Perpetual Energy : 2016 Management Information Circular

MANAGEMENT INFORMATION CIRCULAR‌‌

and

Meeting to be held at:‌‌‌‌

Calgary Petroleum Club 319 - 5 Avenue SW Calgary, Alberta T2P 0L5‌‌‌‌‌

Wednesday, May 24, 2017 at 9:00 a.m. (Calgary time)

The deadline for the receipt of proxies for the Meeting is 9:00 a.m.‌‌‌‌‌‌‌‌‌‌

(Calgary time) on Friday, May 19, 2017.‌

TABLE OF CONTENTS

LETTER TO SHAREHOLDERS 1

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS 2

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT 4

GENERAL INFORMATION 4

MATTERS TO BE CONSIDERED AT THE MEETING 4

DIRECTOR NOMINEES 6

STATEMENT OF EXECUTIVE COMPENSATION 15

DIRECTOR COMPENSATION 32

CORPORATE GOVERNANCE DISCLOSURE 35

GENERAL PROXY MATTERS 46

INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON 49

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS 49

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS 49

ADDITIONAL INFORMATION 50

LETTER TO SHAREHOLDERS

April 4, 2017

Dear Shareholder:

Perpetual Energy Inc. is pleased to invite you to the Annual Meeting of Shareholders on Wednesday, May 24, 2017 at 9:00 a.m. (Mountain Daylight Time). The meeting will be held at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.

Attending the meeting is your opportunity to meet the Board of Directors and management, learn more about our performance in 2016, the current state of our industry and our top strategic priorities for 2017, and vote in person on the items of business which include the election of our directors and the appointment of our auditors. If you are unable to attend the meeting in person, you can vote by proxy and listen to the live webcast on our website (www.perpetualenergyinc.com).

The attached notice of meeting and management information circular includes important information about the meeting and how to vote. Please take some time to read the document and to vote. More information about Perpetual may be found in our 2016 Annual Report and at www.perpetualenergyinc.com.

Thank you for your continued support of Perpetual. We look forward to sharing with you our spectrum of opportunities.

Sincerely,

Susan L. Riddell Rose

President and Chief Executive Officer

NOTICE IS HEREBY GIVEN that the annual general meeting (the "Meeting") of the holders ("Shareholders") of common shares ("Shares") of Perpetual Energy Inc. ("Perpetual" or the "Corporation") will be held at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta on May 24, 2017, at 9:00 a.m. (Mountain Daylight Time) for the following purposes:

1. to receive and consider the audited consolidated financial statements of the Corporation for the year ended December 31, 2016, together with the auditor's report thereon;

2. to fix the number of directors of the Corporation to be elected at the Meeting at seven

   (7) and to elect seven (7) directors;

3. to appoint auditors of the Corporation and to authorize the directors to fix their remuneration as such; and

4. to transact such further and other business as may properly be brought before the Meeting or any adjournment thereof.

Specific details of the matters to be put before the Meeting are set forth in the attached Management Information Circular and Proxy Statement dated April 4, 2017 (the "Information Circular").

Perpetual has elected to use the notice-and-access provisions under National Instrument 54-101 and National Instrument 51-102 ("Notice-and-Access Provisions") for this Meeting. Notice-and-Access Provisions are a set of rules developed by the Canadian Securities Administrators that reduce the volume of materials that must be physically mailed to Shareholders by allowing Perpetual to post the Circular and any additional materials online. See "General Proxy Matters - Notice and Access" in the Information Circular for further information on the Notice-and-Access Provisions.

The record date (the "Record Date") for determination of Shareholders entitled to receive notice of and to vote at the Meeting is April 4, 2017.

Shareholders of the Corporation of record as at the Record Date are entitled to receive notice of the Meeting and to vote those Shares included in the list of Shareholders entitled to vote at the Meeting prepared as at the Record Date, unless any such Shareholder transfers Shares after the Record Date and the transferee of those Shares, having produced properly endorsed certificates evidencing such Shares or having otherwise established that he or she owns such Shares, demands, not later than 10 days before the Meeting, that his or her name be included in the list of Shareholders entitled to vote at the Meeting, in which case such person shall be entitled to vote such Shares at the Meeting.

Each Share outstanding on the Record Date is entitled to one vote at the Meeting.

A Shareholder may attend the Meeting in person or may be represented by proxy. If you are a registered Shareholder and are unable to attend the Meeting or any adjournment thereof in person, please exercise your right to vote by dating, signing and returning the accompanying form of proxy to Computershare Trust Company of Canada ("Computershare"), the Corporation's transfer agent. To be valid, proxy forms must be dated, completed, signed and deposited with Computershare, (i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, Proxy Department, 135 West Beaver Creek, P.O. Box 300, Richmond Hill, Ontario, L4B 4R5, (ii) by hand delivery to Computershare Trust Company of Canada, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, or (iii) by facsimile to (416) 263-9524 or 1-866- 249-7775. If you vote through the Internet, you may also appoint another person to be your proxyholder. Please go to www.investorvote.com and follow the instructions. You will require