Mr. Robert Broen reports

ATHABASCA OIL CORPORATION ANNOUNCES SALE OF NON-CORE LIGHT OIL ASSETS FOR $160 MILLION; RETAINS STRATEGIC DUVERNAY ASSETS WITH 500 FUTURE DRILLING LOCATIONS

Athabasca Oil Corp. has entered into a definitive agreement to sell non-core light oil assets for total cash proceeds of $160-million. The transaction high-grades the company's deep resource portfolio, crystallizes value from a non-core asset at an attractive price and bolsters the company's strong financial position.

Transaction overview

Athabasca Oil has agreed to sell its 70-per-cent operated working interest in Placid targeting the Montney, its 30-per-cent non-operated working interest in Saxon and Simonette targeting the Duvernay, and other associated non-core Placid Montney assets to a private company for $160-million in cash, prior to adjustments. During the first half of 2023, these assets collectively averaged approximately 3,000 barrels of oil equivalent per day (approximately 45 per cent liquids).

The assets being sold generated significant free cash flow following COVID, supporting Athabasca Oil's deleveraging goals. The transaction is being completed at attractive and accretive metrics, and crystallizes the value of the assets that have become non-core due to the smaller-scale, lower liquids content and lower relative returns versus core assets within the company's portfolio. The 2023 forecasted transaction metrics are the following.

Transaction value/net operating income (1):  7.9 times

Net operating income transaction value/production (2):  $54,700 per barrel of oil equivalent per day

Transaction value/proven reserves (3):  $6.93 per boe

The effective date of the transaction will be March 1, 2023, and closing is expected late in the third quarter of 2023. The transaction is subject to the satisfaction of customary conditions, including receipt of regulatory approvals under the Competition Act (Canada).

The transaction further strengthens the company's balance sheet with an enviable pro forma net cash position of approximately $90-million (5). The transaction is not anticipated to materially impact the company's growth ambitions and the approximately $1-billion (4) forecasted free cash flow outlook during the three-year time frame of 2023 to 2025. The strong cash flow outlook is supported by approximately $3.1-billion of corporate tax pools available, and the company does not forecast paying taxes for approximately seven years (5). Athabasca Oil is committed to its return of capital plans to shareholders and also has a deep inventory of development options. The company will provide updated corporate guidance on closing of the transaction.

Strategic outlook

Athabasca Oil is a liquids-weighted intermediate producer with exposure to Canada's active resource plays (oil sands and Duvernay). The company is focused on maximizing shareholder value through cash flow per-share growth. Current capital initiatives are expected to drive production growth of 5 to 7 per cent annually. The portfolio of long-life assets underpins a low corporate decline of approximately 5 per cent. Athabasca Oil is positioned with a deep inventory of high-quality resource projects across its portfolio.

The thermal oil division has 1.2 billion barrels of proven plus probable reserves. The company is executing an expansion project at its cornerstone Leismer asset that will drive growth to 28,000 barrels per day in mid-2024, and maintains future optionality for additional expansion projects that could support Leismer growth to its regulatory approved capacity of 40,000 bbl/d. Leismer has a significant unrecovered capital balance of approximately $1.4-billion (2022 year-end), which ensures a low Crown royalty framework (5- to 9-per-cent Crown royalty) as the asset is estimated to remain prepayout until 2027 (4).

The light oil division will consist exclusively of the Duvernay in the greater Kaybob area with approximately 155,000 gross acres across Kaybob West, Kaybob North, Kaybob East and Two Creeks. The company's joint venture has seen in excess of $1-billion in capital invested since 2016. Athabasca Oil is uniquely positioned in the liquids-rich and shallower oil window of the play with a derisked inventory of approximately 500 gross wells. The company anticipates additional development in this top-tier play in the coming drilling season and beyond. The Duvernay also provides a synergistic natural hedge for condensate and gas utilization in its thermal oil operations.

The company is committed to executing on its return of capital commitment that will see a minimum of 75 per cent of excess cash flow (adjusted funds flow less sustaining capital) in 2023 returned to shareholders through share buybacks. Since April, the company has completed $61-million in share buybacks (approximately 20 million shares at an average price of $3.04 per share).

(1) Forecasted 2023 net operating income is calculated as revenue less royalties less operating costs using January to June actuals and Athabasca Oil management estimates for July to December using July 25, 2023, strip commodity prices.

(2) Forecasted 2023 production is based on January to June actuals and Athabasca Oil management estimates for July to December.

(3) Year-end 2022 total proven reserves of 23.1 million boe.

(4) Pricing assumptions: 2023 realized prices in first half and flat pricing of $80 (U.S.) West Texas Intermediate, $15 (U.S.) Western Canadian Select heavy differential, $3 (Canadian) Alberta Energy Company and 75 Canadian cents to $1 (U.S.) foreign exchange for second half; 2024 and following: flat pricing of $85 (U.S.) WTI, $12.50 (U.S.) WCS heavy differential, $5 (Canadian) AECO and 75 Canadian cents to $1 (U.S.) foreign exchange.

(5) Net debt/(cash) is defined as the face value of term debt, plus accounts payable and accrued liabilities, plus current portion of provisions and other liabilities less current assets, and excluding risk management contracts. The pro forma estimates reflect second quarter 2023 net debt adjusted for net estimated transaction proceeds.

About Athabasca Oil Corp.

Athabasca Oil is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. Situated in Alberta's Western Canadian sedimentary basin, the company has amassed a significant land base of extensive, high-quality resources. Athabasca Oil's common shares trade on the Toronto Stock Exchange under the symbol ATH.

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