Pardee Resources : 2QR2022

Responsible Development of Natural Resource Properties Integrity Creativity Excellence Respect Teamwork Family

To Our Shareholders:

During Q2 2022, Pardee Resources Company earned $9.24 per share, an increase of 211% above the $2.97 per share earned during Q2 2021. EBITDA during the quarter was $14.74 per share, 144% higher than EBITDA of $6.03 earned in 2021. Supported by strong commodity prices during the quarter, our Metallurgical Coal, Timber & Surface, and Oil & Gas Divisions achieved meaningful revenue improvements over Q2 2021 results. Quarterly revenues from our Alternative Energy Division were down versus last year due to a decline in both power production and the average realized price of our renewable energy credits. Despite high summer temperatures in both California and Portugal, our table grape and almond crops remain on track for a healthy harvest season.

Metallurgical Coal Division: Strong global coal and steel markets lifted U.S. metallurgical coal markets which were further strengthened by the fallout from the Ukraine War. While new U.S. longwall mines helped to meet demand, a limited supply response from Australia and Canada, together with equipment, labor, and transportation bottlenecks in the U.S., kept global supplies in check. As a result, 2022 domestic High Vol-A metallurgical coal contracts settled at record high prices of over $180 per ton. At Pardee, a year-over-year production increase resulting from a new deep mine, coupled with stronger pricing, led to Q2 2022 Division revenues of $6.3 million, 127% higher than our Q2 2021 results; while first half (H1) 2022 Division revenues totaled $11.0 million, 140% above last year's results.

Oil & Gas Division: During Q2 2022 natural gas prices continued their upward momentum, but not without significant volatility. LNG exports and limited gas-to-coal switching led Appalachian Basin prices higher, from a monthly average of $3.23 per MMBtu in January to $6.49 per MMBtu in May. Prices then fell from their interim highs after an explosion in early June forced a major U.S. LNG export facility offline, crimping demand and prices. Late in the quarter, prices were trending upward again as a heatwave spread across the U.S. causing a natural gas demand surge from electric power producers. As a result of the strong pricing year-to-date, Pardee's H1 2022 Division revenues reached $6.6 million, a 101% gain above H1 2021 Division revenues of $3.3 million.

Timber & Surface Division: Strong markets during the quarter sustained hardwood lumber and log prices at elevated levels. Single-family housing starts for the first six months of the year were up 8% over the prior year period, while home remodeling expenditures increased 18%. Hardwood lumber exports through May were also up 21% in dollar value versus the prior year. During Q2 2022, Pardee's realized average hardwood stumpage price was $374 per mbf, 21% higher than Q2 2021 levels. Meanwhile, our Q2 2022 hardwood production was down versus last year due to harvest timing variances, while H1 production year-over- year was flat as logging operations remained challenged by shortages of labor, equipment, and trucking services. Quarterly gains from our Virginia rural real estate initiatives were $394,207, bringing the total for the first half of the year to $1.3 million.

1

Alternative Energy Division: While high prices for oil, natural gas, and coal placed renewed urgency to develop solar generating capacity, U.S. installations during Q1 2022, which is the latest data available, were 21% lower than Q1 2021 and 52% lower than Q4 2021. The reduction in U.S. solar installations was due to a Department of Commerce tariff related investigation which halted solar module shipments to the U.S. from Asia, a constraint which is expected to remain through the end of 2022. Electricity production from Pardee's renewable portfolio during Q2 2022 was 15.3% lower than during Q2 2021, due to both year-over-year weather variances and equipment-related outages. Meanwhile, our average SREC price dropped 17.5% versus Q2 2021, following the expiration of certain long-term contracts in New Jersey. Overall, quarterly Division revenues were $992,000, a 23% decline versus our Q2 2021 results.

Agriculture Division: Despite the high summer temperatures recorded in both California and Portugal during Q2 2022, our table grapes and almond trees are developing well, and healthy harvests are expected in the fall. In California, our table grapes benefited from warm days and cool nights; while in Portugal, the plentiful water supplies allowed for irrigation sufficient to avoid the negative effects of hot weather. As reported in our Q1 2022 Report, we do not expect the current drought in the U.S. West to materially impact our table grape operations since both of our ranches have access to sufficient well water.

Summary: We are grateful for the skill, dedication, and hard work of our employees, whose daily contributions during the quarter provided for the Company's ongoing success. Longer term, their efforts have helped position the Company to benefit fully from the recent strength in commodity prices. Following our improved operating performance year-to-date, we ended the quarter with $28.8 million in cash, allowing the Company to meet its dual goals of returning capital to shareholders and investing for future growth.

*Please see page 6 for an update of legal matters.

Sincerely yours,

Corporate Office

Pardee Resources Company

1500 Chestnut Street, Suite 2 #1950

Philadelphia, PA 19102

1. 405-1260
   [e-mail]
   www.pardee.com

Chairman	President & CEO
Benjamin A. Burditt	Carleton P. Erdman

2

Pardee Resources Company

Unaudited Consolidated Balance Sheets

(Dollars in Thousands)
ASSETS		06-30-22			12-31-21
Current Assets:
Cash & Cash Equivalents	$28,831			$20,177
Accounts Receivable	7,040			7,758
Prepaid Income Taxes	0			121
Other	2,865			1,139
		38,736			29,195
Fixed Assets: (Net of Depl. & Deprec.)
Land & Right of Ways	27,485			27,921
Mineral Rights - Coal	33,053			33,153
Timber	9,842			10,032
Solar Equipment	19,870			20,525
Building & Structures	1,220			1,223
Agriculture Development	8,742			9,064
Equipment	442			428
Automobiles	171			188
Other Fixed Assets	1,308			1,261
		102,133			103,795
Investments & Other
Oil & Gas Investments (Net of Depl. & Deprec.)	35,161			36,402
Equity Investments	514			563
Right of Use Asset	3,454			3,578
Other		179			185
Total Assets	$180,177			$173,718
LIABILITIES & EQUITY
Current Liabilities:
Accounts Payable	$1,437			$3,175
Deferred Revenues	33			712
Income Taxes Payable	386			144
Current Portion Lease Liability	404			404
		2,260			4,435
Noncurrent Liabilities:
Non-recourse Debt	1,134			1,134
Asset Retirement Liability	56			56
Supplemental Pension Plan	496			510
Deferred Revenue, Net of Current Portion	567			390
Deferred Taxes	17,339			17,339
Lease Liability	3,400			3,531
Other		120			104
Total Liabilities		25,372			27,499
Shareholder's Equity:
Common Stock	775			775
Additional Paid in Capital	13,790			14,484
Accumulated Other Comprehensive Income	(25)		(25)
Retained Earnings	160,971			153,246
Treasury Stock	(24,127)		(25,317)
		151,384			143,163
Noncontrolling Interest		3,421			3,056
Total Equity		154,805			146,219
Total Liabilities & Equity	$180,177			$173,718

3

Pardee Resources Company

Unaudited Consolidated Income Statements

(Dollars in Thousands)
		Three		Three		Six		Six
		Months		Months		Months		Months
		Ended		Ended		Ended		Ended
	06-30-22		06-30-21				06-30-22		06-30-21
Divisional Revenues:
Metallurgical Coal	$6,326		$2,793		$11,042		$4,598
Oil & Gas	3,558		1,594		6,647		3,304
Timber & Surface	2,055		1,759		5,119		2,991
Alternative Energy	992		1,289		1,697		2,022
Agriculture	107		(69)		145		(69)
	13,038		7,366		24,650		12,846
Divisional Expenses:
Metallurgical Coal	754		686			1,502		1,328
Oil & Gas	1,051		1,048		2,112		2,085
Timber & Surface	850		818			1,652		1,440
Alternative Energy	513		539			1,014		1,081
Agriculture	(59)	164			432		320
	3,109		3,255		6,712		6,254
Net Operating Income	$9,929		$4,111			$17,938		$6,592
Interest and Other Income	11		12			25		23
Gain (Loss) on Equity Investment	0		45			(2)	50
General and Administrative	(1,590)	(1,503)		(3,331)	(3,033)
Interest Expense	(6)	(7)		(13)	(14)
Income Before Taxes	$8,344		$2,658			$14,617		$3,618
Taxes	2,277		734			3,990		995
NET INCOME	$6,067		$1,924			$10,627		$2,623
Net Loss - Noncontrolling Interest	33		28			89		59
Net Income - Pardee Resources
Shareholders	6,100		1,952		$10,716		$2,682
EARNINGS PER SHARE	$9.24		$2.97			$16.23		$4.08
EBITDA PER SHARE	$14.74		$6.03			$26.30		$9.33
(earnings before interest, taxes,
depreciation and amortization)
Weighted Average Number of
Common Shares Outstanding		660,112			657,227			660,112		657,227
Common Dividend Per Share	$1.80		$1.80			$3.60		$3.60
Total Shareholder Return
paid plus change in stock price)									22.05%			23.61%

4