Mr. Ken Gray reports

PETRUS RESOURCES ANNOUNCES SECOND QUARTER 2023 FINANCIAL & OPERATING RESULTS, REVISED 2023 GUIDANCE

Petrus Resources Ltd. has released financial and operating results as at and for the three and six months ended June 30, 2023.

Q2 2023 highlights:

• Production up 44 per cent -- production was up 44 per cent from 7,280 boe/d (barrels of oil equivalent per day) in the second quarter of 2022 to 10,492 boe/d in the second quarter of 2023 as a result of new wells brought on production in late 2022 and during the first quarter of 2023.
• Operating expense down 26 per cent -- operating expense was $5.83/boe in the second quarter of 2023, a decrease of 26 per cent from $7.92/boe in the second quarter of 2022. The decrease per boe is mainly due to higher production while holding total operating expenses relatively flat.
• Commodity prices decline -- realized price per boe decreased by 52 per cent in the second quarter of 2023 ($30.59/boe) compared with the second quarter of 2022 ($63.33/boe). The realized oil, natural gas and NGL (natural gas liquid) prices decreased by 31 per cent, 66 per cent and 53 per cent, respectively. Realized price per boe was also down 24 per cent quarter-over-quarter (QoQ), continuing the downward trend in 2023.
• Funds flow -- despite the decrease in commodity prices, Petrus generated funds flow of $19-million (15 cents per share) for the second quarter of 2023, 18 per cent lower than funds flow of $23.2-million (21 cents per share) during the second quarter of 2022. The decrease is due to lower commodity prices and is partially offset by higher realized hedging gains and lower costs.
• Net debt down 31 per cent QoQ -- net debt was $36.9-million at June 30, 2023, 31 per cent lower than the prior quarter-end ($53.1-million at March 31, 2023). The net debt to annualized funds flow ratio was 0.5 times, well below the target of under one time.
• Credit facility increase -- Petrus's lender completed the semi-annual borrowing base redetermination and increased the borrowing limit from $30-million to $45-million. As of the date of this report, $6.3-million was drawn on this facility.

2023 revised budget guidance

Consistent with Petrus's commitment to maximize long-term value for shareholders, the company has pivoted its capital program for the remainder of 2023 to ensure spending remains within cash flow while also prioritizing its most strategic investments. This shift also positions Petrus to generate significant free cash flow, allowing the company to introduce a return of capital to shareholders through dividends and share buybacks in the fourth quarter while continuing to reduce debt.

Petrus is revising its 2023 capital budget guidance to $60-million to $75-million, $33.1-million of which has already been spent, largely on drilling. Remaining capital will be allocated as follows: 35 per cent to adding infrastructure, including a pipeline to North Ferrier which will provide greater flexibility and lower operating costs in the development of the company's assets in this area; and 65 per cent to new wells, including the completion of the four Ferrier wells drilled in Q1 2023, and new drilling in North Ferrier.

The revised capital budget is expected to result in 2023 annual production of 10,000 to 10,500 boe/d (up 35 per cent year-over-year) and annual funds flow of $70-million to $80-million (down 14 per cent year-over-year). Net debt at the end of the year is expected to be $40-million to $50-million, well below the company's target maximum net debt to annualized funds flow ratio of one time. Free cash flow is expected to be in the range of $5-million to $15-million.

In summary, the board of directors has approved a revised 2023 capital budget and guidance is as follows:

• Capital budget of $60-million to $75-million;
• Average annual production rate of 10,000 to 10,500 boe/d;
• Generate annual funds flow of $70-million to $80-million for 2023 (assuming an average 2023 price forecast of $72.50 (U.S.)/barrel WTI for oil, AECO gas price of $2.58/gigajoule and 2023 foreign exchange rate of 75 U.S. cents);
• Free cash flow of $5-million to $15-million, which will be used to introduce a return of capital to shareholders through dividends and share buybacks in the fourth quarter and continue to reduce debt.

The revised capital program is reflective of Petrus's flexible and disciplined investment strategy and strongly positions the company for sustainable long-term growth and value creation.

Operations update

Second quarter average production by area was as noted herein.

Second quarter average production was 10,492 boe/d in 2023 compared with 7,280 boe/d in 2022. The 44-per-cent increase in production was mainly a result of Petrus's capital program during 2022 and three (3.0 net) new 2023 drilled wells brought on stream in late February and early March.

Second quarter production was down from first quarter production of 11,385 boe/d due to a combination of natural decline and production interruptions from the Alberta wildfires.

Capital expenditures

Capital expenditures (excluding acquisitions and dispositions) totalled $3.4-million in the second quarter of 2023, compared with $4.9-million in the prior-year comparative period. The majority of the capital spent in the second quarter of 2023 is related to the equip and tie-in of the wells drilled in the first quarter as well as preliminary construction costs on the North Ferrier pipeline. Completion activities for the remaining wells drilled in the first quarter of 2023 began subsequent to quarter-end.

During the first quarter of 2022, Petrus closed an acquisition in its core Ferrier area; included in this acquisition was approximately 425 boe/d of production and 5,120 net acres of undeveloped land. The acquisition was made for total share consideration of 10 million shares ($15.2-million).

An updated corporate presentation can be found on the company's website.

We seek Safe Harbor.