President's Message
We have been building a foundation for our business that does not rely just on
our Utica discovery.  Our successes this year in cementing that foundation,
reflect our efforts over the past few years.

We took advantage of higher prices to eliminate debt because we prioritized
preserving financial liquidity during the pandemic. We now have a working
capital surplus of close to $25 million, representing mainly cash. We also have
an undrawn credit facility of $16 million. This will fund the upcoming 50/50
drilling program at Kakwa North. We proved up the value of these lands with a
successful farmout for an $80 million investment four years ago. We recently
converted our royalty interest to a working interest in the original farm-in
wells, adding just over 700 boe/d in the fourth quarter.

By focusing on capital preservation, the restructuring of our investee company,
Red Leaf, was also successful. They are now well-positioned to advance their new
version of the technology that integrates carbon capture to facilitate a CCUS
project.  This is a game changer for the future of what was otherwise an energy
intensive process.  Plus, taking over the operatorship and 100% equity position
of the niche market wax processing project in Utah has opened up an exciting
opportunity.  

Despite our efforts to eliminate emissions and build social acceptability,
including an agreement with the Abenaki First Nation, we did not convince the
Government of Quebec who was facing an imminent election. The Government enacted
Bill 21, revoking our exploration licenses and effectively nationalizing our
discovery without just compensation.  The value of this discovered giant natural
gas field to the province of Quebec is enormous. It is large enough to satisfy
domestic demand and supply LNG to Europe through a nearby permitted facility. It
is an unjust enrichment to nationalize it indirectly by breaching the contracts
we made with the province.  We are preserving our legal claim and challenging
the validity of the law.  However, as we have said consistently, we prefer a
political and business solution.  We have discovered an enormous source of
secure and reliable energy for the people of Quebec.  We look forward to
upcoming consultations in Quebec on solving the impending electricity energy
crisis with our Clean Gas and hydrogen solutions. 

Highlights
o	Strong financial position with a working capital surplus of close to $25
million and an unutilized credit facility of $16 million
o	Conversion of royalty interest in Kakwa North farm-in wells add 700 boe/d in
the fourth quarter
o	Government of Quebec enacts Bill 21 to revoke oil and gas exploration licenses
o	Before tax NPV-10% of total proved and probable reserves unchanged at $270
million even with a 10% decrease in volumes to 30 MMBoe 
o	Average daily production of 1,714 boe/d and adjusted funds flow from
operations of $26.3 million

Quebec 
We filed our claim against the Government of Quebec just over one year ago. We
assert that the Government has inter alia, fundamentally breached its duty to
act in good faith, and in accordance with the due process of the law, to honor
its contractual commitments and its duty to consult with our First Nation
partners and respect their rights. Furthermore, their decision to ban our Clean
Gas and hydrogen project that would eliminate emissions conflicts with a recent
Supreme Court of Canada ruling that emissions asserting that climate change is a
worldwide issue requiring global solutions. We anticipate a hearing date for our
claim could be set later this year.

Many of our shareholders have enquired about quantifying the value of our
licenses for our claim. We have commissioned a report to quantify the value of
our multi-Tcf gas discovery on the basis that the Government abided by the law
they passed in 2016 and allowed us to proceed with development. This report is
privileged under Canadian law and must be introduced in accordance with the
rules of evidence.  It will be disclosed in due course as we validate with our
expert witness the possible scenarios as well as the key assumptions including
the pace and likelihood of development and the appropriate discount rate for the
expected cash flows. However, it cannot be disclosed prior to its finalization
it in accordance with the Court requirements.

The looming electricity shortage in Quebec is an opportunity for us to still
move forward with the Government. For a province that generates over 90% of its
electricity from hydro, this shortage seemed inconceivable only a few years ago.
 Yet the Government has recently publicly acknowledged the province will in fact
experience a shortfall.  Part of the longer-term solution is the possible
construction of additional hydroelectric dams and alternative energy projects. 
However, current demand anticipating electrification of the economy, requires
additional energy sources.  The alternative is a severe curtailment of
industrial and other demand during peak periods. 

Volkswagen recently announced it will locate its battery plant in Ontario.
Minister Fitzgibbon recently stated this was in part because Quebec did not have
sufficient electricity supply. We see our Clean Gas and hydrogen project as a
more viable option to maintain Quebec's economic competitiveness. It would meet
their short-term needs to free up hydroelectricity for heating demand. It would
also offer a cheap and environmentally friendly way to produce hydrogen in the
longer term. We continue to engage with stakeholders and the Government on how
our project could meet their needs.

Red Leaf and Jordan

We are seeing some early successes with the engagement of stakeholders for Red
Leaf's wax processing project in Utah that will upgrade the value of the local
waxy oil. They signed a collaboration agreement with the Ute Tribe, the largest
indigenous landholder in the state to supply crude feedstock, market finished
products and provide utilities. Several of the largest producers in the Uintah
Basin have expressed an interest in our project as an opportunity to maximize
the value of the light sweet and waxy oil. Although the learning curve is steep,
we are encouraged by the robust business case and the regulatory path forward.
The project falls under state jurisdiction and holds a grandfathered air permit,
with the remaining anticipated permits requiring six to nine months of lead
time. There are many more milestones, including securing financing, but we
remain optimistic about this opportunity.

We are also optimistic about the prospects for their technology to produce oil
from shale that incorporates carbon capture. This would leverage the cash tax
incentives for carbon capture under the US Inflation Reduction Act. Together
with Red Leaf, we formed a consortium with two Jordanian companies to assess a
600 to 1,000 bbl/d facility. Early this year, we met with the Government of
Jordan to discuss our approach as well as the amendments necessary for the
proposed concession agreement.

Operating & Financial

With three (0.75 net) wells brought on production at Kakwa Central this year,
our volumes increased over the last year. The higher volumes also reflect the
conversion of the Kakwa North royalty interest into a working interest in the
fourth quarter. Higher prices generated adjusted funds flow from operations of
$26.3 million. Net of capital investment of $11.6 million in 2022, this resulted
in a working capital surplus of $24.5 million. This surplus also includes the
refund of $7.7 million in restricted cash from the Quebec Government. Pending a
ruling on our claim to have Bill 21 declared invalid, we are segregating these
funds internally as we are responsible for reclamation costs under the
pre-existing regulations in Quebec. 

We only participated in one (0.25 net) of the two (0.50 net) wells drilled by
the operator at Kakwa Central this winter. The expected return on our capital
for the second well was challenged by lower commodity prices, inflation in well
costs and their proposed completion design that might not maximize recoveries.
As a result, we expect our production will experience natural declines this year
prior to the commencement of the Kakwa North drilling program of up to three
(1.5 net) wells late this fall. 

Outlook

With our current liquidity, we are well positioned to participate in the
proposed drilling at Kakwa North. If the operator drills three (1.5 net) wells,
we could see our production materially increase in the second half of next year
by over 1,500 boe/d.

We have redoubled our efforts in Quebec. As we follow the legal process, we have
met with several European countries on how our project can provide near-zero
emissions natural gas delivered through a permitted LNG export facility in
Quebec to improve their energy security. We have encouraged them to engage with
the Quebec Government on a path forward. We have discussed with Government of
Quebec and local business and other groups how our project could be a solution
to their energy crisis. Though the timeline and outcome of these initiatives is
far from certain, we remain committed to crystallizing value for our discovery.
We have also made significant progress with our high impact projects in the
Kingdom of Jordan and Utah. Our future is now less dependent on the Quebec
Utica.
 
Michael Binnion, President and Chief Executive Office