Mr. Donald Benson reports

AVILA ENERGY CORPORATION ANNOUNCES RIGHTS OFFERING

Avila Energy Corp. will be undertaking a rights offering to holders of its common shares as of the close of business (Mountain Time) on Dec. 17, 2025 (the record date).

Under the rights offering, shareholders will receive one transferable right for each one common share held as of the record date. Each right will entitle the holder thereof to subscribe for one unit at a subscription price of 0.375 cent per unit pursuant to the basic subscription privilege. Each unit will consist of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one additional common share at an exercise price of (i) five cents per common share for the period of six months following the date of issuance of the warrant; and (ii) 10 cents per common share for the remaining 18 months of the 24 months following the date of issuance of the warrant. The subscription price represents a 25-per-cent discount to the trading price of the common shares on the Canadian Securities Exchange.

Pursuant to applicable securities laws and to the extent that other holders of rights do not exercise all of their rights under the basic subscription privilege, each holder of rights who fully exercises its basic subscription privilege will also be entitled to subscribe for additional units on a pro rata basis at the subscription price, in the manner prescribed by applicable securities laws and as further detailed in the circular (as defined below).

The rights offering is not subject to any minimum subscription level. A maximum of 226,490,954 units may be issued under the rights offering, for maximum aggregate gross proceeds of $849,341.08.

The rights, and the underlying warrants, will not trade on the CSE. The common shares issuable upon exercise of the rights are listed on the CSE under the symbol VIK.

The completion of the rights offering is conditional upon the satisfaction of certain conditions, including, but not limited to: (i) the receipt of all necessary regulatory approvals, including the final acceptance of the CSE; and (ii) there being no material adverse change in the business, operations, assets or financial condition of the company. The company reserves the right to waive any conditions or to terminate, cancel or modify the rights offering at any time prior to the expiry time (as defined below).

Further details on the rights offering, including eligibility requirements for shareholders to participate and the procedures to be followed by shareholders in order to subscribe for units, will be included in a rights offering circular dated Dec. 10, 2025, a rights offering notice and a notice to ineligible holders, which will be filed on SEDAR+ under Avila's profile.

It is expected that a copy of the rights offering notice, a direct registration system advice representing the rights and a subscription form will be mailed to each registered shareholder of the company resident in all provinces and territories of Canada (the eligible jurisdictions) as at the record date. Registered shareholders who wish to exercise their rights must forward the completed subscription form, together with payment, to the subscription agent, Endeavor Trust Corp., on or before the expiry time of 4 p.m. Mountain Time on Jan. 14, 2026. Any rights not exercised at or before the expiry time will be void and will have no value. Shareholders who hold their common shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.

Treatment of ineligible shareholders

The rights are being offered only to shareholders resident in the eligible jurisdictions as of the record date. Shareholders whose registered addresses are in, or who are otherwise resident in, jurisdictions other than the eligible jurisdictions (the ineligible jurisdictions) will generally not be eligible to receive rights or to exercise rights under the rights offering, unless they are recognized by the company as approved ineligible holders as described below.

Shareholders in ineligible jurisdictions will not receive rights DRS advices or rights certificates. Instead, they will be sent the notice to ineligible holders describing how, in the company's discretion and subject to applicable law, they may apply to be recognized as approved ineligible holders and, if so approved, participate in the rights offering. Rights delivered to CDS Clearing and Depository Services Inc. participants may not be forwarded by those participants to, or exercised on behalf of, beneficial holders resident in ineligible jurisdictions unless and until such holders have been recognized by the company as approved ineligible holders and the applicable participant has submitted payment in full of the subscription price to the subscription agent prior to the expiry time. For further details, refer to the circular.

Use of proceeds

The proceeds from the rights offering are expected to be used for payments to creditors and other liabilities not addressed under the company's amended proposal (as defined and further discussed below), as discussed below and in the circular, for inspection and repair of the company's natural gas processing equipment, and for working capital and general corporate purposes, as more fully described in the circular.

On Nov. 14, 2025, the company filed an amended proposal under the Bankruptcy and Insolvency Act (Canada) with FTI Consulting Canada Inc., in its capacity as proposal trustee. The amended proposal has been approved by the requisite majority of unsecured creditors and is subject to court approval, which is expected to be sought in late January, 2026. Under the amended proposal, the company will satisfy the claims of affected creditors through the issuance of common shares at a deemed price of five cents per common share, subject to the policies of the CSE. Accordingly, the total number of common shares to be issued will be equal to the aggregate dollar amount of affected creditor claims divided by five cents, subject to final reconciliation of claims and court approval. The shares-for-debt transaction is separate from the rights offering but will result in material dilution to existing shareholders, including shareholders who participate in the rights offering.

About Avila Energy Corp.

Avila is a company that is engaged in the business of acquiring, exploring and developing crude oil, natural gas and natural gas liquids in Western Canada. The company's assets consist of the West Central Alberta assets, located 50 kilometres southwest of Edmonton, Alta., and the East Central Alberta assets, located 90 kilometres east of Red Deer, Alta. The company exists under the laws of the Province of Alberta, with its principal place of business located at Suite 201, 2750 3rd Ave. NE, Calgary, Alta., T2A 2L5, Canada. Avila's common shares trade on the CSE under the trading symbol VIK, the Frankfurt Stock Exchange under the symbol 6HGO and OTC Markets Group under the symbol PTRVF.

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