Mr. Robert Broen reports

ATHABASCA OIL ANNOUNCES 2023 THIRD QUARTER RESULTS WITH RECORD ADJUSTED FUNDS FLOW, FREE CASH FLOW AND LEISMER PRODUCTION ALONG WITH CONTINUED SHARE BUYBACKS

Athabasca Oil Corp. has released its third quarter results highlighted by record adjusted funds flow and free cash flow, operational momentum at Leismer, and execution on its return of capital commitment through share repurchases. Athabasca is uniquely positioned as a low-leveraged company generating significant free cash flow through its low-decline, oil-weighted asset base.

Q3 2023 and recent corporate highlights

• Production: Approximately 36,200 barrels of oil equivalent/day (boe/d; 95 per cent liquids) consisting of approximately 31,700 barrels/day (bbl/d) in thermal oil and approximately 4,500 boe/d in light oil;
• Record production at Leismer: 24,232 bbl/d during the quarter following the ramp-up of Pad L8M with five sustaining well pairs. The company's expansion project is on track for growth to 28,000 bbl/d in mid-2024 and with the increased operating scale the company forecasts approximately $5/bbl margin improvement;
• Record cash flow: Consolidated operating income of $168-million and record adjusted funds flow of $141-million. Cash flow was supported by strong heavy oil prices and an overall operating netback of $50.84/bbl (including an operating netback of $55.17/bbl at Leismer);
• Capital program: $33-million focused on advancing the Leismer expansion project in thermal oil;
• Record free cash flow: $108-million of free cash flow underpinning return of capital commitments;
• Return of capital: $113-million in share buybacks (33 million shares at an average price of $3.42 per share) completed since April, representing 57 per cent of the company's annual normal course issuer bid limit. Year to date Athabasca has reduced its fully diluted share count by approximately 7 per cent;
• Light oil disposition: Closed the sale of approximately 3,000 boe/d of non-core Placid, Saxon and Simonette assets for $160-million in cash in September. The transaction was completed at attractive valuation metrics (7.9 times net operating income);
• Balance sheet: $7-million of incremental debt retirement with a net cash position of $155-million at quarter-end. Strong liquidity of $425-million, including cash of $337-million. The company also holds $2.8-billion in corporate tax pools.

Strategic outlook:

• Compelling value proposition: Athabasca is focused on driving shareholder value through strong multiyear cash flow per-share growth. The company's asset base provides a platform to drive profitable liquids-weighted growth supported by financial resiliency to execute on return of capital initiatives. The company intends to release its 2024 guidance in December.
• 2023 guidance: The company is executing an approximately $145-million capital program with activity focused on advancing the expansion project at Leismer and operational readiness in light oil. Corporate production is expected to average approximately 34,500 boe/d with the approximately 3,000 boe/d non-core disposition being partially offset by recent growth at Leismer. Athabasca's portfolio of long-life assets underpins a low corporate decline of approximately 5 per cent annually.
• Return of capital commitment: Athabasca is committed to executing on its 2023 return of capital commitment that will see a minimum of 75 per cent of excess cash flow (adjusted funds flow less sustaining capital) returned to shareholders through share buybacks.
• Capital efficient growth at Leismer: The company has seen a strong ramp-up of production with a facility expansion under way. Athabasca has completed drilling the initial wells required to support sustainable growth to approximately 28,000 bbl/d by mid-2024 at a competitive capital efficiency of approximately $14,000/bbl/d. This project is on track with previous guidance and is expected to bolster future free cash flow generation through enhanced margins.
• Managing for free cash flow: Athabasca is positioned for continued margin growth in 2024 with the Leismer expansion and anticipated narrower WCS heavy differentials following the start-up of the Trans Mountain pipeline expansion. The company expects to generate approximately $1-billion in free cash flow during the three-year time frame of 2023 to 2025.
• Thermal oil differentiation: Strong margins and free cash flow are supported by a thermal oil prepayout Crown royalty structure, with royalty rates between 5 and 9 per cent. Leismer is estimated to remain prepayout until late 2027 and Hangingstone well into the 2030s ($85 (U.S.) WTI, $12.50 (U.S.) WCS differential). This results in maximum cash flow at current commodity prices and creates a significant advantage over the majority of industry oil sands projects.
• Excellent exposure to commodity upside: Athabasca maintains excellent exposure to upside in commodity prices with 25 per cent of rolling 12-month production volumes hedged in accordance with its debt agreements. The company has hedged approximately 23,250 bbl/d in Q4 2023 with an average WTI collar of $50 (U.S.) to $111 (U.S.)/bbl and approximately 9,000 bbl/d in Q1 2024 with an average WTI collar of $50 (U.S.) to $126 (U.S.)/bbl. Every $5/bbl WTI change impacts annual cash flow by approximately $50-million (unhedged) and every $5 (U.S.)/bbl WCS differential change impacts annual cash flow by approximately $80-million (unhedged).

Business environment

Oil prices advanced in the quarter with strong world oil demand. The global supply picture was supported by continued OPEC+ cuts and inventory drawdowns. Athabasca maintains a constructive outlook on prices supported by years of industry underinvestment, OPEC+ policy and demand trends.

Canadian WCS heavy differentials narrowed significantly in the quarter with differentials averaging approximately $13 (U.S.)/bbl, compared with approximately $20 (U.S.)/bbl in the first half of 2023. Athabasca believes the recent widening in differentials to approximately $21 (U.S.)/bbl (Q4 strip pricing) is primarily a function of seasonality with refinery downtime and anticipates tightening from current levels in 2024 following the start-up of the Trans Mountain pipeline expansion (590,000 bbl/d) and new global heavy oil refining capacity.

Operations update

Thermal oil

Bitumen production for the third quarter of 2023 averaged 31,691 bbl/d. The thermal oil division generated operating income of $155-million (operating netbacks -- $55/bbl at Leismer and $48/bbl at Hangingstone) during the period with capital expenditures of $31-million, primarily related to well completions and progressing the facility expansion at Leismer.

Leismer

Leismer produced a record 24,232 bbl/d during the quarter following the ramp-up of Pad L8M (five sustaining well pairs). In August, the fifth new well pair on Pad L8M was placed on production supporting current production levels of approximately 24,000 bbl/d with a steam oil ratio (SOR) of approximately 3x.

During the quarter, the final four well pairs at Pad L8S and four infill wells on Pad L7 were completed and facilities construction is continuing. These additional new wells are expected to start steaming at the end of Q4 and they will support production in 2024 and beyond.

The facility expansion project continues to progress and will support sustainable growth up to approximately 28,000 bbl/d by mid-2024. This production level can be held with modest sustaining capital (approximately $6/bbl) for many years into the future. The project is being completed at a competitive capital efficiency of approximately $14,000/bbl/d and is expected to enhance margins in 2024 by approximately $5/bbl through increased operating scale. The company 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 as the asset is estimated to remain prepayout until late 2027 ($85 (U.S.) WTI, $12.50 (U.S.) WCS differential).

Hangingstone

Production during the quarter averaged 7,459 bbl/d. Non-condensable gas co-injection continues to assist in pressure support, reduced energy usage and an improved SOR averaging approximately 3.6 times year to date. Activity at Hangingstone was focused on initial work for the Pad AA extension in anticipation of drilling sustaining well pairs in 2024 to maintain base production.

Light oil

Production for the third quarter of 2023 averaged 4,485 boe/d (55 per cent Liquids). The light oil division generated operating income of $13-million (operating netback -- $32/boe) during the period. Activity was focused on operational readiness in advance of the coming drilling season.

In mid-September, Athabasca closed its sale of non-core light oil assets at Placid, Saxon and Simonette which included approximately 3,000 boe/d (45 per cent liquids). The company's light oil division now consists 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 with approximately 500 future well locations.

At Kaybob East and Two Creeks, the company has extended production history from 27 wells derisking an inventory of 290 gross future locations. The wells have consistently supported the company's type curve expectations with IP365's averaging approximately 550 boe/d per well, approximately 85 per cent liquids (latest 12 wells since 2020), demonstrating the significant potential of the asset. The area continues to be active with industry drilling programs under way.

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's common shares trade on the Toronto Stock Exchange under the symbol ATH.

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