Mr. Neil Roszell reports

HEADWATER EXPLORATION INC. PROVIDES FIRST QUARTER OPERATIONS UPDATE

Headwater Exploration Inc. had first quarter average production volumes of approximately 19,500 boe/d (barrels of oil equivalent per day), which are in line with guidance and on trend to meet previously announced annualized production guidance of 20,000 boe/d. With visibility to expansion of WCS egress, growth capital has been strategically allocated in the second half of 2024.

Marten Hills West

In Marten Hills West, Headwater drilled 14 wells in the first quarter inclusive of 10 Clearwater A producers, three Clearwater A injectors and a Clearwater E exploration test.

The Clearwater E exploration test at 00/04-35-076-02W5 achieved a 15-day initial production rate of 155 bbl/d of 24 API oil before being shut in for breakup. The team is extremely excited about this result as it validates a Clearwater E pool that covers approximately 15 sections of Headwater land. An all-weather access road will be constructed to access this well and additional drilling locations in this pool late in the third quarter of 2024.

Based on strong results from our initial Clearwater G discovery well at 00/02-30-075-01W5, three Clearwater G follow-up tests are expected to be drilled early in the second quarter of 2024 extending north and south of this discovery well.

Implementation of the company's first full section waterflood in section 7-076-02W5 at Marten Hills West is complete. Initial water injection rates have been strong with offsetting producing wells showing immediate gas-to-oil ratio decreases. The pattern is expected to stabilize approximately 300 bbl/d (barrels per day) of oil production. Continued successful results from this pattern will set up significant further waterflood development across the Clearwater A pool.

West Nipisi

Two multilateral exploration wells were drilled in the West Nipisi expansion area via winter access roads. Unfortunately, these wells had to be prematurely shut in for breakup in mid-March due to unseasonal warm weather.

The first four-leg lateral well at 00/05-18-77-11W5, targeting the Clearwater F sand, achieved a five-day initial production rate of 90 bbl/d of 16.5 API oil. This highly encouraging result is expected to be followed by a second test of the Clearwater F sand in the first quarter of 2025 once winter access can be re-established.

A second four-leg lateral exploration well targeting the Clearwater G sand was drilled at 02/05-15-077-12W5. The well encountered natural fractures while drilling resulting in extremely strong fluid rates but also high water cuts in the later stages of load recovery. The geotechnical shows while drilling this well were highly encouraging with strong porosity and oil staining throughout the laterals. A follow-up test away from the natural fracturing in this pool will be drilled in the first quarter of 2025 when winter access can be re-established.

Heart River

The company's exploration team identified an encouraging Falher prospect at Heart River where the company has accumulated 23 sections of land since late 2023. The company's first six-leg lateral well testing this geological concept was drilled at 00/06-36-076-16W5. This well has recently finished load fluid recovery and is currently producing 120 bbl/d. Results from the discovery well have the potential to set up a pool that is estimated to cover approximately 12 sections. Further delineation tests of this pool are expected to be completed in the fourth quarter of 2024.

Seal

Headwater is excited to report drilling of the company's first Bluesky test. The 04/13-06-083-15W5 well at Seal, a 12-leg Bluesky test was drilled in 11 days with approximately 17,000 metres of reservoir exposure. The company is pleased with the execution of this well which is currently recovering load fluid at favorable rates. It is anticipated the well will finish recovering load fluid and enter its initial production phase in mid-April.

Headwater is in the midst of an active delineation drilling campaign at Seal targeting both the Falher B and D zones. This four-well program, which includes three Stingwray wells, is a follow up to the Falher B discovery well at 03/13-06-083-15W5 and the initial Stingwray test in the Falher D at 00/07-07-083-15W5.

The successes achieved to date in Seal are expected to establish the area as a multizone growth engine for Headwater over the next several years.

Handel

A stratigraphic test and one single-leg horizontal well have been recently drilled on the 56-section Manville prospect in Saskatchewan. The 1-30-035-18W3, a single lateral open hole well, was drilled in the Lloyd formation and placed on production in March. This well is currently being optimized to understand its deliverability potential. Pending success of this current test, additional multilateral tests are planned for later in 2024.

Exploration

The Headwater team continues its pursuit of organic growth opportunities in and beyond the boundaries of the Clearwater accumulating over 520 net sections in the Clearwater fairway and 175 net sections of non-Clearwater acreage in oily fairways across the basin.

Over the balance of 2024, the current budget contemplates testing an additional three to four exploration prospects.

Additional corporate information can be found in the company's corporate presentation and on Headwater's website.

We seek Safe Harbor.