Birchcliff Energy Ltd. Announces Unaudited 2022 Full-Year and Fourth Quarter Results and 2022 Reserves Highlights

Birchcliff Energy Ltd.

CALGARY, Alberta, Feb. 15, 2023 (GLOBE NEWSWIRE) -- Birchcliff Energy Ltd. (“Birchcliff” or the “Corporation”) (TSX: BIR) is pleased to announce its unaudited 2022 full-year and fourth quarter financial and operational results and highlights from its independent reserves evaluation effective December 31, 2022.

“2022 was a record year for all of Birchcliff’s cash flow metrics. We generated record annual adjusted funds flow⁽¹⁾ of $953.7 million, record annual free funds flow⁽¹⁾ of $589.1 million and record annual net income to common shareholders of $653.7 million, with annual average production of 76,925 boe/d. As a result of the significant free funds flow that we have generated over the past two years, we have retired an aggregate of $768.1 million of total debt⁽²⁾ and preferred shares since June 30, 2020. In addition, we returned an aggregate of $128.9 million to shareholders in 2022 through our base common share dividend, a special dividend of $0.20 per common share and common share repurchases,” commented Jeff Tonken, Chief Executive Officer of Birchcliff.

“Birchcliff was able to replace 127% of its annual production with new proved developed producing (“PDP”) reserves at year-end 2022, with PDP F&D costs⁽³⁾ of $10.24/boe, which has resulted in Birchcliff’s PDP reserves having an adjusted funds flow recycle ratio⁽⁴⁾ of 3.3x, highlighting the profitability of our business.”

“For 2023, we remain committed to generating free funds flow, delivering shareholder returns through the payment of our common share dividend and maintaining capital discipline. We are closely monitoring commodity prices and have the flexibility to adjust our 2023 capital program if necessary to achieve these priorities. As set forth in our press release dated January 18, 2023, our board approved an increase to our annual base dividend to $0.80 per common share for 2023 (approximately $213 million in aggregate⁽⁵⁾), which will be declared and paid quarterly at the rate of $0.20 per common share⁽⁶⁾, beginning with the first payment date of March 31, 2023 for those shareholders of record as of March 15, 2023. Our F&D capital program of $260 million to $280 million and base dividend of $0.80 per common share for 2023 remain fully funded at an average WTI price of US$70.00/bbl, an average AECO price of CDN$3.00/GJ, an average Dawn price of US$3.25/MMBtu and an average NYMEX HH price of US$3.35/MMBtu⁽⁷⁾⁽⁸⁾.”

2022 Full-Year Financial and Operational Highlights

• Achieved annual average production of 76,925 boe/d, a 2% decrease from 2021. Liquids accounted for 19% of Birchcliff’s total production in 2022 as compared to 21% in 2021.

• Generated record annual adjusted funds flow of $953.7 million, or $3.59 per basic common share⁽⁴⁾, both of which increased by 77% from 2021. Cash flow from operating activities was a record $925.3 million, an 80% increase from 2021.

• Delivered record annual free funds flow of $589.1 million, or $2.22 per basic common share⁽⁴⁾, a 90% and 91% increase, respectively, from 2021.

• Earned record annual net income to common shareholders of $653.7 million, or $2.46 per basic common share, a 111% and 110% increase, respectively, from 2021.

• Achieved an operating netback⁽⁴⁾ of $32.85/boe and adjusted funds flow per boe⁽⁴⁾ of $33.97, a 53% and 80% increase, respectively, from 2021.

• Realized an operating expense⁽³⁾ of $3.62/boe, a 13% increase from 2021.

• Successfully executed the Corporation’s 2022 capital program, bringing on production a total of 39 wells. F&D capital expenditures were $364.6 million in 2022.

• Retired approximately $449.0 million of total debt and preferred shares in 2022, including reducing total debt by $360.8 million (72%) from $499.4 million at December 31, 2021 and the redemption of all of its issued and outstanding Series A and Series C preferred shares for an aggregate redemption value of $88.2 million.

• Returned $128.9 million to common shareholders in 2022 through dividends and purchases under its normal course issuer bid (the “NCIB”), including the purchase of 6,340,192 common shares under the NCIB at an average price of $9.01 per share (before fees).
  

Q4 2022 Financial and Operational Highlights

• Achieved quarterly average production of 79,799 boe/d, a 1% increase from Q4 2021. Liquids accounted for 19% of Birchcliff’s total production in Q4 2022 as compared to 20% in Q4 2021.

• Generated quarterly adjusted funds flow of $217.1 million, or $0.82 per basic common share, both of which increased by 12% from Q4 2021. Cash flow from operating activities was $224.4 million, a 14% increase from Q4 2021.

• Delivered quarterly free funds flow of $110.3 million, or $0.41 per basic common share, a 30% and 32% decrease, respectively, from Q4 2021.

• Earned quarterly net income to common shareholders of $69.5 million, or $0.26 per basic common share, both of which decreased by 35% from Q4 2021.

• Achieved an operating netback of $29.35/boe and adjusted funds flow per boe of $29.57, a 7% and 11% increase, respectively, from Q4 2021.

• Realized an operating expense of $4.06/boe, a 16% increase from Q4 2021.

• F&D capital expenditures were $106.8 million in Q4 2022.

• Returned $61.3 million to common shareholders in Q4 2022 through dividends and purchases under the NCIB, including the payment of a special dividend of $0.20 per common share for an aggregate of approximately $53.2 million and the purchase of 300,000 common shares under the NCIB at an average price of $9.30 per share (before fees).

2022 Year-End Reserves Highlights

• PDP reserves at December 31, 2022 were 224.8 MMboe, an increase of approximately 4% from 217.1 MMboe at December 31, 2021. After taking into account 2022 actual production of 28.1 MMboe⁽⁹⁾, Birchcliff added 35.6 MMboe of PDP reserves in 2022, which reflects a reserves replacement of 127%.

• Birchcliff delivered PDP F&D costs of $10.24/boe and an adjusted funds flow recycle ratio of 3.3x, which are attributed to the high-quality nature of Birchcliff’s Montney/Doig assets, notwithstanding $80.5 million in F&D capital expenditures that were allocated to DCCET projects that had no production or PDP reserves assigned at year-end 2022 and major facility turnarounds and infrastructure enhancement projects where the benefits are expected to be realized over several years.

• The net present value of future net revenue at December 31, 2022 (before income taxes, discounted at 10%) was $3.3 billion for Birchcliff’s PDP reserves, $6.5 billion for its proved reserves and $8.2 billion for its proved plus probable reserves, a 31%, 30% and 28% increase, respectively, from December 31, 2021.

• The net asset value per common share⁽¹⁰⁾ of Birchcliff’s PDP and proved reserves at December 31, 2022 (before income taxes, discounted at 10%) was $11.32 and $22.43, respectively, which is 28% and 155% higher than the closing price of its common shares on February 14, 2023 of $8.81 per share and demonstrates the significant value opportunity presented by Birchcliff.

• Birchcliff had a reserves life index at December 31, 2022 of 7.5 years on a PDP basis, 22.3 years on a proved basis and 32.9 years on a proved plus probable basis, based on a forecast production rate of 82,000 boe/d (which represents the mid-point of Birchcliff’s annual average production guidance range for 2023 as disclosed in its January 18, 2023 press release).
  

Birchcliff anticipates filing its annual information form and audited financial statements and related management’s discussion and analysis for the year ended December 31, 2022 on March 15, 2023.

This press release contains forward-looking statements within the meaning of applicable securities laws. For further information regarding the forward-looking statements contained herein, see “Advisories – Forward-Looking Statements”. With respect to the disclosure of Birchcliff’s production contained in this press release, see “Advisories – Production”. With respect to the disclosure of Birchcliff’s reserves and related reserves metrics contained in this press release, see “2022 Year-End Reserves”, “Presentation of Oil and Gas Reserves” and “Advisories – Oil and Gas Metrics”. In addition, this press release uses various “non-GAAP financial measures”, “non-GAAP ratios”, “supplementary financial measures” and “capital management measures” as such terms are defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure (“NI 52-112”). Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under GAAP and might not be comparable to similar financial measures disclosed by other issuers where similar terminology is used. For further information regarding the non-GAAP and other financial measures used in this press release, see “Non-GAAP and Other Financial Measures”.

______________________

^{(1) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures”.
(2) Capital management measure. See “Non-GAAP and Other Financial Measures”.
(3) Supplementary financial measure. See “Non-GAAP and Other Financial Measures”.
(4) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”.
(5) Based on 266 million common shares outstanding.
(6) Other than the dividend declared for the quarter ending March 31, 2023, the declaration of dividends is subject to the approval of the board of directors (the “Board”) and is subject to change. See “Advisories – Forward-Looking Statements”.
(7) Based on F&D capital expenditures of approximately $270 million in 2023, which is the mid-point of the Corporation’s F&D capital expenditures guidance range for 2023.
(8) Holding all other variables constant.
(9) Consists of 811.4 Mbbls of light oil, 1,707.8 Mbbls of condensate, 2,726.9 Mbbls of NGLs and 136,990.0 MMcf of natural gas.  
(10) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”.}

2022 UNAUDITED FINANCIAL AND OPERATIONAL SUMMARY

	Three months ended December 31,				Twelve months ended December 31,
	2022		2021		2022		2021
OPERATING
Average production
Light oil (bbls/d)	2,413		2,604		2,223		2,899
Condensate (bbls/d)	4,822		5,330		4,679		5,715
NGLs (bbls/d)	7,963		7,570		7,471		7,705
Natural gas (Mcf/d)	387,604		379,275		375,315		373,217
Total (boe/d)	79,799		78,716		76,925		78,520
Average realized sales price (CDN$)(1)(2)
Light oil (per bbl)	115.24		92.79		119.78		79.24
Condensate (per bbl)	114.32		98.66		122.27		85.65
NGLs (per bbl)	35.80		38.24		41.09		30.54
Natural gas (per Mcf)	6.11		5.52		6.73		4.29
Total (per boe)	43.63		40.02		47.73		32.53
NETBACK AND COST ($/boe)(2)
Petroleum and natural gas revenue(1)	43.64		40.02		47.73		32.53
Royalty expense	(4.86	)	(3.93	)	(5.74	)	(2.66	)
Operating expense	(4.06	)	(3.50	)	(3.62	)	(3.19	)
Transportation and other expense(3)	(5.37	)	(5.06	)	(5.52	)	(5.18	)
Operating netback(3)	29.35		27.53		32.85		21.50
G&A expense, net	(1.82	)	(1.45	)	(1.27	)	(0.99	)
Interest expense	(0.53	)	(0.72	)	(0.49	)	(1.00	)
Realized gain (loss) on financial instruments	2.57		1.37		2.88		(0.75	)
Other cash income	-		0.01		-		0.07
Adjusted funds flow(3)	29.57		26.74		33.97		18.83
Depletion and depreciation expense	(7.97	)	(7.44	)	(7.61	)	(7.42	)
Unrealized gain (loss) on financial instruments	(8.31	)	-		4.67		2.94
Other (expense) income(4)	(0.77	)	(0.01	)	(0.43	)	0.03
Dividends on preferred shares	-		(0.23	)	(0.18	)	(0.24	)
Deferred income tax expense	(3.06	)	(4.41	)	(7.14	)	(3.31	)
Net income to common shareholders	9.46		14.65		23.28		10.83
FINANCIAL
Petroleum and natural gas revenue ($000s)(1)	320,358		289,806		1,340,180		932,406
Cash flow from operating activities ($000s)	224,447		196,142		925,275		515,369
Adjusted funds flow ($000s)(5)	217,099		193,649		953,683		539,733
Per basic common share ($)(3)	0.82		0.73		3.59		2.03
Free funds flow ($000s)(5)	110,337		157,923		589,062		309,254
Per basic common share ($)(3)	0.41		0.60		2.22		1.16
Net income to common shareholders ($000s)	69,453		106,102		653,682		310,489
Per basic common share ($)	0.26		0.40		2.46		1.17
End of period basic common shares (000s)	266,047		264,790		266,047		264,790
Weighted average basic common shares (000s)	265,922		265,197		265,548		265,990
Dividends on common shares ($000s)	58,503		2,646		71,788		6,639
Dividends on preferred shares ($000s)	-		1,717		5,162		6,905
F&D capital expenditures ($000s)(6)	106,762		35,726		364,621		230,479
Total capital expenditures ($000s)(5)	107,471		36,075		368,230		232,480
Revolving term credit facilities ($000s)	131,981		500,870		131,981		500,870
Total debt ($000s)(7)	138,549		499,397		138,549		499,397

^{(1) Excludes the effects of financial instruments but includes the effects of physical delivery contracts.
(2) Average realized sales prices and the component values of netback and costs set forth in the table above are supplementary financial measures unless otherwise indicated. See “Non-GAAP and Other Financial Measures”.
(3) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”.
(4) Includes non-cash items such as compensation, accretion, amortization of deferred financing fees and other gains and losses.
(5) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures”.
(6) See “Advisories – F&D Capital Expenditures”.
(7) Capital management measure. See “Non-GAAP and Other Financial Measures”.}

FULL-YEAR AND Q4 2022 UNAUDITED FINANCIAL AND OPERATIONAL RESULTS

Production

Birchcliff’s production averaged 76,925 boe/d in 2022, a 2% decrease from 2021. Birchcliff’s production averaged 79,799 boe/d in Q4 2022, a 1% increase from Q4 2021. Birchcliff’s production in the full-year and Q4 2022 was slightly below its guidance of 78,000 boe/d and 81,000 to 83,000 boe/d, respectively. Birchcliff’s full-year production was negatively impacted by: (i) natural production declines; (ii) a major scheduled turnaround in Q2 2022 at AltaGas’ deep-cut sour gas processing facility in Gordondale (the “AltaGas Facility”) that decreased annual average production in Gordondale by approximately 900 boe/d; and (iii) the timing of new wells brought on production in 2022 as compared to 2021, which resulted from scheduling differences in Birchcliff’s drilling and completions program year-over-year. Birchcliff’s full-year and Q4 production was positively impacted by incremental production volumes from the 39 new Montney/Doig light oil and liquids-rich natural gas wells brought on production in 2022.

Liquids accounted for 19% of total production in 2022 as compared to 21% in 2021, with a liquids-to-gas ratio in 2022 of 38.3 bbls/MMcf (48% high-value light oil and condensate). Liquids accounted for 19% of Birchcliff’s total production in Q4 2022 as compared to 20% in Q4 2021, with a liquids-to-gas ratio in Q4 2022 of 39.2 bbls/MMcf (48% high-value light oil and condensate). The decreases in the liquids production weighting were primarily due to: (i) the Corporation specifically targeting horizontal natural gas wells in liquids-rich zones in Pouce Coupe; and (ii) natural production declines from light oil and liquids-rich natural gas wells producing since December 31, 2021. The full-year liquids production weighting was also negatively impacted by the AltaGas Facility turnaround in Q2 2022, which resulted in lower liquids being produced in the Gordondale area.

Adjusted Funds Flow and Cash Flow From Operating Activities

Birchcliff achieved record adjusted funds flow of $953.7 million in 2022, or $3.59 per basic common share, both of which increased by 77% from 2021. Birchcliff’s adjusted funds flow was $217.1 million in Q4 2022, or $0.82 per basic common share, both of which increased by 12% from Q4 2021. Birchcliff’s full-year adjusted funds flow was lower than its guidance of $1.02 billion, primarily due to a lower than anticipated average realized natural gas sales price.

Birchcliff’s cash flow from operating activities was a record $925.3 million in 2022, an 80% increase from 2021. Birchcliff’s cash flow from operating activities was $224.4 million in Q4 2022, a 14% increase from Q4 2021.

The increases in adjusted funds flow and cash flow from operating activities were primarily due to higher reported petroleum and natural gas revenue, partially offset by a higher royalty expense, both of which were largely impacted by a 47% and 9% increase in the average realized sales price received for Birchcliff’s production in the full-year and Q4 2022, respectively, as compared to 2021. Birchcliff’s average realized sales price benefited from the increases in benchmark oil and natural gas prices in the full-year and Q4 2022. See “Full-Year and Q4 2022 Unaudited Financial and Operational Results – Commodity Prices”. Birchcliff’s adjusted funds flow and cash flow from operating activities were also positively impacted by a realized gain on financial instruments of $80.7 million and $18.8 million in the full-year and Q4 2022, respectively, as compared to a realized loss on financial instruments of $21.5 million in 2021 and a realized gain on financial instruments of $9.9 million in Q4 2021.

Free Funds Flow

Birchcliff delivered record free funds flow of $589.1 million in 2022, or $2.22 per basic common share, a 90% and 91% increase, respectively, from 2021. The increases were primarily due to higher adjusted funds flow, partially offset by higher F&D capital expenditures in 2022 as compared to 2021. Birchcliff’s free funds flow in 2022 was lower than its guidance of $655 million to $665 million, primarily due to lower than anticipated adjusted funds flow.

Birchcliff’s free funds flow was $110.3 million in Q4 2022, or $0.41 per basic common share, a 30% and 32% decrease, respectively, from Q4 2021. The decreases were primarily due to higher F&D capital expenditures in Q4 2022 as compared to Q4 2021, as a result of the acceleration of the Corporation’s 2023 capital program, which was announced on October 13, 2022, partially offset by higher adjusted funds flow in Q4 2022 as compared to Q4 2021.

Net Income to Common Shareholders

Birchcliff earned record net income to common shareholders of $653.7 million in 2022, or $2.46 per basic common share, a 111% and 110% increase, respectively, from 2021. The increases were primarily due to higher adjusted funds flow and an increase in the unrealized mark-to-market gain on financial instruments which resulted from changes in the fair value of the Corporation’s NYMEX HH/AECO 7A basis swap contracts, partially offset by a higher deferred income tax expense in 2022. Birchcliff recorded an unrealized mark-to-market gain on financial instruments of $131.0 million in 2022, a 56% increase from 2021.

Birchcliff earned net income to common shareholders of $69.5 million in Q4 2022, or $0.26 per basic common share, both of which decreased by 35% from Q4 2021. The decreases were primarily due to an unrealized mark-to-market loss on financial instruments which resulted from changes in the fair value of the Corporation’s NYMEX HH/AECO 7A basis swap contracts, partially offset by higher adjusted funds flow and a lower deferred income tax expense in Q4 2022. Birchcliff recorded an unrealized mark-to-market loss on financial instruments of $61.0 million in Q4 2022 as compared to a negligible unrealized mark-to-market gain on financial instruments in Q4 2021.

Operating Netback and Selected Cash Costs

Birchcliff’s operating netback was $32.85/boe in 2022, a 53% increase from 2021. Birchcliff’s operating netback was $29.35/boe in Q4 2022, a 7% increase from Q4 2021. The increases were primarily due to higher per boe petroleum and natural gas revenue and a lower interest expense, partially offset by higher per boe royalty, operating, transportation and other and G&A expenses in the full-year and Q4 2022.

The following table sets forth Birchcliff’s selected cash costs for the periods indicated:

	Three months ended December 31,				Twelve months ended December 31,
($/boe)	2022	2021	% Change		2022	2021	% Change
Royalty expense(1)	4.86	3.93	24		5.74	2.66	116
Operating expense(1)	4.06	3.50	16		3.62	3.19	13
Transportation and other expense(2)	5.37	5.06	6		5.52	5.18	7
G&A expense, net(1)	1.82	1.45	26		1.27	0.99	28
Interest expense(1)	0.53	0.72	(26	)	0.49	1.00	(51)

^{(1) Supplementary financial measure. See “Non-GAAP and Other Financial Measures”.
(2) Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”.}

Royalty expense per boe increased by 116% and 24% from the full-year and Q4 2021, respectively, primarily due to a higher average realized sales price received for Birchcliff’s production. Birchcliff’s full-year royalty expense was below its guidance of $6.70/boe to $6.80/boe, primarily due to a lower than anticipated average realized natural gas sales price.

Operating expense per boe increased by 13% and 16% from the full-year and Q4 2021, respectively, primarily due to: (i) inflationary pressures on power prices and fuel, chemicals and lubricants costs used in Birchcliff’s field operations, which together increased by 42% and 61% on a per boe basis in the full-year and Q4 2022, respectively; and (ii) higher field labour costs. Operating expense per boe in Q4 2022 was also negatively impacted by higher natural gas processing costs at the AltaGas Facility due to incremental production coming on-stream in Q4 2022. Birchcliff’s full-year operating expense was slightly above its guidance of $3.40/boe to $3.50/boe, primarily due to lower than anticipated annual average production.

Transportation and other expense per boe increased by 7% and 6% from the full-year and Q4 2021, respectively, primarily due to higher liquids-handling costs and third-party fractionation processing fees that resulted from inflationary pressures, partially offset by lower liquids pipeline tariffs. Transportation and other expense per boe in the full-year was also negatively impacted by increased take-or-pay fractionation fees and higher NGTL tolling charges for natural gas deliveries. Birchcliff’s full-year transportation and other expense was slightly above its guidance of $5.40/boe to $5.50/boe, primarily due to lower than anticipated annual average production.

G&A expense per boe increased by 28% and 26% from the full-year and Q4 2021, respectively, primarily due to higher employee-related expenses, higher corporate costs due to the easing of Birchcliff’s COVID-19 restrictions and higher general business costs due to inflationary pressures.

Interest expense per boe decreased by 51% and 26% from the full-year and Q4 2021, respectively, primarily due to a lower average outstanding balance under the Corporation’s extendible revolving term credit facilities (the “Credit Facilities”) as a result of the Corporation’s focus on reducing indebtedness. Birchcliff’s full-year interest expense was within its guidance of $0.40/boe to $0.50/boe.

Debt and Credit Facilities

Total debt at December 31, 2022 was $138.5 million, a decrease of 72% from $499.4 million at December 31, 2021. Birchcliff’s 2022 year-end total debt was above its guidance of $60 million to $70 million, primarily due to a lower than anticipated average realized natural gas sales price. At December 31, 2022, Birchcliff had long-term bank debt under its Credit Facilities of $132.0 million (December 31, 2021: $500.9 million) from available Credit Facilities of $850.0 million (December 31, 2021: $850.0 million), leaving the Corporation with $714.3 million of unutilized credit capacity after adjusting for outstanding letters of credit and unamortized deferred financing fees. This unutilized credit capacity provides Birchcliff with significant financial flexibility and additional capital resources to fund its capital expenditure program and dividend payments if required in the future. The Credit Facilities do not contain any financial maintenance covenants and do not mature until May 11, 2025.

Commodity Prices

The following table sets forth the average benchmark commodity index prices and exchange rate for the periods indicated:

	Three months ended December 31,				Twelve months ended December 31,
	2022	2021	% Change		2022	2021	% Change
Light oil – WTI Cushing (US$/bbl)	82.64	79.78	4		94.31	68.70	37
Light oil – MSW (Mixed Sweet) (CDN$/bbl)	110.18	96.12	15		119.95	80.67	49
Natural gas – NYMEX HH (US$/MMBtu)(1)	6.26	5.83	7		6.64	3.88	71
Natural gas – AECO 5A Daily (CDN$/GJ)	4.85	4.41	10		5.04	3.44	47
Natural gas – AECO 7A Month Ahead (US$/MMBtu)(1)	4.11	3.93	5		4.28	2.84	51
Natural gas – Dawn Day Ahead (US$/MMBtu)(1)	5.16	4.65	11		6.04	3.62	67
Natural gas – ATP 5A Day Ahead (CDN$/GJ)	4.53	4.74	(4	)	5.14	4.03	28
Exchange rate (CDN$ to US$1)	1.3573	1.2598	8		1.3004	1.2537	4
Exchange rate (US$ to CDN$1)	0.7368	0.7938	(8	)	0.7690	0.7976	(4	)

^{(1) See “Advisories – MMBtu Pricing Conversions”.}

Marketing and Natural Gas Market Diversification

Birchcliff’s physical natural gas sales exposure primarily consists of the AECO, Dawn and Alliance markets. In addition, the Corporation has various financial instruments outstanding that provide it with exposure to NYMEX HH pricing. The following table details Birchcliff’s effective sales, production and average realized sales price for natural gas and liquids for Q4 2022, after taking into account the Corporation’s financial instruments:

Three months ended December 31, 2022
	Effective sales (CDN$000s)	Percentage of total sales (%)	Effective production (per day)	Percentage of total natural gas production (%)	Percentage of total corporate production (%)	Effective average realized sales price (CDN$)
Market
AECO(1)(2)(3)	42,360	12	85,657 Mcf	22	18	5.38/Mcf
Dawn(4)	106,494	30	161,671 Mcf	42	34	7.16/Mcf
NYMEX HH(1)(2)(5)	109,377	30	140,276 Mcf	36	29	8.48/Mcf
Total natural gas(1)	258,231	72	387,604 Mcf	100	81	7.24/Mcf
Light oil	25,588	7	2,413 bbls		3	115.24/bbl
Condensate	50,712	14	4,822 bbls		6	114.32/bbl
NGLs	26,224	7	7,963 bbls		10	35.80/bbl
Total liquids	102,524	28	15,198 bbls		19	73.32/bbl
Total corporate(1)	360,755	100	79,799 boe		100	49.14/boe

^{(1) Effective sales and effective average realized sales price on a total natural gas and total corporate basis and for the AECO and NYMEX HH markets are non-GAAP financial measures and non-GAAP ratios, respectively. See “Non-GAAP and Other Financial Measures”.
(2) AECO sales and production that effectively received NYMEX HH pricing under Birchcliff’s long-term physical NYMEX HH/AECO 7A basis swap contracts have been included as effective sales and production in the NYMEX HH market. Birchcliff sold physical NYMEX HH/AECO 7A basis swap contracts for 5,000 MMBtu/d at an average contract price of NYMEX HH less US$1.205/MMBtu during Q4 2022.
(3) Birchcliff has short-term physical sales agreements with third-party marketers to sell and deliver into the Alliance pipeline system. All of Birchcliff’s short-term physical Alliance sales and production during Q4 2022 received AECO premium pricing and have therefore been included as effective sales and production in the AECO market.
(4) Birchcliff has agreements for the firm service transportation of an aggregate of 175,000 GJ/d of natural gas on TransCanada PipeLines’ Canadian Mainline, whereby natural gas is transported to the Dawn trading hub in Southern Ontario.
(5) NYMEX HH sales and production include financial and physical NYMEX HH/AECO 7A basis swap contracts for an aggregate 152,500 MMBtu/d at an average contract price of NYMEX HH less US$1.23/MMBtu during Q4 2022. Birchcliff’s effective average realized sales price for NYMEX HH of CDN$8.48/Mcf (US$5.74/MMBtu) was determined on a gross basis before giving effect to the average NYMEX HH/AECO 7A fixed contract basis differential price of CDN$1.81/Mcf (US$1.23/MMBtu) and includes any realized gains and losses on financial NYMEX HH/AECO 7A basis swap contracts during Q4 2022. After giving effect to the NYMEX HH/AECO 7A basis contact price and including any realized gains and losses on financial NYMEX HH/AECO 7A basis swap contracts during Q4 2022, Birchcliff’s effective average realized net sales price for NYMEX HH was CDN$6.67/Mcf (US$4.51/MMBtu) in Q4 2022.}

The following table sets forth Birchcliff’s sales, production, average realized sales price, transportation costs and natural gas sales netback by natural gas market for the periods indicated, before taking into account the Corporation’s financial instruments:

Three months ended December 31, 2022
	Natural gas sales(1) (CDN$000s)	Percentage of natural gas sales (%)	Natural gas production (Mcf/d)	Percentage of natural gas production (%)	Average realized natural gas sales price(1)(2) (CDN$/Mcf)	Natural gas transportation costs(2)(3) (CDN$/Mcf)	Natural gas sales netback(2)(4) (CDN$/Mcf)
AECO	101,194	46	208,042	53	5.29	0.39	4.90
Dawn	106,494	49	161,671	42	7.16	1.41	5.75
Alliance(5)	10,134	5	17,891	5	6.16	-	6.16
Total	217,822	100	387,604	100	6.11	0.80	5.31
Three months ended December 31, 2021
	Natural gas sales(1) (CDN$000s)	Percentage of natural gas sales (%)	Natural gas production (Mcf/d)	Percentage of natural gas production (%)	Average realized natural gas sales price(1)(2) (CDN$/Mcf)	Natural gas transportation costs(2)(3) (CDN$/Mcf)	Natural gas sales netback(2)(4) (CDN$/Mcf)
AECO	85,230	44	185,870	49	4.98	0.42	4.56
Dawn	88,932	46	156,618	41	6.17	1.47	4.70
Alliance(5)	18,391	10	36,787	10	5.43	-	5.43
Total	192,553	100	379,275	100	5.52	0.82	4.70

^{(1) Excludes the effects of financial instruments but includes the effects of physical delivery contracts.
(2) Supplementary financial measure. See “Non-GAAP and Other Financial Measures”.
(3) Reflects costs to transport natural gas from the field receipt point to the delivery sales trading hub.
(4) Natural gas sales netback denotes the average realized natural gas sales price less natural gas transportation costs.
(5) Birchcliff has short-term physical sales agreements with third-party marketers to sell and deliver into the Alliance pipeline system. Alliance sales are recorded net of transportation tolls.}

Capital Activities and Investment

Birchcliff’s 2022 capital program was focused on the drilling of high-value, liquids-rich natural gas and light oil wells in Pouce Coupe and Gordondale. In addition, the Corporation directed funds towards two planned facility turnarounds and key infrastructure enhancement projects to increase the overall throughput, reliability and safety of Birchcliff’s operating assets. F&D capital expenditures were $364.6 million in 2022, which was within Birchcliff’s guidance of $355 million to $365 million.

The following table summarizes the number of wells Birchcliff drilled and brought on production in 2022:

			Total # of wells drilled in 2022		Total # of wells brought on production in 2022
POUCE COUPE
		Basal Doig/Upper Montney	10		12
		Montney D2	5		2
		Montney D1	16		14
		Montney C	4		2
		Total	35		30
GORDONDALE
		Montney D2	5		5
		Montney D1	4		4
	Total		9		9
TOTAL			44(1)(2)		39(3)

^{(1) Includes 7 wells that were brought on production in January and February 2023 and 1 well that is currently standing and may be completed as part of the 2023 capital program.
(2) Does not include 2 (0.375 net) Charlie Lake horizontal oil wells that the Corporation participated in during 2022, with production coming on-stream in Q1 2023.
(3) Includes 5 wells that were drilled and rig released in Q4 2021.}

Birchcliff was able to safely and efficiently execute on its 2022 capital program despite significant inflationary pressures, labour shortages and supply chain constraints experienced during the year that affected the Canadian oil and gas industry as a whole. The Corporation accomplished this through detailed planning and excellent collaboration with its service providers.

In 2022, Birchcliff successfully developed multiple zones in the lower Montney (D2, D1 and C) and Basal Doig/Upper Montney intervals, targeting brownfield and greenfield reservoir areas. The 2022 capital program was developed using pad-specific well spacing and geo-engineered completions designs to maximize economic resource recovery. The learnings from the 2022 capital program have been significant as they demonstrate both the economic and technical success of the Corporation’s approach and provide greater confidence in Birchcliff’s robust inventory of multi-layer Montney/Doig opportunities across its land base.

OPERATIONS UPDATE

Gordondale

9-Well Pad (06-35-77-11W6)

As disclosed in the Corporation’s press release dated November 9, 2022, Birchcliff brought all 9 (9.0 net) wells on its 06-35 pad on production through Birchcliff’s owned and operated infrastructure in late September 2022. The wells from this pad are producing in-line with the Corporation’s expectations. The following table summarizes the aggregate and average production rates for the 9 wells from the 06-35 pad:

		IP 30(1)	IP 60(1)
Aggregate production rate (boe/d)		8,108	7,220
	Aggregate natural gas production rate (Mcf/d)	40,568	36,923
	Aggregate oil production rate (bbls/d)	1,349	1,066
Average per well production rate (boe/d)		901	802
	Average per well natural gas production rate (Mcf/d)	4,508	4,103
	Average per well oil production rate (bbls/d)	150	118
Condensate-to-gas ratio (bbls/MMcf)		33	29

^{(1) Represents the cumulative volumes for each well measured at the wellhead separator for the 30 or 60 days (as applicable) of production immediately after each well was considered stabilized after producing fracture treatment fluid back to surface in an amount such that flow rates of hydrocarbons became reliable. See “Advisories – Initial Production Rates”.}

Pouce Coupe

6-Well Pad (03-06-78-11W6)

As part of the accelerated 2023 capital program that was initiated in Q4 2022, the Corporation brought 4 (4.0 net) wells on its 03-06 pad on production in December 2022 and 1 (1.0 net) well on production in early January 2023. These wells are producing with strong liquids and natural gas rates and are exceeding internal forecasts. The sixth well on this pad is currently standing and may be completed later in the year as part of the 2023 capital program. As the wells have not yet produced for over 60 days, Birchcliff anticipates providing further details regarding the results of these wells with the release of its audited 2022 results.

6-Well Pad (14-06-79-12W6)

Birchcliff successfully completed its 6-well 14-06 pad in early January 2023. The pad was drilled in late Q4 2022 in 3 different intervals (3 in the Montney D1, 2 in the Montney D2 and 1 in the Montney C) and targeted condensate-rich natural gas. Flowback operations have commenced and the wells are expected to be on-stream in February 2023, with production flowing through Birchcliff’s 100% owned and operated natural gas processing plant in Pouce Coupe (the “Pouce Coupe Gas Plant”).

Ongoing Drilling and Completions Operations

Birchcliff has completed the drilling of two 4-well pads in its core acreage that will be completed later in Q1 2023 and are anticipated to be brought on production in Q2 2023. The first 4-well pad is located at 04-23-78-12W6 and consists of 2 Montney D1 and 2 Montney D2 wells. The second 4-well pad is located at 15-27-78-13W6 and consists of 2 Montney D1, 1 Montney D2 and 1 Montney C wells.

Birchcliff currently has two drilling rigs at work on its 8-well 04-16-78-13W6 pad. This pad is targeting 4 wells in each of the Basal Doig/Upper Montney and Montney D1 intervals. The Corporation’s 2023 capital program is focused on optimizing well spacing to maximize economic resource recovery.

Third-Party Pipeline Outage

On January 19, 2023, Birchcliff was notified that a force majeure event had occurred on a major third-party NGLs transportation pipeline, resulting in an unplanned outage impacting all volumes on the pipeline, which includes the Corporation’s NGLs volumes. Birchcliff has been able to reduce the impact of the outage on its production volumes by retaining NGLs within its natural gas stream to the extent possible. The third-party pipeline operator has stated that they expect the pipeline to resume service in late February 2023, subject to regulatory approval. The Corporation continues to monitor the situation to determine the anticipated impact on its annual average production volumes.

2022 YEAR-END RESERVES

Birchcliff retained Deloitte LLP (“Deloitte”), independent qualified reserves evaluator, to evaluate and prepare a report on 100% of Birchcliff’s light crude oil and medium crude oil, conventional natural gas, shale gas and NGLs reserves. The reserves data set forth below at December 31, 2022 is based upon the evaluation by Deloitte with an effective date of December 31, 2022 as contained in the report of Deloitte dated February 15, 2023 (the “2022 Reserves Report”). The forecast commodity prices, inflation and exchange rates utilized were computed using the average of forecasts from Deloitte, McDaniel & Associates Consultants Ltd. (“McDaniel”), GLJ Ltd. (“GLJ”) and Sproule Associates Limited (“Sproule”) effective January 1, 2023 (the “2022 IQRE Price Forecast”).

The 2022 Reserves Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).

For additional information regarding the presentation of Birchcliff’s reserves disclosure contained herein, see “Presentation of Oil and Gas Reserves” and “Advisories” in this press release. The reserves data provided in this press release presents only a portion of the disclosure required under NI 51-101. The disclosure required under NI 51-101 will be contained in Birchcliff’s annual information form for the year ended December 31, 2022, which is expected to be filed on the System for Electronic Document Analysis and Retrieval (www.sedar.com) on March 15, 2023. In certain of the tables below, numbers may not add due to rounding.

Reserves Summary

The following table summarizes the estimates of Birchcliff’s gross reserves at December 31, 2022 and December 31, 2021, estimated using the forecast price and cost assumptions in effect as at the effective date of the applicable reserves evaluation:

Summary of Gross Reserves
(Forecast Prices and Costs)

Reserves Category	December 31, 2022 (Mboe)	December 31, 2021(1) (Mboe)	% Change
Proved Developed Producing	224,826	217,145	4
Total Proved	668,545	689,941	(3)
Total Probable	317,867	331,927	(4)
Total Proved Plus Probable	986,412	1,021,868	(3)

^{(1) Deloitte prepared an evaluation with an effective date of December 31, 2021 as contained in the report of Deloitte dated February 9, 2022 (the “2021 Reserves Report”). Deloitte prepared the 2021 Reserves Report using the average of forecasts from Deloitte, McDaniel, GLJ and Sproule effective January 1, 2022 (the “2021 IQRE Price Forecast”).}

Birchcliff has remained focused over the last several years on delivering PDP reserves additions by leveraging its efficient execution and large multi-well pads to improve capital efficiencies and maximize profitability. This focus on PDP reserves, which included converting existing proved undeveloped or probable undeveloped locations into PDP reserves, as well as the optimization of its field development plan, resulted in the Corporation’s proved and proved plus probable reserves declining slightly at December 31, 2022 as compared to December 31, 2021. Birchcliff continues to have a large inventory of potential future locations that are not booked in the 2022 Reserves Report that may be added over time depending on the Corporation’s drilling programs in subsequent years.

The following table sets forth Birchcliff’s light crude oil and medium crude oil, conventional natural gas, shale gas and NGLs reserves at December 31, 2022, estimated using the 2022 IQRE Price Forecast:

Summary of Reserves at December 31, 2022
(Forecast Prices and Costs)

Reserves Category			Light Crude Oil and Medium Crude Oil				Conventional Natural Gas				Shale Gas				NGLs(1)				Total Boe
			Gross (Mbbls)		Net (Mbbls)		Gross (MMcf)		Net (MMcf)		Gross (MMcf)		Net (MMcf)		Gross (Mbbls)		Net (Mbbls)		Gross (Mboe)		Net (Mboe)
Proved
	Developed Producing		6,433		5,130		6,526		6,051		1,076,797		963,829		37,839		29,320		224,826		196,097
	Developed Non-Producing		9		9		0		0		5,635		5,184		228		185		1,177		1,058
	Undeveloped		9,224		7,495		2,908		2,621		2,296,003		2,015,974		50,167		38,758		442,543		382,685
Total Proved			15,666		12,634		9,434		8,672		3,378,435		2,984,986		88,234		68,263		668,545		579,840
Total Probable			10,354		7,940		5,267		4,767		1,535,665		1,310,222		50,691		38,020		317,867		265,125
Total Proved Plus Probable			26,020		20,574		14,701		13,439		4,914,100		4,295,207		138,925		106,283		986,412		844,965

^{(1) NGLs includes condensate.}

Net Present Values of Future Net Revenue

The following table sets forth the net present values of future net revenue attributable to Birchcliff’s reserves at December 31, 2022, estimated using the 2022 IQRE Price Forecast, before deducting future income tax expenses and calculated at various discount rates:

Summary of Net Present Values of Future Net Revenue at December 31, 2022⁽¹⁾
(Forecast Prices and Costs)

Reserves Category		Before Income Taxes Discounted At (%/year)
		0 ($000s)		5 ($000s)		10 ($000s)		15 ($000s)		20 ($000s)				Unit Value Discounted at 10%/year ($/boe)(2)
Proved
Developed Producing		5,411,147		4,099,497		3,270,335		2,731,169		2,359,084				16.68
Developed Non-Producing		32,220		23,580		18,604		15,449		13,295				17.58
Undeveloped		9,417,320		5,225,962		3,165,262		2,030,121		1,350,164				8.27
Total Proved		14,860,687		9,349,039		6,454,201		4,776,739		3,722,543				11.13
Total Probable		8,151,975		3,452,613		1,701,775		938,455		562,867				6.42
Total Proved Plus Probable		23,012,662		12,801,652		8,155,976		5,715,194		4,285,410				9.65

^{(1) Estimates of future net revenue, whether calculated without discount or using a discount rate, do not represent fair market value.
(2) Unit values are based on net reserves volumes.}   

Pricing Assumptions

The following table sets forth the 2022 IQRE Price Forecast used in the 2022 Reserves Report:

2022 IQRE Price Forecast

Year		Crude Oil				Natural Gas(1)						NGLs								Currency Exchange Rate (US$/CDN$)		Price and Cost Inflation Rates (%)
		WTI at Cushing Oklahoma (US$/bbl)		Edmonton City Gate (CDN$/bbl)		Alberta AECO Average Price (CDN$/Mcf)		Ontario Dawn Reference Point (CDN$/Mcf)		NYMEX Henry Hub (US$/Mcf)		Edmonton Ethane (CDN$/bbl)		Edmonton Propane (CDN$/bbl)		Edmonton Butane (CDN$/bbl)		Edmonton Pentanes + Condensate (CDN$/bbl)
2023		$80.25		$103.16		$4.44		$6.53		$4.93		$13.91		$41.25		$54.35		$105.00		0.74		0.0
2024		$78.19		$97.34		$4.53		$5.92		$4.66		$14.27		$40.16		$52.73		$100.05		0.76		2.5
2025		$76.10		$94.21		$4.37		$5.51		$4.42		$13.77		$40.04		$51.08		$96.97		0.76		2.0
2026		$76.96		$94.90		$4.44		$5.59		$4.50		$14.00		$40.35		$51.47		$98.35		0.77		2.0
2027		$78.50		$96.48		$4.52		$5.70		$4.59		$14.23		$41.01		$52.32		$99.98		0.76		2.0
2028		$80.07		$98.41		$4.61		$5.80		$4.68		$14.52		$41.84		$53.37		$101.98		0.77		2.0
2029		$81.67		$100.38		$4.70		$5.93		$4.78		$14.82		$42.67		$54.43		$104.03		0.77		2.0
2030		$83.30		$102.38		$4.79		$6.04		$4.87		$15.11		$43.52		$55.51		$106.10		0.77		2.0
2031		$84.96		$104.43		$4.88		$6.17		$4.97		$15.42