Mr. Scott Ratushny reports

CARDINAL ANNOUNCES ITS 2017 CAPITAL BUDGET

Cardinal Energy Ltd.'s board of directors has approved a $100-million capital expenditure budget for 2017 that focuses on balance sheet strength, maintaining a significant and sustainable dividend, and development of all of the company's three core areas.

The 2017 capital budget is designed to achieve significant growth in funds flow per share and to maintain the company's annualized dividend at 42 cents per share. Capital expenditures will be financed by reinvesting cash flow and the consideration for a proposed acquisition described as follows.

Development capital expenditures are anticipated to include drilling 18 (16.2 net) horizontal oil wells and, combined with production from the acquisition, are expected to deliver annual average production of between 16,800 barrels of oil equivalent per day and 17,300 barrels of oil equivalent per day in 2017. Cardinal expects to have a total payout ratio of 95 per cent based on funds flow of $92-million and a simple payout ratio of 33 per cent. Funds flow before risk management is expected to be $116-million. Cardinal 2017 forecast annual average production represents an increase of between 15 per cent and 18 per cent over 2016 annual production guidance of 14,600 barrels of oil equivalent per day.

Management has taken a conservative approach in forecasting production from the new wells at Mitsue and expects that, with drilling success, the company could exceed its forecast.

Acquisition

Cardinal has entered into an agreement to acquire certain assets that fall within the company's North (Mitsue) operating area. The assets are light oil focused and are expected to produce an average of 1,000 barrels of oil equivalent per day in 2017. Cardinal estimates that the assets have 3.4 million barrels of oil equivalent total proved plus probable (2P) reserves ($12.05 per barrel of oil equivalent). The acquisition is expected to increase Cardinal's light oil drilling inventory.

The acquisition will be fully financed through the issuance of approximately four million common shares of Cardinal and a cash payment of $4-million for a total purchase price of $41-million, subject to customary adjustments. The cash portion of the purchase price is expected to be financed through existing working capital, and Cardinal does not expect to assume or incur any additional debt in conjunction with the acquisition.

This acquisition is consistent with Cardinal's strategy of acquiring light-oil-focused properties and increasing the overall light oil weighting of its production mix. The 2017 budget includes the base production from this acquisition and production from the drilling of two light oil development wells on the properties to be acquired pursuant to the acquisition. The acquisition is subject to customary closing conditions, including the Toronto Stock Exchange, and is expected to close in the first quarter of 2017.

2017 capital budget

With the recent improvements of commodity prices, the focus of the company's 2017 budget is to switch from the maintenance scenario of 2015 and 2016 to one in which the company begins to further develop and grow each of its three core operating areas. Management continues to focus on building a long-term business based on value creation while maintaining balance sheet strength and the company's top-quartile production decline rate of less than 15 per cent.

Cardinal's monthly dividend is currently set at 3.5 cents per share, which the company expects to maintain throughout 2017 given the current outlook for oil and natural gas pricing and taking into account the company's hedge positions. Cardinal's dividend is reviewed quarterly by its board of directors, is dependent on current commodity prices and overall economic conditions, and is currently yielding approximately 4.5 per cent per share.

The major components of the 2017 capital budget of $100-million include $41-million for the acquisition; $16-million for facilities and pipelines; $32.7-million for the drilling of 18 wells; as well as $4-million on environmental and reclamation initiatives.

South area (Bantry)

Cardinal expects to spend $24-million, or 24 per cent of its capital budget, in the Bantry area of Alberta. The company continues to see above expected performance on its Glauconite drilling and has budgeted to drill nine Glauc horizontal oil wells in 2017. Cardinal continues to evaluate other Mannville opportunities in the area and to work to optimize the waterfloods on the company's existing properties.

Central area (Wainwright)

Wainwright and Chauvin in eastern Alberta are the company's lowest-decline properties and require minimal capital expenditures. These properties generate significant funds flow which the company is able to reinvest in other areas of the company and provide financing for its dividend. Cardinal expects to spend $8.5-million, or 8.5 per cent of its capital budget, in this area in 2017. Approximately 50 per cent of the capital expenditures in this area will be to pro-actively replace aging large-diameter pipelines. Cardinal expects to drill two wells in this area targeting Waseca channels, and the company expects to expand its drilling inventory in the area.

North area (Mitsue)

The company's North producing area includes production to be acquired in the announced acquisition and, in addition to the acquisition, will see $23-million, or 23 per cent of the 2017 budget. This will include the planned drilling of seven horizontal development wells targeting light oil. As part of the company's Mitsue acquisition in late 2015, Cardinal recognized the need to replace an aging natural gas plant and downsize it with equipment that is more suitable for the current throughput.

The company has commenced an initial horizontal well drilling program in Mitsue, targeting three different exploitation concepts in the Gilwood sand. The company's first well in the program was spudded in late 2016 and recently rig released for production testing. Results from this program are expected to be released at the end of the first quarter. Success in any or all of the exploitation drilling is expected to set up a considerable light oil drilling inventory for Cardinal in this area.

Risk management

Cardinal employs various forms of hedging as part of the company's overall strategy to protect cash flows and lock in individual project economics. The company hedges crude oil, natural gas, power and the U.S.-dollar/Canadian-dollar exchange rates. The company currently has 6,375 barrels per day of its 2017 oil production hedged at a minimum average price of $65.66 per barrel and 6,000 gigajoules per day of natural gas at a minimum average price of $2.50 per gigajoule.

Liquidity

Cardinal's year-end 2016 net bank debt is estimated to be $68-million. The company's current syndicated banking facility has a $150-million credit facility. Cardinal's borrowing base was set by its lenders at $250-million at the company's most recent banking review.

In addition to its bank facility, Cardinal has $50-million of convertible debentures outstanding. The debentures mature on Dec. 31, 2020, and are convertible into common shares of Cardinal at $10.50 per common share.

Royalties and operating costs

Operating costs are expected to average $19.75 to $20.25 per barrel of oil equivalent in 2017. On a per-barrel-of-oil-equivalent basis, costs are expected to be similar to 2016 as increased production offsets the effects of service industry cost inflation, the effects of the carbon tax and wage increases.

Royalties are expected to average 14 per cent in 2017, a slight increase from Cardinal's 2016 rate due to increased drilling and an increase in Crown royalties due to the increase in oil prices.

General and administrative costs

General and administrative expenses are expected to be within a range of $2.10 to $2.30 per barrel of oil equivalent in 2017. Cardinal pro-actively reduced salaries in 2015 instead of reducing staff as commodity prices deteriorated. These salary reductions were reversed in January, 2017.

Capital financing

Cardinal expects to have a total payout ratio in 2017 of 95 per cent with funds flow of $92-million based on an average oil price of $55 per barrel West Texas Intermediate, a natural gas price of $3 per thousand cubic feet AECO and a U.S.-dollar/Canadian-dollar exchange rate of 0.74. Funds flow is expected to fully finance the company's development capital expenditure program and dividend. Cardinal also employs a no-discount dividend reinvestment plan and stock dividend plan program as part of its dividend that reduces the overall cash payout of the company's dividends with participation rates between 4 per cent and 10 per cent in 2016.

Cardinal is well positioned with a strong balance sheet to finance an increase in its 2017 capital budget. The oil and gas business in Canada is dynamic, and Cardinal believes it has the ability and financing capability to react quickly to opportunities as they may arise.

Environmental

Cardinal has budgeted $4-million for environmental and reclamation expenditures in 2017. The company's postacquisition liability management rating (LMR) ratio is expected to be 1.98 at the end of the first quarter of 2017 without taking into account any budgeted expenditures described herein. The company expects to achieve an LMR ratio of two or higher in 2017. Cardinal has been focused on being a responsible operator and continues a program of abandoning and reclaiming suspended wells. The company continues to exceed requirements set out by the Alberta Energy Regulator. Cardinal has committed significant resources in this year's budget to replace aging infrastructure and will continue to pro-actively maintain its assets in the future.

Guidance

Cardinal's guidance for 2017 (assuming the completion of the acquisition) is set forth in the attached table.

                    2017 GUIDANCE

Production
Oil and NGLs (bbl/d)                     13,900 to 14,300
Natural gas (mcf/d)                      17,400 to 18,000
Total (boe/d)                            16,800 to 17,300
Expenses ($/boe)
Operating                                $19.75 to $20.25
G&A                                        $2.10 to $2.30
Financial (000s)
Funds flow                                        $92,000
Development capital expenditures                  $58,000
Acquisitions (1)                                  $41,000
Weighted average shares basic                      78,293
Weighted average shares diluted (2)                82,493

(1) The value of the share consideration is based 
on the three-day volume-weighted average closing 
price of the common shares of Cardinal prior to 
entering into of the acquisition agreement.
(2) Excluding convertible debentures.

We seek Safe Harbor.