2023 Fourth Quarter Report

Q4

Financial Highlights

Three months ended

Year ended

December 31

December 31

($000, except as otherwise indicated)

2023

2022

2023

2022

Financial Statement Highlights

147,137

541,100

Natural gas and liquids sales

223,200

950,458

Net income and comprehensive income(3)

41,026

113,962

101,597

338,667

per basic share (2)

0.25

0.63

0.61

1.81

Basic weighted average shares (000)

163,939

180,248

166,553

187,022

Cash provided by operating activities

89,048

112,558

323,345

502,378

Cash used in financing activities

(52,120)

(49,718)

(70,263)

(209,091)

Cash used in investing activities

(58,846)

(69,060)

(282,761)

(269,585)

Other Financial Highlights

82,494

313,570

Adjusted funds flow (1)

124,205

516,790

per boe (1)

13.11

24.29

14.16

25.39

per basic share (1)(2)

0.50

0.69

1.88

2.76

Net capital expenditures (1)

39,938

49,687

282,796

241,790

Free cash flow (1)

42,556

74,518

30,774

275,000

Working capital surplus (1)

18,651

71,564

18,651

71,564

Bank indebtedness

212,854

177,200

212,854

177,200

Net debt (1)

222,022

121,336

222,022

121,336

Operating Highlights

Production

3,254

2,710

Crude oil (bbls/d)

1,854

1,972

Condensate (bbls/d)

1,264

1,092

1,166

1,082

NGLs (bbls/d)

3,345

2,680

3,021

3,039

Total liquids production (bbls/d)

7,863

5,626

6,897

6,093

Natural gas (Mcf/d)

363,124

299,684

322,687

298,053

Total production (boe/d)

68,384

55,573

60,678

55,769

Average realized prices (including realized derivatives)

2.84

3.24

Natural gas ($/Mcf)

5.65

5.55

Liquids ($/bbl)

81.55

86.39

78.35

92.48

Operating Netback ($/boe)

23.39

24.43

Natural gas and liquids sales

43.66

46.69

Realized gains (losses) on derivatives

0.98

(4.76)

1.59

(7.08)

Processing and other income

0.39

0.60

0.34

0.45

Net sales of purchased natural gas

‐

‐

(0.01)

‐

Royalty expense

(1.64)

(5.31)

(1.92)

(5.22)

Operating expense

(3.61)

(3.39)

(3.81)

(3.16)

Transportation expense

(4.08)

(4.43)

(4.09)

(4.43)

Operating netback (1)

15.43

26.37

16.53

27.25

  1. Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
  2. Based on basic weighted average shares outstanding.
  3. Net income and comprehensive income attributable to Advantage shareholders.

CONTENTS

MESSAGE TO SHAREHOLDERS

2

RESERVES

3

CONSOLIDATED MANAGEMENT'S DISCUSSION & ANALYSIS

10

CONSOLIDATED FINANCIAL STATEMENTS

56

Independent Auditor's Report…………………………………………………………………………………………………………………………57

Consolidated Statements of Financial Position

61

Consolidated Statements of Comprehensive Income (Loss)

62

Consolidated Statements of Changes in Shareholders' Equity

63

Consolidated Statements of Cash Flows

64

Notes to the Consolidated Financial Statements

65

ADVISORY

103

Advantage Energy Ltd. - 1

MESSAGE TO SHAREHOLDERS

Advantage Energy Ltd. ("Advantage" or the "Corporation") is pleased to report 2023 year‐end financial and operating results as well as year‐end 2023 reserves.

Advantage achieved exceptional results during 2023, including record production, improved well results, and significant share buybacks, while ending the year below our net debt target. Additional achievements included an unbudgeted $10 million acquisition of 53 net Montney sections at Conroy and successfully executing a 17‐day Glacier plant turnaround.

Following a comprehensive review of our capital program, we have materially reduced our planned 2024 capital expenditures by $40 million to between $220 million and $250 million. Thanks to continued outperformance of our recent development program, we can deliver this reduced capital level without changing our production guidance or compromising our long‐term adjusted funds flow ("AFF") per share focus.

2024 Capital Program Update

Advantage continuously reviews its capital program to adjust to rapidly changing supply/demand dynamics in North America. Our 2024 capital spending guidance has been revised to a range of $220 million to $250 million (from $260 million to $290 million). Budgetary reductions include at least two fewer wells, the deferral of debottlenecking and reliability projects, and a previously unbudgeted capital recovery. Production guidance remains unchanged, thanks to continued outperformance of our development program.

Significant discretionary capital remains in the budget for the second half of 2024, including a steady one‐rig drilling program and the first phase of the 150 mmcf/d Progress gas plant project, currently on‐schedule to be commissioned mid‐year 2025. In the event that North American supply growth continues to overwhelm demand and create further downward pressure on futures pricing, any discretionary investments that fail to meet threshold metrics may be deferred allowing incremental free cash flow to be redeployed to the share buyback.

Based on current futures pricing, Advantage estimates capital spending will be approximately 75% of forecasted total AFF for 2024 and 2025, preserving balance sheet flexibility and optionality for opportunistic, counter‐cyclical share repurchases.

Marketing Update

Advantage has hedged approximately 20% of its forecast natural gas production for summer 2024, 11% for winter 2024/25, 5% for summer 2025 and 6% for winter 2025/26. Advantage has only approximately 8% exposure to AECO volatility this summer through a combination of fixed price hedges and physical market diversification.

Looking Forward

To maximize shareholder value, Advantage remains focused on growing AFF per share(a) while maintaining a net debt(a) target of $200 million to $250 million. Advantage's three‐year plan is to deliver compounding AFF per share growth via careful capital allocation, with annual spending between $220 million and $300 million and production growth capped at 10%. All excess cash will be returned to shareholders via share buybacks.

With modern, low emissions‐intensity assets and the Glacier carbon capture and sequestration asset, the Corporation continues to proudly deliver clean, reliable, sustainable energy, contributing to a reduction in global emissions by displacing high‐carbon fuels. Advantage wishes to thank our employees, Board of Directors and our shareholders for their ongoing support.

  1. Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".

Advantage Energy Ltd. - 2

RESERVES

Advantage engaged its independent qualified reserves evaluator Sproule Associates Ltd. ("Sproule") to evaluate its year‐end reserves as of December 31, 2023 in accordance with National Instrument 51‐101 - Standards of Disclosure for Oil and Gas Activities ("NI 51‐101"), and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook").

Reserves and production information included herein is stated on a gross working interest basis (before royalty burdens and excluding royalty interests) unless noted otherwise. Certain tables may not add due to rounding. In addition to the information disclosed in this annual report, more detailed information on Advantage's oil and gas reserves, including its reserves on a net interest basis (after royalty burdens and including royalty interests) is included in Advantage's Annual Information Form dated March 4, 2024 and is available at www.advantageog.com

and www.sedarplus.ca.

Highlights - Gross Working Interest Reserves

December 31

December 31

2023

2022(4)

Proved plus probable reserves (mboe)

608,878

585,648

Net Present Value of future net revenue of 2P reserves

4,229,092

4,745,165

discounted at 10%, before tax ($000) (1)

Net Asset Value per Share discounted at 10%, before tax (2)(5)

25.07

27.16

Reserve Life Index (proved plus probable ‐ years) (3)

24.4

28.9

Reserves per share (proved plus probable ‐ boe) (2)

3.75

3.41

Bank indebtedness per boe of reserves (proved plus probable)

0.35

0.30

Notes:

  1. Assumes that development of each property will occur, without regard to the likely availability to the Corporation of funding required for that development.

(2)

(3)

Based on 166.2 million shares outstanding at December 31, 2023 and 171.7 million at December 31, 2022. Based on fourth quarter average production and Corporation interest reserves.

  1. Reserves based upon an evaluation by Sproule with an effective date of December 31, 2022 contained in a report of Sproule dated February 22, 2023 using the IQRE average product price forecast effective December 31, 2022.
  2. Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".

Advantage Energy Ltd. - 3

Corporation Gross (before royalties) Working Interest Reserves Summary as at December 31, 2023

Light Crude Oil

Conventional

Natural Gas

Total Oil

and Medium

Crude Oil

Natural Gas

Liquids

Equivalent

(Mbbl)

(Mmcf)

(Mbbl)

(Mboe)

Proved

Developed Producing

4,278

819,376

9,462

150,303

Developed Non‐producing

‐

62,250

380

10,755

Undeveloped

8,343

1,455,505

18,210

269,137

Total Proved

12,622

2,337,130

28,051

430,195

Probable

6,795

957,328

12,334

178,683

Total Proved Plus Probable

19,416

3,294,457

40,385

608,878

Total Oil Equivalent Corporation Gross (before royalties)

Working Interest Reserves Summary

553,365

(Mboe)

585,648608,878

2021

2022

2023

Proved Developed Producing

Proved Developed Non‐producing

Proved Undeveloped

Probable

Total Proved Plus Probable

Advantage Energy Ltd. - 4

Corporation Net Present Value of Future Net Revenue using IQRE Average price and cost forecasts(1)(2)(3)

Before Income Taxes Discounted at

($000)

0%

10%

15%

Proved

Developed Producing

2,489,682

1,392,412

1,139,988

Developed Non‐producing

187,858

91,048

70,802

Undeveloped

4,805,440

1,467,675

923,922

Total Proved

7,482,980

2,951,135

2,134,712

Probable

4,287,209

1,277,958

870,359

Total Proved Plus Probable

11,770,188

4,229,092

3,005,071

Notes:

  1. Advantage's light crude oil and medium crude oil, conventional natural gas and natural gas liquid reserves were evaluated using the average of the forecasts ("IQRE Average Forecast") prepared by McDaniel & Associates Consultants Ltd., GLJ Petroleum Consultants and Sproule effective December 31, 2023, prior to the provision for income taxes, interests, debt services charges and general and administrative expenses. It should not be assumed that the discounted future net revenue estimated by Sproule represents the fair market value of the reserves.

(2)

(3)

Assumes that development of reserves will occur, without regard to the likely availability to the Corporation of funding required for that development.

Future Net Revenue incorporates Managements' estimates of required abandonment and reclamation costs, including expected timing such costs will be incurred, associated with all wells, facilities and infrastructure.

  1. Table may not add due to rounding.

Net Present Value of Future Net Revenue

Before Income Taxes Discounted at 10%

($ millions)

4,745

4,229

3,353

3,384

2,951

2,205

1,148

1,361

1,278

2021

2022

2023

Total Proved

Probable

Total Proved Plus Probable

Advantage Energy Ltd. - 5

IQRE Average Forecasts and Assumptions

The net present value of future net revenue at December 31, 2023 was based upon light and medium oil, conventional natural gas and natural gas liquid pricing assumptions, which was computed by using the IQRE Average Forecast effective December 31, 2023. These forecasts are adjusted for reserves quality, transportation charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years are summarized in the table below:

Canadian Light

Sweet Crude Oil

AECO‐C

Edmonton

Edmonton

Edmonton

40o API

Spot

Pentanes Plus

Butane

Propane

Year

($Cdn/bbl)

($Cdn/MMbtu)

($Cdn/bbl)

($Cdn/bbl)

($Cdn/bbl)

2024

92.91

2.20

29.65

47.69

96.79

2025

95.04

3.37

35.13

48.83

98.75

2026

96.07

4.05

35.43

49.36

100.71

2027

97.99

4.13

36.14

50.35

102.72

2028

99.95

4.21

36.86

51.35

104.78

2029

101.94

4.30

37.60

52.38

106.87

2030

103.98

4.38

38.35

53.43

109.01

Operating

Cost Inflation

Capital Cost

Exchange

Rate

Inflation Rate

Rate

Year

%/year

%/year

($US/$Cdn)

2024

0.0%

0.0%

0.75

2025

2.0%

2.0%

0.75

2026

2.0%

2.0%

0.76

2027

2.0%

2.0%

0.76

2028

2.0%

2.0%

0.76

2029

2.0%

2.0%

0.76

2030

2.0%

2.0%

0.76

Advantage Energy Ltd. - 6

Net Asset Value using IQRE Average price and cost forecasts (Before Income Taxes)

The following net asset value ("NAV") table shows what is normally referred to as a "produce‐out" NAV calculation under which the current value of the Corporation's reserves would be produced at forecast future prices and costs. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time.

Before Income Taxes Discounted at

($000, except per share amounts)

0%

10%

15%

Net asset value per share (1) ‐ December 31, 2022

$

75.28

$

27.16

$

19.62

Net present value proved and probable reserves

11,770,188

4,229,092

3,005,071

Undeveloped land (2)

15,960

15,960

15,960

Working capital and other (3)(4)

127,196

127,196

127,196

Bank indebtedness

(212,854)

(212,854)

(212,854)

Financing liability

(92,897)

(92,897)

(92,897)

Net asset value ‐ December 31, 2023 (3)

11,607,593

4,066,497

2,842,476

Net asset value per share (1)(3) ‐ December 31, 2023

$

71.55

$

25.07

$

17.52

Notes:

(1)

(2)

Based on 166.2 million shares outstanding at December 31, 2023 and 171.7 million at December 31, 2022. The value of undeveloped land is based on book value.

  1. Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".
  2. Working capital excludes the working capital balance incurred by the Corporation's subsidiary, Entropy. Other is calculated as current and non‐current derivative asset less current and non‐current derivative liability.

Advantage Energy Ltd. - 7

Company Gross (before royalties) Working Interest Reserves Reconciliation

Light Crude Oil

and Medium

Conventional

Natural Gas

Total Oil

Crude Oil

Natural Gas

Liquids

Equivalent

Proved

(Mbbl)

(Mmcf)

(Mbbl)

(Mboe)

Opening balance December 31, 2022

12,432

2,278,778

24,650

416,879

Extensions and improved recovery (1)

2,607

502,415

7,752

94,095

Technical revisions (1)

(1,440)

(325,118)

(2,822)

(58,448)

Discoveries

‐

‐

‐

‐

Acquisitions

‐

‐

‐

‐

Dispositions

‐

‐

‐

‐

Economic factors

12

(1,164)

(1)

(184)

Production

(989)

(117,781)

(1,528)

(22,148)

Closing balance at December 31, 2023

12,622

2,337,130

28,051

430,195

Light Crude Oil

Conventional

Natural Gas

Total Oil

and Medium

Crude Oil

Natural Gas

Liquids

Equivalent

Proved Plus Probable

(Mbbl)

(Mmcf)

(Mbbl)

(Mboe)

Opening balance December 31, 2022

19,456

3,186,329

35,137

585,648

Extensions and improved recovery (1)

4,028

484,625

9,859

94,658

Technical revisions (1)

(3,079)

(258,568)

(3,085)

(49,258)

Discoveries

‐

‐

‐

‐

Acquisitions

‐

‐

‐

‐

Dispositions

‐

‐

‐

‐

Economic factors

‐

(146)

2

(22)

Production

(989)

(117,781)

(1,528)

(22,148)

Closing balance at December 31, 2023

19,416

3,294,458

40,385

608,878

Notes:

  1. Proved and Proved Plus Probable reserves have been reassigned to different areas to align with the Corporation's current development plan, which includes the expansion of processing facilities at Progress and Valhalla to develop reserves with higher liquid recoveries. Certain locations at Glacier have been removed and replaced by new locations at Valhalla. The removed locations are reported as negative technical revisions and replaced new locations categorized as extensions and improved recovery in the same table. Included in technical revisions, but not apparent due to the large negative revisions, are positive revisions at existing wells and locations due to increased performance, amounting to 15,647.2 Mboe Gross Proved and 17,983.7 Mboe Gross Proved Plus Probable.
  2. Table may not add due to rounding.

Advantage Energy Ltd. - 8

Corporation Finding and Development Cost ("F&D")

Corporation 2023 F&D Cost - Gross (before royalties) Working Interest Reserves Including Future Development Capital(1)(2)(3)

Proved

Proved

Plus Probable

Net capital expenditures ($000)(4)(5)

266,187

266,187

Acquisitions

(10,159)

(10,159)

Net change in Future Development Capital ($000)

45,375

114,752

Total capital ($000)

301,403

370,780

Total mboe, end of year

430,195

608,878

Total mboe, beginning of year

416,879

585,648

Production, mboe

(22,148)

(22,148)

Reserve additions, mboe

35,464

45,378

2023 F&D cost ($/boe) (4)(5)

$8.50

$8.17

2022 F&D cost ($/boe) (4)(5)

$7.48

$6.62

Three‐year average F&D cost ($/boe) (4)(5)

$7.60

$6.90

Notes:

  1. F&D cost is calculated by dividing total capital by reserve additions during the applicable period. Total capital includes both capital expenditures incurred and changes in FDC required to bring the proved undeveloped and probable reserves to production during the applicable period. Reserve additions is calculated as the change in reserves from the beginning to the ending of the applicable period excluding production.
  2. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC generally will not reflect total finding and development costs related to reserves additions for that year. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect Sproule's best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.

(3)

(4)

The change in FDC is primarily from incremental undeveloped locations.

Excludes net capital expenditures incurred by the Corporation's subsidiary, Entropy.

  1. Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures".

Advantage Energy Ltd. - 9

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Advantage Oil & Gas Ltd. published this content on 18 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2024 14:00:07 UTC.