Mr. M. Scott Ratushny reports

CARDINAL ENERGY LTD. ANNOUNCES SECOND QUARTER 2023 OPERATING AND FINANCIAL RESULTS

Cardinal Energy Ltd. has released its operating and financial results for the second quarter ended June 30, 2023.

Financial and operating highlights from the second quarter of 2023:

• Average production volumes of 21,047 barrels of oil equivalent per day were negatively impacted by approximately 700 boe/d due to short-term shut-in production associated with forest fires in Northern Alberta in the second quarter; all shut-in volumes are now back on-line with current production at approximately 22,000 boe/d;
• Adjusted funds flow (1) increased 7 per cent over the first quarter of 2023 due to narrower Western Canadian Select (WCS) differentials;
• Decreased net debt (1) by 2 per cent over the prior quarter, leading to a net debt to adjusted funds flow ratio (1) of 0.3 times;
• Closed the disposition of non-core undeveloped land with minimal production and associated asset retirement obligations (ARO) for proceeds of $10-million;
• Brought on stream its four Nipisi Clearwater wells that were drilled in the first quarter of 2023 with combined current rates over 975 boe/d, approximately 30 per cent higher than its offsetting 2022 pad initial production rates;
• Drilled six (4.6 net) successful wells in its Midale, Sask., area and one (1.0 net) well in Southern Alberta, which are expected to start producing early in the third quarter.

(1) A non-generally accepted accounting principle and other financial measure.

The attached table summarizes its second quarter financial and operating highlights (thousands of dollars except shares, per-share and operating amounts).

Second quarter overview

During the second quarter of 2023, wildfires throughout Northern Alberta impacted the company's production and adjusted funds flow. Cardinal's priority was the safety of its employees, contractors and residents of the areas affected. The company pro-actively shut in production in those affected areas to allow staff to focus on the safety of families and homes, as well as to reduce risk within the field. Although there was no direct damage to its wells or facilities, power to many of its fields was affected by downed power poles and lines. The company estimates that its second quarter average production was negatively impacted by approximately 700 boe/d.

Despite the lower production, adjusted funds flow of $56.2-million was 7 per cent higher than the prior quarter due to narrowing WCS differentials. In the second quarter, WCS differentials averaged almost $10 (U.S.) per barrel less than the prior quarter. On a per diluted share basis, adjusted funds flow was 35 cents per share while second quarter 2023 free cash flow (1) of $26.3-million was utilized for shareholder returns through its six-cent-per-common-share-per-month dividend.

Cardinal's net debt closed the second quarter of 2023 at $76.3-million, which was 2 per cent lower than the prior quarter and included $53.2-million of bank debt and $23.1-million of adjusted working capital deficiency (1). Cardinal's net debt to adjusted funds flow ratio remained low at 0.3 times. During the second quarter, despite materially higher Canadian interest rates, Cardinal's low debt levels resulted in a 14-per-cent reduction in interest and other costs per boe over the same period in 2022.

In the second quarter of 2023, the company spent $20.4-million on capital expenditures, which included the drilling and completion of six (4.6 net) wells at Midale and one (1.0 net) well in Southern Alberta. The company continued with its well reactivation program, spending $2.3-million on recompletions and workovers throughout its operating areas. Cardinal also constructed new facilities and upgraded existing infrastructure across its asset base and continued with the enhanced oil recovery program with carbon dioxide injection at Midale. Cardinal also closed the disposition of non-core undeveloped land and associated liabilities for proceeds of $10-million in its Northern Alberta area.

(1) A non-generally accepted accounting principle and other financial measure.

Operations

Cardinal's second quarter production averaged 21,047 boe/d. The Northern Alberta wildfires impacted its second quarter production as it experienced relatively minor shut-ins across some of its Mitsue and Grande Prairie assets during the second half of May. However, at its House Mountain field, just north of the town of Swan Hills, the fires and the power outage that resulted caused production to be shut in beginning on May 15. Restart of the House Mountain field began on June 12 as power was slowly restored.

While this was an extremely difficult situation, Cardinal is very proud of the response shown by its personnel. It is also thankful for the efforts of the fire response teams and other emergency responders, who worked to protect nearby communities.

Its drilling program continues to deliver positive results. The company has drilled three (2.3 net) producing wells and three (2.3 net) injector wells at Midale in the second quarter with initial production and injectivity from the first three in line with expectation, the remaining three wells are currently being brought on stream.

At Wainwright, it spudded the first of its four-(4.0 net)-well Rex multilateral delineation program. Planned to continue through August, it expects this activity will further derisk this large oil resource. Last year's Rex multilateral discovery well continues to produce over 100 boe/d, demonstrating the long-term potential of this play, where it has identified up to 90 future drilling locations.

In Southern Alberta, it spudded the first of its four-(4.0 net)-well Ellerslie multilateral well program in June. The first well came on stream in early July and is currently producing over 300 boe/d. It has recently finished drilling the second well with initial production rates of over 500 boe/d.

Its four Nipisi Clearwater wells drilled in the first quarter of 2023 continue to produce at rates approximately 30 per cent higher than last year's very successful program with current production of approximately 975 boe/d.

The success to date of these activities across its asset base is providing further confidence in the long-term breadth and depth of its identified drilling inventory and the sustainability of its production base.

A key piece of new enhanced liquids recovery infrastructure was brought on stream in the quarter at Midale. Stripping out valuable liquids from gas produced, associated with the CO2 enhanced oil recovery program, this new infrastructure is expected to further optimize one of its core producing assets.

Environmental, social and governance (ESG)

Cardinal's strong corporate emission performance has continued in 2023 with continuing CO2 sequestration in Saskatchewan and further implementation of projects aimed at reducing emissions from its operations across Alberta. Through its world-class carbon capture and sequestration (CCS) enhanced oil recovery (EOR) operation at Midale, the company sequestered approximately 78,000 tonnes of CO2 equivalent during the second quarter of 2023. This amount of carbon sequestration exceeds its Scope 1 emissions. To date, the Midale CCS EOR project has sequestered 5.6 million tonnes of CO2 and has reduced oil production decline rates from this project to approximately 3 per cent.

Cardinal's safety record continues to be in the top tier of the industry, as is its regulatory compliance level.

Cardinal will continue with its commitment to reduce its environmental footprint with $23-million in its 2023 budget for asset retirement obligations, more than 2.5 times its required regulatory spend requirements. In the second quarter of 2023, Cardinal spent $4.1-million of this budget, bringing the total spend in the first half of 2023 to $8.8-million.

Outlook

With the majority of its 2023 drilling program expected to come on stream during the third quarter and assuming forecasted associated productivity, corporate production volumes are expected to move past 22,000 boe/d during the third quarter into the fourth quarter. Its first two wells in both Wainwright on the Rex play and in Southern Alberta on the Ellerslie development are finished drilling and look encouraging. In both areas, it has two additional wells to drill as part of its 2023 program. Initial productivity from its first two producers at Midale is on forecast, with the third well planned to come on stream in August.

Its base production remains predictable and low decline. It will continue to pursue projects and opportunities that increase its sustainability and decrease its corporate risk. In the past 12 months, it has disposed of approximately 400 boe/d of non-core production with approximately $16-million of undiscounted ARO. It will continue to optimize its asset base.

On behalf of the board of directors, management and employees, the company would like to thank its shareholders for their continuing support.

About Cardinal Energy Ltd.

Cardinal works to continually improve its environmental, social and governance profile, and operates its assets in a responsible and environmentally sensitive manner. As part of this mandate, Cardinal injects and conserves more carbon than it directly emits, making it one of the few Canadian energy companies to have a negative carbon footprint.

Cardinal is a Canadian oil and natural gas company with operations focused on low-decline oil in Western Canada.

We seek Safe Harbor.