Paramount Resources reported its Q1 2019 results.

Highlights:

• Sales volumes averaged 81,296 Boe/d (37 percent liquids) in the first quarter of 2019.

• Paramount’s netback increased 61 percent to $115.7 million in the first quarter of 2019 compared to $72.0 million in the fourth quarter of 2018, mainly due to a 26 percent average increase in realized prices.

• The liquids-rich Karr development accounted for $52.8 million (46 percent) of the Company’s total netback in the first quarter.

• Adjusted funds flow increased 121 percent to $100.5 million ($0.77 per share) in the first quarter of 2019 compared to $45.5 million ($0.35 per share) in the prior quarter.

• The Company is delivering test volumes from its Wapiti 9-3 pad as part of the commissioning of the new third-party processing plant. First sales are expected in May 2019.

• Paramount is reaffirming its 2019 production guidance, including first half average sales volumes of between 80,000 Boe/d and 81,000 Boe/d and annual average sales volumes of between 81,000 Boe/d and 85,000 Boe/d. Production is expected to increase in the second half of the year as Wapiti ramps up, with fourth quarter sales volumes expected to average between 85,000 Boe/d and 90,000 Boe/d.

• First quarter base capital spending totaled $68.6 million, primarily related to drilling and completion programs at Wapiti and Kaybob Montney Oil.

• The Company’s $350 million base capital budget for 2019 remains unchanged.

• The expansion of the Karr 6-18 natural gas facility (the ʺ6-18 Facilityʺ) remains on track for start-up in the second half of 2020. First quarter spending on the project totaled $34.5 million. Total forecast spending for the project for 2019 remains at $145 million. The Company continues to evaluate funding alternatives to complete the project.

• Paramount’s natural gas diversification strategy includes approximately 122,000 GJ/d of sales underlong-term contracts priced at the Dawn, US Midwest and Malin markets. The Company’s average realized natural gas sales price for the first quarter of 2019 was $3.37/Mcf compared to average AECO prices of $2.17/GJ.

• The Company has 15,000 Bbl/d of liquids hedged for the remainder of 2019 at an average price of $77.58/Bbl and 3,000 Bbl/d hedged for 2020 at an average price of $80.07/Bbl.

• The Company’s net debt position was $903.3 million as at March 31, 2019, relatively unchanged from December 31, 2018, as first quarter capital spending was largely funded by cash flow.

The Company drilled its initial lower Montney well on the 1-2 pad in 2018. Two additional wells in the 2019 development program will also target the lower Montney. To date, no lower Montney locations have been included in the reserves recognized for Karr. The results of these three wells will be incorporated in Paramount’s reserves evaluations in the future and will be used to determine the Company’s inventory of potential lower Montney drilling locations.

Producing Montney wells at Karr continue to exhibit strong production rates and condensate yields. The following table summarizes the performance of the five wells on the 1-2 pad brought on-stream in the third quarter of 2018 and the 27 wells drilled in the 2016/2017 Karr capital program:

(1)Peak 30-Day is the highest daily average production rate over a 30-day consecutive period for each well, measured at the wellhead. Natural gas sales volumes are approximately 10 percent lower and liquids sales volumes are approximately 12 percent lower due to shrinkage. Excludes days when the wells did not produce. The production rates and volumes shown are 30-day peak rates over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells. These wells were produced at restricted rates from time-to-time due to facility and gathering system constraints.

(2)Cumulative is the aggregate production measured at the wellhead to May 3, 2019. Natural gas sales volumes are approximately 10 percent lower and liquids sales volumes are approximately 12 percent lower due to shrinkage. These wells were produced at restricted rates from time-to-time due to facility and gathering system constraints. The production rates and volumes shown are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells.

(3)CGRs mean condensate to gas ratios and are calculated by dividing raw wellhead liquids volumes by raw wellhead natural gas volumes.

(4)Average days on production per well for the 2016/2017 Wells.

Wapiti

Paramount’s new Wapiti resource play is a continuation of the Montney trend that the Company has been successful in developing approximately 25 kilometers to the southeast at Karr. First quarter 2019 capital spending at Wapiti was $32.1 million, focused on the tie-in of 11 (11.0 net) wells on the 9-3 pad and the drilling of 12 (12.0 net) wells on the 5-3 pad.

The Company is delivering test volumes from the 9-3 pad as part of the commissioning of the new third- party Wapiti natural gas processing plant (the ʺWapiti Plantʺ) and first sales are expected in May 2019. Production is expected to increase as throughput at the Wapiti Plant ramps up, with all 11 wells on the 9-3pad scheduled to be brought-on production in 2019. Drilling operations were completed for 12 wells on the 5-3 pad in the first quarter of 2019, and these wells are scheduled to be completed in the second quarter. Paramount has firm-service third-party natural gas transportation capacity for its Wapiti production volumes, which increases from 50 MMcf/d in 2019 to 130 MMcf/d in 2021.

The Company continues to pursue innovative alternatives to further reduce costs in its drilling and completion programs, including optimizing drilling and completion designs, streamlining logistics and realizing the benefits of economies of scale by utilizing large multi-well pads. As a result of these cost reduction initiatives, total capital costs for the 9-3 pad were reduced by approximately 11 percent compared to the original budget for the project.

As the Company integrated learnings from the 9-3 pad, drilling improvements were achieved on the 5-3 pad. Drilling time decreased in the lateral sections by approximately 25 percent compared with the 9-3 pad.

Paramount is executing a project in the Central Alberta and Other and Kaybob regions to replace approximately 1,700 high-bleed controllers with modern low-bleed units at a total estimated cost of $3.5 million. Once installed, these low-bleed controllers are expected to eliminate approximately 120,000 tonnes of GHG emissions annually. This project is anticipated to generate approximately $9 million in GHG credits through 2022.

Planning has also commenced for upgrades to the Company’s remaining high-bleed controllers and other equipment to reduce emissions of GHGs, including methane, carbon dioxide, and nitrogen oxides.

Corporate

Paramount’s natural gas diversification strategy includes approximately 122,000 GJ/d of sales under long- term contracts priced at the Dawn, US Midwest and Malin markets. The Company’s average realized natural gas sales price for the first quarter of 2019 was $3.37/Mcf compared to average AECO prices of $2.17/GJ.

To protect the Company’s cash flows and support its capital programs, Paramount has 15,000 Bbl/d of liquids hedged for the remainder of 2019 at an average price of $77.58/Bbl and 3,000 Bbl/d hedged for 2020 at an average price of $80.07/Bbl.

In the first quarter of 2019, the Company entered into interest rate swaps to fix interest rates on a portion of its bank debt; $250 million notional amount for four years and an additional $250 million notional amount for seven years.

As at March 31, 2019, $827.3 million was drawn on the Company’s $1.5 billion bank credit facility. The Company’s net debt position was $903.3 million as at March 31, 2019, relatively unchanged from December 31, 2018, as first quarter capital spending was largely funded by cash flow.

In January 2019, Paramount implemented a normal course issuer bid program under which the Company may purchase up to 7.1 million Paramount common shares for cancellation. No purchases have been made under the program to date.

Adjusted Funds Flow

Exploration and Development Capital (5)

(1)Readers are referred to the advisories concerning Non-GAAP Measures and Oil and Gas Measures and Definitions in the Advisories section of this document.

(2)Natural gas revenue presented as $/Mcf.

(3)Other NGLs means ethane, propane and butane.

(4)Includes downstream transportation costs and NGLs fractionation costs.

(5)Excludes land and property acquisitions and spending related to corporate assets.