Mr. Pat Carlson reports

SEVEN GENERATIONS ENERGY'S FIRST QUARTER CASH FLOW UP 60 PER CENT

Seven Generations Energy Ltd. generated a 60-per-cent increase in cash flow and a 141-per-cent increase in production in the first quarter, as compared with the same period of 2014.

"Our financial and operating performance during our first full quarter as a public company provides additional testament to how our low-cost production and field optimization provides us with the competitive edge to sustainably grow Seven Generations, even during this period of significantly lower energy prices," said Pat Carlson, 7G's chief executive officer. "With our first quarter natural gas production averaging 125 million cubic feet per day, and construction now under way on our Lator 2 gas-processing plant, we are on track to deliver 250 million cubic feet per day of liquids-rich natural gas to the Chicago-area market on the Alliance pipeline at the end of 2015. As Canadian energy producers continue to look for expanded market access, the value of a liquids-rich pipeline out of an oversupplied region continues to prove its worth," Mr. Carlson said.

"We continue to operate from a position of financial strength with the recent issue of $425-million (U.S.) of senior notes and an increase to our undrawn credit facility up to $650-million. This takes our available funding, including adjusted working capital at the end of the first quarter, to more than $1.5-billion. As 2015 funds from operations are expected to grow in line with rising production, we are very well positioned to fund our low-cost growth through 2016 while maintaining manageable debt levels, backed by a strong commodity hedge position," Mr. Carlson added.

Highlights for the quarter ended March 31, 2015

• Strong production growth with first quarter 2015 production averaging 48,768 barrels of oil equivalent per day consisting of 57 per cent liquids;
• First quarter 2015 production increase of 10 per cent from the fourth quarter of 2014 and up 141 per cent compared with the first quarter of 2014;
• Successful implementation of standardized well construction design with the most recent five Super Pad wells resulting in drilling and completion costs of less than $13-million per well;
• 7G commissioned a 25,000-barrel-of-oil-equivalent-per-day condensate stabilizer in March, 2015, which is expected to improve condensate quality and pricing in future quarters.

Subsequent to quarter-end, 7G issued $425-million (U.S.) of senior notes due in 2023 with a coupon of 6.75 per cent. Additionally, the company and its lending syndicate have agreed to increase the size of its undrawn senior secured revolving credit facilities from $480-million to $650-million. On a pro forma basis, 7G has available financing in excess of $1.5-billion as at March 31, 2015.

Effective resource growth and resource-to-reserve conversion

In its report dated March 31, 2015, McDaniel & Associates Consultants Ltd. assigned best-estimate contingent resources of 905 million boe to the company's properties as at Dec. 31, 2014, an increase of approximately 24 per cent compared with the prior evaluation dated July 1, 2014. Best-estimate contingent resources increased approximately 177 million boe, outpacing the 140-million-barrel-of-oil-equivalent growth in proved plus probable reserves over the same time period.

7G continues to actively hedge production with an average of 65 billion British thermal units per day of 2015 AECO gas hedged at an average price of $4.07 per million British thermal units and an average of 54 billion British thermal units per day of 2016 volumes hedged at approximately $4 per million British thermal units. The company has on average 9,500 barrels per day of 2015 liquids hedged at a minimum WTI price of $96.10 per barrel and 11,000 barrels per day of 2016 liquids hedged with $70 to $80.80 collars.

     FIRST QUARTER FINANCIAL AND OPERATING RESULTS 

                            Three months ended March 31,
                                           2015    2014
Operational
Production
Oil and condensate (bbl/d)               15,810   7,554
NGLs (bbl/d)                             12,042   4,054
Natural gas (MMcf/d)                        125      52
Oil equivalent (boe/d)                   48,768   20,231
Liquids ratio                                57%      57%
Realized prices
Oil and condensate ($/bbl)               $47.59   $92.61
NGLs ($/bbl)                               8.69    28.25
Natural gas ($/Mcf)                        2.78     5.47
Oil equivalent ($/boe)                    24.73    54.23

Financial ($000s except per-share
amounts)
Oil and natural gas revenue            $108,540  $98,737
Funds from operations                    86,889   54,164
Per share -- diluted                       0.32     0.25
Operating income                         23,998   24,481
Per share -- diluted                       0.09     0.12
Net income (loss)                       (82,698)   1,164
Per share -- diluted                      (0.34)    0.01

Operational review

First quarter 2015 production averaged 48,768 barrels of oil equivalent per day consisting of 57 per cent liquids (32 per cent condensate and 25 per cent natural gas liquids), which is a 10-per-cent increase in production over the fourth quarter of 2014 volumes and a 141-per-cent increase from first quarter 2014. Annual average production guidance for 2015 is unchanged at 55,000 to 60,000 boe per day. Production from 7G's core liquids-rich gas field -- the Nest -- continues to meet expectations. Newer wells are showing slightly higher liquids yields than originally anticipated. This is attributed to longer laterals, higher proppant densities and restricted production rates, which optimize recoveries in a manner that 7G refers to as slowback.

Capital investments totalled $368-million in the first quarter, which reflects the higher planned activity in the first and fourth quarters of 2015. About 71 per cent of first quarter capital was invested in drilling and completions and 28 per cent in facilities and well equipment. First quarter capital investments included the drilling of 23 gross (22.5 net) wells and the completion of 17 gross (16.5 net) wells, with a 100-per-cent success rate. 7G's 2015 capital program remains consistent with previous guidance of $1.3-billion to $1.35-billion.

              DRILLING AND COMPLETIONS 

                      Three months ended March 31,
                               2015          2014 
         
Gross Hz wells rig released      23             9             
Average measured depth (m)    5,901         5,484         
Average horizontal length (m) 2,717         2,350         
Average drilling days per well   51            54                                                            
Gross wells completed            17             6             
Average number of stages         30          23.5          
Average tonnes pumped         4,200         2,550         

An average of 11 drilling rigs were operated during the first quarter of 2015, with the rig count reduced from a peak of 14 in January (13 operated and one non-operated) to nine operated rigs at the end of the quarter. All first quarter 2015 drilling targeted the Montney formation and included two wells, which were cored through the Montney, then plugged back and drilled laterally. During the first quarter, 7G rig released one (1.0 net) deep SW well, one (1.0 net) Lower Montney well, one (0.5 net) non-operated Wapiti area well and 20 (20.0 net) Upper/Middle Montney wells in the Nest area. The average horizontal length for the 20 (20.0 net) Upper/Middle Montney wells drilled in the Nest in the first quarter was 2,756 metres with an average spud-to-rig-release time of 51 days and an average drilling cost of $6.1-million. Market conditions and the stability of 7G's development program enabled the company to replace some less efficient rigs with some of the most modern and efficient drilling equipment available for pad-style Nest area drilling.

During the first quarter, 7G completed 16 wells in the Nest, stimulating a total of 488 stages, averaging 30 stages and 4,200 tonnes (9.2 million pounds) per well, for an average completion cost of approximately $7.6-million. First quarter completion costs were approximately 35 per cent below fourth quarter 2014 costs, reflecting design optimizations and reduced service costs. Optimization efforts have been focused on reducing coil tubing interventions, reduced-cost proppant selection and more efficient pressure-pumping operations. 7G's last five Super Pad wells, with an average lateral length of 3,042 metres, had average well construction costs (drilling and completion) of less than $13-million using the standardized well construction design. Performance of the dedicated Schlumberger hydraulic fracturing spread has been strong and has delivered operational and efficiency gains. As a result, effective March 7, 2015, both parties agreed to extend the term of the pressure pumping contract through March, 2016, in exchange for further pricing improvements.

The 25,000-barrel-per-day stabilizer at the Karr 7-11 battery was commissioned at the end of the first quarter and is expected to improve condensate quality and reduce pricing discounts in subsequent quarters. During the first quarter, construction began on the Lator 2 gas plant expansion, and the project is on schedule for a November, 2015, commissioning and a Dec. 1, 2015, start-up, consistent with the commencement of the 250-million-cubic-foot-per-day Alliance and Aux Sable transportation and extraction commitment. The Lator 2 gas plant expansion is expected to cost about $155-million, of which approximately 34 per cent was invested by the end of the first quarter of 2015. Subsequent to the end of the quarter, regulatory approvals were received for the next 250-million-cubic-foot-per-day plant, tentatively named Cutbank, and clearing of the plant site began on April 15. The Cutbank plant, meter station and pipeline connecting to the company's gathering system are expected to cost about $233-million, of which 16 per cent ($37-million) was invested by the end of the first quarter. Start-up of the Cutbank plant is scheduled for mid-2016.

As of March 31, 2015, the company had five satellite pads and 17 well tie-ins under construction in addition to 19 well tie-ins that were completed in the first quarter. The company currently has an inventory of approximately 45 wells at various stages of construction between drilling and tie-in.

Financial review

7G continues to be in a strong financial position with more than $860-million of available financing as of March 31, 2015, which consists of $380-million of adjusted working capital plus an undrawn $480-million revolver. Subsequent to quarter-end, 7G announced the issuance of $425-million (U.S.) senior unsecured 6.75-per-cent notes maturing in 2023. In addition, the company and its lenders have increased the size of the senior secured revolving credit agreement from $480-million to $650-million. On a pro forma basis, 7G has available financing in excess of $1.5-billion as of March 31, 2015.

The company generated funds from operations of $87-million for the quarter ended March 31, 2015. Benchmark WTI and AECO natural gas prices were 51 per cent lower than the first quarter of 2014. 7G's increased production offset the lower energy price environment equating to a 60-per-cent year-over-year increase in funds from operations.

Netbacks for the first quarter of 2015 were $13.43 per boe before hedging and $24.97 per boe after hedging. First quarter 2015 netbacks were adversely impacted by lower realized condensate and natural gas pricing, coupled with higher royalties. In the first quarter of 2015, the company trucked condensate and NGLs to a number of delivery points, partially due to restricted liquids pipeline access, which resulted in lower realized condensate prices when compared with benchmark prices. Additionally, the company did not have its condensate stabilizer operational until late in the quarter and did not realize the benefits associated with stabilization. The company anticipates being able to ship a portion of its volumes for the rest of 2015 under its firm liquids transportation commitment, which commenced on May 1, 2015. Condensate volumes in excess of the company's firm transportation commitments are anticipated to have higher transportation charges and lower realizations compared with pipeline-connected volumes.

7G's realized natural gas price was impacted by a seasonal widening of the pricing differential between AECO and Chicago Citygate gas markets. Under the company's Aux Sable extraction agreement, 7G is required to purchase makeup gas to replace the heat value removed during the NGL extraction process. Makeup gas purchases are priced off the Chicago Citygate market and netted against the company's AECO-based revenues resulting in a negative impact to the net realized price. 7G will be exposed to these market price differentials until December, 2015, at which point the company's long-haul Alliance pipeline transportation agreement begins.

The company also experienced higher royalty costs on a per boe basis due to timing differences in its royalty payments. The company does not anticipate royalties to remain in this range and expects to see royalties in line with the 2014 annual average of 10 per cent to 12 per cent of revenue.

          FIRST QUARTER COMMODITY PRICING AND NETBACKS 

                                         Three months ended March 31,
Operating netback per boe ($)                       2015        2014

Oil and natural gas revenue                       $24.73      $54.23
Royalties                                          (3.46)      (2.96)
Operating expenses                                 (4.89)      (6.26)
Transportation expenses                            (2.95)      (3.64)
Netback prior to hedging                           13.43       41.37
Realized hedging gain (loss)                       11.54       (2.97)
Netback after hedging                              24.97       38.40
General and administrative expenses per boe         1.52        1.74

Risk management

Risk management continues to be an important component of 7G's financial strategy. Management has set an internal hedge target of up to 55 per cent of forecasted production volumes (net of royalties) for the coming four quarters and up to 30 per cent of forecasted production volumes (net of royalties) for the successive four quarters. Price targets are established at levels that will provide a threshold rate of return-on-capital investment based on a combination of benchmark oil and gas prices, projected well performance, and capital efficiencies. As of the date of this news release, the company had an average of 65 billion British thermal units per day of 2015 AECO gas hedged at an average price of $4.07 per million British thermal units and an average of 54 billion British thermal units per day of 2016 volumes hedged at approximately $4 per million British thermal units. The company has on average 9,500 barrels per day of 2015 liquids hedged at a minimum WTI price of $96.10 per barrel and 11,000 barrels per day of 2016 liquids hedged with $70 to $80.80 collars.

Contingent resource update

Based upon the independent evaluation that was conducted by McDaniel, as at Dec. 31, 2014, the contingent resources (best estimate), attributable to the Kakwa River project, increased by approximately 24 per cent compared with McDaniel's previous evaluation that was conducted as at July 1, 2014. This adds to 7G's significant inventory of low-cost liquids and natural gas development opportunities.

Conference call

7G management plans to hold a conference call to discuss results and address investor questions on May 5, 2015, at 9 a.m. MDT (11 a.m. EDT).

Dial-in:

Calgary:  587-880-2171

Toronto:  416-764-8688

Toll-free:  888-390-0546

Replay:

Replay:  888-390-0541 (available until June 2, 2015)

Replay code:  612538 followed by the number sign

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