Kiwetinohk Energy Corp. has entered into an agreement to acquire an additional 28.5% average working interest in Kiwetinohk-operated Montney assets in the Placid area for total cash consideration of $61.4 million (purchase price net of adjustments is approximately $59 million) (the Acquisition). The Acquisition includes 1,200 boe/d (45% oil & liquids) of current Montney production and increases Kiwetinohk's Placid area natural gas processing and condensate handling capacity to 100 MMcf/d and 5,000 bbl/d respectively (an increase of 30 mmcf/d and 1,750 bbl/d).

Kiwetinohk will obtain an incremental 14.12% ownership in the 14-28 Bigstone sweet natural gas processing facility, bringing its total working interest to 39.31%. Total owned processing capacity at the Bigstone sweet natural gas processing facility increases from 20 MMcf/d to 31 MMcf/d. The Acquisition is expected to close on or about September 15, 2022, with an effective date of July 1, 2022. With this Acquisition, Kiwetinohk has now increased its working interest to 100% in 53,000 Montney acres in the area where all its new Montney drilling has occurred in the past two years.

The Acquisition consolidates Kiwetinohk's position in the Placid Montney area and increases its average working interest over 79,000 acres in the region to 88.2%. Grossing up Kiwetinohk's Montney reserves for the Acquisition adds 12.9 MMboe of total proved plus probable (TPP) reserves, based on the independent reserves report of McDaniel & Associates Consultants Ltd. (McDaniel) effective as of December 31, 2021. The acquired assets are in the Company's Montney and Duvernay core area near Fox Creek, Alberta.

Following the Acquisition Kiwetinohk is now 45% weighted to the Montney on current production and 43% on TPP reserves as reported in McDaniel's independent report at year end 2021. The Acquisition will be funded through Kiwetinohk's bank facilities and is accretive on all per share metrics. With ample borrowing capacity, a lending facility redetermination was not required to undertake this transaction.

Kiwetinohk's next routine lending redetermination is scheduled for the fourth quarter. On closing, Kiwetinohk is expected to have $210.0 million of available borrowing capacity, 56% of its current $375 million bank facility. The Acquisition consolidates Kiwetinohk's interest in the Placid area, providing control over future development planning, optimizing infrastructure and streamlining decision making as to the lands that include the acquired assets.

With increased control, Kiwetinohk plans to accelerate the development of the Placid area and establish a material Montney position to complement its existing Duvernay base. Production from the Montney Placid area may also be used to satisfy Kiwetinohk's Alliance Pipeline firm commitment obligations, reducing purchased replacement gas requirements while adding the benefit of currently favourable Chicago natural gas pricing to current production, which further increases its peer-leading corporate netbacks of $70.70/boe (pre-hedging) reported in the second quarter. The Acquisition increases Kiwetinohk-owned processing capacity, further augmenting regional infrastructure ownership and control.

This will enable Kiwetinohk to treat more sour gas through owned facilities and reduce reliance on third party sour gas processing, immediately decreasing per boe processing fees. With the added potential to optimize the facility for sour gas disposal, Kiwetinohk could further reduce processing costs over the medium term. This is a continuation of Kiwetinohk's long-term strategy of owning its processing infrastructure and being a low-cost producer.

This Acquisition will also eliminate an Area of Mutual Interest (AMI) agreement. This means Kiwetinohk no longer has an obligation to offer participation in future Placid area acquisitions to its former working interest partner, further supporting regional control over Kiwetinohk's Montney land position.