President's Message to Shareholders

Revised Production Guidance

Pine Cliff remains disciplined with respect to our 2024 capital programs while AECO gas prices have been low. Our capital spending in the first two quarters has been limited to $1.6 million in maintenance activities and $1.4 million in abandonment and reclamation expenditures.  We deferred drilling capital decisions to Q4 2024 as we do not feel it is prudent to exploit our best locations at the current gas prices.  That said, we are excited about the prospective inventory that we are seeing unfold on our land base, with recent industry activity in and around our core areas, helping validate our internal evaluations that indicate attractive development opportunities through the next several years.  

Production in the second quarter of 23,688 Boe/d² was consistent with our first quarter volumes, despite normal course maintenance-related outages at a handful of third-party processing facilities and a temporary reduction in well optimization due to low gas prices impacting production. With additional planned third-party facility outages expected in the fall, and the likelihood of continuing with limited field optimization and capital spending until the fourth quarter, we are lowering our production guidance by ~ 4% to 23,250 –23,750 Boe/d⁴ from 24,000 – 25,000 Boe/d⁴ previously. Our production mix is unchanged, with oil and NGLs continuing to account for just over 20% of total volumes and more than 50% of revenue at current strip pricing.

Dividend

We closely monitor our total payout ratio (total costs, including dividend, compared to our total funds flow from operations). At current commodity strip prices, we are maintaining our monthly dividend at $0.005 per share.  

Hedging Update

Pine Cliff uses physical hedging and internal market diversification options as part of our ongoing marketing strategy to help protect our cash flow as a dividend paying company.  This strategy was successful again in Q2, contributing to a corporate average realized gas price of C$2.10/Mcf, representing a 79% premium to the AECO Daily 5A average price of C$1.17/Mcf.   We have approximately 45% of estimated gas volume hedged through the second half of the year at C$2.87/Mcf, providing a key element of support to our cash flow. On the oil side, approximately 55% of estimated volumes are hedged at$100.18/Bbl during the same period. We will continue to add these to these positions where we believe it will support our business model and dividends.

Webcast

We will host our quarterly webcast regarding our Q2 results at 9:00 am MT on Friday August 9th.  Participants can access the live webcast via https://www.gowebcasting.com/13423, through the Pine Cliff website at http://www.pinecliffenergy.com or by calling 1-877-407-8819, passcode 86286.

Outlook

2024 has been one of the most unique periods I have experienced since we started Pine Cliff in 2012. We have dealt with depressed commodity prices before, but never with material positive forward gas prices (contango) on the horizon. Our operations and field staff have remained focused on reducing costs where prudent, but at the same time, maintaining and ensuring our assets are in a strong position to take advantage of the expected rise in natural gas process in the months ahead. The increased natural gas demand that is expected to enter the market in the coming months will come from both the expansion of North American LNG export capacity and from the growing industrial demand connected with our continent’s increasing energy needs.  

We remain steadfast in our commitment to enhancing long-term shareholder value. Every economic and operational decision we make is made with the intent to increase value at the per share level. This includes carefully optimizing our asset portfolio and upholding the disciplined approach to capital allocation that our shareholders have come to expect from Pine Cliff. The macro fundamentals of an increasing global and North American demand for natural gas have not been diminished by the short-term impact of weather and higher summer storage levels. We have always managed Pine Cliff with an eye on the future, and these short-term challenges have not in any way altered that strategy. Thank you for your ongoing support.

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Yours truly,

Phil Hodge

President and Chief Executive Officer

August 8, 2024

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¹Disclosure Note: Please refer to Pine Cliff’s Website for Reader Advisories regarding forward looking information, non-GAAP measures, oil and gas measurements, definitions as this email is subject to the same cautionary statements as set out therein.

² Comprised of 112,531Mcf/d natural gas, 3,334 Bbl/d NGLs and 1,599 Bbl/d light and medium oil.

³ Comprised of 113,076Mcf/d natural gas, 3,343 Bbl/d NGLs and 1,587 Bbl/d light and medium oil

⁴ Refer to the August 8, 2024Press Release for commodity split by product.

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