Mr. Kevin Johnson reports

GEAR ENERGY LTD. ANNOUNCES FIRST QUARTER 2024 OPERATING RESULTS

Gear Energy Ltd. has provided a first quarter operating update to shareholders. Gear's interim condensed consolidated financial statements and related management's discussion and analysis for the period ended March 31, 2024, are available for review on Gear's website and on SEDAR+.

Message to shareholders

In March, 2024, Gear announced the retirement of Ingram Gillmore from his role as president and chief executive officer (CEO) and the appointment of Kevin Johnson as the new president and CEO. With this transition, Gear has been diligently reviewing near-term capital investment decisions and execution plans. In addition, Gear has focused efforts on re-establishing momentum, maximizing and expanding its high-quality inventory-rich asset base with the singular goal of delivering meaningful, long-term, outsized shareholder value creation. In parallel, Gear intends on rewarding long-term shareholders with a reliable and sustainable monthly dividend while maintaining a strong balance sheet.

Quarterly highlights

• Production for the first quarter of 2024 was 5,714 boe (barrels of oil equivalent) per day, a 4-per-cent decrease over the 5,952 boe per day reported in the first quarter of 2023 and a 5-per-cent decrease from the fourth quarter of 2023 of 6,000 boe per day. The decrease in production is due to the extreme cold snap in January, 2024, that temporarily froze off approximately 25 per cent of Gear's production. Production recovered and averaged approximately 6,000 boe per day for the month of March, 2024.
• Gear invested $7.6-million of capital through the first quarter of 2024. This included the drilling of four gross (four net) successful wells including one unlined multilateral heavy oil well in Wildmere, Alta., two lined single-lateral heavy oil wells in Celtic, Sask., and one lined single lateral heavy oil well in Maidstone, Sask. The Maidstone heavy oil well was equipped with a circulation string that should assist with sand mobility in the wellbore. Over the last 30 days, the four new wells cumulatively averaged approximately 400 barrels per day of oil production.
• Funds from operations for the first quarter of 2024 was $15.2-million, an increase of 17 per cent from the first quarter of 2023 as a result of higher commodity prices. Although WTI (West Texas Intermediate) oil pricing remained relatively unchanged, Canadian heavy oil differentials narrowed from $24.76 (U.S.) discount per barrel in the first quarter of 2023 to $19.33 (U.S.) discount per barrel in the first quarter of 2024. With the Trans Mountain pipeline expansion slated to be operational in the second quarter of 2024, Canadian heavy oil differentials are currently forecasted to be below $12 (U.S.) discount per barrel for the third quarter of 2024.
• Gear distributed $3.9-million of dividends or 1.5 cents per share through the first quarter of 2024, bringing the total cumulative dividends to $46.9-million, or 18 cents per share, paid from inception to the date hereof.
• Net debt to quarterly annualized funds from operations was 0.2 times, with net debt decreasing from $14.1-million on Dec. 31, 2023, to $12.5-million on March 31, 2024. This decrease was a result of funds from operations exceeding capital expenditures and dividends through the quarter. For the second quarter of 2024, using the current outlook on commodity prices, net debt is forecasted to fall considerably.
• In the first quarter, Gear announced a normal course issuer bid (NCIB). Gear does not expect to purchase any shares under the NCIB at this time as it allocates funds from operations to capital investments and growth.
• After 10 years of service, Harry English announced he will not be seeking re-election at Gear's May 1, 2024, annual general meeting (the AGM). Gear would like to extend its sincerest gratitude to Mr. English for his valuable contributions and guidance as a director to the company. Kathy Turgeon, formerly the vice-president, finance, and chief financial officer of Peyto Exploration & Development Corp., has been nominated for election as a director of Gear at the AGM. Ms. Turgeon's extensive financial experience will be very complementary to the skills and experience of the other members of the Gear board of directors.
• In April, Gear appointed Steve Power to role of vice-president of exploration, replacing Dustin Ressler in the role. Gear would like to thank Mr. Ressler for his significant contributions to Gear over the last 13 years and wishes him the very best in his future endeavours. Mr. Power brings significant experience in both conventional and unconventional plays across the Western Canadian sedimentary basin. Throughout his career, Mr. Power has consistently demonstrated his ability to identify, capture and deliver top-tier inventory across numerous oil and condensate-rich resource plays.

We seek Safe Harbor.