Mr. Alex Verge reports

JOURNEY ENERGY PROVIDES UPDATED 2024 GUIDANCE

Journey Energy Inc. has provided updated guidance for 2024 with a focus on advancing its power business and improving long-term sustainability.

2024 capital program

Upon closing the previously announced convertible debenture financing on March 20, 2024, Journey used a portion of the net proceeds of $36.6-million to retire the remaining vendor takeback debt of $11.0-million and has also repaid AIMCo $12.7-million of its term debt. This will create interest cost savings in 2024 as the new debt carries a lower average interest rate than the repaid debt.

With enhanced liquidity for 2024, Journey now forecasts reducing leverage by over $20-million while maintaining production and advancing the development of two new power facilities. Journey today announces that it has expanded its capital program by $10-million to $51-million. Of the $51-million of total capital spending in 2024, $16-million is related to drilling and completions, half of which was already spent in the first quarter. Journey drilled 4.0 wells (2.9 net) in Medicine Hat in the first quarter and also completed the two Poplar Creek wells drilled in the fourth quarter of 2023. Production from these wells is exceeding internal projections. Journey is planning to expand its exploration and development program with additional drilling in the second half of 2024, and will provide further detail on this expansion in due course.

In addition to the drilling program, Journey is planning to increase capital spending for facilities, water flood and polymer flood to $9-million. This increase in spending includes facility debottlenecking in Cherhill; expanding the polymer flood in Medicine Hat to new, unflooded areas; and a water flood expansion in Matziwin. These projects are designed to increase recovery from well-defined oil pools and also help flatten Journey's already low-decline rates.

Journey is maintaining its previously planned expenditures of $17-million, which include both the power facility currently under construction in Gilby, as well as the continued development of the Mazeppa project. Journey is preparing for an Oct. 1 start-up in Gilby but has not included any additional power revenue for 2024 into the current guidance. Journey is still awaiting results from the electricity cluster study, which is expected in late June. This will then provide more clarity around the Mazeppa start-up date. At full capacity, Journey's Countess, Gilby and Mazeppa power projects are forecast to provide cash flow of over $17-million in 2025.

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 of 13 per cent, and its proven developed producing net asset value (discounted at 10 per cent) of $5 per share (see the Feb. 22, 2024, reserves press release). In addition to $17-million of power-related capital in 2024, approximately $18-million of capital will be devoted to land, seismic, facilities, polymer and end-of-life costs. Most of these expenditures will add to Journey's future value and future cash flow, but have only a minor impact on 2024 production volumes due to the expenditures being made later in the year. This leaves $16-million (approximately 31 per cent) of budgeted expenditures to maintain current production volumes.

In addition, $9-million will be devoted to end-of-life costs, land and seismic.

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 is maintaining its current guidance pertaining to sales volumes and adjusted funds flow ranges due to a series of offsetting factors. Increased downtime due to the extreme cold weather in January and increased downtime budgeted for turnarounds and routine maintenance have reduced initially forecasted volumes. Increased capital devoted to the polymer and water flood expansions also reduces near-term volumes (in favour of future volumes) due to injector conversions. Drilling capital will be phased in for later in 2024 and therefore will have a minor impact on 2024 volumes. The impact of the incremental capital is to increase exit liquids (crude oil and natural gas liquids) volumes by 500 to 600 barrels per day. The combined impact of the increased liquids production and the future secondary/tertiary recovery volumes positions Journey very well for an expanded capital program in 2025.

The recent financing has provided Journey financial flexibility to exit 2024 without a significant working capital deficit. After the final payment for the AIMCo term debt on April 30, 2025, there will be no debt repayment obligations until 2029. This, along with the inclusion of new power generation revenue in 2025, will provide the company the ability to significantly ramp up growth capital in 2025. This will include, but is not limited to, the drilling of two Duvernay wells. Journey has 35 net sections of largely contiguous land in the heart of the west shale basin. The land has been delineated by three basin-leading wells. As an early indicator of the value of this play, on March 20, 2024, two-year mineral licences for approximately 30 sections of offsetting lands to Journey and on trend in the oil window were sold for over $1-million per section.

Adjusted funds flow projections for 2024 remain unchanged from previous guidance since the reduction in the forecasted natural gas pricing is being offset by a minor increase in the pricing for oil. Journey will update its guidance in due course at regular intervals throughout the year as commodity price projections change.

Journey has embarked on a careful and prudent expansion of its business plan to expand the company profitably. This includes executing on acquisitions, of which the timing 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.