Mr. Jim McFarland reports

VALEURA ANNOUNCES THIRD QUARTER 2016 FINANCIAL AND OPERATING RESULTS AND PROGRESS ON RECENT TRANSFORMATIONAL TRANSACTIONS

Valeura Energy Inc. has released highlights of its unaudited financial and operating results for the three- and nine-month periods ended Sept. 30, 2016, and has provided an update on subsequent developments, including progress toward closing a number of recently announced transactions, including the Banarli farm-in, the TBNG acquisition, West Thrace deep rights sale and private placement financing. The complete quarterly reporting package for the corporation, including the unaudited financial statements and associated management's discussion and analysis, has been filed on SEDAR and posted on the corporation's website.

"We believe that the series of transactions announced by Valeura in the past few months will be transformational for the corporation and highly attractive for shareholders. They pave the way for us to ramp up drilling and put the shallow gas business back on a growth path with a program that, for the first time, will be under our control," said Jim McFarland, president and chief executive officer of Valeura. "We have a robust inventory of drillable prospects and exploration leads in the conventional shallow gas formations and normally pressured tight gas formations on the TBNG JV lands and Banarli licences, which could support a one-rig drilling program of up to 12 to 14 exploration development wells in 2017. Our standout operational netbacks and competitive cost structure in Turkey are expected to generate strong economic returns for this capital program.

"We are also thrilled that the two transactions completed with Statoil, with an expected total value of $51-million (U.S.), have validated the potential of a basin-centred gas play concept in the deep formations below 2,500 metres in parts of the Thrace basin, which we had conceived and advanced with new 3-D seismic and targeted deep drilling and testing programs in the past few years. By retaining a 50-per-cent and 31.5-per-cent participating interest in the deep formations on the Banarli licences and West Thrace lands, respectively, we have preserved significant option value for Valeura should the deep play prove successful.

"Average net sales of 680 boe/d in Q3 2016 and 801 boe/d in the first nine months of 2016 are at the low end of the range of previous guidance of 800 to 900 boe/d for annual average sales. The low production level in Q3 reflects the deferral of new drilling pending the closing of the transactions and delays in first gas from the Bati Gurgen-2 well at Banarli. In contrast, and dependent on completing the transactions, we are targeting to achieve average net sales of 2,000 to 2,200 boe/d in 2017 with a more aggressive, operated capital expenditure program in the higher-working-interest shallow gas business we will own at the closing of the TBNG acquisition," added Mr. McFarland.

Third quarter 2016 results at a glance:

• Executed definitive agreements for the Banarli farm-in, TBNG acquisition and West Thrace deep rights sale transactions, and closed an underwritten private placement financing;
• Net sales 680 barrels of oil equivalent per day (42 per cent from Banarli);
• Funds flow from operations of $1.1-million;
• Working capital surplus of $3.70-million;
• Natural gas price realization of $9.35 per thousand cubic feet;
• Operating netback of $38.69 per boe;
• Net capital expenditures of $3.1-million.

Transaction highlights and update

Farm-in with Statoil:

• As announced on Aug. 19, 2016, an affiliate of Valeura executed definitive agreements with Statoil Holding Netherlands, a wholly owned affiliate of Statoil ASA, for a farm-in agreement for the exploration of the deeper formations below approximately 2,500 metres on the Banarli licences targeting a potential basin-centred gas accumulation (BCGA) play.
• Under the terms of the Banarli farm-in, Statoil has the option to earn a 50-per-cent participating interest in the deep formations on the Banarli licences by investing in an exploration program that includes payments and carried costs of at least $36-million (U.S.), including two deep exploration wells and 3-D seismic.
• Closing of the Banarli farm-in is subject to the Turkish government approvals for the associated transfer of the licence interests. At closing, which is expected by year-end 2016, Statoil will pay Valeura $6.0-million (U.S.) as a contribution to back costs incurred on the Banarli licences. Applications for the licence interest transfers were submitted to General Directorate of Petroleum Affairs of the Republic of Turkey (GDPA) for its review on Sept. 8, 2016, and were subsequently presented to the Ministry of Energy of Natural Resources on Nov. 1, 2016, for approval.
• A drilling location for the first deep exploration well has been chosen on the existing 3-D seismic area approximately three kilometres northwest of the Yayli-1 well. A preliminary AFE for the drilling, coring and log evaluation phase has been agreed and will be finalized once bids are selected for the drilling rig and associated equipment and services.
• The target spud date for the first well is year-end 2016 or early 2017, depending on the progress of government approvals to close the Banarli farm-in. Valeura will operate the deep exploration program during the earning phase.

TBNG acquisition:

• • As announced on Oct. 13, 2016, an affiliate of Valeura executed a share purchase agreement with an affiliate of TransAtlantic Petroleum to acquire 100 per cent of the shares of Thrace Basin Natural Gas (Turkiye) (TBNG) for $22-million (U.S.), effective March 31, 2016, which after closing adjustments is expected to be reduced to approximately $18.5-million (U.S.) at the targeted closing of year-end 2016.
  • TBNG holds a 41.5-per-cent participating interest in the TBNG joint venture and will increase Valeura's participating interest in the TBNG JV to 81.5 per cent (subject to the West Thrace deep rights sale) and establishes Valeura as the operator.
  • Acquiring operatorship allows Valeura to accelerate the early ramp-up of exploration and development activities on the TBNG JV lands, with the initial priority on spudding four shallow commitment wells on the West Thrace lands by late June, 2017.
  • The TBNG acquisition requires various Turkish government approvals. Applications were submitted to the various government agencies in October, 2016.

West Thrace deep rights sale:

• As announced on Oct. 13, 2016, an affiliate of Valeura executed a sale and purchase agreement with Statoil, to initially sell Valeura's current 40-per-cent participating interest in deep formations below approximately 2,500 metres on certain TBNG JV lands for cash consideration of $12-million (U.S.), and upon closing of the TBNG acquisition, to sell an additional 10-per-cent participating interest in the same deep rights for $3-million (U.S.).
• Upon the closing of the West Thrace deep rights sale and subsequent West Thrace deep rights sale, Valeura will retain a 31.5-per-cent participating interest, and Statoil acquires a 50-per-cent participating interest in the deep formations on the West Thrace lands. Valeura will retain an 81.5-per-cent participating interest in the shallow formations on the West Thrace lands and an 81.5-per-cent participating interest in all formations on other TBNG JV lands.
• Any deep drilling on the West Thrace lands prior to Statoil completing the earning under the Banarli farm-in would require the unanimous approval of the parties holding participating interests in the deep formations.
• The West Thrace deep rights sale provides a crucial source of non-dilutive financing for the TBNG acquisition and further validates the potential for a deep BCGA play on Valeura's lands.
• Closing of the West Thrace deep rights sale is subject to the Turkish government approvals for the associated transfer of the licence interests and is expected before year-end 2016. Furthermore, closing of the TBNG acquisition is conditional on the closing of the West Thrace deep rights sale. Applications for the licence interest transfers were submitted to the GDPA on Oct. 26, 2016.

Underwritten private placement offering:

• As announced on Oct. 13 and 14, 2016, Valeura entered into an agreement with Cormark Securities Inc. as lead underwriter, and on behalf of a syndicate of underwriters, including GMP FirstEnergy, pursuant to which the corporation will sell and the underwriters will purchase, on an underwritten private placement basis, 14,629,000 subscription receipts of the corporation at a price of 75 cents per subscription receipt for total gross proceeds of approximately $11-million. The subscription receipts (and the underlying common shares of the corporation issuable pursuant thereto) will be subject to a four-month hold period.
• Valeura will use the net proceeds to partially finance the TBNG acquisition and to ramp up the planned shallow gas drilling program on the TBNG JV lands and Banarli licences in 2017.
• The offering closed Nov. 3, 2016.
• Each subscription receipt represents the right to receive one common share of the corporation, without the payment of any additional consideration or further action, upon satisfaction of certain conditions, including that all conditions to the completion of the TBNG acquisition (but for the payment of the purchase price). If: (i) the TBNG acquisition is not completed on or before March 3, 2017; (ii) the acquisition agreement is terminated in accordance with its terms at an earlier time; or (iii) Valeura advises the underwriters or the public that it does not intend to proceed with the TBNG acquisition, holders of subscription receipts will receive, for each subscription receipt held, a return of the cash payment equal to the offering price per subscription receipt and any interest earned thereon during the term of the escrow.

Operational highlights:

• Net petroleum and natural gas sales in Turkey in third quarter 2016 averaged 680 barrels of oil equivalent per day, which were down 27 per cent from second quarter 2016 and down 14 per cent from third quarter 2015. Net sales in third quarter 2016 included 4.0 million cubic feet per day of natural gas and 10 barrels of oil per day.
• Lower sales in third quarter 2016 reflect natural declines, a delay in first gas from the Bati Gurgen-2 well on the Banarli licences and minimal capital expenditures on the joint venture lands acquired from Thrace Basin Natural Gas (Turkiye) and Pinnacle Turkey.

Banarli licences (Valeura 100-per-cent working interest):

• The Bati Gurgen-2 well was placed on stream on Sept. 26, 2016, as a producer from approximately 8.0 metres of conventional stacked sands in the Osmancik formation at a depth of 1,640 metres. Over the initial 30 days of on-stream operations, the well was produced at an average restricted rate of 1.1 million cubic feet per day (IP30). The well is currently producing at a restricted rate of approximately 1.1 million cubic feet per day.
• The Bati Gurgen-1 well is currently producing from the Osmancik formation at a restricted rate of approximately 1.6 million cubic feet per day. A recompletion program to perforate additional pay in the shallower Danismen formation is under review for possible implementation in early 2017.
• The Yayli-1 well remains shut in due to high water production. It is currently planned to swab the well for an extended period to unload water from the wellbore and determine whether stabilized gas flows can be achieved prior to any decision to equip the well with a pump.

TBNG JV lands (Valeura 40-per-cent working interest currently):

• Plans are under way to spud a 1,300-metre conventional shallow gas well at Dogu Atakoy-3 in early 2017, contingent on closing the transactions. This well would be the first of four licence commitment wells on the West Thrace lands in the TBNG JV that must commence drilling by the end of June, 2017. under the TBNG acquisition agreement, Valeura can proceed with this well as an independent operation at an 81.5-per-cent working interest (PTI 18.5-per-cent working interest) in anticipation of closing the TBNG acquisition. If the transaction does not close, TBNG will be required to finance its 41.5-per-cent share of the cost.
• The corporation is also seeking TBNG JV partner support to perforate additional Osmancik formation pay in the Gurgen-1 and Gurgen-2 wells prior to year-end 2016.

Financial highlights:

• The average natural gas price realization in Turkey of $9.35 per thousand cubic feet in third quarter 2016 was down 1 per cent and 5 per cent from second quarter 2016 and third quarter 2015, respectively, due primarily to fluctuations in the Turkish lira exchange rate and a higher proportion of sales from Banarli.
• The average operating netback of $38.69 per boe in third quarter 2016 was down 10 per cent and 13 per cent from second quarter 2016 and third quarter 2015, respectively, due to lower natural gas price realizations and higher unit operating costs.
• The working capital surplus at Sept. 30, 2016, was $3.7-million, including cash of $2.3-million.
• Funds flow from operations of $1.1-million in third quarter 2016 was down 49 per cent from second quarter 2016 due to lower volumes, higher unit operating costs reflecting employee termination costs in TBNG and higher realized foreign exchange losses, partially offset by lower general and administrative expenses, and was down 45 per cent from third quarter 2015 due to lower sales volumes, lower natural gas price realizations and higher unit operating costs, partially offset by lower general and administrative expenses and lower realized foreign exchange losses.
• Net capital expenditures of $3.1-million in third quarter 2016 were essentially unchanged from second quarter 2016 and were up 315 per cent from third quarter 2015 due to higher drilling expenditures on the Banarli licences. Expenditures on the TBNG JV lands were nominal in third quarter 2016 and the same period in 2015.
• Additional financial and operating results are summarized in the attached table.
• In a subsequent development, the Turkish government reduced the BOTAS reference price (in Turkish lira) by 10 per cent, effective Oct. 1, 2016, which is expected to reduce Valeura's average price realizations to approximately $8.12 per thousand cubic feet at current exchange rates. This reduction is reportedly linked to negotiated price reductions in some natural gas imports. Turkey imports approximately 99 per cent of its natural gas supply. The last change in the BOTAS reference price was in Oct. 1, 2014, when the price was increased by 9 per cent, reportedly to offset the the impact of the weakening of the Turkish lira against the U.S. dollar in 2014 and the resulting higher cost of imported gas typically priced in U.S. dollars.

 
                                   FINANCIAL AND OPERATING RESULTS SUMMARY (1)
                  (thousands of dollars, except per-share amounts, and as otherwise stated)

                                   Three months ended       Nine months ended   Three months ended   Nine months ended
                           Sept. 30, 2016     June 30, 2016    Sept. 30, 2016       Sept. 30, 2015      Sept. 30, 2015
Financial
Petroleum and
natural gas revenues               $3,510            $4,809           $12,647               $4,309             $17,118
Funds flow from operations (1)      1,066             2,098             5,133                1,949               8,585
Net (loss) from operations         (1,263)             (642)           (2,897)                (169)               (849)

Operations
Production 
Crude oil (bbl/d)                      10                 7                 8                    7                   8
Natural gas (Mcf/d)                 4,020             5,560             4,756                4,723               6,062
Boe/d (at 6:1)                        680               933               801                  794               1,019

Average reference price
Brent ($ per bbl)                   59.75             57.81             55.31                65.91               69.91
BOTAS reference ($ per Mcf) (2)      9.67              9.78              9.90                10.07               10.40
Average realized price
Crude oil ($ per bbl)               56.24             54.41             52.15                48.79               52.25
Natural gas -- Turkey ($ per Mcf)    9.35              9.44              9.61                 9.85               10.27
Average operating netback
($ per boe at 6:1) (1)              38.69             43.02             42.72                44.50               46.99

Notes:
(1) The table includes non-international financial reporting standard measures, which may not be 
comparable with other companies. Funds flow from operations is calculated as net income (loss) 
for the period adjusted for non-cash items in the statement of cash flows. Operating netback is 
calculated as petroleum and natural gas sales less royalties, production expenses and 
transportation costs. See management's discussion and analysis for further discussion.
(2) Boru Hatlari ile Petrol Tasima Anonim Sirketi (BOTAS) owns and operates the national crude 
oil and natural gas pipeline grids in Turkey and purchases the majority of Turkey's natural gas
imports. BOTAS regularly posts prices, and its Level 2 wholesale tariff is shown herein as a 
reference price. See the 2015 annual information form for further discussion.              

Outlook

The corporation currently expects to complete a capital expenditure program of approximately $10-million in 2016 focused primarily on the Banarli licences. Capital expenditures in fourth quarter 2016 are expected to include several recompletions on the TBNG JV lands. The current outlook for annual average net sales in 2016 is approximately 800 barrels of oil equivalent per day, which is at the low end of the most recent guidance range of 800 to 900 boe per day provided on Aug. 11, 2016. The current net sales outlook for 2016 reflects delays in achieving first gas from the Bati Gurgen-2 well and deferral of new drilling pending the closing of the transactions and the funds flow therefrom.

The corporation is targeting to close the Banarli farm-in, the TBNG acquisition and the West Thrace deep rights sale, and to complete the offering, by year-end 2016. Applications have been submitted to the Turkish government for the various approvals required to close the Banarli farm-in, the TBNG acquisition and the West Thrace deep rights sale. Closing of the subsequent West Thrace deep rights sale is expected in early 2017, which first requires Turkish government approval of the TBNG acquisition and the subsequent licence interest transfer.

Based on completing the Banarli farm-in, TBNG acquisition, the West Thrace deep rights sale and the offering by year-end 2016, the corporation is planning a capital expenditure program of up to $30-million to 33-million (net) in 2017 focused entirely on the shallow gas business. This program is expected to include a significant ramp-up in drilling in the shallow formations (less than 2,500 metres) on the TBNG JV lands and Banarli licences targeting corporate average sales volumes in the range of 2,000 to 2,200 boe per day. The 2017 work program and expenditures, and the timing thereof, are dependent on closing of the transactions and receipt of the funds flow therefrom.

The corporation also expects that the Banarli farm-in program, fully financed by Statoil and operated by Valeura, will commence by early 2017 with the spudding of a deep exploration well.

We seek Safe Harbor.