Ms. Susan Riddell Rose reports

PERPETUAL ENERGY INC. REPORTS YEAR-END 2023 FINANCIAL AND OPERATING RESULTS, Q1 2024 OUTLOOK AND RESERVES

Perpetual Energy Inc. has released its fourth quarter and year-end 2023 financial and operating results, a first quarter 2024 outlook, and a summary of the company's year-end 2023 reserves as reported by the independent engineering firm McDaniel and Associates Consultants Ltd. A complete copy of Perpetual's audited consolidated financial statements, management's discussion and analysis, and annual information form for the year ended Dec. 31, 2023, is available through the company's website and SEDAR+.

Fourth quarter and year-end 2023 highlights:

• On Nov. 22, 2023, the company closed the previously announced disposition of certain assets at Mannville in eastern Alberta for $35.8-million before customary purchase price adjustments of $2.1-million resulting in total net consideration of $33.7-million.
• Fourth quarter average production was 5,749 barrels of oil equivalent per day, down 19 per cent from the comparative period of 2022 (Q4 2022: 7,138 boe/d) and down 12 per cent quarter over quarter (third quarter 2023: 6,570 boe/d) as a result of the Mannville disposition. During the fourth quarter of 2023, there were production increases from the two (1.0 net) additional wells drilled, completed and brought on production during the fourth quarter at East Edson.
• Full-year 2023 average production of 6,375 boe/d, down 2 per cent from 2022 (6,486 boe/d) as a result of the Mannville disposition, which was in the high end of its 2023 production guidance of 6,200 to 6,400 boe/d, as updated for the Mannville disposition.
• Adjusted funds flow in the fourth quarter of 2023 was $12.7-million (19 cents per share), up $1.0-million (11 per cent) from $9.1-million (14 cents per share) in the third quarter of 2023 (Q4 2022: $14.2-million and 22 cents per share). Adjusted funds flow on a unit-of-production basis was $24.07 per boe, a 57-per-cent increase from the $15.32 per boe in the third quarter of 2023, driven by higher realized gains on risk management contracts, as well as lower general and administrative and cash finance expenses. Adjusted funds flow in 2023 was $34.4-million or 51 cents per share in 2023 (2022: $48.5-million and 75 cents per share).
• Perpetual's exploration and development capital expenditures in the fourth quarter of 2023 were $5.3-million to drill, complete, equip and tie in two (1.0 net) wells at East Edson. In addition, $900,000 was spent on land purchases at East Edson and $3.2-million in corporate expenditures related to leasehold improvements. Full-year 2023 exploration and development capital spending totalled $21.5-million, down from $31.8-million in 2022. Approximately $100,000 was spent on asset retirement obligations to abandon wells that had reached their end of life and execute surface lease reclamation activities, bringing full-year 2023 ARO spending to $1.6-million.
• Cash costs were $6.6-million or $12.52 per boe in the fourth quarter of 2023 (Q3 2023: $9.8-million or $16.16 per boe and Q4 2022: $9.0-million or $13.77 per boe). Cash costs were $36.4-million ($15.64 per boe) for full-year 2023, up from $33.8-million in 2022 ($14.26 per boe).
• Net income for the fourth quarter of 2023 was $8.5-million, a 2-per-cent decrease from $8.6-million net income in the fourth quarter of 2022. Net income in 2023 was $5.6-million (eight cents per share) as compared with $44.4-million (69 cents per share) in 2022.
• As at Dec. 31, 2023, net debt was $21.6-million, a decrease of $34.1-million from $55.7-million at Dec. 31, 2022.
• Perpetual had available liquidity at Dec. 31, 2023, of $47.0-million, composed of the $30.0-million borrowing limit of Perpetual's first-lien credit facility and cash on hand of $18.3-million, less letters of credit of $1.3-million.
• As previously announced on March 22, 2024, after several years of litigation, Perpetual has entered into an agreement with the trustee to resolve the Sequoia litigation without any party involved admitting liability, wrongdoing, or violation of law, regulations, public policy or fiduciary duties. Pursuant to an agreement and subject to court approval, the company will make an aggregate payment of $30.0-million spread out over several years, consisting of an initial payment of $10.0-million and annual instalments of $3.75-million until the total amount of the settlement principal is paid. Subject to the payment of all amounts under the settlement agreement, interest prior to March 27, 2026, will accrue and be forgiven. As of March 28, 2026, interest will accrue and be payable on the outstanding settlement principal at an interest rate equal to the applicable Bank of Canada prime rate on the date of payment.
• As of March 22, 2024, Perpetual has repaid and cancelled its $2.7-million second-lien term loan and provided notice for the early redemption of its $33.2-million 8.75 per cent senior secured third-lien notes maturing Jan. 23, 2025. Noteholders may elect to be continuing holders of 2025 senior notes subject to amendments, which, among other things, provide Perpetual with the right to convert all or a portion of the 2025 senior notes into common shares of the company at its discretion. Entities controlled or directed by the president and chief executive officer, holding $26.2-million of 2025 senior notes, have provided written confirmation to Perpetual of their election to agree to the amended terms and to be a continuing holder of 2025 senior notes.

Year-end 2023 reserves

The change in reserves year over year was relatively flat after excluding the Mannville disposition of 5.4 million boe. The additional nominal decrease of 200,000 boe was a result of positive reserve adds that substantially offset production. Total company proven plus probable reserves year over year decreased by 5.6 MMboe, and Perpetual's proven plus probable reserves at year-end 2023 were 26.0 MMboe, composed of 9 per cent crude oil and natural gas liquids (2022: 31.6 MMboe and 20 per cent crude oil and NGL).

Reserve highlights include:

• Total proven reserves were 15.9 MMboe at year-end 2023, representing 61 per cent of the company's proven plus probable reserves (2022: 67 per cent).
• Proven plus probable producing reserves were 12.2 MMboe at year-end 2023, representing 47 per cent of total proven plus probable reserves (2022: 15.7 MMboe and 50 per cent).
• The Mannville disposition contributed a decrease in total proven plus probable reserves of 5.4 MMboe.
• Based on the three-consultant average price (McDaniel, GLJ and Sproule) forecasts used by McDaniel, the net present value of Perpetual's total proven plus probable reserves (discounted at 10 per cent) before income tax was $178.6-million (2022: $302.0-million). The decrease is related primarily to the Mannville disposition and also to impacts to the value of the East Edson property related to inflation, carbon tax and the decrease in the independent reserve evaluators' forecast in the early years for natural gas and NGL prices at year-end 2023 as compared with the prior year.
• All abandonment, decommissioning and reclamation obligations are included in the reserve report, consistent with year-end 2022. These include all future obligations for developed wells and undeveloped locations assigned reserves, and the additional costs expected to be incurred to abandon and reclaim non-reserve wells, facilities and pipelines are included.
• Based on the consultant average price forecast, Perpetual's reserve-based net asset value (discounted at 10 per cent) at year-end 2023 is estimated at $174.7-million ($2.59 per share) as compared with $250.1-million ($3.80 per share) at year-end 2022.

2024 outlook

Perpetual expects that court approval for the settlement agreement will occur in late April or early May. With the Sequoia litigation resolved, Perpetual is positioned to turn its attention again to executing its business plan and pursue the company's strategic priorities, which include:

1. Maximize funds flow and value at Edson;
2. Reignite active exploration program for tight oil and gas;
3. Advance technology-driven diversifying new ventures;
4. Strengthen the balance sheet, reduce corporate costs and manage risk.

Perpetual's board of directors has approved the first quarter 2024 production guidance of between 4,300 and 4,600 boe/d, capital spending of $1.0-million, cash costs between $16 and $18 per boe, and royalties of 18 per cent to 20 per cent as a percentage of total revenue.

Perpetual will continue to address end of life ARO, with total abandonment and reclamation expenditures of approximately $1.2-million planned for the first quarter of 2024. The company's area-based mandatory spending requirement for 2024 of $1.3-million, as calculated by the Alberta Energy Regulator, will largely be incurred during the first quarter, with remaining spending to occur in the third and fourth quarter of 2024.

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 and undeveloped bitumen leases in Northern Alberta.

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