Mr. Philip Hodge reports

PINE CLIFF ENERGY LTD. ENTERS INTO A $33.25 MILLION AGREEMENT TO ACQUIRE CARROT CREEK/EDSON AREA OIL AND NATURAL GAS ASSETS

Pine Cliff Energy Ltd. has entered into a binding agreement dated July 29, 2014, to acquire oil and natural gas assets in one of its core areas of Carrot Creek/Edson in the province of Alberta for cash consideration of $33.25-million, prior to any adjustments. The cash consideration is expected to be financed by a combination of working capital and debt.

The transaction will have an effective date of June 1, 2014, and is scheduled to close on Aug. 7, 2014. The transaction is conditional upon Pine Cliff's partner in the area, private company Velvet Energy Ltd., completing its acquisition of the assets from a third party, which acquisition is expected to close concurrently with the closing of this transaction. No assurances can be given that the acquisition of the assets by Velvet or the transaction will be completed as proposed or at all.

Transaction highlights:

• The assets possess a predictable low-cost production profile, long reserve life and a geographically focused asset base contiguous with Pine Cliff's current Carrot Creek/Edson core area. The assets are 67 per cent weighted to natural gas, are approximately 50-per-cent-operated, high-working-interest properties (averaging 72 per cent) and include ownership in key strategic infrastructure.
• The assets have multizone potential along with a number of potentially low-risk growth opportunities, including infill drilling. The assets are characterized by liquids-rich, high-productivity wells, and favourable royalties and operating costs.
• Pine Cliff will be partnering with Velvet, an experienced and active driller in the area, on future drilling development on the acquired lands. Subsequent to the closing of the transaction, Pine Cliff is expected to have a combined asset base of over 7,000 barrels of oil equivalent (boe) per day, weighted 92 per cent toward natural gas.
• Subsequent to the closing of this transaction and the closing of the July 24, 2014, announced acquisition of shallow natural gas assets in Alberta and Saskatchewan, expected to close Nov. 1, 2014, Pine Cliff is expected to have a combined base asset production of over 12,000 boe per day, weighted approximately 95 per cent toward natural gas, with a combined decline rate of 15 per cent.

Key attributes of the assets are as shown in the attached table.

                                  KEY ATTRIBUTES

Production (May, 2014, average provided                       
by vendor)                                                    970 boe per day     
Natural gas weighting                                                      67%
Proved reserves (1)                                                  2.9 Mboe
Proved and probable reserves (1)                                     4.0 Mboe
Decline rate                                                               24%
Booked drilling locations (1)                               15 gross (4.2 net)
Land                                     22,962 gross acres (14,476 net acres)
Estimated funds flow from operations           
(12 months following the effective
date) (2)                                      $8.1-million (at $4.00/mcf gas)
Estimated funds flow from operations           
(12 months following the effective
date) (2)                                      $8.8-million (at $4.55/mcf gas)

(1) Based on reserves evaluated by an independent third party reserves      
    evaluator with an effective date of April 1, 2014                      
(2) Based on pricing of $100 (U.S.) per barrel West Texas Intermediate, $4 per
    thousand cubic feet or $4.55 per thousand cubic feet AECO, as applicable,
    and foreign exchange of 92.5 U.S. cents to $1, and using estimated          
    production at June 1, 2014, of 970 boe per day, a 6-per-cent royalty rate
    and $10.90 per boe for operating costs.

Based on the purchase price of the assets of $33.25-million, the acquisition metrics are as shown in the attached table.

                         ACQUISITION METRICS

Production                                $34,280 per flowing boe               
Proved reserves (1)                                $11.47 per boe                        
Proved and probable reserves (1)                    $8.31 per boe                         
Funds flow multiple (2)               4.1 times (at $4.00/mcf gas)          
Funds flow multiple (2)               3.8 times (at $4.55/mcf gas)          

(1) Based on reserves evaluated by an independent third party reserves      
    evaluator with an effective date of April 1, 2014
(2) Based on the estimated funds flow from operations shown in the key
    attributes table

Strategic rationale

Pine Cliff has been actively seeking accretive opportunities to enhance shareholder value by adding low-cost and low-decline natural gas production. This transaction is expected to provide these attributes.

The successful completion of the transaction is currently expected to result in:

• Increased funds flow from operations on a per-share basis;
• Pine Cliff raising its 2014 production guidance at closing;
• A significant increase in Pine Cliff's high-quality, multiyear drilling inventory;
• Significant free cash flow which is anticipated to enable Pine Cliff the opportunity to pursue further accretive gas acquisitions and repay debt.

We seek Safe Harbor.