Mr. Jeff Standen reports

Vital Energy Inc. has entered into an agreement with a third party whereby the third party has committed to spend up to $10.5-million to, among other things, drill, frac, test, complete and equip up to seven one-mile horizontal test wells on one of Vital's project areas. This will be phase 1 on a project that has identified an additional 27 drilling locations on the project lands. The primary target is medium gravity (21 degrees) oil. Vital will be the operator of the phase 1 drilling program. Drilling is expected to commence immediately after spring breakup in 2017.

Under the terms of the agreement, the third party will pay up to $10.5-million for commitments that include paying 100 per cent of the costs incurred to drill, frac, test, complete and equip up to seven wells on the project lands. The third party will be entitled to receive 80 per cent of the net profits generated by the sale of petroleum substances from the phase 1 wells and its drilling spacing units. Once the third party has recovered 180 per cent of its investment back from the 80-per-cent net profits interests, the third party will convert from its net profits interest to a non-convertible 5 per cent gross overriding royalty in the phase 1 wells and its respective drilling spacing units.

Under the terms of the agreement, the third party will have the right of first refusal to finance additional phases of development drilling on the project lands, on the same terms and conditions as for the phase 1 drilling program.

Vital Energy is a publicly traded junior oil and gas company whose primary focus is developing light and medium crude oil production in Western Canada.

We seek Safe Harbor.