President's Message

We are taking a more active role at Red Leaf, our 40% owned investee company, as
they develop their core assets: a wax processing facility in the Uintah Basin
with environmental permits in place and their patented technology to produce oil
from shale that incorporates carbon capture.

We have been leading discussions with stakeholders including producers in the
basin, prospective purchasers, and financial advisors. These have been very
encouraging and support the business case for the wax project. Red Leaf has also
been working closely with us and a potential licensee for a small-scale project
using their technology in the Kingdom of Jordan.

We are following the legal process for our claim against the Quebec Government
including the preparation of our damage assessment. As our Clean Gas remains a
viable option to resolve the impending electricity energy shortage in the
province, we are still seeking a business and political solution. During the
quarter, the Quebec Ministry of Energy sent us a request for a proposal for
pilot projects that would 'foster carbon neutrality and help attain targets in
the fight against climate change.' This was followed by the announcement of a
consultation process ahead of new legislation this fall on a new clean energy
strategy for the province.

Highlights

o Red Leaf commissions pre-FEED engineering study for 40,000 bbl/d wax
processing facility
o Government of Quebec seeks proposals for carbon sequestration pilot projects
o Average daily production of 1,790 boe/d and adjusted funds flow from
operations of $4.3 million

Energy transition policies are responsible for projected power shortages in
Canada. This issue is not limited to Canada. At a recent investor presentation
in Oslo, we heard a report from Statnett, the Norwegian transmission system
operator, that increased demand could cause a power shortage as early as 2027.
Canada's largest bank published a report last fall that noted that Ontario,
Canada's largest province, could face shortages as early as 2026.

In Quebec, the province lost a $13 billion Volkswagen battery manufacturing
project to Ontario due to a lack of energy resources, according to Minister
Fitzgibbon.

Both in the near and long term, our Clean Gas and hydrogen project is, in our
view, a very viable solution. It frees up hydroelectricity immediately and can
provide near zero-emissions hydrogen as the market develops in the future. This
is aligned with the bank report referenced above that recommended 'existing
natural gas plants will need to keep operating in provinces facing major energy
shortages until at least 2035.' Despite the drop in natural gas prices this
year, economics for the project remain strong with gas in Quebec continuing to
trade at a premium to the benchmark Henry Hub price.

Red Leaf's wax processing facility could have robust economics too. It would
capture the margin between the price for wax that is exported for processing and
the price of the finished products such as ultra low sulphur diesel and naphtha.
The remainder of the barrel will be shipped to the refineries on the US Gulf
Coast. It would receive a premium to WTI as it is used to make feedstock for the
base oil used to manufacture high-value lubricants.

The next steps in this project are the completion of a pre-FEED study to
validate the design and costs estimates. Later this year, discussions for
potential supply and off-take agreements should commence. In conjunction with
securing financing for the project our goal is to facilitate the start of field
work as required by our permit from the Utah Department of Air Quality.

Operating & Financial

Year over year, our production volumes increased with the conversion of our
royalty interest to a working interest at Kakwa North in the fourth quarter last
year. With only one (0.25 net) well expected on-stream in the second quarter, we
expect our volumes will decline nominally over the second half of the year.

Crude oil prices were lower in the first quarter of this year compared to last
year. With over 80% of our revenue from light oil and liquids, these mostly
offset the impact of the increased production volumes. As a result, we generated
adjusted funds flow from operations of $4.3 million this year, virtually
unchanged from last year.
Net of capital spending of $3.2 million largely for completing the one well at
Kakwa, we increased our working capital surplus to $25.5 million at the end of
the quarter.

Outlook

With over $30 million in cash and our unutilized credit facility we are well
positioned to fund our share of a proposed 50/50 program at Kakwa North for up
to three (1.5 net) wells assuming oil prices stay strong. This could start as
soon as the fourth quarter of 2023 with initial production in the second quarter
of 2024. We expect the operator will confirm their final plans late this summer.

We plan to participate in the public hearings in Quebec for a new clean energy
strategy. We are hopeful that they consider the economic and environmental
benefits of our project as well as its ability to meet their energy needs on a
timely basis. Concurrently, we are protecting our legal position while we seek a
political and commercial solution with the next hearing date scheduled for early
this summer.

The initial feedback on Red Leaf's wax processing project has been quite
positive. We believe the combination of zero-emissions, strong margins and
participation by key stakeholders including Indigenous people, make this an
attractive opportunity for the investment community.