Paramount Resources : 2023 Annual Information Form

DEFINITIONS

In this annual information form, capitalized terms have the following meanings:

"2023 Financial Statements and MD&A" means Paramount's audited consolidated financial statements as at and for the year ended December 31, 2023 and the accompanying Management's Discussion and Analysis, which can be found under the Company's profile on SEDAR+ at www.sedarplus.ca;

"ABCA" means the Business Corporations Act (Alberta);

"AER" means the Alberta Energy Regulator;

"BCER" means the British Columbia Energy Regulator;

"Cavalier Energy" means Paramount's wholly-owned subsidiary, Cavalier Energy Inc.;

"COGE Handbook" means the Canadian Oil and Gas Evaluation Handbook;

"Common Shares" means class A common shares in the capital of the Company;

"Credit Facility" means Paramount's senior secured revolving bank credit facility;

"ESG" means environmental, social and governance;

"Fox Drilling" means Paramount's wholly-owned limited partnership, Fox Drilling Limited Partnership;

"GHG" means greenhouse gases;

"IFRS" means International Financial Reporting Standards;

"McDaniel" means McDaniel & Associates Consultants Ltd.;

"McDaniel Report" means the report of McDaniel on Paramount's oil and natural gas reserves effective as of December 31, 2023 and dated and prepared as of March 5, 2024;

"Paramount" or the "Company" means Paramount Resources Ltd. and, unless otherwise specified or the context otherwise requires, its subsidiaries and partnerships; and

"TSX" means the Toronto Stock Exchange.

Information herein is presented as at December 31, 2023 unless otherwise noted.

OIL AND NATURAL GAS MEASURES, ABBREVIATIONS AND TERMS

Oil and natural gas measures, abbreviations and terms used in this annual information form have the meanings set forth below.

Oil and Gas Equivalent

"Abandonment and Reclamation Costs" mean the costs associated with restoring properties disturbed by oil and gas activities to the standard imposed by applicable government and regulatory authorities. Such costs are incurred in connection with abandoning, decommissioning, remediating and reclaiming wells, facilities, pipelines and associated surface leases.

"gross" means:

1. in relation to wells, the total number of wells in which Paramount has an interest;
2. in relation to properties, the total area of properties in which Paramount has an interest; and
3. in relation to Paramount's interest in production or reserves, Paramount's working interest share before deduction of any royalties and without including Paramount's royalty interests.

"net" means:

1. in relation to wells, the number of wells obtained by aggregating Paramount's working interest in each of its gross wells;
2. in relation to Paramount's interest in a property, the total area in which Paramount has an interest multiplied by the working interest it owns; and
3. in relation to Paramount's interest in production or reserves, Paramount's working interest share after deduction of royalty obligations, plus Paramount's royalty interests.

"NGLs" means natural gas liquids, including pentanes-plus (or condensate) (C5+), ethane (C2), propane (C3) and butane (C4).

"liquids" means oil and NGLs.

Unless a specific product type is presented on a separate basis, references to natural gas include shale gas and conventional natural gas and references to oil include tight oil, light and medium crude oil and heavy crude oil.

A ratio of six thousand cubic feet of natural gas to one barrel (6:1) is used when converting natural gas to Boe and a ratio of one barrel to six thousand cubic feet of natural gas (1:6) is used when converting oil and NGLs to Mcfe. Equivalency measures such as Boe and Mcfe may be misleading, particularly if used in isolation. A conversion ratio of 6:1 for Boe or 1:6 for Mcfe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. For the year ended December 31, 2023, the value ratio between six thousand cubic feet of natural gas and one barrel of oil was approximately 36:1. This value ratio is significantly different from the energy equivalency ratio of 6:1 for Boe and using such a ratio would be misleading as an indication of value.

RESERVES CATEGORIES AND DEFINITIONS

Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: (i) analysis of drilling, geological, geophysical and engineering data; (ii) use of established technology; and (iii) specified economic conditions, which are generally accepted as being reasonable. The following definitions and assumptions form the basis of classification for reserves presented in the McDaniel Report:

Reserves are classified according to the degree of certainty associated with the estimates:

Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

Each of the reserves categories (proved and probable) may be divided into developed and undeveloped categories:

Developed Reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (for example, when compared to the cost of drilling a well) to put the reserves on production. The developed category may be subdivided into producing and non- producing as follows:

Developed Producing Reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.

Developed Non-producingReserves are those reserves that either have not been on production, or have previously been on production, but are shut-in, and the date of resumption of production is unknown.

Undeveloped Reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved or probable) to which they are assigned.

In multi-well pools it may be appropriate to allocate total pool reserves between the developed and undeveloped categories or to subdivide the developed reserves for the pool between developed producing and developed non-producing. This allocation should be based on the estimator's assessment as to the reserves that will be recovered from specific wells, facilities and completion intervals in the pool and their respective development and production status.

The qualitative certainty levels referred to in the definitions above are applicable to individual reserves entities (which refers to the lowest level at which reserves calculations are performed) and to reported reserves (which refers to the highest level sum of individual entity estimates for which reserves are presented). Reported reserves should target the following levels of certainty under a specific set of economic conditions: (i) at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves; and (ii) at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves.

A quantitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods.

Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGE Handbook.

FINANCIAL INFORMATION

Unless otherwise specified, all dollar amounts are expressed in Canadian dollars and all references to "dollars" or "$" are to Canadian dollars and all references to "US$" are to United States dollars.

Unless otherwise indicated, all financial information included in this annual information form has been prepared in accordance with IFRS. The 2023 Financial Statements and MD&A can be found under the Company's profile on SEDAR+ at www.sedarplus.ca.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward looking information in this document includes, but is not limited to:

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document, including those set out under "Reserves and Other Oil and Gas Information - Other Oil and Gas Information - Tax Horizon":

Although Paramount believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as Paramount can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Paramount and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled "Risk Factors" in this annual information form. The forward-looking information contained in this annual information form is made as of the date hereof and, except as required by applicable securities law, Paramount undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

THE COMPANY

Paramount Resources Ltd. is incorporated under the ABCA. The Company's corporate and registered office is located at Suite 4700, 888 - 3rd Street SW, Calgary, Alberta T2P 5C5. The Common Shares are listed on the TSX under the symbol "POU".

The Company has various subsidiaries and partnerships, including Cavalier Energy and Fox Drilling. The Company's subsidiaries and partnerships each accounted for: (i) less than 10 percent of the Company's consolidated assets as at December 31, 2023; and (ii) less than 10 percent of the Company's consolidated revenues for the year ended December 31, 2023. In aggregate, the Company's subsidiaries and partnerships did not exceed 20 percent of the Company's total consolidated assets or total consolidated revenues as at and for the year ended December 31, 2023.

GENERAL DEVELOPMENT OF THE BUSINESS

Paramount is an independent, publicly traded, liquids-rich natural gas focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas. Paramount commenced operations as a public company in 1978 and has adapted to a multitude of operating and economic climates over the past 45+ years.

Paramount's operations are organized into the following three regions:

• the Grande Prairie Region, located in the Peace River Arch area of Alberta, which is focused on Montney developments at Karr and Wapiti;
• the Kaybob Region, located in west-central Alberta, which includes the Kaybob North Duvernay development and other natural gas and oil producing properties; and
• the Central Alberta and Other Region, which includes the Willesden Green Duvernay development in central Alberta and shale gas properties in the Horn River Basin and the Liard Basin in northeast British Columbia.

The Company's assets also include: (i) strategic investments in exploration and pre-development stage assets, including prospective natural gas and oil acreage in the Mackenzie Delta and Central Mackenzie in the Northwest Territories and interests held by Cavalier Energy prospective for cold flow heavy oil and in- situ thermal oil recovery; (ii) six triple-sized drilling rigs owned by Fox Drilling; and (iii) investments in other publicly traded and private entities.

Set forth below is a brief description of the events that have influenced the general development of Paramount's business over the past three fiscal years.

2021

In January 2021, the Company completed a private placement of $35.0 million of 7.5% senior unsecured convertible debentures with a maturity date of January 31, 2024.

In the first quarter of 2021, the Company sold certain non-core properties in the Kaybob Region and in the Central Alberta and Other Region for aggregate net cash proceeds of approximately $79 million. These properties had average sales volumes of approximately 2,700 Boe/d (15.4 MMcf/d of conventional natural gas and 142 Bbl/d of NGLs) in the quarter prior to disposition.

In the first quarter of 2021, sales volumes at Karr exceeded 40,000 Boe/d for the first time.

In June 2021, Paramount received a cash payment of $67 million from Strathcona Resources Ltd. in settlement of previously disclosed dissent proceedings respecting Strath Resources Ltd. and for the sale of its remaining securities in Strathcona Resources Ltd.

In July 2021, the Company began paying a regular monthly dividend of $0.02 per Common Share.

In July 2021, Paramount sold its non-operated Birch property in northeast British Columbia, which was included in the Central Alberta and Other Region, for net cash proceeds of approximately $85 million. The property had average sales volumes of approximately 2,300 Boe/d (10.7 MMcf/d of shale gas and 524 Bbl/d of NGLs) in the quarter prior to disposition.

In November 2021, the Company increased its regular monthly dividend to $0.06 per Common Share.

In November 2021, Paramount delivered notices to redeem all $35.0 million of the 7.5% senior unsecured convertible debentures effective December 3, 2021. Prior to the redemption date, all of the debentures were converted by their holders to acquire an aggregate of 5,249,019 Common Shares.

2022

In March 2022, Paramount increased its regular monthly dividend to $0.08 per Common Share.

In April 2022, the Company acquired assets in the Willesden Green area for net cash consideration of approximately $38 million. The assets included approximately 90,000 net acres of Duvernay rights (after deducting near-term expiries) and 1,300 Boe/d of sales volumes (4.0 MMcf/d of shale gas, 580 Bbl/d of NGLs and 60 Bbl/d of tight oil).

In May 2022, Paramount increased the capacity of its Credit Facility to $1.0 billion and extended the maturity date to May 3, 2026. The capacity of the Credit Facility can be increased by up to $250 million pursuant to an accordion feature, subject to incremental lender commitments. Additional information concerning the Credit Facility is included in the 2023 Financial Statements and MD&A.

In May 2022, Paramount increased its regular monthly dividend to $0.10 per Common Share.

In August 2022, the Company acquired additional assets in the Willesden Green area for net cash consideration of approximately $60 million. The assets included approximately 90,000 net acres of Duvernay rights and 1,700 Boe/d of sales volumes (4.6 MMcf/d of shale gas, 700 Bbl/d of NGLs and 230 Bbl/d of tight oil).