Mr. Philip Hodge reports

PINE CLIFF ENERGY LTD. ANNOUNCES STRATEGIC ACQUISITION, NEW TERM DEBT FACILITY AND MONTHLY DIVIDEND

Pine Cliff Energy Ltd. has entered into a definitive agreement to offer to acquire all of the issued and outstanding common shares of Certus Oil & Gas Inc., a privately held oil and natural gas producer, for a cash purchase price of $100-million. The offer will be financed through a combination of available cash and a new secured term debt facility. The board of directors of both Pine Cliff and Certus have unanimously approved the offer. The offer is expected to close by the end of 2023, subject to certain customary conditions and regulatory approvals.

Acquisition highlights

Pine Cliff expects the proposed acquisition of Certus will have the following benefits:

• Expands Pine Cliff's core operations into the Caroline area of western-central Alberta, adding production (September, 2023) of approximately 5,300 boe/d (barrels of oil equivalent per day; 49 per cent liquids).
• Adds an initially identified 31 gross (15.4 net) deep-basin liquids-rich natural gas and oil development locations that are expected to compete for capital in Pine Cliff's annual spending program for the next several years.
• Strengthens Pine Cliff's operating netback through increased exposure to crude oil and natural gas liquids (NGLs) production.
• Before-tax PDP4 reserve value of the acquired reserves at a 10-per-cent discount rate is $112.5-million based on externally estimated PDP reserves of 12.3 million boe effective July 1, 2023.
• Based on September, 2023, average production, the Certus assets are expected to generate net operating income of approximately $38.4-million in 2024 at strip pricing.
• Pine Cliff's pro forma base production decline rate is expected to remain less than 10 per cent, ranking among the lowest for publicly traded Canadian upstream oil and gas companies.

Strategic rationale

Since inception, Pine Cliff has grown by acquiring strategic, low-decline assets through a continuing commitment to providing reliable returns to its shareholders. The acquisition is consistent with this strategy and is expected to improve Pine Cliff's operating netback at current commodity prices by increasing its liquids exposure while adding future development locations that offer attractive economic returns. Financing the acquisition without equity will result in accretion to per-share metrics and is expected to increase the free funds flow generated by Pine Cliff at current commodity prices.

Since introducing a dividend in June, 2022, Pine Cliff's conservative balance sheet has helped backstop the monthly dividend payment, with cumulative dividends paid from adjusted funds flow. The company will continue with a prudent hedging program to support the dividend and debt repayment postacquisition. Pine Cliff expects to issue annual guidance in the first quarter of 2024.

New term debt facility

Pine Cliff has entered into a non-binding term sheet for a three-year term debt facility provided by a private institutional investor (the lender). The company expects to enter into a binding commitment with the lender concurrent with the closing of the offer. The term debt facility will be subject to interest of Canadian prime rate plus 3.65 per cent and includes scheduled amortization with options for prepayment after 12 months.

Pine Cliff will maintain its current demand operating loan of $8-million with a Canadian chartered bank as part of its normal course of business.

Dividend

Pine Cliff has declared a regular monthly dividend of 1.083 cents per common share to be paid Nov. 30, 2023, to shareholders of record on Nov. 15, 2023. The dividend is designated as an eligible dividend for Canadian income tax purposes.

Transaction details

Under the agreement, Pine Cliff has agreed to mail the offer and accompanying takeover bid circular, notice of guaranteed delivery, and letters of transmittal to all registered shareholders of Certus and other persons who are entitled to receive these documents under applicable law. Concurrently, the board of directors of Certus will mail to shareholders a directors circular containing the unanimous recommendation of the board that shareholders accept and tender their common shares to the offer.

In connection with the offer, certain shareholders of Certus, who collectively hold approximately 51 per cent of the common shares, have entered into lock-up agreements with Pine Cliff agreeing to, among other things, deposit their common shares under the offer.

As specified in further detail in the offer documents, the agreement contains customary deal protections in favour of Pine Cliff for a transaction of this kind. Full details of the offer will be set out in offer documents which will be mailed to shareholders and filed on Pine Cliff's SEDAR+ profile.

Advisers

Haywood Securities Inc. and Paradigm Capital are both acting as financial advisers to Pine Cliff with respect to the offer.

TPH&Co, the energy business of Perella Weinberg Partners, is acting as the strategic adviser to Pine Cliff with respect to the offer.

Stifel Canada is acting as strategic adviser to Certus with respect to the offer.

About Pine Cliff Energy Ltd.

Pine Cliff is a natural-gas-focused company with a long-term view of creating shareholder value.

We seek Safe Harbor.