Mr. James Evaskevich reports

YANGARRA ANNOUNCES SECOND QUARTER 2018 FINANCIAL AND OPERATING RESULTS

Yangarra Resources Ltd. has released its financial and operating results for the three and six months ended June 30, 2018.

Second quarter highlights:

• Reached 10,000 barrels of oil equivalent per day of production at the end of the quarter;
• Average production of 7,570 boe/d (60 per cent liquids) during the quarter (an increase of 1 per cent from the first quarter of 2018 and a 33-per-cent increase from the same period in 2017);
• Oil and gas sales of $29.9-million, an increase of 53 per cent from the same period in 2017;
• Funds flow from operations of $17-million (20 cents per share (basic)), an increase of 41 per cent from the same period in 2017;
• Adjusted earnings before interest, taxes, depreciation and amortization (which excludes changes in derivative financial instruments) of $16.6-million (20 cents per share (basic));
• Net income of $1.6-million (two cents per share (basic)), or $2.6-million net income before tax;
• Operating costs of $7.72 per barrel of oil equivalent (including $1.31 per boe in transportation costs);
• Field netbacks of $31.82 per boe;
• Operating netbacks, which include the impact of commodity contracts, of $26.64 per boe;
• Operating margins of 61 per cent and cash flow margins of 57 per cent;
• General and administrative costs of 56 cents per boe;
• Royalties were 9 per cent of oil and gas revenue;
• Total capital expenditures of $26-million;
• Commissioned the 20 million cubic fee per day Ferrier West facility (together with the company's third oil treating facility);
• Net debt (which excludes current derivative financial instruments) of $115.1-million;
• Net debt to annualized second quarter funds flow from operations ratio of 1.69 to one;
• Corporate LMR of 8.78, with decommissioning liabilities of $11.4-million (discounted).

Operations update

Yangarra has now drilled a total of 42 bioturbated Cardium wells. IP 30 results for wells 21 to 30 had a 10-per-cent improvement from wells 11 to 20 and a 25-per-cent improvement from wells one to 10 (all wells adjusted for lateral length).

The company resumed drilling operations in late May, 2018, and drilled five gross/net wells in the second quarter (consisting of three two-mile and two one-mile horizontal wells). The Q2 drilling program included various interfrack spacings on pads ranging from 60 to 96 stages per mile, which will be compared with the current standard of 80 stages per mile to assist with determining optimal frack spacing.

As a result of continuously improving drilling and production results, Yangarra continues to update future drilling inventory. The company's Cardium-type curve is the weighted average of all future inventory in all areas of the Cardium portfolio. Current inventory is estimated at 913 gross (716 net) locations (one-mile wells). Based on current inventory, drilling with two rigs year-round, other than breakup, Yangarra estimates it has 16 years (net) of future inventory. In 2018, the company added 17 sections of Cardium land.

Budget update

The board of directors approved an increase in the capital budget from $90-million to $120-million for 2018. This budget will allow the company to continue to utilize two drilling rigs, which optimizes drilling operations and provides economies of scale.

As the additional spending will occur in the fourth quarter, the existing guidance of 9,000 to 10,000 boe/d average production for 2018 remains unchanged.

Yangarra estimates that 22 gross (19 net) wells will be put on production during the second half of 2018, including wells drilled in the first half of 2018, but expected to be completed in the second half of 2018.

Management changes

Yangarra has appointed Gurdeep Gill as vice-president of business development (with responsibilities for business development and capital markets). Mr. Gill has 18 years of experience in investment banking and capital markets, most recently as the head of investment banking at AltaCorp Capital Inc. Prior to that, he worked at National Bank Financial and Tristone Capital Inc.

                                            FINANCIAL SUMMARY 
  
                                                                                            Six months ended 
                                                 Q2 2018      Q1 2018      Q2 2017         2018         2017 
 
Statements of comprehensive income                                                                                
Petroleum and natural gas sales              $29,922,471  $29,749,716  $19,527,395  $59,672,187  $35,076,783  
Net income (before tax)                        2,604,506    8,046,711    7,893,731   10,651,217   15,235,464  
Net income                                     1,646,498    5,658,059    5,611,218    7,304,557   10,827,763 
Net income per share -- basic                       0.02         0.07         0.07         0.09         0.13 
Net income per share -- diluted                     0.02         0.07         0.07         0.08         0.13

Quarter end disclosure

The company's financial statements, notes to the financial statements, and management's discussion and analysis for the year ended Dec. 31, 2017, and three and six months ended June 30, 2018, have been filed on SEDAR and are available at the company's website.

We seek Safe Harbor.