An anonymous director reports

STRATHCONA RESOURCES LTD. REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL AND OPERATING RESULTS

Strathcona Resources Ltd. has released its fourth quarter and full-year (FY) 2023 financial and operating results.

Highlights (Q4 2023):

• Production of 186,064 barrels of oil equivalent per day (boe/d) (71 per cent oil and condensate, 77 per cent liquids) (1);
• Operating earnings of $202.1-million (94 cents per share) (2);
• Free cash flow of $150.8-million (70 cents per share) (2).

Highlights (FY 2023):

• Production of 155,459 boe/d (78 per cent oil and condensate, 84 per cent liquids) (1);
• Operating earnings of $748.4-million ($3.49 per share) (2);
• Free cash flow of $497.5-million ($2.32 per share) (2).

Quarter review and near-term priorities

In Cold Lake, record production of approximately 60 million barrels (mbbl) per day in the fourth quarter reflected approximately 20-per-cent year-over-year growth, driven by encouraging early performance from the new Tucker H-pad, reactivation of legacy well pairs at Tucker and strong base production performance at Lindbergh. Going forward, production at Cold Lake is expected to continue to benefit from the tie-in of seven infills on the D04 pad and five well pairs at the D08 pad at Lindbergh in the first quarter of 2024.

In Lloydminster, fourth quarter production was consistent versus the third quarter, with capital activity primarily concentrated in Strathcona's polymer flood at Bodo-Cosine and infill drilling at Winter. Strathcona's thermal assets in Lloydminster continued to benefit from Strathcona's owned and operated Hamlin rail terminal, which ships approximately 30 million barrels per day of undiluted crude oil directly to the U.S. Gulf Coast, earning prices tied to the WCS Houston benchmark. WCS Houston traded at an approximately $15-(U.S.)-per-barrel premium to WCS Hardisty in the fourth quarter of 2023, partially insulating Strathcona from wider local heavy oil differentials. Strathcona's realized pricing for its Lloydminster thermal assets is expected to further improve in 2024 due to the commissioning of an expansion to a unit train offloading facility in the U.S. Gulf Coast. The facility was purpose built for Strathcona to better supply a local U.S. Gulf Coast refiner that has executed a new crude purchase agreement with Strathcona at a premium to WCS Houston.

In the Montney, Strathcona closed the acquisition of Pipestone Energy Corp. on Oct. 3, 2023, and brought on production at the five-well 16-30 pad, which is performing above expectations. Strathcona's development plan for the legacy Pipestone asset reflects a more conservative approach to well configuration and spacing, designed to maximize per-well economics. In Kakwa, Strathcona tied in the five-well 3-24 pad, leading to record production of approximately 40 million boe/d at the asset. Performance from Kakwa continues to be strong, with Strathcona having drilled five of the top 20 producing wells in Alberta since the start of 2022 per public data, as measured by total condensate per light oil produced.

Strathcona repaid its bank term loan at the end of the fourth quarter of 2023, exiting the year with approximately $2.7-billion in debt. Following strong year-end reserves growth, Strathcona is pleased to announce it has received approval from its lenders for an expanded revolving credit facility of $2.5-billion (from $2.3-billion previously). The new facility is subject to completion of documentation, which is anticipated to occur on or about March 28, 2024.

For further details on Strathcona's year-end 2023 reserves, please see the news release dated March 11, 2024 and reserves overview highlights.

2024 capital budget update

Strathcona's 2024 capital budget continues to progress as planned. In light of weak natural gas prices, Strathcona has elected to defer the tie-in of its three-well 13-25 pad at Groundbirch, which was spudded in early 2024 and previously planned for tie-in midyear. The Groundbirch wells reflect the only portion of Strathcona's capital program where natural gas prices primarily drive economics. Natural gas prices are expected to meaningfully improve this winter and Strathcona will act opportunistically to maximize value.

The deferral of the Groundbirch wells is expected to reduce calendar year 2024 production by approximately 15 million cubic feet per day (mmcf/d). Strathcona is therefore reducing its 2024 production guidance to 187.5 million to 192.5 million boe/day (from 190 million to 195 million boe/day previously), and increasing its expected oil weighting to 71 per cent (from 70 per cent) and increasing expected total liquids weighting to 78 per cent (from 77 per cent). Oil and total liquids production guidance is unchanged. Strathcona's capital budget of $1.3-billion is also unchanged.

Production for the first half of 2024 is expected to be roughly flat versus the fourth quarter of 2023, with growth occurring in the back half of the year, coinciding with the expected in-service date of the Trans Mountain Expansion pipeline, which is expected to meaningfully improve local heavy oil prices.

Conference call details

Strathcona will host a conference call on March 27, 2024, starting at 9 a.m. MT (11 a.m. ET), to review the company's fourth quarter and year-end 2023 financial and operating results.

Date:  Wednesday, March 27, 2024

Time:  11 a.m. ET (9 a.m. MT)

On-line registration:  To join without operator assistance, register on-line up to 15 minutes before the start time. Enter your name and phone number to receive an automated callback.

Telephone entry:  Alternatively, you can join with operator assistance by dialling 1-888-390-0605 (North American toll-free) and quote conference ID No. 836882.

Webcast:  A webcast will be available.

For those unable to participate in the conference call at the scheduled time, a recording of the conference call will be available for seven days following the call and can be accessed by dialling 1-888-390-0541 and entering the conference No. 836882.

About Strathcona Resources Ltd.

Strathcona is one of North America's fastest-growing oil and gas producers with operations focused on thermal oil, enhanced oil recovery and liquids-rich natural gas. Strathcona is built on an innovative approach to growth achieved through the consolidation and development of long-life oil and gas assets. Strathcona's common shares (symbol SCR) are listed on the Toronto Stock Exchange.

Specified financial measures

This news release makes reference to certain financial measures and ratios that are not recognized measures under generally accepted accounting principles (GAAP) and do not have a standardized meaning prescribed by international financial reporting standards (IFRS). Non-GAAP financial measures and ratios are used internally by management to assess the performance of the company. They also provide investors with meaningful metrics to assess the company's performance compared with other companies in the same industry. However, the company's use of these terms may not be comparable with similarly defined measures presented by other companies. Investors are cautioned that these measures should not be construed as an alternative to financial measures determined in accordance with GAAP and these measures should not be considered to be more meaningful than GAAP measures in evaluating the company's performance.

Non-GAAP measures and ratios

Oil and natural gas sales, net of blending and other income, is calculated by deducting purchased product and blending costs from oil and natural gas sales, sales of purchased product and other income. Management uses this metric to isolate the revenue associated with company production after accounting for the unavoidable cost of blending.

Operating earnings is considered a key financial metric for evaluating the profitability of Strathcona's principal business and is derived from income (loss) and comprehensive income (loss) adjusted for amounts that are considered non-recurring or not directly attributable to the company's operations.

Funds from operations is used by management to analyze operating performance and provides an indication of the funds generated by Strathcona's principal business to either finance operating activities, reinvest to either maintain or grow the business, or make debt repayments. Funds from operations is derived from income (loss) and comprehensive income (loss) adjusted for non-cash items and transaction costs.

Free cash flow indicates funds available for deleveraging, financing future growth or, at some point in the future, shareholder returns. Free cash flow is derived from income (loss) and comprehensive income (loss) adjusted for non-cash items, transaction costs, capital expenditures and decommissioning costs.

A quantitative reconciliation of operating earnings, funds from operations, free cash flow and adjusted free cash flow to the most directly comparable GAAP financial measure, income (loss) and comprehensive income (loss) is set forth in an attached table.

Effective royalty rate is calculated by dividing royalties by oil and natural gas sales, net of blending. This metric allows management to analyze the movement of royalty expense in relation to realized and benchmark commodity prices.

Supplementary financial measures

Readers are referred to specified financial measures in Strathcona's fourth quarter and year-end 2023 MD&A (management's discussion and analysis) for supplementary financial measures, which information is incorporated by reference to this new release.

Interest and finance costs are an aggregation of interest and finance costs. Management uses this metric to obtain a fulsome understanding of all interest and accretion costs the company is subject to.

Other (income) expenses are an aggregation of risk management contracts, foreign exchange, transaction related costs, unrealized (gain) loss on Sable remediation fund, share of equity investment income, gain on step acquisitions of equity method investee, loss on termination of lease liability and deferred tax expense (recovery). They are presented in such a manner to yield prominence to key financial metrics such as income (loss) and comprehensive income (loss), funds from operations and free cash flow.

Non-cash items are an aggregation of depletion, depreciation and amortization, finance costs, other income -- ARO government grant and loss on termination of lease liability. They are presented in such a manner to yield prominence to key financial metrics such as income (loss) and comprehensive income (loss), funds from operations and free cash flow.

Presentation of oil and gas information

This news release contains various references to the abbreviation boe, which means barrels of oil equivalent. All boe conversions in this news release are derived by converting gas to oil at the ratio of 6,000 cubic feet of natural gas to one barrel of crude oil. Boe may be misleading, particularly if used in isolation. A boe conversion rate of one barrel to 6,000 cubic feet is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared with natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of one barrel to 6,000 cubic feet, utilizing a conversion ratio of one barrel to 6,000 cubic feet may be misleading as an indication of value.

References to liquids in this news release refer to, collectively, bitumen, heavy oil, condensate and light oil (comprising condensate and light oil), and other natural gas liquids (NGL) (comprising ethane, propane and butane only). References to oil and condensate in this news release refer to, collectively, light and medium crude oil, heavy crude oil, bitumen, and natural gas liquids. References to natural gas in this news release refer to conventional natural gas.

References to initial production rates and other short-term production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production for the company or the assets for which such rates are provided. Accordingly, the company cautions that the initial production rates should be considered to be preliminary.

We seek Safe Harbor.