Mr. Walter Vrataric reports

CHINOOK ENERGY INC. ANNOUNCES FIRST QUARTER 2017 RESULTS

Chinook Energy Inc. has released its first-quarter 2017 financial and operating results.

The company's operational and financial highlights for the three months ended March 31, 2017, are noted below, and should be read in conjunction with the company's condensed consolidated financial statements for the three months ended March 31, 2017, and 2016, and its related management's discussion and analysis, which have been posted on the SEDAR website and the company's website.

       FIRST-QUARTER 2017 FINANCIAL AND OPERATING HIGHLIGHTS
  
                                         Three months ended March 31                      
                                                    2017        2016 
Operations
Production volumes
Crude oil (bbl/d)                                     29         817
Natural gas liquids (boe/d)                          482         733
Natural gas (mcf/d)                               18,022      25,215
Average daily production (boe/d)                   3,514       5,753
Sales prices
Average oil price ($/bbl)                        $ 60.32     $ 35.41
Average natural gas liquids price ($/boe)        $ 51.39     $ 27.65
Average natural gas price ($/mcf)                $  2.71     $  1.43
Netback (1)
Average commodity pricing ($/boe)                $ 21.42     $ 14.82
Realized gains on derivative contracts ($/boe)   $  1.38     $     -
Royalties ($/boe)                                $  0.20     $ (0.99)
Net production expenses ($/boe) (1)              $(11.27)    $(15.12)
Operating netback ($/boe) (1)                    $ 11.73     $ (1.29)
Wells drilled (net)
Total natural gas wells drilled (net)                  -           -
Financial
($ thousands, except per-share amounts)
Petroleum and natural gas revenues, net of
royalties                                       $  6,838    $  7,244
Adjusted funds (outflow) from operations (1)    $  2,036    $ (2,890)
Per share -- basic and diluted ($/share)        $   0.01    $  (0.01)
Net income (loss)                               $ 10,422    $(12,775)
Per share -- basic and diluted ($/share)        $   0.05    $  (0.06)
Capital expenditures                            $  8,823    $  3,026
Net surplus (1)                                 $(25,622)   $(20,180)
Total assets                                    $148,665    $299,623

(1) Adjusted funds (outflow) from operations, adjusted funds (outflow)
    from operations per share, net debt (surplus), operating netback
    and net production expense are non-generally accepted accounting
    principles measures. These terms do not have any standardized
    meanings as prescribed by international financial reporting
    standards measures and, therefore, may not be comparable with the
    calculations of similar measures presented by other companies.

Highlights for the three months ended March 31, 2017

The company ended the first quarter of 2017 with a strong balance sheet, including a net surplus of $25.6 million (including cash of $21.6-million).

The company brought on stream an additional three (2.64 net) wells at its Birley/Umbach area late in the first quarter, bringing its current number of producing wells in this area to nine wells (7.63 net). The company's total current production is approximately 5,050 barrels of oil equivalent per day.

The company's capital investment of $8.8-million during the first quarter included completing, equipping and tying in three (2.64 net) horizontal Montney wells at Birley/Umbach at an average cost to drill and complete of $3.7-million per well, a 30-per-cent decrease from the previous six (5.0 net) wells which averaged $5.3-million per well. Since the end of the first quarter the company has drilled another three (2.67 net) of a four-well (3.67 net) horizontal drilling program at Birley/Umbach.

For the first quarter the company is reporting its highest adjusted funds flow from operations since the third quarter of 2015.

During the first quarter, the company signed an $8.0-million demand revolving credit facility with a Canadian chartered bank, of which it currently has $2.0-million of availability with expansion to $8.0-million pending confirmation that the wells that the company brought on stream in the first quarter are producing to the lender's satisfaction. The company ended the first quarter undrawn on this facility and expects to remain undrawn on this facility through 2017.

The company completed the disposition of non-core properties in the Knopcik/Pipestone and East Gold Creek areas of northwestern Alberta (100 boe/d -- 65 per cent natural gas) for combined net proceeds of $18.0-million, before closing adjustments.

Strategic transactions

Craft Oil Ltd.

On June 10, 2016, the company conveyed the majority of its Alberta oil and natural gas assets, excluding its Montney assets, and the associated decommissioning obligations in addition to $900,000 cash to Tournament Exploration Ltd., which subsequently changed its name to Craft Oil Ltd. and then Craft Oil Inc., a private Calgary-based petroleum and natural gas production company, for 70 per cent of its issued and outstanding common shares pursuant to an asset purchase and sale agreement dated and effective May 1, 2016. On Dec. 12, 2016, the company completed the distribution of all of the Craft Oil Ltd. shares held by it to its shareholders as at the close of business pursuant to a plan of arrangement under the Business Corporations Act (Alberta). Following the Craft share distribution, the company's control over Craft's operations ceased. As a result, for any period(s) subsequent to Dec. 12, 2016, the accounts of Craft are not reflected in its financial and operating results. Generally, the first-quarter changes in operating results and their corresponding financial measures, in comparison with the same quarter of 2016, result from the subject assets as either sold in October, 2016, or as included in the Craft share distribution.

First-quarter 2017 financial results

The company's production in the first quarter of 2017 averaged 3,514 boe/d, down 39 per cent from the same quarter of 2016 primarily as a result of the Craft share distribution. However, first-quarter production for 2017 increased 36 per cent compared with the 2,593 boe/d achieved during the fourth quarter of 2016 related to assets that the company still currently owns. This increase resulted from the Birley/Umbach area development program and the reactivation of wells in Boundary Lake North, B.C.

First-quarter 2017 petroleum and natural gas revenues were down approximately 13 per cent from the same quarter of 2016 due to the decrease of production volumes resulting from the absence of the subject assets. However, although overall petroleum and natural gas revenues were down, an increase in realized prices, due to increases in benchmark pricing, resulted in an increase in revenues related to natural gas and associated liquids during the first quarter of 2017 compared with the same quarter of 2016.

Net production expense (operating costs net of processing income) for the first quarter of 2017 decreased by approximately 55 per cent to $3.6-million from $7.9-million in the quarter of 2016, which, on a boe basis, respectively, resulted in a decrease to $11.27/boe from $15.12/boe. First-quarter net production expense benefited from a new gas handling agreement which the company entered into during the third quarter of 2016.

Adjusted funds from operations for first quarter of 2017 of $2.0-million increased by approximately $4.9-million compared with the same quarter of 2016. This increase resulted from higher commodity benchmark prices, realized gains on a commodity price contract and a lower cash-based cost structure for Montney-focused operations.

The company reported net income for the first quarter of 2017 of $10.4-million compared with a loss of $12.8-million during the same quarter of 2016. This increase reflects higher commodity prices, a lower cost structure associated with the company's transition to a pure Montney play, in addition to a $10.9-million gain on the disposition of non-core properties and a $1.7-million gain on commodity price contracts.

First-quarter 2017 operational results

During the first quarter of 2017, the company completed, equipped and tied in three (2.64 net) horizontal Montney wells at Birley/Umbach at an average total cost of $3.7-million per well, a 30-per-cent decrease from the previous six (5.0 net) wells which averaged $5.3-million per well. Completion and equipping costs were consistent with the company's revised budget. Currently, the company has production from nine wells (7.63 net) in this area.

Through to the date of this news release, at the Birley/Umbach area, the company has drilled another three (2.67 net) of a four-well (3.67 net) drilling program. All three wells were drilled on the D-93-F pad with various downhole locations. The fourth well (1.0 net) will be drilled in May on the same pad. Completions and equipping are expected to occur after spring breakup. All four of these Birley/Umbach wells are scheduled to be on stream during the fourth quarter of 2017.

Hedging

The company uses commodity price hedges to support its capital investment and growth by providing more certainty regarding its adjusted funds from operations and balance sheet management. Its internal policy permits it to hedge up to a maximum period of 24 months, based on total estimated oil and natural gas production volumes, consisting of no more than 50 per cent for the first 12 months and 25 per cent for the last 12 months.

Outlook

The company continues to execute on its previously announced $40-million capital program for 2017 and remains excited about the growth this program will provide. As the company implements this capital program, it will continue to closely monitor its balance sheet and commodity prices. As in previous years, the company will remain prudent in how it deploys its capital in order to defend its strong balance sheet.

The company has made great strides over the past 12 months to improve its cost structure, including completing the Craft share distribution and executing a new gas handling agreement in British Columbia. On a per boe basis, net production expense in the fourth quarter of 2017 is expected to drop by almost 30 per cent to approximately $8.00/boe from $11.27/boe in the first quarter of 2017. General and administrative expenses are also projected to drop from $5.10/boe during the first quarter of 2017 to below $2.90/boe in the fourth quarter of 2017. As the company begins to increase its production at Birley, its cost structure and profitability significantly improve.

The company is maintaining its previously announced production guidance for 2017 as tabulated.

                    2017 GUIDANCE (1)
               ($ millions, except boe/d)         

Average production (boe/d)               4,200 - 4,300
Exit production (boe/d)                  6,300 - 6,500
Capital expenditures                             $  40
Net surplus as at Dec. 31, 2017                  $   2

(1) 2017 guidance assumptions: AECO natural gas price
    of $2.64 per million British thermal units, Station
    2 natural gas price of $2.11 per million British
    thermal units and Chicago Alliance natural gas price
    of $2.92 per million British thermal units.

Finally, the company would like to personally acknowledge Matthew J. Brister, Stuart G. Clark and Donald F. Archibald, who have decided not to run for re-election to the board of directors this year. The company wishes to thank them collectively for all the hard work and commitment they brought to the company, and wish them all the best in their future endeavours.

About Chinook Energy Inc.

Chinook is a Calgary-based public oil and natural gas exploration and development company which is focused on realizing per-share growth from its large contiguous Montney liquids-rich natural gas position at Birley/Umbach, B.C.

We seek Safe Harbor.