Rubellite Energy : Q2 2022 Management Discussion and Analysis

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is management's discussion and analysis ("MD&A") of Rubellite Energy Inc.'s ("Rubellite", the "Company" or the "Corporation") operating and financial results for the three and six months ended June 30 2022, as well as information and estimates concerning the Corporation's future outlook based on currently available information. This discussion should be read in conjunction with the Corporation's unaudited condensed interim financial statements and accompanying notes for the three and six months ended June 30, 2022 as well as the audited financial statements and accompanying notes for the year ended December 31, 2021. Disclosure which is unchanged from the December 31, 2021 MD&A has not been duplicated herein. The Corporation's financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") which require publicly accountable enterprises to prepare their financial statements using International Financial Reporting Standards ("IFRS"). Readers are referred to the advisories for additional information regarding forecasts, assumptions and other forward-looking information contained in the "Forward-Looking Information" section of this MD&A.

The date of this MD&A is August 10, 2022. All amounts are in Canadian dollars unless specified otherwise. Rubellite commenced operations with the acquisition of Perpetual Energy Inc.'s ("Perpetual") Clearwater lands, wells, roads and related facilities in northeast Alberta (the "Clearwater Assets") on July 15, 2021. Operating results for 2021 reflect the period from September 3, 2021, the effective date of the completion of the plan of arrangement between Perpetual, shareholders of Perpetual and Rubellite (the "Arrangement"), to December 31, 2021. As result, there are no Q1 2021 or Q2 2021 comparatives and the Company has provided comparison to the most recent prior quarter of Q1 2022.

This MD&A contains certain specified financial measures that are not recognized by GAAP and used by management to evaluate the performance of the Corporation and its business. Since certain specified financial measures may not have a standardized meaning, securities regulations require that specified financial measures are clearly defined, qualified and, where required, reconciled with their nearest GAAP measure. See "Non-GAAP and Other Financial Measures" for further information on the definition, calculation and reconciliation of these measures. This MD&A also contains forward-looking information. See "Forward-Looking Information".

NATURE OF BUSINESS: Rubellite is a Canadian energy company headquartered in Calgary, Alberta and engaged in the exploration, development and production of conventional heavy crude oil from the Clearwater formation in Eastern Alberta, utilizing multi-lateral horizontal drilling technology. Rubellite has a pure play Clearwater asset base and is pursuing a robust organic growth plan focused on superior corporate returns and funds flow generation while maintaining a conservative capital structure and prioritizing environmental, social and governance ("ESG") excellence. Additional information on Rubellite can be accessed at www.sedar.comand found at www.rubelliteenergy.com.

Rubellite's common shares are publicly traded on the Toronto Stock Exchange under the symbol "RBY".

SECOND QUARTER 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS

• Capital expenditures (see "Non-GAAP and Other Financial Measures") totaled $12.7 million in the second quarter of 2022 (Q1 2022 - $35.5 million). Exploration and development spending was $9.5 million (Q1 2022 - $21.8 million) as the Company was able to get an early start on its post breakup drilling program and accelerated some of its Q3 2022 capital into Q2 2022. Land purchases during the second quarter of 2022 were $3.2 million (Q1 2022 - $13.7 million), adding strategic lands within the Clearwater play.
• Drilling activity for the second quarter of 2022 totaled six (4.8 net) multi-lateral horizontal Clearwater wells, including four (4.0 net) wells at Ukalta and two (0.8 net) wells at Marten Hills that were rig released during the quarter. At the end of June, one (1.0) well at Ukalta was spud on June 27, 2022 and rig released July 10, 2022 and one (0.3 net) well at Marten Hills was spud on June 20, 2022 and rig released July 5, 2022. During the second quarter, the Company drilled an additional vertical water disposal well at Ukalta and began drilling one (1.0 net) exploration well at Alpen to the west of Figure Lake, which rig released July 7, 2022.
• During the second quarter, the Company executed a definitive farm-in and option agreement (the "Peavine Transaction") with Cavalier Energy Inc. in the Peavine area, in the vicinity of recent industry Clearwater drilling activity and southwest of Rubellite's existing option acreage at West Dawson in northern Alberta. The Peavine Transaction provides exposure to 61.25 gross (34.75 net) sections of land highly prospective for the Clearwater formation, of which Rubellite may earn up to a 60 percent working interest by drilling wells or making certain qualifying capital expenditures.
• As of June 30, 2022, there were thirty six (33.0 net) wells contributing to sales production, with another three (2.3 net) wells rig released and recovering oil-based drilling mud ("OBM"), as compared to twenty eight (26.0 net) wells on production at the end of the first quarter of 2022. Recoveries of OBM are not recorded as sales production as the OBM is recycled for future drilling operations to the extent possible or sold and credited back to drilling capital.
• Daily average sales production increased 18% from first quarter 2022 levels to average 1,478 bbl/d of conventional heavy oil in the second quarter of 2022 (Q1 2022 - 1,251 bbl/d) which was just outside of the Company's Q2 2022 production guidance of 1,525 to 1,625 bbl/d. Production progressively ramped up through the first half of 2022 as new wells fully recovered OBM, filled tank inventories and then commenced delivery to sales terminals.
• Operating netbacks (see "Non-GAAP and Other Financial Measures") in the second quarter of 2022 were $11.6 million, or $85.97/bbl (Q1 2022 - $8.0 million or $71.02/boe), reflecting strong Western Canadian Select ("WCS") benchmark prices and increased production. Increases were partially offset by higher costs in all areas as a result of increased production, increased fuel prices and fuel surcharges and higher royalties. After realized losses on risk management contracts of $6.2 million or $46.12/boe (Q1 2022 - losses of $3.3 million or $29.04/boe), operating netbacks were $5.4 million or $39.85/boe (Q1 2022 - $4.7 million or $41.98/boe).
• Adjusted funds flow (see "Non-GAAP and Other Financial Measures") in the second quarter of 2022 was $4.6 million (Q1 2022 - $3.8 million) up 20% quarter-over-quarter, driven by the growth in sales production. Cash flow from operating activities in the second quarter of 2022 was $6.5 million (Q1 2022 - $3.2 million).

RUBELLITE ENERGY INC.

Q2 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS

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• Net income for the second quarter of 2022 was $4.7 million (Q1 2022 - $9.3 million net loss) driven by a swing from an unrealized loss on risk management contracts of $10.6 million in the first quarter to an unrealized gain on risk management contracts of $3.6 million in the second quarter.
• Adjusted working capital surplus (see "Non-GAAP and Other Financial Measures") at the end of the second quarter of 2022 was $2.7 million, down 51% or $2.7 million from $5.4 million at December 31, 2021 as a result of capital spending being higher than adjusted funds flow.

($ thousands, except as noted)	Q2 2022	Q1 2022	Q4 2021	Q3 2021
Financial	15,632
Oil revenue	10,876	3,931	992
Net income (loss)	4,726	(9,272)	(1,265)	8,967
Per share - basic(3)	0.09	(0.21)	(0.03)	12.34
Per share - diluted(3)	0.08	(0.21)	(0.03)	5.16
Total assets	160,202	164,009	115,862	132,370
Cash flow from operating activities	6,473	3,192	1,115	--
Adjusted funds flow(1)	4,597	3,835	1,469	378
Per share - basic(2)(3)	0.09	0.09	0.03	0.70
Per share - diluted(2)(3)	0.09	0.09	0.03	0.29
Common shares (thousands)	54,725
Weighted average - basic	43,930	41,834	726
Weighted average - diluted	55,797	43,930	42,360	1,739
Operating	1,478
Daily average oil sales production (bbl/d) (4)	1,251	603	561
Rubellite average realized oil price(2)	116.21
Average realized oil price ($/bbl)	96.61	70.94	65.50
Average realized oil price - after risk management contracts($/bbl)	70.09	67.57	72.77	65.50

1. Non-GAAPmeasure. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.
2. Supplementary financial measure. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.
3. Per share amounts are calculated using the weighted average number of basic or diluted common shares.
4. Conventional heavy oil sales production excludes tank inventory volumes.

OPERATIONS UPDATE

At Marten Hills, the final eight-legmulti-lateral well of the four (2.0 net) well winter drilling program was rig released in early April. Two of the four winter drilling program wells reached the end of their initial 30-day production periods, recording IP30 rates of 142 bbl/d and 139 bbl/d as compared to the Marten Hills type curve(1) IP30 of 120 bbl/d. The remaining two winter-program wells reached the end of their initial 30-day production periods during May, also performing slightly stronger than the Marten Hills type curve with average IP30 rates of 186 and 179 bbl/d. With the rig racked on location at Marten Hills over spring break up, dry field conditions permitted the spud of two additional horizontal multilateral wells in June prior to re-locating the rig to Figure Lake. The two new wells were drilled at the Marten Hills Area's after payout working interest of 30%. The first well was rig released in mid-June, reached full recovery of its oil-based mud load fluid on July 6th and achieved an average IP30 rate of 188 bbl/d. The second adjacent well rig released in early July, reached full recovery of oil-based mud in late July and is performing positively, commensurate with the neighboring well.

Drilling operations at Ukalta related to the first quarter drilling program continued into early spring as the final Clearwater multi-lateral horizontal well on the 13-35 pad was rig released in April and a vertical water disposal well was subsequently drilled to reduce future water handling costs and enhance field netbacks. Production is now beginning to stabilize on the 13-35 pad, although production rates have been lower than the Ukalta type curve with higher water cuts and gas hampering operations. Following spring break-up, drilling in the Ukalta area re-commenced in early June at a new pad located at 5-26-57-18W4 (the "5-26 pad"), with three new wells drilled and rig released during the second quarter and a fourth well rig released in early July. All four wells have fully recovered their respective load oil and are now producing in their IP30 production periods, targeting to extend the primary Clearwater zone development to the north end of Rubellite's Ukalta area land base. Preliminary results confirm the pool extends to the north, however average production rates from the 5-26 pad appear to be stabilizing below the Ukalta type curve, as the reservoir thins and becomes more variable. Additionally, a vertical delineation well was drilled and cored in early July to evaluate the potential of the northwest portion of Rubellite's exploratory acreage position at Ukalta; however, preliminary log and core analysis results have unfortunately not been encouraging. The Ukalta drilling program has shifted back to the main development area with two of four planned development wells drilled thus far in the third quarter on a new pad located at 16-16-57-18W4 (the "16-16 pad"). Two additional multi-lateral wells at the 16-16 pad and up to four additional development wells planned for the Ukalta area are expected to keep one rig running continuously until mid-way through the fourth quarter.

At Figure Lake, drilling operations recommenced in early July as surface access conditions permitted, with the drilling of a vertical water disposal well to enhance field netbacks and to provide additional reservoir quality information on the prospective Clearwater zone. With positive encouragement from the stratigraphic information obtained in this vertical well, two of up to nine new horizontal multi-lateral wells planned for the remainder of 2022 have been rig released and are recovering oil-based load fluid.

Finally, in late June, Rubellite windowed a third rig to evaluate an exploration prospect at Alpen, approximately ten miles west of Figure Lake. A vertical exploration well was cored and logged, and a six-legmulti-lateral exploratory follow-up well was drilled to evaluate the production capability of the mapped Clearwater heavy oil resource. Preliminary production performance indicates the quality of the oil in the Alpen prospect is heavier than desired. Performance will continue to be monitored to evaluate future follow-up potential.

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The Company has been successful at partially mitigating the impact of inflationary pressures by improving drill bit performance and reducing drilling days, enhancing netbacks for oil-based mud recoveries which are credited back to drilling operations, and employing bulk-purchasing and other capital efficiency strategies.

1. Type curve assumptions are based on the Total Proved Plus Probable Undeveloped reserves contained in the McDaniel Reserve Report as disclosed in the Company's Annual Information Form which is available under the Company's profile on SEDAR atwww.sedar.com. "McDaniel" means McDaniel & Associates Consultants Ltd. independent qualified reserves evaluators. "McDaniel Reserve Report" means the independent engineering evaluation of the crude oil, natural gas and NGL reserves, prepared by McDaniel with an effective date of December 31, 2021, and a preparation date of March 9 2022.

2022 OUTLOOK AND GUIDANCE

During the second half of 2022, Rubellite plans to spend approximately $24 to $26 million to continue its two-rig drilling program into the fourth quarter of 2022 to drill, complete, equip and tie-in 20 (17.2 net) multi-lateral horizontal wells planned in its three core operating areas at Ukalta, Figure Lake and Marten Hills. Aside from a modest 10% increase to accommodate ongoing inflationary pressures, Rubellite's 2022 exploration and development capital program remains unchanged, with full year 2022 capital expenditures (see "Non-GAAP and Other Financial Measures") now expected to total $54 to $56 million, relative to previous 2022 capital expenditure guidance of $48 to $50 million.

The table below summarizes Rubellite's forecast exploration and development capital expenditures and anticipated horizontal multi-lateral drilling activities for 2022, excluding expenditures for exploratory drilling activity on its northern Clearwater trend exploratory land blocks, and undeveloped land purchases and acquisitions.

2022 Exploration and Development Forecast Capital Expenditures(1)(6)

	H1 2022(1)(4)	# of wells	H2 2022	# of wells	2022	# of wells
	($ millions)	(gross/ net)	($ millions)	(gross/ net)	($ millions)	(gross/ net)
Development(1)(2)	$30.0	17 / 14.3	$24 - $26	20 / 17.2	$54 - $56	37 / 31.5
Ukalta(2)		10 / 10.0		7 / 7.0		17 / 17.0
Figure Lake(2)(3)		2 / 2.0		9 / 9.0		11 / 11.0
Marten Hills(2)		5 / 2.3		4 / 1.2		9 / 3.5
Service Wells		1 / 1.0		1 / 1.0		2 / 2.0

Exploration(5)	$1.3	0 / 0.0	$3 - $5	4 / 3.0	$4 - $6	3 / 2.0
Ukalta(5)		0 / 0.0		1 / 1.0		1 / 1.0
Alpen(2)		0 / 0.0		1 / 1.0		1 / 1.0
Northern(5)		0 / 0.0		2 / 1.5		2 / 1.5
Total(6)	$31.3	17 / 14.3	$27 - $30	24 / 20.7	$58 - $62	40 / 33.5

1. Capital expenditures includes drill, complete, equip and tie-in capital spent during the period as well as spending for 2 vertical water disposal service wells, vertical evaluation wells, undeveloped land purchases and acquisitions, if any.
2. Well count reflects multi-lateral wells rig released during the period but excludes two (2.0 net) vertical water disposal service wells in Q2 and Q3 2022 at Ukalta and Figure Lake respectively. One (1.0 net) well at Ukalta, one (1.0 net) well at Alpen, west of Figure Lake, and one (0.3 net) well at Marten Hills were spud late in Q2 2022 and rig released in early July.
3. Capital expenditures at Figure Lake are reduced for the Figure Lake GORR which contributed $0.4 million in H1 2022 and is forecast to contribute $1.3 million in H2 2022.
4. H1 2022 capital expenditures included $2.1 million for equipment, tubulars and OBM inventory procurement for the remainder of the 2022 drilling program. Capital expenditures for 2022 include spending for the vertical evaluation well at Ukalta and the two vertical water disposal wells.
5. Exploration capital spending and well count includes 1 vertical evaluation well at Ukalta drilled in July.
6. Non-GAAPmeasure. Refer to the section entitled "Non-GAAP and Other Financial Measures" for an explanation of composition.

During the second quarter, Rubellite spent $3.2 million to acquire 79.2 net sections of land through Crown land purchases and other transactions. Including lands acquired in the second quarter of 2022, the Company has grown its land position for exposure to the Clearwater play to over 298 net sections, up 187% from the 104 net sections held by Rubellite at its inception in July of 2021. A significant portion of the newly acquired lands are complementary to existing operating areas in Ukalta and Figure Lake on the southern Clearwater trend, while the remainder of the additional new acreage supplements Rubellite's exploratory acreage in the northern Clearwater play fairway and captures land on other Clearwater exploration prospects.

The Company is finalizing its plans to evaluate several of its northern Clearwater trend exploratory land blocks, including lands at West Dawson and Peavine, with the drilling of four to six (3.0 - 4.0 net) exploratory wells prior to April 1, 2023. Exploration capital expenditures are expected to include vertical evaluation and multi-lateral drilling activities on exploration blocks in the Northern Clearwater trend which are dependent on timing of surface access. Exploration and development capital expenditure guidance excludes undeveloped land purchases and additional acquisitions.

Forecast drilling activities are expected to be fully funded from adjusted funds flow (see "Non-GAAP and Other Financial Measures") and the Company's credit facility. The Figure Lake drilling program will be partially funded by the Figure Lake GORR, which is forecast to contribute $1.7 million in 2022.

The 2022 drilling program at Ukalta, Figure Lake and Marten Hills is expected to continue to drive progressive production growth over the remainder of 2022. Third quarter sales volumes are forecast to average between 1,600 and 1,800 bbl/d and will continue to ramp up through the balance of the year. Adjusting for several wells at Ukalta that have performed below the Ukalta area type curve, and the earlier than forecast conversion to the 30% after payout working interest at Marten Hills. Rubellite's full year 2022 forecast average sales production levels are expected to be between 1,700 and 2,000 bbl/d, down from previous guidance of 2,200 to 2,400 bbl/d.

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	Previous	Revised
	2022 Guidance	2022 Guidance
Production (bbl/d)	2,200 - 2,400	1,700 - 2,000
Development ($ millions)(1)	$48.0 - $50.0	$54.0 - $56.0
Multi-lateral development wells (net)	29.6	31.5
Heavy oil wellhead differential ($/bbl)(2)	$8.00 - $9.00	$9.00 - $10.00
Royalties ($/bbl)	11% - 12%	11% - 12%
Production & operating costs ($/bbl)	$5.50 - $6.50	$6.50 - $7.50
Transportation ($/bbl)	$5.50 - $6.50	$6.00 - $7.00
General & administrative ($/bbl)	$4.00 - $4.50	$4.50 - $5.50

1. Non-GAAPratio. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.
2. Quality differential relative to Western Canadian Select.

SECOND QUARTER 2022 FINANCIAL AND OPERATING RESULTS

Cash Flow used in Investing Activities, Capital Expenditures, Acquisitions and Dispositions

Cash flow used in investing activities was $17.5 million as compared to $28.5 million in the first quarter of 2022. In addition to cash flow used in investing activities, Rubellite uses capital expenditures to measure its capital investments compared to the Company's annual budgeted expenditures. The capital budget excludes acquisition and disposition activities as well as the accounting impact of any accrual changes. "Capital expenditures" is not a standardized measure and, therefore, may not be comparable with the calculation of similar measures by other entities. For reconciliation of cash flow used in investing activities to capital expenditures, refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A.

The following table summarizes capital spending for both property, plant and equipment assets and exploration and evaluation assets, excluding non-cash items:

($ thousands)	YTD 2022	Q2 2022	Q1 2022
Exploration and development	31,256	9,482	21,774
Land and acquisitions	16,960	3,223	13,737
Capital expenditures (1)	48,216	12,705	35,511

1. Non-GAAPmeasure. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.

Wells drilled by area
(gross/net)	YTD 2022	Q2 2022	Q1 2022
Ukalta(1)(2)(3)	10/10.0	4/4.0	6/6.0
Figure Lake	2/2.0	-/-	2/2.0
Marten Hills(4)(5)	5/2.3	2/0.8	3/1.5
Total	17/14.3	6/4.8	11/9.5

1. One (1.0 net) additional Ukalta well was spud on March 24, 2022 and rig released April 5, 2022 and not included in the Q1 2022 well count.
2. One (1.0) net Ukalta well was a vertical water disposal well in Ukalta which is excluded from the Q2 2022 well count.
3. One (1.0) net additional Ukalta well was spud on June 27, 2022 and rig released July 10, 2022 and not included in the Q2 2022 well count.
4. One (0.5 net) additional Marten Hills well was spud on March 20, 2022 and rig released April 8, 2022 and not included in the Q1 2022 well count.
5. One (0.3 net) additional Marten Hills well was spud on June 20, 2022 and rig released July 5, 2022 and not included in the Q2 2022 well count.

Rubellite's exploration and development spending in the second quarter of 2022 was $9.5 million. Drilling activity for the second quarter represented four (4.0 net) horizontal wells drilled at Ukalta, one water disposal well at Ukalta and two (0.8 net) wells drilled at Marten Hills. A sixth well at Ukalta and third well at Marten Hills were largely spent during the second quarter and were rig released in the beginning of the third quarter.

Near the end of the second quarter of 2022, an exploratory well at Alpen began drilling on June 24, 2022, with the majority of the capital spent during the second quarter. The well was rig released at the beginning of the third quarter.

Land spending in the second quarter of 2022 was $3.2 million to purchase 79.2 additional net sections of strategic land prospective for the Clearwater formation.

Exploration and development spending in the first quarter of 2022 was $21.8 million. Drilling activity for the first quarter of 2022 represented six (6.0 net) wells drilled at Ukalta, two (2.0 net) wells drilled at Figure Lake and three (1.5 net) wells drilled at Marten Hills. A seventh well at Ukalta and fourth well at Marten Hills were spud during the first quarter and were rig released in the beginning of the second quarter of 2022.

Land spending in the first quarter of 2022 was $13.7 million to purchase an additional 65.1 net sections of land in the Clearwater area.

2021 significant acquisitions

On September 3, 2021, the Clearwater Assets were acquired from Perpetual for aggregate consideration of $65.5 million. The consideration consisted of promissory notes totaling $59.4 million, which were paid in cash on October 5, 2021, the issuance of 680,485 Rubellite common shares valued at $1.4 million, the return of 8.2 million Perpetual common shares exchanged in the Arrangement valued at $2.8 million and issuance of warrants to purchase 4.0 million Rubellite common shares at a price of $3.00 per share for a period of five years, valued at $2.0 million.

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Production
	YTD 2022	Q2 2022	Q1 2022
Production
Average daily heavy crude oil (bbl/d) - production(1)	1,350	1,476	1,223
Average daily heavy crude oil (bbl/d) - sales(1)	1,365	1,478	1,251
Total production (bbl/d)	1,365	1,478	1,251

1. The Company's heavy oil sales volumes and production volumes differ due to changes in inventory.

Second quarter sales production averaged 1,478 bbl/d, up 227 bbl/d or 18% from 1,251 bbl/d in the first quarter.

At the end of the second quarter, an additional eight (6.3 net) wells were contributing to sales production with one additional well drilled at Ukalta during the second quarter on-production early in the third quarter. As of June 30, 2022, there were thirty six (33.0 net) wells contributing to sales production, as compared to twenty eight (26.0 net) wells on production at the end of the first quarter of 2022. Production has progressively ramped up through the first half of 2022 as new wells fully recovered base-oil load fluid, filled tank inventories and then commenced delivery to sales terminals. Third quarter production volumes are expected to average between 1,600 and 1,800 bbl/d and will continue to ramp up through the balance of the year. The Company's full year 2022 average forecast sales production guidance is between 1,700 and 2,000 bbl/d down from previous guidance of between 2,200 and 2,400 bbl/d.

Oil Revenue
($ thousands, except as noted)	YTD 2022	Q2 2022	Q1 2022
Oil revenue	26,508	15,632
Oil revenue	10,876
Reference prices	101.35	108.41
West Texas Intermediate ("WTI") (US$/bbl)	94.29
Exchange rate (US$/CAD$)	1.27	1.28	1.27
West Texas Intermediate ("WTI") (CAD$/bbl)	128.86	138.44	119.39
Western Canadian Select ("WCS") differential (US$/bbl)	(13.67)	(12.80)	(14.53)
WCS (CAD$/bbl)	111.55	122.09	101.01
Rubellite average realized prices(1)	107.28	116.21
Average realized oil price ($/bbl)	96.61

1. Supplementary financial measure. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.

Rubellite's oil revenue for the three months ended June 30, 2022 of $15.6 million increased from $10.9 million during the first quarter of 2022, due to the 18% increase in production. Additionally, commodity prices increased during the second quarter of 2022, when compared to the first quarter of 2022, driven by higher WTI reference prices. The increase in the WCS average price was due to the increase in WTI oil prices which averaged US$108.41/bbl (Q1 2022 - US$94.29/bbl) during the second quarter and narrowed the price differential.

Risk Management Contracts

The Company's realized price deviates from the index due to the Company's market diversification strategies that balances pricing exposure. The Company uses "average realized prices after risk management contracts" which is not a standardized measure, and therefore may not be comparable with the calculation of similar measures by other entities. The measure is used by management to calculate the Company's net realized commodity prices, taking into account the monthly settlements of financial crude oil forward sales and basis differentials contracts. These contracts are put in place to protect Rubellite's cash flows from potential volatility.

($ thousands, except as noted)	YTD 2022	Q2 2022	Q1 2022
Unrealized gain (loss) on risk management contracts	(6,933)	3,647	(10,580)
Realized gain (loss) on risk management contracts	(9,472)	(6,203)	(3,269)
Realized gain (loss) on risk management contracts ($/bbl)	(38.33)	(46.12)	(29.04)
Average realized oil price after risk management contracts(1)	68.95	70.09	67.57

1. Non-GAAPratio. Refer to the section entitled "Non-GAAP and Other Financial Measures" contained within this MD&A for an explanation of composition.

Realized losses on risk management contracts totaled $6.2 million or $46.12/boe for the second quarter of 2022, compared to losses of $3.3 million or $29.04/boe for the first quarter of 2022. Hedging losses are attributable to reference price fluctuations relative to pricing on commodity contracts with losses increasing as WTI oil prices strengthen.

For the second quarter of 2022, Rubellite recorded an unrealized gain on risk management contracts of $3.6 million (Q1 2022 - $10.6 million unrealized loss). Unrealized gains and losses represent the change in mark-to-market value of risk management contracts as forward commodity prices and foreign exchange rates change. Unrealized gains and losses on risk management contracts are excluded from the Company's calculation of cash flow from (used in) operating activities as non-cash items. Risk management contract gains and losses vary depending on the nature and extent of the risk management contracts in place, which in turn, vary with the Company's assessment of commodity price risk, committed capital spending and other factors.

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Q2 2022 MANAGEMENT'S DISCUSSION AND ANALYSIS

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