would allow modifications to be implemented in the first half of 2008. Full terminal activities will not likely resume until sometime in the second half of 2008. Vermilion continues to work towards an interim solution that would allow access to a storage vessel not impacted by the shut-down order at the Ambes terminal. If successful, this plan would allow intermittent use of the pipeline and Ambes loading facility and would considerably reduce the current trucking requirements.

Authorities in France granted Vermilion and its partners an extension to the drilling period for the Orca 1 well on the Aquitaine Maritime prospect offshore France to September 30, 2007. Vermilion expects the Byford Dolphin rig to begin moving to the location in the next few days and should commence drilling the well in late August 2007. Well results should be available by early October 2007. Vermilion is excited about the potential for this well, but reminds investors that it is a high-risk exploration target. On July 24, 2007 Vermilion announced that French authorities awarded the Aquila offshore exploration permit to Vermilion and Verenex (50/50) providing the right to explore a 709 square kilometre area which lies between the Aquitaine Maritime Permit and the southwest coast of France. This could further enhance the significance of a successful well on the Aquitaine Maritime Permit.

Vermilion commenced drilling its first well of a three well program in the Netherlands on July 26, 2007. The first wells are targeting the development of a tight chalk reservoir at Harlingen and a later well will be targeting the extension of a reservoir at De Blesse. Work is proceeding on plans to install new compression facilities at the Harlingen Treatment Centre, to reduce horsepower consumption and to release some fuel gas to the sales line. These facility modifications will require a three week shut down in October, which is expected to reduce production by approximately 1,000 boe/d for the month. Subsequently, Vermilion expects gas sales at the Harlingen Treatment Center to increase by 200 boe/d compared to previous levels. Second quarter production volumes were curtailed by approximately 800 boe/d due to reduced seasonal demand. Vermilion signed a new contract with its natural gas purchaser, Gasterra (formerly Gasunie), on July 1, 2007 that will allow Vermilion to produce gas at full capacity year-round. This will eliminate the seasonal reductions that have impacted Vermilion's gas volumes in both the second and third quarter in past years.

In Australia, Vermilion recognized a combined production increase of approximately 825 boe/d (at 60% interest) from two wells that were re-perforated in 'bypassed pay' zones. On June 20, 2007, the Trust closed the acquisition of an additional 40% interest in the Wandoo field boosting Vermilion's production capacity by approximately 3,000 boe/d. Subsequent to the end of the quarter, Vermilion shut-in the platform for approximately one week while it completed the second phase of the facility expansion on the Wandoo B Platform. Current production capacity at Wandoo exceeds 8,000 boe/d. We expect to experience normal declines from this field over the balance of the year.

Subsequent to the end of the quarter Verenex announced that its B1-47/02 and C1-47/02 wells in Libya both tested successfully, that testing on the fourth well, D1 47/02 which appears similar to the C1 well will commence shortly and that a fifth is currently drilling. The B1-47/02 well tested 23,800 barrels per day of light crude oil and the C1 well test was similar. Vermilion holds a 41.8% equity interest in Verenex.

The recent passage of legislation related to the change in taxation of income trusts beginning in 2011 requires these changes to be appropriately reflected in the determination of future income tax assets and liabilities. This legislation resulted in the recognition of future income taxes related to Vermilion Energy Trust, the parent entity, whereas previously such differences were only recognized in relation to subsidiaries of the Trust. The related impact on the Trust's future income tax provision and future income tax liability related to this legislation was not material.

Vermilion continues to offer its investors a rich portfolio of assets, positive unit price performance and exposure to potentially high-impact opportunities.


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