VET

Business Context and Reporting Period

Company: Vermilion Energy Trust (Vermilion)

Filing Type: Form 6-K (Report of Foreign Private Issuer)

Reporting Period: First Quarter ended March 31, 2005

Announcement Date: May 6, 2005

Vermilion reported unaudited interim results, consolidating its operations with Verenex Energy Inc. (54% owned subsidiary). The quarter was marked by the closing of a $95 million acquisition of producing assets in Australia on March 31, 2005, and the maintenance of stable monthly distributions.

Key Financial Metrics

Production: 22,762 boe/d (Trust production). Current capacity estimated at over 27,000 boe/d following the Australian acquisition.

Unit Performance: Total return of 15.5% in Q1 (13.0% capital appreciation, 2.5% distributions). Unit price closed at $22.73.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 40% year-over-year, driven by higher commodity prices (WTI up 42% to $49.85/bbl) and the inclusion of Netherlands operations.
• Acquisition Impact: Net debt increased by approximately $95 million due to the Australian asset purchase, funded entirely by existing credit facilities without new equity issuance.
• Production Mix: Canadian production declined slightly (less than 3.5%) but was offset by recompletions. France production was lower than projected due to drilling activity delaying workovers. Netherlands production was impacted by plant turnarounds.
• Costs: Operating costs rose to $7.52/boe from $6.16/boe in Q1 2004, attributed to industry-wide cost pressures in Canada and the strengthening Euro affecting European operations.
• Accounting Changes: Adoption of fair value methodology for unit compensation and reclassification of exchangeable shares as non-controlling interest per EIC-151.

Guidance, Outlook, and Risks

Outlook and Guidance

• 2005 Capital Program: Increased from $68 million to $98 million to accelerate development in Canada (Drayton Valley), France (seismic and drilling), and the Netherlands.
• Production Forecast: Corporate production expected to range between 25,000 and 26,000 boe/d for 2005.
• Reserve Replacement: The Australian acquisition is expected to replace approximately 170% of 2005 production.
• Reclamation Fund: Targeting a fund balance exceeding $40 million by year-end 2005, including a planned $15 million lump sum injection.

Risks and Contingencies

• Operational Curtailments: Q2 production in Canada expected to be reduced by ~700 boe/d due to plant turnarounds. Netherlands production may be reduced by up to 1,500 b/d due to facility inspections and third-party gathering issues.
• Commodity Prices: Results are sensitive to oil and gas price fluctuations; hedging programs are in place for 3,000 bbls/d of oil in 2005.
• Regulatory/Ownership: Non-resident ownership is currently ~29% (excluding exchangeables), well below the 50% limit in the Trust Indenture.

Investor Verification Checklist

• Debt Capacity: Verify the terms of the $240 million credit facility and the impact of the $95 million drawdown on future borrowing capacity.
• Production Volumes: Confirm Q2 production recovery in France and the Netherlands following the reported curtailments and turnarounds.
• Reserve Quality: Review the specific reserve replacement ratio and production profile of the newly acquired Australian assets.
• Cost Inflation: Monitor operating cost trends per boe, particularly in Europe, given the impact of currency exchange rates.
• Accounting Adjustments: Understand the impact of the EIC-151 change on non-controlling interest and net earnings attribution.