Mr. James Evaskevich reports

YANGARRA ANNOUNCES 2023 FIRST QUARTER FINANCIAL AND OPERATING RESULTS

Yangarra Resources Ltd. has released its financial and operating results for the three months ended March 31, 2023.

Operations update

Yangarra drilled eight wells and completed nine wells during the first quarter of 2023, and exited Q1 with five drilled but uncompleted wells. Included in the Q1 completion program were three wells in the new Chambers area, along with the full commissioning of a 15 mmcf/d (million cubic feet per day) compression facility and a 10.5-kilometre sales line. Initial results from the new Chambers area are positive, and have exceeded initial expectations for natural gas and liquids production rates.

The Chambers area serves as a template for the company's Cardium development strategy of pursuing halo Cardium lands with no legacy conventional development. By targeting virgin lands for development, Yangarra can typically drill four wells to eight wells per section for optimal reserve recoveries from the entire section. With minimal conventional development on the company's Cardium lands, Yangarra can cost-effectively develop sections similar to other unconventional resource plays such as the Montney. This upside is reflected in the company's reserve report with a larger proven undeveloped and probable weighting than other conventional Cardium players.

Additional advantages of drilling in the halo Cardium include the use of simplified well designs as intermediate casing is not required, lower mud losses and water injection hits are rarely encountered. Yangarra's strategy of avoiding legacy Cardium production has resulted in overall lower decommissioning costs, especially as Cardium wells drilled in the 1960s and 1970s have a higher likelihood of legacy reclamation issues.

The company continues to experience sustained cost increases in operations, and for drilling and completion activities. While some of the cost increases are due to inflation, a significant portion of the cost increases are attributable to increased regulatory burden, for which the company has increased staff count and allocated additional resources to manage these issues facing the entire oil and gas industry.

An updated corporate presentation is also available on the company's website.

Capital budget and 2023 guidance

As a result of the increased snowfall during the past winter season, the company made the decision to curtail capital spending until field conditions improve. Given the curtailment of activity during spring breakup, the company has updated production guidance for the year. Funds flow guidance has also been revised to reflect the significant reduction in natural gas pricing from the original budget.

The revised guidance numbers are shown in the associated table.

First quarter highlights:

• Funds flow from operations of $30.1-million (32 cents per share -- fully diluted), a decrease of 24 per cent from the same period in 2022;
• $12.8-million of adjusted net debt was repaid during first quarter;
• Oil and gas sales were $49-million, a decrease of 5 per cent from the same period in 2022;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $32.4-million (37 cents per share -- basic);
• Net income of $14.9-million (16 cents per share -- diluted, $19.5-million before tax), a decrease of 34 per cent from the same period in 2022;
• Average production of 12,412 boe/d (barrels of oil equivalent per day) (42 per cent liquids) during the quarter, a 24-per-cent increase from the same period in 2022;
• Operating costs were $8.36/boe (including $1.35/boe of transportation costs);
• Field operating netbacks were $30.88/boe;
• Operating netbacks, which include the impact of commodity contracts, were $30.84/boe;
• Operating margins were 70 per cent and funds flow from operations margins were 61 per cent;
• G&A (general and administrative) costs of $1.41/boe;
• Royalties were 11 per cent of oil and gas revenue;
• All-in cash costs were $17.05/boe;
• Capital expenditures were $32.5-million;
• Adjusted net debt was $121.5-million;
• Adjusted net debt to first quarter annualized funds flow from operations was 1:1;
• Retained earnings of $280-million;
• Decommissioning liabilities of $14.9-million (discounted).

Annual general meeting of shareholders

The company's annual general meeting of shareholders is scheduled for 10 a.m. on Thursday, April 27, 2023, in the Tillyard Management Conference Centre, Main floor, 715 5th Ave. SW, Calgary, Alta.

Operations summary

Net petroleum and natural gas production, pricing and revenue are summarized in the associated table.

Quarter-end disclosure

The company's March 31, 2023, unaudited condensed interim consolidated financial statements and management's discussion and analysis will be filed on SEDAR and are available on the company's website.

We seek Safe Harbor.