President's Message

We have been transforming into a carbon technology company. This change in
strategy is to allow us to unlock the giant resources we have discovered but
have been blocked from producing in an increasingly ESG focused world. Our
initial approach to the use of carbon technology was as a cost centre, or part
of the new cost of doing business. With increasing prices on carbon, we are now
seeing the potential for this to be a profit centre.

In particular, interest in carbon capture and storage ("CCS") is growing in
Quebec, and this business could be independent of our Clean Gas production. We
are pursuing a carbon storage pilot project under the existing legislation as a
step towards a business and political solution. We continue our fiduciary
obligations to preserve our legal rights before the Court. Our motion to suspend
key elements of Bill 21 was heard in late October. We are awaiting the Court's
decision.

Carbon storage is also integral to the development of our investee, Red Leaf's,
assets in the Uintah Basin, Utah. In addition to their permit for a wax
processing facility, they own the rights for carbon sequestration over 7,000
acres. Discussions are ongoing with partners to assess this potential.
Concurrently, they are advancing the design of a small-scale commercial project
for their oil shale technology with a consortium of Jordanian companies.

On our conventional assets, we recently drilled an oil well and are expanding
our secondary recovery scheme at Antler, Saskatchewan. The operator of our Kakwa
Central acreage plans to drill three (0.75 net) wells early next year and,
subject to commodity prices, we plan to participate in this program.

While unexpected, the Government of Quebec's calls for carbon and hydrogen
storage pilot projects earlier this year was a positive development.

We originally applied for a carbon storage test just over two years ago to test
the rights we hold over one million acres. At the time, this was essential to
our plans to eliminate the emissions from both production and consumption of our
Clean Gas. With the price of carbon expected to rise to $170 per tonne in Canada
by 2030, we are looking at this as a standalone opportunity. Of interest, the
Government of Quebec recently invested in a new tech start-up focusing
exclusively on CCS in the province.

Following our recent discussions with the Government, we intend to submit an
updated application to test the CCS potential early next year. We are pursuing a
collaborative approach with them on this pilot. As well as assessing the
injectivity and storage capacity, other criteria is proximity to some of the
large emitters in the province. As an example, there are several industries
including an aluminum plant near the Becancour industrial park that account for
just over one million tonnes of carbon dioxide emissions annually or almost 5%
of the province's reported emissions from industrial activity.

The 2035 Action Plan for the provincial utility, Hydro-Québec, includes the use
of combined cycle natural gas from the Becancour power plant during peak demand
periods. CCS is a possible solution to mitigate emissions from this plant. 

Preserving our legal rights remains a priority. At the hearing in late October,
we reiterated our position that key elements of Bill 21 including enforcement
actions should be suspended until a final hearing on the merits of our case. 

We are applying our experience from our zero-emissions projects in Quebec to
help Red Leaf develop their Uintah Basin assets. Their proposed wax processing
facility could be the anchor tenant for a net-zero industrial park. It would
benefit from their rights to store carbon dioxide on their land. They could also
provide carbon sequestration as a fee for service to the tenants in the park,
possibly eliminating Scope I and II emissions. They presented this concept at a
recent energy summit and it was well received. Their next step is to test the
storage potential. 

Operating & Financial

Production in the quarter and year to date increased over last year, averaging
1,830 boe/d and 1,866 boe/d respectively, compared to 1,629 boe/d and 1,609
boe/d last year.
At both Antler and Kakwa, we had two workovers go over budget by an incremental
$1 million due to downhole operational problems. This reduced our adjusted funds
flow from operations for the quarter compared to the prior quarter. Adjusted
funds flow from operations was $3 million for the quarter and $12.6 million year
to date. Our working capital surplus at the end of the period was $30.2 million.


Outlook

The emergence of net-zero hubs globally supports our view that CCS will be part
and parcel of future energy development. For this reason, we are optimistic
about a CCS pilot in Quebec. As we follow the legal process to dispute the
nationalization of our discovery, we remain hopeful the Government will see our
project as an environmentally sound solution to their energy crisis.
 
Michael Binnion
President and Chief Executive Officer