Mr. Shawn Van Spankeren reports

CARDINAL ENERGY LTD. ANNOUNCES FOURTH QUARTER 2023 AND YEAR-END FINANCIAL RESULTS

Cardinal Energy Ltd. has released its operating and financial results for the fourth quarter and year ended Dec. 31, 2023.

Highlights from the fourth quarter and full year of 2023:

• Production for the fourth quarter and for the full year of 2023 increased by 4 per cent and 1 per cent, respectively, over the same periods in 2022.
• Adjusted funds flow (1) for the fourth quarter was $64.0-million and for fiscal 2023 was $253.7-million. For the full year 2023, adjusted funds flow was directed toward:
  • Direct returns to shareholder through $115.8-million in declared dividends and $3.0-million in common share treasury purchases;
  • Capital expenditures (1) of $117.3-million and exploration and evaluation expenditures of $4.9-million;
  • Asset retirement and decommissioning liability expenditures of $23.2-million, more than double Cardinal's regulatory requirement.
• Capital expenditures of $117.3-million were directed toward the drilling of 20 wells (18.6 net) in addition to the strategic Mitsue/Buffalo Lake acquisition located within Cardinal's core operating areas for total consideration of $24.6-million. In addition, the company acquired Saskatchewan heavy oil assets for non-cash consideration of $10.0-million through the issuance of Cardinal common shares at a value of $7.35 per share.
• Total payout ratio (1) for the fourth quarter was 70 per cent, compared with 89 per cent in the prior-year comparative quarter.
• Cardinal incurred $4.9-million in cash exploration and evaluation expenditures during 2023, which were principally directed toward drilling stratigraphic wells as part of the evaluation and derisking of Cardinal's Reford, Sask., thermal project.
• During 2023, Cardinal initiated the development of a steam-assisted gravity drainage (SAGD) project in its Reford, Sask., operating area, that upon expected completion in the fourth quarter of 2025, is anticipated to produce approximately 6,000 barrels per day (bbl/d) (100 per cent heavy crude oil). See the Saskatchewan thermal project summary and update for additional details.
• Net operating costs per boe (barrel of oil equivalent) (1) for the fourth quarter were 10 per cent lower than the comparative quarter and for the full year 2023 were 2 per cent lower than the prior year. G&A (general and administrative) costs per boe for the fourth quarter were 16 per cent lower than the prior-year quarter and 10 per cent lower than the third quarter of 2023.
• Cardinal continues to demonstrate the ability to efficiently deploy capital to enhance the quality, predictability and sustainability of its low-decline asset base. Utilizing less than 50 per cent of adjusted funds flow, Cardinal replaced production in the proved developed producing (PDP) reserves category, replaced total proved (TP) reserves and total proved plus probable (TPP) reserves at 1.4 times and 1.7 times of 2023 annual production, respectively.
• Excellent 2023 drilling results at Nipisi for Clearwater oil and Alderson for Ellerslie oil further delineated development drilling opportunities. In addition, an exploratory discovery at Heart River is now producing with continuing assessment to determine further long-term development opportunities.

(1) See non-GAAP (generally accepted accounting principles) and other financial measures.

An attached table summarizes the company's fourth quarter and annual 2023 operating and financial highlights.

Fourth quarter overview

Oil prices during the fourth quarter of 2023 were lower than the third quarter of 2023 and lower than the prior-year comparative quarter. West Texas Intermediate (WTI) benchmark oil price averaged $78.32 (U.S.) per barrel (bbl) during the fourth quarter, compared with $82.26 (U.S.) per bbl in the third quarter of 2023 and $82.65 (U.S.) per bbl in the prior-year comparative quarter. Canadian oil differentials widened during the fourth quarter, negatively impacting the Western Canadian Select (WCS) benchmark price by approximately 17 per cent over the third quarter. In addition to weaker crude oil prices, fourth quarter revenues were also impacted by a 55-per-cent reduction in the AECO natural gas benchmark price.

Production for the fourth quarter was 2 per cent above budget and 4 per cent higher than the prior-year comparative quarter. Improved production was due to incremental oil and gas production attributable to Cardinal's 2023 drilling program combined with the Mitsue/Buffalo Lake acquisition, which closed in the fourth quarter. These increases were offset in part by the disposition of approximately 200 barrels of oil equivalent per day (boe/d) of non-core, non-operated, production in the fourth quarter of 2023. Production for both the fourth quarter and full year 2023 consisted of 88 per cent crude oil and natural gas liquids, consistent with the prior-year respective periods.

Fourth quarter 2023 adjusted funds flow of $64.0-million was 6 per cent lower than the same period in 2022. Lower adjusted funds flow was primarily driven by the reduction in the realized price for crude oil as noted above. Adjusted funds flow was directed toward the payment of dividends, Cardinal's capital and E&E (exploration and evaluation) programs, and environmental and decommissioning activities. Cardinal's total payout ratio for the fourth quarter was 70 per cent, compared with 89 per cent in the prior-year quarter, as reduced development capital expenditures, more than offset a modest reduction in adjusted funds flow.

Net operating expenses for the fourth quarter of $23.19 per boe, compared with $25.72 per boe in the prior-year comparative quarter. Fourth quarter 2023 operating expenses benefited from Cardinal's fixed-price electricity hedging contracts in its Alberta operations, offset in part by higher well servicing, workover costs and general inflationary pressures. Electricity is a material cost to Cardinal's operations due to the nature of the asset base, as both CO2 (carbon dioxide) and water are pumped/moved in two directions to maintain optimal reservoir pressure. As a result of the nature of Cardinal's conventional asset base, the company's cost structure may be higher than similar peers; this impact is offset by Cardinal's low-decline asset base, which requires significantly less sustaining capital relative to the same peer group.

Capital expenditures for the fourth quarter were $41.3-million, consisting of $3.5-million on recompletions and workovers throughout its operating areas combined with $7.9-million on facilities and infrastructure upgrades. Cardinal continued to focus on its enhanced oil recovery program, utilizing a combination of CO2 injection and water flood.

Also included in capital expenditures for the fourth quarter of 2023 is $24.6-million related to the Mitsue-Buffalo Lake acquisition, which closed during the quarter, adding approximately 900 boe/d of production in the fourth quarter. The acquisition included the consolidation of working interests in Cardinal's existing, operated, long-life light-oil unit in Mitsue, Alta., while also adding production of approximately 500 barrels per day (bbl/d) of Clearwater oil production in Buffalo/Figure Lake. The transaction is synergistic with Cardinal's existing operations, does not require any additional direct administrative staff and is consistent with the company's focus on operating assets with long-life/low-decline and predictable production.

As noted above, Cardinal disposed of approximately 200 boe/d of non-core assets during the fourth quarter of 2023, which included a reduction in asset retirement obligations of $7.6-million. For the full year 2023, asset dispositions, which consisted primarily of non-core, non-producing assets (except as noted for the fourth quarter), resulted in cash proceeds of $11.6-million with a reduction in asset retirement obligations of $9.1-million.

During the fourth quarter, Cardinal completed one (1.0 net) Falher/Clearwater oil well at Heart River. This well was brought on stream late in the fourth quarter of 2023; current production rates are approximately 100 bbl/d (100 per cent heavy crude oil). There are currently 12 identified follow-up drill locations within the existing drilled horizon with the potential to develop additional secondary zone within the existing land block.

Cardinal has established, and in 2023 further enhanced, a multiyear drilling inventory to complement its low-decline production base. This conventional inventory is located across the company's asset base, allowing the company to mitigate increases in local area operating costs and production decline.

Cardinal continues to demonstrate the ability to efficiently deploy capital to enhance the quality, predictability and sustainability of its low-decline asset base. As noted earlier, the company successfully replaced current year production in its PDP, TP and TPP reserve categories, with 90 per cent of Cardinal's TPP reserves consisting of light, medium and heavy crude oil and natural gas liquids. Additionally, Cardinal's before tax net present value (discounted at 10 per cent) of the TPP reserves was $1.8-billion, a 1-per-cent increase from the prior year. Cardinal's Dec. 31, 2023, reserves summary does not include the potential impact of its Reford, Sask., thermal assets. Additional details on Cardinal's 2023 year-end reserves can be found in the company's news release from Feb. 12, 2024, "Cardinal Energy Ltd. Announces 2023 Year-End Reserves."

Asset retirement expenditures for the fourth quarter of 2023 were $9.0-million ($23.2-million for fiscal 2023). Asset retirement obligations were also impacted by the acquisition of the Mitsue-Buffalo Lake assets, with Cardinal acquiring $7.2-million of incremental liabilities, which was more than offset by the disposition of $7.6-million of liabilities through the disposition of non-core non operated assets.

In the fourth quarter of 2023, Cardinal declared $28.9-million of dividends, which was consistent with the prior-year quarter. In 2023, Cardinal returned over $118-million to shareholders in the form of dividends and treasury share purchases. Cardinal's dividend is currently six cents per common share per month (72 cents per common share annualized).

Saskatchewan thermal project summary and update

As previously noted, Cardinal has initiated a SAGD project in its Reford, Sask., operating area, that upon completion is expected to produce approximately 6,000 bbl/d (100 per cent heavy crude oil). The initial development phase of the project is expected to be completed prior to the end of fiscal 2025.

Key attributes of Cardinal's Reford, Sask., thermal project that are consistent with Cardinal's overall corporate strategy include:

• The initial 6,000 bbl/d (100 per cent heavy crude oil) project is risk appropriate for Cardinal's size, further enhancing the company's low-decline existing asset base while also providing the optionality for future projects, which could increase the size of the overall trend to 20,000 bbl/d (100 per cent heavy crude oil).
• Low operating costs are forecasted to positively impact Cardinal's overall operating cost structure in the future.

During the fourth quarter of 2023, Cardinal incurred $4.3-million ($4.9-million -- 2023 year to date) of costs associated with the evaluation and derisking of this project. These costs are included as a component of E&E expenditures.

During the first quarter of 2024, Cardinal entered into an agreement with Propak Systems Ltd. for the engineering, fabrication and field construction of a central processing facility, including the first SAGD well pad. The fixed-price agreement with Propak, which represents approximately half of the total estimated project costs, provides cost certainty for Cardinal, in addition to reducing manufacturing uncertainty as a result of Propak's ability to manufacture and fabricate the modular facilities in a controlled indoor environment.

Operations

Cardinal's average production was 21,705 boe/d in 2023. The company drilled 26 (24.6 net) wells in the year consisting of 17 (16.3 net) producing wells, three (2.3 net) injection wells and six (6.0 net) vertical stratigraphic wells. Highlights from our 2023 drilling include:

• At Nipisi, the company drilled its second successful four-well program (4.0 net). These wells began production at the end of the first quarter and delivered IP90 rates of approximately 240 boe/d per well. After producing for nearly a full year, these wells continue to greatly exceed the company's initial expectations, with current combined production of approximately 750 boe/d.
• In the Alderson area, near Brooks, Alta., the company continued with successful multilateral Ellerslie oil drilling. Two wells (2.0 net) were drilled coming on stream early in the third quarter. Initial production rates well exceeded expectations, combining for approximately 600 boe/d over their initial 180 days of production.

Environmental, social and governance (ESG)

Cardinal continued to successfully minimize its corporate emissions profile during 2023. This included continuing CO2 sequestration in Saskatchewan and further implementation of projects aimed at reducing both scope 1 and scope 2 emissions from the company's operations across all areas. Through its world-class carbon capture and sequestration (CCS) enhanced oil recovery (EOR) operation at Midale, the company sequestered approximately 270,000 tonnes of CO2 (carbon dioxide) equivalent during 2023. This amount of carbon sequestration again exceeds the company's total scope one emissions. To date, the Midale CCS EOR project has sequestered 5.7 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 the company's regulatory compliance level.

In 2023, Cardinal continued its commitment to responsible, sustainable operations, spending $23.2-million on asset retirement activities. Cardinal abandoned more than 120 gross operated wells, 190 kilometres of pipelines and nine facilities during 2023. During the year, Cardinal also reclaimed 69 gross operated sites (including two facility sites). These liability reduction activities and associated spending far exceeded all regulatory requirements for the year.

Cardinal will continue with its commitment to reduce its environmental footprint with planned spending on liability reduction activities in 2024 of approximately $20-million.

Outlook

Throughout 2023, Cardinal made a number of investments to further enhance the quality, predictability and sustainability of its low-decline asset base. The sanctioning of the Reford SAGD project is a cornerstone to extending its reserve life beyond its existing peer leading producing reserve base and decline profile. The project is being developed in a manner that will provide 20-plus years of incremental adjusted funds flow and positively impact Cardinal's per-barrel operating cost metrics.

In addition to the focus on the development of the Reford SAGD project, Cardinal will continue development of its conventional asset base throughout 2024. Specifically, Cardinal will continue to expand its multilateral development inventory with a particular focus on the Clearwater and Mannville trends, where Cardinal has had significant development success over the past several years.

With WTI oil prices currently in the high $70 (U.S.) per bbl range and the expectation of further tightening of Western Canadian Select oil price differentials from current levels due to the Trans Mountain pipeline expansion during 2024, Cardinal is confident in its ability to execute on its 2024 budget (1), directing a substantial portion of the capital toward the Reford SAGD project. The company expects that adjusted funds flow for 2024 and 2025, driven by its low-decline conventional oil and gas assets, will finance continuing returns to shareholders and the development of the Reford project. The execution of the Reford project and the anticipated corresponding increase in adjusted cash flow in 2026 will allow Cardinal to revisit its framework for both shareholder returns and future capital spending budgets.

The board of directors, management and employees would like to thank shareholders for their continued support.

(1) See news release from Nov. 6, 2023, "Cardinal Energy Ltd. Announces Third Quarter 2023 Operating and Financial Results, Appointment of a New Director, Establishment of Thermal Operating Unit and Our 2024 Budget," for additional details on the company's 2024 budget.

Annual filings

Cardinal also announces the filing of its audited financial statements for the year ended Dec. 31, 2023, and the related management's discussion and analysis (MD&A) with the Canadian securities regulatory authorities on SEDAR+. In addition, Cardinal will file its annual information form for the year ended Dec. 31, 2023, on SEDAR+ on or prior to April 1, 2024. Electronic copies may be obtained on Cardinal's website and on Cardinal's SEDAR+ profile.

Supplemental information regarding product types

This news release includes references to 2023 and 2022 production. The company discloses crude oil production based on the pricing index that the oil is priced off of. The corresponding table is intended to provide the product type composition as defined by National Instrument 51-101.

Non-GAAP and other financial measures

This news release contains certain specified measures consisting of non-GAAP financial measures, capital management measures, non-GAAP financial ratios and supplementary financial measures. Since these specified financial measures may not have a standardized meaning, they must be clearly defined and, where required, reconciled with their nearest GAAP measure and may not be comparable with the calculation of similar financial measures disclosed by other entities.

About Cardinal Energy Ltd.

Cardinal is a Canadian oil and natural gas company with operations focused on low-decline oil in Western Canada. Cardinal differentiates itself from its peers by having the lowest-decline conventional asset base in Western Canada. Cardinal has recently announced the commencement of its first thermal SAGD oil development project, which will further increase the long-term sustainability of the company. Cardinal works to continually improve its environmental, social and governance profile and operates its assets in a responsible and environmentally sensitive manner.

We seek Safe Harbor.