Mr. Pat Carlson reports

KIWETINOHK ENERGY ANNOUNCES 2024 BUDGET

Kiwetinohk Energy Corp. has provided an update on fourth quarter operating results, has released its 2024 budget and has established a three-year growth target of 40,000 barrels of oil equivalent per day of annualized sales volumes.

Message to shareholders

"In consideration of the evolving business environment, our 2024 budget is aimed to serve the goal of maximizing shareholder value, providing optionality, and delivering safe and reliable operations," said Pat Carlson, chief executive officer.

"Since acquiring the Simonette asset in the second quarter of 2021, Kiwetinohk has achieved strong returns on invested capital and grown production by approximately 108 per cent. Our 2024 program will build on this success as we execute a continuous drilling program in our upstream division to deliver strong annual production growth, which will accelerate filling our recently expanded gas processing infrastructure and contracted capacity on the Alliance pipeline to Chicago. Together, these components of our plan will support continued profitable development of our upstream asset base through a further reduction in operating costs, coupled with access to a recently stronger natural gas pricing market in the [United States]. Very encouraging early performance results from our recently completed four-well Duvernay pad at 14-29 has only increased confidence in our asset base, and we expect to see these four wells added to the list of top-producing Duvernay wells in 2024.

"In the power division, we continue to advance our renewable and gas-fired power projects through the [Alberta Electric System Operator] regulatory queue while closely managing development costs. During the fourth quarter, three projects advanced to the next AESO stage, including Opal, our 101-megawatt gas-fired peaker project. Opal, along with our 400-megawatt Homestead solar project, remain our most advanced development projects, each at Stage 4, awaiting approval for their transmission line connections before being in a position to commence construction. Kiwetinohk is seeking external capital to finance these projects, and has engaged a financial adviser to help us survey capital markets for potential financing partners and/or acquirers of these projects. Transactions for these projects may include a partial or outright sale with proceeds helping to fund ongoing development of the remaining portfolio. We are excited to bring these high-quality, differentiated projects to market; however, we also recognize timing for each process may be impacted by uncertainty from ongoing policy discussions between provincial and federal governments. We continue to dialogue with industry and provincial and federal governments on future policy decisions. We are generally supportive of changes that enable power generators to profitably provide the Alberta electricity grid with clean, reliable, dispatchable and affordable energy, which is in alignment with our power strategy."

Key three-year strategic objectives

Kiwetinohk has revised its short- to medium-term objectives in line with its 10-year strategy to build a high-quality energy transition business and include the following:

1. A focus on further development of the lower-risk Simonette Duvernay to better demonstrate and fully realize the large economic potential of this resource; its base 2024 budget includes 12 wells in the Duvernay;
2. Delineate and optimize the well design for the Montney in each of Simonette and West Placid to achieve economic recognition of the value of the company's Montney lands while preserving prospective Montney acreage; its base budget includes three wells in the Montney (two Simonette and one Placid);
3. Annual average production growth to 24,000 to 27,000 barrels of oil equivalent per day in 2024 as part of a medium-term plan to increase average annual production from its existing resource to approximately 40,000 boe/d by 2026 and fully utilize its recently expanded plant capacity;
4. In the short term, confine capital spending to maintain balance sheet flexibility and stay within a net debt to adjusted funds flow ratio of less than 1.0 times; this positions the company to reduce debt in subsequent years while continuing to invest sufficiently in upstream production;
5. Substantially reduce capital deployment on power development and carbon capture and storage projects to the minimum required to maintain viability and competitive positioning until further clarity is provided on the regulatory and policy revisions at both the federal and provincial levels;
6. Advance Homestead and Opal power projects (501 megawatts) toward a final investment decision and successful transaction conclusions.

2024 corporate budget

Planned capital expenditures:

• Drill, complete, equip and tie in (DCET) 15 wells, including 12 Duvernay and three Montney wells, for a total estimated DCET expenditure of $250-million to $265-million; additional upstream capital of $20-million to $22-million includes other capital required to manage base production, infrastructure and water requirements;
• Power division capital of $5-million to $8-million, reflecting a capital-disciplined approach as the industry awaits policy clarity from both provincial and federal governments; Kiwetinohk is pleased that governments have undertaken to clarify policy and provide regulations suited for the company's business, the energy transition; primary objectives are to preserve and to advance the development portfolio within the AESO regulatory process and to achieve FID for Homestead and Opal, including engineering and environmental studies to define projects sufficiently for the pursuit of financing.

The operating plan underlying the budget is resilient and flexible: It predominantly takes advantage of existing upstream infrastructure while executing multiple three-well drilling and completion pads that can be easily scaled and deferring major power project construction expenses. This flexibility enables the company to expand or contract capital spending in response to a changing business environment. The base budget reflects a focus on financial discipline given the recent volatility in commodity prices. Kiwetinohk can also accelerate capital in response to an improved economic environment (such as improved commodity prices) and has retained the option to increase second half 2024 capital expenditures by approximately $45-million to advance three additional Duvernay wells. If pursued, this optional pad would provide a forecasted additional approximately 3,000 boe/d of production in 2025 and be announced in the first half of 2024.

Annual average production is expected to be 24,000 to 27,000 boe/d during 2024 through the upstream capital investment outlined herein. The budgeted wells position Kiwetinohk to achieve the objective of continuously filling its processing capacity by 2026.

Adjusted funds flow from operations is expected to be between $250-million and $360-million (see detailed 2024 guidance herein for key assumptions), with commodity price sensitivities outlined herein. Kiwetinohk has designed an upstream capital program that can achieve attractive growth and at the same time be financed primarily within adjusted funds from operations. This will allow Kiwetinohk to exit 2024 with a forecasted ratio of net debt to adjusted funds from operations between 0.3 times and 0.8 times.

Commodity price hedging will remain an integral part of its go-forward capital program as it aims to preserve strong returns for capital deployed and maintain prudent debt levels while it adds new profitable production to its asset base. For 2024, approximately 54 per cent of oil and condensate production from current wells is hedged at an average floor price of $68 (U.S.) per boe with structures that allow for upside price participation up to $79 (U.S.) per boe. In addition, approximately 63 per cent of its natural gas production from current wells is hedged with an average floor price of $3.20 (U.S.) per million British thermal units with structures that allow for upside price participation to $4.07 (U.S.) per MMBtu. Kiwetinohk will be seeking to add further hedges on the 2024 budget volumes to bring total hedged volume in line with current hedging levels.

Detailed 2024 guidance

Kiwetinohk's 2024 guidance provides information relevant to expectations for financial and operational results. This corporate guidance is based on various commodity price scenarios, regulatory assumptions and economic conditions, and readers are cautioned that certain guidance estimates may fluctuate. Kiwetinohk will update guidance if and as required throughout the year.

Fourth quarter operations and corporate update

In the upstream division in mid-November, Kiwetinohk began production from its new 14-29 four-well Duvernay pad. This pad consists of two infill and two unbound Simonette Duvernay wells. Initial wellhead production rates, which are nearing their first 30 days on production, are very encouraging. The two unbound wells are producing at a slightly higher choke setting, and each well has been averaging between approximately 10.0 million and 12.0 million cubic feet per day of natural gas and natural gas liquids and approximately 1,500 to 1,700 barrels per day of condensate. Production rates on the two infill wells, which have shorter lateral lengths and are being restricted, have been averaging between approximately 5.5 million and 6.5 million cubic feet per day of natural gas and natural gas liquids and approximately 1,200 to 1,400 barrels per day of condensate per well. Driven by the recent well results, total company production is currently averaging approximately 28,000 to 30,000 boe/d. As a result, the company is confident in its expectation of achieving near the midpoint of its 2023 production guidance range.

Through continued execution, the team has gained a better understanding of optimal well design and construction practices that Kiwetinohk expects will reduce risk and cost, increase completed lateral length, and increase productivity and recovery per unit of completed lateral length.

"Based on public production data, Kiwetinohk now owns 34 of the top-100 wells and seven of the top 10 in the entire Duvernay play. The tally includes wells drilled by Kiwetinohk and the previous operator with four of the top-10 wells drilled by the Kiwetinohk team," said Mike Backus, chief operating officer, upstream. "I am pleased with what the team has accomplished with well design and operational execution. The recent four-well pad illustrates the evolving capability."

In addition to the recent completion activity at the 14-29 pad, drilling operations are continuing on the 8-23 Simonette pad, where the last of three Duvernay wells is under way. Kiwetinohk plans to complete and bring these wells on stream in the first quarter of 2024 as part of its continued development program.

In the power division, Kiwetinohk continues to add value through the development of its portfolio of solar and gas-fired generation projects. During the fourth quarter, the 101-megawatt Opal firm renewable (gas-fired peaker) project advanced into Stage 4 of the AESO regulatory queue, with Granum 300-megawatt solar and Little Flipi 124-megawatt firm renewable both advanced into Stage 3.

The power team has established a leading position among Alberta power developers with seven projects (two gas-fired peakers, two gas-fired natural gas combined cycle with provisions for carbon capture and three solar) in the AESO project development queue. All of the projects are outside of the new, cluster review and approval process adopted by the regulator. The projects continue to advance in the regulatory process with Opal and Homestead targeting readiness for FID in the second half 2024. In aggregate, the portfolio, along with the company's two carbon capture projects, represents significant capital investment opportunities. Consistent with Kiwetinohk's stated strategy, the company will seek external project equity and debt capital to fully finance the construction of the projects, and may consider the partial or outright sale of one or more of these projects. Under the new leadership of power division president Fareen Sunderji, the team is poised to approach capital markets in search of financing.

"Our strategy is intended to deliver a balanced portfolio and realize the value through a variety of opportunities for these high-quality projects that addresses Alberta's need for clean, reliable, dispatchable and affordable electricity. The team is managing seven projects with a total nameplate capacity of approximately 2,150 megawatts through the approval process, and we are confident we have the capability to make this energy transition vision a reality," stated Ms. Sunderji.

Three-year outlook

Kiwetinohk anticipates that its 2024 development program and contingent extension of another three-well pad will position the company to achieve annual targeted upstream production of 40,000 boe/d by 2026. If achieved, this would represent 78-per-cent growth over the midpoint of 2023 guidance of 22,500 boe/d. Under this development plan, the upstream division will require an estimated additional approximately $800-million of capital expenditures expected over 2025 and 2026 to achieve this production target. Kiwetinohk would seek to finance future development through the reinvestment of cash flows and targets, reducing debt levels over the same periods.

If targeted production of 40,000 boe/d is reached in 2026, Kiwetinohk expects its initial annual sustaining capital expenditures, under current economic conditions and assumptions consistent with 2024 guidance, to be approximately $250-million with sufficient inventory to sustain this production level for an extended period. Kiwetinohk's land is well tenured to 2032 and beyond, with the next two years of activity expected to address the majority of near-term expiring lands.

Kiwetinohk's 2025 and 2026 plans are subject to board approval and may change. Capital investment decisions will be re-evaluated annually or as market conditions dictate.

Sustainability

Kiwetinohk continues to position itself as a profitable clean energy business with focused delivery of greenhouse gas emission reductions from its upstream business to achieve a 50-per-cent reduction in vented methane by 2025. In 2024, asset retirement activities will continue with the company remaining on track to eliminate all current inactive upstream asset retirement obligations within five to seven years.

Kiwetinohk continually engages with governments on issues affecting its business, and is working with indigenous nations and stakeholders to identify challenges and opportunities for shared value creation. As Kiwetinohk's portfolio of natural-gas-fired and solar renewable power projects advances in 2024, the company plans to continue engagement on a range of topics, including local contracting, employment and agrivoltaics (the use of land for both solar power production and agriculture).

About Kiwetinohk Energy Corp.

The company, at Kiwetinohk, is passionate about addressing climate change and the future of energy. Kiwetinohk's mission is to build a profitable energy transition business, providing clean, reliable, dispatchable, affordable energy. Kiwetinohk develops and produces natural gas and related products, and is in the process of developing renewable power, natural-gas-fired power, carbon capture and hydrogen clean energy projects. It views climate change with a sense of urgency, and it wants to make a difference. Kiwetinohk's common shares trade on the Toronto Stock Exchange under the symbol KEC.

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