Greetings, and welcome to the Vermilion Energy Inc. Second Quarter Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lorenzo Donadeo, President and CEO for Vermilion Energy. Thank you. Mr. Donadeo, you may begin.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today to discuss our second quarter 2012 financial and operating results. I'm Lorenzo Donadeo, President and CEO of Vermilion. Joining me today are Tony Marino, Executive Vice President and Chief Operating Officer; Curtis Hicks, Executive Vice President and CFO; and Dean Morrison, our Director of Investor Relations. Earlier this morning, we released our second quarter 2012 financial and operating results, reporting production of 39,168 BOEs a day. While second quarter production was essentially flat with the previous quarter, it has increased more than 11% since the second quarter of 2011. This increase is largely the result of higher volumes from Vermilion Cardium development program and the company's acquisition of approximately 2,200 BOEs a day of largely Brent crude base production in France, which we completed in January 2012. With our continued focus on predominantly crude-based production growth, we've successfully grown our oil and liquids exposure to nearly 60% of our -- 67% of our consolidated production, most notably in Canada where oil and liquid now account for 57% of average production as compared to 42% in the second quarter of 2011. Combined with our Netherlands natural gas production, which is priced off a basket of primarily Brent-based heating and fuel oil products, our production volumes are approximately 82% weighted to crude-based pricing. Funds flow from operations for the second quarter were $128 million, $1.30 per share, as compared to $151 million, or $1.56 per share, in the prior quarter and $119 million, or $1.32 per share, in the second quarter of 2011. The decrease in funds flow from the first quarter 2012 reflects a nearly 12% reduction in our weighted average realized price due to the 9% decrease in both the West Texas intermediate and Dated…

[Operator Instructions] Our first question comes from the line of Greg Pardy with RBC Capital Markets.

So I'll hit you with 3. The nagging question around the inventory reversals, just curious as to how much of that you think might reverse as we go into the third quarter? And then more operationally, interested in what your plans are in the Duvernay and in the Cardium, particularly how big of a program you'd expect to have in 2013. And then the last point is, I know you get to 50,000 just with the existing asset base. Is your inclination then to get deeper within countries that you're in now or is it a possibility you may add another country as we go over the next 12, 18 months?

Thanks, Greg. So I'll maybe let Curtis speak to the inventory reversals, we'll get Tony to speak to the Duvernay and the Cardium and I'll maybe give a bit of color on the -- on our asset base.

Greg, what we would expect the inventory builds that we saw, that inventory will essentially get sold in the third quarter. We do expect in -- right now, we're forecasting a total draw of our June 30 inventory, about 60,000 barrels each of Australia and France. Again, those numbers could change. It all depends on the timing of vessels showing up and taking that inventory to market. But that's the current expectation for Q3.

Okay. So, Greg, with respect to the Duvernay, our current activity is that we're -- we have a vertical test well that we've deepened in the Edson area, and we're conducting injection tests to try to get some of the reservoir properties and to get some flow samples to help us determine the liquid yield in that area. So that's the current activity. With respect to what we might do in 2013, it's really, first of all, too early to say. We'll have a board-approved budget later this year and we'll be able to disclose it that time what our plans are. I would point out that we're going to be able to be very judicious, parsimonious in the spending what we do as we move the Duvernay along because first of all, we have very strong land tenure having just acquired these lands. Secondly, there's going to be, I think, as Lorenzo mentioned in the opening section, there's going to be a lot of industry data that is going to be made public all up and down the broader Duvernay trend. And of course, we want to take maximum advantage of that as a way of just having the most capital-efficient program, taking advantage of capital that other companies have spent, because this play is de-risked and has development techniques are refined for the Duvernay. So it's hard to say what next year's program will be, but we will continue our evaluation of the play. With respect to the Cardium, again, we don't have a 2013 board-approved budget. We're in the midst of our budgeting and planning process. I think we'll continue to run an aggressive Cardium development program. We've got a very large amount of land. In my view, it's really the highest quality extensive Cardium land base in the entire play and that will give us multiple years of high-quality development and continued growth. That growth is able to use the infrastructure that we've installed so we can -- we'll not only have good well results, but we've got advantages in our capital efficiency because of the infrastructure that we put in place. But again, can't identify the size of the program yet because we're in the midst of our budgeting.

Okay. And, Tony, just with respect to the program you have now, any sense as to where you might either exit 2012 or start to -- the levels you might start to reach as you get into the first quarter?

We don't really guide to an exit number. I mean, really with respect to production guidance, I think I would just revert to what we've said, that all of the business units in the company are performing very well. In fact, performing better than we had forecasted. We think we'll be in the mid- to the upper-end of our production guidance range and that's despite having taken off a significant amount of Canadian natural gas volumes just in view of the pretty low price environment we have right now. And then I'll probably just leave our production guidance at that, at the company level.

And, I guess, finally, the question about other areas that we may look at. There's sort of 2 components to that, both on the M&A side and then on our New Growth Initiatives. On the M&A side, we're going to be pretty opportunistic there. Really, we're looking for opportunities that are value-driven opportunities. They'll be incremental to our current business plan. And with the M&A, we're currently focused in our core areas -- or core regions, sort of in Canada, the broader European area as well as, I'll call it, Australasia. We are looking at maybe one other area to see if it makes sense but we really haven't made any decisions yet. So that's sort of the M&A side. And then on the New Growth side. Really, this is focused on -- in our core area, so in Canada, sort of broader European area, in Australia. The strategy, the way we term it is called the low-cost early entry. So it's really a land capture opportunity where we're capturing -- trying to capture large blocks of land that are sort of in the million acre range. If the play works, we're targeting play sizes that are in excess of 200 million barrels and higher than that BOEs. And so we're in the early parts of that. We're having some encouraging initial results of our discussion and we're optimistic that we're going to be able to add to our unconventional resource plays in those areas over the next several months.

Our next question comes from the line of Eric Kasel [ph] with CCI [ph].

I just had a flip-sided question about France. Can you talk a little bit about the taxes? Do they affect you at all? And just the general atmosphere with the new change in president.

Yes, Eric, the taxes do impact us to the extent there's been no change to date. There's some discussions ongoing, some potential proposed legislative changes. If they are approved and legislated in, then certainly, there will be an increase in tax stake on Vermilion. Our initial assessment is it's not significant, it's not going to change the way we do business in France and overall, to the company, not hugely material.

Okay. So second question is, you mentioned you're going to do some additional drilling in Australia. Will that like in prior years significantly decrease production for a short period of time while you do the drilling?

No, I don't think it's going to have a significant impact on production during the drilling phase. There may be some minor impacts. The wells themselves, the whole program takes about 60 days. And since the completion activities, once the wells are drilled and lined, are quite brief, those wells should be able to come on production shortly after we demobilize the jack-up.

Our next question comes from the line of Cristina Lopez with Macquarie.

Just a quick question on the Netherlands. Given the success you've have to date, or potential success, what are your capacity constraints there with facilities and what is -- is there sort of a key production level that you can reach in the Netherlands? And second to that, when looking potentially at Europe for resource play and resource play capture, are you focused more on natural gas in Europe or are you focused on both crude and natural gas, obviously, knowing that you have the Lias Shale oil already?

On the resource plays, we're primarily focused on natural gas. But you're right, I mean, we've got a material position in a world-class shale oil play in France. And what's encouraging about that, it's early days, but we have the Minister of Industry from France that has made a commented in the press that the frac -- the current -- the temporary frac band is something that he wants to review because, I think, they see it as a way to perhaps add to the unemployment problem -- or help satisfy some of the unemployment issues in France right now. So we're encouraged there but it's still a little bit early days. But you're right, the focus is primarily gas and in some areas in, for example, in Australia, we're focused more on liquids-rich gas. So on the first question, I'll maybe pass it on to Tony regarding Netherlands.

Okay, in the Netherlands program. So as you know, the well productivity is -- on a new well there tends to be quite good. In some cases, some of the wells that we've been able to tie in -- and we haven't disclosed test results yet on this most recent drill at Vinkega-2, but -- and in some cases, we do have some gathering limitations. And -- but what I can tell you about that is that we're looking at those bottlenecks that exist now and we could have some CapEx projects to increase that gathering capacity that would have a positive impact on the Netherlands rates next year. That is a possibility and that's something we're evaluating.

[Operator Instructions] Our next question comes from the line of Gordon Tait with BMO Capital Markets.

I was wondering just given where you're spending and where you're not spending, would you look at almost exiting your conventional gas production in Canada? Either just letting it -- like just not investing in it and let it kind of blow down, or would you sell it? It certainly doesn't look like it competes with the other projects you have.

No, it doesn't. I mean, we've got some pretty strong projects that we're currently developing with our Cardium oil, our Netherland's Gas, Australia oil. But there are some projects there that we've got that we've just kept in inventory, our liquids-rich gas as we've touched to in our presentation -- in our discussions earlier. The liquids-rich gas, we've got some pretty interesting plays there that are economic even in -- under the current gas price. So we're actually happy with portions of our natural gas conventional portfolio. The parts, the dry gas piece like the CBM and some of those, it's a smaller part of our overall business. I don't know if it's wise to be trying to sell those assets in this market, because the market seems to be up awfully flooded. And we're happy, they're good long life reserves. And so we're happy to hold on to those and hopefully wait for a bit of a resurgence in gas prices over the next several years. But what's nice is that we can be patient. You're right, we're not investing capital in the dry gas side and we have better opportunities in some of our oil plays. But the liquids-rich gas, we do have plans to develop that over -- later on in our 5-year business plan. And then, I think, with success in the Duvernay, in the liquids-rich window there, that would be, obviously, a big part of our future growth beyond 2016.

Okay. And then with the amount of drilling you've done in West Pembina, you had moderate increase in your Cardium volumes. What is the infrastructure situation there like? Is that something you're going to need to invest in as you bring on more oil?

No. The battery is designed -- we originally designed it for 15,000 barrels a day and it was designed really to handle all of our development to the full lifecycle of that asset. And by being a bit of a first mover there, it actually -- we positioned ourselves to be the dominant player in that area. And so we've got now a lot of third parties that come through that facility and we're generating third-party processing revenue that's in excess of $7 million to $8 million a year. So that facility will be paid out just with the third-party processing revenues. And of course, we've got first call on that capacity and we see our volumes sort of ramping up to between 10,000 and 12,000 barrels a day and that fits in fine on the -- in terms of the existing infrastructure we have in place for the Cardium production.

[Operator Instructions] Mr. Donadeo, there are no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Great. Well, thank you, operator, and thank you, everyone, for joining us this morning and for participating in our conference call.

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.