Mr. Joel MacLeod reports

HIGHWOOD ASSET MANAGEMENT LTD. ANNOUNCES SALE OF WILSON CREEK ASSETS

Highwood Asset Management Ltd. has entered into a definitive asset purchase and sale agreement to sell its Wilson Creek assets to Obsidian Energy Ltd. for up to $112-million.

Under the terms of the agreement, Obsidian Energy will acquire the assets for cash consideration of $105-million payable upon close, subject to closing adjustments, plus contingent consideration in quarterly instalments between the third quarter of 2026 and the second quarter of 2027 up to an aggregate of $7-million, based on the price of West Texas Intermediate. The transaction has an effective date of April 1, 2026, and is expected to close on or about June 30, 2026, subject to customary closing conditions and regulatory approvals.

Highwood expects to use a portion of the upfront consideration to reduce the company's outstanding debt, improving Highwood's balance sheet and overall liquidity. The transaction creates optionality for capital acceleration, returns of capital to shareholders and acquisitions.

Transaction highlights:

• Compelling value creation and significant return on invested capital -- crystallizes a pretax return on invested capital of greater than 200 per cent for the Wilson Creek assets since they were acquired in August, 2023; the assets were acquired for net consideration of approximately $35-million and have generated approximately $26-million in asset-level free cash flow up to March 31, 2026;
• Creates further capital allocation optionality to maximize total returns to shareholders -- significantly reduces Highwood's leverage; net proceeds from the divestiture will be used to reduce Highwood's net debt, which is anticipated to be approximately $15.0-million after closing of the transaction; the strength of Highwood's balance sheet postclosing is expected to provide Highwood with the flexibility to enhance shareholder total returns through accelerated growth in Brazeau, further development of early-stage opportunities in Highwood's portfolio, strategic acquisitions and/or returns of capital;
• Portfolio concentration toward profitable long-duration assets -- continued drilling success in the Basal Belly River at Brazeau, which is analogous to the Belly River at Wilson Creek and implementation of water flood, which will continue to lower base declines and increase reserve lives.

Strategic rationale

Since closing the Brazeau, Castlegate and Shale acquisitions in August, 2023, at 2.2 times field net operating income and 0.5 times proven reserves, Highwood has increased production from approximately 4,000 barrels of oil equivalent per day to over 6,000 boe/d while converting reserves at strong recycle ratios (proven developed producing: 1.4 times; proven: 2.0 times; proven plus probable: 3.3 times). The divestiture of Wilson Creek represents the next phase of the company's strategy: concentrating capital toward long-duration, high-margin assets in Brazeau and other early-stage opportunities in Highwood's portfolio.

Highwood's high-netback oil-weighted Brazeau asset delivers compelling single-well economics with attractive recycle ratios and payback periods (approximately 2.6 times recycle ratio and 12-month before-tax payback period at $65 (U.S.) WTI). Capital efficiencies of approximately $19,000 per boe/d and a corporate free cash flow break-even below $45 (U.S.) WTI provide significant downside protection while preserving upside optionality as the company evaluates further growth opportunities. Highwood has recently commenced water flood initiatives at Brazeau. Based on the independent qualified reserves evaluator's (GLJ Ltd.) evaluation of Highwood's reserves as at Dec. 31, 2025, the company's retained reserves carry a before-tax net present value discounted at 10 per cent of approximately $153-million on a proven developed producing basis and approximately $306-million on a total proven basis, net of approximately $15-million of net debt pro forma for closing, implying a net asset value of approximately $9 per share (PDP) and approximately $19 per share (1P).

Given the recent industry success in close proximity to Highwood's Mannville stack lands in eastern Alberta using horizontal technology, Highwood plans to deploy capital to the assets before the end of the year. Further, the company continues to add to its portfolio in the area through multiple Crown acquisitions. These lands provide multiple opportunities, including potential steam-assisted gravity drainage projects. The company plans to delineate and commence strategic financing and partnership discussions over the coming several months to advance these opportunities. In addition, the company continues to explore strategic options for its lithium, critical mineral and rare earth element assets. Highwood has seen interest from potential strategic partners, and believes there is strong potential to access government financing support.

Shareholder returns

As part of Highwood's commitment to enhancing shareholder returns, the company intends to implement its inaugural normal course issuer bid in the second half of 2026, subject to approval from the board of directors and acceptance by the TSX Venture Exchange.

Advisers

RBC Capital Markets is acting as lead financial adviser to Highwood with respect to the transaction, and DLA Piper is acting as legal counsel to Highwood. ATB Capital Markets is acting as financial adviser to the special committee of the board of directors, and Blake, Cassels & Graydon LLP is acting as legal counsel to the special committee. CIBC Capital Markets is acting as strategic adviser to Highwood.

We seek Safe Harbor.