Vermilion Energy Trust - Year end 2006 operating and financial results



    CALGARY, March 1 /CNW/ - Vermilion Energy Trust ("Vermilion") (TSX -
VET.UN) is pleased to report operating and unaudited financial results for the
year ended December 31, 2006.

    
    2006 HIGHLIGHTS

    -   Recorded production of 27,401 boe/d in 2006 an increase of 9%
        compared to 25,166 boe/d in 2005. Fourth quarter 2006 production was
        29,452 boe/d compared to 28,411 in the third quarter of 2006.

    -   Generated funds from operations of $89.6 million ($1.27 per unit) in
        the fourth quarter of 2006, bringing full year 2006 funds from
        operations to $342.5 million ($4.86 per unit) compared to
        $278.2 million ($4.08 per unit) in 2005.

    -   Provided top quartile total returns to unitholders of 24.5% in 2006,
        compared to the negative 12.2% average for the S&P/TSX Energy Trust
        Index. This marks the third consecutive year of top quartile
        performance for Vermilion. Over the past three years, the Trust has
        delivered a compounded average rate of return of 38.9%, making it the
        top performing conventional Canadian energy trust over that period.

    -   Replaced in excess of 200% of 2006 production through drilling and
        acquisitions, providing a 5.5% increase in reserves per debt-adjusted
        unit from year-end 2005 levels. Over the past three years, Vermilion
        has increased its proved plus probable reserves per debt-adjusted
        unit by 32%, while increasing its production per unit by 24%. The
        Trust's proved plus probable reserve life index at the end of 2006
        increased to 11.5 years as compared to 11.4 years at the end of 2005.

    -   Completed the installation of new processing facilities, gathering
        systems and pipeline connections for coalbed methane ("CBM") and
        shallow gas production in the Morningside region of Central Alberta.
        These facilities will enable Vermilion to add approximately 800 boe/d
        of natural gas during the first quarter of 2007, and will accommodate
        new production from the proposed 30 well drilling program in 2007.

    -   Acquired approximately 3,900 boe/d of light, sweet oil in France.
        Vermilion is France's largest oil producer and has assembled a
        portfolio of properties that should support further gains in
        production and reserves over the coming years.

    -   Advanced plans to drill the Aquitaine Maritime prospect offshore
        France by negotiating access to a rig and securing a partner to
        farm-in on a portion of the project. Pending receipt of regulatory
        and permit approvals, the well is scheduled to drill in the third
        quarter of 2007.

    -   Expanded the fluid handling capacity of the offshore Wandoo B
        platform in Australia by approximately 20%, which has improved
        production and will accommodate anticipated gains from the scheduled
        workover program in 2007.

    -   Maintained a strong financial position. Vermilion's net debt at
        year-end 2006 was approximately $355 million, resulting in a debt to
        trailing cash flow of approximately 1.0 times.

    CONFERENCE CALL

    Vermilion anticipates releasing its fourth quarter 2006 and year-end
results on Thursday, March 1, 2007 prior to the opening of markets. Vermilion
will discuss these results in a conference call to be held on March 1, 2007.
The conference call will begin at 9:00 AM MST. To participate, you may call
toll free 1-800-733-7560 or 1-416-644-3415 (Toronto area). The conference call
will also be available on replay by calling 1-877-289-8525 or 1-416-640-1917
(Toronto area) using pass code 21216372 followed by the pound key. The replay
will be available until midnight eastern time on March 8, 2007.


    Highlights                  Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006       2005(2)        2006       2005(2)
    -------------------------------------------------------------------------
    Financial ($000 CDN
     except unit and
     per unit amounts)
    Petroleum and natural
     gas revenues         $   155,722  $   152,864  $   618,072  $   527,877
    Funds from operations      89,558       87,865      342,502      277,237
      Per unit, basic(1)         1.27         1.29         4.86         4.07
    Capital expenditures       37,425       27,199      136,939      102,578
    Acquisitions,
     including acquired
     working capital
     deficiency                 5,845       91,613      195,880      186,580
    Net debt                                            354,809      245,430
    Reclamation fund
     contributions and
     abandonment
     expenditures               8,027        3,566       13,770       26,131
    Cash distributions
     per unit                    0.51         0.51         2.04         2.04
    Cash distributions
     total                     32,961       31,837      130,638      126,190
      Less DRIP                 6,131        5,042       18,811       15,850
      Cash distributions
       net                     26,830       26,795      111,827      110,340
      % of cash flow
       distributed gross          37%          36%          38%          46%
      % of cash flow
       distributed net            30%          30%          33%          40%
    Total net
     distributions, capex,
     reclamation fund
     contributions and
     abandonment
     expenditures         $    72,282  $    57,560  $   262,536  $   239,049
      % of cash flow              81%          66%          77%          86%
    Trust units
     outstanding(1)
      Basic                                          71,251,256   68,875,321
      Diluted                                        74,925,989   73,148,621
    Weighted average
     trust units
     outstanding(1)
      Basic                                          70,520,196   68,122,539
      Diluted                                        73,059,877   69,395,074
    Unit trading
      High                                          $     37.99  $     30.42
      Low                                           $     26.51  $     19.67
      Close                                         $     35.00  $     29.74
    -------------------------------------------------------------------------
    Operations
    Production
      Crude oil (bbls/d)       16,033       13,319       14,204       12,287
      Natural gas
       liquids (bbls/d)         1,215        1,425        1,229        1,480
      Natural gas (mcf/d)      73,221       71,376       71,805       68,398
      Boe/d (6:1)              29,452       26,639       27,401       25,166
    Average reference
     price
      WTI ($US/bbl)       $     60.21  $     60.02  $     66.21  $     56.56
      Brent ($US/bbl)           59.68        56.90        65.14        54.37
      AECO ($CDN/mcf)            6.91        11.43         6.53         8.77
      NIP 2004 Netherlands
       (Euro/GJ)                 6.04         5.50         6.12         4.64
      TAPIS Australia
       ($US/bbl)                61.69        59.37        68.15        59.39
      Foreign exchange
       rate ($US/$CDN)           0.88         0.85         0.88         0.83
      Foreign exchange
       rate (Euro/$CDN)          0.68         0.72         0.70         0.67
    Average selling price
      Crude oil ($CDN/bbl)      65.20        64.59        74.75        65.82
      Natural gas
       liquids ($CDN/bbl)       55.28        64.84        61.79        56.53
      Natural gas
       ($CDN/mcf)                7.92        10.11         7.74         8.29
    Netbacks per boe (6:1)
      Operations netback        36.92        38.64        41.86        35.01
      Cash flow netback         33.06        35.86        34.25        30.18
      Operating costs           10.52         8.02         9.65         7.92
      General and
       administration     $      1.27  $      1.28  $      1.58  $      1.29
    -------------------------------------------------------------------------
    (1) Includes trust units issuable for outstanding exchangeable shares
        based on the period end exchange ratio
    (2) 2005 results do not include Verenex Energy Inc.

    The above table includes non-GAAP measurements, which may not be
    comparable to other companies.

    FOR A COMPLETE COPY OF VERMILION'S 2006 FINANCIAL STATEMENTS AND RELATED
    MANAGEMENT'S DISCUSSION AND ANALYSIS, PLEASE REFER TO WWW.SEDAR.COM
    AND/OR VERMILION'S WEBSITE AT WWW.VERMILIONENERGY.COM. THESE DOCUMENTS
    WILL BE MADE AVAILABLE ON OR BEFORE MARCH 30, 2007.
    -------------------------------------------------------------------------


    2006 IN REVIEW

    2006 was a year in which Vermilion continued to maintain a long-term
stable business plan. The strong operating and financial results are the
result of the execution of the Trust's plan. Throughout the year, Vermilion
had to deal with a number of challenges:

    -   The year began with tropical cyclones hampering the operations of our
        offshore platform in Australia.
    -   A long and complex negotiating process involving the acquisition of
        the French subsidiary of a multinational producer resulted in the
        completion of the transaction more than a year after Vermilion began
        working on the project.
    -   In the Netherlands, the approval process to drill development wells
        took nearly a year to conclude.
    -   In Canada, reluctant landowners in the Trust's CBM and shallow gas
        operating region pushed back the completion of the Morningside
        facilities by nearly nine months.
    -   Finally the Canadian government's proposal to tax income trusts has
        required a patient and measured response from individual trusts and
        from the industry groups that continue to oppose these measures.
    

    Through it all, Vermilion has remained successful, reflecting the quality
of its assets, the strength of its people and the significance of a stable
business plan.
    Vermilion's offshore Australia facilities survived the cyclone season
with negligible damage. The lessons learned last year have been used to
improve operating routines, creating an even safer and more stable environment
in the event of future storms. The Trust initiated significant facility
expansions and evaluated the flow performance of several wells in preparation
for a subsurface work program in 2007.
    In France, Vermilion successfully completed the acquisition in early
summer, adding more than 15.0 million barrels of high quality oil reserves and
further enhancing its dynamic team of professionals. Preliminary remedial
operations confirm the rich potential of these assets.
    In the Netherlands, Vermilion succeeded in securing approvals for all of
its proposed wells and continued to build on positive relations established 
in-country over the past three years. Plans for a 2007 drilling program and to
further consolidate surface facilities to improve operating efficiencies and
to reduce costs are ongoing.
    Vermilion takes pride in its environmental stewardship and responsibility
to all stakeholders. Nowhere is this more evident than in the Trust's own
backyard, where the firm has made every effort to accommodate its neighbors.
Pushing beyond Alberta Energy and Utility Board standards in all areas ranging
from groundwater protection, to land disturbance to noise control, Vermilion
undertakes to minimize its impact on local communities. Despite these efforts,
some landowners are opposed to any activity on their lands and force prolonged
hearings before the Energy Board. To date, because of Vermilion's stringent
efforts, the Board has ruled in favour of Vermilion's continued activities.
The Trust will continue to work with land owners in its attempts to amicably
resolve any further disputes, but acknowledges that this will be an ongoing
issue in the development of these lands.
    As for the Canadian government's proposal to tax income trusts, Vermilion
is working closely with the Canadian Coalition of Energy Trusts to educate the
ruling Conservative party and the opposition parties as to the advantages that
the trust structure provides in the development of mature oil and gas
properties and to the long term benefits the energy trusts will have on the
Canadian economy. In the event that the legislation is enacted as proposed,
Vermilion believes that it is well positioned to maintain its current business
plans with minimal impact to the unitholders.
    The patient and steady adherence to the Trust's well articulated business
plan has resulted in the delivery of superior operational performance and in
turn, superior market performance over the past few years. By delivering a
stable stream of distributions as well as strong growth in both production and
reserves on a per-unit basis, Vermilion provided unitholders with an industry
leading 38.9% compounded average rate of return over the past three years. The
Trust recorded record profits and funds from operations in 2006.

    OUTLOOK

    Vermilion's Board of Directors approved a $155 million development
capital program for 2007, representing an approximate 13% increase over
development spending in 2006. The Trust has active drilling and workover
programs planned in all of its jurisdictions. Despite production interruptions
related to an oil spill at the Ambes pipeline terminal in France, Vermilion
anticipates that production volumes will remain within the previously provided
guidance range of 29,500 to 30,500 boe/d in 2007.
    On January 15, Vermilion announced the temporary shut down of its
Parentis to Ambès pipeline due to an oil spill at the Ambès terminal.
Subsequent to the incident, local government authorities initiated a shut-down
of all existing storage tanks at the terminal, subject to determination of the
cause of the tank failure and inspection of all other tanks. Vermilion
continues to work with the regulatory authorities to devise an interim
solution that would allow the re-start of the pipeline. In the interim period,
production is being transported to an alternate shipping location by truck.
This program will result in reduced volumes in the first quarter of 2007 as
well as higher costs related to the trucking operations. As well, under the
trucking program, Vermilion's crude is being mixed with poorer quality crude
produced by a third party, which will reduce the realized price of a certain
portion of the Trust's production stream in France by approximately $5.00 per
bbl.
    Based on preliminary calculations, assuming that an interim pipeline
solution can be secured by the end of the first quarter of 2007, Vermilion's
total production volumes in France would be reduced by approximately 500 boe/d
in 2007 while the average after-tax netback in France would be reduced by
approximately $3.50 per boe. In addition, some workover program spending for
the Aquitaine Basin in southern France will be re-allocated to the Paris Basin
properties. Further information will be provided as discussions with
regulatory authorities unfold.
    Vermilion anticipates investing approximately $50 million in development
capital in France in 2007, including its share of the cost to drill the
Aquitaine Maritime exploration prospect. The first well will target the Orca
Prospect, a structure with 32 square kilometers of closure having vertical
relief of up to 500 metres. The Trust has signed a letter of intent with an
offshore well manager and has concluded a farm-in agreement with a third party
to share a portion of the cost of this well. Pending receipt of all government
regulatory and permit approvals, the well is scheduled for drilling in the
third quarter of 2007. Vermilion will retain a direct 47.5% interest in the
well and earn an additional notional 10% interest through its equity interest
in Verenex Energy Inc. ("Verenex", VNX - TSX). The Trust anticipates its 
after-tax share of the cost to drill this well will be approximately
US$5 million.
    Two wells in the La Torche/Champotran field will be drilled in the second
quarter, offsetting successful wells completed earlier in the program. Until
the pipeline issues are resolved in the Aquitaine Basin, the workover and
recompletion efforts will focus on fields acquired in the Paris Basin, which
is unaffected by these issues.
    In Canada, Vermilion anticipates a development capital program of
approximately $76 million, with efforts continuing to focus on the CBM and
shallow gas program in Central Alberta as well as the tight gas infill
development program at Drayton Valley. The Trust is also working on the
optimization of oil recoveries from its large Slave Lake pool at Utikuma, and
has drilled two infill wells in 2007 as part of that program.
    In the Netherlands, three to four infill wells will be drilled in 2007 at
Harlingen and DeBlesse, which should offset production declines in this
country. Vermilion continues to advance plans to consolidate processing
facilities at Harlingen and Garijp, to further improve operating efficiencies
and reduce operating costs. The expected capital development program in the
Netherlands for 2007 is $18 million.
    In Australia, the Trust is scheduled to complete the second phase of its
surface facilities optimization, which will increase the production capacity
of the platform and reduce the environmental impact of our operations. Two
workovers aimed at capturing bypassed oil in the Wandoo field are underway. If
successful, several additional wells may be eligible for recompletion. This
program may also determine the suitability of infill drilling to improve
reservoir recoveries. Total capital investment anticipated in Australia is
approximately $11 million.
    Verenex, in which Vermilion holds approximately 16.4 million shares
representing a 45.4% equity interest, continues to explore on its 1.5 million
acre land position in the Ghadames Basin of Libya. Verenex recently announced
the discovery of oil in its first well, which tested 5,172 bbls/d of light oil
from an 82 foot interval in the well. The company expects to complete the
testing of additional zones in this well by the end of the first quarter. A
second well is currently drilling on a separate prospect. Verenex anticipates
drilling as many as six wells on its lands by the end of 2007. While Vermilion
does not consolidate any of the operating or financial results of Verenex into
its figures, the value of Verenex's program should be reflected in Vermilion's
stake in the company.
    Vermilion's rich portfolio of properties and assets, combined with the
potential high impact exposure provided to unitholders through Verenex and the
Aquitaine Maritime project, should continue to attract investors. Management
remains focused on delivering positive meaningful returns to its investors.

    OPERATIONAL ACTIVITIES

    Canada
    ------

    In Canada, the Trust participated in the drilling of 81 wells (54.1 net)
resulting in 44 gas wells (28.1 net), 3 abandoned holes (1.7 net) and 34
standing wells (24.3 net) awaiting further evaluation and tie-in. The total
wells include 48 CBM and shallow gas wells (38.6 net) which continue to
achieve a 100% success rate.

    France
    ------

    In France, Vermilion drilled and completed four new La Torche wells with
mixed outcomes. Further evaluation of the results indicates the need to
patiently develop these properties to achieve maximum impact. While the recent
successful recompletion of the Conquille 1 well, which lies approximately five
kilometers east of the nearest producer, confirms the aerial extent of this
type of reservoir, the geologic complexity suggests that stepping out too far
from successful producers raises the risk of the program. Accordingly, the
wells scheduled in 2007 are being drilled in closer proximity to past
successes.
    Early in July 2006, Vermilion acquired control of 100% of Esso Rep in
France. Subsequent to the date of acquisition, Esso Rep was renamed Vermilion
Emeraude Rep SAS. The acquisition provided incremental production of
approximately 3,900 boe/d of light, sweet crude oil. The acquired properties
are situated in ten production concessions in the Paris and Aquitaine Basins.
The two largest producing fields are at Chaunoy (Paris Basin) and Cazaux
(Aquitaine Basin), which together represent approximately 65% of the acquired
production. Base decline rates from the properties are about 12% annually,
with operating and cash flow netbacks similar to those received from
Vermilion's existing production in France.
    Vermilion also began an active program to re-start shut-in producers,
particularly in the Cazaux field in the Aquitaine Basin. A total of five wells
were returned to production averaging approximately 150 bbls/d per well. Until
the transportation issues are resolved in southern France, further re-starts
and recompletions at Cazaux will be deferred.

    Netherlands
    -----------

    In the Netherlands, Vermilion submitted three drilling permits to
regulatory authorities and received approvals of all three, now scheduled for
mid-2007. Initial targets include two development wells in existing tight-gas
reservoirs at Harlingen and a larger step-out prospect at DeBlesse. The Trust
reactivated two shut-in gas wells, installed three additional velocity strings
and performed stimulations on two producing wells in 2007. The engineering
team finalized plans to optimize facilities at the Harlingen and Garijp gas
treatment centres. Enhanced compression utilization at Garijp allowed
Vermilion to reduce the number of compressors by one third at that location.
At Harlingen, Vermilion plans to replace two large gas-turbine compressors
with smaller, electric powered units, which will reduce total horsepower
requirements by two-thirds and eliminate the use of produced gas to power this
facility. The changes at Harlingen are scheduled for the second half of 2007.

    Australia
    ---------

    Vermilion completed the first phase of a significant expansion to the
fluid handling capacity of the Wandoo platform in the fourth quarter of 2006.
Production logs, used to determine the source of reservoir inflow, were
performed on a number of wells last summer in preparation of a selective sub-
surface workover program. Vermilion also experienced a high level of storm
activity in early 2006, enduring a number of cyclones ranging from Category 2
to Category 4 storms. Vermilion's personnel and facilities performed admirably
through this difficult period that yielded no injuries and relatively minor
damage.

    PRODUCTION

    Average production in Canada during 2006 was 4,011 bbls/d of oil and
NGL's and 41.0 mmcf/d of natural gas compared to 4,870 bbls/d of oil and NGL's
and 38.4 mmcf/d of natural gas in 2005. Fourth quarter 2006 production
averaged 3,752 bbls/d of oil and natural gas liquids and 42.0 mmcf/d of
natural gas representing an annual decline of less than 3% compared to the
fourth quarter of 2005. Canadian production is expected to experience modest
growth in 2007.
    Production in France averaged 7,800 boe/d in 2006, 37% higher than the
5,695 boe/d produced in 2005, reflecting the acquisition of 3,900 boe/d in
early July 2006. Fourth quarter production of 9,841 boe/d in 2006 compared to
6,096 boe/d produced in France during the fourth quarter of 2005, reflecting
the full impact of the acquisition. While current production capacity is near
10,000 boe/d, actual volumes in 2007 are expected to be slightly less,
impacted by transportation issues in the Aquitaine Basin.
    Production in the Netherlands averaged 4,943 boe/d in 2006 compared to
4,812 boe/d in 2005. Volumes in both years were impacted by low rates of takes
during the summer months, reflecting softer seasonal demand. Fourth quarter
production in the Netherlands averaged 5,091 boe/d in 2006 compared with
5,214 boe/d during the same period in 2005, reflecting normal production
declines offset in part by a contract reallocation gain. A further 15% decline
in production is projected for 2007, which could be offset by successful
drilling operations and improved seasonal demand next summer. A recent
pipeline expansion from the Netherlands to the UK could dampen the sharp drop
in summer demand that the Trust has experienced over the past two years.
    Australia production averaged 3,815 boe/d in 2006, compared to a full
year average of 3,391 in 2005. Volumes in 2005 reflected only nine months of
production following the acquisition on March 31, 2005, while 2006 volumes
were impacted by storm related shut-downs during the first quarter and
operations related shut-downs in the second half of 2006. Production during
the fourth quarter of 2006 averaged 3,775 boe/d, compared to 4,294 boe/d
during the same period in 2005. Much of the facility expansion work on the
Wandoo platform was completed during the fourth quarter of 2006, requiring a
temporary shut-down of production. Scheduled well interventions and additional
facility modifications are expected to improve production from Australia in
2007.

    
    Production
    -------------------------------------------------------------------------
                         Three Months Ended
                               Dec 31, 2006    Year Ended Dec 31, 2006
                     Oil &  Natural             Oil &  Natural
                      NGLs      Gas   Total      NGLs      Gas   Total
                   (bbls/d) (mmcf/d) (boe/d)  (bbls/d) (mmcf/d) (boe/d)    %
    -------------------------------------------------------------------------
    Vermilion
     Energy Trust
      Canada         3,752    41.96   10,745    4,011    40.99   10,843   40
      France         9,629     1.27    9,841    7,576     1.35    7,800   28
      Netherlands       93    29.99    5,091       31    29.47    4,943   18
      Australia      3,775        -    3,775    3,815        -    3,815   14
    -------------------------------------------------------------------------
    Total           17,249    73.22   29,452   15,433    71.81   27,401  100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                         Three Months Ended
                               Dec 31, 2005    Year Ended Dec 31, 2005
                     Oil &  Natural             Oil &  Natural
                      NGLs      Gas   Total      NGLs      Gas   Total
                   (bbls/d) (mmcf/d) (boe/d)  (bbls/d) (mmcf/d) (boe/d)    %
    -------------------------------------------------------------------------
    Vermilion
     Energy Trust
      Canada         4,522    39.08   11,035    4,870    38.39   11,268   45
      France         5,861     1.41    6,096    5,478     1.30    5,695   23
      Netherlands       67    30.88    5,214       28    28.70    4,812   19
      Australia(1)   4,294        -    4,294    3,391        -    3,391   13
    -------------------------------------------------------------------------
    Total           14,744    71.37   26,639   13,767    68.39   25,166  100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Effective from April 1, 2005
    

    RESERVES SUMMARY

    GLJ Petroleum Consultants Ltd. (GLJ), independent petroleum engineering
consultants in Calgary, has prepared the 2006 year-end reserve evaluation
report for the Trust. This report is in compliance with regulatory compliance
initiatives(1) (National Instrument 51-101).
    Vermilion added total proved plus probable reserves of 22.5 mmboe, more
than two times production in 2006. After production of 10.0 mmboe, the Trust's
proved reserves (P90) increased by 10% to 86.4 mmboe at January 1, 2007. Total
proved plus probable reserves (P50) increased by approximately 11% to
123.3 mmboe. On a per unit basis (debt adjusted where all debt is assumed to
be converted to equity at year-end), Vermilion's reserves (P50) increased by
5.5% over the prior year. Based on fourth quarter production rates, the
Trust's effective reserve life index at January 1, 2007 is 8.0 years for
proved reserves and 11.5 years for P50 reserves.

    (1) Under the 51-101 guidelines, proved reserves are qualified as those
    reserves that have a 90% chance of being exceeded at the reported
    level. Proved reserves, by definition, are conservative. Nine times
    out of ten actual reserves will be greater than the proved estimate.
    Proved plus probable reserves are defined as those reserves that have
    a 50% probability of being exceeded at the reported level. They are
    the best estimate, or the most realistic case. It is equally likely
    that the actual reserves will be higher or lower than the estimate.

    The summary reserve statement and reserve reconciliation statement are
included below. The reserves shown are Vermilion's working interest share
before deducting royalties.

    
    Reserve Summary Table (Gross) (as at January 1, 2007)
    -------------------------------------------------------------------------
                                                        Cumulative Cash Flow
                                                           (Escalated Prices)
    -------------------------------------------------------------------------
              Light &    Natural
           Medium Oil        Gas      NGL's        6:1     Undisc.        8%
              (mmbbls)      (bcf)   (mmbbls)    (mmboe)   ($000's)   ($000's)
    -------------------------------------------------------------------------
    Proved      53.68      177.0       3.24      86.42  2,807,551  1,819,678
    Proved plus
     probable   74.57      262.7       4.95     123.30  4,093,419  2,389,446
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The net present value of the reserves shown above (cumulative cash flow)
are based on GLJ's escalating price and cost scenario, are presented for
comparative purposes only and are not necessarily representative of fair
market value.


    Reserve Reconciliation Summary Table (as at January 1, 2007)
    -------------------------------------------------------------------------
                                                                        P-50
                                                                       Total
                                                             P-90     Proved
                                                Proved      Total       Plus
    Oil Equivalent (mmbbl) Gas at 6:1        Producing     Proved   Probable
    -------------------------------------------------------------------------
    Opening Balance:                             67.11      78.49     110.77
      Drilling additions                          5.06       4.83       6.21
      Acquisition                                 9.99      10.98      16.08
      Disposition                                  0.0        0.0      (0.20)
      Technical revisions                         2.82       2.07       0.39
      Production                                 (9.95)     (9.95)     (9.95)
    -------------------------------------------------------------------------
    Closing balance                              75.03      86.42      123.3
    -------------------------------------------------------------------------
    FOR COMPLETE INFORMATION REGARDING VERMILION'S RESERVES, PLEASE REVIEW
    THE TRUST'S 2006 ANNUAL INFORMATION FORM THAT WILL BE FILED ON SEDAR
    WWW.SEDAR.COM  ON OR BEFORE MARCH 31, 2007.
    -------------------------------------------------------------------------


    FINANCIAL REVIEW

    The Trust generated funds from operations of $89.6 million ($1.27 per
unit) in the fourth quarter of 2006, compared to $87.9 million ($1.29 per
unit) in the fourth quarter of 2005. The increase in production volumes in the
fourth quarter of 2006 compared to last year's period was offset by lower
commodity prices in the fourth quarter of 2006. The Trust's distributions in
the fourth quarter totaled $33.0 million ($0.51 per unit) for a payout ratio
of 37%. Cash flow for the year ended December 31, 2006 totaled $342.5 million
compared to $277.2 million in the prior year. The full year distributions in
2006 totaled $130.6 million compared to $126.2 million in 2005. This
represents a payout ratio of approximately 38% of total cash flow before the
impact of the Trust's distribution reinvestment program ("DRIP"), which
generated $18.8 million of cash to the Trust as unitholders reinvested their
monthly distributions in additional units of the Trust at 95% of the weighted
average trading price. After accounting for the DRIP, the resulting net
distribution payout ratio in 2006 was 33%.
    Development capital expenditures during the fourth quarter of 2006 were
$37.4 million bringing the full year total to $136.9 million. Vermilion
continued to take advantage of strong cash flow driven by high commodity
prices to inject a further $9.6 million into the Trust's reclamation fund
during the year, increasing the fund balance to $56.4 million, which
represents 44% of the present value of the Trust's asset retirement
obligations. Vermilion is committed to maintaining a source of funds available
for abandonment and reclamation activities, such that future distribution and
capital program decisions will not be impacted by these liabilities.
Vermilion's net debt as of December 31, 2006 was $355 million, approximately
1.0 times trailing cash flow.


    Benchmark Prices
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    AECO ($CDN/mcf)       $      6.91  $     11.43  $      6.53  $      8.77
    WTI ($US/bbl)         $     60.21  $     60.02  $     66.21  $     56.56
    Foreign exchange
     rate ($US/$CDN)      $      0.88  $      0.85  $      0.88  $      0.83
    WTI ($CDN/bbl)        $     68.42  $     70.61  $     75.24  $     68.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    REVENUE

    Total revenues for 2006 were $618.1 million compared to $529.9 million in
2005 and $155.7 million in the fourth quarter of 2006 compared to
$154.0 million for the corresponding period in 2005. Vermilion's combined
crude oil & NGL price was $73.71 per bbl ($64.50 per bbl for the quarter) in
2006, an increase of 14% over the $64.79 per bbl ($64.59 per bbl for the
quarter) reported in 2005. The natural gas price realized in 2006 was $7.74
per mcf ($7.92 per mcf for the quarter) compared to $8.28 per mcf ($10.12 per
mcf for the quarter) realized a year ago, a 7% year-over-year decrease.
    In the following chart, "Derivative instruments" is the amortization of
the fair value loss of Vermilion's hedges in place as of January 1, 2004.

    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Crude oil & NGL's     $   102,362  $    88,413  $   415,245  $   326,754
    Per boe               $     64.50  $     64.59  $     73.71  $     64.79
    Natural gas                53,360       66,759      202,827      207,902
    Per mcf               $      7.92  $     10.12  $      7.74  $      8.28
    -------------------------------------------------------------------------
    Combined                  155,722      155,172      618,072      534,656
    Derivative
     instruments                    -       (1,186)           -       (4,718)
    -------------------------------------------------------------------------
    Petroleum and
     natural gas revenue  $   155,722  $   153,986  $   618,072  $   529,938
    Per boe               $     57.47  $     62.87  $     61.80  $     57.94
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    DERIVATIVE INSTRUMENTS

    Vermilion continues to manage its risk exposure through prudent commodity
and currency economic hedging strategies. Vermilion has the following collars
and puts in place at the end of 2006:


    Risk Management: Oil     Funded Cost            bbls/d           US$/bbl
    -------------------------------------------------------------------------
    Collar - WTI
      2007                   US$1.00/bbl               500   $60.00 - $77.30
      Q1 2007                   costless               250   $58.00 - $83.85
      Q1 2007                US$0.11/bbl               250   $65.00 - $90.00
      Q1 2007                US$0.06/bbl               500   $70.00 - $90.00
      Q2 2007                US$0.50/bbl               500   $61.70 - $90.00
    Put
      2007                   US$1.27/bbl               250            $57.05
    Collar - BRENT
      Q3 2007                US$0.88/bbl               500   $60.00 - $90.00
      Q4 2007                US$0.70/bbl               500   $60.00 - $89.00
    Call Spread - BRENT
      2009 - 2011            US$5.73/bbl               700   $65.00 - $85.00
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Risk Management:
     Natural Gas             Funded Cost              GJ/d             C$/GJ
    -------------------------------------------------------------------------
    Collar
      Q2 2007                   $0.35/GJ             2,500     $6.50 - $7.85
      Q2 2007                   $0.25/GJ             2,500     $6.25 - $7.96
      April - October 2007      $0.02/GJ             2,500     $6.50 - $9.00
    Put
      Q1 2007                   $0.34/GJ             4,000             $6.37
      Q1 2007                   $0.34/GJ             3,000             $6.60
      Q1 2007                   $0.34/GJ             3,000             $6.44
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The impact of Vermilion's hedging program reduced cash netbacks by $0.02
per boe on a combined basis for the year ended 2006 compared to an economic
hedging cost of $4.46 per boe in 2005. Oil hedging resulted in a $1.3 million
cost for the year ($0.2 million gain for the quarter), $0.13 per boe for the
year ($0.08 per boe gain for the quarter). For 2005, oil hedging resulted in a
$41.6 million cost for the year ($11.1 million for the quarter), $4.51 per boe
for the year ($4.50 for the quarter). Gas hedging costs were negligible in the
year.

    ROYALTIES

    Total royalties, net of ARTC, decreased to $9.22 per boe ($9.23 per boe
for the quarter) in 2006 or 15% of sales compared with $9.54 per boe ($10.94
per boe for the quarter) in 2005 or 17% of sales. The decrease is due to the
impact of lower gas prices. In France, royalties for the most part are
calculated on a unit of production basis and rates do not react to price
changes, therefore as prices increase, the royalties, as a percentage of
sales, decline. In Australia, royalties are reduced by capital reinvestment in
the country. For 2006, Vermilion's capital program in Australia was minimal
resulting in the Trust paying royalties at or near the maximum rate.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Crude oil & NGL's     $    18,783  $    17,582  $    70,941  $    61,322
    Per boe               $     11.84  $     12.84  $     12.59  $     12.16
    Natural gas                 6,220        9,412       21,271       26,679
    Per mcf               $      0.92  $      1.43  $      0.81  $      1.06
    -------------------------------------------------------------------------
    Combined              $    25,003  $    26,994  $    92,212  $    88,001
    -------------------------------------------------------------------------
    Per boe               $      9.23  $     10.94  $      9.22  $      9.54
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    OPERATING COSTS

    Operating costs increased to $9.65 per boe ($10.52 per boe for the
quarter) in 2006 from $7.89 per boe ($7.99 per boe for the quarter) in 2005.
The increase in the dollar amount of operating costs over 2005 reflects the
inclusion of a full year of expenses related to higher cost assets in
Australia which were acquired in the first quarter of 2005. In Canada, the
significant activity levels in the industry combined with increased energy
costs, have placed upward pressure on costs across the board. When combined
with a reduction in production volumes due primarily to plant turnarounds,
year over year increases in costs per boe have been experienced. In France,
operating costs are up slightly due to the higher cost assets associated with
the acquisition of Vermilion Emeraude Rep SAS. In the Netherlands, operating
costs are up slightly due primarily to unplanned plant maintenance. Cost of
operations in Australia are up significantly due to increased labour costs,
unplanned diesel purchases for gas lift purposes and the effect of lower
volumes.
    Fourth quarter operating costs in Canada are higher due to year end
chemical purchases; third party processing fees, adjustments and equipment
overhauls. Costs in 2007 are expected to be similar to overall costs reported
in 2006. Fourth quarter operating costs are also up in Australia due to
unplanned diesel purchases for gas lift purposes which are expected to
continue through much of 2007.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Crude oil & NGL's     $    17,819  $    11,817  $    54,494  $    39,060
    Per boe               $     11.23  $      8.63  $      9.67  $      7.75
    Natural gas                10,700        7,917       41,998       33,796
    Per mcf               $      1.59  $      1.20  $      1.60  $      1.35
    -------------------------------------------------------------------------
    Combined              $    28,519  $    19,734  $    96,492  $    72,856
    -------------------------------------------------------------------------
    Per boe               $     10.52  $      7.99  $      9.65  $      7.89
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    TRANSPORTATION

    Transportation costs as presented in the statements of earnings are
defined by the point of legal transfer of the product. Transportation costs
are dependent upon where the product is sold, product split, location of
properties, and industry transportation rates that are driven by supply and
demand of available transport capacity. For Canadian gas production, legal
title transfers at the intersection of major pipelines (referred to as "the
Hub") whereas the majority of Vermilion's Canadian oil production is sold at
the wellhead. The majority of Vermilion's transportation costs are made up of
shipping charges incurred in the Aquitaine Basin in France where oil
production is transported by tanker from the Ambès terminal in Bordeaux to
Donges, France. In Australia, oil is sold at the Wandoo B platform and in the
Netherlands gas is sold at the plant gate, resulting in no transportation
costs relating to Vermilion's production in these countries.
    The increase in transportation costs in the quarter is due to the purchase
of Vermilion Emeraude Rep SAS as the resulting incremental volumes are
transported by tanker in France.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Transportation        $     2,798  $     2,010  $    10,504  $     9,136
    -------------------------------------------------------------------------
    Per boe               $      1.03  $      0.81  $      1.05  $      0.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GENERAL AND ADMINISTRATION EXPENSES

    General and administration expenses for the year increased to $1.58 per
boe ($1.27 per boe for the quarter) in 2006 from $1.43 per boe ($1.39 per boe
for the quarter) in 2005.  The increase per boe is primarily a result of
increased staffing levels combined with increased staff retention costs and
increased regulatory compliance costs year over year.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    General and
     administration       $     3,433  $     3,441  $    15,839  $    13,241
    -------------------------------------------------------------------------
    Per boe               $      1.27  $      1.39  $      1.58  $      1.43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    UNIT COMPENSATION EXPENSE

    A non-cash trust unit compensation expense of $2.44 per boe ($3.54 per boe
for the quarter) was recorded in 2006 compared to $1.52 per boe ($1.41 per boe
for the quarter) in 2005. This non-cash amount relates to the value
attributable to long-term incentives granted to officers, directors and
employees under the Trust Unit Rights Incentive Plan ("Unit Rights Plan") and
the Trust Unit Award Plan ("Award Plan").
    The increased expense in the fourth quarter is attributable to the fact
that Vermilion finished in the top quartile of its peer group based on total
returns which effectively doubles the units received under the Award Plan in
the year. The year over year increase reflects the transition from the Unit
Rights Plan to the Award Plan and the increased impact of the Award Plan.
    From inception of the unit rights incentive plan until January 1, 2005,
the Trust applied the intrinsic value methodology based on the initial
assessment that the number of uncertainties regarding the reduction in the
strike price of the rights precluded a reasonable estimate of the fair value
of the rights on the date of grant. In the fourth quarter of 2005 it was
determined that, in the circumstances, the fair value methodology could be
applied since inception of the plan. The Trust has therefore completed a fair
value estimate of the rights at the respective date of grant and has
retroactively restated its unit compensation expense back to the inception of
the plan in 2003.
    In September 2006, the Board of Directors approved a new long-term
incentive plan for certain employees not eligible to participate in the Award
Plan, which provides for cash payments based on the fair market value of a
trust unit. The cash consideration paid upon vesting is dependent upon the
future performance of the Trust compared to its peers based on a performance
factor that may range from zero to two times the number of notional units
originally granted. Awards granted in 2006 will vest over three years.
    Compensation expense recognized is based on the closing market price of a
trust unit and is remeasured at each reporting date. The total expense is
amortized over the relevant vesting periods and the amount payable is recorded
as a liability until settlement. Expense associated with this unit based
compensation plan is excluded from unit compensation expense on the statements
of earnings and the table below.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Unit compensation
     expense              $     9,604  $     3,488  $    24,383  $    14,000
    -------------------------------------------------------------------------
    Per boe               $      3.54  $      1.41  $      2.44  $      1.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INTEREST EXPENSE

    Interest expense increased to $1.55 per boe ($2.00 per boe for the
quarter) in 2006 from $0.69 per boe ($0.90 per boe for the quarter) in 2005 as
a result of higher average debt levels. Debt levels are higher in 2006
primarily stemming from the purchase of the Australia assets in the first
quarter of 2005, the Glacier acquisition in December 2005 and the acquisition
of Vermilion Emeraude Rep SAS in July of 2006. The Trust's interest rates have
remained steady over the year.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Interest              $     5,427  $     2,228  $    15,433  $     6,331
    -------------------------------------------------------------------------
    Per boe               $      2.00  $      0.90  $      1.55  $      0.69
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    DEPLETION, DEPRECIATION AND ACCRETION EXPENSE

    Depletion, depreciation and accretion expense increased to $16.23 per boe
($16.93 per boe for the quarter) in 2006 from $13.23 per boe ($14.20 per boe
for the quarter) in 2005. The increase is due mainly to the increase of
finding and development costs in Canada and France and the increase in the
asset retirement obligation resulting primarily from the France acquisition.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Depletion,
     depreciation and
     accretion            $    45,876  $    35,040  $   162,254  $   122,098
    -------------------------------------------------------------------------
    Per boe               $     16.93  $     14.20  $     16.23  $     13.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    TAXES

    The Trust's current tax provision has increased to $4.29 per boe ($0.27
per boe for the quarter) in 2006 from $2.71 per boe ($0.52 per boe for the
quarter) in 2005 and is due primarily to higher commodity prices in the
taxable jurisdictions. The recovery in future income taxes is a result of the
taxable portion of distribution payments made to unitholders. In the Trust's
structure, payments are made between the operating company and the Trust
transferring both income and future income tax liability to the unitholder.
Therefore it is the opinion of management that no cash income taxes in Canada
are expected to be paid by the operating company in the future, and as such,
the future income tax liability recorded on the balance sheet related to
Canadian operations will be recovered through earnings over time.
    On October 31, 2006, the Canadian federal government announced plans to
introduce a tax on publicly traded income trusts. The proposed changes,
assuming they are enacted, would not take effect until January 1, 2011,
provided the Trust experiences only "normal growth" and no "undue expansion"
before then. The government has defined "normal growth" parameters, relative
to the market capitalization of the Trust's issued and outstanding publicly-
traded trust units as of October 31, 2006. For the period from November 1,
2006 to December 31, 2007, a trust's permitted or "safe harbour" growth amount
will be 40% of the October 31, 2006 market capitalization benchmark and for
each of the years 2008 through and including 2010 will be 20% of the
benchmark, cumulatively allowing growth of up to 100% until 2011. In addition,
we understand that trusts may be able to issue equity to retire debt existing
on October 31, 2006 without eroding their safe harbour limits. Vermilion's
estimated market capitalization as defined by the government, was $2.4 billion
at October 31, 2006 and outstanding indebtedness was approximately $400
million.
    The overall impact on Vermilion of the proposed change will not be
determinable at least until the final legislation is enacted. Our
interpretation of the existing proposal suggests that Vermilion may be able to
mitigate the contemplated distribution tax. Currently, Vermilion's foreign
operations generate after tax cash flow and subsequently declare and pay
dividends which do not attract additional taxes when received in Canada. We
anticipate being able to flow through this dividend income to unitholders as
part of the normal distributions paid and not attract the proposed
distribution tax on that portion of distributions made up of this dividend
income. In addition, Vermilion has increased the return on capital or taxable
portion of its distribution for 2006 to 100% in order to preserve the tax
basis it would have utilized to declare a portion of the 2006 distribution as
a return of capital or tax deferred. The Trust expects that it will continue
with this practice through 2010 to preserve the tax basis during the interim
period prior to the implementation of the new rules. Under the proposed
legislation commencing in 2011, that portion of the distribution that
represents a return of capital will not attract the distribution tax.
    The foregoing discussion on the proposed legislation is a general
assessment of the impact on Vermilion and is not meant to be exhaustive or
definitive. The impact of the recent proposals on Vermilion will not be known,
however, until the government has enacted final legislation.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Current and
     capital tax          $       731  $     1,296  $    42,876  $    25,007
    -------------------------------------------------------------------------
    Per boe               $      0.27  $      0.52  $      4.29  $      2.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    FOREIGN EXCHANGE

    A combined realized and unrealized foreign exchange loss of $1.30 per boe
($4.81 loss per boe for the quarter) was recorded in 2006 with a gain of $1.16
per boe ($0.03 loss per boe for the quarter) in 2005. The loss for the year
ended December 31, 2006 is mostly due to the impact of the weakening of the
Canadian dollar on foreign currency denominated liabilities.


    ($000's except per BOE)
    -------------------------------------------------------------------------
                                Three Months Ended                Year Ended
                               Dec 31,      Dec 31,      Dec 31,      Dec 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Foreign exchange
     loss (gain)          $    13,050  $        59  $    12,997  $   (10,727)
    -------------------------------------------------------------------------
    Per boe               $      4.81  $      0.03  $      1.30  $     (1.16)
    -------------------------------------------------------------------------



    NETBACKS (6:1)               Three Months                 Twelve Months
                           Ended Dec 31, 2006            Ended Dec 31, 2006
    -------------------------------------------------------------------------
    Trust           Oil &   Natural               Oil &   Natural
    Financial        NGLs       Gas     Total      NGLs       Gas     Total
    Information     $/bbl     $/mcf     $/boe     $/bbl     $/mcf     $/boe
    -------------------------------------------------------------------------
    Canada
    Price          $ 59.85   $  7.24   $ 49.18   $ 69.09   $  7.16   $ 52.64
    Realized
     hedging loss     1.06     (0.01)     0.33      0.52      0.01      0.24
    Royalties
     (net)          (11.82)    (1.60)   (10.39)   (13.23)    (1.41)   (10.24)
    Transportation   (0.15)    (0.22)    (0.92)    (0.20)    (0.18)    (0.77)
    Lifting costs   (13.94)    (1.68)   (11.41)   (11.51)    (1.42)    (9.64)
    -------------------------------------------------------------------------
    Operating
     netback       $ 35.00   $  3.73   $ 26.79   $ 44.67   $  4.16   $ 32.23
    -------------------------------------------------------------------------
    France
    Price          $ 62.95   $  7.81   $ 62.60   $ 71.54   $  7.78   $ 70.83
    Realized
     hedging loss     0.32         -      0.31     (0.43)        -     (0.42)
    Royalties
     (net)           (6.85)    (0.26)    (6.74)    (5.81)    (0.26)    (5.69)
    Transportation   (2.13)        -     (2.09)    (2.70)        -     (2.62)
    Lifting costs    (7.98)    (2.13)    (8.09)    (7.06)    (2.87)    (7.35)
    -------------------------------------------------------------------------
    Operating
     netback       $ 46.31   $  5.42   $ 45.99   $ 55.54   $  4.65   $ 54.75
    -------------------------------------------------------------------------
    Netherlands
    Price          $ 62.16   $  8.88   $ 53.42   $ 63.99   $  8.54   $ 51.32
    Lifting
     costs               -     (1.44)    (8.50)        -     (1.79)   (10.68)
    -------------------------------------------------------------------------
    Operating
     netback       $ 62.16   $  7.44   $ 44.92   $ 63.99   $  6.75   $ 40.64
    -------------------------------------------------------------------------
    Australia
    Price           $73.16   $     -   $ 73.16   $ 82.97   $     -   $ 82.97
    Royalties
     (net)          (24.85)        -    (24.85)   (25.50)        -    (25.50)
    Transportation       -         -         -         -         -         -
    Lifting costs   (17.09)        -    (17.09)   (13.01)        -    (13.01)
    -------------------------------------------------------------------------
    Operating
     netback       $ 31.22   $     -   $ 31.22   $ 44.46   $     -   $ 44.46
    -------------------------------------------------------------------------
    Total Trust
    Price          $ 64.50   $  7.92   $ 57.47   $ 73.71   $  7.74   $ 61.80
    Realized
     hedging loss     0.41     (0.01)     0.23     (0.07)     0.01     (0.02)
    Royalties
     (net)          (11.84)    (0.92)    (9.23)   (12.59)    (0.81)    (9.22)
    Transportation   (1.22)    (0.13)    (1.03)    (1.38)    (0.11)    (1.05)
    Lifting costs   (11.23)    (1.59)   (10.52)    (9.67)    (1.60)    (9.65)
    -------------------------------------------------------------------------
    Operating
     netback       $ 40.62   $  5.27   $ 36.92   $ 50.00   $  5.23   $ 41.86
    -------------------------------------------------------------------------
    Verenex
     Energy Inc.
    Price          $     -   $     -   $     -   $     -   $     -   $     -
    -------------------------------------------------------------------------
    Operating
     netback       $     -   $     -   $     -   $     -   $     -   $     -
    -------------------------------------------------------------------------
    Consolidated
    Price          $ 64.50   $  7.92   $ 57.47   $ 73.71   $  7.74   $ 61.80
    Realized
     hedging loss     0.41     (0.01)     0.23     (0.07)     0.01     (0.02)
    Royalties
     (net)          (11.84)    (0.92)    (9.23)   (12.59)    (0.81)    (9.22)
    Transportation   (1.22)    (0.13)    (1.03)    (1.38)    (0.11)    (1.05)
    Lifting costs   (11.23)    (1.59)   (10.52)    (9.67)    (1.60)    (9.65)
    -------------------------------------------------------------------------
    Operating
     netback       $ 40.62   $  5.27   $ 36.92   $ 50.00   $  5.23   $ 41.86
    -------------------------------------------------------------------------
    General and
     administration                      (1.27)                        (1.58)
    Interest                             (2.50)                        (1.68)
    Foreign
     exchange                             0.18                         (0.06)
    Current and
     capital taxes                       (0.27)                        (4.29)
    -------------------------------------------------------------------------
    Cash flow
     netback                           $ 33.06                       $ 34.25
    -------------------------------------------------------------------------
    Depletion,
     depreciation
     and accretion                      (16.93)                       (16.23)
    Future income
     taxes                               (0.46)                         1.63
    Income earned
     on
     reclamation
     fund                                 0.50                          0.13
    Foreign
     exchange                            (4.99)                        (1.24)
    Non-
     controlling
     interest                                -                             -
    Non-
     controlling
     interest
     - exchangeable
     shares                              (1.20)                        (1.49)
    Equity in
     losses of
     affiliate                            0.04                          0.01
    Unrealized loss
     on derivative
     instruments                          0.03                          0.06
    Fair value of
     stock
     compensation                        (3.54)                        (2.44)
    -------------------------------------------------------------------------
    Earnings
     netback                           $  6.51                       $ 14.68
    -------------------------------------------------------------------------


    NETBACKS (6:1)
                     Three    Twelve
                    Months    Months
                     Ended     Ended
                 Dec 31/05 Dec 31/05
    ----------------------------------
    Trust
    Financial        Total     Total
    Information      $/boe     $/boe
    ----------------------------------
    Canada
    Price          $ 71.64   $ 59.95
    Realized
     hedging loss    (5.21)    (4.98)
    Royalties
     (net)          (14.79)   (12.29)
    Transportation   (0.48)    (0.58)
    Lifting costs    (8.45)    (7.37)
    ----------------------------------
    Operating
     netback       $ 42.71   $ 34.73
    ----------------------------------
    France
    Price          $ 57.74   $ 64.00
    Realized
     hedging loss    (9.75)    (9.96)
    Royalties
     (net)           (5.26)    (5.46)
    Transportation   (2.67)    (3.22)
    Lifting costs    (4.89)    (6.89)
    ----------------------------------
    Operating
     netback       $ 35.17   $ 38.47
    ----------------------------------
    Netherlands
    Price          $ 45.48   $ 41.29
    Lifting
     costs           (8.44)    (9.63)
    ----------------------------------
    Operating
     netback       $ 37.04   $ 31.66
    ----------------------------------
    Australia
    Price          $ 68.64   $ 65.03
    Royalties
     (net)          (22.76)   (21.07)
    Transportation       -     (0.04)
    Lifting costs   (10.84)    (9.09)
    ----------------------------------
    Operating
     netback       $ 35.04   $ 34.83
    ----------------------------------
    Total Trust
    Price          $ 62.86   $ 57.98
    Realized
     hedging loss    (4.39)    (4.48)
    Royalties
     (net)          (11.00)    (9.58)
    Transportation   (0.81)    (0.99)
    Lifting costs    (8.02)    (7.92)
    ----------------------------------
    Operating
     netback       $ 38.64   $ 35.01
    ----------------------------------
    Verenex
     Energy Inc.
    Price          $ 64.19   $ 48.67
    ----------------------------------
    Operating
     netback       $ 64.19   $ 48.67
    ----------------------------------
    Consolidated
    Price          $ 62.87   $ 57.94
    Realized
     hedging loss    (4.36)    (4.46)
    Royalties
     (net)          (10.94)    (9.54)
    Transportation   (0.81)    (0.99)
    Lifting costs    (7.99)    (7.89)
    ----------------------------------
    Operating
     netback       $ 38.77   $ 35.06
    ----------------------------------
    General and
     administration  (1.39)    (1.43)
    Interest         (0.90)    (0.69)
    Foreign
     exchange        (0.05)    (0.08)
    Current and
     capital taxes   (0.52)    (2.71)
    ----------------------------------
    Cash flow
     netback       $ 35.91   $ 30.15
    ----------------------------------
    Depletion,
     depreciation
     and accretion  (14.20)   (13.23)
    Future income
     taxes           (3.11)     0.03
    Income earned
     on
     reclamation
     fund                -         -
    Foreign
     exchange         0.02      1.24
    Non-
     controlling
     interest        (0.05)     0.13
    Non-
     controlling
     interest
     - exchangeable
     shares          (1.89)    (1.56)
    Equity in
     losses of
     affiliate        0.10      0.03
    Unrealized loss
     on derivative
     instruments      4.81      1.92
    Fair value of
     stock
     compensation    (1.41)    (1.52)
    ----------------------------------
    Earnings
     netback       $ 20.18   $ 17.19
    ----------------------------------
    The above table includes non-GAAP measurements which may not be comparable
to other companies, including "operating netback" and "cash flow netback".


    Consolidated Balance Sheets
    ($000's unaudited)

                                                    December 31, December 31,
                                                           2006         2005
    -------------------------------------------------------------------------

    Assets

    Current
      Cash and cash equivalents                     $    26,950  $    42,777
      Accounts receivable                               120,573       75,098
      Crude oil inventory                                 4,898       10,279
      Fair value of derivative instruments                1,624        1,166
      Prepaid expenses and other                         13,473        9,387
    -------------------------------------------------------------------------
                                                        167,518      138,707
    Fair value of derivative instruments                  4,656            -
    Long-term investments                                27,152       19,637
    Goodwill                                             19,840       19,840
    Reclamation fund                                     56,357       42,198
    Capital assets                                    1,187,316      891,357
    -------------------------------------------------------------------------
                                                    $ 1,462,839  $ 1,111,739
    -------------------------------------------------------------------------

    Liabilities

    Current
      Accounts payable and accrued liabilities      $   139,672  $    90,422
      Distributions payable to unitholders               11,000       10,626
      Income taxes payable                               13,419       11,607
      Fair value of derivative instruments                    -          383
    -------------------------------------------------------------------------
                                                        164,091      113,038
    Long-term debt                                      358,236      271,099
    Asset retirement obligation                         127,494       70,214
    Future income taxes                                 224,631      160,475
    -------------------------------------------------------------------------
                                                        874,452      614,826
    -------------------------------------------------------------------------
    Non-controlling interest - exchangeable shares       51,780       38,760
    -------------------------------------------------------------------------

    Unitholders' Equity

      Unitholders' capital                              321,035      274,813
      Contributed surplus                                30,513       14,566
      Accumulated earnings                              663,437      516,514
      Accumulated cash distributions                   (478,378)    (347,740)
    -------------------------------------------------------------------------
                                                        536,607      458,153
    -------------------------------------------------------------------------
                                                    $ 1,462,839  $ 1,111,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Earnings and Accumulated Earnings
    ($000's except unit and per unit amounts, unaudited)

                                Three Months Ended                Year Ended
    -------------------------------------------------------------------------
                          December 31, December 31, December 31, December 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------

    Revenue
      Petroleum and
      natural gas revenue $   155,722  $   153,986  $   618,072  $   529,938
      Royalties (net)          25,003       26,994       92,212       88,001
    -------------------------------------------------------------------------
                              130,719      126,992      525,860      441,937
    -------------------------------------------------------------------------

    Expenses
      Production               28,519       19,734       96,492       72,856
      Transportation            2,798        2,010       10,504        9,136
      Unit compensation         9,604        3,488       24,383       14,000
      (Gain) loss on
       derivative
       instruments               (695)      (2,309)        (349)      18,787
      Interest                  5,427        2,228       15,433        6,331
      General and
       administration           3,433        3,441       15,839       13,241
      Foreign exchange
       loss (gain)             13,050           59       12,997      (10,727)
      Depletion,
       depreciation and
       accretion               45,876       35,040      162,254      122,098
    -------------------------------------------------------------------------
                              108,012       63,691      337,553      245,722
    -------------------------------------------------------------------------

    Earnings before income
     taxes and other items     22,707       63,301      188,307      196,215
    -------------------------------------------------------------------------

    Income taxes (recovery)
      Future                    1,249        7,682      (16,349)        (240)
      Current and capital         731        1,296       42,876       25,007
    -------------------------------------------------------------------------
                                1,980        8,978       26,527       24,767
    -------------------------------------------------------------------------

    Other items
      Non-controlling
       interest -
       exchangeable shares      3,244        4,672       14,917       14,399
      Non-controlling
       interest                     -          123            -       (1,159)
      Equity in (gain)
       of affiliates             (121)        (250)         (60)        (263)
    -------------------------------------------------------------------------
                                3,123        4,545       14,857       12,977
    -------------------------------------------------------------------------

    Net earnings               17,604       49,778      146,923      158,471
    -------------------------------------------------------------------------

    Accumulated earnings,
     beginning of  period     645,833      466,736      516,514      358,043
    -------------------------------------------------------------------------

    Accumulated earnings,
     end of period        $   663,437  $   516,514  $   663,437  $   516,514
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per
     trust unit
      Basic               $      0.27  $      0.80  $      2.30  $      2.57
      Diluted             $      0.26  $      0.78  $      2.22  $      2.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     trust units
     outstanding
      Basic                64,583,168   62,308,081   63,977,134   61,755,432
      Diluted              73,693,408   70,026,862   73,059,877   69,395,074
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Cash Flows
    ($000's unaudited)

                                Three Months Ended                Year Ended
    -------------------------------------------------------------------------
                          December 31, December 31, December 31, December 31,
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Cash and cash equivalents provided by (used in):
    Operating
      Net earnings        $    17,604  $    49,778  $   146,923  $   158,471
      Items not affecting
       cash:
        Depletion,
         depreciation and
         accretion             45,876       35,040      162,254      122,098
        Amortization of
         deferred charges
         for derivative
         instruments                -        1,186            -        4,718
        Change in
         unrealized gains
         and losses and
         amounts accrued
         relating to
         derivative contracts     (82)     (13,069)        (571)     (22,393)
        Unit compensation       9,604        3,488       24,383       14,000
        Equity in (gains)
         of affiliates           (121)        (250)         (60)        (263)
        Unrealized foreign
         exchange loss (gain)  13,532          (64)      12,353      (11,466)
        Non-controlling
         interest                   -          123            -       (1,159)
        Non-controlling
         interest -
         exchangeable shares    3,244        4,672       14,917       14,399
        Income earned on
         reclamation fund      (1,348)           -       (1,348)           -
        Future income
         taxes recovery         1,249        7,682      (16,349)        (240)
    -------------------------------------------------------------------------
      Funds from operations    89,558       88,586      342,502      278,165
      Asset retirement
       costs incurred          (2,854)        (303)      (4,217)        (948)
      Changes in non-cash
       operating working
       capital                  7,027       20,711      (32,252)     (32,101)
    -------------------------------------------------------------------------
                               93,731      108,994      306,033      245,116
    -------------------------------------------------------------------------
    Investing
      Drilling and
       development of
       petroleum and natural
       gas properties         (37,425)     (31,250)    (136,939)    (113,530)
      Acquisition of
       petroleum and natural
       gas properties          (5,845)           -      (26,435)     (90,318)
      Long-term investment     (7,500)     (10,000)      (7,500)     (12,299)
      Corporate acquisition         -      (87,036)    (124,604)     (87,036)
      Purchase of
       derivative instrument   (4,926)           -       (4,926)           -
      Contributions to
       reclamation fund        (5,173)      (3,263)      (9,553)     (25,183)
      Changes in non-cash
       investing working
       capital                 (6,871)     (22,746)         548       (7,068)
    -------------------------------------------------------------------------
                              (67,740)    (154,295)    (309,409)    (335,434)
    -------------------------------------------------------------------------
    Financing
      Issue of trust units
       for cash, net of
       unit issue costs         1,155          530       11,545        9,147
      Cash distributions      (32,909)     (31,799)    (130,264)    (125,884)
      (Decrease) increase
       in long-term debt      (54,402)      87,911       87,137      196,084
      Issue of trust units
       pursuant to
       distribution
       reinvestment plan        6,131        5,042       18,811       15,850
      Cash acquired on
       shares issued by
       subsidiary, net of
       share issue costs            -            -            -          424
      Changes in non-cash
       financing working
       capital                    850         (423)      (1,531)        (584)
    -------------------------------------------------------------------------
                              (79,175)      61,261      (14,302)      95,037
    -------------------------------------------------------------------------
    Foreign exchange gain
     (loss) on cash held in
     foreign currencies         1,938       (2,648)       1,851       (9,062)
    -------------------------------------------------------------------------
    Net change in cash and
     cash equivalents         (51,246)      13,312      (15,827)      (4,343)
    Impact on cash resulting
     from de-consolidation
     of Verenex                     -      (17,911)           -      (17,911)
    Cash and cash equivalents,
     beginning of period       78,196       47,376       42,777       65,031
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period        $    26,950  $    42,777  $    26,950  $    42,777
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary
     information - cash
     payments
      Interest paid       $     6,114  $     3,111  $    20,320  $     8,612
      Income taxes paid   $    12,180  $     2,430  $    47,523  $    26,190
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Disclaimer:
    -----------
    This press release contains forward-looking financial and operational
information including debt levels, production and capital expenditure
projections. These projections are based on the Trust's expectations and are
subject to a number of risks and uncertainties that could materially affect
the results. These risks include, but are not limited to, future commodity
prices, exchange rates, interest rates, geological risk, reserves risk,
political risk, product demand and transportation restrictions. Certain
natural gas volumes have been converted on the basis of six thousand cubic
feet of gas to one barrel equivalent of oil. Barrels of oil equivalent (boe's)
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.

    %SEDAR: 00018945E




For further information:

For further information: Curtis W. Hicks, C.A., Executive Vice President
& Chief Financial Officer or Paul Beique, Director, Investor Relations, 2800,
400 - 4th Avenue S.W., Calgary, Alberta, T2P 0J4, Phone: (403) 698-8827, Fax:
(403) 264-6306, IR Toll Free: 1-866-895-8101,
investor_relations@vermilionenergy.com, www.vermilionenergy.com

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VERMILION ENERGY TRUST

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