Mr. Neil Roszell reports

HEADWATER EXPLORATION INC. ANNOUNCES THIRD QUARTER OPERATING AND FINANCIAL RESULTS, DECLARATION OF Q4 DIVIDEND AND SUCCESSION PLAN

Headwater Exploration Inc. has released its operating and financial results for the three and nine months ended Sept. 30, 2023. Selected financial and operational information is outlined herein, and should be read in conjunction with the unaudited condensed interim financial statements and the related management's discussion and analysis. These filings will be available at SEDAR+ and the company's website.

Highlights for three months ended Sept. 30, 2023:

• Achieved record production averaging 18,027 barrels of oil equivalent per day (consisting of 16,902 barrels per day heavy oil, 6.1 million cubic feet per day natural gas and 103 bbl per day natural gas liquids), representing an increase of 55 per cent from the third quarter of 2022;
• Realized record adjusted funds flow from operations of $80.9-million (34 cents per share, basic) and cash flows from operating activities of $85.6-million (36 cents per share, basic);
• Achieved an operating netback, including financial derivatives of $58.80 per boe and an adjusted funds flow netback of $49.22 per boe;
• Achieved record net income of $49.7-million (21 cents per share, basic) equating to $30.23 per boe;
• Executed a $70.2-million capital expenditure program focusing on development in Marten Hills West, drilling a total of 26 crude oil wells in the area at a 100-per-cent success rate;
• Returned 10 cents per share to shareholders; since announcing the company's inaugural dividend in November, 2022, Headwater Exploration has returned a total of 40 cents per share to shareholders;
• As at Sept. 30, 2023, Headwater Exploration had adjusted working capital of $35.9-million, working capital of $43.5-million and no outstanding bank debt.

Fourth quarter dividend

The board of directors of Headwater Exploration has declared a quarterly cash dividend to shareholders of 10 cents per common share payable on Jan. 15, 2024, to shareholders of record at the close of business on Dec. 29, 2023. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada).

2023 guidance update

Year to date in 2023, Headwater Exploration had extremely favourable drilling conditions, allowing it to accelerate some of the planned 2024 drilling into the fourth quarter of 2023. As a result of these changes, the board has approved a $10-million expansion to the 2023 capital budget from $225-million to $235-million. Its 2023 guidance of 18,000 boe/d remains intact with its exit adjusted working capital expected to be $60-million.

Headwater Exploration expects to release 2024 guidance in early December.

Headwater Exploration succession plan

As part of Headwater Exploration's continuing long-term succession planning, effective Jan. 1, 2024, Jason Jaskela will transition from president and chief operating officer to president and chief executive officer. Neil Roszell, the current chairman and chief executive officer, will stay on as Headwater Exploration's executive chairman. Brad Christman will assume the role of chief operating officer from his current role of vice-president, production.

Mr. Roszell said: "Jason and Brad have been pivotal in the success of the multiple iterations of our franchise over the past 14 years. They have consistently demonstrated exceptional leadership skills and an unwavering dedication to enhancing shareholder value. As executive chairman, I look forward to continuing that collaboration in our ongoing pursuit of shareholder value creation."

We seek Safe Harbor.