Mr. James Evaskevich reports

YANGARRA ANNOUNCES 2023 YEAR END FINANCIAL AND OPERATING RESULTS AND RESERVES

Yangarra Resources Ltd. has released its financial and operating results and reserves for the year ended Dec. 31, 2023.

2023 operational review:

• Yangarra continued to refine the company's drilling approach resulting in a dramatic reduction in drilling times and drilling costs.
• The new core area of Chambers with Cardium, Belly River and Manville potential was delineated with five Cardium wells and one Belly River well with positive results.
• The company added 2.2 new drilling locations for every well drilled.
• Several Smart Dart and Plug & Perf wells were tested during the year, with the company returning to cemented, coil-activated sleeve completions while monitoring the results on the Smart Dart and Plug & Perf wells.
• Yangarra constrained the fourth quarter capital program due to continuing depressed natural gas prices, resulting in capital spending of $16-million in Q4.

2024 outlook:

• Yangarra's primary goal in 2024 is to hit a debt target of $80-million and then focus on shareholder returns.
• The company has set a capital budget of $70-million for 2024:
  • Yangarra will continue to constrain the capital program into 2024 because of depressed natural gas prices with spending of $20-million to $25-million in the first half, dependent on the timing of spring breakup.
  • The second-half spending has been set at $45-million to $50-million; however, this is dependent on an improvement in commodity pricing.
  • Included in the budget is a well stimulation and optimization program targeting 20 per cent to 25 per cent of legacy wells. This stimulation strategy was initiated in 2021 and now has evolved to where the company can apply the strategy to the entire field annually.
  • The 2024 capital budget is designed to hold production flat for 2024 while maximizing debt repayment.
• A recent Computer Modelling Group (CMG) study indicated waterflood potential in the Halo Cardium, and, as a result, Yangarra plans to initiate a waterflood pilot in Q2 2024 in the Chedderville area. Water for the pilot will be sourced from flowback and produced water, which would have otherwise needed to be disposed of, giving the project an added benefit of approximately $800,000 per year in avoided water disposal fees.

2023 highlights:

• Average production of 11,936 barrels of oil equivalent per day (39 per cent liquids), an increase of 8 per cent from 2022;
• Oil and gas sales of $166.5-million, a decrease of 31 per cent from 2022;
• Funds flow from operations of $99-million ($1.06 per share -- fully diluted), a decrease of 44 per cent from 2022;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $109-million ($1.11 per share -- fully diluted);
• Net income of $46.7-million (47 cents per share -- fully diluted), resulting in an income margin of 28 per cent;
• Return on capital employed of 9.5 per cent;
• Operating costs of $8.24 per barrel of oil equivalent (including $1.54 per barrel of oil equivalent of transportation costs);
• Operating netback of $26.72 per barrel of oil equivalent;
• Operating margin of 70 per cent and funds flow from operations margin of 59 per cent;
• G&A (general and administrative) costs of $1.32 per barrel of oil equivalent;
• Royalties at 9 per cent of oil and gas revenue;
• Capital expenditures of $94.3-million;
• Adjusted net debt of $118.6-million, a decrease of $15.7-million from 2022;
• Retained earnings of $311.7-million;
• Decommissioning liabilities of $16-million (discounted):
  • Less than $1-million is required to abandon all non-producing wells;
  • Expenditures on abandonments and reclamations of $500,000 for calendar 2023.

Fourth quarter highlights:

• Funds flow from operations of $17.6-million (19 cents per share -- fully diluted), a decrease of 58 per cent from the same period in 2022;
• Oil and gas sales of $33.7-million, a decrease of 44 per cent from the same period in 2022;
• Adjusted EBITDA of $20.1-million (20 cents per share -- fully diluted), a decrease of 40 per cent from the same period in 2022;
• Net income of $12.4-million (14 cents per share -- fully diluted), a decrease of 50 per cent from the same period in 2022;
• Average production of 11,133 barrels of oil equivalent per day (38 per cent liquids), a 5-per-cent decrease from the same period in 2022;
• Operating costs of $8.39 per barrel of oil equivalent (including $1.70 per barrel of oil equivalent of transportation costs);
• Operating netback of $21.54 per barrel of oil equivalent;
• Operating margin of 66 per cent and funds flow from operations margin of 52 per cent;
• G&A costs of $1.55 per barrel of oil equivalent;
• Royalties at 8 per cent of oil and gas revenue;
• All-in cash costs of $15.77 per barrel of oil equivalent;
• Capital expenditures of $16-million;
• Adjusted net debt to fourth quarter annualized funds flow from operations of 1.69:1.

Reserve report highlights

Summary

All reserves information contained in this press release are based on the company's 2023 National Instrument 51-101 oil and gas reserve report as prepared by Deloitte LLP.

Proved developed producing (PDP) reserves:

• 38 million barrels of oil equivalent (45-per-cent increase from 2022);
• Net present value before tax discounted at 10 per cent (NPV10) of $504-million (3-per-cent decrease from 2022);
• Yangarra's PDP finding and development (F&D) cost is $5.85 per barrel of oil equivalent resulting in a recycle ratio of 4.6 times;
• PDP net asset value per fully diluted common share (NAV per FD share) of $3.79;
• PDP reserve life index (RLI) of 9.4 years;
• PDP additions replaced 370 per cent of 2023 production.

Total proved reserves (1P):

• 96.8 million barrels of oil equivalent (12-per-cent increase from 2022);
• NPV10 of $1.1-billion (21-per-cent decrease from 2022);
• 1P future development costs of $420-million;
• Yangarra's 1P F&D cost is $7.49 per barrel of oil equivalent resulting in a recycle ratio of 3.6 times;
• 1P NAV per FD share of $9.85;
• RLI of 24 years;
• 1P additions replaced 336 per cent of 2023 production.

Proved plus probable reserves (2P):

• 155.7 million barrels of oil equivalent (7-per-cent increase from 2022);
• NPV10 of $1.6-billion (21-per-cent decrease from 2022);
• 2P future development costs of $632-million;
• Yangarra's 2P F&D cost is $7.74 per barrel of oil equivalent, resulting in a recycle ratio of 3.5 times;
• 2P NAV per FD share of $14.25;
• RLI of 38 years;
• 2P additions replaced 349 per cent of 2023 production.

Operations summary

Net petroleum and natural gas production, pricing and revenue are summarized in an attached table.

Working capital summary

An attached table summarizes the change in adjusted net debt for the years ended Dec. 31, 2023, and 2022.

Capital spending

Capital spending is summarized as shown in an attached table.

Oil and gas reserves

The attached tables summarize certain information contained in the 2023 reserve report. The 2023 reserve report encompasses 100 per cent of Yangarra's oil and gas properties and was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities, by Deloitte.

Annual general meeting of shareholders

The company's annual general meeting of shareholders is scheduled for 10 a.m. on Wednesday, May 1, 2024, in the Tillyard Management Conference Centre, main floor, 715 5th Ave. SW, Calgary, Alta.

Year-end disclosure

The company's Dec. 31, 2023, audited consolidated financial statements, management discussion and analysis, and annual information form have been filed on SEDAR+ and are available on the company's website.

We seek Safe Harbor.