Rubellite Energy : Q2 2023 Management’s 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, 2023, 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 consolidated financial statements and accompanying notes as at June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 as well as the audited financial statements and accompanying notes for the years ended December 31, 2022 and 2021. Disclosure, which is unchanged from the December 31, 2022 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"). The date of this MD&A is August 10, 2023.

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". Readers are also referred to the other advisory sections at the end of this MD&A for additional 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 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.sedarplus.caand found at www.rubelliteenergy.com.

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

SECOND QUARTER 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS

• Second quarter conventional heavy oil sales production averaged 2,844 bbl/d, down 5% from first quarter of 2023 (Q1 2023 - 2,990 bbl/ d) as a result of the reduced working interest at Marten Hills upon conversion to a lower working interest at payout of the carried interest wells drilled along with reduced capital activity during spring break-up. Sales production from the second quarter of 2023 was up 92% from the second quarter of 2022 (Q2 2022 - 1,478 bbl/d). As of June 30, 2023, there were 71 (63.3 net) wells contributing to sales production, as compared to 65 (58.5 net) wells on production at the end of the first quarter of 2023.
• Adjusted funds flow(1) in the second quarter was $12.0 million ($0.19 per share), a 24% increase from the first quarter of 2023 (Q1 2023
  - $9.7 million), driven by the growth in revenue on a 14% increase in Western Canadian Select ("WCS") benchmark prices. Adjusted funds flow per boe was $46.35/boe, up 29% from $36.00/boe in the first quarter of 2023.
• Exploration and development capital expenditures(1), excluding land purchases, for the second quarter totaled $11.7 million. Development expenditures of $11.1 million, related to the drilling of four (4.0 net) multi-lateral horizontal wells at Figure Lake, with three of the wells contributing to sales production by the end of the quarter. One (1.0 net) well at Figure Lake was spud on June 25, 2023 and was rig released July 10, 2023. An additional $0.5 million was spent on step-out drilling activities in Figure Lake, with two (2.0 net) wells drilled in 2023 transferred to PP&E during the second quarter. As of June 30, 2023, Rubellite has drilled two (2.0 net) wells as part of the Figure Lake extension onto the Buffalo Lake Metis Settlement ("BLMS") lands as part of the Company's commitment to drill four wells prior to February 14, 2024.
• Second quarter land spending of $0.2 million brought total land spending for 2023 to $2.7 million for an additional 23.0 net sections of land at Figure Lake.
• Operating netbacks(1) in the second quarter were $13.3 million, or $51.38/boe (Q1 2023 - $11.7 million or $43.58/boe), reflecting the increase in Western Canadian Select ("WCS") benchmark prices, partially offset by higher royalties and production and operating costs. After the realized gain on risk management contracts of $0.7 million, or $2.77/boe (Q1 2023 - loss of $0.2 million or $0.77/boe), operating netbacks after risk management contracts were $14.0 million or $54.15/boe (Q1 2023 - $11.9 million or $44.35/boe). Second quarter operating netbacks after realized losses on risk management contracts were 36% higher on a per boe basis than the second quarter of 2022 (Q2 2022 - $5.4 million or $39.85/boe) despite lower benchmark pricing with losses on risk management contracts in the comparative period and higher production combining with lower royalties, production and operating expenses and transportation costs per boe.
• Cash costs(1) were $5.9 million or $22.73/boe in the second quarter of 2023, in line with expectations (Q1 2023 - $6.0 million or $22.15/ boe; Q2 2022 - $3.0 million or $22.18/boe). On a per boe basis, the reduction in costs were driven by efficiencies over a higher production base partially offset by the impact of cost inflation, incremental carbon tax obligations and higher G&A and interest costs.
• Net income for the second quarter of 2023 was $3.4 million attributable to a $4.6 million deferred tax recovery, partially offset by $6.8 million of E&E expense.
• As at June 30, 2023, net debt(1) was $20.7 million, a decrease from $28.2 million as at December 31, 2022.
• Rubellite had available liquidity (see "Liquidity, Capitalization and Financial Resources - Capital Management") at June 30, 2023 of $27.7 million, comprised of the $40.0 million borrowing limit of Rubellite's first lien credit facility ("Credit Facility Borrowing Limit"), less current borrowings of $12.3 million.

1. Non-GAAPfinancial measure, non-GAAP ratio or supplementary financial measure. See "Non-GAAP and Other Financial Measures".

OPERATIONS UPDATE

At Figure Lake, a total of four (4.0 net) multi-lateral wells were rig released during the second quarter and one (1.0 net) well was drilled over the end of the quarter and rig released in early July.

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The drilling rig completed operations over the end of the first quarter on April 4, 2023, at the 10-19-63-17W4 pad (the "10-19 Pad") located on the Buffalo Lake Metis Settlement ("BLMS") before being shut down for spring break-up. Equipment was mobilized and drilling operations resumed on May 6, 2023 on an existing pad at 3-26-63-18W4 (the "3-26 Pad") where three (3.0 net) wells were drilled and rig released, and at a new adjacent pad located at 15-24-63-18W4 (the "15-24 Pad") where the first of eight (8.0 net) wells was spud on June 25, 2023 and rig released in early July. Given the infill drilling characterization of development in this central portion of the Figure Lake area, Rubellite intends to maintain continuous drilling operations on six to eight well pads for the remainder of 2023 to minimize rig moves and facility builds, and optimize the re-use of oil-based mud, thereby reducing costs and improving capital efficiencies.

The first of two (2.0 net) wells located on the BLMS lands on the 10-19 Pad recorded an IP(30) and IP(60) of 111 bbl/d and 87 bbl/d, respectively. The second well recorded an IP(30) of 47 bbl/d and IP (60) of 30 bbl/d. The underperformance of the second well is interpreted to be attributed to the dominance of flow from a perched water zone in an isolated structural low which was penetrated by one of the horizontal legs, resulting in higher water cuts (95% of the produced emulsion) as compared to the field average water cut of approximately 20%. Additional 2D trade seismic lines have been acquired and interpreted to refine the mapping to optimize future well placement. The Company intends to drill an additional two (2.0 net) wells on the BLMS lands to extend and de-risk the reservoir for subsequent development.

Six (6.0 net) wells have now been placed on production at the 3-26 Pad and have exhibited an average IP(30) of 162 bbl/d (5 wells), IP(60) of 129 bbl/d (4 wells) and IP(90) of 114 bbl/d (3 wells), and continue to outperform the Figure Lake type curve(1). Wells not included in the preceding figures are either still recovering load fluid or have not been on production for sufficient days to be included.

Since the end of the second quarter, two additional wells have been spud on the 15-24 pad for a total of three to date. Two of the 15-24 Pad wells have been placed on production and recovered their oil-based mud load fluid, and are now in their IP30 periods exhibiting strong performance commensurate with the neighboring 9-23 Pad.

Rubellite plans to contract a second rig to start-up in the fourth quarter to drill a minimum of two (2.0 net) wells and up to three (3.0 net) wells to accelerate evaluation of the BLMS lands while maintaining the ongoing infill drilling program in the sweet spot at Figure Lake. Up to 16 (16.0 net) multi-lateral horizontal wells are expected to be drilled at Figure Lake in the second half of 2023 for a full year 2023 total of 25 - 26 (25.0 - 26.0 net) wells, as the property continues to be the primary focus of investment and development.

At Marten Hills, applications are being prepared to implement a bottom-up waterflood to enhance production and increase recoverable reserves beginning in 2024.

No new activity was planned or conducted on the Northern Exploration Program during the quarter due to limited all-season access; however, the Company has elected to drill a second earning well (0.5 net) at Dawson to earn an additional six sections (3.0 net) to follow up and delineate the 5-16-81-16W5 discovery well drilled in the first quarter.

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.sedarplus.ca. "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, 2022 and a preparation date of March 9, 2023.

OUTLOOK AND GUIDANCE

Rubellite's board of directors has approved the addition of the second rig at Figure Lake to expand development capital spending(1) for the remainder of 2023, bringing total expected exploration and development capital spending for 2023 to $54 - $65 million. This includes $25 - $27 million to drill, complete, equip and tie-in 15 - 16 (15.0 - 16.0 net) multi-lateral development infill and step-out wells at Figure Lake. Forecast drilling activities are expected to be funded from adjusted funds flow and the Company's credit facility.

Factoring in type curve performance from the recent and future drilling program at Figure Lake, production sales volumes are expected to average between 2,900 - 3,100 bbl/d for 2023. Forecast production incorporates the future sales volume impact of the reduced working interest at Marten Hills effective May 1, 2023 related to reaching full payout during the first quarter, assumes no contribution from the Northern Exploration Program wells that were shut-in due to access for the remainder of 2023, and assumes minimal contribution to annual production volumes for wells drilled by the second rig in the fourth quarter.

During the second quarter of 2023, the Company's carbon tax obligations increased to $0.2 million ($0.65/boe) due to the effect of higher fuel gas usage and incinerated volumes associated with higher production combined with the annual step up in carbon tax pricing. When factoring in these incremental costs the 2023 guided range increased to $6.50/bbl - $7.00/bbl from $6.00/bbl - $6.50/bbl.

Capital spending, drilling activity and operational guidance for 2023 is as outlined in the table below:

	Full Year 2023 Guidance
Sales Production (bbl/d)	2,900 - 3,100
Development spending ($ millions)(1)(2)(3)	$47 - $52
Multi-lateral development wells (net)(1)(2)	25.0 - 26.0
Exploration spending ($ millions)(1)(4)	$7 - $13
Exploration wells (net)(4)	2.5 - 4.5
Heavy oil wellhead differential ($/bbl)(1)(5)	$6.00 - $7.00
Royalties (% of revenue)(1)	9.5% - 10.5%
Production and operating costs ($/boe)(1)(6)	$6.50 - $7.00
Transportation costs ($/boe)(1)	$7.50 - $8.00
General and administrative costs ($/boe)(1)	$5.50 - $6.00

1. Non-GAAPfinancial measure, non-GAAP ratio or supplementary financial measure. See "Non-GAAP and Other Financial Measures".
2. Updated from previous guidance for development spending of $43 - $45 million for 23.0 net multi-lateral development wells.
3. Q2 2023 capital expenditures include $3.2 million for inventory procurement of casing, tubulars and facilities equipment for the remainder of the 2023 drilling program.
4. Updated from previous guidance for exploration spending of $11 - $13 million for 4.5 net exploration wells.
5. Updated from previous guidance of $7.00/bbl - $8.00/bbl.
6. Updated from previous guidance of $6.00/bbl - $6.50/bbl.

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SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS

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

Cash flow used in investing activities was $15.7 million and $43.4 million for the three and six months ended June 30, 2023, respectively, as compared to $17.5 million and $46.0 million in the comparative periods 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 related to both property, plant and equipment assets ("PP&E") and exploration and evaluation assets ("E&E") assets. The capital budget excludes acquisition and disposition activities. "Capital Expenditures" is not a standardized measure and, therefore, may not be comparable with the calculation of similar measures by other entities.

For a 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 tables summarize capital expenditures for both PP&E and E&E assets:

Three Months Ended June 30,

		2023			2022
($ thousands)	E&E	PP&E	Total	E&E	PP&E	Total
Drilling and completions	111	5,702	5,813	-	7,438	7,438
Facilities	379	3,619	3,998	-	1,099	1,099
Lease construction	29	1,828	1,857	-	1,331	1,331
Capital Expenditures(1)	519	11,149	11,668	-	9,868	9,868
Land and other	152	-	152	3,223	(386)	2,837
Capital expenditures(1), including land and other	671	11,149	11,820	3,223	9,482	12,705

1. Non-GAAPmeasure. See "Non-GAAP and Other Financial Measures".

Six Months Ended June 30,

		2023			2022
($ thousands)	E&E	PP&E	Total	E&E	PP&E	Total
Drilling and completions	9,047	11,801	20,848	-	23,097	23,097
Facilities	1,983	5,121	7,104	-	6,344	6,344
Lease construction	898	2,330	3,228	-	2,201	2,201
Capital Expenditures(1)	11,928	19,252	31,180	-	31,642	31,642
Land and other	2,701	-	2,701	16,960	(386)	16,574
Capital expenditures(1), including land and other	14,629	19,252	33,881	16,960	31,256	48,216

1. Non-GAAPmeasure. See "Non-GAAP and Other Financial Measures".
   Wells drilled by area

	Three months ended June 30,	Six months ended June 30,
(gross/net)	2023	2022	2023	2022
Development
Ukalta	- / -	4 / 4.0		-/-	10 / 10.0
Figure Lake(1)	3 / 3.0	- / -	8	/ 8.0	2 / 2.0
Marten Hills	- / -	2 / 0.8		-/-	5 / 2.3
Service Wells	- / -	1 / 1.0		-/-	1 / 1.0
Figure Lake Extension
Figure Lake - Buffalo Lake area(2)	1 / 1.0	- / -	2 / 2.0	- / -
Northern Exploration
Dawson(3)	- / -	- / -	1	/ 0.5	- / -
Peavine(4)	- / -	- / -	2	/ 2.0	- / -
Total	4 / 4.0	7 / 5.8	13 /	12.5	18 / 15.3

1. One (1.0 net) well drilled at the 3-26 pad was spud on June 25, 2023 and rig released July 10, 2023 and not included in the Q2 2023 well count. The well was drilled on existing lands previously transferred to PP&E.
2. The two (2.0 net) wells drilled during 2023 at the extension area of Figure Lake were transferred from E&E to PP&E as at June 30, 2023.
3. The one (0.5 net) well drilled during 2023 at the Dawson Northern Exploratory area was transferred from E&E to PP&E as at June 30, 2023.
4. The two wells at Peavine were drilled at 100% working interest cost to earn a 60% working interest and were transferred to E&E expense during the second quarter of 2023.

Additions to PP&E assets

Rubellite's additions to PP&E in the second quarter of 2023 was $11.1 million from drilling activity of three (3.0 net) wells at Figure Lake. Capital to drill a fourth well at Figure Lake, including costs for the eight-well pad and facilities construction, was largely spent during the second quarter and was rig released in the beginning of the third quarter.

Rubellite's additions to PP&E in the first quarter of 2023 was $8.1 million from drilling activity of five (5.0 net) wells at Figure Lake.

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Additions to E&E assets

Rubellite's additions to E&E in the second quarter of 2023 was $0.7 million, which included land spending of $0.2 million and $0.5 million related to the drilling of one (1.0 net) well in the Figure Lake extension area.

Rubellite's additions to E&E in the first quarter of 2023 was $13.9 million, which included land spending of $2.5 million. Land spending and acquisitions resulted in the addition of 22.0 net sections of land, which included 20.0 net sections under a Land Acquisition and Drilling Agreement with the Buffalo Lake Métis Settlement.

During the second quarter of 2023, Rubellite transferred $8.0 million of E&E to PP&E, related to one (0.5 net) well at Dawson and two (2.0 net) wells in Figure Lake.

During the second quarter of 2023, the Company recognized an E&E expense of $6.8 million, which includes capital costs to drill two (2.0 net) wells at Peavine, one (1.0 net) vertical evaluation well at Utikuma, one (1.0 net) vertical evaluation well at Ukalta and a small amount of associated land.

Production
	Three months ended June 30,	Six months ended June 30,
	2023	2022	2023	2022
Production
Average daily heavy crude oil (bbl/d) - production(1)	2,842	1,476	2,949	1,350
Average daily heavy crude oil (bbl/d) - sales(1)	2,844	1,478	2,917	1,365

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

Sales production for the three and six months ended June 30, 2023 increased 1,366 bbl/d (92%) and 1,552 bbl/d (114%), respectively, from the comparative periods of 2022. Production and sales volumes have progressively ramped up throughout 2022 and the first half of 2023 as new wells were drilled, fully recovered load fluid and commenced delivery to sales terminals. At the end of the second quarter, an additional four (4.0 net) wells were contributing to sales production, after having fully recovered their oil-based mud load fluid.

Oil Revenue
	Three months ended June 30,	Six months ended June 30,
($ thousands, except as noted)	2023	2022	2023	2022
Oil revenue
Oil revenue	18,863	15,632	35,967	26,508
Reference prices
West Texas Intermediate ("WTI") (US$/bbl)	73.75	108.41	74.92	101.35
Foreign Exchange rate (CAD$/US$)	1.34	1.28	1.35	1.27
West Texas Intermediate ("WTI") (CAD$/bbl)	98.83	138.44	101.14	128.86
Western Canadian Select ("WCS") differential (US$/bbl)	(15.16)	(12.80)	(19.98)	(13.67)
WCS (CAD$/bbl)	78.74	122.09	74.05	111.55
Rubellite average realized prices(1)
Average realized oil price ($/bbl)	72.88	116.21	68.13	107.28

1. Supplementary financial measure. See "Non-GAAP and Other Financial Measures".

Rubellite's oil revenue for the three and six months ended June 30, 2023 increased by $3.2 million (21%) and $9.5 million (36%), respectively, from the comparative periods of 2022, attributable to the increase in production, partially offset by lower realized oil prices. Compared to the second quarter of 2022, the WCS average price of $78.74/bbl (Q2 2022 - $122.09/bbl) decreased significantly with the decrease in WTI, partially offset by the narrowing of the WCS differential on WTI oil prices and the increase in the CAD$/US$ exchange rate. During the first half of 2023, the WCS average price decrease was consistent with the decrease in WTI oil prices which averaged US$74.92/ bbl (2022 - US$101.35/bbl) and the increase in the WCS differential to US$19.98/bbl (2022 - US$13.67/bbl) combined with the CAD$/US$ exchange rate of $1.35 (2022 - $1.27).

Risk Management Contracts

The Company's realized price deviates from benchmark prices due to the Company's risk management strategies. The Company uses "average realized oil 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 oil price, taking into account the monthly settlements of financial and physical crude oil forward sales, differentials and foreign exchange contracts. These contracts are put in place to protect Rubellite's cash flows from potential volatility and lock in economics on drilling programs.

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The following table calculates the average realized oil prices after risk management contracts, which is not a standardized measure:

	Three months ended June 30,	Six months ended June 30,
($ thousands, except as noted)	2023	2022	2023	2022
Unrealized gain (loss) on risk management contracts	304	(3,647)	(147)	6,933
Realized gain (loss) on risk management contracts	718	(6,203)	926	(9,472)
Realized gain (loss) on risk management contracts ($/bbl)	2.77	(46.12)	1.75	(38.33)
Average realized oil price after risk management	75.65		69.88
contracts(1)	70.09	68.95

1. Supplementary financial measure. See "Non-GAAP and Other Financial Measures".

The realized gain on risk management contracts totaled $0.7 million or $2.77/bbl for the second quarter of 2023, compared to a loss of $6.2 million, or $46.12/bbl, for the second quarter of 2022. For the six month period ending June 30, 2023, the realized gain on risk management contracts totaled $0.9 million or $1.75/bbl (2022 - $9.5 million realized loss or $38.33/bbl). Hedging gains or losses are attributable to reference price fluctuations relative to pricing on commodity contracts driven by changes in WTI and WCS differential prices as well as fluctuations in foreign exchange rates and the percentage of production volumes hedged at any given time.

The unrealized gain on risk management contracts was $0.3 million for the second quarter of 2023 (Q2 2022 - $3.6 million unrealized loss) and the unrealized loss on risk management contracts was $0.1 million for the six month period ended June 30, 2023 (2022 - $6.9 million unrealized gain). 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 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.

Royalties
	Three months ended June 30,	Six months ended June 30,
($ thousands, except as noted)	2023	2022	2023	2022
Oil royalties - Crown	815	799	1,718	1,493
Oil royalties - freehold	839	1,023	1,541	1,447
Total royalties	1,654	1,822	3,259	2,940
$/boe	6.39	13.55	6.17	11.90
Royalties as a percentage of revenue(1)
Crown (% of oil revenue)(1)	4.3	5.1	4.8	5.6
Freehold and overriding (% of oil revenue)(1)	4.4	6.5	4.3	5.5
Total (% of oil revenue)(1)	8.7	11.6	9.1	11.1

1. Non-GAAPratio. See "Non-GAAP and Other Financial Measures".

Total royalties for the second quarter of 2023 were $1.7 million, a 9% decrease from the second quarter of 2022 (Q2 2022 - $1.8 million) on lower pricing. On a per boe basis, royalties decreased in the second quarter to $6.39/boe (Q2 2022 - $13.55/boe) due to lower prices. Royalties as a percentage of revenue for the second quarter were 8.8%, a decrease from 11.7% in the second quarter of 2022, due to the impact of lower WTI prices. Some of the freehold royalties are price sensitive with some royalties not being paid if WTI prices are below the minimum threshold.

For the six months ended June 30, 2023, royalties were $3.3 million (2022 - $2.9 million), $0.4 million or 11% higher than the prior year as a result of increased production, partially offset by lower prices. On a per boe basis, royalties were down 48% to $6.17/boe (2022 - $11.90/ boe) as prices decreased. Royalties as a percentage of revenue for 2023 were 9.1%, a decrease from 11.1% in the comparative period of 2022.

Rubellite's royalties consist of Crown royalties payable to the Alberta provincial government and other freehold and gross overriding ("GORR") royalties. The mix between Crown and freehold production as a percentage of total production can change the composition of royalties from one period to the next. Under the Alberta Modernized Royalty Framework ("MRF"), the Company paid a flat Crown royalty of 5% on wells where mineral rights are leased from the Crown with the remainder of royalties attributable to the composition of freehold and GORR royalties some of which are price sensitive.

Production and operating expenses
	Three months ended June 30,	Six months ended June 30,
($ thousands, except as noted)	2023	2022	2023	2022
Production and operating expenses	1,869	1,347	3,510	2,457
$/boe	7.22	10.01	6.65	9.94

Total production and operating expenses for the three and six months ended June 30, 2023 increased to $1.9 million and $3.5 million from $1.3 million and $2.5 million in the comparative periods of 2022 as a result of higher costs being applied to higher production volumes. Higher costs were attributable to incremental carbon taxes for 2023 of $0.2 million or $0.65/boe and overall cost inflation.

On a per boe basis, costs decreased by 28% to $7.22/boe in the second quarter of 2023 (Q2 2022 - $10.01/boe) and by 33% to $6.65/boe for the six months ended June 30, 2023 (2022 - $9.94/boe). Despite an increase in overall costs, as more wells have come on production the fixed components of production and operating expenses are spread across higher sales volumes. The carbon tax impact for the six months ended June 30, 2023 was $0.2 million or $0.32/boe, and when factoring in these incremental costs the 2023 guided range increased to $6.50/ bbl - $7.00/bbl from $6.00/bbl - $6.50/bbl.

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