Trilogy Energy : Announces Financial and Operating Results for the Six Months-Ended June 30, 2016

Calgary, Alberta

August 4, 2016

News Release: Trilogy Energy Corp. Announces Financial and Operating Results for the Six Months-Ended June 30, 2016

Trilogy Energy Corp. (TSX: TET) ("Trilogy") is pleased to announce its financial and operating results for the six months-ended June 30, 2016.

Financial and Operating Highlights

• Reported sales volumes for the second quarter of 2016 were lower at 20,299 Boe/d as compared to 22,786 Boe/d in the previous quarter. The decrease in production was attributed to the impact of shut-in production due to low natural gas prices (~ 1,200 Boe/d), forest fires in the Fox Creek area (~ 700 Boe/d), and facility downtime and restrictions (~ 1,000 Boe/d). Natural declines were offset, mostly, by resumed and new well production brought on in the quarter;

• Combined liquids pricing increased quarter over quarter by 37 percent to $49.09/Bbl in the second quarter from

  $35.73/Bbl in the previous quarter, offset by a reduction in the price for natural gas of 47 percent from $2.70/mcf to

  $1.42/mcf resulting in the shut-in of natural gas production in the quarter. The decrease in natural gas prices were offset, in part, by significantly lower transportation costs on the commencement of long-term firm service contracts in the second quarter;

• Total operating expenditures decreased to $15.4 million ($8.34/Boe) in the second quarter from $16.9 million ($8.17/Boe) in the previous quarter on the lower production;

• Funds flow from operations (1) in the second quarter increased to $9.7 million as compared to $8.3 million in the previous quarter, primarily on lower operating, transportation and general and administrative costs, partially offset by lower sales revenue and higher interest costs;

• Trilogy has experienced significant capital cost efficiencies achieved mainly through improved drilling and completion practices and general decreases in the cost of the related services in the low commodity price environment;

• During the quarter, Trilogy's revolving credit facility agreement was amended. The amendments included:

  • an extension to the maturity date by one year (to April 30, 2018);

  • a reduction in the borrowing base to $300 million (previously $450 million);

  • an increase in pricing for all borrowings in excess of $250 million;

  • the suspension of its Consolidated debt to EBITDA financial covenant ratio until June 30, 2017; and

  • increased limits to its Senior Debt to EBITDA financial covenant ratio;

• Net debt (1) decreased to $561.6 million at the end of the second quarter of 2016 from $564.4 at the end of the prior quarter. Capacity under the credit facility at the end of the quarter was $33.3 million, inclusive of its working capital surplus and outstanding letters of credit.

(1) Refer to Non-GAAP measures in this release and MD&A

Financial and Operating Highlights Table

(In thousand Canadian dollars except per share amounts and where stated otherwise)

1. Funds flow from operations and net debt are non-GAAP terms. Please refer to the advisory on Non-GAAP measures below.

2. Excluding shares held in trust for the benefit of Trilogy's officers and employees under the Company's Share Incentive Plan. Includes Common Shares and Non-voting Shares. Refer to the notes to the interim consolidated financial statements for additional information.

Operations Update for the Second Quarter 2016

Trilogy's 2016 second quarter production was 20,299 Boe/d, a decrease of 11 percent from first quarter 2016 production of 22,786 Boe/d. The decline in second quarter production reflects the impact of shut-in production due to low commodity prices (~1,200 Boe/d), Fox Creek area forest fires (~700 Boe/d) and facility downtime and restrictions (~1,000 Boe/d). Trilogy did not participate in any new wells during the quarter; most of the natural production declines in the quarter were offset by production from two horizontal Montney oil wells that were drilled in the first quarter and brought on production during the second quarter. The Company expects to average approximately 22,000 Boe/d for the year, with its forecasted capital spending to be within cash flow.

During the quarter, Trilogy's net capital expenditures totaled $0.6 million while $9.7 million was generated in funds flow from operations, resulting in year-to-date net capital expenditures of $22.9 million and funds flow from operations of

$18.0 million. Included in Trilogy's annual production guidance of 22,000 Boe/d are the proposed third quarter drilling of 4 Montney oil locations, 1 Duvernay completion and the drilling of a Duvernay horizontal lateral to manage expiries. Given the current production forecast and strip pricing, Trilogy expects to generate approximately $50-$60 million in annual funds flow from operations. If the upper end of the funds flow forecast proves out, Trilogy may drill and complete up to four additional Montney oil locations in the fourth quarter, for a total of 10 new Montney oil wells drilled during 2016. Trilogy will continue to monitor commodity prices and operating netbacks to ensure its wells are producing profitably and that it is able to execute a cash flow-balanced spending program while maintaining or growing current production levels.

During the second quarter, Trilogy tied in the 2 horizontal Montney oil wells drilled in the first quarter - 100/05-06-064- 18W5M (the "05-06 well") and 102/12-06-064-18W5M (the "02/12-06 well"). Each of these wells were drilled, completed and tied-in for total costs of approximately $2.9 million as compared to historical costs of $4.1 million. These cost reductions were achieved mainly through improved drilling and completion practices and Trilogy believes such reductions will be sustainable going forward. The 05-06 well and the 02/12-06 well were brought on production in April and, in the initial 60 producing days, produced 64,000 barrels and 33,000 barrels of oil, respectively. Trilogy increased the proppant from 10 tonnes of sand per stage in the 02/12-6 well to 20 tonnes of sand per stage in the 05-06 well (each well had 22 stages). Trilogy will continue to evaluate well performance to determine whether the higher productivity in the 05-06 well is directly related to the increase in proppant and will adjust future completions programs if required.

Due to low natural gas prices, Trilogy deferred production from the 2 extended reach horizontal Montney gas wells drilled in the first quarter of 2016. The first well (100 percent working interest) was brought on production in early July, while the second well (50 percent working interest) was put on production later in the month as natural gas prices continued to increase relative to the second quarter. These 2 wells were drilled, completed and tied in for a total cost of approximately $5.1 million each, which is a 25 percent cost reduction from previously drilled long reach lateral wells in the area. These cost reductions were the result of improvements in the technology used in drilling operations and in the completion design for the wells, which Trilogy believes to be sustainable, as well as reductions in the cost of services. Trilogy will continue to evaluate the relative economics of its Montney gas wells given the increase in forecasted natural gas prices, which may result in additional wells being drilled later in the year.

Included in Trilogy's annual 2016 capital and production guidance are 4 additional horizontal Montney oil wells that Trilogy plans to drill in the third quarter to grow production from its Kaybob Montney oil pool. On average, each well is budgeted to cost approximately $2.9 million to drill, complete, equip and tie-in, and is expected to generate attractive economics at current WTI oil prices of $40 to $50 USD per barrel. Additional Kaybob Montney oil wells may be drilled into this pool in the fourth quarter if Trilogy is able to opt-in to the new Modernized Royalty Framework before the original proposed implementation date of January 1, 2017 and assuming current pricing forecasts are maintained. Trilogy also plans to drill a Duvernay horizontal lateral from a well that was previously drilled to its intermediate casing point at 09-30-063-17W5M in the first quarter of the year. By drilling the horizontal lateral, Trilogy anticipates continuing nine sections of expiring acreage offsetting the well. The original well was drilled to intermediate casing point for approximately $1.5 million before operations were suspended due to break up. The horizontal lateral will be drilled to a

bottom hole location at 12-21-063-17W5M in August and is expected to have a lateral length of approximately 2,400 meters with an anticipated cost of drilling the lateral of approximately $2 million.

Trilogy is currently completing the horizontal Duvernay well that it drilled in the first quarter of 2016. The well was drilled from a surface location at 07-08-061-19W5M to a bottom hole location at 102/16-17-061-19W5M with a 2,255 meter lateral for a cost of $4.7 million. The single well completion is expected to cost approximately $5.8 million and is included in the Company's current budgeted capital spending program. Management believes the details announced by the Alberta Government in April 2016 for the Modernized Royalty Framework and subsequent information on the Emerging Resources Program will result in renewed investment interest in the Duvernay and will support the continued development of its lands in the future. Collectively, the industry has continued to progress drilling and completion techniques to further reduce costs and increase ultimate recoverable reserves per well, resulting in improved economics for the commercial development of the Duvernay formation in the Kaybob area. Trilogy's Duvernay land position and producing infrastructure provides it with a tremendous opportunity to profitably grow its corporate production and the Company will evaluate options to accelerate the development of its Duvernay asset base.

Trilogy is extremely pleased with the operating cost reductions achieved over the past year and believes it remains profitable and competitive in the current commodity price environment. The Company has been able to reduce year-to- date operating costs to $8.25/Boe versus $9.18/Boe in calendar 2015, despite declining production rates. Trilogy forecasts annual operating costs to be approximately $8.50/Boe for 2016. General and administrative costs have been reduced throughout the Company as employees and contractors have all shared in reducing costs and controlling expenditures. Significant savings have also been achieved in our capital spending program by re-engineering previous processes and applying new technology to reduce drilling days and completions costs. These reduced costs are expected to provide improved economics in our key plays as drilling resumes.

Outlook

In the current natural gas and crude oil commodity price environment, Trilogy expects to manage its business through continued production of profitable wells, asset rationalization and disciplined capital spending. As a growth-oriented corporation, Trilogy must remain flexible in order to respond to changes in commodity prices and royalty structures and believes it can manage its asset base prudently.

Trilogy is strategically positioned in that its Montney oil and gas, Duvernay and Gething oil pools are all economic at current oil and gas prices, mainly due to capital and operating efficiencies realized by Trilogy's staff over the past twelve to eighteen months. Management believes these pools and Trilogy's collective asset base will produce significant profitable growth into the future, and that the past eighteen months have been very important in helping Trilogy solidify its three to five year growth plan. Trilogy will continue to allocate capital and manage its resources to provide the best return to its shareholders. Accordingly, annual guidance for 2016 is estimated as follows:

Additional Information

Trilogy's financial and operating results for the second quarter of 2016, including Management's Discussion and Analysis and the Company's unaudited Interim Consolidated Financial Statements and related notes as at and for the quarter ended June 30, 2016 can be obtained at http://media3.marketwire.com/docs/trilogy2016q2results.pdf .These reports will also be made available through Trilogy's website at www.trilogyenergy.com and SEDAR at www.sedar.com.