PetroShale : PSH 2021 Annual Information Form

Annual Information Form Year Ended December 31, 2021

March 28, 2022

TABLE OF CONTENTS

Page

GLOSSARY OF TERMS ............................................................................................................................................ 2

ABBREVIATIONS ...................................................................................................................................................... 3

CONVENTIONS ......................................................................................................................................................... 3

CONVERSIONS .......................................................................................................................................................... 3

BARREL OF OIL EQUIVALENCY ......................................................................................................................... 4

FORWARD-LOOKING INFORMATION AND STATEMENTS ......................................................................... 4

NON-IFRS MEASURES ............................................................................................................................................. 6

PETROSHALE INC .................................................................................................................................................... 6

GENERAL DEVELOPMENT OF OUR BUSINESS ............................................................................................... 7

GENERAL DESCRIPTION OF OUR BUSINESS ................................................................................................ 10

STATEMENT OF RESERVES DATA AND OTHER OIL AND NATURAL GAS INFORMATION ............ 11

DESCRIPTION OF OUR CAPITAL STRUCTURE ............................................................................................. 24

MARKET FOR OUR SECURITIES ....................................................................................................................... 27

DIRECTORS AND OFFICERS ............................................................................................................................... 27

AUDIT COMMITTEE INFORMATION ............................................................................................................... 30

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .................................... 31

DIVIDEND POLICY ................................................................................................................................................ 31

INDUSTRY CONDITIONS ...................................................................................................................................... 32

RISK FACTORS ....................................................................................................................................................... 39

LEGAL PROCEEDINGS AND REGULATORY ACTIONS ............................................................................... 58

TRANSFER AGENT AND REGISTRAR .............................................................................................................. 58

MATERIAL CONTRACTS ..................................................................................................................................... 58

EXPERTS ................................................................................................................................................................... 59

ADDITIONAL INFORMATION ............................................................................................................................. 59

APPENDICES

• A - AUDIT COMMITTEE CHARTER

• B - REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATORS

• C - REPORT OF MANAGEMENT AND DIRECTORS ON RESERVES DATA AND OTHER INFORMATION

GLOSSARY OF TERMS

Capitalized terms in this Annual Information Form have the meanings set forth below:

Entities

Board of Directors means our board of directors.

NDIC means the North Dakota Industrial Commission.

PetroShale, we, us, our or the Corporation means PetroShale Inc. and where the context requires, means us and all our controlled entities on a consolidated basis, and where the context requires, also means our predecessor issuers, Mondak Petroleum Inc., Algonquin Oil & Gas Limited and their controlled entitles on a consolidated basis.

PetroShale US means PetroShale (US), Inc., our subsidiary incorporated under the laws of Delaware.

Shareholders mean holders of our Common Shares.

Independent Engineering

COGE Handbook means the Canadian Oil and Gas Evaluation Handbook, maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter), as amended from time to time.

CSA 51-324 means Staff Notice 51-324 - Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators.

NSAI means Netherland, Sewell & Associates, Inc., worldwide independent petroleum consultants.

NSAI Report means the report prepared by NSAI dated March 3, 2022 evaluating the crude oil, natural gas and natural gas liquids reserves attributable to all of our oil and natural gas assets located in Montana and North Dakota, United States at December 31, 2021.

NI 51-101 means National Instrument 51-101- Standards of Disclosure for Oil and Natural Gas Activities.

Securities

Common Non-Voting Shares means our common non-voting shares as presently constituted. See "Description of Share Capital - Common Non-Voting Shares".

Common Shares means our common voting shares as presently constituted. See "Description of Share Capital - Common Shares".

Preferred Shares means our class A preferred shares as presently constituted. See "Description of Share Capital - Preferred Shares".

Special Voting Shares means our series 1 class A preferred shares as presently constituted. See "Description of Share Capital - Special Voting Shares".

Subsidiary Preferred Shares means the Series A Preferred Stock of our subsidiary, PetroShale US. See "Description of Share Capital - Subsidiary Preferred Shares".

Other

IFRS means International Financial Reporting Standards.

First Reserve means FR XIII PetroShale Holdings L.P.

TSXV means the TSX Venture Exchange.

United States or US means the United States of America.

ABBREVIATIONSOil and Natural Gas Liquids

Natural Gas

Bbl
Bbls
Bbls/d
Mbbls
Other
API
°API	an indication of the specific gravity of crude oil measured on the API gravity scale
BOE or Boe	barrel or barrels of oil equivalent, using the conversion factor of 6 Mcf of natural gas being
equivalent to one barrel of oil
Boe/d	barrels of oil equivalent per day
MBoe	thousand barrels of oil equivalent
MMboe	million barrels of oil equivalent
NGL	natural gas liquids
WTI	West Texas Intermediate, the reference price paid in US dollars at Cushing, Oklahoma for the
crude oil standard grade

barrel	Mcf	thousand cubic feet
barrels	MMcf	million cubic feet
barrels per day	Mcf/d	thousand cubic feet per day
thousand barrels	MMbtu	million British Thermal Units
American Petroleum Institute

$000s thousands of dollars

CONVENTIONS

Certain terms used herein are defined in the "Glossary of Terms". Certain other terms used herein but not defined herein are defined in NI 51-101 and CSA 51-324 and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101 and CSA 51-324. References herein to "$", "$Cdn", "C$" or "dollars" are to Canadian dollars and references herein to "US$" or "US dollars" are to United States dollars. Unless otherwise indicated, all financial information herein has been presented in Canadian dollars.

CONVERSIONS

The following table sets forth certain conversions between Standard Imperial Units and the International System of Units (or metric units).

To Convert From	To	Multiply By
Mcf	cubic metres	28.317
cubic metres	cubic feet	35.315
Bbls	cubic metres	0.159
cubic metres	Bbls	6.289
feet	metres	0.305
metres	feet	3.281
miles	kilometres	1.609
kilometres	miles	0.621
acres	hectares	0.405
hectares	acres	2.471
gigajoules	MMbtu	0.950
MMbtu	gigajoules	1.0526

BARREL OF OIL EQUIVALENCY

The term "Boe" may be misleading, particularly if used in isolation. A Boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf: 1 Bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

FORWARD-LOOKING INFORMATION AND STATEMENTS

This Annual Information Form, including documents incorporated by reference herein, contains forward-looking information and statements (collectively, "forward-looking statements"). These forward-looking statements relate to future events or our future performance. All information and statements other than statements of historical fact contained in this Annual Information Form are forward-looking statements. Such forward-looking statements may be identified by looking for words such as "about", "approximately", "may", "believe", "expects", "will", "intends", "should", "plan", "budget", "predict", "potential", "projects", "anticipates", "forecasts", "estimates", "continues" or similar words or the negative thereof or other comparable terminology. In addition, there are forward-looking statements in this Annual Information Form under the headings "General Development of our Business - Recent Developments" our business plan and strategy, the effect of negotiation of contracts, potential acquisitions and our acquisition plans and strategy, and meeting existing environmental standards and regulations and the anticipated effect of controls and regulations governing the oil and natural gas industry; "Statement of Reserves Data and Other Oil and Natural Gas Information" as to our reserves and future net revenue from our reserves, income taxes and pricing, exchange and inflation rates, the development of our proved undeveloped reserves and probable undeveloped reserves, the amount of future developments costs, our plans to fund future development costs through a combination of internally generated cash flow, debt and equity issuances and anticipated funding costs; and as to our exploration and development plans and opportunities, anticipated land expiries, hedging and marketing policies, abandonment and reclamation obligations, tax horizon and future production; "Oil and Natural Gas Wells - Significant Factors or Uncertainties Relevant to Properties With No Attributed Reserves" as to the expected requirement to make substantial capital expenditures in order to prove, exploit, develop and produce oil, natural gas and natural gas liquids from the Corporation's properties and the potential availability of debt and equity financing to meet these requirements; and "Dividend Policy" as to our dividend policy and the future payment of dividends.

In addition to the forward-looking statements identified above, this Annual Information Form contains forward-looking statements pertaining to the following:

• • well completions and the timing thereof;

• • the performance characteristics of our oil and natural gas properties;

• • expectation of future production rates, volumes and product mixes;

• • projections of market prices and costs, and exchange and inflation rates;

• • supply and demand for oil, natural gas and natural gas liquids;

• • expectations regarding our ability to raise capital and to continually add to reserves through acquisitions, development and optimization;

• • the estimated levels of certainty in respect of the Corporation's reserves;

• • the anticipated timeframe for completing undeveloped projects;

• • the lack of any anticipated significant economic factors or significant uncertainties affecting any particular component of our reserves data;

• • treatment under governmental regulatory regimes and tax laws;

• • productive capacity of wells, anticipated or expected production rates and anticipated dates of commencement of production and timing of results therefrom;

• • fluctuations in depletion, depreciation and accretion rates;

• • expectations regarding the costs and timing to drill and complete oil and natural gas wells;

• • expectations regarding the costs to produce, process and transport our oil, natural gas and natural gas liquids to markets;