EXHIBIT 99.8
------------
[GRAPHIC OMITTED]
[LOGO - VERMILION ENERGY TRUST]
PRESS RELEASE - FOR IMMEDIATE RELEASE NOVEMBER 10, 2003
THIRD QUARTER RESULTS, SEPTEMBER 30, 2003
Vermilion Energy Trust ("Vermilion") (TSX - VET.UN) is pleased to report
unaudited interim operating and financial results for the period ended September
30, 2003. These results include the consolidated results of Aventura Energy Inc.
("Aventura"), a 72.2% owned subsidiary. Where applicable, the results have been
segregated to reflect Aventura operations and those related to the Trust (the
"Trust"), as Aventura does not currently contribute any cash flow or production
to the generation of the Trust distributions.
Vermilion achieved the following highlights:
THIRD QUARTER HIGHLIGHTS
> Achieved consolidated production of 24,661 boe/d, compared to 26,288 boe/d
in the second quarter of 2003. Third quarter production was affected by
normal production declines, by the temporary shut-in of the Shane
Kiskatinaw 'D' Pool, and by operational interruptions and delays in France
due to a windstorm in July 2003.
> Participated in the successful efforts to resume production from the Shane
Kiskatinaw 'D' Pool, and transferred operatorship of the pool to Clear
Energy Inc.
> Maintained consistent distributions of $0.17 per unit per month. Vermilion
anticipates that it will be able to maintain its monthly distribution at
$0.17 per unit through 2003.
> The Trust generated cash flow of $34.0 million ($0.59 per unit) from
production of 22,091 boe/d, consisting of 12,222 bbls/d of oil and NGL's
and 59.2 mmcf/d of natural gas(1). This compares to a second quarter cash
flow of $38.5 million from production of 24,073 boe/d. Current production
for the Trust, excluding Aventura, is approximately 22,500 boe/d.
> Continued to experience active trading, with over 15.5 million units
changing hands in the third quarter. Since Vermilion began trading as a
trust on January 24, 2003 almost 61 million units have been traded,
representing a 115% turnover of the market float. Through September 30th,
2003, the Trust provided a total return of 37% to its unitholders since
inception, comprised of 27% in capital appreciation and 10% in
distributions.
> Initiated a modest drilling program in Canada and France. Vermilion began
drilling Champotran 24, the first of three planned wells in France, in
September 2003. Drilling and completion of the Trust's Canadian wells is
ongoing with three wells remaining to be drilled in the fourth quarter.
> Announced that Vermilion was in negotiations with a potential acquirer of
the outstanding shares of Aventura. The completion of the proposed
transaction is dependent upon the parties reaching agreement on all terms
as well as satisfying a number of conditions precedent, including obtaining
government and other approvals in Trinidad. These negotiations are ongoing.
(1) Although Aventura's production and financial results are consolidated in the
financial tables, these are not included as part of distributable funds for the
Trust's unitholders.
CONFERENCE CALL
Vermilion will discuss these results in a conference call to be held on
Wednesday, November 12, 2003. The conference call will begin at 10:00 a.m. EST
(8:00 a.m. MST). To participate, you may call toll free 1-800-814-3911 or
1-416-640-4127 (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 21021476 followed by the pound "#" key. The replay will be available until
midnight eastern time on November 19, 2003.
1
- --------------------------------------------------------------------------------
HIGHLIGHTS
THREE MONTHS ENDED NINE MONTHS ENDED
- ---------------------------------------------------------------------------------------------------------------------------------
Trust Aventura Trust Aventura
Financial Energy CONSOLIDATED Financial Energy CONSOLIDATED
(Unaudited) Information Inc.(3) SEPT 30, 2003 Information Inc.(3) SEPT 30, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL ($000 CDN. EXCEPT UNIT AND PER UNIT AMOUNTS)
Petroleum and natural gas revenues $ 70,131 $ 3,048 $ 73,179 $ 233,339 $ 8,767 $ 242,106
Cash flow from operations 34,000 1,779 35,779 110,887 4,012 114,899
Per unit, basic (1) 0.59 0.61 1.91 1.98
Distributions (2) 27,429 27,429 70,986 70,986
Per unit 0.51 0.51 1.36 1.36
% cash flow distributed 81% 77% 64% 62%
Capital expenditures 17,884 1,014 18,898 39,650 13,415 53,065
Acquisitions (dispositions) -- (159) (159) 5,761 (7,055) (1,294)
Debt, net of working capital (surplus) 200,060 (8,323) 191,737
Trust units outstanding (1)
Basic 58,236,936
Diluted 62,714,536
Weighted average trust units outstanding (1)
Basic 57,989,679
Diluted 58,376,951
Unit trading
High $ 15.40
Low $ 11.12
Close $ 14.95
OPERATIONS
Production
Crude oil (bbls/d) 10,355 359 10,714 10,891 335 11,226
Natural gas liquids (bbls/d) 1,867 -- 1,867 1,978 -- 1,978
Natural gas (mcf/d) 59,215 13,266 72,481 63,334 12,125 75,459
Boe/d (6:1) 22,091 2,570 24,661 23,425 2,356 25,781
Average selling price
Crude oil (per bbl, including hedging) $ 35.54 $ 36.07 $ 35.55 $ 36.37 $ 38.82 $ 36.44
Crude oil (per bbl, not including hedging) 39.57 36.07 39.45 40.80 38.82 40.74
Natural gas liquids (per bbl) 32.38 -- 32.38 36.17 -- 36.17
Natural gas (per mcf, including hedging) 5.64 1.52 4.89 6.11 1.55 5.38
Natural gas (per mcf, not including hedging) 5.64 1.52 4.89 6.25 1.55 5.50
Netbacks per boe (6:1)
Operations netback 19.62 8.54 18.47 21.49 9.32 20.37
Cash flow netback 16.73 7.53 15.77 17.34 6.24 16.33
Cash flow netback excluding reorganization costs 18.72 17.58
Operating costs 6.38 2.89 6.02 5.86 2.82 5.59
General and administrative $ 1.18 $ 1.66 $ 1.23 $ 1.21 $ 1.37 $ 1.23
(1) Includes trust units issuable for outstanding exchangeable shares based on
the period end exchange ratio
(2) Distributions are paid on issued trust units at each record date
(3) The Trust owns 72.2% of the outstanding shares of Aventura, necessitating
the consolidation of the results of the Trust and Aventura
OPERATIONAL ACTIVITIES
The Trust's activities in the third quarter included the drilling of nine wells
(5.1 net) of which five (3.1 net) have been cased and four (2.0 net) have been
abandoned. Of the cased wells, two have been completed and are currently on
production while the balance are pending completion and tie-in. The production
impact from the third quarter drilling program will materialize in the fourth
quarter. In mid-September the Trust began drilling the first of three scheduled
wells in France. Vermilion will drill the target zones using an underbalanced
drilling system, the first time this technique has been used on the Trust's
properties in France. Underbalanced drilling technology has proven very
effective for reservoirs that are sensitive to water damage induced by
traditional drilling methods.
2
- --------------------------------------------------------------------------------
PRODUCTION SUMMARY (6:1)
THREE MONTHS ENDED SEPT 30, 2003 NINE MONTHS ENDED SEPT 30, 2003
- ------------------------------------------------------------------------------------------------------------------
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 6,397 57.62 16,001 6,897 61.87 17,210 67
France 5,825 1.59 6,090 5,972 1.46 6,215 24
- ------------------------------------------------------------------------------------------------------------------
Total 12,222 59.21 22,091 12,869 63.33 23,425 91
- ------------------------------------------------------------------------------------------------------------------
AVENTURA ENERGY INC.
Trinidad 359 13.27 2,570 335 12.13 2,356 9
- ------------------------------------------------------------------------------------------------------------------
Consolidated 12,581 72.48 24,661 13,204 75.46 25,781 100
==================================================================================================================
Third quarter production in Canada averaged 6,397 bbls/d of oil and NGL's and
57.6 mmcf/d of natural gas compared to 7,296 bbls/d and 62.7 mmcf/d in the
second quarter. Vermilion also produced 6,090 boe/d from its properties in
France, compared to 6,334 boe/d in the second quarter.
In France, production gains from workovers and production optimization programs
have largely offset normal declines. Since the beginning of the year these
workovers have added approximately 400 boe/d of stabilized production.
Currently, our France properties are producing approximately 6,200 boe/d.
Depending on the results of the drilling program in the fourth quarter, the
Trust's production volumes in France should end the year well above 2002 exit
rates of approximately 6,400 boe/d.
DRILLING ACTIVITY (# OF WELLS)
THREE MONTHS ENDED SEPT 30, 2003 NINE MONTHS ENDED SEPT 30, 2003
- ------------------------------------------------------------------------------------------------------------------
GROSS (NET) GROSS (NET)
- ------------------------------------------------------------------------------------------------------------------
CANADA
Oil 0 (0.0) 0 (0.0)
Gas 5 (3.1) 8 (4.7)
D&A 4 (2.0) 4 (2.0)
- ------------------------------------------------------------------------------------------------------------------
TOTAL 9 (5.1) 12 (6.7)
==================================================================================================================
FRANCE
Oil 0 (0.0) 0 (0.0)
Gas 0 (0.0) 0 (0.0)
D&A 0 (0.0) 0 (0.0)
- ------------------------------------------------------------------------------------------------------------------
TOTAL 0 (0.0) 0 (0.0)
==================================================================================================================
COMBINED
Oil 0 (0.0) 0 (0.0)
Gas 5 (3.1) 8 (4.7)
D&A 4 (2.0) 4 (2.0)
- ------------------------------------------------------------------------------------------------------------------
TOTAL 9 (5.1) 12 (6.7)
==================================================================================================================
In addition to its operational activity, Vermilion had 15 wells drilled on its
lands in Canada to date in 2003 (five wells in the third quarter) through
farm-out arrangements in which Vermilion maintained either a small working
interest or a gross overriding interest. The Trust will continue to pursue
activity on its undeveloped land base by third parties as a means of drilling
locations that are not compatible with Vermilion's capital development strategy
and creating economic value in the form of overriding royalty income.
3
- --------------------------------------------------------------------------------
FINANCIAL
The Trust generated cash flow of $34.0 million in the third quarter ($0.59 per
unit), compared to $38.5 million ($0.67 per unit) in the second quarter. The
Trust's distributions in the third quarter totalled $27.4 million or $0.51 per
unit. The Trust's year-to-date payout ratio is approximately 64% of total cash
flow. Vermilion's earnings for the third quarter were $13.3 million, bringing
year-to-date earnings to $45.2 million. Capital expenditures for the Trust in
the third quarter totalled $17.9 million. The Trust's total debt, net of working
capital (assignable to the Trust) at the end of the period was $200 million.
CAPITAL EXPENDITURES ($000'S)
THREE MONTHS ENDED SEPT 30, 2003 NINE MONTHS ENDED SEPT 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
AVENTURA AVENTURA
TRUST ENERGY TRUST ENERGY
ASSETS INC. CONSOLIDATED ASSETS INC. CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------------------------------
Land $ 226 $ 0 $ 226 $ 879 $ -- $ 879
Seismic (83) 0 (83) 1,037 -- 1,037
Drilling and completion 8,683 0 8,683 12,990 -- 12,990
Production equipment and facilities 2,330 0 2,330 7,675 -- 7,675
Workovers 5,439 0 5,439 12,004 -- 12,004
Trinidad 0 1,014 1,014 1,804 13,415 15,219
Other 1,289 0 1,289 3,261 -- 3,261
- -----------------------------------------------------------------------------------------------------------------------------------
17,884 1,014 18,898 39,650 13,415 53,065
Property acquisitions (dispositions) 0 (159) (159) 5,761 (7,055) (1,294)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 17,884 $ 855 $ 18,739 $ 45,411 $ 6,360 $ 51,771
===================================================================================================================================
AVENTURA ENERGY INC.
Production from Carapal Ridge remained stable in the quarter at
market-restricted rates. The Baraka-1 well is shut-in pending tie-in and testing
in 2004. Aventura has received a certificate of environmental clearance to
tie-in the Baraka-1 well to the Carapal Ridge production facilities. The
Baraka-1 well will be tested through these facilities in 2004. Simultaneously,
the Carapal Ridge-1 well will be shut-in for pressure build-up testing, which
will enable further evaluation of this reservoir.
Aventura holds a well-developed prospect inventory on its Central Block
properties in Trinidad. The Company believes the ultimate potential recoverable
reserves from these properties could exceed 1.0 TCF of natural gas. Aventura is
developing a capital program for 2004 that would include the drilling of an
additional three exploration wells. The Company is currently surveying the
proposed well sites for 2004 and will subsequently apply for environmental
clearance. Negotiations are underway with several drilling contractors and a
tender for drilling services will be issued in the next few weeks. Aventura is
maintaining its capital planning schedule to provide a contingency plan in the
event the proposed disposition is not consummated.
OUTLOOK
Vermilion's third quarter was negatively impacted by production interruptions in
Canada and France that have since been resolved. The total third quarter loss in
production due to the shut-in of the Shane Pool in Canada and storm related
workover delays in France was approximately 900 boe/d. Current production is
approximately 22,400 boe/d, which should remain stable to year-end. The balance
of the year should benefit from ongoing drilling and tie-in activity in Canada
and France. The Trust is advancing its farm out activity, which could add
further to the value of its existing asset base. The Trust is also evaluating
several domestic and international acquisition opportunities.
4
- --------------------------------------------------------------------------------
In France, Vermilion was awarded 100% of the Aquitaine Maritime exploration
concession that lies in shallow offshore waters on trend with the firm's
operations in the Aquitaine Basin. Vermilion will be reviewing avenues to
capitalize on this tremendous exploration opportunity while minimizing the risk
exposure to our unitholders. The Aquitaine Maritime prospect is believed to
encompass a 200-600 million barrel structure, however, will require full seismic
coverage and the drilling of at least one well over the next two to three years.
Vermilion plans to bring in third party participants and outside sources of
capital to limit the Trust's capital exposure to this project, and believes this
prospect will eventually provide unitholders with significant capital
appreciation potential without impairing the Trust's ability to maintain its
stable distribution policy.
Vermilion has established that non-residents own approximately 33% of its issued
and outstanding units (not including exchangeables) and 30% if the exchangeable
shares are included. This compares to 39% and 35%, respectively, at the end of
the second quarter 2003. Pursuant to Vermilion's Trust Indenture, non-resident
unitholders may not own more than 50% of total outstanding trust units. The
Trust will continue to ensure that it complies with all requirements under its
Trust Indenture, including Canadian ownership requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE NINE MONTHS ENDED SEPTEMBER 30, 2003 REPRESENTS THE FIRST THREE QUARTERS OF
VERMILION'S OPERATION AS A TRUST. AS VERMILION ENERGY TRUST WAS CREATED THROUGH
THE RE-ORGANIZATION OF VERMILION RESOURCES LTD., THE HISTORICAL RESULTS OF
VERMILION RESOURCES LTD. WILL REPRESENT THE HISTORICAL RESULTS OF THE TRUST FOR
COMPARATIVE PURPOSES.
Oil and gas prices for the first three quarters of 2003 were strong in
comparison with the first three quarters of 2002. The WTI reference price for
oil averaged $30.99 US per bbl for the nine month period, Dated Brent was $28.65
US per bbl and AECO reference price for gas was $7.01 Cdn per mcf. This compares
to $25.39 per bbl for WTI, $24.38 per bbl for Brent and $3.53 per mcf, Cdn AECO
for the first nine months of 2002. These year over year price increases are the
main drivers behind the increase in netbacks in 2003 as compared to 2002. In
2003, Vermilion's operating netback equalled $20.37 per boe, up 8% over the
$18.91 reported for the first nine months of 2002. The cash flow netback of
$16.33 per boe for the first nine months was up 11% over the $14.77 recorded in
2002. The 2003 third quarter operating and cash flow netbacks totalled $18.47
and $15.77 per boe, respectively. These compare to 2002 third quarter operating
and cash flow netbacks equal to $19.61 and $15.43 per boe, respectively. In
addition, the 2003 cash flow netbacks were reduced by $1.25 per boe for the year
as a result of the impact of the cash costs incurred in the re-organization of
Vermilion into a trust.
Total revenues for the first three quarters of 2003 were $242.1 million compared
to $204.2 million for the first three quarters of 2002 and $73.2 million in the
third quarter of 2003 compared to $70.7 million for the corresponding reporting
period in 2002. Vermilion's combined crude oil & NGL price was $40.06 per bbl
for the first three quarters of 2003, an increase of 14% over the $35.01 per bbl
reported for the first three quarters of 2002. The third quarter price was
$38.40 per bbl compared to $39.35 per bbl a year ago. The natural gas price
realized in the first three quarters of 2003 was $5.50 per mcf compared to $3.91
per mcf realized a year ago, a 41% year-over-year increase. The third quarter
price of $4.89 per mcf was 37% greater than the $3.56 per mcf for the same
period of 2002. Tempering these increases was the impact of Vermilion's hedging
program, whereby prices were reduced by $2.22 per boe on a combined basis for
the nine month period ended September 30, 2003, compared to a hedging loss of
$0.16 per boe in the first three quarters of 2002. Gas prices were reduced on
average by $0.12 per mcf over the first three quarters of 2003, with third
quarter prices not impacted by the Trust's natural gas collar.
5
- --------------------------------------------------------------------------------
Vermilion continues to manage its risk exposure through prudent commodity and
currency hedging strategies. Physical and financial natural gas contracts for
19,071 GJ/d remain in place for the calendar year of 2003 with various price
structures resulting in an average floor price of $4.80/GJ. Currently, the Trust
has hedged 10,198 GJ/d of its 2004 natural gas production with various price
structures, resulting in an average floor price of $4.71/GJ. Vermilion has WTI
hedges covering 2,950 bbls/d at US$24.74/bbl for the remainder of 2003; 2,250
bbls/d in 2004 at US$24.35/bbl; and 1,500 bbls/d in 2005 at US$24.80/bbl.
Vermilion has Brent hedges covering 2,600 bbls/d at US$23.24/bbl for the
remainder of 2003; 2,250 bbls/d in 2004 at US$22.93/bbl; and 1,500 bbls/d in
2005 at US$23.37/bbl.
Vermilion has Canadian/US dollar currency swaps in place covering its oil hedge
positions for 2003 at approximately US$0.63 per CDN dollar. For 2004 US$38.0
million in currency hedges average approximately US$0.71 per CDN dollar.
Total royalties, net of ARTC, increased to $8.44 per boe or 23.0% of sales in
the first three quarters of 2003, compared with $6.21 per boe, or 21.0% of sales
in the first three quarters of 2002. The quarter over quarter amounts were $7.77
per boe in 2003 and $5.90 per boe for the same period in 2002. The increase is
due directly to the increase in prices explained above as royalties are price
sensitive in Canada and calculated as a percentage of revenue. In France,
royalties for the most part are calculated on a unit of production basis and do
not react to price changes.
Operating costs increased to $5.59 per boe in 2003 from $4.35 per boe in the
first three quarters of 2002. Operating costs for the third quarter of the year
were $6.02 per boe in comparison to $4.39 for the third quarter of 2002. In
Canada, processing costs in the Peace River Arch area, workovers designed to
increase production and increased power costs resulting from the strong gas
prices in the year have contributed to the year over year increase. Adding to
this was the shut in wells at Shane which increased the per unit costs. In
addition to these factors, per unit operating costs are higher in 2003 due to
the impact of the reorganization into a Trust and the impact of lower cost
production allocated to Clear Energy Inc.
In France, power costs continue to rise and the strengthening Euro also
contributed to the increase in operating costs when converted to Canadian
dollars.
General and administrative expenses for the year increased to $1.23 per boe from
$1.06 per boe in the first three quarters of 2002. The third quarter number for
2003 of $1.23 is increased over the third quarter 2002 number of $0.99 by $0.24.
The increase is due to the increased costs of operating a Trust.
Reorganization costs of $25.6 million relate to Vermilion's decision to convert
to a trust. Included in this amount are $8.8 million in transaction costs, which
include investment banking fees as well as all accounting and legal fees,
related to the conversion. Also included in this amount is the value of trust
units issued in exchange for the cancellation of all outstanding employee
options. The value of the trust units issued totalled $16.8 million. All of
these costs were incurred in the first quarter of 2003.
Interest expense increased to $0.92 per boe for the first three quarters of 2003
from $0.57 per boe for the corresponding period in 2002 as a result of higher
average debt levels. The quarter over quarter increase was $0.27 per boe from
$0.77 per boe in the third quarter of 2002 to $1.04 in 2003.
Depletion and depreciation expenses increased from $10.02 per boe in the first
three quarters of 2002 to $10.27 per boe in 2003. The quarter over quarter
numbers were $10.80 in the third quarter of 2003 as compared to $10.92 a year
ago. Included in depletion and depreciation is a $1.4 million charge
representing the loss on the sale of Aventura's interest in assets in Argentina.
Aventura's assets are now focused exclusively in Trinidad.
The Trust's current tax provision has decreased to $0.64 per boe in the first
three quarters of 2003 and $0.43 in the third quarter from $2.51 per boe in the
first nine months of 2002 and $2.45 in the third quarter. The current provision
is based on an estimated $6 million tax liability in France for the year, while
in Canada, it is anticipated that there will be no current taxes due. A
reduction in tax rates for
6
- --------------------------------------------------------------------------------
Canadian resource activities resulted in a recovery of future income taxes,
which was recorded in the second quarter pushing earnings to $45.2 million for
the first three quarters of 2003. Adding to this recovery is 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.
Foreign exchange loss increased to $0.32 per boe with a gain of $0.36 per boe in
the first three quarters of 2003 and third quarter respectively from NIL in the
nine months ended 2002 and a gain of $0.03 per boe in the third quarter 2002.
The increased loss relates to a loss on working capital held in a foreign
currency in our France operations combined with Aventura's loss on its working
capital related to its operations in Trinidad.
Capital spending for the first nine months totalled $51.8 million including
$39.7 million invested on the Trust's asset base with the balance being
Aventura's capital program in Trinidad. This compares to $199.5 million spent in
the first three quarters of 2002, $31.0 million of which was for the corporate
acquisition of Artemis Energy Limited and $66.3 million of which was for the
purchase of a 40% participating interest in, and operatorship of the Central
Block onshore Trinidad. The capital for the first three quarters of 2003 was
funded entirely through cash flow and was primarily spent on facilities, tie-ins
and workovers.
Vermilion's debt (net of working capital) on September 30, 2003 was $191.7
million. During the third quarter, Vermilion's credit facility with its banking
syndicate was amended to provide a $240 million credit facility effective
September 30, 2003. The amended loan facility remains with the same syndicate of
lenders with no change to the terms and security provisions. The facility
structure is comprised of a one year revolving period with a one year term to
follow with a final settlement payment required at the end of the second year.
7
NETBACKS (6:1) THREE NINE
MONTHS MONTHS
THREE MONTHS NINE MONTHS ENDED ENDED
ENDED SEPT 30, 2003 ENDED SEPT 30, 2003 SEPT 30/02 SEPT 30/02
- ----------------------------------------------------------------------------------------------------------------------------------
Oil & Natural Oil & Natural
NGLs Gas TOTAL NGLs Gas TOTAL Total Total
$/bbl $/mcf $/BOE $/bbl $/mcf $/boe $/boe $/boe
- ----------------------------------------------------------------------------------------------------------------------------------
TRUST FINANCIAL INFORMATION
CANADA
Price $43.07 $5.66 $37.59 $44.37 $6.28 $40.37 $28.56 $27.94
Hedging gain (loss) (3.56) -- (1.42) (3.95) (0.15) (2.11) (1.06) (0.23)
Royalties (net) (8.51) (1.86) (10.09) (9.62) (1.95) (10.85) (6.35) (6.85)
Lifting costs (7.19) (0.91) (6.13) (6.28) (0.81) (5.44) (3.89) (3.71)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating netback $23.81 $2.89 $19.95 $24.52 $3.37 $21.97 $17.26 $17.15
- ----------------------------------------------------------------------------------------------------------------------------------
FRANCE
Price(1) $33.42 $4.92 $33.25 $35.14 $5.09 $34.97 $38.71 $34.82
Hedging gain (loss) (3.26) -- (3.12) (3.51) -- (3.38) (1.50) 0.08
Royalties (net) (4.47) (0.25) (4.34) (4.49) (0.24) (4.38) (4.54) (4.21)
Lifting costs (6.57) (2.87) (7.04) (6.69) (2.64) (7.05) (5.89) (6.34)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating netback $19.12 $1.80 $18.75 $20.45 $2.21 $20.16 $26.78 $24.35
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL TRUST
Price $38.47 $5.64 $36.40 $40.09 $6.25 $38.93 $31.07 $29.63
Hedging gain (loss) (3.42) -- (1.89) (3.75) (0.14) (2.44) (1.17) (0.16)
Royalties (net) (6.58) (1.81) (8.51) (7.24) (1.91) (9.14) (5.90) (6.21)
Lifting costs (6.90) (0.96) (6.38) (6.47) (0.85) (5.86) (4.39) (4.35)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating netback $21.57 $2.87 $19.62 $22.63 $3.35 $21.49 $19.61 $18.91
- ----------------------------------------------------------------------------------------------------------------------------------
AVENTURA FINANCIAL INFORMATION
Price $36.07 $1.52 $12.89 $38.82 $1.55 $13.63 -- --
Hedging gain (loss) -- -- -- -- -- -- -- --
Royalties (net) (5.50) (0.13) (1.46) (4.70) (0.14) (1.49) -- --
Lifting costs -- (0.56) (2.89) -- (0.55) (2.82) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Operating netback $30.57 $0.83 $ 8.54 $34.12 $0.86 $ 9.32 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED
Price $38.40 $4.89 $33.95 $40.06 $5.50 $36.62 -- --
Hedging gain (loss) (3.32) -- (1.69) (3.66) (0.12) (2.22) -- --
Royalties (net) (6.55) (1.51) (7.77) (7.18) (1.63) (8.44) -- --
Lifting costs (6.70) (0.89) (6.02) (6.31) (0.80) (5.59) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Operating netback $21.83 $2.49 $18.47 $22.91 $2.95 $20.37 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
General and administrative (1.23) (1.23) (0.99) (1.06)
Reorganization costs -- (1.25) -- --
Interest (1.04) (0.92) (0.77) (0.57)
Foreign exchange - - 0.03 --
Current and capital taxes (0.43) (0.64) (2.45) (2.51)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow netback $15.77 $16.33 $15.43 $14.77
- ----------------------------------------------------------------------------------------------------------------------------------
Depletion and depreciation (10.80) (10.27) (10.92) (10.02)
Future income taxes 0.48 3.12 (1.16) (0.71)
Deferred financing charges (0.03) (0.05) (0.08) (0.08)
Foreign exchange 0.36 (0.32) 0.03 --
Non-controlling interest 0.07 - (0.01) 0.01
Trust units issued - (2.39) - --
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings netback $ 5.85 $ 6.42 $ 3.29 $ 3.97
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Price includes a $0.41 Q3 decrease, $0.26 year to date increase due to
inventory valuation at cost (GAAP) versus market
8
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
($000'S, UNAUDITED)
SEPTEMBER 30, December 31,
2003 2002
- --------------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 33,530 $ 32,562
Accounts receivable 37,021 56,582
Crude oil inventory 4,486 3,207
Prepaid expenses and other 3,241 4,699
- --------------------------------------------------------------------------------
78,278 97,050
Deferred financing costs 257 435
Deferred reorganization costs -- 2,324
Reclamation fund (Note 2) 555 --
Capital assets 681,775 711,902
- --------------------------------------------------------------------------------
$ 760,865 $ 811,711
================================================================================
LIABILITIES AND UNITHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 61,728 $ 79,817
Distributions payable to unitholders 8,921 --
Income taxes payable 4,517 10,977
- --------------------------------------------------------------------------------
75,166 90,794
- --------------------------------------------------------------------------------
Long-term debt (Note 5) 194,849 193,025
Provision for future site restoration 12,480 11,169
Future income taxes 154,047 171,094
- --------------------------------------------------------------------------------
436,542 466,082
- --------------------------------------------------------------------------------
NON-CONTROLLING INTEREST 29,307 21,321
- --------------------------------------------------------------------------------
Unitholders' Equity
Unitholders' capital (Note 7) 124,784 140,557
Exchangeable shares (Note 7) 12,261 --
Accumulated earnings 228,957 183,751
Accumulated cash distributions (70,986) --
- --------------------------------------------------------------------------------
295,016 324,308
- --------------------------------------------------------------------------------
$ 760,865 $ 811,711
================================================================================
9
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS AND ACCUMULATED EARNINGS
($000'S, EXCEPT UNIT AND PER UNIT AMOUNTS, UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30 Sept 30 SEPT 30 Sept 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Revenue:
Petroleum and natural gas revenue $ 73,179 $70,719 $242,106 $204,186
Royalties (net) 17,631 14,428 59,381 43,024
- ------------------------------------------------------------------------------------------------------------------
55,548 56,291 182,725 161,162
- ------------------------------------------------------------------------------------------------------------------
Expenses:
Production 13,658 10,289 39,313 30,172
Interest 2,450 1,997 6,848 4,466
General and administrative 2,793 2,313 8,650 7,354
Reorganization costs (Note 3) -- -- 25,628 --
Foreign exchange loss (gain) (827) (151) 2,269 7
Depletion and depreciation 24,497 25,614 72,285 69,468
- ------------------------------------------------------------------------------------------------------------------
42,571 40,062 154,993 111,467
- ------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and other item 12,977 16,229 27,732 49,695
Income taxes (recovery):
Future (Note 6) (1,090) 2,728 (21,990) 4,902
Current 641 5,409 3,960 16,631
Capital 303 330 557 747
- ------------------------------------------------------------------------------------------------------------------
(146) 8,467 (17,473) 22,280
Other item:
NON-CONTROLLING INTEREST (154) 21 (1) (99)
- ------------------------------------------------------------------------------------------------------------------
Net earnings 13,277 7,741 45,206 27,514
Excess of consideration paid over stated value
of shares purchased (340) (340)
Accumulated earnings, beginning of period 215,680 162,670 183,751 142,897
- ------------------------------------------------------------------------------------------------------------------
Accumulated earnings, end of period $228,957 $170,071 $228,957 $170,071
==================================================================================================================
Net earnings per trust unit (Note 9):
Basic $ 0.23 $ 0.14 $ 0.78 $ 0.49
Diluted $ 0.22 $ 0.14 $ 0.77 $ 0.49
Weighted average trust units outstanding
Basic 58,147,919 55,890,865 57,989,679 55,771,851
Diluted 59,060,674 56,519,277 58,376,951 56,711,190
10
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S, UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30 Sept 30 SEPT 30 Sept 30
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents provided by (used in):
Operating
Net earnings $ 13,277 $ 7,741 $ 45,206 $ 27,514
Items not affecting cash and cash equivalents:
Depletion and depreciation 24,497 25,614 72,285 69,468
Unrealized foreign exchange loss (gain) (827) (75) 2,249 17
Amortized deferred financing costs 76 181 333 529
Non-controlling interest (154) 21 (1) (99)
Trust units issued on cancellation of
employee stock options -- -- 16,817 --
Future income taxes (1,090) 2,728 (21,990) 4,902
- -------------------------------------------------------------------------------------------------------------------
Cash flow from operations 35,779 36,210 114,899 102,331
Site restoration costs incurred (1,058) (407) (1,303) (565)
Changes in non-cash working capital 22,132 17,247 (4,182) 744
- -------------------------------------------------------------------------------------------------------------------
56,853 53,050 109,414 102,510
- -------------------------------------------------------------------------------------------------------------------
Investing
Disposition (acquisition) of capital assets 159 (19,703) 1,294 (23,433)
Drilling and development of petroleum and
natural gas properties (18,898) (34,387) (53,065) (78,695)
Corporate acquisition -- (65,686) -- (87,601)
Restricted cash held for acquisition -- 66,348 -- --
Contributions to reclamation fund, net -- -- (555) --
- -------------------------------------------------------------------------------------------------------------------
(18,739) (53,428) (52,326) (189,729)
- -------------------------------------------------------------------------------------------------------------------
Financing
Increase (decrease) in long-term debt (9,341) 14,741 1,824 100,362
Increase in deferred charges (130) (61) (155) (136)
Issue (repurchase) of Common shares for cash, net
of share issue costs -- (365) 1,201 3,887
Distribution reinvestment plan 2,380 -- 3,351 --
Cash acquired on shares issued by subsidiary,
net of share issue costs 91 3 294 2,830
Cash distributions (26,671) -- (62,065) --
- -------------------------------------------------------------------------------------------------------------------
(33,671) 14,318 (55,550) 106,943
- -------------------------------------------------------------------------------------------------------------------
Foreign exchange gain (loss) on cash held
in a foreign currency 206 (910) (570) (734)
- -------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 4,649 13,030 968 18,990
Cash and cash equivalents, beginning of period 28,881 12,676 32,562 6,716
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 33,530 $25,706 $33,530 $25,706
===================================================================================================================
Cash payments:
Interest $ 1,790 $ 2,336 $ 7,295 $ 4,522
Taxes $ (12,470) $ 361 $ 9,852 $ 7,520
11
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002, UNAUDITED
(000'S, EXCEPT UNIT AND PER UNIT AMOUNTS)
1. BASIS OF PRESENTATION
Vermilion Energy Trust (the "Trust" or "Vermilion") was established on
January 22, 2003, under a Plan of Arrangement entered into by the Trust,
Vermilion Resources Ltd., Clear Energy Inc., and Vermilion Acquisition Ltd.
The Trust is an open-end unincorporated investment trust governed by the
laws of the Province of Alberta and created pursuant to a trust indenture.
Vermilion Resources Ltd. (the "Company") is a wholly owned subsidiary of
the Trust.
Prior to the Plan of Arrangement on January 22, 2003, the consolidated
financial statements included the accounts of the Company and its
subsidiaries. After giving effect to the Plan of Arrangement, the
consolidated financial statements have been prepared on a continuity of
interests basis which recognizes the Trust as the successor entity to
Vermilion Resources Ltd. The consolidated financial statements include the
accounts of the Trust and its subsidiaries and have been prepared by
management in accordance with Canadian generally accepted accounting
principles on a consistent basis with the audited consolidated financial
statements for the year ended December 31, 2002. The interim consolidated
financial statements should be read in conjunction with the Trust's 2002
Annual Information Form.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Unit Rights Incentive Plan
The Trust has a unit-based long-term compensation plan for employees,
directors and consultants of the Trust and its subsidiaries.
Compensation cost is measured based on the intrinsic value of the
award at the date of the grant and is recognized over the vesting
period. Consideration received by the Trust on exercise of the units
rights is credited to unitholders' capital. See Note 8 for a
description of the plan and pro-forma disclosure of the associated
compensation cost.
b) Per Unit Amounts
Net earnings per unit are calculated using the weighted average number
of units outstanding during the period, including the weighted average
number of exchangeable shares outstanding converted at the exchange
ratio at the end of each month. Diluted net earnings per unit are
calculated using the treasury stock method to determine the dilutive
effect of unit based compensation. The treasury stock method assumes
that the proceeds received from the exercise of "in the money" trust
unit rights are used to repurchase units at the average market rate
during the period.
c) Reclamation Fund
A reclamation fund has been set up by the Trust to ensure that cash is
available to carry out future abandonment and reclamation work on
wells, plants and facilities. The contributions are currently made on
the basis of $0.20 per barrel of oil equivalent of production in
Canada and France. Actual abandonment and reclamation work undertaken
in the period was funded from the fund balance.
12
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d) Income Taxes
Income taxes are calculated using the liability method of accounting
for income taxes. Under this method, income tax liabilities and assets
are recognized for the estimated tax consequences attributable to
differences between the amounts reported in the consolidated financial
statements of the Trust and their respective tax base, using enacted
income tax rates. The effect of a change in income tax rates on future
tax liabilities and assets is recognized in income in the period in
which the change occurs.
The Trust is a taxable entity under the Income Tax Act (Canada) and is
taxable only on income that is not distributed or distributable to the
Unitholders. As the Trust allocates all of its Canadian taxable income
to the Unitholders in accordance with the Trust Indenture, and meets
the requirements of the Income Tax Act (Canada) applicable to the
Trust, no provision for Canadian income tax expense has been made in
the Trust.
In the Trust structure, payments are made between the Company and the
Trust which result in the transferring of taxable income from the
Company to individual Unitholders. These payments may reduce future
income tax liabilities previously recorded by the Company which would
be recognized as a recovery of income tax in the period incurred.
e) Distributions
The Trust makes monthly distributions of its distributable cash to
Unitholders of record on the last day of each calendar month. Pursuant
to the Trust's policy, it will pay distributions to its unitholders
subject to retaining an appropriate distribution reserve, satisfying
its financing covenants, making loan repayments and, if applicable,
funding future removal and site restoration reserves.
3. TRANSFER OF ASSETS AND LIABILITIES PURSUANT TO THE PLAN OF ARRANGEMENT
Under the Plan of Arrangement, the Company transferred to Clear Energy Inc.
a portion of the Company's existing lands and exploration assets. As this
was a related party transaction, assets and liabilities were transferred at
book value. Details are as follows:
Petroleum and natural gas assets and equipment $19,509
Future income tax asset 5,461
-------------------------------------------------------------------------
Total assets transferred $24,970
Provision for site restoration and abandonment 89
-------------------------------------------------------------------------
Net assets transferred and reduction in share capital $24,881
=========================================================================
Associated with the Plan of Arrangement, the Company recorded transaction
costs of $25.6 million, with $16.8 million related to the issue of Trust
units in exchange for cancellation of stock options and $8.8 million in
advisory and other costs.
4. BUSINESS DISPOSITION AND INVESTMENT
Effective January 22, 2003, the Company sold its existing 40% working
interest in the Central Block in Trinidad to Aventura Energy Inc.
("Aventura") for consideration of 212,059,512 common shares. As this was a
related party transaction, assets and liabilities were transferred at book
value. The sale increases the Company's equity holding in Aventura to
approximately 72% from approximately 47% held prior to the sale.
13
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT
At September 30, 2003, the Trust had a line of credit of $240 million with
a banking syndicate, which has a one year revolving period with a one year
term to follow with a final settlement payment required at the end of the
second year. A working capital tranche of $1 million included in the $240
million facility has been placed in France to assist cash-management
practices.
6. FUTURE INCOME TAXES
During the period ended September 30, 2003, reductions in corporate income
tax rates were substantially enacted. The enacted rates are to be phased in
over five years starting in 2003. As a result, the Trust's future income
tax rate decreased to approximately 37 percent compared to 42 percent in
prior periods. The future income taxes recovery recorded in the second
quarter of 2003 includes the impact of this reduction in future income
taxes of $13.7 million.
7. UNITHOLDERS' CAPITAL AND EXCHANGEABLE SHARES
Pursuant to the Plan of Arrangement, 51,480,467 units of the Trust and
6,000,000 exchangeable shares of the Company were issued in exchange for
all of the outstanding shares of the Company, a wholly owned subsidiary of
the Trust on a one for one basis.
The exchangeable shares are convertible into trust units based on the
exchange ratio, which is adjusted monthly to reflect the distribution paid
on the trust units. Cash distributions are not paid on the exchangeable
shares. During the period, a total of 728,364 exchangeable shares were
converted into 739,738 trust units based on the exchange ratio at the time
of conversion. At September 30, 2003, the exchange ratio was 1.09317 trust
units per exchangeable share.
NUMBER OF SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
Common Shares of Vermilion Resources Ltd.
Balance as at December 31, 2002 55,866,918 $140,557
Issued upon exercise of stock options 267,100 1,201
----------------------------------------------------------------------------------------------------------
Balance january 21, 2003, prior to plan of arrangement 56,134,018 $141,758
----------------------------------------------------------------------------------------------------------
Trust units issued on cancellation of employee
stock options (Note 3) 1,346,449 $ 16,817
Transfer of assets and liabilities to Clear Energy Inc. (Note 3) - (24,881)
Trust units issued (51,480,467) (119,739)
Exchangeable shares issued (6,000,000) (13,955)
----------------------------------------------------------------------------------------------------------
NIL NIL
----------------------------------------------------------------------------------------------------------
NUMBER OF UNITS AMOUNT
----------------------------------------------------------------------------------------------------------
Trust Units
Unlimited number of trust units authorized to be issued
Issued pursuant to Plan of Arrangement January 22, 2003 51,480,467 $119,739
Distribution reinvestment plan 253,937 3,351
Issued on conversion of exchangeable shares 739,738 1,694
----------------------------------------------------------------------------------------------------------
Balance as at September 30, 2003 52,474,142 124,784
Trust units issuable on conversion of exchangeable shares 5,762,794 12,261
----------------------------------------------------------------------------------------------------------
Trust unitholders' capital as at september 30, 2003 58,236,936 $137,045
----------------------------------------------------------------------------------------------------------
14
7. UNITHOLDERS' CAPITAL AND EXCHANGEABLE SHARES (CONTINUED)
NUMBER OF SHARES CONSIDERATION
---------------------------------------------------------------------------------------------------------
EXCHANGEABLE SHARES
Issued pursuant to Plan of Arrangement January 22, 2003 6,000,000 $13,955
Exchanged for trust units (728,364) (1,694)
---------------------------------------------------------------------------------------------------------
Balance as at september 30, 2003 5,271,636 12,261
---------------------------------------------------------------------------------------------------------
As per the Plan of Arrangement, shareholders of the Company received
one unit or one exchangeable share in the Trust for each common share
held. In addition, Vermilion shareholders received one share in a
separate publicly listed oil and gas company, Clear Energy Inc. for
each three common shares held (Note 3).
8. TRUST UNIT RIGHTS INCENTIVE PLAN
The Trust has a unit rights incentive plan that allows the Trust to
issue rights to acquire trust units to directors, officers, employees
and service providers. The Trust is authorized to issue up to 6,000,000
unit rights, however, the number of trust units reserved for issuance
upon exercise of the rights shall not at any time exceed 10% of the
aggregate number of issued and outstanding trust units of the Trust.
Unit right exercise prices are equal to the market price for the trust
units on the date the unit rights are issued. If certain conditions are
met, the exercise price per unit may be calculated by deducting from
the grant price the aggregate of all distributions, on a per unit
basis, made by the Trust after the grant date. Rights granted under the
plan vest over a three year period and expire five years after the
grant date.
The Trust accounts for its unit rights incentive plan using the
intrinsic-value of the unit rights. Using intrinsic-values,
compensation costs are not recognized in the consolidated financial
statements for unit rights granted to employees and directors when
issued at prevailing market prices.
Since the fair value of the unit rights can not be determined due to
the nature of the reducing exercise price feature, pro-forma
compensation cost has been determined using the excess of the unit
price as at the date of the consolidated financial statements, over the
exercise price for unit rights issued since January 22, 2003 as at the
date of the consolidated interim financial statements. For the nine
months ended September 30, 2003, net earnings would be reduced by
$5,220,000. The effect on net earnings would be a decrease of $0.09 per
unit. For the three months ended September 30, 2003, net earnings would
be reduced by $3,113,000. The effect on net earnings would be a
decrease of $0.05 per unit.
The following table summarizes information about the Trust's unit rights
THREE MONTHS ENDED SEPT 30, 2003 NINE MONTHS ENDED SEPT 30, 2003
WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE
UNIT RIGHTS EXERCISE PRICE UNIT RIGHTS EXERCISE PRICE
---------------------------------------------------------------------------------------------------------
Opening balance 4,425,700 $ 11.50 -- $ --
Granted 69,000 14.19 4,756,000 11.54
Cancelled (17,100) 11.45 (278,400) 11.45
---------------------------------------------------------------------------------------------------------
Closing balance 4,477,600 $ 11.54 4,477,600 $ 11.54
=========================================================================================================
15
- --------------------------------------------------------------------------------
9. PER UNIT AMOUNTS
Basic per unit calculations are based on the weighted average number of
trust units outstanding. Diluted calculations include additional trust
units for the dilutive impact of unit rights outstanding pursuant to
the unit rights incentive plan.
Net earnings from operations per unit are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30 Sept 30 SEPT 30 Sept 30
2003 2002 2003 2002
---------------------------------------------------------------------------
Net earnings
Basic (1) $0.23 $0.14 $0.78 $0.49
Diluted (2) $0.22 $0.14 $0.77 $0.49
---------------------------------------------------------------------------
(1) Basic per unit calculations are based on the weighted average number
of trust units outstanding in 2003 of 57,989,679 for the period
(55,771,851 common shares in 2002) which includes outstanding
exchangeable shares converted at the period end exchange ratio.
(2) Diluted calculations include additional trust units in 2003 of 387,272
for the period (939,339 additional shares in 2002) for the dilutive
impact of the unit rights incentive plan (stock option plan in 2002).
Calculations of diluted shares exclude 75,000 of unit rights in 2003
which would have been anti-dilutive. There were no adjustments to net
earnings from operations in calculating dilutive per unit amounts.
10. SEGMENTED INFORMATION
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT 30 Sept 30 SEPT 30 Sept 30
2003 2002 2003 2002
--------------------------------------------------------------------------------------------------
Petroleum and natural gas revenues:
Canada $ 53,252 $ 49,106 $ 179,343 $145,218
France 16,879 21,613 53,593 58,968
Trinidad 3,048 -- 9,170 -
--------------------------------------------------------------------------------------------------
$ 73,179 $ 70,719 $ 242,106 $204,186
--------------------------------------------------------------------------------------------------
Net earnings:
Canada $ 11,785 $2,572 $ 36,638 $14,134
France 1,907 5,169 8,235 13,380
Trinidad (415) -- 333 -
--------------------------------------------------------------------------------------------------
$ 13,277 $ 7,741 $ 45,206 $27,514
--------------------------------------------------------------------------------------------------
Cash flow from operations:
Canada $ 25,150 $ 22,084 $ 79,705 $64,772
France 8,850 14,126 30,173 37,559
Trinidad 1,779 -- 5,021 -
--------------------------------------------------------------------------------------------------
$ 35,779 $ 36,210 $ 114,899 $102,331
--------------------------------------------------------------------------------------------------
Capital expenditures:
Canada $ 8,910 $ 44,387 $ 20,927 $110,755
France 8,941 7,232 15,785 19,141
Trinidad/Argentina 888 68,819 15,059 69,567
--------------------------------------------------------------------------------------------------
$ 18,739 $ 120,438 $ 51,771 $199,463
--------------------------------------------------------------------------------------------------
SEPT 30 Dec 31
2003 2002
Identifiable assets:
Canada $ 443,043 $497,512
France 205,609 199,385
Trinidad/Argentina 112,213 114,814
--------------------------------------------------------------------------------------------------
$ 760,865 $811,711
--------------------------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
11. CONTINGENCIES
On September 25, 2001, Vermilion received a tax notice from the
Direction Generale des Impots regarding the Company's wholly owned
subsidiary in France, Vermilion REP S.A. The notice advises that the
Company is liable for a registration fee that was owed at the time of
the purchase of the French properties in 1997 in the amount of 4.5
million Euro, including interest charges for late filing. The Company
disagrees with the tax authorities position and is in the process of
challenging the notice. At the present time the Company is unable to
determine the likelihood that it will be required to pay the
registration fee, and as such, no amount has been accrued in the
consolidated financial statements at September 30, 2003.
12. COMMITMENTS
The Trust realized a financial hedging loss of $10.7 million during the
first nine months of 2003 (2002 - $1.6 million gain) related to its
hedging activities. Physical and financial hedging contracts currently
in place are as follows:
OIL HEDGING WTI BRENT
Fixed Price Swaps BBLS/D US$/BBL BBLS/D US$/BBL
-------------------------------------------------------------------------------------------------------
Q4 2003 2,950 $24.74 2,600 $23.24
-------------------------------------------------------------------------------------------------------
2004 Average 2,250 $24.35 2,250 $22.93
2005 Average 1,500 $24.80 1,500 $23.37
GAS HEDGING FLOOR CEILING
Costless Collars GJ/D C$/GJ C$/GJ
-------------------------------------------------------------------------------------------------------
Q4 2003 19,071 $4.80 $6.66
-------------------------------------------------------------------------------------------------------
Q1 2004 17,500 $4.90 $8.53
Q2 2004 10,000 $4.56 $6.65
Q3 2004 10,000 $4.56 $6.65
Q4 2004 3,370 $4.56 $6.65
-------------------------------------------------------------------------------------------------------
2004 Average 10,198 $4.71 $7.46
2005 Average -- -- --
CURRENCY HEDGING US$/MO EXCHANGE
(000'S) RATE
-------------------------------------------------------------------------------------------------------
Q4 2003 $4,080 $0.63
2004 $3,170 $0.71
13. COMPARATIVE FIGURES
Certain of the prior period numbers have been reclassified to conform
with the current period presentation.
17
- --------------------------------------------------------------------------------
FORWARD-LOOKING INFORMATION
This report contains forward-looking financial and operational information
including earnings, cash flow, 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.
NON-GAAP MEASURES:
Included in this news release are references to terms commonly used in the oil
and gas industry, such as cash flow and cash flow per share. These terms are not
defined by Generally Accepted Accounting Principles. Consequently, these are
referred to as non-GAAP measures. Cash flow, as discussed in this news release,
appears as a separate caption on the Company's cash flow statement and is
reconciled to both net income and cash flow from operations.
For further information please contact:
Curtis W. Hicks, C.A.
VP Finance & Chief Financial Officer
or
Paul Beique, Director Investor Relations
2800, 400 - 4th Avenue S.W.
Calgary, Alberta T2P 0J4
Phone: (403) 781-9449
Fax: (403) 264-6306
IR Toll Free: 1-866-895-8101
info@vermilionenergy.com
www.vermilionenergy.com