Vermilion Bumps Up Production in Alberta

Vermilion announced 100% success in its Cardium light oil and liquids-rich natural gas drilling programs in Alberta. The significant scope of these resource plays will provide Vermilion with a rich source of organic production growth for the foreseeable future.


Vermilion's Canadian operations are focused on Cardium light oil and liquids-rich natural gas development centered in the West Pembina and Drayton Valley regions of north central Alberta. Since late 2009, participation in land sales, swaps and small acquisitions has expanded Vermilion's prime Cardium land inventory from 121 net sections to approximately 150 net sections. This significant land position is expected to support more than 426 net locations in the West Pembina Cardium fairway including at least 15 net Cardium light oil horizontal wells to be drilled in 2010. Vermilion expects to increase its drilling activity to between 30 and 40 Cardium light oil wells in 2011.

Vermilion's liquids-rich gas program has an inventory of more than 120 net locations identified for horizontal drilling, and will see nine gross (6 net) wells drilled in 2010, including four horizontal wells (2.5 net). These wells are targeting Ellerslie and Notikewin formations that deliver 40 to 60 barrels of high value liquids per million cubic feet of gas production providing strong economics even at current gas price levels.


Vermilion has drilled five Cardium wells to date, four have been completed and three have been tied-in and producing in excess of 30 days, post the recovery of all fracture treatment fluids. All completed wells were treated with 18 stage oil fracs containing 20 tonnes of sand. The Cardium program has benefited from strong operational performance to date with a total of 70 of the 72 fracs successfully placed during completion of the first four wells. The wells are roughly 1,800 meters deep, with horizontal legs ranging from 1,250 to 1,500 meters. All the wells encountered significant accumulations of oil bearing, clean sandstones estimated to be approximately 8 meters thick. The average 30 calendar day production for the first three wells, post recovery of the hydrocarbons used in the fracturing process, is approximately 440 boe/d per well, with individual well averages ranging from 366 boe/d to 537 boe/d. Production from these wells is approximately 90% light oil and 10% associated gas with no water production. The fourth well was recently completed and initial results appear in-line with those of the first three wells. The fifth well is anticipated to be completed in early June. Vermilion believes the geological deposition characteristics in West Pembina will provide for highly repeatable results for this play going forward, and plans to double its level of activity in the area for 2011.

Vermilion also participated in two horizontal conventional Notikewin gas well completions in the first quarter of 2010, with optimized 30-day average gross production rates of approximately of 4.0 mmcf/d of natural gas and between 160 and 200 bbl/d of natural gas liquids per well. Vermilion has currently identified an inventory of 26 net additional horizontal conventional Notikewin prospects.

Vermilion plans to drill and complete its first horizontal Ellerslie well using slickwater frac technology late in the third quarter of 2010. Vermilion has previously completed a vertical Ellerslie well using slickwater frac technology achieving optimized 30-day average production rates of approximately 430 boe/d comprised of 2.0 mmcf/d and 100-120 bbl/d of natural gas liquids. The application of slickwater frac technology to multistage horizontal completions is expected to yield similarly strong performance gains to those achieved with the successful vertical well completion. Vermilion has an identified inventory of more than 40 net horizontal Ellerslie drilling opportunities.

Vermilion is in the early stages of evaluating the development potential of an emerging unconventional Notikewan resource play through application of horizontal drilling and multi-stage slickwater fracturing techniques. To date, the play has been tested using two operated vertical slickwater fracs and one non-operated horizontal completion. Vermilion has current plans to further test and de-risk the play with an additional two to four vertical recompletions and one operated horizontal completion during the coming winter drilling season. Vermilion has currently identified 54 Notikewan resource prospects in the West Pembina region.


Based on these initial results and the strength of Vermilion's ongoing operations, average production guidance for 2010 has been increased to a range of 31,000 to 32,000 boe/d with an exit rate of between 33,000 and 34,000 boe/d, depending on the timing of completion and tie-in of new wells.


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