Mr. Jim Evaskevich reports

YANGARRA PROVIDES OPERATIONS UPDATE

Yangarra Resources Ltd. has provided the following updates.

New Cardium two-mile type curve

Yangarra has analyzed the results from its most recent 10-well program to develop a type curve for future two-mile Cardium wells on the company's land base. The wells drilled in the bioturbated zone exhibit better initial flow rates, higher pressures and lower-than-expected declines.

The type curve has IP30 rates of 490 barrels of oil equivalent per day (390 barrels per day of oil), IP90 rates of 425 boe per day (295 bbl per day of oil) and 12-month declines of 48 per cent on a boe basis. At $47.50-(U.S.)-per-barrel WTI pricing, the type curve generates a half cycle internal rate of return of 132 per cent and has a payout of 10 months and a net present value discounted at 10 per cent of $5.5-million (the full assumption list and sensitivities can be found in the updated corporate presentation).

Using the new type curve, the company projects annual production-per-share growth for 2017 of 85 per cent when compared with 2016.

Capital budget and guidance

The company's board of directors has approved an increased 2017 capital budget of $70-million. The revised capital budget projects drilling an additional 12 extended-reach horizontal Cardium wells, annual 2017 production of 5,500 to 6,000 boe per day and cash flow from operations of $47.5-million to $52.5-million.

The company expects year-end 2017 net debt of $77.5-million to $82.5-million resulting in a debt-to-annual-cash-flow ratio of 1.5 times to 1.7 times and fourth quarter annualized debt to cash flow approaching 1.1 times. The budget assumes an average price of $47.50 (U.S.) per bbl for WTI crude oil (down from $55 (U.S.) per bbl in the previous budget), $61.65 per bbl Edmonton par and an average price of $2.75 per gigajoule for AECO natural gas (down from $3 per gigajoule in the previous budget).

Operations update

Five new two-mile Cardium wells have been licensed, and two multiwell pads have been constructed. The company plans to spud the first well as soon as weather permits. Yangarra continues its strategy of building multiwell pads, completing a tie-in at that location to facilities to handle the associated gas, while drilling only a single well on the pad. In a future development phase, these locations will allow the company to drill several more from the existing pad with minimal additional cost.

Based on previous performance, Yangarra expects to execute the balance of the 2017 drilling program with one rig.

The company plans to commence construction at its 2-4 oil-handling facility to connect an oil sales pipeline, as well as add to storage and blending facilities, in the third quarter.

The company's hedge position for the balance of 2017 provides coverage for 40 per cent of projected oil volumes at an average price of $72.75 per bbl and 30 per cent of projected natural gas volumes at an average price of $3.07 per gigajoule.

Corporate presentation

An updated corporate presentation is available on the company's website.

We seek Safe Harbor.