President's Message to Shareholders

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Discretionary Capital Shifts to 2025

We believe that capital discipline is a key differentiator of Pine Cliff. We determined that it was not a good use of capital to drill wells and bring flush production on at a time when natural gas prices were at historical lows. Total capital spending in the quarter was limited to $0.9 million for maintenance activities and $1.6 million for abandonment and reclamations. Our development capital will now be deferred into 2025.  As a result, we now expect total capital spending of $12 million in 2024, which is down from our initial $17.5 million budget.  Despite the deferral of our remaining 2024 development CAPEX, we are maintaining our annual production guidance at 23,250 – 23,750 Boe/d⁴. That is the power of having one of the lowest production declines in our industry.  

Production in the third quarter of 22,546 Boe/d² was 5% lower than 23,688 Boe/d³from the second quarter mostly due to several maintenance-related outages at third-party processing facilities, particularly in September. We limited field optimization work through the summer, and now that well swabbing has recommenced, production has been restored.  

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Dividend

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

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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 Q3, contributing to a corporate average realized gas price of C$2.00/Mcf, representing a 194% premium to the AECO Daily 5A average price of C$0.68/Mcf. We have approximately 44% of estimated gas volumes⁴ hedged for the fourth quarter at C$2.77/Mcf. On the oil side, approximately 51% of estimated volumes⁴ are hedged at C$100.79/bbl during the same period.

We will continue to add to these positions where we believe it will support our business model to pay down debt while returning capital to shareholders by dividends.

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Webcast

We will host our quarterly webcast regarding our Q3 results at 9:00 am MT on Thursday November 14th. Participants can access the live webcast via https://www.gowebcasting.com/13841, or through the Pine Cliff website at http://www.pinecliffenergy.com.

Outlook

In the past 13 years, we have managed our unique business model through strong and weak commodity price environments by diversifying our product mix, layering in hedge positions and prudently managing our CAPEX, debt, operating costs and dividend payouts. Since we started our dividend in June 2022, we have returned over $90 Million to our shareholders by dividends.

We are entering 2025 with a balance sheet able to capitalize on the expected increase in natural gas prices. While we haven’t set our production guidance for 2025 yet, it is worth noting that our production base provides a higher per share leverage to improving AECO gas prices than most Western Canada producers. As set out in our Q3 report, a C$0.10/mcf change in realized natural prices translates to a $3.7 million change in our cash flow for 2024. We believe that Canadian gas could deliver material gains in the years ahead as LNG exports and increasing Alberta industrial demand begin to impact Western Canada storage levels.  

We remain committed to enhancing long-term shareholder value, with a sharp focus on adding value on a per share basis.  As we have demonstrated in 2024,this includes capitalizing on opportunities to optimize our asset portfolio and preserving the disciplined approach to capital allocation that our shareholders have come to expect from Pine Cliff.  We continue to believe that natural gas will fill a critical role in the growing global demand for all forms of energy. Our strategy to be positioned for long-term exposure to natural gas has not changed.  Thank you for your ongoing support.

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Yours truly,

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Phil Hodge

President and Chief Executive Officer

November 13, 2024

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¹ Disclosure 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 107,985Mcf/d natural gas, 3,105 Bbl/d NGLs and 1,443 Bbl/d light and medium oil.

³ Comprised of 111,373Mcf/d natural gas, 3,263 Bbl/d NGLs and 1,538 Bbl/d light and medium oil.

⁴ Refer to the November 13, 2024 Press Release for commodity split by product.

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