Obsidian Energy : 2022 Environmental, Social & Governance Report

Caring for our future needs

2022 ENVIRONMENTAL, SOCIAL & GOVERNANCE REPORT

Contents

INTRODUCTION

					ABOUT THIS REPORT
Company overview	. . . . . .	. . . 01
Message to our stakeholders . .	. . . . . . . . . . .			This environmental, social and governance ("ESG") sustainability report provides an overview of Obsidian
. . 02
Sustainability - at the centre of our strategy		. . 04		Energy Ltd..'s ("Obsidian Energy," the "Company," "our," or "we") approach to sustainability along with key
. . .		initiatives, metrics and accomplishments.. This report is intended to present a comprehensive view of the
					Company's commitment to sustainability across the organization and the communities that we work in.. It is
					based on an annual reporting cycle and, unless specifically noted, is as of December 31, 2022, and compared to
ENVIRONMENT
				the same period in 2021..
					References to the Sustainability Accounting Standards Board ("SASB") "Oil & Gas - Processing & Exploration"
Highlights	. . . . . .
. . ..07
Continued commitment to restoring the land	. 08		accounting standard, Global Reporting Initiative ("GRI") "GRI 11: Oil & Gas Sector 2021," and the Task Force
	for Climate Related Financial Disclosure ("TCFD") recommendations are included for the sustainability issues
Maintaining our asset portfolio. . . .	. . . . . . . . . . . . . .10. . .	that were deemed relevant to stakeholders.. SASB and GRI reporting data may be found in the Performance
Protecting air quality by managing emissions		. . 12		Summary tables.. TCFD aims to provide guidelines on how to incorporate climate risk and opportunities into
	companies' existing governance, strategy, risk management and data frameworks; related information can
Proven commitment to preserve water resources. . .	. 14.		be found in our AIF.. Although standard suggested disclosures are included, not all of the requirements to be
					considered in full accordance with SASB, GRI and TCFD reporting standards are referenced.. The data within
					the report is calculated by standard industry methodologies and, in cases where industry standards may not
SOCIAL
				have been used, the appropriate techniques and methodology for the calculation is stated within the data..
					Unless otherwise noted, all financial figures are presented in Canadian dollars, environmental data is in metric
Highlights	. . . . . .	.
. . 16
					units and production values are reported in "barrels of oil equivalent" or "boe.." The accuracy of this report is of
Committed to strong health & safety practices	. . . .	. .17.		utmost importance and as such the included data and statements have been reviewed by senior management,
Recognizing and rewarding our employees		. .19.	and relevant employees; all of whom believe the published information to be an accurate representation of
. .	Obsidian Energy's performance for the reporting years..
Engaging and supporting our communities	. . . . . 20. .
	Barrels of oil equivalent may be misleading, particularly if used in isolation.. A boe conversion ratio of six
					thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion
GOVERNANCE
				method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead..
					Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly
Highlights	. . . . .	. .			different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading
. 23
Ensuring strong governance oversight	. . . 24		as an indication of value..
This report contains forward-looking information pertaining to the internal expectations and projections of
Managing risk through solid ESG practices	. . . . 25. .
Obsidian Energy.. For a full list of associated disclosures, please refer to the Forward-lookingStatements &

Advisories section..

APPENDIX

Performance summary. . . . . . . . . . . . . . . . . . . . . 26. . . . . .

GRI index.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31. . . . . .

Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34. . . . . . .

Forward-looking statements & advisories

. 35. .

INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

Company overview

Obsidian Energy is an intermediate-sized oil and gas producer based in Calgary, Canada, with a well-balanced portfolio of high-quality assets in Alberta's Peace River, Willesden Green/Pembina (Cardium) and Viking areas.. Our principal business consists of the responsible exploration, development and production of petroleum resources, providing energy to fuel our economy and support our communities..

With a proven track record as an efficient, highly successful operator, our unique portfolio of assets and experienced team continue to deliver value to all our stakeholders.. We are proud of our commitment to strong ESG practices that include minimizing our environmental impact, creating a culture where the individual and our communities are valued, and implementing best-in-class governance practices to ensure we are acting in the interests of our stakeholders..

MISSION, VISION, VALUES

Obsidian Energy is a company based on discipline, relentless passion for the work we do, and resolute accountability to all our stakeholders including shareholders, our partners and the communities in which we operate..

In carrying out our business, we strive to act in a manner that supports our culture and hold each other accountable to comply with our shared values..

O U R VA L U E S

EXCELLENCE

HONESTY

TEAMWORK

SAFETY

ACCOUNTABILITY RESPECT EMPOWERMENT INTEGRITY

30,682 boe/d

(25% increase atDec. 31, 2022 over 2021)

$315 million

in capital expenditures

(123% increase over 2021)

2,036

active wells (2022)

>181 MMboe

in gross reserves (2P, year end 2022)

~270

full-time staff and contractors (2022)

~$2.0 billion

in economic contribution (2018 - 2022)

Markets served

Alberta and Western Canada

P E A C E

R I V E R

C A R D I U M

V I K I N G

Core areas

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INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

Message to our stakeholders

Strong stewardship is an integral value of Obsidian Energy and shapes how we run our business.. We strive to embed a conscious mindset of ESG at the forefront of all our activities to do what's right, not just what

is required.. By operating sustainably, we endevour to balance environmental impact while supporting local communities and providing value to our stakeholders - leaving things in as good or better shape than how we found them..

We are pleased to share our progress in improving our ESG performance during 2022.. Obsidian Energy's team was extremely active in 2022 with a capital program that was 123 percent higher than in 2021, contributing to 31 percent more wells drilled, 80 percent more wells fracture stimulated, 226 percent more pipelines abandoned, an increase in safety initiatives, and the doubling of wellsite and pipeline in-line inspections.. The larger capital program drove a 25 percent increase

in production volumes, which resulted in a corresponding rise in energy and resource use.. Despite this, we achieved significant improvements in our sustainability program - becoming more efficient in our operations, decreasing environmental intensities, and doubling our economic contribution over 2021 levels..

OPERATING EFFICIENTLY TO REDUCE

ENVIRONMENTAL IMPACT

Obsidian Energy is committed to strong environmental stewardship, continuously identifying and adopting new strategies, technologies and processes to improve our performance.. We believe that we are one of the best companies at managing our environmental impact in the Western Canada Sedimentary Basin as measured on a per barrel of oil equivalent basis.. The larger capital program translated into associated higher energy use and emissions on a total volume basis, but generally lower on a proportional or per boe basis.. As volumes increased, we became more efficient in managing our environmental impact: intensity of fresh water usage, GHG emissions and spills decreased by 62 percent, nine percent and 95 percent respectively, while the amount of frac'd water used per well decreased by 20 percent with almost double the number of wells..

Overall, our impact on the environment was less in several areas than at the beginning of 2022 even though the impact of several of our 2022 initiatives were not realized until 2023.. Regardless of the higher activity level, we used 34 percent less fresh water and reduced

fugitive emissions by seven percent.. We spent above the mandated regulatory decommissioning level in 2022 to accelerate the reduction of our inactive ARO, including: modernizing sites by replacing unused pads with new technology, completing a four-year project to abandon 97 percent of our inactive legacy wellbores, and safely executing a comprehensive, multi-partner project to remediate a mid-century wellsite located near a fish- bearing watercourse..

STRENGTHENING RELATIONSHIPS AND GOVERNANCE

The health, safety and well-being of our people, partners, communities and stakeholders is our biggest priority.. Integral to our success, Obsidian Energy strives to ensure our actions support and provide economic

and social benefit to those who work or reside in and around our operations.. To accomplish this, we engage with stakeholders to better understand their priorities and needs, creating long-lasting, mutually beneficial relationships..

A strong focus on health and safety ("H&S") is an integral part and fundamental value of our Company as we strive for an injury-free workplace.. H&S is a core

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INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

"With higher activity levels and a doubled capital program, we still made significant progress to improve our ESG performance across all areas in 2022. Our commitment and focus on stewardship make this possible as the Company continues to grow, providing responsible energy today as we care for the needs of future generations."

responsibility of everyone at Obsidian Energy, and we increased worker safety initiatives and introduced new technology and training into our operations in 2022 to reinforce safe practices and better protect employees and contractors.. In addition, we work to provide an environment that respects, rewards and recognizes our people for their hard work and dedication, striving to improve employees' health and well-being..

Supporting the well-being of local communities, we doubled our economic contribution to over $690 million through employment, local contracting, taxes and support for community social causes.. We are very proud of our employees' contributions in our community giving program - both as part of Obsidian Energy and through their own initiatives - providing support to organizations from food banks and specialty school programs to rural sports programs.. By being an active member of the community, we fulfil our commitment to being a good neighbour, and further strengthen our relationships with these key stakeholders..

We believe strong corporate governance fosters transparency and accountability, helps build trust and strengthen relationships, and is core to our long-term success..

Our robust governance framework ensures that the Board of Directors, leadership team, employees and others working for the Company act honestly and in good faith in accordance with our policies, procedures and corporate values.. A key and critical governance area is the oversight of cybersecurity as the conversion to digitization continues at an ever-increasing pace.. We continually enhance our cyber defense program to protect the confidentiality, integrity and reliability of our information and that of our stakeholders..

MAINTAINING A STRONG ESG FOCUS

World events have been a powerful reminder that energy reliability, security and affordability remain critical considerations along with reducing environmental impacts.. We believe that efficiently operated conventional energy sources are essential to meeting societies' needs, even as we embrace new energy options..

We thank the entire Obsidian Energy team, as well as our contractors and partners, for their continued focus on keeping ESG a top priority while delivering outstanding results.. Our dedication to solid ESG stewardship and improving our ESG practices will continue as the Company grows, helping us preserve the world around us for future generations while providing the energy we need today..

Stephen Loukas - President & CEO

Gordon M. Ritchie - Chairman

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INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

Sustainability - at the centre of our strategy

Obsidian Energy prioritizes strong ESG practices throughout the organization as a responsible energy producer committed to continuous improvement and delivering solid performance in all aspects of our business.. Our approach to sustainability is firmly embedded in our corporate strategy, helping shape our investment decisions, guide our practices and set the foundation for how we engage with others.. Through the effective delivery of sustainability initiatives, implementation of innovative technology and responsible development activities, we continue to create long-term value for our stakeholders - our people, local communities, partners and shareholders..

Our ESG management approach centers on several key principles: monitoring global trends; considering industry risks; listening to stakeholders; implementing ESG best practices and regulations; and concentrating on material topics where we can make a sustainable

our people, local communities and the environment, and we do so by focusing our strategies on each of the key ESG areas as follows:

• Environment: Develop and use new practices and technology to minimize the potential impact to the environment and ecosystems..
• Social: Create strong stakeholder relationships while supporting the economic and social well-being of our employees, contractors and the communities in which we operate..
• Governance: Continually improve our governance structure, processes and oversight to ensure our actions support the Company's long-term success and stakeholders' interests..

In 2022, we entered a period of growth and significantly increased activity with increasing production, increased capital spending and improved financial strength.. While

assets: our people, partners and local communities, the environment, and our operations.. We made significant progress in advancing our ESG goals and initiatives during 2022, identifying new opportunities for improvement and to operate more efficiently as production volumes grew.. We are extremely proud of our team's accomplishments to substantially reduce our ARO associated with inactive properties, improve total GHG emission, spill and water use intensities, manage H&S metrics as workforce hours increased by 50 percent, and contribute to the communities where we live and work..

Regardless of past accomplishments, we understand the need for improvement especially as the Company grows.. Obsidian Energy will continue to re-evaluate and redefine our ESG practices to meet changing global needs and improve our ESG performance.. Through creating a resilient and sustainable business, we will grow shareholder value, contribute to responsible

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INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

ESG HIGHLIGHTS AND GOALS

Focusing on material ESG areas for the benefit of the environment, local communities and our stakeholders.

Environment

Social

Governance

Our Commitment

Reduce environmental impacts of operations Commitment to the full life cycle of assets

Maintain a strong focus and culture of H&S

Engage employees and support their needs

Invest in local communities Collaborative community citizenship

Accountability and transparency of Board and management

Assurance of effective leadership

Appropriate oversight of strategic and ESG matters

Material Topics

Abandonment and reclamation activities

Asset integrity and spills

Air quality and GHG emissions

Water usage

Health & safety

Employee rewards and recognition

Stakeholder engagement Economic impact and support Community investment

Corporate governance

Independence

Policies and procedures

Ethics

Compensation

ESG oversight

2022 Highlights

257 wells abandoned

599 km of pipelines abandoned

Met target to abandon 97% of inactive legacy wellbores $34..5 million in ARO spend (gross, including ASRP funds)

96% decrease in spill volumes

24% reduction in pipeline incidents, below industry average Doubled pipeline in-line and wellsite inspections

9% reduction in total GHG intensity

7% decrease in fugitive emissions

Replaced all our legacy pneumatic controllers from high to low bleed

62% reduction in fresh water intensity

12% reduction in fresh water use

20% decrease in frac water used per well

>11,000 safety leading indicators/actions Appointed new H&S advisors

Doubled mental health support in benefit program 26% female employees

Increased summer student program

>$690 million in economic contribution

86% independent Board members (5..2-year average tenure) 100% independent Audit and HRG&C Committees

6..8% insider ownership (Directors & Executive)

Compensation aligned with shareholders (stock-based)

Multiple Board, Committee and management meetings to discuss ESG and risk Enhanced cybersecurity through increased awareness training and new technology

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INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

Environment

To be truly sustainable, 'responsible environmental management' needs to be more than just a phrase - it must be a conscious mindset that

is at the forefront of all activities. At Obsidian Energy, minimizing our environmental impact is an integral part of our culture, improving our environmental performance and solid environment stewardship to help us preserve the environment for future generations.

INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

We made significant progress in reducing our environmental impact despite an increase in activity and production volumes in 2022. Our dedication to responsible operations made this possible - and will continue to provide benefit as the Company grows.

Our approach to responsible and sustainable energy means that we carefully consider all risks in new development and routine operations, and use best-

	C
O	U
F			S	Develop and use new practices and technology to minimize the potential impact

to the environment and ecosystems..

in-class environmental practices and technology to minimize the potential impact on the environment and local communities.. In 2022, we significantly increased our activity level with a 123 percent higher capital program from 2021, resulting in: 31 percent more wells drilled; 80 percent more wells fracture stimulated;

226 percent more pipelines abandoned; the doubling of wellsite and pipeline in-line inspections; and the purchase of a major gas plant.. Increasing production by 25 percent, this activity translated into associated higher

Guiding Principles

• Develop and use best practices and technology to better manage environmental impact..
• Restore land to maximize reclaimed sites through strong remediation and reclamation practices..
• Maintain and improve asset integrity, reducing the risk of environmental incidents..

• Decrease GHG emission intensity through innovation, technology and more efficient operations..
• Conduct responsible water management to protect this valuable resource..

energy use and emissions on a total volume basis, although lower on a proportional or per boe basis..

2022 HIGHLIGHTS

We also became more efficient in managing our environmental impact: intensity of fresh water usage, GHG emissions and spills decreased by 62 percent, nine percent and 95 percent respectively, while the amount of frac'd water used per well decreased by 20 percent..

The full impact of many of our 2022 initiatives will be realized in 2023 as we continue to focus on reducing emissions intensity and ARO while maintaining a high standard for low water usage intensity and asset integrity..

Goal

Reduce ARO by $17 million by YE 2022¹

Pipeline failure rate at or below 2021 industry average

10% decrease in methane emissions over 2021 levels by YE 2023

Sustain fresh water usage reductions

Strategy

Use capital investment to maximize ARO reduction

Advanced risk modelling, increase inspections, and utilize available technology to detect leaks earlier

Multi-pronged approach utilizing new technology and infrastructure investment to reduce emissions and improve asset integrity

Continue to use produced water for new waterfloods and transition to recycled water use across legacy waterfloods

Highlight

$18 million reduction in decommissioning liability¹

Pipeline failure below 2021 industry average (pipeline incidents decreased 24%)

9% reduction in total GHG intensity

On track to meet methane emissions target by YE 2023

62% reduction in fresh water intensity

12% reduction in fresh water use

1 ARO goal and decommissioning liability was based on existing liabilities at the beginning of the year and excludes new liabilities created during the year. Obsidian Energy Ltd. | 07

INTRODUCTION ENVIRONMENT SOCIAL GOVERNANCE APPENDIX

Continued commitment to restoring the land

As an industry leader in responsible asset retirement and reclamation, we consider the potential impact before we begin any development, spending more than required to lessen our existing footprint over the past three years.

We are extremely proud of our team's accomplishments to substantially reduce our ARO associated with inactive

ACCELERATING OUR DECOMMISSIONING ACTIVITIES INVESTING MORE TO RESTORE LAND

properties, going beyond what is minimally required..

In our commitment to being an industry leader, we have adopted several best-in class practices and actively participate in industry and government associations and committees to remain at the forefront of advances in this area, help improve industry practices and ensure our operations are at or exceed environmental standards.. As a result, we believe we have one of the best liability management programs among our peers, economically remediating sites to allow land reuse by communities, wildlife and our stakeholders..

We are committed to reducing our environmental footprint through prudent full-cycle land management practices that minimize ecosystem impact, return sites to their original state and effectively manage inactive liabilities. Our goal is to reduce existing liability profile by committing to meaningful annual asset retirement levels that meet or exceed regulated requirements.

Our focus on responsible asset development ensures that landscapes are restored, and our abandonment and reclamation obligations are adequately funded.

As a part of our continued focus on accelerating our decommissioning activities, we are an early adopter of available government programs to reduce our footprint faster than required by the regulators.. Although the AER's Area Based Closure program ended in 2021, we continued to be an active participant in the ASRP until its completion in 2022.. By using our cash flow combined with program funds, we were able to aggressively accelerate the reduction in our inactive ARO liabilities, using $30..5 million (gross) of ASRP grants and allocations over the three-year ASRP period in addition to our own funds..

We remain committed to the AER's Liability Management Framework, contributing at or above mandatory levels that has resulted in inactive liability reductions since 2020.. In 2023, the AER increased the mandatory ARO spend for all companies across the industry from $443 million to $700 million to reflect the increase in commodity prices and industry revenues seen in 2022.. While this accelerated our decommissioning spending, we remain committed to doing what is needed to continue to restore land back to as good or better condition as when our operations began..

We consistently meet or exceed our asset retirement obligations and return land to as good, or better, than its original state.. In 2022, we more than doubled our ARO spend (including ASRP funds) to $34..5 million from $14..4 million in 2021, with a special focus on the abandonment of pipelines and more challenging well sites..

ARO SPEND

($ millions)
				35
421
13	13	14	14	12
		0	3
2019	2020	2021	2022

AER required spend

Gross ARO spend

TRACKING LEADING INDICATORS 2022

	F U L L C YC L E A S S E T L I F E C YC L E	257
				WELLS ABANDONED
Planning	Production	Assessment	Site Reclamation	Reclamation
Certificate

599km

PIPELINES DISCONTINUED

AND ABANDONED

10

FACILITIES ABANDONED

Development

Abandonment

Remediation

Site Assessment

101

LICENSES RECLAIMED

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