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BlackPearl Progresses at Onion Lake Expansion in Q3

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Black Pearl reported its Q3 2017 results.

Highlights:

• At Onion Lake, excellent progress was made during the quarter on the construction of the 6,000 barrel per day (bbl/d) phase 2 thermal expansion. Construction is currently ahead of schedule and costs are in line with our original estimates of $185 million. Fabrication of the modules for the central processing facilities and well pads were approximately 85% complete at the end of the quarter and the modules continue to be shipped out to site for assembly and tie-in. All 14 horizontal production wells have been drilled as well as 29 of 39 planned steam injection wells. Drilling should be complete by the end of November. We now anticipate construction to be completed and initial steam injection to occur as early as the end of Q1 2018, with first oil expected in Q3 2018. We anticipate reaching peak production approximately 12 months after initial steam injection, a similar timeline achieved for phase 1.

• We successfully completed a planned turnaround on the phase 1 thermal facilities at Onion Lake in Q3 2017. Thermal production from Onion Lake was temporarily impacted by the turnaround as well as the temporary shut-in of phase 1 wells to allow for offset drilling of the phase 2 wells. The thermal facilities and wells were successfully restarted and current production is back up to design capacity of 6,000 bbl/d.

• At Blackrod, we continued to successfully operate and produce the SAGD pilot. The pilot produced 500 bbl/d in Q3 and cumulatively the well pair has produced 600,000 barrels of oil. We continue to operate the pilot to fully understand the well characteristics for an extended period. Additional core hole drilling is planned this winter at Blackrod to further define our development plans for the area.

• Production for the quarter averaged 9,072 bbls/d, 13% lower than Q2 2017 volumes. Lower volumes were mainly attributable to the planned maintenance work on the Onion Lake thermal facilities; current production is back over 10,000 bbls/d.

• Total capital investment for the quarter was $58.6 million, almost all of which related to the Onion Lake thermal expansion project.

• Oil and gas sales during the first nine months of 2017 increased 46% to $108 million and adjusted funds flow (a non-GAAP measure) increased 40% to $41 million. For the nine months ended September 30, 2017, the Company recognized net income of $11 million.

• The Company maintained a strong liquidity position with net debt of $81 million, while its $120 million bank credit facilities remained undrawn.

• Initial 2018 guidance demonstrates the significant impact the Onion Lake thermal expansion is expected to have on our operations as we expect to exit 2018 at about 14,000 bbl/d, approximately 40% higher than our current production.