Mr. M. Scott Ratushny reports

CARDINAL ANNOUNCES ITS 2020 OPERATING AND CAPITAL BUDGET, RENEWAL OF THE CONVERTIBLE DEBENTURE NORMAL COURSE ISSUER BID AND THE MONTHLY DIVIDEND FOR DECEMBER

Cardinal Energy Ltd.'s board of directors has approved an operating and capital budget for 2020 that will focus on debt reduction, a sustainable dividend, operating costs reductions and increasing production volumes. Cardinal also announces that the Toronto Stock Exchange has accepted the notice of Cardinal's intention to commence a normal course issuer bid (the NCIB).

Highlights of 2020 budget:

• Forecasting net debt reduction of 15 per cent by year-end;
• Low corporate production decline rate allows for a conservative $60-million to $65-million development capital expenditure budget;
• Generates free cash flow of $40-million to $45-million for debt repayment, asset retirement obligation (ARO) expenditures or normal course issuer bid activity;
• Forecasting 6-per-cent debt-adjusted production-per-share growth;
• Targeting a 5-per-cent decrease in operating and general and administrative (G&A) expenses;
• Reduction of the company's total 2020 net debt to annual adjusted funds flow ratio to 1.7 times;
• Increased adjusted funds flow results in a total payout ratio of approximately 65 per cent to 70 per cent.

Cardinal's 2020 capital budget follows up on the success of the company's continuing asset development with a particular focus on drilling in Southern Alberta, which earns additional lands in the company's core area. Additionally, the company plans to increase expenditures in its carbon dioxide enhanced recovery project at Midale, continue with continuing operating cost reduction projects, including additional power generation projects throughout its operating areas, and pro-actively upgrading its pipeline and facility infrastructure. Cardinal's 2020 budget includes the abandonment of over 80 non-producing wells and reclamation of 100 inactive leases as the company continues to reduce its environmental footprint for the long-term sustainable development of the company. In addition, the budget forecasts a 15-per-cent reduction in net debt. The company has renewed its NCIB to purchase and cancel the maximum allowable 10 per cent of the outstanding balance of convertible debentures and will opportunistically repurchase and cancel common shares through its continuing common share NCIB.

2020 budget

Cardinal's 2020 operating budget is expected to produce adjusted funds flow of approximately $125-million to $130-million ($1.11 per share), assuming a royalty rate of 17 per cent, a West Texas Intermediate (WTI) oil price of $55 (U.S.) per barrel, a U.S./Canadian-dollar exchange rate of 0.76 and a $1.75-per-thousand-cubic-foot AECO (Alberta Energy company) natural gas price. During 2020, Cardinal's operating expenses per barrel of oil equivalent are forecasted to decrease by approximately 5 per cent over 2019 levels due to the company's 2019 cost reduction projects in operation for 2020 combined with new cost reduction projects being forecasted to be implemented in 2020.

Cardinal's 2020 capital budget is structured to take advantage of the company's top-tier low-decline rate and includes drilling and completing 17 (14.6 net) wells and completing three (3.0 net) additional wells, which were drilled in 2019. The drilling is focused on farm-in wells in the company's Alberta South business unit, along with select development wells across its asset base and new CO2 injection wells at Midale, Sask. In addition, Cardinal will continue to optimize the company's multiple existing water flood projects and the company's carbon sequestration development at Midale, where the company sequesters more CO2 than it directly emits throughout the entire company. Approximately 80 per cent of the company's oil production is under secondary recovery schemes, including water and miscible floods. The company's 2020 capital budget will continue the successful operating cost reduction program initiated in 2019, which includes reducing its dependence on the power grid and upgrading its infrastructure to facilitate the handling of additional volumes through its underutilized facilities. The capital budget is allocated as follows.

Capital budget

Drill, complete and tie in new wells:  $26-million to $28-million

Enhanced oil recovery, facility and pipeline upgrades:  $20-million to $22-million

Maintenance capital:  $14-million to $15-million

Total development capital expenditures:  $60-million to $65-million

Capitalized general and administrative expenses and other:  $3-million to $4-million

Total capital expenditures:  $63-million to $69-million

The capital budget results in free cash flow of approximately $40-million to $45-million for debt repayment, ARO expenditures, or NCIB activity for the company's common share and convertible debenture buybacks and cancellations.

Cardinal's total payout ratio, which is represented by the development capital expenditures plus dividend payments divided by adjusted funds flow, is expected to be 65 per cent to 70 per cent. Production is forecasted to average 20,500 to 20,800 barrels of oil equivalent per day for 2020, which are approximately 3 per cent higher than the company's estimated 2019 average. Forecasted production takes into account all planned facility turnarounds and downtime.

2020 budget summary

Average production:  20,500 to 20,800 boe per day

Adjusted funds flow:  $125-million to $130-million

Closing net debt:  $215-million to $220-million

Debt-adjusted per-share-production growth (1):  6 per cent

Total capital expenditures:  $63-million to $69-million

Operating costs:  $19.75 to $20.25 per boe

Transportation costs:  30 cents to 40 cents per boe

G&A:  $2.05 to $2.25 per boe

WTI:  $55 (U.S.) per barrel

U.S./Canadian-dollar exchange rate:  0.76

WTI-WCS (Western Canadian Select) basis differential:  $15 (U.S.) per barrel

WTI-MSW basis differential:  $5 (U.S.) per barrel

AECO:  $1.75 per thousand cubic feet

(1) Debt-adjusted shares are calculated with weighted-average outstanding shares adjusted for the change in net debt divided by an average share price of $2.50 for forecasted 2019 and the 2020 budget.

ARO

Cardinal has budgeted approximately $7.0-million for abandonments and reclamations in 2020 and has opted into the area-based-closure (ABC) program approach implemented by the Alberta government and plans to focus its 2020 abandonment and reclamation activities in its Southern Alberta business unit. The company's current plans are to abandon over 80 non-producing wells and reclaim at least 100 inactive leases in 2020.

The company is committed to the environmentally responsible development of its resources and will continue to manage its abandonment and reclamation obligations with a view of long-term sustainability. In 2019, the company exceeded its required spend under the ABC program to pro-actively reduce its environmental footprint by abandoning and reclaiming inactive sites and wells. Over the last five years, Cardinal has abandoned over 230 wells and reclaimed 384 locations.

Sensitivities: effect on adjusted funds flow

$1-(U.S.)-per-barrel change in WTI:  $7.0-million

$1-(U.S.)-per-barrel MSW (Mixed Sweet Blend) basis:   $1.9-million

$1-(U.S.)-per-barrel WCS basis:  $4.0-million

25 Canadian cents per thousand cubic feet:  $1.0-million

Foreign exchange one cent:  $4.0-million

Summary

The company's 2020 budget is expected to generate approximately $40-million to $45-million of free cash flow, which will be used to reduce debt, provide returns to the company's shareholders with NCIB activity and reduce the company's environmental footprint through ARO expenditures. The company's 2020 production is expected to increase by approximately 3 per cent over average 2019 production levels while operating costs per boe are forecasted to decrease by 5 per cent. Cardinal plans to exit the year with a healthy balance sheet, targeting a 1.7 times net debt to annual adjusted funds flow ratio and a 65-per-cent to 70-per-cent total payout ratio. The company's conservative spending and cost reduction program during 2019 and budgeted into 2020 is intended to maintain ample liquidity, allowing the company to reduce both its overall debt and its higher-cost borrowings through the repayment of its convertible debentures when they become due.

During 2020, the company plans to continue with its environmental stewardship and reduce its future liabilities by increasing its ARO spending to approximately $7.0-million by abandoning and reclaiming non-producing wells and inactive facilities.

The company's conservative budget gives the company the flexibility to increase its capital program, pay down additional debt and/or provide increased returns to its shareholders through its NCIB or increased dividend payments if commodity prices increase. Cardinal's shares represent a compelling investment with a projected 6-per-cent debt-adjusted production-per-share growth and an approximate 9-per-cent dividend yield.

Cardinal's annual 2019 reserve results will be released on Feb. 26, 2020, with the 2019 financial and operating results to be released on March 17, 2020.

Renewal of normal course issuer bid

The NCIB allows the company to purchase up to $4.45-million aggregate principal amount of its 5.50 per cent convertible unsecured subordinated debentures (representing approximately 10 per cent of its public float of $44.5-million aggregate principal amount of the issued and outstanding convertible debentures as of Dec. 5, 2019), in each case, over a period of 12 months commencing on Dec. 19, 2019. The NCIB will expire no later than Dec. 18, 2020.

Under the NCIB, convertible debentures may be repurchased in open market transactions on the Toronto Stock Exchange and/or alternative Canadian trading systems, or by such other means as may be permitted by the TSX and applicable securities laws and in accordance with the rules of the TSX governing NCIBs. The average daily trading volume of the convertible debentures is $40,000. As a result, the total number of convertible debentures that Cardinal is permitted to purchase is subject to a daily purchase limit of $10,000 aggregate principal amount of convertible debentures; however, Cardinal may make one block purchase per calendar week, which exceeds the daily repurchase restrictions. Any convertible debentures that are purchased under the NCIB will be cancelled upon their purchase by the company.

The company's previous NCIB for convertible debentures will expire on Dec. 18, 2019. Under the previous NCIB, Cardinal obtained the approval of the TSX to purchase up to $5-million principal amount of convertible debentures, which represented 10 per cent of the public float at the time of approval. The company purchased the maximum amount of convertible debentures under the previous NCIB.

Management of Cardinal believes that, from time to time, the market price of its convertible debentures may not fully reflect the underlying value of the convertible debentures and that, at such times, the purchase of convertible debentures would be in the best interests of Cardinal. The purchase of convertible debentures will increase the proportionate interest of, and be advantageous to, all remaining securityholders.

December dividend

Cardinal confirms that its dividend of 1.5 cents per common share will be paid on Jan. 15, 2020, to shareholders of record on Dec. 31, 2019. The board of directors of Cardinal has declared the dividend payable in cash. This dividend has been designated as an eligible dividend for Canadian income tax purposes.

About Cardinal Energy Ltd.

Cardinal is a junior Canadian oil-focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused on low-decline light- and medium-quality oil in Alberta and Saskatchewan.

We seek Safe Harbor.