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Prairie Provident Resources First Quarter 2021 Results

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   |    Tuesday,May 11,2021

Prairie Provident Resources Inc. reported its Q1 2021 results.

Q1 2021 Highlights:

• Successful Drilling Program: During the quarter, we successfully drilled and completed our first Ellerslie well to prove the emerging play in Princess. The well commenced production on April 29, 2021 and initial production averaged 223² boe/d (weighted 60% to liquids) during the first 10 days. In addition, we drilled a Glauconite well in Princess that was completed in the second quarter of 2021 with test production rates of 776³ boe/d (weighted 47% to liquids). This well is expected to come on production in mid-May 2021. For Q1 2021, we incurred $4.4 million of Net Capital Expenditures¹.
• Production: Production averaged 4,071 boe/d (66% liquids) in the quarter, which was 23% or 1,210 boe/d lower than Q1 2020, due primarily to natural declines and production shut-ins from last year. In the summer of 2020, PPR resumed workover activities that had been deferred due to weak commodity prices on select projects meeting economic thresholds of less than a one-year payout, however, several projects remain uneconomic though Q1 2021, which continues to contribute to reduced production volumes. Q1 2021 average production was lower than 2021 annualized guidance as production from our capital program is scheduled to come on after Q1 2021, in addition to production outages from inclement weather. Production is expected to increase throughout the remainder of 2021 as we look forward to adding new production from our 2021 capital program.
• Operating netback¹: Operating netback for Q1 2021 was $5.9 million ($16.17/boe) before the impact of derivatives, and $4.8 million ($13.23/boe) after the realized losses on derivatives, an 85% increase and 7% decrease, respectively, relative to Q1 2020. On a per boe basis, operating netback before and after the realized losses on derivatives increased by 143% and 22%, respectively, primarily due to higher realized prices, partially offset by higher operating expenses and realized losses on derivatives. Q1 2021 operating expenses included higher seasonal electricity and fuel costs and higher maintenance costs on a per boe basis, a direct result of cold weather.
• Adjusted funds flow (“AFF”)¹: AFF for Q1 2021 totaled $2.1 million ($0.01 per basic and diluted share), excluding $0.1 million of decommissioning settlements, reflecting a 125% improvement from the same quarter of 2020 primarily due to lower cash interest and G&A expenses.
• Net loss: Net loss totaled $11.5 million in Q1 2021, a $56.6 million improvement compared to Q1 2020. The decrease was primarily driven by the absence of a $77.3 million non-cash impairment charge recognized in Q1 2020 and an increase in foreign exchange gain of $8.0 million in Q1 2021, partially offset by a decrease in unrealized gains on derivative instruments of $31.9 million. Unrealized gains on derivatives recognized in Q1 2020 were caused by sharply declining forward commodity prices at the end of Q1 2020. Conversely, at the end of Q1 2021, forward commodity prices increased resulting in unrealized losses on derivatives for the quarter. The increase in foreign exchange gain was due to strengthening of the Canadian dollar relative to the US dollar at the end of Q1 2021.
• Net debt¹: Net debt at March 31, 2021, net debt totaled $118.2 million, an increase of $2.6 million from December 31, 2020. The increase was primarily due to deferred interest recognized on the Company’s long-term debt of $0.4 million and capital expenditures in the quarter that exceeded AFF¹, partially offset by a $0.9 million unrealized foreign exchange gain on our US dollar denominated debt. Using current commodity forward prices, capital expenditures are expected to be fully funded by AFF for 2021.
• Long-term debt: At March 31, 2021, PPR had US$44.4 million of borrowings drawn against its US$57.7 million revolving facility (“Revolving Facility”), leaving the Company with US$13.3 million (CAN$16.7⁴ million equivalent (December 31, 2020 — US$11.2 million)) borrowing capacity under the Revolving Facility. In addition, US$47.3 million (CAN$59.5⁴ million) of senior subordinated notes were outstanding at March 31, 2021, for total borrowings of US$91.7 million (CAN$118.2⁴ million equivalent).

Outlook

Prairie Provident is encouraged by early production and test data from the first two wells of our 2021 capital program. For the second half of 2021, we expect to drill two development wells in the Princess area, while monitoring our pilot waterflood program at Michichi. Prairie Provident’s full-year 2021 guidance estimates remain unchanged from those presented in the Company’s news release dated March 26, 2021.