Mr. Jeff Chisholm reports

CANASIA ANNOUNCES DECEMBER 31, 2023 CONTINGENT BITUMEN RESOURCES FOR SAWN LAKE, ALBERTA SAGD PROJECT OF ANDORA ENERGY CORPORATION AND SELECTION OF ANDORA ENERGY CORPORATION AS SUCCESSFUL BIDDER TO ACQUIRE ADDITIONAL SAWN LAKE ASSETS FROM RECEIVERSHIP

Canasia Energy Corp., on behalf of its wholly owned subsidiary Andora Energy Corp., has released the Dec. 31, 2023, contingent bitumen resources report which is a National Instrument 51-101-compliant resources evaluation for Andora's oil sands interests at Sawn Lake, Alta., Canada, as evaluated by independent qualified reserves evaluator Sproule Associates Ltd. The evaluation included all of Andora's Oil Sands Leases at Sawn Lake based on exploitation using steam-assisted gravity drainage (SAGD).

Canasia further announced today that Andora has been selected as the successful bidder to acquire certain assets of Northern Alberta Oil Ltd. (NAOL) and Deep Well Oil & Gas (Alberta) Ltd., including the debtor's 25-per-cent working interest in 11 sections of the Sawn Lake Central block, from Ernst & Young Inc., as receiver and manager of certain of the debtors' present and after-acquired properties, assets and undertakings, for a purchase price equal to $2.0-million (net approximately $1.3-million following receipt of amounts owing from the debtors to Andora).

Please note that unless otherwise stated, amounts are in Canadian dollars and volumes and financial amounts are net to Andora's interests as at Dec. 31, 2023.

Highlights of Sawn Lake, Alta., contingent resources report as of Dec. 31, 2023

• The resources report reflects the development plan for Sawn Lake Central and Sawn Lake South of staged development with five standardized battery-scale SAGD facilities where growth is primarily financed by cash flow generated by the project. The SAGD batteries will be capable of producing 5,000 to 6,000 barrels of bitumen per day (BOPD) each and will utilize Andora's proprietary produced water boiler (PWB) technology which will use water from SAGD production to generate steam and meet water recycle requirements in Alberta. This strategy is expected to significantly reduce financial, reservoir and operating risk.
• The resource report at Dec. 31, 2023, reflects the use of a 1,600-metre horizontal SAGD wellpair design with industry standard inflow control devices (ICDs) to reduce the number of required wellpairs to develop the contingent resources. The number of new wellpairs required to develop the contingent resources is reduced from 359 to 182. The unrisked net present value, discounted at 15 per cent for Andora's interests as at Dec. 31, 2023, is increased relative to the Dec. 31, 2022, resources report $50-million on an after-tax basis for the best case, $28-million on an after-tax basis for the low case and $62-million on an after-tax basis for the high case.
• The unrisked best estimate net present value discounted at 10 per cent and 15 per cent for Andora's interests as at Dec. 31, 2023, is $665-million and $281-million on an after-tax basis, respectively.
• The resources report assigned an 85 per cent chance of development for Sawn Lake, and the risked best estimate contingent resources for Andora as at Dec. 31, 2023, are 244.2-million barrels of bitumen recoverable. The risked best estimate net present value, discounted at 10 per cent and 15 per cent, for Andora's interests as at Dec. 31, 2023, is $567-million and $240-million on an after-tax basis, respectively.
• While use of ICDs and longer horizontal length to boost SAGD production is now industry standard ultimate recoveries over the entire well life cycle has not yet been demonstrated. This is reflected in the Dec. 31, 2023, resource report in which contingent resources are adjusted for the low case to 90 per cent, best case to 98 per cent and high case to 109 per cent of resources reported in the Dec. 31, 2022, resource report. It is expected that ICDs should increase steam conformance and ultimate recoveries. The ultimate recovery factors will be reviewed and adjusted as necessary as more industry ICD production data becomes available.
• Contingent resources have been assigned to the Sawn Lake Central and Sawn Lake South blocks of Sawn Lake. The unrisked best estimate contingent resources for Andora as at Dec. 31, 2023, are 287.3 million barrels of bitumen recoverable.
• Andora is the operator of both blocks and currently holds a 75-per-cent working interest in the 11 sections of the Central block, which have been assigned 212.8 million barrels of unrisked best estimate recoverable bitumen (net to Andora's interests as at Dec. 31, 2023) and holds a 100-per-cent working interest in the 16 sections of the South Block, which have been assigned 74.5 million barrels of unrisked recoverable bitumen.
• The resources report forecasts bitumen production from 2025 to 2111, with maximum unrisked best estimate production net to Andora (based on its working interest as at Dec. 31, 2023) of 21,442 BOPD (barrels of oil per day) in 2039.
• The potential first stage of commercial development is at Sawn Lake Central battery No. 1 (where Andora is operator and currently holds a 75-per-cent working interest, which will increase to 100 per cent following closing of the purchase and sale of the assets from the receiver) to reactivate the existing SAGD facility with a new 1,600-metre horizontal length SAGD wellpair for restart of bitumen production in 2025. On a 100-per-cent working interest basis, the estimated capital cost (excluding operating losses until plateau production is reached) is $13.7-million and plateau production is 1,210 BOPD in 2026. The potential second stage of commercial development starts with the installation of a produced water boiler (PWB) in 2026 to demonstrate effectiveness and the restart of the existing wellpair 1. This is expected to be followed in 2027 and 2028 with the drilling of an additional wellpair and related facilities work largely financed by cash flow. On a 100-per-cent working interest basis, the estimated capital cost is $29.7-million in 2026 to 2028 with plateau production at 2,780 BOPD in 2029. Regulatory approval for the Sawn Lake commercial operation to 3,200 BOPD was received in December, 2017. The facility with additional wellpairs could be expanded in 2029 and 2030 after regulatory approval to increase production to 5,635 BOPD. Four additional batteries would be constructed for full field development. The timing of individual batteries is dependent on regulatory approval and after-tax cash flow from existing operations for funding of new investment. Volume and capital costs estimates are on a 100-per-cent working interest basis.

Resources report

• The resources report evaluated Andora's interests at the Sawn Lake Alberta oil sands project. Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by the application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies. The contingent resources volumes estimated in the resources report are considered contingent until such time as there are additional delineation wells confirming reservoir quality and continuity, refinement of the commercial development plan, regulatory approval for full field development, corporate commitment to move forward and financing for commercial development. Contingent resources are further classified as high, best and low in accordance with the level of certainty.
• Sproule classifies the project evaluation status of the contingent resource volumes to be at the development studies level. The contingent resource volumes are classified as development pending with respect to project maturity. Sproule evaluated Andora's development plan for the contingent resources to be economically viable in the aggregate, although there may be individual locations within the project which may be uneconomic.
• Contingent resource volumes in the resources report have been assigned an 85 per cent chance of development by Sproule. This chance of development risk factor is an aggregation of risk factors attributable to the identified contingencies. There is uncertainty that it will be commercially viable to produce any portion of the reported contingent resources volumes.
• The resources report identified key positive and negative factors for development of the Bluesky formation in the Sawn Lake area. Key positive factors include: the abundance of well data available from penetrations on and surrounding Andora's lands (petrophysical, geophysical and production history); the presence of successful analog SAGD projects; and the successful pilot project at the 16-30-91-12W5M location. Key negative factors include: access to the funding required to develop the resource base; sensitivity to low commodity pricing which will impact the economics of development; environmental and regulatory approval for approval of bitumen development, pipelines and other infrastructure; higher Alberta or federal carbon tax, income tax or royalties; and market egress.
• The Dec. 31, 2023, contingent resources report represents an update of a Dec. 31, 2022, contingent resources report which was also prepared by Sproule. The Dec. 31, 2023, report has been updated for:
  • Dec. 31, 2023, price forecasts for crude oil, bitumen, natural gas and exchange rates.
  • The reduction of required new wellpairs from 359 to 182 utilizing 1,600-metre horizontal SAGD wellpairs with associated changes to well type curves, overall forecast bitumen volumes and assigned development risk.
  • Adjustment of the development stages for potential commencement of commercial production in 2025 and development matched to internal funding. A Sawn Lake reactivation commences with the drilling and completion of a 1,600-metre horizontal SAGD well followed by plant expansions as internally generated cash flow allows.
  • Updates for Andora tax pools and non-capital loss carry-forwards of $63.3-million and the Alberta oil sands royalties prepayout cumulative costs of $51.2-million for the Sawn Lake project.
  • Changes to income tax rates, carbon tax legislation and other factors.

Andora selected as successful bidder to acquire additional Sawn Lake assets from receivership

On March 8, 2024, Andora applied for and received an order from the Court of King's Bench of Alberta, appointing the receiver as receiver and manager of the debtors' property. The court also approved a proposed sales and investment solicitation process (the SISP), which contemplated and included a stalking horse asset purchase agreement (the stalking horse APA) between the debtors, by and through the receiver, as vendors, and Andora, as purchaser.

Pursuant to the SISP, the receiver marketed the property with Andora's stalking horse APA serving as a stalking horse bid for the assets. Following the receipt of a bid by the bid deadline on April 19, 2024, the receiver conducted an auction process for the property on April 29, 2024. Andora participated in the auction process and was ultimately selected as the successful bidder.

The assets include all of the debtors' right, title and interest, in and to the joint operating agreement (the JOA) dated Jan. 1, 2014, between Andora, MP Energy West Canada Corp. and the debtors, the ownership of working interest in the joint lands and the joint assets (each as defined in the JOA), as well as certain related interests.

Following closing of the purchase and sale of the assets, Andora's working interest in the 11 gross sections at the Sawn Lake Central block will increase from 75 per cent to 100 per cent. Under the SISP, closing of the purchase and sale of the assets is expected to occur in May, 2024, and is subject to the approval of the court and the Alberta Energy Regulator.

Sawn Lake SAGD development

Andora holds interests in 27 sections (currently 24.25 net sections) of heavy oil sands leases in Sawn Lake, within the central Alberta Peace River oil sands region. Andora is focused on developing the bitumen resources at Sawn Lake using SAGD development. Contingent resources have been assigned to the Sawn Lake Central block and Sawn Lake South block where Andora is the operator.

A SAGD demonstration project at the Sawn Lake Central block commenced in 2013 and consisted of one SAGD wellpair drilled to a depth of 650 metres and a horizontal length of 780 metres and a SAGD facility for steam generation, water handling and bitumen treating. Steam injection commenced in May, 2014, and produced bitumen from September, 2014 to February, 2016. The demonstration project reached a steady-state production level in February, 2016, of 620 BOPD with an instantaneous steam-oil ratio (ISOR) of 2.1. The demonstration project successfully captured the key data associated with the objectives of the demonstration project and operations were suspended at the end of February, 2016. The demonstration project proved that the SAGD process works in the Bluesky formation at Sawn Lake, established characteristics of ramp-up through stabilization of SAGD performance, indicated the productive capability, ISOR and provided critical information required for well and facility design associated with future commercial development. Production results to date are not necessarily indicative of long-term performance or of ultimate recovery and the Sawn Lake demonstration project has not yet proven that it is commercially viable.

The development plan for Sawn Lake Central and Sawn Lake South is for development in stages with five standardized battery-scale SAGD facilities where growth is primarily financed by net operating income generated by the project. After tax cash flow in the Sproule evaluation is Andora's share, as at Dec. 31, 2023, of revenue less royalty burden, operating expenses, abandonments, capital expenditures and income tax.

The potential first stage of commercial development is at Sawn Lake Central battery No. 1 (where Andora is operator and currently holds a 75-per-cent working interest, which will increase to 100 per cent following closing of the purchase and sale of the assets from the receiver) to reactivate the existing SAGD facility with a new 1,600-metre horizontal length SAGD wellpair for restart of bitumen production in 2025. On a 100-per-cent working interest basis, the estimated capital cost for the best case (2C) contingent resources (excluding operating losses until plateau production is reached) is $13.7-million and plateau production of 1,210 BOPD in 2026. The potential second stage of commercial development forecast is the installation of a produced water boiler (PWB) in 2026 to demonstrate effectiveness and the restart of the existing wellpair 1. This is expected to be followed in 2027 and 2028 with the drilling of an additional wellpair and related facilities work largely financed by cash flow. On a 100-per-cent working interest basis, the estimated capital cost is $29.7-million in 2026 to 2028 with plateau production at 2,780 BOPD in 2029. Regulatory approval for the Sawn Lake commercial operation to 3,200 BOPD was received in December, 2017. The facility with additional wellpairs could be expanded in 2029 and 2030 after regulatory approval to increase production to 5,635 BOPD. Four additional batteries would be constructed for full field development. The timing of individual batteries is dependent on regulatory approval and after-tax cash flow from existing operations for funding of new investment. Volume and capital costs estimates are on a 100-per-cent working interest basis.

It is recognized that stable crude oil prices, and specifically Western Canada Select benchmark prices, will have a significant impact on project economics and financing, and on decisions regarding the timing and extent of future development.

About Canasia Energy Corp.

Canasia is a Calgary, Alberta-based, oil and gas company with operations in Western Canada.

We seek Safe Harbor.