Mr. Robert Broen reports

ATHABASCA OIL ANNOUNCES CLOSING OF "DUVERNAY ENERGY CORPORATION" WITH CENOVUS ENERGY AND PROVIDES UPDATED 2024 GUIDANCE

Athabasca Oil Corp. has closed its previously announced transaction agreements to create Duvernay Energy Corp. with Cenovus Energy Inc.

Transaction overview

Duvernay Energy is a privately held subsidiary of Athabasca. Athabasca and Cenovus have contributed assets into Duvernay Energy combining Athabasca's existing Duvernay assets, Athabasca's new 100-per-cent working interest Duvernay assets and Cenovus's 100-per-cent working interest Kaybob Duvernay assets. Athabasca owns a 70-per-cent equity interest in Duvernay Energy with Cenovus owning the remaining 30-per-cent equity interest. The transaction closed on Feb. 6, 2024, with an effective date of Jan. 1, 2024.

The creation of Duvernay Energy is designed to enhance value for Athabasca's shareholders by providing a clear path for self-financed production and cash flow growth in the Kaybob Duvernay resource play. This will be achieved without compromising Athabasca's capacity to finance capital in its thermal oil division or its return of capital strategy. Athabasca and Duvernay Energy have independent strategies and capital allocation frameworks.

Duvernay Energy will be managed by Athabasca through a management and operating services agreement.

Duvernay Energy -- 2024 guidance

Production. Current production is approximately 2,000 boe/d (barrels of oil equivalent per day) (75 per cent liquids) and 2024 production guidance is about 3,000 boe/d (75 per cent liquids). Development plans are under way and are expected to drive strong production momentum into 2025 with estimated production of approximately 6,000 boe/d.

Capital. The 2024 capital program is approximately $82-million and includes the drilling of 12 gross (7.1 net) Duvernay wells. The program includes five net 100-per-cent working interest (WI) wells and 2.1 net 30-per-cent WI wells on the JV lands. Capital will be financed through the initial seed capital and cash flow from existing operations.

Balance sheet. Duvernay Energy's capitalization includes approximately $40-million of seed capital (approximately $21-million contribution from Athabasca after closing adjustments) and a $50-million undrawn credit facility.

Growth plans. The plan is to allocate 100 per cent of adjusted funds flow from Duvernay Energy to drive near-term production growth. Assuming a constructive commodity price outlook, Duvernay Energy has self-financed growth potential to approximately 25,000 boe/d (75 per cent liquids) by the late 2020s.

Operations update. Duvernay Energy recently rig released a two-well pad (100-per-cent working interest) at 03-18-64-17W5 with an average horizontal length of approximately 4,150 metres per well. Completion operations are planned for Q1 2024 with on-stream timing at the end of Q2 2024. A three-well pad (30-per-cent working interest) is expected to spud in February with completions and tie-in to follow in the spring. Activity through the fall is anticipated to drive strong momentum into 2025.

Athabasca Oil -- 2024 thermal oil guidance

Athabasca's thermal oil division underpins the company's strong free cash flow outlook, with an unchanged $135-million capital budget and production guidance of 32,000 to 33,000 bbl/d. At Leismer, the company is currently steaming well pairs at Pad L8 South and infills on Pad 7. The facility expansion is on track to be commissioned in the spring and following the tie-in of behind pipe wells production is expected to reach approximately 28,000 bbl/d mid-year. At Hangingstone, two 1,400-metre well pairs will spud in Q3 2024. These well pairs will support base production in 2025 and beyond with the objective of ensuring Hangingstone continues to deliver meaningful cash flow contributions to the company.

Capital allocation framework

In 2023, Athabasca completed $158-million in share buybacks (44 million shares at an average price of $3.58 per share) exceeding its commitment of returning a minimum of 75 per cent of excess cash flow to shareholders.

Athabasca is committed to executing on its 2024 return of capital commitment with 100 per cent of free cash flow returned to shareholders through share buybacks. The company intends to renew its normal course issuer bid with the Toronto Stock Exchange mid-March for another 12-month period.

Excluding its 70-per-cent equity interest in Duvernay Energy, Athabasca forecasts adjusted funds flow of approximately $460-million in 2024 ($80 (U.S.)/bbl WTI (West Texas Intermediate) and $15 (U.S.)/bbl WCS (Western Canadian Select) heavy differential). The Duvernay Energy transaction does not reduce Athabasca's 2024 free cash flow forecast that is maintained at about $325-million. The company's low sustaining capital requirements are fully financed within cash flow to $55 (U.S.)/bbl WTI. During the time frame of 2024 to 2026, Athabasca forecasts greater than $1-billion in free cash flow.

Athabasca anticipates releasing its 2023 year-end results and reserves on Feb. 29 after market close.

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 light oil assets are held in a private subsidiary (Duvernay Energy) in which Athabasca owns a 70-per-cent equity interest. Athabasca's common shares trade on the Toronto Stock Exchange under the symbol ATH.

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