Action Note Equity Research December 2, 2016

Action Note Equity Research December 2, 2016 Energy Producers - Seniors & Unconventional BlackPearl Resources Inc. (PXX-T) C$1.85 1.75% Onion Lake GORR Sale ($55mm): Likely to Kick-start Phase 2 Aaron Bilkoski 403 299 3294 aaron.bilkoski@tdsecurities.com John C. Green, CPA, CA (Associate) 403 292 1204 johnc.green@tdsecurities.com Event Announces the sale of a 1.75% GORR on Onion Lake. Impact: POSITIVE A Rare Win-win for Both BlackPearl and PrairieSky (PSK-T) We view this transaction positively for both parties, given PrairieSky's acquisition of lowdecline, low-cost, SAGD production with a strong likelihood of future growth. From BlackPearl's perspective, we believe that the proceeds provide line of sight to Phase II development by eliminating the single largest hurdle access to capital. Details of the 1.75% GORR The gross overriding royalty (GORR) covers both conventional and SAGD production from Onion Lake. Phase 1 of the Onion Lake SAGD project is currently producing above its design capacity of 6,000 BOE/d and has been an operational success, in our opinion. The GORR will also be applicable to Phase II of Onion Lake, which is slated to be an additional 6,000 BOE/d, with sanctioning expected in H2/17. Proceeds of the Sale Used to Eliminate Debt/Fund Phase II Development This transaction permits BlackPearl to exit 2016 with a net cash position and be undrawn on its $117.5-million credit facility (recently reconfirmed). As such, the company now has line of sight to finance the $180-million Phase II expansion via a combination of current credit capacity and expected cash flow. Phase II construction is expected to take 12-15 months, with subsequent ramp-up requiring an additional 9-12 months. Why does PSK State a 3.75% GORR? It is our understanding that a 2% GORR previously existed on Onion Lake, which was held by a third party. PrairieSky has acquired both the 1.75% GORR from BlackPearl and the 2% GORR from the third party simultaneously. TD Investment Conclusion BlackPearl's outlook has been significantly improved by the recently announced macro events - namely pipeline approvals and the OPEC cut. Furthermore, the announced GORR sale provides visibility to the development of the 6,000 bbl/d Phase II that could be on stream in 2019. Based on valuation, our HOLD rating is unchanged; however, we are increasing our target price to $1.85 (from $1.55) to reflect the GORR proceeds and advancement of Phase 2 in our NAV. PXX-T: Price 2.5 2.5 2 2 1.5 1.5 1 1 0.5 0.5 0 0 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Company Profile BlackPearl is a Calgary-based E&P company with its primary operations in Alberta and Saskatchewan. It is principally targeting conventional heavy oil plays, coupled with longterm potential for significant SAGD oil sands development. BlackPearl's primary properties include Onion Lake, Mooney, and Blackrod. Recommendation: Risk: 12-Month Target Price: 12-Month Dividend (Est.): HOLD HIGH C$1.85á Prior: C$1.55 C$0.00 12-Month Total Return: 0.0% Market Data (C$) Current Price C$1.85 52-Week Range $0.47 - $1.90 Mkt Cap (f.d.) ($mm) $630.3 Mkt Cap (basic) ($mm) $620.9 Float Cap ($mm) $498.0 Current Dividend $0.00 Dividend Yield 0.0% Avg. Daily Trading Vol. 590,827 Financial Data (C$) Fiscal Y-E December Shares O/S (f.d)(mm) 340.7 Shares O/S (basic) (mm) 335.6 Float Shares (mm) 269.2 Net Debt ($mm) $(3.2) Net Debt/Total Cap (1.0)% Net Debt/EBITDA (0.1)x Estimates (C$) CFPS (f.d) 0.27 0.15 0.13 0.17 Oil (b/d) 8,872 7,976 10,026 9,277 Gas (MMcf/d) 2.5 2.1 0.8 0.7 MBOE/d 9.3 8.3 10.2 9.4 CFPS (f.d) Quarterly Estimates (C$) Q1 0.08 0.04 0.01 0.05 Q2 0.07 0.04 0.03 0.04 Q3 0.07 0.03 0.04 0.04 Q4 0.06 0.03 0.05 0.04 Valuations EV/DACF 8.9x 8.1x 13.1x 10.1x P/NAV MG 99.0% Supplemental Data WTI (US$/bbl) 92.81 49.00 43.50 57.00 HENRY HUB (US$/ 4.27 2.65 2.55 3.25 MMBTU) AECO (C$/mcf) 4.44 2.70 2.20 3.25 FX (US$/C$) 0.91 0.78 0.76 0.77 All figures in C$, unless otherwise specified Please see the final pages of this document for important disclosure information. Page 1 of 6

December 2, 2016 Outlook We have made minor changes to incorporate the disposition into our cash flow and NAV models. Year-ahead production declines modestly to reflect the ~150 bbl/d of net production disposed, but the greater impact is the $55-million improvement to net debt. Exhibit 1. Revised Estimates 2015A 2017E Guidance New Old % Chg New Old % Chg Average Production [BOE/d] 8,331 10,000 10,162 10,162-9,385 9,536 (2%) % Natural Gas 4% 1% 1% - 1% 1% 0% Financial ($mm) Revenue $96 $106 $106 - $141 $144 (2%) Cash Flow $49 $42-45 $45 $44 1% $58 $58 1% Capex $69 $7-10 $9 $9 - $20 $20 - Ending Net Debt $87 ~$0 -$3 $52 (106%) -$41 $15 (383%) CFPS (diluted) $0.15 $0.13 $0.13 1% $0.17 $0.17 1% DPS $0.00 $0.00 $0.00 - $0.00 $0.00 - Netbacks ($/BOE) Revenue $31.66 $28.67 $28.67 - $41.24 $41.25 (0%) Hedging Gains/(Loss) $12.24 $3.63 $3.63 - ($1.44) ($1.42) 2% Royalties ($5.28) ($3.73) ($3.73) - ($6.39) ($6.39) (0%) % Revenue 17% 13% 13% - 15% 15% 0% Operating ($18.50) ($11.84) ($11.84) - ($12.00) ($12.00) - Transportation ($1.05) ($2.04) ($2.04) - ($2.43) ($2.43) - Operating Netback $19.07 $14.69 $14.69 - $18.98 $19.00 (0%) G&A (Cash) ($2.52) ($1.84) ($1.84) - ($1.99) ($1.95) 2% Interest Expense ($0.44) ($0.85) ($0.94) (10%) $0.00 ($0.53) (100%) Income / Capital Tax ($0.01) $0.01 $0.01 - $0.00 $0.00 - Other $0.00 $0.00 $0.00 - $0.00 $0.00 - Cash Netback $16.10 $12.01 $11.91 1% $16.99 $16.52 3% Source: Company reports, TD Securities Inc. Valuation Exhibit 2. Relative Valuation Comparison Mkt Cap. Source: TD Securities Inc. D/CF % Drawn Ex. DRIP BOE/d EV/DACF $/BOEPD Inc. DRIP 2017E Gas Gwth* 2017E 2017E NBZ $488 12% 2.0x -20% 85% 53% 18,549 2% (8%) 4.7x 6.8x $40,512 $41,858 PXX $630 - -0.1x 0% 20% 20% 9,385 1% (9%) 13.1x 10.1x $61,704 $62,740 CJ $744 4% 1.2x 10% 99% 96% 15,605 14% (0%) 11.8x 6.8x $55,328 $49,988 BNE $911 5% 3.8x 86% 90% 90% 13,512 28% 3% 11.7x 7.4x $97,373 $89,467 PGF $1,139-2.8x 0% 11% 11% 51,198 37% (10%) 4.3x 9.5x $44,606 $47,620 PWT $1,181-3.6x 29% 60% 60% 35,951 39% (34%) 6.6x 6.8x $31,903 $46,069 BNP $1,211 1% 3.1x -16% 63% 63% 75,304 68% 2% 6.5x 4.7x $29,834 $26,279 TOG $1,519 4% 2.4x 53% 101% 83% 19,900 12% (1%) 14.3x 7.8x $96,686 $87,811 FRU $1,611 4% 0.7x 33% 40% 35% 11,411 44% (12%) 16.9x 12.0x $139,299 $141,706 ERF $2,843 2% 2.6x 0% 84% 84% 96,021 48% (3%) 10.7x 6.0x $39,049 $36,724 WCP $4,456 3% 2.1x 71% 76% 76% 57,000 18% 16% 12.6x 8.9x $115,058 $89,895 VET $6,634 5% 2.6x 65% 105% 66% 69,459 53% 5% 14.1x 11.1x $124,829 $114,388 PSK $7,726 3% -0.3x 0% 92% 84% 23,979 52% 4% 39.3x 28.3x $330,765 $315,453 ARX $8,453 3% 0.5x 0% 94% 76% 122,036 69% 2% 12.8x 10.8x $73,892 $72,659 CPG $9,449 3% 2.3x 46% 87% 87% 172,870 11% (2%) 7.6x 6.1x $77,906 $73,449 Median $1,211 3% 2.4x 27% 87% 80% 24,201 28% (2%) 11.7x 7.8x $65,255 $72,659 *Y/Y Growth Per Share Yield Corporate P/O Page 2 of 6

December 2, 2016 Justification of Target Price Exhibit 3. NAV Summary Project Summary Resource (mmboe) $/bbl $mm $/share Shares Outstanding Conventional Reserves 30 $0.13 $4 $0.01 Basic 335.6 mm Onion Lake (SAGD) 84 $6.48 $546 $1.60 Dilutive 5.0 mm Blackrod - Phase 1 (SAGD) 180 $0.10 $18 $0.05 Diluted 340.7 mm Remaining Resource 615 $0.05 $31 $0.09 Subtotal 909 $0.66 $599 $1.76 Target Price Calculation NAV 100% $1.87 $/share Other NAV Adjustment 1.00x $1.87 $/share Hedging ($2) ($0.00) Target Price (Calculated) $1.87 $/share Undeveloped Land $36 $0.11 Target Price (Rounded) $1.85 $/share Subtotal $35 $0.10 Valuation Notes Financial Summary Working Capital Deficit (Surplus) ($4) ($0.01) Bank Debt $1 $0.00 Long Term Debt $0 $0.00 ($3) ($0.01) Net Asset Value $637 $1.87 Source: TD Securities Inc. Our 12-month target price is based on 1.00x our $1.87 NAV. Key Risks to Target Price Onion Lake (SAGD) is based on NPV10% of Phases 1+2. Blackrod Phase 1 valued at $0.10/bbl and the remaining Blackrod and Mooney contingent resource is valued at $0.05 per 2C bbl. This is consistent for comparable oil sands projects in our coverage. Key risks associated with our target price include business risks of the company and industry, including, but not limited to: loss of key employees; drilling success; volatile commodity prices; operating costs; capital cost overruns; product supply and demand; financing/access to capital; government regulations; legislation; royalties; taxes; exchange rates; interest rates; and environment and weather concerns. The key near-term risks specific to BlackPearl are: continued volatility in the heavy differential; the inability to source the necessary capital to fund the development of its key growth projects; and the technical risk associated with SAGD and polymer flooding. Page 3 of 6

December 2, 2016 BlackPearl Resources Inc. Price Target: $1.85 Rating: HOLD Total Return: 0% Risk: HIGH Company Overview Key Valuation Ratios 2014A 2015A 2017E Market Capitalization ($mm) $630 P/CF (x) 8.0x 6.5x 14.0x 10.8x Net Debt ($mm) ($3) EV/DACF (x) 8.9x 8.1x 13.1x 10.1x Enterprise Value ($mm) $627 EV/Production ($000/BOE/d) $86,510 $48,711 $61,704 $62,740 EV/1P Reserves ($/BOE) $12.14 $6.35 - - Current Price $1.85 EV/2P Reserves ($/BOE) $2.71 $1.38 - - 52 Week Low/High $0.47 $1.90 P/NAV (2P) 99% Current Yield 0.0% P/NAV (Modified Growth) 99% ROCE 3.5% - - - Production 2014A 2015A 2017E Crude Oil & NGLs (bbl/d) 0 0 0 0 Leverage 2014A 2015A 2017E Heavy Oil (bbl/d) 8,872 7,976 10,026 9,277 Bank Debt ($mm) 29 88 1 (38) Total Liquids (bbl/d) 8,872 7,976 10,026 9,277 Term Debt ($mm) 0 0 0 0 Natural Gas (mcf/d) 2,492 2,130 817 651 Net Debt ($mm) 67 87 (3) (41) Total Production (BOE/d) 9,287 8,331 10,162 9,385 Net Debt-CF (x) 0.7x 1.8x -0.1x -0.7x % Gas 4% 4% 1% 1% Credit Facility ($mm) 150 150 118 118 Production Hedged (%) 0% 0% 2% 16% % Drawn 19% 59% 0% -32% Dividend PoR (%) (Pre-DRIP) 0% 0% 0% 0% Growth 2014A 2015A 2017E Dividend PoR (%) (Post-DRIP) 0% 0% 0% 0% Y/Y Production Growth -2% -10% 22% -8% Corporate PoR (%) (Pre-DRIP) 261% 140% 20% 34% Y/Y Production Per Share Growth -12% -12% 21% -9% Corporate PoR (%) (Post-DRIP) 261% 140% 20% 34% Y/Y DAPPS Growth -11% -32% 45% 4% Cash Flow Summary ($mm) 2014A 2015A 2017E Pricing Assumptions 2014A 2015A 2017E Funds Flow from Operations 90 49 45 58 WTI (US$/bbl) $92.80 $49.00 $43.50 $57.00 Debt-Adjusted Cash Flow 90 50 48 58 Edmonton Par (C$/bbl) $94.45 $57.51 $53.25 $69.75 Investing Activities WCS (C$/bbl) $81.49 $45.28 $39.50 $55.75 Exploration and Development (234) (69) (9) (20) Nymex (US$/mcf) $4.27 $2.65 $2.55 $3.25 Acquisitions/Divestitures (2) 0 55 0 AECO (C$/mcf) $4.44 $2.70 $2.20 $3.25 Total Capital Expenditures (235) (69) 46 (20) Exchange Rate (US$/C$) $0.91 $0.78 $0.76 $0.77 Financing Activities Net Change in Debt 29 59 (87) (38) Corporate Netback ($/BOE) 2014A 2015A 2017E Dividends 0 0 0 0 Revenue $67.50 $31.66 $28.67 $41.24 DRIP 0 0 0 0 Hedging $0.55 $12.24 $3.63 ($1.44) Other Share Issue Proceeds 35 0 0 0 Royalties ($12.94) ($5.28) ($3.73) ($6.39) EBITDA 90 50 48 58 Transportation ($1.81) ($1.05) ($2.04) ($2.43) Operating ($24.20) ($18.50) ($11.84) ($12.00) CFPS (diluted) 2014A 2015A 2017E Operating Netback $29.10 $19.07 $14.69 $18.98 Q1 $0.08 $0.04 $0.01 $0.05 G&A ($2.49) ($2.52) ($1.84) ($1.99) Q2 $0.07 $0.04 $0.03 $0.04 Interest Expense ($0.15) ($0.44) ($0.85) $0.00 Q3 $0.07 $0.03 $0.04 $0.04 Cash Taxes and Other ($0.02) ($0.01) $0.01 $0.00 Q4 $0.06 $0.03 $0.05 $0.04 Cash Flow Netback $26.44 $16.10 $12.01 $16.99 Annual $0.27 $0.15 $0.13 $0.17 Per Share Metrics 2014A 2015A 2017E Quarterly Production (BOE/d) 2014A 2015A 2017E WA Outstanding Shares (diluted) 328.2 335.6 337.5 340.7 Q1 9,363 8,269 9,167 10,379 CFPS (diluted) $0.27 $0.15 $0.13 $0.17 Q2 8,897 8,051 9,698 9,684 EPS (diluted) - - - - Q3 9,248 7,478 10,951 9,045 2P NAV $1.87 Q4 9,639 9,522 10,805 8,457 Modified Growth NAV $1.87 Annual 9,287 8,331 10,162 9,385 Source: Company reports, TD Securities Estimates Page 4 of 6

Action Note Equity Research December 2, 2016 December 2, 2016 TD Securities Equity Research Disclosures Distribution of Research Ratings^ Investment Services Provided* 75% REDUCE - 2.0% 63.68% BUY - 56.9% 50% 34.83% 25% HOLD - 41.0% 0% 1.49% BUY HOLD REDUCE Definition of Research Ratings ACTION LIST BUY: The stock's total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months and it is a top pick in the Analyst's sector. BUY: The stock s total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months. SPECULATIVE BUY: The stock's total return is expected to exceed 30% over the next 12 months; however, there is material event risk associated with the investment that could result in significant loss. HOLD: The stock s total return is expected to be between 0% and 15%, on a risk-adjusted basis, over the next 12 months. TENDER: Investors are advised to tender their shares to a specific offer for the company's securities or to support a proposed combination reflecting our view that a superior offer is not forthcoming. REDUCE: The stock s total return is expected to be negative over the next 12 months. Overall Risk Rating in order of increasing risk: Low (7.3% of coverage universe), Medium (35.3%), High (44.3%), Speculative (13.1%) Research Dissemination Policy TD Securities makes its research products available in electronic and/or printed formats and as soon as practicable distributes them to its institutional clients who are entitled to receive them. The Action Notes are distributed by email, and are available in PDFform on Thomson Reuters, Bloomberg, S&P Capital IQ and FactSet. Research Reports are distributed by email; they are also printed and distributed by courier to our entitled clients. PDFs of Reports are available on Thomson Reuters, Bloomberg, S&P Capital IQ and FactSet. 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