Athabasca Oil Corporation Announces 2017 Third Quarter Results

Transcription

1 FOR IMMEDIATE RELEASE Nvember 2, 2017 Athabasca Oil Crpratin Annunces 2017 Third Quarter Results CALGARY Athabasca Oil Crpratin (TSX: ATH) ( Athabasca r the Cmpany ) is pleased t prvide its 2017 third quarter results and an peratins update. The quarter marks cntinued executin f Athabasca s strategy with strng cnsecutive quarterly cash flw grwth supprted by crprate prductin nw in excess f 40,000 be/d. Third Quarter and Recent Highlights Q Operating and Financial Results Prductin f 36,133 be/d (90% liquids), representing 143% year ver year per share grwth Current prductin f apprximately 41,000 be/d (Octber estimate) Cnsecutive quarter f strng cash flw grwth, earnings and nging cst discipline Funds flw f $34.4 millin ($0.07 per share) Net incme f $5.1 millin ($0.01 per share) G&A f $2/be, a 64% reductin year ver year Capital expenditures f $67.7 millin Net debt f $365 millin (2.7x D/CF annualized) and strng liquidity supprted by $174 millin f cash and equivalents, a $183 millin Duvernay capital carry balance and a $120 millin credit facility Light Oil High Margin Liquids Rich Grwth Prductin f 7,875 be/d (54% liquids), representing 108% per share grwth ver Q Current prductin f 10,500 be/d (Octber estimate) Realized netbacks f ~$19/be Placid Mntney (70% wrking interest) Recent IP30s f 1,206 be/d (66% liquids) exceed upsized type curve expectatin Currently drilling a 6 well pad that is intended t maintain 2018 Light Oil vlumes in excess f 10,000 be/d Kaybb Duvernay (30% wrking interest) 3 well vlatile il pad exceeds type curve with restricted IP30s f 795 be/d (72% liquids) Murphy planning t perate tw rigs until break up fr significant vlatile il delineatin Thermal Oil Underpins Lw Crprate Decline and Free Cash Flw Generatin Prductin f 28,258 bbl/d, representing 155% per share grwth ver Q Current prductin f 30,400 bbl/d (Octber estimate) Operating incme f $38.6 millin and $18.2 millin f free cash flw Realized netbacks f ~$15/bbl (~$18/bbl Leismer & ~$3/bbl Hangingstne)

2 Athabasca s Strategy Athabasca is an intermediate il weighted prducer with expsure t several f the largest resurce plays in Western Canada, including the Mntney, Duvernay and il sands. The Cmpany has a funded and flexible develpment utlk capable f delivering strng ecnmic grwth. The Cmpany s near term fcus is maximizing prfitability and sharehlder returns thrugh mdest activity in Light Oil and nging Thermal Oil ptimizatin. Bth divisins are psitined fr accelerated peratins and grwth with cmmdity price supprt. The Cmpany is guided by a strategy that includes: Light Oil: Defined and Material Margin Grwth A scalable perated Mntney psitin at Placid Funded Duvernay develpment thrugh the jint venture with Murphy Current prductin in excess f 10,000 be/d with scalable grwth t 20,000 be/d by 2020 with a 1 rig prgram in the Mntney and current Duvernay develpment plans Thermal Oil: Free Cash Flw with Leverage t Oil Prices A large and established lw decline prductin base Significant free cash flw generatin in the current envirnment Reserve life index f ver 70 years (prved plus prbable) Financial Sustainability Maturing cash flw prfile with strng sustainability metrics and a lw verall crprate prductin decline f apprximately 10% annually Diverse asset base prvides flexibility in future capital allcatin decisins Five year term debt with n financial cvenants and strng liquidity

3 Financial and Operating Highlights 3 mnths ended Sept mnths ended Sept. 30 ($ Thusands, unless therwise nted) CONSOLIDATED PRODUCTION Petrleum and natural gas vlumes (be/d) 36,133 11,848 33,183 12,098 LIGHT OIL DIVISION Petrleum and natural gas sales vlumes (be/d) 7,875 3,018 6,197 5,019 Light Oil perating incme 1 $ 13,748 $ 5,511 $ 37,001 $ 17,632 Light Oil perating netback 1 ($/be) $ $ $ $ Capital expenditures $ 53,406 $ 18,920 $ 162,113 $ 55,095 Recvery f capital carry thrugh capital expenditures $ (6,092) $ (4,286) $ (30,265) $ (5,760) THERMAL OIL DIVISION Bitumen prductin (bbl/d) 28,258 8,830 26,986 7,079 Thermal Oil perating incme (lss) 1 $ 38,610 $ (6,088) $ 78,345 $ (41,079) Thermal Oil perating netback 1 ($/bbl) $ $ (6.80) $ $ (20.99) Capital expenditures 2 $ 20,382 $ 3,754 $ 45,376 $ 6,857 CASH FLOW AND FUNDS FLOW Cash flw frm perating activities $ 49,488 $ (18,990) $ 24,637 $ (51,297) per share (basic) $ 0.10 $ (0.05) $ 0.05 $ (0.13) Funds flw frm peratins 1 $ 34,400 $ (15,778) $ 60,315 $ (84,622) per share (basic) $ 0.07 $ (0.04) $ 0.12 $ (0.21) NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) Net incme (lss) and cmprehensive incme (lss) $ 5,113 $ (33,032) $ 181 $ (157,331) per share (basic and diluted) $ 0.01 $ (0.08) $ $ (0.39) SHARES OUTSTANDING Weighted average shares utstanding (basic) 509,335, ,556, ,845, ,357,248 Weighted average shares utstanding (diluted) 513,332, ,556, ,283, ,357,248 ACQUISITIONS AND FINANCINGS Leismer Crner Acquisitin 3 $ (881) $ $ (626,645) $ Net prceeds frm sale f assets $ $ (1,944) $ 90,205 $ 390,394 Net prceeds frm issuance f 2022 Ntes $ $ $ 542,117 $ Repayment f 2017 Ntes and term lan $ $ $ (550,000) $ (285,441) As at ($ Thusands) Sept. 30, 2017 Dec LIQUIDITY AND INDEBTEDNESS Cash and cash equivalents $ 174,076 $ 650,301 Restricted cash $ 113,372 $ 107,012 Capital carry receivable (current & LT prtin undiscunted) $ 183,204 $ 213,469 Face value f lng term debt (current & LT prtin) 4 $ 562,950 $ 550,000 1) Refer t "Advisries and Other Guidance" in the MD&A fr additinal infrmatin n Nn GAAP Financial Measures. 2) Thermal Oil capital expenditures excludes the cst f the Leismer Crner Acquisitin. 3) Cnsists f cash f $435.9 millin, cmmn shares f $166.0 millin and cntingent payment bligatins f $24.7 millin fr the nine mnths ended September 30, ) Face value f the US dllar denminated 2022 Ntes as at September 30, 2017 is US$450 millin. The 2022 Ntes were translated int Canadian dllars at the perid end exchange rate f US$1.00=C$

4 Operatins Update Light Oil Prductin averaged 7,875 be/d (54% liquids) in Q Octber prductin averaged apprximately 10,500 be/d with vlumes driven by the tie in f Mntney wells frm last winter s prgram and representing apprximately 175% per share grwth since Q The Cmpany remains n track t achieve the upper end f its annual Light Oil guidance f 6,500 7,500 be/d. Light Oil perating incme was $13.7 millin ($18.98/be netback). Capital expenditures ttaled $47.3 millin net with activity fcused n cmpleting tw Mntney pads, cmmencing the secnd half drilling prgram at Placid and nging Duvernay jint develpment peratins. Operating expenses were $10.90/be in Q and were impacted by a 19 day planned turnarund at the Keyera Simnette gas plant. Operating expenses are expected t drp in Q and int 2018 supprted by additinal prductin grwth and field ptimizatin. Greater Placid Mntney (Athabasca perated, 70% wrking interest) At Placid the Cmpany has established scale f peratins with a high netback prductin base, wnership in strategic reginal infrastructure and a multi year lw risk develpment inventry. The Mntney asset is psitined fr flexible, scalable and ecnmic grwth in the current price envirnment. During the quarter Athabasca cmpleted the remaining tw pads (eight wells) frm last winter s five multi well pad prgram. The first pad (surface lcatin W5) was placed n prductin in September and the secnd pad (surface lcatin W5) is expected t be n prductin thrugh permanent facilities in early Nvember. IP30s frm the 3 4 pad averaged 1,206 be/d (66% liquids) supprting the previusly increased type curve (IP30s 1,000 be/d 57% liquids & 675 mbe EUR). The Cmpany attributes strnger well perfrmance t the higher prppant cmpletin design which appears t yield a mre effective reservir stimulatin. Extended prductin is supprting strnger liquids rates at higher flwing pressures when cmpared t the prir design as well as ffsetting reginal industry wells. Lng term liquids yields are a significant driver in well ecnmics. Placid 2016/17 Winter Prgram IP30 1 IP90 1 IP180 1 Pad Surface Lcatin be/d % liquids be/d % liquids be/d % liquids W5 On stream December % % % W5 (Pd 2) 2 On stream April % % % W5 2 On stream April 1,053 50% % % W5 3 On stream September 1,206 66% W5 On stream Nvember 1) IPs reflect sales gas, free cndensate and estimated plant based NGL recvery. 2) Peak 30 day rates reprted n Pad 2 & 3 as the initial rates in April were temprarily restricted by spring rad bans and the 16 day Keyera unplanned utage. 3) Includes IP30s fr 3 wells and an IP27 fr the 1 28 well which was initially shut in during cmpletins peratins f the adjacent 7 33 pad.

5 The Cmpany spud a six well pad in August (surface lcatin W5 Pd 2) with cmpletins anticipated in Q The Cmpany views the 7 30 Pd 2 pad as a lw risk capital efficient develpment that shuld maintain base Light Oil prductin levels thrugh Decisins regarding 2018 activity will be finalized later this year and the Cmpany retains flexibility t adapt activity levels t results and external market cnditins. Over the past year Athabasca has cmpleted a number f strategic land acquisitins thrugh industry swaps and crwn land sales. The Cmpany s perated Mntney psitin nw stands at apprximately 80,000 grss acres, f which 48,000 grss acres (36,000 net) are high graded Placid develpment. An inventry f ver 200 lcatins psitins the Cmpany fr multi year grwth. Greater Kaybb Duvernay (Murphy perated, 30% wrking interest) Jint venture peratins cmmenced in the fall f 2016 with the bjectives f driving near term prductin and cash flw grwth, delineatin acrss all phase windws, ptimizing well design and maximizing land retentin. The 2017/18 winter prgram is underway and Murphy expects t run tw rigs until spring break up. Planned peratins include significant vlatile il delineatin at Simnette, Kaybb West, Kaybb Nrth and Kaybb East as well as cndensate rich gas drilling Saxn. Murphy is testing a number f cmpletin techniques in the initial wells, leveraging ff their experience in the Eagle Frd il windw. During the quarter a three well vlatile il pad at Kaybb West ( W5 surface lcatin) had average restricted IP30s f 795 be/d (72% liquids), exceeding Athabasca type well expectatins f 530 be/d. Kaybb Duvernay Activity Area Date Restricted IP30 1 Pad Lcatin / UWI be/d % liquids 2 well pad (Surface W5) W5 On stream June 1,790 75% Kaybb West Vlatile Oil W5 On stream June % 3 well pad ( W5) W5 On stream July % W5 Kaybb West Vlatile Oil On stream July % W5 On stream July % 1 well pad ( W5) W5 Kaybb West Vlatile Oil On Sak / Q4 test 2 well pad ( W5) W W5 2 well pad ( W5) 00/ W5 02/ W5 2 well pad ( W5) Kaybb West Vlatile Oil Simnette Vlatile Oil Cmpleted / Q4 On stream Q4 Cmpletin / Q1 On stream W5 Kaybb East Vlatile Oil Q4 spud

6 W5 3 well pad ( W5) W W W5 1) IPs reflect sales gas, free cndensate and estimated plant based NGL recvery. Saxn Cndensate Rich Gas Q4 Spud The Cmpany remains encuraged by strng ffsetting industry well results and rbust activity levels (Shell, Encana and Chevrn). The Duvernay cmpetes with ther tp Nrth American shale plays and basts high free liquids (200 1,000 bbl/mmcf), premium value cndensate prductin and a lw 5% ryalty ver the first three years (cmpared t average Permian rates f ~25%). Resulting perating netbacks fr an 80% liquids well at US$55/bbl WTI are apprximately C$45/be. The jint venture psitins Athabasca sharehlders with a funded Duvernay develpment prfile ver the next fur years and lng term upside with a 30% wrking interest in ver 200,000 prspective Duvernay acres and an inventry f apprximately 1,500 drilling lcatins. Thermal Oil Prductin averaged 28,258 bbl/d in Q Thermal Oil perating incme was $38.6 millin ($14.66/bbl) with $20.4 millin f capital expenditures during the quarter. Resulting free cash flw was $18.2 millin. Current Thermal Oil prductin is apprximately 30,400 bbl/d (Octber estimate). Leismer Leismer prductin averaged 19,498 bbl/d in Q which incrprated facility maintenance in July and August. Octber prductin averaged apprximately 20,900 bbl/d. The Cmpany is taking deliberate steps t prudently manage reservir perfrmance and maximize prfitability. Near term peratins are fcused n prductin and steam ptimizatin acrss the field and the start up f predrilled infills n Pad L5 in The Cmpany expects t manage prductin between 20,000 22,000 bbl/d. The Cmpany estimates a lw average 32% recvery factr n existing wells t date with recveries expected t reach apprximately 65% lng term, in line with cmparable industry prjects. The asset s reserve life index is ver 30 years prven and ver 70 years prved plus prbable. Management remains pleased with the quality f the asset and inherent flexibility t reduce capital while maintaining prductin in this envirnment. Hangingstne Hangingstne averaged 8,760 bbl/d in Q with $2.3 millin f perating incme. Octber prductin averaged apprximately 9,500 bbl/d. Prductin is expected t cntinue t increase with steam chamber grwth. Hangingstne is expected t require minimal capital ver the next several years.

7 Balance Sheet, Hedging and Sustainability Financial sustainability remains a cre part f Athabasca s strategy and thrughut 2017 the Cmpany has fcused n activities that drive increased margins and imprve financial resiliency capital has been primarily directed t the high margin Mntney and Duvernay with Light Oil vlumes currently in excess f 10,000 be/d. The Cmpany manages its expsure t cmmdity prices thrugh an active hedging prgram and intends t hedge up t 50% f 2018 vlumes. The Cmpany currently has 20,000 bbl/d hedged fr the remainder f 2017 at an average price f ~C$50.75/bbl Western Canadian Select (heavy blend), 18,000 bbl/d fr Q at ~C$48/bbl, 11,000 bbl/d fr Q at ~C$48/bbl and 5,000 bbl/d fr Q at ~C$48/bbl. The Cmpany maintains a strng balance sheet with net debt at the end f Q f $365 millin (2.7x net debt t quarterly funds flw annualized). Liquidity is supprted by $174 millin f cash and equivalents, a $183 millin Duvernay carry balance and a $120 millin credit facility. The Cmpany als has significant asset value in its established and perated Thermal and Light Oil infrastructure Guidance and 2018 Outlk Reaffirming 2017 Guidance Athabasca s 2017 capital budget is unchanged at $210 millin with annual crprate prductin expected t average apprximately 35,000 be/d Full Year CORPORATE (net) Prductin (be/d) 33,500 36,500 Liquids Weighting (%) ~91% Funds Flw frm Operatins ($MM) ~$80 LIGHT OIL (net) Prductin (be/d) 6,500 7,500 Operating Incme ($MM) ~$60 Capital Expenditures ($MM) $150 THERMAL OIL Bitumen Prductin (bbl/d) 27,000 29,000 Operating Incme ($MM) ~$105 Capital Expenditures ($MM) $60 COMMODITY ASSUMPTIONS WTI (US$/bbl) $50.00 Western Canadian Select (C$/bbl) $49.25 AECO Gas (C$/mcf) $2.15 FX (US$/C$) 0.77

8 2018 Outlk Management expects t align 2018 capital spending with crprate cash flw. The Cmpany s assets affrd it significant capital flexibility in bth the Light Oil and Thermal Oil divisins. Placid Mntney activity has n near term land expiries and a prgram f six t eight wells annually is expected t hld prductin flat. Drilling peratins are underway n a six well develpment pad with cmpletins expected t fllw in Q This base level f activity is expected t supprt Light Oil vlume in excess f 10,000 be/d fr In the Duvernay, funded grwth is driven thrugh the jint venture and the Cmpany is prtected by a capital carry n the first $1 billin f investment (7.5% capital expsure fr a 30% WI) activity is expected t be cnsistent with the jint develpment agreement which cntemplates apprximately $350 millin f grss investment (apprximately $26 millin net), up frm apprximately $200 millin grss in In Thermal Oil, the Cmpany will cntinue t ptimize capital and peratins in rder t maximize prfitability and lng term recveries. Athabasca is firmly psitined as an intermediate prducer and in 2018 expects t maintain prductin in excess f 40,000 be/d (~90% liquids), apprximately 15% grwth year ver year, with a mdest capital prgram. The Cmpany retains readiness t accelerate activity in bth divisins with cmmdity price supprt. The 2018 capital budget and guidance will be released n December 6 th. Bard Additins and Management Update Athabasca is pleased t annunce the recent appintments f Anne Dwney and Henry Sykes as directrs t the Cmpany s Bard f Directrs, which is nw cmprised f seven members. Ms. Dwney has 40 years f upstream il and gas experience at Gulf Canada, Petr Canada and Statil Canada. Ms. Dwney previusly held the rle f VP Operatins at Statil Canada respnsible fr il sands asset develpment, peratins and technlgy strategy and implementatin. Ms. Dwney was selected t be an Industry member f the Alberta Gvernment s Oil Sands Advisry Grup. Mr. Sykes has mre than 35 years f legal and upstream il and gas experience. Mr. Sykes was previusly President and a directr f MGM Energy frm and President f CncPhillips Canada frm Prir t this Mr. Sykes was a partner at Bennett Jnes, specializing in mergers and acquisitins, crprate and securities law in Calgary. The Cmpany is als pleased t annunce a key additin t Athabasca s executive leadership team with the appintment f Angela Avery as General Cunsel and Vice President f Business Develpment. Ms. Avery has ver 20 years f diverse legal and business experience within the energy industry with a fcus n majr transactins. Prir t Athabasca, Ms. Avery held senir management rles at CncPhillips including Chief Cmpliance Officer f the glbal business based in Hustn and Vice President, Law and Business Develpment f the Canadian business.

9 Abut Athabasca Oil Crpratin Athabasca Oil Crpratin is a Canadian energy cmpany with a fcused strategy n the develpment f thermal and light il assets. Situated in Alberta s Western Canadian Sedimentary Basin, the Cmpany has amassed a significant land base f extensive, high quality resurces. Athabasca s cmmn shares trade n the TSX under the symbl ATH. Fr mre infrmatin, visit Fr mre infrmatin, please cntact: Matthew Taylr Vice President, Capital Markets and Cmmunicatins mtaylr@atha.cm

10 Reader Advisry: This News Release cntains frward lking infrmatin that invlves varius risks, uncertainties and ther factrs. All infrmatin ther than statements f histrical fact is frward lking infrmatin. The use f any f the wrds anticipate, plan, cntinue, estimate, expect, may, will, prject, believe, view, cntemplate, target, ptential and similar expressins are intended t identify frward lking infrmatin. The frward lking infrmatin is nt histrical fact, but rather is based n the Cmpany s current plans, bjectives, gals, strategies, estimates, assumptins and prjectins abut the Cmpany s industry, business and future perating and financial results. This infrmatin invlves knwn and unknwn risks, uncertainties and ther factrs that may cause actual results r events t differ materially frm thse anticipated in such frward lking infrmatin. N assurance can be given that these expectatins will prve t be crrect and such frward lking infrmatin included in this News Release shuld nt be unduly relied upn. This infrmatin speaks nly as f the date f this News Release. In particular, this News Release cntains frward lking infrmatin pertaining t, but nt limited t, the fllwing: the Cmpany s 2017 guidance and five year utlk; type well ecnmic metrics; estimated recvery factrs and reserve life index in respect f the Leismer assets; and ther matters. Infrmatin relating t "reserves" is als deemed t be frward lking infrmatin, as it invlves the implied assessment, based n certain estimates and assumptins, that the reserves described exist in the quantities predicted r estimated and that the reserves can be prfitably prduced in the future. With respect t frward lking infrmatin cntained in this News Release, assumptins have been made regarding, amng ther things: cmmdity utlk; the regulatry framewrk in the jurisdictins in which the Cmpany cnducts business; the Cmpany s financial and peratinal flexibility; the Cmpany s, capital expenditure utlk, financial sustainability and ability t access surces f funding; gelgical and engineering estimates in respect f Athabasca s reserves and resurces; and ther matters. Actual results culd differ materially frm thse anticipated in this frward lking infrmatin as a result f the risk factrs set frth in the Cmpany s Annual Infrmatin Frm ( AIF ) dated March 9, 2017 available n SEDAR at including, but nt limited t: fluctuatins in cmmdity prices, freign exchange and interest rates; plitical and general ecnmic, market and business cnditins in Alberta, Canada, the United States and glbally; changes t ryalty regimes, envirnmental risks and hazards; the ptential fr management estimates and assumptins t be inaccurate; the dependence n Murphy as the peratr f the Cmpany s Duvernay assets; the capital requirements f Athabasca s prjects and the ability t btain financing; peratinal and business interruptin risks; failure by cunterparties t make payments r perfrm their peratinal r ther bligatins t Athabasca in cmpliance with the terms f cntractual arrangements; abriginal claims; failure t btain regulatry apprvals r maintain cmpliance with regulatry requirements; uncertainties inherent in estimating quantities f reserves and resurces; litigatin risk; envirnmental risks and hazards; reliance n third party infrastructure; hedging risks; insurance risks; claims made in respect f Athabasca s peratins, prperties r assets; risks related t Athabasca s amended credit facilities and senir secured ntes; and risks related t Athabasca s cmmn shares. Als included in this press release are estimates f Athabasca's 2017 capital expenditures, funds flw frm peratins, perating netbacks and perating incme levels, which are based n the varius assumptins as t prductin levels, cmmdity prices and currency exchange rates and ther assumptins disclsed in this news release. T the extent any such estimate cnstitutes a financial utlk, it was apprved by management and the Bard f Directrs f Athabasca n Nvember 2, 2017, and is included t prvide readers with an understanding f the Cmpany s utlk. Management des nt have firm cmmitments fr all f the csts, expenditures, prices r ther financial assumptins used t prepare the financial utlk r assurance that such perating results will be achieved and, accrdingly, the cmplete financial effects f all f thse csts, expenditures, prices and perating results are nt bjectively determinable. The actual results f peratins f the Cmpany and the resulting financial results may vary frm the amunts set frth herein, and such variatins may be material. The financial utlk cntained in this New Release was made as f the date f this press release and the Cmpany disclaims any intentin r bligatins t update r revise such financial utlk, whether as a result f new infrmatin, future events r therwise, unless required pursuant t applicable law. Oil and Gas Infrmatin BOEs" may be misleading, particularly if used in islatin. A BOE cnversin rati f six thusand cubic feet f natural gas t ne barrel f il equivalent (6 Mcf: 1 bbl) is based n an energy equivalency cnversin methd primarily applicable at the burner tip and des nt represent a value equivalency at the wellhead. As the value rati between natural gas and crude il based n the current prices f natural gas and crude il is significantly different frm the energy equivalency f 6:1, utilizing a cnversin n a 6:1 basis may be misleading as an indicatin f value. Initial Prductin Rates The initial prductin rates prvided in this News Release shuld be cnsidered t be preliminary. Initial prductin rates disclsed herein may nt necessarily be indicative f lng term perfrmance r f ultimate recvery. Drilling Lcatins The 200 (grss) Mntney inventry referenced in this News Release includes 34 prved undevelped and 12 prbable undevelped lcatins, fr a ttal f 46 undevelped bked lcatins with the balance being unbked lcatins. Prved undevelped lcatins and prbable undevelped lcatins are bked and derived frm the Cmpany's mst recent independent reserves evaluatin as prepared by GLJ Petrleum Cnsultants Ltd. as f December 31, 2016 and accunt fr drilling lcatins that have assciated prved and/r prbable reserves, as applicable. Unbked lcatins are internal management estimates. Unbked lcatins d nt have attributed reserves r resurces (including cntingent r prspective). Unbked lcatins have been identified by management as an estimatin f Athabasca s multi year drilling activities expected t ccur ver the next tw decades based n evaluatin f applicable gelgic, seismic, engineering, prductin and reserves infrmatin. There is n certainty that the Cmpany will drill all unbked drilling lcatins and if drilled there is n certainty that such lcatins will result in additinal il and gas reserves, resurces r prductin. The drilling lcatins n which the Cmpany will actually drill wells, including the number and timing theref is ultimately dependent upn the availability f funding, il and natural gas prices, prvincial fiscal and ryalty plicies, csts, actual drilling results and additinal reservir infrmatin that is btained and ther factrs. While certain f the unbked drilling lcatins have been derisked by drilling existing wells in relative clse prximity t such unbked drilling lcatins, the majrity f ther unbked drilling lcatins are farther away frm existing wells where management has less infrmatin abut the characteristics f the reservir and therefre there is mre uncertainty whether wells will be drilled in such lcatins and if drilled there is mre uncertainty that such wells will result in additinal il and gas reserves, resurces r prductin. Nn GAAP Financial Measures The "Funds Flw frm Operatins, "Light Oil Operating Incme", Light Oil Operating Netback, "Thermal Oil Operating Incme", "Thermal Oil Operating Netback" and Net Debt financial measures cntained in this News Release d nt have standardized meanings which are prescribed by IFRS and they are cnsidered t be nn GAAP measures. These measures may nt be cmparable t similar measures presented by ther issuers and shuld nt be cnsidered in islatin with measures that are prepared in accrdance with IFRS. Funds Flw frm Operatins is nt intended t represent cash flw frm perating activities, net earnings r ther measures f financial perfrmance calculated in accrdance with IFRS. The Funds Flw frm Operatins measure allws management and thers t evaluate the Cmpany s ability t fund its

11 capital prgrams and meet its nging financial bligatins using cash flw internally generated frm nging perating related activities. Funds Flw frm Operatins per share (basic) is calculated as Funds Flw frm Operatins divided by the number f weighted average basic shares utstanding. The Light Oil Operating Incme and Light Oil Operating Netback measures in this News Release are calculated by subtracting ryalties and perating and transprtatin expenses frm petrleum and natural gas sales and midstream revenues received. The Light Oil Operating Netback measure is presented n a per be basis. The Light Oil Operating Incme and the Light Oil Operating Netback measures allw management and thers t evaluate the prductin results frm the Cmpany s Light Oil assets. The Operating Incme and Operating Netback measures in this News Release with respect t the Leismer Prject and Hangingstne Prject are calculated by subtracting the cst f diluent blending, ryalties, perating expenses and transprtatin expenses frm blended bitumen sales. The Leismer Prject measures als include gas revenues received. The cnslidated Thermal Oil Operating Incme and Operating Netback measures als include realized gains n cmmdity risk management cntracts. The Thermal Oil Operating Netback measure is presented n a per bbl basis. The Thermal Oil Operating Incme and the Thermal Oil Operating Netback measures allw management and thers t evaluate the prductin results frm the Cmpany s Thermal Oil assets. The Net Debt measure is calculated by summing the face value f utstanding term debt with current liabilities and subtracting current assets adjusted fr the capital carry receivable and risk management cntracts. The Net Debt measure is nt intended t represent ther measures f financial psitin n the Cmpany s balance sheet that are calculated in accrdance with IFRS. The Net Debt financial measure allws management and thers t evaluate the Cmpany s funding psitin and utilizatin f debt within its capital structure.