Athabasca Oil Corporation Announces has reported its operating and unaudited consolidated financial results for the three months ended March 31, 2020.

Operations Highlights

• Q1 Production: ~36,550 boe/d including ~28,300 bbl/d in Thermal Oil & ~8,250 boe/d in Light Oil.
• Leismer: Q1 production of ~19,800 bbl/d supported by strong results at Pad 7.
• Placid Montney: Encouraging initial results from 10 wells that were placed on production for clean‐up in April with plans to defer new volumes until commodity prices improve.
• Kaybob Duvernay: Continued strong results in the oil window with recent pads at Kaybob East IP30s averaging ~1,000 boe/d per well (88% liquids). These results compare favorably to the East Shale Basin Duvernay due to low capital costs and higher sustained liquids rates.

Resiliency Measures Taken in Response to COVID19

• Halted Capital Program: 2020 budget of $85 million reflects a $40 million reduction from the original budget. Minimal activity planned for the balance of the year ($31.5 million Q2‐Q4 2020).
• Production Curtailments: Shut in production indefinitely at Hangingstone and planning to curtail production at Leismer to ~8,000 bbl/d by June and Light Oil to ~7,500 boe/d starting in May. The duration of curtailments will be dictated by commodity prices.
• G&A Reductions: Moved to 80% work week for corporate staff in the Calgary office.
• Contingent Bitumen Royalty: $70 million cash consideration for an upsized Royalty agreement with Burgess Energy at a highly attractive cost of capital (the "Royalty").
• Reduced Future Financial Commitments: Reassigned 15,000 bbl/d of Keystone XL transportation commitment to a third party while retaining 10,000 bbl/d of capacity.
• Risk Management: Protection in place to mitigate near term pricing volatility including 18,000 bbl/d of WTI hedged for Q2 at ~US$42.50 vs. strip at ~US$20.50 (May 4).

Balance Sheet and Financial Highlights

Balance Sheet: Liquidity of $352 million (cash, cash equivalents and available credit facilities at March 31, 2020 and pro forma the Royalty transaction announced on April 28, 2020).
Financial Results: Q1 Operating Income of $1.1 million with financial results impacted by realized price declines related to the onset of the COVID‐19 pandemic.

Athabasca remains focused on maximizing corporate funds flow and maintaining strong corporate liquidity. Athabasca maintains long‐term optionality across a deep inventory of high‐quality Thermal Oil projects and flexible Light Oil development opportunities. This balanced portfolio provides shareholders with differentiated exposure to liquids weighted production and significant long reserve life assets.

Business Environment and the Impact of COVID19

In March 2020, the COVID‐19 outbreak was declared a pandemic by the World Health Organization. The COVID‐19 pandemic has caused a material disruption to global business and a slowdown of the global economy. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

Global commodity prices have declined significantly as countries around the world enact emergency measures to combat the spread of the virus. The decrease in oil demand has been unprecedented with an estimated 22.5 MMbbl/d off market in April, 2020 (Goldman Sachs Global Investment Research). Additionally, Saudi Arabia and Russia could not agree on extending production cuts in March 2020 resulting in world supply increasing. Global inventories have reached all‐time highs recently, including in North America. The result has seen WTI prices drop from ~US$57.50 in January to ~US$16.75 in April (monthly average prices). Physical markets and regional benchmark prices (e.g. Western Canadian Select "WCS" heavy oil) have also been impacted by inventory balances and underlying commodity price volatility.

In April, OPEC and non‐OPEC countries agreed to supply cuts amounting to 10 MMbbl/d in response to the over‐supply situation along with other global producer curtailments. Athabasca expects improving global oil fundamentals through H2 2020 due to these supply cuts and demand support as countries implement relaunch programs for businesses and day‐to‐day life.

Corporate Update and Response to COVID19

Athabasca's first priority is the safety of its employees and contractors and ensuring the Company is doing its part to flatten the curve. Athabasca's field operations have been reduced to essential personnel and the Company is strictly complying with Alberta Health Guidelines. The Company has successfully implemented remote work access for its Calgary staff since mid‐March.

The Company has taken swift action in response to the pandemic and economic crisis. Major initiatives to date include halting the 2020 capital program, significant production curtailments, partnering with service companies to reduce operating costs and reducing future financial commitments on the Keystone XL pipeline. Finally, the Company recently bolstered its liquidity by $70 million through an upsized Contingent Bitumen Royalty.

The Company is well positioned to navigate the current challenging environment with $352 million in liquidity ($270 million cash and cash equivalents, $82 million undrawn credit capacity as at March 31, 2020 and pro forma the Royalty transaction announced on April 28). The low decline nature of Athabasca's assets allows for minimal capital investment while maintaining its production base for a crude oil demand recovery. Strong current liquidity in conjunction with swift operational actions should allow Athabasca to remain resilient under strip commodity prices through this cycle with significant upside potential as oil prices recover. Athabasca is continuing to explore opportunities to increase liquidity to further insulate from market volatility including potentially accessing the recently announced Federal Government support programs.

Athabasca's 2020 capital program is $85 million ($31.5 million Q2 - Q4 2020), with $40 million cancelled from the original budget. The Company is suspending its production guidance given the uncertainty associated with the duration of the announced curtailments which will be dictated by commodity pricing.

The Company has 18,000 bbl/d of WTI hedged for Q2 2020 at ~US$42.50 and 9,000 bbl/d for H2 2020 at ~US$41. For the balance of the year (Q2 - Q4), the Company has 15,000 bbl/d of WCS differentials hedged at ~US$18.

There have been recent positive developments on market egress. TC Energy and the Alberta Government announced on March 31, 2020 that the Alberta Government would provide financial support in the form of a $1.5 billion equity investment in 2020 and $6 billion of loan guarantees in 2021, enabling completion of the Keystone XL pipeline. As a result, the project resumed construction on April 1, 2020. Despite these encouraging advancements, overall broader market uncertainty has delayed returns that our investors expect. Canada is fortunate to have an abundance of resources and the technical strength for responsible development. 

Operations Update

Thermal Oil
In Q1 2020, production averaged 28,315 bbl/d with a strong contribution from Leismer which averaged 19,818 bbl/d. Leismer had a 13% improvement in its steam oil ratio ("SOR") to 3.4x compared with Q4 2019. The improvement at Leismer was due to increased co‐injection of non‐condensable gas and the impact of Pad 7's low SOR.

The Company has recently voluntarily curtailed Leismer volumes to optimize operating cash flows while conserving valuable reserves for a more constructive pricing environment. In the near term, the Company anticipates managing volumes down to ~8,000 bbl/d by June. Operations are focused on maintaining reservoir integrity through optimizing steam levels and non‐condensable gas co‐injection. The duration of curtailments will be dictated by commodity pricing. Leismer's operating break‐even is estimated at US$23 WCS (US$35 WTI assuming a US$12.50 WCS differential) at current production capacity (~19,000 bbl/d).

Overall Thermal Oil financial results in Q1 were impacted by the severe selloff in commodity prices following the global COVID‐19 outbreak with an Operating Loss of $33.1 million. Capital expenditures were $17.7 million and were primarily associated with Leismer and included the completion of the water disposal project as well as drilling observation wells and purchasing long‐lead items for Pad 8. Minimal capital activity is budgeted for the balance of 2020 and only includes routine pump‐changes on wells.

Athabasca suspended the Hangingstone SAGD operation on April 2, 2020. This suspension involved shutting in the well pairs, halting steam injection to the reservoir, and taking measures to preserve the processing facility and pipelines in a safe manner so that it could be re‐started at a future date when the economy has recovered. The Hangingstone asset has an operating break‐even of approximately US$37 WCS (US$50 WTI assuming $12.50/bbl WCS differential) and this action is expected to significantly improve corporate resiliency in the current environment.

Light Oil
In Q1 2020, production averaged 8,242 boe/d (59% liquids). The division generated Operating Income of $12.8 million ($17.04/boe netback). The Company's Light Oil Netbacks are top tier when compared to Alberta's other liquids‐rich Montney and Duvernay resource producers and are supported by a high liquids weighting and low operating expenses. Capital Expenditures were $35.8 million. The Company has no additional Light Oil activity planned for the balance of the year.

At Greater Placid, the 10 Montney development wells from the winter program were all placed on‐ production by April for clean‐up. Athabasca is pleased with initial production results and has elected to defer new volumes from the development wells until commodity prices improve. The Company anticipates managing base Montney volumes to ~3,500 boe/d through May and June. Greater Placid is positioned for flexible future development with no near‐term land retention requirements.

In the Greater Kaybob Duvernay, Athabasca concluded an active winter campaign that included the drilling of 8 wells, 13 completions and a total of 16 tie‐ins expected by mid‐year. In the volatile oil window, production results have been consistently strong. Recent multi‐well pads at Kaybob East (10 wells) had IP30s averaging ~1,000 boe/d per well (80% liquids). Drilling and completion costs have been reduced to

~C$7.5 million on recent wells (2‐well pads) with line of sight to further improvements with multi‐well pad development. These results compare favorably to the East Shale Basin Duvernay due to low capital costs and higher sustained liquids rates.

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