Mr. Alex Verge reports

JOURNEY ENERGY PROVIDES UPDATE ON 2023 CAPITAL PROGRAM; PROVIDES 2024 PRELIMINARY GUIDANCE INCLUDING STAGGERED PAYMENT OF TERM DEBT

Journey Energy Inc. has provided an update on a highly successful 2023 capital program. The program results exceeded expectations and have resulted in Journey exceeding its last guidance.

Journey is also pleased to provide preliminary guidance for 2024 with a focus on eliminating over 80 per cent of remaining indebtedness, advancing its power business and improving long-term sustainability.

2023 capital highlights:

• Increased daily sales volumes for November to 12,700 barrels of oil equivalent per day (55 per cent liquids) based on field estimates;
• Finished drilling the final well of a 12.0-well (10.3 net) program;
• 8.0 wells (6.8 net) were placed on production with overall program results exceeding type curve expectations;
• 2.0 wells (1.8 net) drilled in Cherhill are expected to come on production in January, 2024, with 2.0 wells (1.7 net) in Poplar Creek being completed in January, 2024;
• Total program costs of $11.4-million are 31 per cent lower than originally budgeted, allowing Journey to drill an additional 1.0 well in Matziwin (fourth quarter 2023), 1.7 net wells in Poplar Creek (fourth quarter 2023/first quarter 2024) and 2.9 net wells in Medicine Hat (first quarter of 2024).

During the third quarter, Journey began its 2023 exploration and development program, starting with a drilling program in the Medicine Hat pool. The Medicine Hat pool was a cornerstone of the acquisition that closed on Oct. 31, 2022. Journey drilled 4.0 (2.9 net) wells in Medicine Hat. These wells have markedly exceeded expectations with respect to both costs and results. Total capital costs for the program were $5.4-million (gross), with initial production from the four wells being approximately 550 (400 net to Journey) barrels per day of oil. The wells have increased overall Medicine Hat production by over 20 per cent and are forecast to pay out in approximately six months. Based upon these results, both Journey and its partner have begun planning a second program for the first quarter 2024. With 30 estimated future locations, along with future water flood and polymer flood expansion potential, Journey expects this field to continue to provide increasing shareholder value for many years to come.

The lower costs associated with the Medicine Hat program encouraged Journey to expand and accelerate the drilling of the Matziwin program. Journey has drilled 3.0 gross (3.0 net) wells in Matziwin. All three wells have been completed and placed on production. Similar to Medicine Hat, the total program costs were significantly below forecast. Initial production from one of the wells remains restricted, but overall production is forecast to meet type curve expectations.

On Nov. 7, 2023, Journey moved a drilling rig to the Cherhill field to drill 3.0 gross (2.7 net) wells. One well came on production Dec. 11, 2023, and two wells are currently being equipped and tied in. Following completion of the Cherhill drilling program, Journey added two additional wells (1.7 net) in Poplar Creek that will be completed in January.

The 2023 program is being financed from the flow-through-share issuance, which was closed in the spring of 2023. Journey has until the first quarter of 2024 to complete the expenditures under this program. To date, the program costs are well below forecast, and therefore, Journey is preparing four (2.9 net) additional wells in Medicine Hat in the first quarter of 2024.

In the third quarter of 2023, Journey had sales volumes of 11,756 barrels of oil equivalent per day. This volume was below what the company had forecast due to several one-time items. Restoration of shut-in production, along with new production from the capital program, has resulted in production increasing to 12,700 boe/d (55 per cent liquids) for November of 2023, based upon field estimates. The ability to maintain production rates above 12,000 boe/d with limited capital expenditures is a testament to Journey's very low corporate decline rate.

Throughout 2023, Journey has maintained a conservative posture with respect to capital expenditures. The company continues to prioritize its balance sheet strength along with the expansion of the power business. Due to the extensive regulatory timelines associated with adding power to the grid, Journey forecasts power-related capital expenditures of $7.6-million (excluding the Mazeppa purchase) for 2023 and has budgeted $16.8-million for 2024. The current target on-stream dates for the Gilby and Mazeppa power projects are the second quarter and fourth quarters of 2024, respectively.

Term debt repayment

Journey is pleased to report that it has entered into an agreement with its largest shareholder and term debt provider, Alberta Investment Management Corp., to extend the maturity of its term debt repayments. Previously, there was a balloon payment on April 30, 2024, for $24.7-million and a second one on Oct. 31, 2024, for $19.1-million. These repayments will be subject to a much smaller balloon payment with the balance being amortized over monthly amounts. For the first maturity in April, $12.7-million of principal will be paid on April 30, 2024, and then repayments of $1.0-million per month (plus accrued interest) will be paid from May, 2024, to April, 2025. For the second maturity in October, $10.1-million will be repaid on Oct. 31, 2024, and then six monthly payments of $1.5-million (plus accrued interest) will be made from November, 2024, to April, 2025.

Journey chief executive officer Alex Verge commented: "We are pleased that AIMCo has once again demonstrated its ongoing commitment to Journey's longer-term success and sustainability by remaining flexible in the current soft pricing environment. This repayment accommodation provides additional liquidity to enable Journey to complete its winter drilling program and advance the completion of the Gilby power generation project."

This new repayment schedule is aligned with Journey's current repayment commitment to Enerplus Corp. under the vendor takeback obligation from the acquisition in October of 2022. The repayments under the VTB are sensitive to the price of West Texas Intermediate oil, and Journey has reduced the principal amount from the initial $45.0-million to a currently outstanding amount of $17.0-million. Journey currently expects that the VTB will be fully repaid on Sept. 4, 2024, based on forecast WTI prices. This repayment date aligns with the start of repayments for the second tranche of AIMCo debt of $1.5-million, which begins on Oct. 31, 2024.

Expanding Journey's power business

Journey has demonstrated, through the operation of its existing Countess power plant, that it is far more profitable to convert its natural gas into electricity, than to merely sell the natural gas at current spot prices. The currently operating four-megawatt Countess facility, which was originally commissioned in the fourth quarter of 2020, has already paid out the original investment. Based on Journey's realized power prices in 2022, the average, effective, net realized price for natural gas used to generate power for the year was approximately $9.41 per thousand cubic feet. For the first nine months of 2023, the average, effective, net realized price was $9.47 per Mcf. These prices take into account the cost of the natural gas and the incremental costs of operating the power plant. As a comparison, the average Alberta Energy Company benchmark price for the first nine months of 2023 was $2.83 per Mcf.

Journey has budgeted $10.7-million to complete the Gilby power project and $6.3-million for re-energizing the Mazeppa power project in 2024. The steelwork on the building for the Gilby project is nearing completion, and building construction is scheduled to begin in January. Journey currently forecasts completion of the Gilby project in the second quarter of 2024 pending regulatory approvals.

In the second quarter of 2023, Journey purchased the 16.5-megawatt power generation facility at Mazeppa through an open auction process that started in November, 2022. This facility was originally commissioned by another operator in 2015 and ran for less than one year before being shut in. The Mazeppa facility is located near the community of High River, Alta., consists of five 3.3-megawatt generators, and includes switchgear, coolers and an export transformer. The generators, ancillary equipment and buildings are in excellent condition as they previously had minimal run time. Journey estimates that the replacement value of this facility is in excess of five times the purchase price. Journey has purchased the land the facility currently resides on and has also purchased the pipeline, which transports sales gas from an Atco buyback meter station. Recently, the operator of the buyback meter has verbally agreed to upgrade this meter station. Although Journey continues to await regulatory approvals, all of the efforts to date have resulted in Journey being confident that Mazeppa will be re-energized in its current location within the next year and looks forward to providing updates in due course.

Journey is planning to increase its power sales to the Alberta electricity grid by over 350 per cent over the next year. The nature of Journey's asset base is such that it is a large power consumer with power costs representing 25 per cent of overall corporate operating costs. When the Gilby and Mazeppa power projects are on stream, Journey will be in a position to more than offset its corporate power usage with power sales to the Alberta power grid. This will help diversify the corporate revenue stream and effectively provide a hedge against a volatile commodity pricing environment. The record power prices of $311 per megawatt realized in December of 2022, along with the expanding valuations demonstrated by recent market transactions, continue to reinforce the validity of this longer-term strategy.

2024 capital program

In 2024, Journey forecasts reducing leverage by $50-million while maintaining production and energizing two power facilities.

Of the $41-million in planned 2024 capital, $6.2-million is related to drilling and completions, all of which will be spent in the first quarter. Journey plans on drilling 4.0 wells (2.9 net) in Medicine Hat in the first quarter, along with the completion of the Poplar Creek wells, drilled in the fourth quarter of 2023. The ability to maintain production rates near 12,000 barrels of oil equivalent per day with limited capital expenditures is a testament to Journey's very low corporate decline rate. Approximately $17.7-million of capital will be devoted to land, seismic, facilities, polymer and end-of-life costs. An amount of $16.8-million of capital in 2024 is associated with the expansion of Journey's power business.

Outlook and guidance

The guidance incorporates many material underlying assumptions, including, but not limited to:

• Forecasted commodity prices;
• Assumptions of vendor takeback principal payments, as these repayments are based upon realized West Texas Intermediate oil prices;
• Forecast operating costs, including forecasted prices for power;
• Forecast costs for the capital program;
• Forecast results and phasing in of production additions from the capital program.

Journey has embarked on a careful and prudent expansion of its business plan to expand the company profitably. This includes executing on acquisitions, the timing of which can be unpredictable and, when executed on, can defer drilling plans.

About Journey Energy Inc.

Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in Western Canada. Journey's strategy is to expand its production base by drilling on its existing core lands, implementing water flood projects and executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.

We seek Safe Harbor.