Ms. Susan Riddell Rose reports

PERPETUAL ENERGY INC. REPORTS THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS

Perpetual Energy Inc. has released its third quarter 2023 financial and operating results. Select financial and operational information is outlined below, and should be read in conjunction with Perpetual's unaudited condensed interim consolidated financial statements and related management's discussion and analysis (MD&A) for the three and nine months ended Sept. 30, 2023, which are available through the company's website and SEDAR+.

This news release contains certain specified financial measures that are not recognized by GAAP (generally accepted accounting principles) and used by management to evaluate the performance of the company and its business. Since certain specified financial measures may not have a standardized meaning, securities regulations require that specified financial measures are clearly defined, qualified and, where required, reconciled with their nearest GAAP measure. See the section on non-GAAP and other financial measures in the MD&A for further information on the definition, calculation and reconciliation of these measures.

Subsequent events

Subsequent to the end of the third quarter and as previously announced on Oct. 17, 2023, Perpetual entered into a definitive agreement with a private operator to sell certain assets at Mannville in eastern Alberta for gross proceeds of $35.8-million in cash, prior to customary purchase price adjustments. The Mannville transaction is expected to close on or about Nov. 22, 2023, with a Sept. 1, 2023, effective date. The properties included in the Mannville transaction comprise substantially all of the production attributed to the company's eastern Alberta cash-generating unit, which averaged 1,431 barrels of oil equivalent per day (boe/d) (66 per cent conventional heavy oil) during the third quarter of 2023. Proceeds from the Mannville transaction will be used to reduce bank debt and manage future maturities on the company's term loan and senior notes and other obligations as they come due, as well as provide Perpetual with the liquidity to invest in its remaining assets at East Edson and pursue other new venture opportunities.

Concurrent with the announcement of the Mannville transaction, Perpetual confirmed it had completed the semi-annual borrowing base redetermination for its bank credit facility. Inclusive of the impact of the Mannville transaction, the borrowing limit on Perpetual's credit facility was reconfirmed at $30.0-million by the company's bank lending syndicate, with the next borrowing limit redetermination scheduled on or prior to May 31, 2024.

Third quarter 2023 highlights:

• Third quarter production averaged 6,570 boe/d (1) (78 per cent natural gas) with production increases from two (1.0 net) wells drilled and brought on production at East Edson. The company is on track to achieve its 2023 annual average production guidance, as updated for the previously announced Mannville transaction, of 6,200 to 6,400 boe/d as a result of strong well performance from the new East Edson wells.
• Adjusted funds flow (2) was $9.1-million (14 cents per share) in the third quarter of 2023. On a unit-of-production basis, adjusted funds flow was $15.10 per barrel of oil equivalent (boe). Net cash flows from operating activities were $2.5-million.
• Perpetual invested $7.3-million in the third quarter of 2023 to drill, complete, equip and tie in a two-well (1.0 net) pad at East Edson targeting the Wilrich formation. In addition, $900,000 was spent on asset retirement obligations (ARO) during the third quarter to abandon wells that had reached their end of life and execute surface lease reclamation activities.
• Cash costs (1) were $9.8-million or $16.16 per boe in the third quarter of 2023, in line with expectations for annual cash cost guidance of $16 to $18 per boe for 2023.
• Net income for the third quarter of 2023 was $3.7-million.
• Net debt (1) was $55.3-million at Sept. 30, 2023, an decrease of $400,000 from $55.7-million at Dec. 31, 2022.
• Perpetual had available liquidity (1) at Sept. 30, 2023, of $13.6-million, comprised the $30.0-million borrowing limit of Perpetual's first-lien credit facility, less current borrowings and letters of credit of $15.1-million and $1.3-million, respectively.

(1) See financial and operating highlights for breakdown by product type.

(2) Non-GAAP financial measure, non-GAAP ratio or supplementary financial measure that does not have any standardized meaning under IFRS (international financial reporting standards) and therefore may not be comparable with similar measures presented by other entities.

2023 outlook

Perpetual's board of directors previously approved annual exploration and development capital spending (1) of $25-million to $32-million for 2023, prior to acquisitions and dispositions, if any, of which $2-million to $4-million was allocated for potential spending in eastern Alberta in the second half of 2023. As a result of the Mannville transaction, the $2-million to $4-million of spending previously allocated for eastern Alberta will not occur. In addition, with further refinement of the execution timing of the East Edson drilling program, expected capital spending for the remainder of 2023 has been reduced to $5.5-million to $6.5-million. These adjustments resulted in forecast annual 2023 exploration and development capital spending (1) of $22-million to $23-million focused almost exclusively at East Edson, refined from previous guidance announced Oct. 17, 2023.

During the fourth quarter of 2023, Perpetual plans to participate at its 50-per-cent working interest in an East Edson drilling program to drill, complete, equip and tie in an additional two (1.0 net) horizontal Wilrich wells, to offset production declines through the West Wolf gas plant in order to optimize production and operating costs and meet transportation commitments. Additional expenditures are also planned for pad preparation for first quarter 2024 East Edson drilling activity.

Prior to giving effect to the Mannville transaction, the company was on track to deliver results in line with previous 2023 guidance. Updated 2023 guidance assumptions, adjusted for the Mannville transaction and refined East Edson capital spending for the remainder of the year, are provided in an attached table.

Perpetual will continue to address end-of-life ARO, with total abandonment and reclamation expenditures of approximately $1.5-million to $1.6-million planned for 2023. This exceeds the company's annual area-based closure mandatory spending requirement of $1.4-million as calculated by the Alberta Energy Regulator (AER).

About Perpetual Energy Inc.

Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alta. Perpetual owns a diversified asset portfolio, including liquids-rich conventional natural gas assets in the deep basin of west-central Alberta, heavy crude oil and shallow conventional natural gas in eastern Alberta, and undeveloped bitumen leases in Northern Alberta. Additional information on Perpetual can be accessed on SEDAR+ or from the company's website.

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