Mr. Patrick Oliver reports

BONTERRA ENERGY ANNOUNCES FOURTH QUARTER AND YEAR END 2023 RESULTS HIGHLIGHTED BY RESPONSIBLE PRODUCTION GROWTH WITH CONTINUED BALANCE SHEET STRENGTHENING

Bonterra Energy Corp. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023. The related financial statements and notes, as well as management's discussion and analysis (MD&A), along with the annual information form (AIF), all for the period ended Dec. 31, 2023, are available on SEDAR+ and on Bonterra's website.

Financial and operating highlights:

• Production in 2023 averaged 14,204 barrels of oil equivalent per day, 6 per cent higher than in 2022, while fourth quarter volumes averaged 15,128 barrels of oil equivalent per day, 16 per cent above the same period last year, reflecting Bonterra's efficient deployment of capital, high-quality asset base and the outperformance of new wells brought on stream in 2023.
• Funds flow (1) totalled $147.3-million ($3.95 per fully diluted share) in 2023, while funds flow (1) in Q4 2023 totalled $40.4-million ($1.08 per fully diluted share).
• Free funds flow (1), defined as funds flow (1) net of development capital and decommissioning expenditures settled, was $12.5-million in 2023 and $22.4-million in Q4 2023, and was directed primarily to reducing net debt, helping further advance the company's goal of reinstating a sustainable return of capital framework.
• Net earnings in 2023 demonstrated full-cycle profitability, totalling $44.9-million ($1.20 per diluted share), while in Q4 2023, net earnings totalled $15.0-million (40 cents per diluted share).
• Field netbacks (1) averaged $37.01 per barrel of oil equivalent in 2023 and $35.85 per barrel of oil equivalent in Q4 2023, while cash netbacks averaged $28.42 per barrel of oil equivalent in 2023 and $29.06 per barrel of oil equivalent in Q4 2023, with both reflecting lower commodity prices in 2023 compared with the prior year, partially offset by gains on realized risk management contracts and lower per-unit production and royalty costs.
• Production costs declined by 17 per cent in Q4 2023 over Q4 2022, averaging approximately $13.37 per barrel of oil equivalent in Q4 2023, while annual average production costs were 8 per cent lower than 2022 at $16.02 per barrel of oil equivalent, reflecting Bonterra's continued focus on cost control, operational enhancements and facility upgrades.
• Capital expenditures totalled $126.5-million during 2023 and $14.0-million in Q4 2023, including the drilling and completion of an unbudgeted exploratory Montney well, described below:
  • $91.6-million of 2023 capital directed to drilling 41 gross (39.2 net) operated wells, bringing 37 gross (35.6 net) wells onto production following their completion, equip and tie-in;
  • $31.2-million directed to related infrastructure, recompletions and non-operated capital, including the first exploration Montney well, as detailed further below;
  • $3.7-million directed to the expansion of a wholly owned gas plant to alleviate processing capacity limitations.
• Net debt (1) totalled $140.4-million at year-end, representing a 6-per-cent decline from the end of 2022 and a significant 47-per-cent decline from year-end 2021. Bank debt decreased by 16 per cent over 2022 to total $14.8-million at year-end 2023, reflecting the positive impact on free funds flow from increased production and a continuing focus on cost reductions.
• Responsible operations throughout 2023 remained a priority for Bonterra, with $9.1-million invested in abandonment and reclamation activities, higher than the anticipated $5-million to $6-million. The company is pleased to confirm completion of its third sustainability report, which is now available on Bonterra's website.
• The company established a complementary new core area in Charlie Lake subsequent to the year-end, as outlined in the company's March 4, 2024, news release, with an agreement to acquire 79 net sections of land in Bonanza, Alta., that is prospective for light oil.

(1) Non-IFRS (international financial reporting standards) measures.

Year in review

Bonterra's successful 2023 drilling and completions program drove strong production volumes, which averaged 14,204 barrels of oil equivalent per day in 2023, exceeding the upper end of the company's previously announced annual guidance range of 13,500 to 13,700 barrels of oil equivalent per day and increasing 6 per cent over 2022. In the fourth quarter, production averaged a record 15,128 barrels of oil equivalent per day, increasing 16 per cent over Q4 2022 without any contribution from the Montney well, supported by a full quarter of production from 12 gross (11.8 net) operated wells that were drilled in Q3 2023.

Net debt declined to $140.4-million at Dec. 31, 2023, a reduction of 6 per cent or $9.4-million from year-end 2022, while bank debt declined 16 per cent to $14.8-million at quarter-end, a $2.8-million decrease over the prior year. Relative to year-end 2021, the company has successfully reduced net debt by 47 per cent, showcasing Bonterra's ability to generate free funds flow and to focus on strengthening the balance sheet in order to continue supporting the future implementation of a return of capital model.

Revenue, netbacks and funds flow

The company's higher-value light oil and liquids production represented 88 per cent of the company's total realized oil and gas sales in 2023, helping offset downward pricing pressure from persistent global supply and demand imbalances for natural gas throughout the year. When combined with gains on risk management contracts resulting from the company's hedging program, Bonterra's strategic production profile generated average field and cash netbacks (1) of $37.01 and $28.12 per barrel of oil equivalent, respectively, driving total funds flow (1) of $147.3-million ($3.95 per fully diluted share) and free funds flow (1) of $12.5-million in 2023. Bonterra also continued to post positive net earnings with $44.9-million ($1.20 per diluted share) generated in the year.

Efficient capital program

Bonterra executed a highly successful capital program in 2023 that was largely directed to the continued development of its high-quality, light-oil-weighted asset base, with annual capital expenditures totalling $126.5-million, and $91.6-million being directed to drilling 41 gross (39.2 net) operated wells and having 37 gross (35.6 net) operated wells completed, equipped, tied in and placed on production. The remaining four gross (3.6 net) operated wells were placed on production in the first quarter of 2024.

In addition to drilling and completions, Bonterra's 2023 capital program also invested in strategic infrastructure development, recompletions and non-operated capital, including the successful expansion of a wholly owned gas plant to alleviate processing capacity limitations, upgrading equipment to drive down per-unit production costs and the drilling of a Bonterra's first exploration Montney well, as detailed further below.

Charlie Lake acquisition

Subsequent to the year-end, Bonterra established a new core area in the Charlie Lake fairway, one of North America's top-decile oil plays. As previously announced, the acquisition involves the addition of 79 net sections of land in Bonanza, Alta., which are prospective for light oil and are expected to yield substantial growth opportunities while supporting the company's continued focus on free funds flow generation. The acquisition, including 330 barrels of oil equivalent per day of production, is highly complementary to Bonterra's existing 37 net sections of Charlie Lake land and results in 116 net sections of contiguous land in the light-oil-prone Charlie Lake.

Charlie Lake production is anticipated to reach production of 6,000 barrels of oil equivalent per day by 2026, which can be maintained over the long term, while also maintaining its leverage metrics that support efforts to implement a return of capital framework.

See the company's news release dated March 4, 2024, for additional details, including information on the strategic rationale of the acquisition and Bonterra's plans for development and growth in the area.

Testing of first Montney test well

In the fourth quarter of 2023, Bonterra achieved a significant milestone with the completion of its first Montney test well at 04-03-074-6W6, drilled under budget, which expands the company's potential drilling inventory. The company has since successfully negotiated a processing agreement and secured natural gas egress through third party infrastructure, with expectations of flowing the Montney well in the second quarter of 2024. This positive development positions Bonterra to consider drilling a second well from the same pad in order to further derisk the company's land block while also holding its acreage. The results of Bonterra's first Montney well support continued testing and delineation in the area, though the company intends to take a measured approach to align the pace of development with available egress.

Bonterra's Montney land base, situated north of Grande Prairie, Alta. (Valhalla), features a contiguous 45 sections (28,880 acres) of land with 100-per-cent working interest. The positive Montney well results to date indicate the potential for an expanded development runway for the future and ensure optionality for shareholders.

Continuing abandonment and reclamation

The company continued to responsibly pursue abandonment and reclamation efforts in 2023, having leveraged support from the Alberta site rehabilitation program (SRP), which concluded in Q2 2023. The company abandoned 84.1 net wells and 155 pipelines throughout the year, representing a total pipe length of 135.7 kilometres. By year-end 2024, approximately 75 per cent of all wells previously identified as having no further economic potential are expected to be successfully abandoned.

Outlook

Subsequent to year-end 2023, the company has remained focused on executing its 2024 capital program, having drilled seven gross operated (6.5 net) wells to date, which are expected to be completed, equipped and placed on production by the end of the Q1 2024, along with four gross operated (3.6 net) wells that were drilled in Q4 2023. With the addition of the Charlie Lake asset, the company's previous focus on M&A (merger and acquisition) activity will be redirected to the efficient deployment of capital and continuing operational execution to optimally develop the expanded inventory within Bonterra's three core areas.

Return of capital strategy

Bonterra remains committed to prioritizing responsible free funds flow generation in 2024, which can be directed toward further balance sheet strengthening, achieving modest production growth or the implementation of a return of capital model. Should low commodity prices persist, the company intends to prioritize the continued management of the balance sheet and maintaining continuing financial discipline.

Enhanced stability through risk management

In order to protect future cash flows, diversify the company's commodity price exposure and add stability during periods of market volatility, hedges have been layered on approximately 30 per cent of Bonterra's expected crude oil and natural gas production through Q3 2024. Through the next nine months, Bonterra has secured the following risk management contracts: WTI (West Texas Intermediate) prices between $50 (U.S.) and $93.75 (U.S.) per barrel on approximately 2,133 barrels per day; and natural gas prices between $1.81 and $3.56 per gigajoule on approximately 13,662 gigajoules per day.

Bonterra remains committed to executing its focused business strategy and responsibly developing its high-quality, oil-weighted asset base. The company believes that it is strategically positioned to deliver long-term value to stakeholders and achieve sustainable profitability, strengthened by its recent core area addition, which adds considerable value and development runway to Bonterra's existing portfolio.

About Bonterra Energy Corp.

Bonterra is a conventional oil and gas corporation forging a grounded path forward for Canadian energy. Operations include a large, concentrated land position in Alberta's Pembina Cardium, one of Canada's largest oil plays. Bonterra's liquids-weighted Cardium production provides a foundation for implementing a return of capital strategy over time, which is focused on generating long-term, sustainable growth and value creation for shareholders. An emerging Montney exploration opportunity is expected to provide enhanced optionality and an expanded potential development runway for the future. Bonterra's shares are listed on the Toronto Stock Exchange under the symbol BNE.

This summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Bonterra and should not be considered in any way as a substitute for reading the full report. For the full report, please go to the company's website.

Non-IFRS and other financial measures

Throughout this news release, the company uses the terms funds flow, free funds flow, net debt, field netback and cash netback to analyze operating performance, which are not standardized measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable with such measures as reported by other companies.

The company defines funds flow as funds provided by operations, including proceeds from sale of investments and investment income received, excluding effects of changes in non-cash working capital items and decommissioning expenditures settled. Free funds flow is defined as funds flow less dividends paid to shareholders, capital and decommissioning expenditures settled. Net debt is defined as long-term subordinated term debt, subordinated debentures and bank debt plus working capital deficiency (current liabilities less current assets). Field netback is defined as revenue and realized risk management contract gain (loss) minus royalties and operating expenses divided by total barrels of oil equivalent for the period. EBITDA is defined as net earnings excluding deferred consideration, finance costs, provision for current and deferred taxes, depletion and depreciation, share-option compensation, gain or loss on sale of assets, and unrealized gain or loss on risk management contracts. Net debt to EBITDA ratio is defined as net debt at the end of the period divided by EBITDA for the trailing 12 months.

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