PROSPECTUS

Filed Pursuant to Rule 424(b)(3)  Registration Statement No. 333-270624

HAMMERHEAD ENERGY INC.

99,176,973 Class A Common Shares

12,737,500 Warrants to Purchase Class A Common Shares

28,549,991 Class A Common Shares Underlying Warrants

This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling Securityholders”) of (A) up to 3,557,813 of our Class A Common Shares (“Common Shares”) held by the DCRD Initial Shareholders (as defined below), originally acquired for a purchase price equivalent to approximately $0.002 per share, including 3,464,323 of our Common Shares held by DCRD Sponsor (as defined below), an affiliate of the Riverstone Parties (as defined below), which Common Shares are subject to transfer restrictions in the Sponsor Support Agreement (as defined below); (B) up to 74,733,134 of our Common Shares held by the Riverstone Parties, of which 70,384,697 such Common Shares, originally acquired through various rounds of financing at purchase prices as low as approximately C$7.11 per share, are subject to transfer restrictions in the Lock-Up Agreement (as defined below) and 4,348,437 of such Common Shares, originally acquired for a purchase price equivalent to approximately $0.002 per share, are subject to transfer restrictions in the Sponsor Support Agreement; (C) 8,148,526 Common Shares issued to certain former shareholders of Hammerhead Resources Inc. (“Hammerhead”), which Common Shares were acquired by the Selling Securityholders in exchange for securities of Hammerhead that were acquired by employees, investors and others through private placements, equity award grants and other sales at prices that equate to purchase prices as low as approximately $0 per share, which are subject to transfer restrictions in the Lock-Up Agreement, (D) warrants to purchase up to 12,737,500 Common Shares held by certain Riverstone Fund V Entities (as defined below) (the “Private Placement Warrants”) received in exchange for DCRD Private Placement Warrants (as defined below) for warrants to purchase Common Shares (the “Warrants”) pursuant to the Founder Transfer, originally issued in a private placement at a price of $1.00 per DCRD Private Placement Warrant in connection with the DCRD IPO (as defined below) and (E) up to 12,737,500 Common Shares issuable upon exercise of the Private Placement Warrants, originally issued in a private placement at a price of $1.00 per DCRD Private Placement Warrant in connection with the DCRD IPO.

In addition, this prospectus relates to the issuance by us of up to (A) 15,812,491 Common Shares that are issuable by us upon the exercise of the Public Warrants, which were previously registered and (B) 12,737,500 Common Shares underlying the Private Placement Warrants.

In connection with the Business Combination, holders of 31,498,579 Common Shares exercised their right to redeem those shares for cash at a price of approximately $10.30 per share, for an aggregate price of approximately $324.5 million. The total number of Common Shares that may be offered and sold under this prospectus by the Selling Securityholders (the “Total Resale Shares”) represents a substantial percentage of the total outstanding Common Shares as of the date of this prospectus. The Total Resale Shares being offered for resale in this prospectus represent approximately 95.7% of our current total outstanding Common Shares, assuming the exercise of all Warrants. Further, certain Selling Securityholders beneficially own a significant percentage of our outstanding Common Shares. As of April 10, 2023, the Riverstone Parties beneficially owned 87,470,634 Common Shares (including 12,737,500 Common Shares issuable upon exercise of Private Placement Warrants held by certain Riverstone Fund V entities), representing approximately 84.4% of the Common Shares, of which 70,384,697 such Common Shares are subject to transfer restrictions in the Lock-Up Agreement that expire on August 23, 2023 and thereafter may be resold, and 4,348,437 of such Common Shares are subject to transfer restrictions in the Sponsor Support Agreement that expire on February 23, 2024 and thereafter may be resold, in each case for so long as the registration statement, of which this prospectus forms a part, is available for use. In addition, as of April 10, 2023, DCRD Sponsor, an entity affiliated with the Riverstone Parties, beneficially owned 3,464,323 Common Shares, representing approximately 3.8% of the Common Shares, which are subject to transfer restrictions in the Sponsor Support Agreement that expire on February 23, 2024 and thereafter may be resold, in each case for so long as the registration statement, of which this prospectus forms a part, is available for use. In the aggregate, as of April 10, 2023, the Riverstone Parties and their affiliates, including DCRD Sponsor, beneficially owned 90,934,957 Common Shares representing approximately 87.7% of the Common Shares (including 12,737,500 Common Shares issuable upon exercise of Private Placement Warrants that are held by certain Riverstone Fund V Entities). The sale of all securities being offered in this prospectus could result in a significant decline in the public trading price of our Common Shares. Even if the current trading price of the Common Shares is at or significantly below the price at which the DCRD Units (as defined below) were issued in the DCRD IPO, some of the Selling Securityholders may still have an incentive to sell because they could still profit on sales due to the lower price at which they purchased their shares compared to the public investors. The public securityholders may not experience a similar rate of return on the securities they purchase due to differences in the purchase prices and the current trading price. See “Risk Factors-Risks Related to Ownership of the Company’s Securities-A significant portion of the Company’s total outstanding securities may be sold into the market in the near future. This could cause the market price of the Common Shares and the Warrants to drop significantly, even if the Company’s business is performing well.” Based on the closing price of our Common Shares as of April 11, 2023 on the Nasdaq Capital Market (the “Nasdaq”) of $8.58, (a) the DCRD Initial Shareholders may experience a potential profit of up to approximately $8.58 per share, (b) the Riverstone Investors may experience a potential profit of up to approximately $3.32 per share, based on the daily exchange rate published by the Bank of Canada on April 11, 2023 of C$1.00 = US$0.74, and (c) certain former shareholders of Hammerhead may experience a potential profit of up to approximately $8.58 per share, in each case, if such Selling Securityholders sold their Common Shares. Public securityholders may not be able to experience the same positive rates of return on securities they purchase due to the low price at which certain Selling Securityholders acquired or purchased their Common Shares.

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The Selling Securityholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the Common Shares or Warrants, except with respect to amounts received by us upon the exercise of the Warrants. Whether Warrant Holders (as defined below) will exercise their Warrants, and therefore the amount of cash proceeds we would receive upon exercise, is dependent upon the trading price of the Common Shares, the last reported sales price for which was $8.15 per share on April 28, 2023 on the Nasdaq. Each Warrant is exercisable for one Common Share at an exercise price of $11.50. Therefore, if and when the trading price of the Common Shares is less than $11.50, we expect that Warrant Holders would not exercise their Warrants. We could receive up to an aggregate of approximately $328.3 million if all of the Warrants are exercised for cash, but we would only receive such proceeds if and when the Warrant Holders exercise the Warrants. The Warrants may not be or remain in the money during the period they are exercisable and prior to their expiration, and the Warrants may not be exercised prior to their maturity on February 23, 2028, even if they are in the money, and as such, the Warrants may expire worthless and we may receive minimal proceeds, if any, from the exercise of Warrants. To the extent that any of the Warrants are exercised on a "cashless basis," we will not receive any proceeds upon such exercise. As a result, we do not expect to rely on the cash exercise of Warrants to fund our operations. Instead, we intend to rely on other sources of cash discussed elsewhere in this prospectus to continue to fund our operations. See "Risk Factors-Risks Related to Ownership of the Company's Securities-There is no guarantee that the exercise price of our Warrants will ever be less than the trading price of our Common Shares on the Nasdaq, and they may expire worthless. In addition, we may reduce the exercise price of the Warrants in accordance with the provisions of the Warrant Agreement, and a reduction in exercise price of the Warrants would decrease the maximum amount of cash proceeds we could receive upon the exercise in full of the Warrants for cash" and "Management's Discussion and Analysis of Financial Condition and Results of Operations-Capital Resource and Liquidity."

We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or "blue sky" laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of Common Shares or Warrants. See "Plan of Distribution."

Our Common Shares and Warrants are listed on the Nasdaq under the symbols "HHRS" and "HHRSW", respectively, and on the Toronto Stock Exchange (the "TSX") under the symbols "HHRS" and "HHRS.WT," respectively. On April 28, 2023, the last reported sales prices of the Common Shares on the Nasdaq and the TSX were $8.15 and C$11.02, respectively, and the last reported sales prices of the Warrants were $1.13 and C$1.40, respectively.

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We are a "foreign private issuer" as defined in the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions under Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Additionally, the Nasdaq rules allow foreign private issuers to follow home country practices in lieu of certain of the Nasdaq's corporate governance rules. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all the Nasdaq corporate governance requirements.

Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading "Risk Factors" beginning on page 5 of this prospectus, and under similar headings in any amendments or supplements to this prospectus.

None of the Securities and Exchange Commission, any state securities commission or the securities commission of any Canadian province or territory has approved or disapproved of these securities, or determined if this prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The date of this prospectus is May 1, 2023.

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TABLE OF CONTENTS

	Page
MARKET AND INDUSTRY DATA	iii
TRADEMARKS AND TRADE NAMES	iii
PRESENTATION OF FINANCIAL INFORMATION	iii
NON-GAAP FINANCIAL MEASURES	iv
EXCHANGE RATES	v
CERTAIN DEFINED TERMS	vi
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	xvi
SUMMARY OF PROSPECTUS	1
THE OFFERING	4
RISK FACTORS	5
USE OF PROCEEDS	41
MARKET PRICE OF OUR SECURITIES AND DIVIDENDS	42
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION	43
BUSINESS	53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	87
MANAGEMENT	131
EXECUTIVE COMPENSATION	146

 

DESCRIPTION OF THE COMPANY'S SECURITIES	189
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES	202
COMMON SHARES ELIGIBLE FOR FUTURE SALE	205
SELLING SECURITYHOLDERS	207
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	210
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS	214
MATERIAL CANADIAN TAX CONSIDERATIONS	223
PLAN OF DISTRIBUTION	229
EXPENSES RELATED TO THE OFFERING	232

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LEGAL MATTERS	233
EXPERTS	233
SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. SECURITIES LAWS	233
WHERE YOU CAN FIND MORE INFORMATION	235
INDEX TO CONSOLIDATED FINANCIAL INFORMATION	F-1

No one has been authorized to provide you with information that is different from that contained in this prospectus or any free writing prospectus filed by us. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.

Except as otherwise set forth in this prospectus, we have not taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.

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MARKET AND INDUSTRY DATA

This prospectus contains estimates, projections, and other information concerning the Company's industry and business, as well as data regarding market research, estimates, forecasts and projections prepared by the Company's management. Information that is based on market research, estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. The industry in which the Company operates is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors." Unless otherwise expressly stated, the Company obtained industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources. In some cases, the Company does not expressly refer to the sources from which this data is derived. In that regard, when the Company refers to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from sources that the Company paid for, sponsored, or conducted, unless otherwise expressly stated or the context otherwise requires. While the Company has compiled, extracted, and reproduced industry data from these sources, the Company has not independently verified the data. Forecasts and other forward-looking information with respect to industry, business, market, and other data are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus. See "Cautionary Note Regarding Forward-Looking Statements."

TRADEMARKS AND TRADE NAMES

The Company owns or has rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. The use or display of third parties' trademarks, service marks, trade names or products in this prospectus is not intended to create, and does not imply, a relationship with the Company or an endorsement or sponsorship by or of the Company. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, their rights or the right of the applicable licensor to these trademarks, service marks and trade names.

PRESENTATION OF FINANCIAL INFORMATION

This prospectus contains:

• the audited consolidated financial statements of DCRD as of December 31, 2022 and 2021 and for the year ended December 31, 2022 and the period from February 22, 2021 (inception) to December 31, 2021;

• the audited consolidated financial statements of Hammerhead (as defined below) as at December 31, 2022 and 2021 and for each of the years in the three-year period ended December 31, 2022; and

• the audited financial statements of the Company as of December 31, 2022 and for the period from September 1, 2022 (inception) to December 31, 2022.

Unless indicated otherwise, financial data presented in this prospectus has been taken from the audited consolidated financial statements of DCRD and Hammerhead, as applicable, included in this prospectus. Unless otherwise indicated, financial information of DCRD has been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and the financial information of Hammerhead has been prepared in accordance with International Financial Reporting Standards ("IFRS"). This prospectus does not include any explanation of the principal differences or any reconciliation between U.S. GAAP and IFRS.

As presented herein, Hammerhead presents its consolidated financial statements in Canadian dollars. DCRD publishes its consolidated financial statements in U.S. dollars. In this prospectus, unless otherwise specified, all monetary amounts are in U.S. dollars, all references to "$," "US$," "USD" and "dollars" mean U.S. dollars and all references to "C$" and "CAD" mean Canadian dollars.

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NON-GAAP FINANCIAL MEASURES

The Company reports certain financial information using meaningful measures commonly used in the oil and natural gas industry that are not defined under IFRS, and are referred to as non-GAAP measures. The Company  believes that these measures provide information that is useful to investors in understanding the performance of the Company and facilitate a comparison of the Company's results from period to period. Non-GAAP financial measures and ratios used in the Company's financial information include capital expenditures, available funding, operating netback, operating netback per boe, funds from operations, funds from operations per boe, and funds from operations per basic share and diluted share. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS, and should be read in conjunction with the audited annual consolidated financial statements of Hammerhead. Readers are cautioned that these non-GAAP financial measures and capital management measures are not standardized measures under IFRS, and may not be comparable to similar financial measures disclosed by other entities.

For more information on the non-IFRS financial measures used in this prospectus, please see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP and Other Specified Financial Measures."

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EXCHANGE RATES

The Company's reporting currency is the Canadian dollar. The determination of the functional and reporting currency of each group company is based on the primary currency in which the group company operates. The functional currency of the Company's subsidiaries is generally the local currency.

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CERTAIN DEFINED TERMS

Unless the context otherwise requires, references in this prospectus to:

• "A&R Registration Rights Agreement" are to that certain amended and restated registration rights agreement entered into concurrently with the Closing.

• "ABCA" are to the Business Corporations Act (Alberta).

• "Adjusted EBITDA" are to a non-IFRS measure calculated as net profit (loss) before interest and financing expenses, income taxes, depletion, depreciation and amortization, adjusted for certain non-cash, extraordinary and non-recurring items.

• "AECO" are to AECO "C" hub price index for Alberta natural gas.

• "Allowable Capital Loss" are to one-half of any capital loss realized by a Canadian Holder in a taxation year that must be deducted from taxable capital gains realized by the Canadian Holder in that year.

• "AmalCo" are to 2453729 Alberta ULC, an Alberta unlimited liability corporation and wholly owned subsidiary of DCRD, which amalgamated with Hammerhead pursuant to the Company Amalgamation to form Hammerhead Resources ULC, a wholly owned subsidiary of the Company.

• "Amalgamated Company" are to Hammerhead Resources ULC, the unlimited liability corporation formed as a result of the Company Amalgamation.

• "Antitrust Division" are to the Antitrust Division of the U.S. Department of Justice.

• "Arrangement" are to an arrangement under section 193 of the ABCA on the terms and subject to the conditions set forth in the Plan of Arrangement.

• "As-Converted Hammerhead Series II Preferred Shares" are to, at any point of determination, the number of Hammerhead Common Shares (or Hammerhead Class A Common Shares, as applicable) issuable if all holders of Hammerhead Series II Preferred Shares converted such shares in accordance with the Hammerhead Articles.

• "As-Converted Hammerhead Series IX Preferred Shares" are to, at any point of determination, the number of Hammerhead Common Shares (or Hammerhead Class A Common Shares, as applicable) issuable if all holders of Hammerhead Series IX Preferred Shares converted such shares in accordance with the Hammerhead Articles.

• "Board" are to the board of directors of the Company.

• "bbl" are to barrel.

• "bbls/d" are to barrels per day.

• "boe" are to barrels of oil equivalent, as calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one boe. This calculation is an energy content correlation and does not reflect a value or price relationship between the commodities.

• "boe/d" are to barrels of oil equivalent per day.

• "Business Combination" are to the transactions consummated pursuant to the Business Combination Agreement, the Plan of Arrangement and all other agreements entered into in connection therewith.

• "Business Combination Agreement" are to that certain Business Combination Agreement, dated September 25, 2022 by and between DCRD, Hammerhead, NewCo and AmalCo.

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• "Canadian Holder" are to a Holder who, at all relevant times, for purposes of the ITA, is or is deemed to be resident in Canada.

• "Cdn$" or "C$" are to Canadian dollars.

• "CIBC" are to the Canadian Imperial Bank of Commerce.

• "Class B Common Shares" are to the Class B common shares in the authorized share capital of the Company.

• "Closing" are to the closing of the Business Combination.

• "Closing Date" are to February 23, 2023.

• "Code" are to the U.S. Internal Revenue Code of 1986, as amended.

• "Common Shares" are to the Company's Class A Common Shares.

• "Company Amalgamation" are to the amalgamation of Hammerhead and AmalCo.

• "Company Amalgamation Effective Time" are to the effective time of the Company Amalgamation.

• "Company Articles" are to the articles of the Company (as amended).

• "Companies Act" are to the Cayman Islands Companies Act (as amended).

• "Company Bylaws" are to the bylaws of the Company.

• "Competition Act" are to the Competition Act (Canada) and the regulations promulgated thereunder.

• "Court" are to the Alberta Court of King's Bench.

• "CRA" are to the Canada Revenue Agency.

• "Credit Facility" are to the credit facilities available to Hammerhead pursuant to the then existing credit agreement between Hammerhead and the lenders thereto, as the context may require.

• "Crown" are to His Majesty the King in right of Canada or His Majesty the King in right of the Province of Alberta, as the context may require.

• "Crude oil" are to light crude oil and medium crude oil as defined in NI 51-101.

• "DCRD" are to Decarbonization Plus Acquisition Corporation IV, a Cayman Islands exempted company, which (i) transferred by way of continuation from the Cayman Islands to the Province of Alberta, Canada and domesticated as an Alberta corporation pursuant to the Domestication and (ii) amalgamated with NewCo, with NewCo surviving as the Company, pursuant to the SPAC Amalgamation.

• "DCRD Articles" are to the amended and restated memorandum and articles of association of DCRD, adopted on August 10, 2021, as amended and restated on January 23, 2023.

• "DCRD Board" are to the board of directors of DCRD.

• "DCRD Class A Common Shares" are to DCRD's Class A common shares.

• "DCRD Class A Ordinary Shares" are to DCRD's Class A ordinary shares, par value $0.0001 per share.

• "DCRD Class B Common Shares" are to DCRD's Class B common shares.

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• "DCRD Class B Ordinary Shares" are to DCRD's Class B ordinary shares, par value $0.0001 per share.

• "DCRD Domesticated Warrants" are to the DCRD Private Placement Warrants and the DCRD Public Warrants, collectively.

• "DCRD Founder Shareholders" are to the DCRD Initial Shareholders and, after the Founder Transfer, certain Riverstone Fund V Entities.

• "DCRD Founder Shares" are to the outstanding DCRD Class B Ordinary Shares immediately prior to the SPAC Amalgamation Effective Time.

• "DCRD Initial Shareholders" are to DCRD Sponsor and DCRD's independent directors, each in their capacity as holders of DCRD Founder Shares.

• "DCRD IPO" are to DCRD's initial public offering of DCRD Units, which closed on August 13, 2021.

• "DCRD management" are to DCRD's officers and directors.

• "DCRD Ordinary Shares" are to the DCRD Class A Ordinary Shares and the DCRD Class B Ordinary Shares.

• "DCRD Private Placement Warrants" are to the warrants issued to DCRD Sponsor and certain of DCRD's independent directors in a private placement simultaneously with the closing of the DCRD IPO.

• "DCRD Public Shareholders" are to the holders of DCRD Public Shares.

• "DCRD Public Shares" are to DCRD Class A Ordinary Shares sold as part of the DCRD Units in the DCRD IPO (whether they were purchased in the DCRD IPO or thereafter in the open market).

• "DCRD Public Warrant Holders" are to holders of DCRD Public Warrants.

• "DCRD Public Warrants" are to the warrants sold as part of the DCRD Units in the DCRD IPO (whether they were purchased in the DCRD IPO or thereafter in the open market).

• "DCRD Shareholders" are to, collectively, the DCRD Initial Shareholders and the DCRD Public Shareholders.

• "DCRD Sponsor" are to Decarbonization Plus Acquisition Sponsor IV LLC, a Cayman Islands limited liability company and an affiliate of Riverstone.

• "DCRD Units" are to the units of DCRD sold in the DCRD IPO, each of which consisted of one DCRD Class A Ordinary Share and one-half of one DCRD Public Warrant.

• "DCRD Warrant Agreement" are to the Warrant Agreement, dated August 10, 2021, between DCRD and Continental Stock Transfer and Trust Company, as warrant agent.

• "DCRD Warrants" are to the DCRD Private Placement Warrants and the DCRD Public Warrants, collectively.

• "Directors" are to the directors of the Company.

• "Domestication" are to the transfer of DCRD by way of continuation from the Cayman Islands to the Province of Alberta, Canada in accordance with the DCRD Articles and the Companies Act and the domestication of DCRD as an Alberta corporation in accordance with the applicable provisions of the ABCA, including all matters necessary or ancillary in order to effect such transfer by way of continuation and domestication, including the adoption of the Domestication Articles and Bylaws.

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• "Domestication Articles and Bylaws" are to the articles and bylaws of DCRD adopted in connection with the Domestication.

• "DPSP" are to a deferred profit sharing plan.

• "DTC" are to The Depository Trust Company.

• "Duff & Phelps" are to Kroll, LLC, operating through its Duff & Phelps Opinions Practice.

• "E&P" are to exploration and production.

• "EGC" are to emerging growth company, as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act.

• "Employee Borrowers" are to the four management employees who received loans from Hammerhead in the aggregate principal amount of C$5,793,000 pursuant to amended and restated limited recourse loan, pledge, call option and security agreements dated February 18, 2020.

• "Exchange Act" are to the U.S. Securities Exchange Act of 1934, as amended.

• "F Reorganization" are to a reorganization pursuant to Section 368(a)(1)(F) of the Code.

• "FHSA" are to a first home savings account.

• "FHSA Amendments" are to Proposed Amendments released on August 9, 2022 to implement tax measures applicable to FHSAs first proposed by the 2022 Federal Budget (Canada).

• "Final Order" are to the final order of the Court pursuant to section 193 of the ABCA, approving the Arrangement, dated February 3, 2023.

• "First Preferred Shares" are to the class of shares of the Company issuable in series, to be limited in number to an amount equal to not more than 20% of the number of issued and outstanding Common Shares at the time of issuance of any First Preferred Shares.

• "Founder Transfer" are to the transfer of DCRD Founder Shares and DCRD Private Placement Warrants pursuant to the Sponsor Side Letter.

• "G&A" are to general and administrative.

• "GAAP" are to generally accepted accounting principles.

• "GHG" are to greenhouse gases.

• "GJ" are to gigajoule.

• "Governmental Authority" are to any U.S. or non-U.S.: (1) nation, state, commonwealth, province, territory, region, county, city, municipality, district, or other jurisdiction of any nature; (2) federal, state, local, municipal, foreign or other government; or (3) governmental, quasi-governmental, public or statutory authority of any nature (including any governmental division, department, agency, regulatory or administrative authority, commission, instrumentality, official, organization, unit, body, or entity and any court, judicial or arbitral body, or other tribunal).

• "Hammerhead 2013 Warrants" are to the 6,000,000 warrants to purchase Hammerhead Common Shares issued pursuant to that certain warrant indenture dated May 1, 2013 by and between Hammerhead and Olympia Trust Company.

• "Hammerhead 2020 Warrants" are to the (i) 33,721,985 warrants to purchase Hammerhead Common Shares issued pursuant to the certain warrant certificate dated June 17, 2020 by and between Hammerhead and Riverstone V Investment Management Coöperatief U.A. (formerly, Riverstone V EMEA Holdings Coöperatief U.A.); and (ii) 1,298,296 warrants to purchase Hammerhead Common Shares issued pursuant to that certain warrant certificate dated December 8, 2020 by and between Hammerhead and HV RA II LLC.

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• "Hammerhead" are to Hammerhead Resources Inc., an Alberta corporation, which amalgamated with AmalCo to form Hammerhead Resources ULC pursuant to the Company Amalgamation.

• "Hammerhead Articles" are to the articles of amalgamation of Hammerhead, dated October 1, 2017, as amended from time to time.

• "Hammerhead Board" are to the board of directors of Hammerhead.

• "Hammerhead Circular" are to the information circular/proxy statement of Hammerhead in respect of the Hammerhead Shareholders meeting.

• "Hammerhead Class A Common Shares" are to the Hammerhead Common Shares after the reclassification of such Hammerhead Common Shares as "Hammerhead Class A Common Shares" pursuant to Section 3.2(a) of the Plan of Arrangement.

• "Hammerhead Class B Common Shares" are to the Class B common shares in the authorized share capital of Hammerhead created pursuant to Section 3.2(a) of the Plan of Arrangement.

• "Hammerhead Common Share Exchange Ratio" are to the quotient obtained by (A) dividing (i) $882,092,851.88 minus (a) $130,603,883.57, representing the Hammerhead Series VII Preferred Share Liquidation Preference, (b) $179,631,775.98, representing the Hammerhead Series III Preferred Share Liquidation Preference and (c) $40.00, by (ii) $10.00, representing the Issue Price, and then (B) by further dividing the resulting number of Common Shares established in (A) above by (C) the sum of (i) the As-Converted Hammerhead Series II Preferred Shares, (ii) the As-Converted Hammerhead Series IX Preferred Shares, (iii) the number of Hammerhead Common Shares that are issuable upon the exercise of Hammerhead Options that are unexpired, issued and outstanding as of immediately prior to the Company Amalgamation Effective Time minus a number of Hammerhead Common Shares with a fair market value equal to the aggregate exercise price (determined in U.S. dollars with reference to the U.S. dollar to Canadian dollar exchange rate reported by the Bank of Canada on September 23, 2022 of 1.3570) of all Hammerhead Options so exercised, in each case, assuming that the fair market value of one Hammerhead Common Share equals (x) the Hammerhead Common Share Exchange Ratio multiplied by (y) $10.00, (iv) the (1) number of Hammerhead Common Shares that are issuable upon the exercise of Hammerhead RSUs that are unexpired, issued and outstanding as of immediately prior to the Company Amalgamation Effective Time minus a number of Hammerhead Common Shares with a fair market value equal to the aggregate exercise price (determined in U.S. dollars with reference to the U.S. dollar to Canadian dollar exchange rate reported by the Bank of Canada on September 23, 2022 of 1.3570) of all Hammerhead RSUs so exercised, in each case, assuming that the fair market value of one Hammerhead Common Share equals (x) the Hammerhead Common Share Exchange Ratio multiplied by (y) $10.00; minus (2) 2,010,154 Hammerhead Common Shares, and (v) the number of Hammerhead Class A Common Shares and Hammerhead Class B Common Shares issued and outstanding immediately prior to the Company Amalgamation Effective Time, including, for greater certainty, any Hammerhead Class A Common Shares issued in connection with the Hammerhead Warrant Settlement.

• "Hammerhead Common Shares" are to the common shares in the authorized share capital of Hammerhead.

• "Hammerhead Options" are to all options to purchase Hammerhead Common Shares, whether or not exercisable and whether or not vested, granted under the Hammerhead Share Option Plan.

• "Hammerhead Preferred Shares" are to, collectively, the Hammerhead Series I Preferred Share, the Hammerhead Series II Preferred Shares, the Hammerhead Series III Preferred Shares, the Hammerhead Series IV Preferred Share, the Hammerhead Series VI Preferred Share, the Hammerhead Series VII Preferred Shares, the Hammerhead Series VIII Preferred Shares and the Hammerhead Series IX Preferred Shares.

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• "Hammerhead RSUs" are to all share awards to purchase Hammerhead Common Shares granted under the Hammerhead Share Award Plan.

• "Hammerhead Series I Preferred Share" are to the Series I First Preferred Share in the authorized share capital of Hammerhead.

• "Hammerhead Series II Preferred Shares" are to the Series II First Preferred Shares in the authorized share capital of Hammerhead.

• "Hammerhead Series III Preferred Share Exchange Ratio" are to the quotient obtained by (A) dividing the Hammerhead Series III Preferred Share Liquidation Preference by the Issue Price, and then (B) by further dividing the resulting number of Common Shares established in (A) above by the number of Hammerhead Series III Preferred Shares issued and outstanding immediately prior the Company Amalgamation Effective Time.

• "Hammerhead Series III Preferred Share Liquidation Preference" are to $179,631,775.98.

• "Hammerhead Series III Preferred Shares" are to the Series III First Preferred Shares in the authorized share capital of Hammerhead.

• "Hammerhead Series IV Preferred Share" are to the Series IV First Preferred Share in the authorized share capital of Hammerhead.

• "Hammerhead Series VI Preferred Share" are to the Series VI First Preferred Share in the authorized share capital of Hammerhead.

• "Hammerhead Series VII Preferred Share Exchange Ratio" are to the quotient obtained by (A) dividing the Hammerhead Series VII Preferred Share Liquidation Preference by the Issue Price, and then (B) by further dividing the resulting number of Common Shares established in (A) above by the number of Hammerhead Series VII Preferred Shares issued and outstanding immediately prior the Company Amalgamation Effective Time.

• "Hammerhead Series VII Preferred Share Liquidation Preference" are to $130,603,883.57.

• "Hammerhead Series VII Preferred Shares" are to the Series VII Preferred Shares in the authorized share capital of Hammerhead.

• "Hammerhead Series VIII Preferred Shares" are to the Series VIII Preferred Shares in the authorized share capital of Hammerhead.

• "Hammerhead Series IX Preferred Shares" are to the Series IX First Preferred Shares in the authorized share capital of Hammerhead.

• "Hammerhead Share Award Plan" are to the amended and restated share award plan of Hammerhead effective August 31, 2016 as amended on November 7, 2019, December 31, 2020, March 30, 2022 and May 20, 2022.

• "Hammerhead Share Option Plan" are to the share option plan of Hammerhead effective March 21, 2011 as amended effective January 10, 2017, December 31, 2020, March 30, 2022 and May 30, 2022.

• "Hammerhead Shareholders" are to, collectively, the holders of Hammerhead Shares as of any determination time prior to the Closing.

• "Hammerhead Shares" are to, collectively, the Hammerhead Common Shares and Hammerhead Preferred Shares.

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• "Hammerhead Warrants" are to, collectively, the Hammerhead 2013 Warrants and the Hammerhead 2020 Warrants.

• "Hammerhead Warrant Settlement" are to the exchange of the Hammerhead Warrants for Hammerhead Class A Common Shares or cash, in either case, in accordance with the Plan of Arrangement.

• "Holder" are to a person who is a beneficial owner of the Company's Securities.

• "IFRS" are to the International Financial Reporting Standards issued by the International Accounting Standards Board, as incorporated in the CPA Canada Handbook at the relevant time.

• "IFRS 2" are to International Financial Reporting Standard 2 - Share-based Payment.

• "IFRS 3" are to International Financial Reporting Standard 3 - Business Combinations.

• "Investment Canada Act" are to the Investment Canada Act (Canada) and the regulations made thereunder.

• "IPO Letter Agreement" are to the letter agreement, dated August 10, 2021, by and among DCRD, DCRD management and DCRD Sponsor.

• "IRS" are to the U.S. Internal Revenue Service.

• "Issue Price" are to $10.00.

• "ITA" are to the Income Tax Act (Canada) and the regulations made thereunder as amended from time to time.

• "JOBS Act" are to the U.S. Jumpstart Our Business Startups Act of 2012.

• "Letter of Credit Facility" are to Hammerhead's letters of credit in both Canadian and U.S. dollars pursuant to a standby letter of credit facility agreement.

• "Liquidation" are to the voluntary or involuntary liquidation, dissolution or winding-up of the Company or any other distribution of its assets among the Shareholders for the purpose of winding up its affairs.

• "Listing Rules" are to the exchange listing rules of the Nasdaq.

• "Lock-Up Agreement" are to the lock-up agreement by which certain existing Hammerhead Shareholders, including the Riverstone Parties, became bound on the Closing Date pursuant to the Business Combination Agreement and the Plan of Arrangement.

• "Mcf" are to thousand cubic feet.

• "Mcf/d" are to thousand cubic feet per day.

• "MMBOE" are to million barrels of oil equivalent.

• "MMBtu" are to million British Thermal Units.

• "Nasdaq" are to the Nasdaq Capital Market.

• "Natural" are to conventional natural gas as defined in NI 51-101.

• "NewCo" are to Hammerhead Energy Inc., an Alberta corporation and wholly owned subsidiary of Hammerhead prior to the SPAC Amalgamation Effective Time, which amalgamated with DCRD to form the Company.

• "NI 51-101" are to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.

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• "Non-Canadian Holder" are to a Holder who, at all relevant times, for purposes of the ITA (i) is not, and is not deemed to be, resident in Canada, (ii) does not, and is not deemed to, use or hold the Company's Securities in, or in the course of carrying on, a business carried on in Canada, (iii) does not have a "permanent establishment" or "fixed base" in Canada, (iv) is not a person who carries on an insurance business in Canada and elsewhere, and (v) is not an "authorized foreign bank," as defined in the ITA.

• "Note" are to that certain promissory note evidencing the loan from DCRD Sponsor to DCRD for an aggregate amount of $300,000 to cover organizational expenses and expenses related to the DCRD IPO.

• "Options" are to options to acquire Common Shares.

• "Ordinary Resolution" are to a resolution by a simple majority of the DCRD Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at the DCRD Shareholders' Meeting.

• "PCAOB" are to the Public Company Accounting Oversight Board.

• "Peters" are to Peters & Co. Limited.

• "Plan of Arrangement" are to the Plan of Arrangement, as amended in accordance with the Business Combination Agreement and the Plan of Arrangement.

• "Proposed Amendments" are to all specific proposals to amend the ITA that have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof.

• "Private Placement Warrants" are to the Warrants into which the DCRD Private Placement Warrants were exchanged pursuant to the SPAC Amalgamation.

• "Public Warrant Holders" are to the holders of the Public Warrants.

• "Public Warrants" are to the Warrants into which the DCRD Public Warrants were exchanged pursuant to the SPAC Amalgamation.

• "RDSP" are to a registered disability savings plan.

• "Registration Statement" are to the registration statement on Form F-1 filed with the SEC by the Company, as it may be amended or supplemented from time to time, of which this prospectus forms a part.

• "RESP" are to registered education savings plan.

• "Riverstone" are to Riverstone Holdings LLC, a Delaware limited liability company, and its affiliates.

• "Riverstone Fund V" are to Riverstone Global Energy and Power Fund V (Cayman), L.P., a Cayman Islands exempted limited partnership.

• "Riverstone Fund V Entities" are to Riverstone Fund V and its direct or indirect wholly-owned subsidiaries.

• "Riverstone Investment" are to Riverstone Investment Group LLC, a Delaware limited liability company, and its affiliates.

• "Riverstone Parties" are to affiliates of Riverstone, which are shareholders of Hammerhead and affiliates of DCRD Sponsor.

• "RRIF" are to a registered retirement income fund.

• "RRSP" are to a registered retirement savings plan.

• "Sarbanes Oxley Act" are to the U.S. Sarbanes Oxley Act of 2002.

• "SEC" are to the U.S. Securities and Exchange Commission.

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• "Securities" are to the Common Shares and the Warrants, collectively.

• "Securities Act" are to the U.S. Securities Act of 1933, as amended.

• "Shareholders" are to the shareholders of the Company.

• "SPAC Amalgamation" are to DCRD's amalgamation with NewCo.

• "SPAC Amalgamation Effective Time" are to the effective time of the SPAC Amalgamation.

• "Sponsor Side Letter" are to that certain letter agreement dated as of September 25, 2022, by and among DCRD, DCRD Sponsor, Riverstone Fund V and certain Riverstone Fund V Entities.

• "Sponsor Support Agreement" are to that certain letter agreement dated as of September 25, 2022, by and among DCRD Sponsor, Riverstone Fund V, DCRD, NewCo and Hammerhead.

• "Taxable Capital Gain" are to one-half of any capital gain realized by a Canadian Holder in a taxation year that must be included in the Canadian Holder's income for the year.

• "TCP Conditions" are to the conditions stating that (i) (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder did not deal at arm's length, (c) partnerships in which the Non-Canadian Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, or (d) any combination of the persons and partnerships described in (a) through (c), owned 25% or more of the issued shares of any class or series of the capital stock of the Company, and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, "Canadian resource properties" (as defined in the ITA), "timber resource properties" (as defined in the ITA), and options in respect of, or interests in or for civil law rights in, any such properties whether or not the properties exist.

• "TFSA" are to a tax-free savings account.

• "Trust Account" are to the trust account that held proceeds (including interest not previously released to DCRD to fund regulatory withdrawals or to pay its taxes, and approximately $11,068,750 previously reserved for deferred underwriting fees, which were used to pay additional transaction expenses in connection with the Business Combination) from the DCRD IPO and the concurrent private placement of the DCRD Private Placement Warrants, established by DCRD for the benefit of the DCRD Public Shareholders maintained at J.P. Morgan Chase Bank, N.A.

• "TSX" are to the Toronto Stock Exchange.

• "U.S. Holder" are to a beneficial owner of the Company's Securities that, for U.S. federal income tax purposes, is an individual who is a citizen or resident of the United States; a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; an estate the income of which is subject to U.S. federal income tax regardless of its source; or a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (ii) that has made a valid election under applicable Treasury Regulations to be treated as a United States person.

• "Units" are to the units of the Company representing one Common Share and one-half of one Warrant.

• "Warrant Agreement" are to the Warrant Agreement, dated August 10, 2021, between DCRD and Continental Stock Transfer & Trust Company, as warrant agent, which was amended and restated in connection with the SPAC Amalgamation.

• "Warrant Holders" are to the holders of the Warrants.

• "Warrant" is to a warrant to acquire one Common Share.

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• "WTI" are to West Texas Intermediate.

• "2015 Credit Agreement" are to the credit facility agreement entered into on December 18, 2015 between Hammerhead and a syndicate of banks, which replaced Hammerhead's then-existing non-syndicated credit facility.

• "2017 Credit Agreement" are to the 2015 Credit Agreement as amended and restated on July 10, 2017.

• "2020 Credit Agreement" are to the 2017 Credit Agreement as amended and restated on June 19, 2020.

• "2021 Credit Agreement" are to the 2020 Credit Agreement as amended and restated on May 31, 2021.

• "2022 Credit Agreement" are to the 2021 Credit Agreement as amended and restated on June 9, 2022.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect the Company's current views with respect to, among other things, its capital resources, performance and results of operations. Likewise, all of the Company's statements regarding anticipated growth in operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words or phrases.

The forward-looking statements contained in this prospectus reflect the Company's current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. In particular, this prospectus contains forward-looking statements pertaining to the consolidated capitalization of the Company; the anticipated timing of ratification of the Company's incentive plans; the number of Common Shares to be issued pursuant to the Legacy Share Option Plan (as defined below) and the Legacy Share Award Plan (as defined below); the executive compensation of the Company's executive officers; expectations relating to resource potential and the potential to add reserves; expectations relating to pipeline and facility expansions and growth of production and the anticipated timing thereof; and expectations relating to the Company's carbon capture and storage program (the "CCS Program") and the timing of same.

The Company does not guarantee that the events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• general economic uncertainty;

• the effects of the COVID-19 pandemic;

• the volatility of currency exchange rates;

• the Company's ability to obtain and maintain financing arrangements on attractive terms;

• the Company's ability to manage growth;

• the Company's ability to maintain the listing of the Common Shares or the Warrants on the Nasdaq, the TSX or any other national exchange;

• risks related to the rollout of the Company's business and expansion strategy;

• the effects of competition on the Company's future business;

• potential disruption in the Company's employee retention as a result of the Business Combination;

• the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which the Company operates or will operate in the future;

• the Company's ability to reduce its greenhouse gas emissions with a target of net zero by 2030 and the anticipated timing thereof;

• the Company's ability to be free cash flow positive by 2024 and the anticipated timing and benefits therefrom;

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• potential litigation, governmental or regulatory proceedings, investigations or inquiries involving the Company, including in relation to the Business Combination;

• the effects of actions by, or disputes among OPEC+ members with respect to production levels or other matters related to the price of oil, market conditions, factors affecting the level of activity in the oil and gas industry, and supply and demand of jackup rigs;

• factors affecting the duration of contracts and the actual amount of downtime;

• factors that reduce applicable dayrates, operating hazards and delays;

• international, national or local economic, social or political conditions that could adversely affect the Company and its business;

• the effectiveness of the Company's internal controls and its corporate policies and procedures;

• changes in personnel and availability of qualified personnel;

• environmental uncertainties and risks related to adverse weather conditions and natural disasters;

• potential write-downs, write-offs, restructuring and impairment or other charges required to be taken by the Company subsequent to the Business Combination;

• the limited experience of certain members of the Company's management team in operating a public company in the United States;

• the volatility of the market price and liquidity of the Common Shares and the Warrants;

• risks relating to any unforeseen liabilities of the Company;

• the tax treatment of the Common Shares in the United States and Canada;

• declines in oil or natural gas prices;

• inaccuracies of reserve estimates or assumptions underlying them;

• revisions to reserve estimates as a result of changes in commodity prices;

• international, federal, provincial and local initiatives relating to the regulation of hydraulic fracturing;

• failure of assets to yield oil or gas in commercially viable quantities;

• the ability to expand pipeline and facility capacity and grow production;

• failure of the CCS Program;

• the costs associated with the CCS Program;

• uninsured or underinsured losses resulting from oil and gas operations;

• inability to access oil and gas markets due to market conditions or operational impediments;

• the impact and costs of compliance with laws and regulations governing oil and gas operations;

• the ability to replace oil and natural gas reserves;

• the approval of construction and sequestration activity from the Alberta Department of Energy;

• the results of the testing of an acid injection well;

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• failure to obtain lender consent, when necessary;

• geological, technical, drilling and processing problems and other difficulties in producing reserves;

• failure to realize anticipated benefits of acquisitions and the development of reserves;

• failure to obtain industry partner and other third-party consents and approvals, when required; and

• the need to obtain required approvals from regulatory authorities.

Additionally, statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. Forward-looking statements are inherently uncertain. Estimates such as expected revenue, production, operating expenses, transportation expenses, EBITDA, general and administrative expenses, cash interest and financing expense, cash taxes, capital expenditures, free cash flow, net debt, reserves and other measures are preliminary in nature. There can be no assurance that the forward-looking statements will prove to be accurate and reliance should not be placed on these estimates in making your investment decision with respect to our Securities.

The forward-looking statements contained herein are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. For a further discussion of the risks and other factors that could cause the Company's future results, performance or transactions to differ significantly from those expressed in any forward-looking statements, please see the section entitled "Risk Factors." There may be additional risks that the Company does not presently know or that the Company currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions made in making these forward-looking statements prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. While such forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this prospectus, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company.

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this prospectus, including the financial statements and notes to the financial statements included herein before making a decision to invest in our Securities. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on the business, cash flows, financial condition and results of operations of the Company. This could cause the trading price of the Common Shares or the Warrants to decline, perhaps significantly, and you therefore may lose all or part of your investment. You should carefully consider the following risk factors in conjunction with the other information included in this prospectus, including matters addressed in the section entitled "Cautionary Note Regarding Forward-Looking Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," the financial statements of Hammerhead, the financial statements of DCRD and notes to the financial statements included herein. The risks discussed below are not exhaustive and are based on certain assumptions made by the Company which later may prove to be incorrect or incomplete. Investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of the Company. The Company may face additional risks and uncertainties that are not presently known to it, or that are currently deemed immaterial, which may also impair its business or financial condition.

Risks Related to the Company's Business and the E&P Industry

The Company's future performance may be affected by the financial, operational, environmental and safety risks associated with the exploration, development and production of oil and natural gas.

Oil and natural gas operations involve many risks. The long-term commercial success of the Company depends on its ability to find, acquire, develop and commercially produce oil and natural gas reserves. Without the continual addition of new reserves, the Company's existing reserves, and the production from them, will decline over time as the Company produces from such reserves. A future increase in the Company's reserves will depend on both the ability of the Company to explore and develop its existing properties and its ability to select and acquire suitable producing properties or prospects. The Company may not be able to continue to find satisfactory properties to acquire or participate in. Moreover, management of the Company may determine that current markets, terms of acquisitions, participation or pricing conditions make potential acquisitions or participation uneconomic. The Company may not discover or acquire further commercial quantities of oil and natural gas.

Future oil and natural gas exploration may involve unprofitable efforts from dry wells or from wells that are productive but do not produce sufficient petroleum substances to return a profit after drilling, completing (including hydraulic fracturing), operating and other costs. Completion of a well does not ensure a profit on the investment or recovery of drilling, completion and operating costs.

Drilling hazards, environmental damage and various field operating conditions could greatly increase the cost of operations and adversely affect the production from successful wells. Field operating conditions include, but are not limited to, delays in obtaining governmental approvals or consents, shut-ins of wells resulting from extreme weather conditions, insufficient storage or transportation capacity or geological and mechanical conditions. It is not possible to eliminate production delays and declines from normal field operating conditions, which can negatively affect revenue and cash flow levels to varying degrees.

Oil and natural gas exploration, development and production operations are subject to all the risks and hazards typically associated with such operations, including fire, explosion, blowouts, cratering, sour gas releases, spills and other environmental hazards. These typical risks and hazards could result in substantial damage to oil and natural gas wells, production facilities, other property and the environment and cause personal injury or threaten wildlife. An unintentional leak of sour gas could result in personal injury, loss of life or damage to property and may necessitate an evacuation of populated areas, all of which could result in liability to the Company.

Oil and natural gas production operations are also subject to geological and seismic risks, including encountering unexpected formations or pressures, premature decline of reservoirs and the invasion of water into producing formations. Losses resulting from the occurrence of any of these risks may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

The prices of crude oil, NGLs and natural gas are volatile, outside of the Company's control and affect its revenues, profitability, cash flows and future rate of growth.

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The Company's revenues, profitability, cash flows and future rate of growth are highly dependent on commodity prices. Commodity prices may fluctuate widely in response to relatively minor changes in the supply of and demand for crude oil, NGLs and natural gas, market uncertainty and a variety of additional factors that are beyond the Company's control, such as:

• domestic and global supply of and demand for crude oil, NGLs and natural gas, as impacted by economic factors that affect gross domestic product growth rates of countries around the world, including impacts from international trade, pandemics and related concerns;

• market expectations with respect to future supply of crude oil, NGLs and natural gas demand and price changes;

• global crude oil, NGLs and natural gas inventory levels;

• volatility and trading patterns in the commodity-futures markets;

• the proximity, capacity, cost and availability of pipelines and other transportation facilities;

• the capacity of refiners to utilize available supplies of crude oil and condensate;

• weather conditions affecting supply and demand;

• overall domestic and global political and economic conditions;

• actions of OPEC, its members and other state-controlled oil companies relating to oil price and production controls;

• fluctuations in the value of the U.S. dollar;

• the price and quantity of crude oil, NGLs and LNG imports to and exports from the U.S. and other countries;

• the development of new hydrocarbon exploration, production and transportation methods of technological advancements in existing methods, including hydraulic fracturing;

• capital investments by oil and gas companies relating to the exploration, development and production of hydrocarbons;

• social attitudes or policies affecting energy consumption and energy supply;

• domestic and foreign governmental regulations, including environmental regulations, climate change regulations and applicable tax regulations;

• shareholder activism or activities by non-governmental organizations to limit certain sources of capital for the energy sector or restrict the exploration, development and production of crude oil and natural gas; and

• the effect of energy conservation efforts and the price, availability and acceptance of alternative energies, including renewable energy.

Commodity prices have historically been, and continue to be, extremely volatile. The Company expects this volatility to continue. The Company makes price assumptions that are used for planning purposes, and a significant portion of its cash outlays, including capital and transportation commitments, are largely fixed in nature. Accordingly, if commodity prices are below the expectations on which these commitments were based, the Company's financial results are likely to be adversely affected because these cash outlays are not variable in the short term and cannot be quickly reduced to respond to unanticipated decreases in commodity prices. The Company's risk management arrangements will not fully mitigate the effects of price volatility.

Significant or extended price declines could also materially and adversely affect the amount of crude oil, NGLs and natural gas that the Company can economically produce, require the Company to make significant downward adjustments to its reserve estimates or result in the deferral or cancellation of the Company's growth projects. A reduction in production could also result in a shortfall in expected cash flows and require the Company to reduce capital spending or borrow funds or access the capital markets to cover any such shortfall. Any of these factors could negatively affect the Company's ability to replace its production and its future rate of growth.

The Company's financial condition is substantially dependent on, and highly sensitive to, the prevailing prices of crude oil and natural gas. Low prices for crude oil and natural gas produced by the Company could have a material adverse effect on the Company's operations, financial condition and the value and amount of the Company's reserves.

Prices for crude oil and natural gas fluctuate in response to changes in the supply of, and demand for, crude oil and natural gas, market uncertainty and a variety of additional factors beyond the Company's control. Crude oil prices are primarily determined by international supply and demand. Factors which affect crude oil prices include the actions of OPEC, the condition of the Canadian, United States, European and Asian economies, government regulation, political stability in the Middle East and elsewhere, the supply of crude oil in North America and internationally, the ability to secure adequate transportation for products, the availability of alternate fuel sources and weather conditions. Natural gas prices realized by the Company are affected primarily in North America by supply and demand, weather conditions, industrial demand, prices of alternate sources of energy and developments related to the market for liquefied natural gas. All of these factors are beyond the Company's control and can result in a high degree of price volatility. Fluctuations in currency exchange rates further compound this volatility when commodity prices, which are generally set in U.S. dollars, are stated in Canadian dollars.

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The Company's financial performance also depends on revenues from the sale of commodities which differ in quality and location from underlying commodity prices quoted on financial exchanges. Of particular importance are the price differentials between the Company's light/medium oil and heavy oil (in particular the light/heavy differential) and quoted market prices. Not only are these discounts influenced by regional supply and demand factors, they are also influenced by other factors such as transportation costs, capacity and interruptions, refining demand, the availability and cost of diluents used to blend and transport product and the quality of the oil produced, all of which are beyond the Company's control. In addition, there is not sufficient pipeline capacity for Canadian crude oil to access the American refinery complex or tidewater to access world markets and the availability of additional transport capacity via rail is more expensive and variable; therefore, the price for Canadian crude oil is very sensitive to pipeline and refinery outages, which contributes to this volatility.

Decreases to or prolonged periods of low commodity prices, particularly for oil, may negatively impact the Company's ability to meet guidance targets, maintain the Company's business and meet all of the Company's financial obligations as they come due. It could also result in the shut-in of currently producing wells without an equivalent decrease in expenses due to fixed costs, a delay or cancellation of existing or future drilling, development or construction programs, un-utilized long-term transportation commitments and a reduction in the value and amount of the Company's reserves.

The Company conducts assessments of the carrying value of the Company's assets in accordance with IFRS. If crude oil and natural gas forecast prices decline, the carrying value of the Company's assets could be subject to downward revisions and the Company's net earnings could be adversely affected.

Adverse general economic, business and industry conditions could have a material adverse effect on the Company's results of operations and cash flow.

The demand for energy, including crude oil, NGLs and natural gas, is generally linked to broad-based economic activities. If there is a slowdown in economic growth, an economic downturn or recession or other adverse economic or political development in the U.S., Europe, or Asia, there could be a significant adverse effect on global financial markets and commodity prices. In addition, hostilities in the Middle East and Ukraine and the occurrence or threat of terrorist attacks in the U.S. or other countries could adversely affect the global economy. Global or national health concerns, including the outbreak of pandemic or contagious diseases, such as COVID-19 (coronavirus), may adversely affect the Company by (i) reducing global economic activity thereby resulting in lower demand for crude oil, NGL and natural gas, (ii) impairing its supply chain, for example, by limiting the manufacturing of materials or the supply of goods and services used in the Company's operations, and (iii) affecting the health of its workforce, rendering employees unable to work or travel. These and other factors that affect the demand for crude oil, NGLs and natural gas, and the Company's business and industry, could ultimately have an adverse impact on the Company's results of operations and cash flows.

Various factors may adversely impact the marketability of oil and natural gas, affecting net production revenue, production volumes and development and exploration activities.

The Company's ability to market its oil and natural gas may depend upon its ability to acquire capacity in pipelines that deliver oil, NGLs and natural gas to commercial markets or contract for the delivery of oil and NGLs by rail. Numerous factors beyond the Company's control do, and will continue to, affect the marketability and price of oil and natural gas acquired, produced, or discovered by the Company, including:

• deliverability uncertainties related to the distance the Company's reserves are from pipelines, railway lines and processing and storage facilities;

• operational problems affecting pipelines, railway lines and processing and storage facilities; and

• government regulation relating to prices, taxes, royalties, land tenure, allowable production and the export of oil and natural gas.

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Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors beyond the control of the Company. These factors include economic and political conditions in the United States, Canada, Europe, China and emerging markets, the actions of OPEC, governmental regulation, political stability in the Middle East, Northern Africa and elsewhere, the foreign supply and demand of oil and natural gas, risks of supply disruption, the price of foreign imports and the availability of alternative fuel sources. Prices for oil and natural gas are also subject to the availability of foreign markets and the Company's ability to access such markets. Oil prices are expected to remain volatile as a result of global excess supply due to the increased growth of shale oil production in the United States, the decline in global demand for exported crude oil commodities, OPEC's recent decisions pertaining to the oil production of OPEC member countries, and non-OPEC member countries' decisions on production levels, among other factors. A material decline in prices could result in a reduction of the Company's net production revenue. The economics of producing from some wells may change because of lower prices, which could result in reduced production of oil or natural gas and a reduction in the volumes and the value and amount of the Company's reserves. The Company might also elect not to produce from certain wells at lower prices.

All these factors could result in a material decrease in the Company's net production revenue and a reduction in its oil and natural gas production, development and exploration activities. Any substantial and extended decline in the price of oil and natural gas would have an adverse effect on the Company's carrying value of its reserves, borrowing capacity, revenues, profitability and cash flows from operations and may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

Oil and natural gas prices may be volatile for a variety of reasons including market uncertainties over the supply and demand of these commodities due to the current state of the world economies, the ongoing COVID-19 pandemic, OPEC actions, political uncertainties, sanctions imposed on certain oil producing nations by other countries and conflicts in Ukraine and the Middle East. Prices for oil and natural gas are also subject to the availability of foreign markets and the Company's ability to access such markets. A material decline in prices could result in a reduction of the Company's net production revenue. The economics of producing from some wells may change because of lower prices, which could result in reduced production of oil or natural gas and a reduction in the volumes and the value of the Company's reserves. The Company might also elect not to produce from certain wells at lower prices. Any substantial and extended decline in the price of oil and natural gas would have an adverse effect on the Company's carrying value of its reserves, borrowing capacity, revenues, profitability and cash flows from operations and may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

Volatile oil and natural gas prices make it difficult to estimate the value of producing properties for acquisitions and often cause disruption in the market for oil and natural gas producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for, and project the return on, acquisitions and development and exploitation projects.

The anticipated benefits of acquisitions may not be achieved and the Company may dispose of non-core assets for less than their carrying value on the financial statements as a result of weak market conditions.

The Company considers acquisitions and dispositions of businesses and assets in the ordinary course of business. Achieving the benefits of acquisitions depends on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner and the Company's ability to realize the anticipated growth opportunities and synergies from combining the acquired businesses and operations with those of the Company. The integration of acquired businesses and assets may require substantial management effort, time and resources, diverting management's focus from other strategic opportunities and operational matters. Management continually assesses the value and contribution of services provided by third parties and the resources required to provide such services. In this regard, non-core assets may be periodically disposed of so the Company can focus its efforts and resources more efficiently. Depending on the market conditions for such non-core assets, certain non-core assets of the Company may realize less on disposition than their carrying value on the financial statements of the Company.

The Company's business may be adversely affected by political and social events and decisions made in Canada.

The Company's results can be adversely impacted by political, legal, or regulatory developments in Canada that affect local operations and local and international markets. Changes in government, government policy or regulations, changes in law or interpretation of settled law, third-party opposition to industrial activity generally or projects specifically, and duration of regulatory reviews could impact the Company's existing operations and planned projects. This includes actions by regulators or political actors to delay or deny necessary licenses and permits for the Company's activities or restrict the operation of third-party infrastructure that the Company relies on. Additionally, changes in environmental regulations, assessment processes or other laws, and increasing and expanding stakeholder consultation (including Indigenous stakeholders), may increase the cost of compliance or reduce or delay available business opportunities and adversely impact the Company's results.

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Other government and political factors that could adversely affect the Company's financial results include increases in taxes or government royalty rates (including retroactive claims) and changes in trade policies and agreements. Further, the adoption of regulations mandating efficiency standards, and the use of alternative fuels or uncompetitive fuel components could affect the Company's operations. Many governments are providing tax advantages and other subsidies to support alternative energy sources or are mandating the use of specific fuels or technologies. Governments and others are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources, and the success of these initiatives may decrease demand for the Company's products.

A change in federal, provincial or municipal governments in Canada may have an impact on the directions taken by such governments on matters that may impact the oil and natural gas industry including the balance between economic development and environmental policy. The oil and natural gas industry has become an increasingly politically polarizing topic in Canada, which has resulted in a rise in civil disobedience surrounding oil and natural gas development-particularly with respect to infrastructure projects. Protests, blockades and demonstrations have the potential to delay and disrupt the Company's activities.

Global political events may adversely affect commodity prices which in turn affect the Company's cash flow.

Political events throughout the world that cause disruptions in the supply of oil continuously affect the marketability and price of oil and natural gas acquired or discovered by the Company. Conflicts, or conversely peaceful developments, arising outside of Canada, including changes in political regimes or the parties in power, have a significant impact on the price of oil and natural gas. Any particular event could result in a material decline in prices and result in a reduction of the Company's net production revenue.

The Company's properties may be subject to terrorist attack or actions by non-governmental agencies.

In addition to the risks outlined above related to geopolitical developments, the Company's oil and natural gas properties, wells and facilities could be subject to a terrorist attack, physical sabotage or public opposition. Such public opposition could expose the Company to the risk of higher costs, delays or even project cancellations due to increased pressure on governments and regulators by special interest groups including Indigenous groups, landowners, environmental interest groups (including those opposed to oil and natural gas production operations) and other non-governmental organizations, blockades, legal or regulatory actions or challenges, increased regulatory oversight, reduced support from the federal, provincial or municipal governments, delays in, challenges to, or the revocation of regulatory approvals, permits and/or licenses, and direct legal challenges, including the possibility of climate-related litigation. The Company may not be able to satisfy the concerns of the special interest groups and non-governmental organizations and attempting to address such concerns may require the Company to incur significant and unanticipated capital and operating expenditures. If any of the Company's properties, wells or facilities are the subject of terrorist attack or sabotage, it may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. The Company does not have insurance to protect against such risks.

The COVID-19 pandemic continues to cause disruptions in economic activity in Canada and internationally and impact demand for oil, natural gas liquids and natural gas.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, prompting many countries around the world to close international borders and order the closure of institutions and businesses deemed non-essential. This resulted in a swift and significant reduction in economic activity in Canada and internationally along with a sudden drop in demand for oil, liquids and natural gas. Since 2020, oil prices have largely recovered from their historic lows, but price support from future demand remains uncertain as countries experience varying degrees of virus outbreak and newly emerging virus variants following efforts to re-open local economies and international borders. Low commodity prices resulting from reduced demand associated with the impact of COVID-19 has had, and may continue to have, a negative impact on the Company's operational results and financial condition. Low prices for oil, liquids and natural gas will reduce the Company's funds from operations, and impact the Company's level of capital investment and may result in the reduction of production at certain producing properties.

The effects of COVID-19 may also include disruptions to production operations, access to materials and services, increased employee absenteeism from illness, and temporary closures of the Company's facilities.

The extent to which the Company's operational and financial results continue to be affected by COVID-19 will depend on various factors and consequences beyond its control such as the duration and scope of the pandemic; additional actions taken by business and government in response to the pandemic, and the speed and effectiveness of responses to combat the virus. Additionally, COVID-19 and its effect on local and global economic conditions stemming from the pandemic could also aggravate the other risk factors identified herein, the extent of which is not yet known.

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The successful operation of a portion of the Company's properties is dependent on third parties.

Other companies operate some of the assets in which the Company has an interest. The Company has limited ability to exercise influence over the operation of those assets or their associated costs, which could adversely affect the Company's financial performance. The Company's return on assets operated by others depends upon a number of factors that may be outside of the Company's control, including the timing and amount of capital expenditures, the operator's expertise and financial resources, the approval of other participants, the selection of technology and risk management practices.

In addition, due to volatile commodity prices, many companies, including companies that may operate some of the assets in which the Company has an interest, may be in financial difficulty, which could impact their ability to fund and pursue capital expenditures, carry out their operations in a safe and effective manner and satisfy regulatory requirements with respect to abandonment and reclamation obligations. If companies that operate some of the assets in which the Company has an interest fail to satisfy regulatory requirements with respect to abandonment and reclamation obligations, the Company may be required to satisfy such obligations and to seek reimbursement from such companies. To the extent that any of such companies go bankrupt, become insolvent or make a proposal or institute any proceedings relating to bankruptcy or insolvency, it could result in such assets being shut-in, the Company potentially becoming subject to additional liabilities relating to such assets and the Company having difficulty collecting revenue due from such operators or recovering amounts owing to the Company from such operators for their share of abandonment and reclamation obligations. Any of these factors could have a material adverse effect on the Company's financial and operational results.

The Company relies on surface and groundwater licenses, which, if rescinded or the conditions of which are amended, could disrupt its business and have a material adverse effect on its business, financial condition, results of operations and prospects.

The Company relies on access to both surface and groundwater, which is obtained under government licenses, to provide the substantial quantities of water required for certain of its operations. The licenses to withdraw water may be rescinded and additional conditions may be added to these licenses. Further, the Company may have to pay increased fees for the use of water in the future and any such fees may be uneconomic. Finally, new projects or the expansion of existing projects may be dependent on securing licenses for additional water withdrawal, and these licenses may be granted on terms not favorable to the Company, or at all, and such additional water may not be available to divert under such licenses. Any prolonged droughts in the Grande Prairie area could result in the Company's surface and groundwater licenses being subject to additional conditions or recission. The Company's inability to secure surface and groundwater licenses in the future and any amendment to or recissions of, its current licenses may disrupt its business and have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

The Company may have to pay certain costs associated with abandonment and reclamation.

The Company will need to comply with the terms and conditions of environmental and regulatory approvals and all legislation regarding the abandonment of its projects and reclamation of the project lands at the end of their economic life, which may result in substantial abandonment and reclamation costs. Any failure to comply with the terms and conditions of the Company's approvals and legislation may result in the imposition of fines and penalties, which may be material. Generally, abandonment and reclamation costs are substantial and, while the Company accrues a reserve in its financial statements for such costs in accordance with IFRS, such accruals may be insufficient.

It is not possible at this time to estimate abandonment and reclamation costs reliably since they will, in part, depend on future regulatory requirements. In addition, in the future, the Company may determine it prudent or be required by applicable laws, regulations or regulatory approvals to establish and fund one or more reclamation funds to provide for payment of future abandonment and reclamation costs. If the Company establishes a reclamation fund, its liquidity and cash flow may be adversely affected.

Alberta has developed liability management programs designed to prevent taxpayers from incurring costs associated with suspension, abandonment, remediation and reclamation of wells, facilities and pipelines if a licensee or permit holder is unable to satisfy its regulatory obligations. The implementation of or changes to the requirements of liability management programs may result in significant increases to the security that must be posted by licensees, increased and more frequent financial disclosure obligations or may result in the denial of license or permit transfers, which could impact the availability of capital to be spent by such licensees which could in turn materially adversely affect the Company's business and financial condition. In addition, these liability management programs may prevent or interfere with a licensee's ability to acquire or dispose of assets, as both the vendor and the purchaser of oil and natural gas assets must be in compliance with the liability management programs (both before and after the transfer of the assets) for the applicable regulatory agency to allow for the transfer of such assets.

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Due to the geographical concentration of the Company's assets, the Company may be disproportionately impacted by delays or interruptions in the regions in which it operates.

The Company's properties and production are focused in the Gold Creek, Karr and Simonette areas of Alberta. As a result, the Company may be disproportionately exposed to the impact of delays or interruptions of production caused by transportation capacity constraints, curtailment of production, availability of equipment, facilities, personnel or services, significant governmental regulation, natural disasters, adverse weather conditions, plant closures for scheduled maintenance or interruption of transportation of oil or natural gas produced from the wells in these areas. In addition, the effect of fluctuations on supply and demand may become more pronounced within the specific geographic oil and gas producing areas in which the Company's properties are located, which may cause these conditions to occur with greater frequency or magnify the effect of these conditions on the Company. Due to the concentrated nature of the Company's portfolio of properties, a number of the Company's properties could experience one or more of the same conditions at the same time, resulting in a relatively greater impact on the Company's results of operations than they might have on other companies that have a more diversified portfolio of properties. Such delays or interruptions could have a material adverse effect on the operating results and financial condition of the Company.

The success of the Company's operations may be negatively impacted by factors outside of its control resulting in operational delays and cost overruns.

The Company manages a variety of small and large projects in the conduct of its business. Project interruptions may delay expected revenues from operations. Significant project cost overruns could make a project uneconomic. The Company's ability to execute projects and to market oil and natural gas depends upon numerous factors beyond the Company's control, including:

• availability of processing capacity;

• availability and proximity of pipeline capacity;

• availability of storage capacity;

• availability of, and the ability to acquire, water supplies needed for drilling, hydraulic fracturing and waterfloods or the Company's ability to dispose of water used or removed from strata at a reasonable cost and in accordance with applicable environmental regulations;

• effects of inclement and severe weather events, including fire, drought and flooding;

• availability of drilling and related equipment;

• unexpected cost increases;

• accidental events;

• currency fluctuations;

• regulatory changes;

• availability and productivity of skilled labor; and

• regulation of the oil and natural gas industry by various levels of government and governmental agencies.

Because of these factors, the Company could be unable to execute projects on time, on budget, or at all and may be unable to market the oil and natural gas that it produces effectively.

Lack of capacity and/or regulatory constraints on gathering and processing facilities, pipeline systems and railway lines may have a negative impact on the Company's ability to produce and sell its oil and natural gas.

The Company delivers its products through gathering and processing facilities, pipeline systems and, may in certain circumstances, deliver by truck and rail. The amount of oil and natural gas that the Company can produce and sell is subject to the accessibility, availability, proximity and capacity of these gathering and processing facilities, pipeline systems, trucking and railway lines. The lack of availability of capacity in any of the gathering and processing facilities, pipeline systems and railway lines could result in the Company's inability to realize the full economic potential of its production or in a reduction of the price offered for the Company's production. The lack of firm pipeline capacity continues to affect the oil and natural gas industry and limit the ability to transport produced oil and gas to market. In addition, the pro-rationing of capacity on inter-provincial pipeline systems continues to affect the ability to export oil and natural gas. Unexpected shut downs or curtailment of capacity of pipelines for maintenance or integrity work or because of actions taken by regulators could also affect the Company's production, operations and financial results.

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A portion of the Company's production may, from time to time, be processed through facilities owned by third parties and over which the Company does not have control. From time to time, these facilities may discontinue or decrease operations either as a result of normal servicing requirements or as a result of unexpected events. A discontinuation or decrease of operations could have a material adverse effect on the Company's ability to process its production and deliver the same to market. Midstream and pipeline companies may take actions to maximize their return on investment, which may in turn adversely affect producers and shippers, especially when combined with a regulatory framework that may not always align with the interests of particular shippers.

The Company competes with other oil and natural gas companies, some of which have greater financial and operational resources.

The petroleum industry is competitive in all of its phases. The Company competes with numerous other entities in the exploration, development, production and marketing of oil and natural gas. The Company's competitors include oil and natural gas companies that may have substantially greater financial resources, staff and facilities than those of the Company. Some of these companies not only explore for, develop and produce oil and natural gas, but also carry on refining operations and market oil and natural gas on an international basis. As a result of these complementary activities, some of these competitors may have greater and more diverse competitive resources to draw on than the Company. The Company's ability to increase its reserves in the future will depend not only on its ability to explore and develop its present properties, but also on its ability to select and acquire other suitable producing properties or prospects for exploratory drilling. Competitive factors in the distribution and marketing of oil and natural gas include price, process, and reliability of delivery and storage.

The Company also faces competition from companies that supply alternative resources of energy, such as wind or solar power. Other factors that could affect competition in the marketplace include additional discoveries of hydrocarbon reserves by the Company's competitors, changes in the cost of production, and political and economic factors and other factors outside of the Company's control.

The petroleum industry is characterized by rapid and significant technological advancements and introductions of new products and services utilizing new technologies that may increase the viability of reserves or reduce production costs. Other companies may have greater financial, technical and personnel resources that allow them to implement and benefit from such technological advantages. The Company may not be able to respond to such competitive pressures and implement such technologies on a timely basis, or at an acceptable cost. If the Company does implement such technologies, the Company may not do so successfully. One or more of the technologies currently utilized by the Company or implemented in the future may become obsolete. If the Company is unable to utilize the most advanced commercially available technology, or is unsuccessful in implementing certain technologies, its business, financial condition and results of operations could also be adversely affected in a material way.

Changes to the demand for oil and natural gas products and the rise of petroleum alternatives may negatively affect the Company's financial condition, results of operations and cash flow.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and renewable energy generation systems could reduce the demand for oil, natural gas and liquid hydrocarbons. Recently, certain jurisdictions have implemented policies or incentives to decrease the use of hydrocarbons and encourage the use of renewable fuel alternatives, which may lessen the demand for petroleum products and put downward pressure on commodity prices. Advancements in energy efficient products have a similar effect on the demand for oil and natural gas products. The Company cannot predict the impact of changing demand for oil and natural gas products, and any major changes may have a material adverse effect on the Company's business, financial condition, results of operations and cash flow by decreasing the Company's profitability, increasing its costs, limiting its access to capital and decreasing the value of its assets.

Modification to current, or implementation of additional, regulations may reduce the demand for oil and natural gas and/or increase the Company's costs and/or delay planned operations.

The oil and gas industry in Canada is a regulated industry. Various levels of governments impose extensive controls and regulations on oil and natural gas operations (including exploration, development, production, pricing, marketing and transportation). Governments may regulate or intervene with respect to exploration and production activities, prices, taxes, royalties and the exportation of oil and natural gas. Amendments to these controls and regulations may occur from time to time in response to economic or political conditions. The implementation of new regulations or the modification of existing regulations affecting the oil and natural gas industry could reduce demand for oil and natural gas and increase the Company's costs, either of which may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. Further, the ongoing third party challenges to regulatory decisions or orders has reduced the efficiency of the regulatory regime, as the implementation of the decisions and orders has been delayed resulting in uncertainty and interruption to business of the oil and natural gas industry.

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In order to conduct oil and natural gas operations, the Company will require regulatory permits, licenses, registrations, approvals and authorizations from various governmental authorities at the municipal, provincial and federal level. The Company may not be able to obtain all of the permits, licenses, registrations, approvals and authorizations that may be required to conduct operations that it may wish to undertake. In addition, certain federal legislation such as the Competition Act and the Investment Canada Act could negatively affect the Company's business, financial condition and the market value of its securities or its assets, particularly when undertaking, or attempting to undertake, acquisition or disposition activity.

Changes to royalty regimes may negatively impact the Company's cash flows.

The governments in Canada may adopt new royalty regimes, or modify the existing royalty regimes, which may have an impact on the economics of the Company's projects. An increase in royalties would reduce the Company's earnings and could make future capital investments, or the Company's operations, less economic.

Implementation of new regulations on hydraulic fracturing may lead to operational delays, increased costs and/or decreased production volumes, adversely affecting the Company's financial position. The Company's operations are dependent upon the availability of water and its ability to dispose of produced water from drilling and production activities.

Hydraulic fracturing involves the injection of water, sand, and small amounts of additives under high pressure into tight rock formations that were previously unproductive to stimulate the production of oil, liquids and natural gas. Concerns about seismic activity, including earthquakes, caused by hydraulic fracturing has resulted in regulatory authorities implementing additional protocols for areas that are prone to seismic activity or completely banning hydraulic fracturing in other areas. Any new laws, regulations, or permitting requirements regarding hydraulic fracturing could lead to operational delays, increased operating costs, third-party or governmental claims, and could increase the Company's costs of compliance and doing business, as well as delay the development of oil, liquids and natural gas resources from shale formations, which are not commercial without the use of hydraulic fracturing. Restrictions or bans on hydraulic fracturing in the areas where the Company operates could result in the Company being unable to economically recover its oil and gas reserves and reserves, which would result in a significant decrease in the value of the Company's assets.

Water is an essential component of the Company's drilling and hydraulic fracturing processes. Limitations or restrictions on the Company's ability to secure sufficient amounts of water (including limitations resulting from natural causes such as drought), could materially and adversely impact its operations. Severe drought conditions can result in local water authorities taking steps to restrict the use of water in their jurisdiction for drilling and hydraulic fracturing in order to protect the local water supply. If the Company is unable to obtain water to use in its operations from local sources it may need to be obtained from new sources and transported to drilling sites, resulting in increased costs, which could have a material adverse effect on its financial condition, results of operations, and cash flows.

In addition, the Company must dispose of the fluids produced from oil, liquids and natural gas production operations, including produced water, which it does directly or through the use of third-party vendors. The legal requirements related to the disposal of produced water into a non-producing geologic formation by means of underground injection wells are subject to change based on concerns of the public or governmental authorities regarding such disposal activities.

Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated laws and regulations regarding waste disposal. These developments could result in additional regulation and restrictions on the use of injection wells by the Company or by commercial disposal well vendors that the Company may use from time to time to dispose of produced water. Increased regulation and attention given to induced seismicity could also lead to greater opposition, including litigation to limit or prohibit oil and natural gas activities utilizing injection wells for produced water disposal. Any one or more of these developments may result in the Company or its vendors having to limit disposal well volumes, disposal rates and pressures or locations, or require the Company or its vendors to shut down or curtail the injection of produced water into disposal wells, which events could have a material adverse effect on the Company's business, financial condition, and results of operations.

Compliance with environmental regulations requires the dedication of a portion of the Company's financial and operational resources.

All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, provincial and local laws and regulations. Environmental legislation provides for, among other things, the initiation and approval of new oil and natural gas projects restrictions and prohibitions on the spill, release or emission of various substances produced in association with oil and natural gas industry operations, and the generation, storage, transportation, and disposal of hazardous substances and wastes. In addition, such legislation sets out the requirements with respect to oilfield waste handling and storage, habitat protection and the satisfactory operation, maintenance, abandonment and reclamation of well and facility sites. New environmental legislation at the federal and provincial levels may increase uncertainty among oil and natural gas industry participants as the new laws are implemented, and the effects of the new rules and standards are felt in the oil and natural gas industry.

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Compliance with environmental legislation can require significant expenditures and a breach of applicable environmental legislation may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require the Company to incur costs to remedy such discharge. Environmental compliance requirements may result in a curtailment of production or a material increase in the costs of production, development or exploration activities or otherwise have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

Restrictions on the availability of and access to drilling equipment may impede the Company's exploration and development activities.

Oil and natural gas exploration and development activities are dependent on the availability of drilling and related equipment (typically leased from third parties) as well as skilled personnel trained to use such equipment in the areas where such activities will be conducted. Demand for such limited equipment, or access restrictions, may affect the availability of such equipment to the Company and may delay exploration and development activities.

Climate change concerns could result in increased operating costs and reduced demand for the Company's products and securities, while the potential physical effects of climate change could disrupt the Company's production and cause it to incur significant costs in preparing for or responding to those effects.

Global climate issues continue to attract public and scientific attention. Numerous reports, including reports from the Intergovernmental Panel on Climate Change, have engendered concern about the impacts of human activity, especially hydrocarbon combustion, on global climate issues. In turn, increasing public, government, and investor attention is being paid to global climate issues and to emissions of greenhouse gases ("GHG"), including emissions of carbon dioxide and methane from the production and use of oil, liquids and natural gas. The majority of countries across the globe, including Canada, have agreed to reduce their carbon emissions in accordance with the Paris Agreement. In addition, during the course of the 2021 United Nations Climate Change Conference in Glasgow, Scotland, Canada's Prime Minister Justin Trudeau made several pledges aimed at reducing Canada's GHG emissions and environmental impact. As discussed below, the Company faces both transition risks and physical risks associated with climate change and climate change policy and regulations.

Foreign and domestic governments continue to evaluate and implement policy, legislation, and regulations focused on restricting emissions commonly referred to as GHG emissions and promoting adaptation to climate change and the transition to a low-carbon economy. It is not possible to predict what measures foreign and domestic governments may implement in this regard, nor is it possible to predict the requirements that such measures may impose or when such measures may be implemented. However, international multilateral agreements, the obligations adopted thereunder and legal challenges concerning the adequacy of climate-related policy brought against foreign and domestic governments may accelerate the implementation of these measures. Given the evolving nature of climate change policy and the control of GHG emissions and resulting requirements, including carbon taxes and carbon pricing schemes implemented by varying levels of government, it is expected that current and future climate change regulations will have the effect of increasing the Company's operating expenses, and, in the long-term, potentially reducing the demand for oil, liquids, natural gas and related products, resulting in a decrease in the Company's profitability and a reduction in the value of its assets.

Concerns about climate change have resulted in a number of environmental activists and members of the public opposing the continued extraction and development of fossil fuels, which has influenced investors' willingness to invest in the oil and natural gas industry. Historically, political and legal opposition to the fossil fuel industry focused on public opinion and the regulatory process. More recently, however, there has been a movement to more directly hold governments and oil and natural gas companies responsible for climate change through climate litigation. Claims have been made against certain energy companies alleging that GHG emissions from oil and natural gas operations constitute a public nuisance under certain laws or that such energy companies provided misleading disclosure to the public and investors of current or future risks associated with climate change. As a result, individuals, government authorities, or other organizations may make claims against oil and natural gas companies, including the Company, for alleged personal injury, property damage, or other potential liabilities. While the Company is not a party to any such litigation or proceedings, it could be named in actions making similar allegations. An unfavorable ruling in any such case could adversely affect the demand for and price of securities issued by the Company, impact its operations and have an adverse impact on its financial condition.

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Given the perceived elevated long-term risks associated with policy development, regulatory changes, public and private legal challenges, or other market developments related to climate change, there have also been efforts in recent years affecting the investment community, including investment advisors, sovereign wealth funds, banks, public pension funds, universities and other institutional investors, promoting direct engagement and dialogue with companies in their portfolios on climate change action (including exercising their voting rights on matters relating to climate change) and increased capital allocation to investments in low-carbon assets and businesses while decreasing the carbon intensity of their portfolios through, among other measures, divestments of companies with high exposure to GHG-intensive operations and products. Certain stakeholders have also pressured insurance providers and commercial and investment banks to reduce or stop financing, and providing insurance coverage to oil and natural gas and related infrastructure businesses and projects. The impact of such efforts require the Company's management to dedicate significant time and resources to these climate change-related concerns, may adversely affect the Company's operations, the demand for and price of the Company's securities and may negatively impact the Company's cost of capital and access to the capital markets.

Emissions, carbon and other regulations impacting climate and climate-related matters are constantly evolving. With respect to environmental, social, governance ("ESG") and climate reporting, the International Sustainability Standards Board has issued an IFRS Sustainability Disclosure Standard with the aim to develop sustainability disclosure standards that are globally consistent, comparable and reliable. If the Company is not able to meet future sustainability reporting requirements of regulators or current and future expectations of investors, insurance providers, or other stakeholders, its business and ability to attract and retain skilled employees, obtain regulatory permits, licenses, registrations, approvals, and authorizations from various governmental authorities, and raise capital may be adversely affected.

The direct and indirect costs of various GHG regulations, existing and proposed, may adversely affect the Company's business, operations and financial results, including demand for the Company's products.

The Company's exploration and production facilities and other operations and activities emit GHGs which may require the Company to comply with federal and/or provincial greenhouse gas emissions legislation in Canada. Climate change policy is evolving at regional, national and international levels, and political and economic events may significantly affect the scope and timing of climate change measures that are ultimately put in place to prevent climate change or mitigate its effects. The direct or indirect costs of compliance with GHG related regulations may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. The Company's facilities may ultimately be subject to future regional, provincial and/or federal climate change regulations to manage GHG emissions.

Although it is not possible at this time to predict how new laws or regulations in the U.S. and Canada would impact the Company's business, any such future laws, regulations or legal requirements imposing reporting or permitting obligations on, or limiting emissions of GHGs from, the Company's equipment and operations could require the Company to incur costs to reduce emissions of GHGs associated with its operations or to purchase emission credits or offsets as well as delays or restrictions in its ability to permit GHG emissions from new or modified sources. The direct or indirect costs of compliance with these regulations may have a material adverse effect on the business, financial condition, results of operations and prospects of the Company. Any such regulations could also increase the cost of consumption, and thereby reduce demand for the oil, condensate and other NGLs and natural gas the Company produces. Given the evolving nature of the discourse related to climate change and the control of GHGs and resulting regulatory requirements, it is not possible to predict with certainty the impact on the Company and its operations and financial condition.

Physical risks associated with climate change may materialize.

Based on the Company's current understanding, the potential physical risks resulting from climate change are long-term in nature and associated with a high degree of uncertainty regarding timing, scope, and severity of potential impacts. Many experts believe global climate change could increase extreme variability in weather patterns such as increased frequency of severe weather, rising mean temperature and sea levels, and long-term changes in precipitation patterns. Extreme hot and cold weather, heavy snowfall, heavy rainfall, and wildfires may restrict the Company's ability to access its properties and cause operational difficulties, including damage to equipment and infrastructure. Extreme weather also increases the risk of personnel injury as a result of dangerous working conditions. Certain of the Company's assets are located in locations that are proximate to forests and rivers and a wildfire or flood may lead to significant downtime and/or damage to the Company's assets or cause disruptions to the production and transport of its products or the delivery of goods and services in its supply chain.

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A failure to secure the services and equipment necessary to the Company's operations for the expected price, on the expected timeline, or at all, may have an adverse effect on the Company's financial performance and cash flows.

The Company's operating costs could escalate and become uncompetitive due to supply chain disruptions, inflationary cost pressures, equipment limitations, escalating supply costs, commodity prices, and additional government intervention through stimulus spending or additional regulations. The Company's inability to manage costs may impact project returns and future development decisions, which could have a material adverse effect on its financial performance and cash flows.

The cost or availability of oil and gas field equipment may adversely affect the Company's ability to undertake exploration, development and construction projects. The oil and gas industry is cyclical in nature and is prone to shortages of supply of equipment and services including drilling rigs, geological and geophysical services, engineering and construction services, major equipment items for infrastructure projects and construction materials generally. These materials and services may not be available when required at reasonable prices. A failure to secure the services and equipment necessary to the Company's operations for the expected price, on the expected timeline, or at all, may have an adverse effect on the Company's financial performance and cash flows.

Oil and natural gas operations are subject to seasonal weather conditions and the Company may experience significant operational delays as a result.

The level of activity in the Canadian oil and natural gas industry is influenced by seasonal weather patterns. Wet weather and spring thaw may make the ground unstable. Consequently, municipalities and provincial transportation departments enforce road bans that restrict the movement of rigs and other heavy equipment, thereby reducing activity levels. Certain oil and natural gas producing areas are located in areas that are inaccessible other than during the winter months because the ground surrounding the sites in these areas consists of swampy terrain. In addition, extreme cold weather, heavy snowfall and heavy rainfall may restrict the Company's ability to access its properties and cause operational difficulties. Seasonal factors and unexpected weather patterns may lead to declines in exploration and production activity and corresponding decreases in the demand for the goods and services of the Company.

The Company's access to capital may be limited or restricted as a result of factors related and unrelated to it, impacting its ability to conduct future operations and acquire and develop reserves.

The Company anticipates making substantial capital expenditures for the acquisition, exploration, development and production of oil and natural gas reserves in the future. As future capital expenditures will be financed out of cash generated from operations, borrowings and possible future equity sales, the Company's ability to do so is dependent on, among other factors:

• the overall state of the capital markets;

• the Company's credit rating (if applicable);

• commodity prices;

• interest rates;

• royalty rates;

• tax burden due to currently applicable tax laws and potential changes in tax laws; and

• investor appetite for investments in the energy industry and the Company's securities in particular.

Further, if the Company's revenues or reserves decline, it may not have access to the capital necessary to undertake or complete future drilling programs. The current conditions in the oil and gas industry have negatively impacted the ability of oil and gas companies to access financing. Debt or equity financing or cash generated by operations may not be available or sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, it may not be on terms acceptable to the Company. The Company may be required to seek additional equity financing on terms that are highly dilutive to existing shareholders. The inability of the Company to access sufficient capital for its operations could have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

The Company may require additional financing, from time to time, to fund the acquisition, exploration and development of properties and its ability to obtain such financing in a timely fashion and on acceptable terms may be negatively impacted by the current economic and global market volatility.

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The Company's cash flow from operations may not be sufficient to fund its ongoing activities at all times and, from time to time, the Company may require additional financing in order to carry out its oil and natural gas acquisition, exploration and development activities. Failure to obtain financing on a timely basis could cause the Company to forfeit its interest in certain properties, miss certain acquisition opportunities and reduce its operations. Due to the conditions in the oil and natural gas industry and/or global economic and political volatility, the Company may, from time to time, have restricted access to capital and increased borrowing costs. The current conditions in the oil and natural gas industry have negatively impacted the ability of oil and natural gas companies to access, or the cost of, additional financing.

As a result of global economic and political conditions and the domestic lending landscape, the Company may, from time to time, have restricted access to capital and increased borrowing costs. If the Company's cash flow from operations decreases as a result of lower oil and natural gas prices or otherwise, it will affect the Company's ability to expend the necessary capital to replace its reserves or to maintain its production. To the extent that external sources of capital become limited, unavailable or available on onerous terms, the Company's ability to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be affected materially and adversely. In addition, the future development of the Company's properties may require additional financing and such financing may not be available or, if available, may not be available upon acceptable terms. Alternatively, any available financing may be highly dilutive to existing shareholders. Failure to obtain any financing necessary for the Company's capital expenditure plans may result in a delay in development or production on the Company's properties.

Defects in the title or rights to produce the Company's properties may result in a financial loss.

The Company's actual title to and interest in its properties, and its right to produce and sell the oil and natural gas therefrom, may vary from the Company's records. In addition, there may be valid legal challenges or legislative changes that affect the Company's title to and right to produce from its oil and natural gas properties, which could impair the Company's activities and result in a reduction of the revenue received by the Company.

If a defect exists in the chain of title or in the Company's right to produce, or a legal challenge or legislative change arises, it is possible that the Company may lose all, or a portion of, the properties to which the title defect relates and/or its right to produce from such properties. This may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

The Company's estimated reserves are based on numerous factors and assumptions which may prove incorrect and which may affect the Company.

There are numerous uncertainties inherent in estimating reserves and the future cash flows attributed to such reserves. The reserves and associated cash flow information set forth in this document are estimates only. Generally, estimates of economically recoverable oil and natural gas reserves (including the breakdown of reserves by product type) and the future net cash flows from such estimated reserves are based upon a number of variable factors and assumptions, such as:

• historical production from properties;

• production rates;

• ultimate reserve recovery;

• timing and amount of capital expenditures;

• marketability of oil and natural gas;

• royalty rates; and

• the assumed effects of regulation by governmental agencies and future operating costs (all of which may vary materially from actual results).

For those reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times may vary. The Company's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates and such variations could be material.

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The estimation of proved reserves that may be developed and produced in the future is often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Recovery factors and drainage areas are often estimated by experience and analogy to similar producing pools. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history and production practices will result in variations in the estimated reserves and such variations could be material.

Actual production and cash flows derived from the Company's oil and natural gas reserves will vary from the estimates contained in the reserve evaluation, and such variations could be material. The reserve evaluation is based in part on the assumed success of activities the Company intends to undertake in future years. The reserves and estimated cash flows to be derived therefrom and contained in the reserve evaluation will be reduced to the extent that such activities do not achieve the level of success assumed in the reserve evaluation. The reserve evaluation is effective as of a specific effective date and, except as may be specifically stated, has not been updated and therefore does not reflect changes in the Company's reserves since that date.

Risk management activities expose the Company to the risk of financial loss and counter-party risk.

From time to time, the Company may enter into physical or financial agreements to receive fixed prices on its crude oil and natural gas production intended to mitigate the effect of commodity price volatility and to support the Company's capital budgeting and expenditure plans. However, to the extent that the Company engages in price risk management activities to protect itself from commodity price declines, it may also be prevented from realizing the full benefits of price increases above the levels of the derivative instruments used to manage price risk. In addition, the Company's risk management arrangements may expose it to the risk of financial loss in certain circumstances, including instances in which:

• production falls short of the contracted volumes or prices fall significantly lower than projected;

• there is a widening of price-basis differentials between delivery points for production and the delivery point assumed in the arrangement;

• counterparties to the arrangements or other price risk management contracts fail to perform under those arrangements; or

• a sudden unexpected event materially impacts crude oil and natural gas prices.

On the other hand, failure to protect against decline in commodity prices exposes the Company to reduced liquidity when prices decline. A sustained lower commodity price environment would result in lower realized prices for unprotected volumes and reduce the prices at which the Company would enter into derivative contracts on future volumes. This could make such transactions unattractive, and, as a result, some or all of the Company's forecasted production volumes may not be protected by derivative arrangements.

Similarly, from time to time, the Company may enter into agreements to fix the exchange rate of Canadian to U.S. dollars or other currencies in order to offset the risk of revenue losses if the Canadian dollar increases in value compared to other currencies. However, if the Canadian dollar declines in value compared to such fixed currencies, the Company will not benefit from the fluctuating exchange rate.

Not all risks of conducting oil and natural gas opportunities are insurable and the occurrence of an uninsurable event may have a materially adverse effect on the Company.

The Company's involvement in the exploration for and development of oil and natural gas properties may result in the Company becoming subject to liability for pollution, blowouts, leaks of sour gas, property damage, personal injury or other hazards. Although the Company maintains insurance in accordance with industry standards to address certain of these risks, such insurance has limitations on liability and may not be sufficient to cover the full extent of such liabilities. In addition, certain risks are not, in all circumstances, insurable or, in certain circumstances, the Company may elect not to obtain insurance to deal with specific risks due to the high premiums associated with such insurance or other reasons. The payment of any uninsured liabilities would reduce the funds available to the Company. The occurrence of a significant event that the Company is not fully insured against, or the insolvency of the insurer of such event, may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

The Company's insurance policies are generally renewed on an annual basis and, depending on factors such as market conditions, the premiums, policy limits and/or deductibles for certain insurance policies can vary substantially. In some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. Significantly increased costs could lead the Company to decide to reduce or possibly eliminate coverage. In addition, insurance is purchased from a number of third-party insurers, often in layered insurance arrangements, some of whom may discontinue providing insurance coverage for their own policy or strategic reasons. Should any of these insurers refuse to continue to provide insurance coverage, the Company's overall risk exposure could be increased and the Company could incur significant costs.

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The Company relies on its reputation to continue its operations and to attract and retain investors and employees.

Oil and gas development receives significant political, media and activist commentary on the subjects of GHG emissions, pipeline transportation, water usage, harm to aboriginal communities, hydraulic fracturing and potential for environmental damage. Public concerns regarding such issues may directly or indirectly harm the Company's operations and profitability in a number of ways, including by: (i) creating significant regulatory uncertainty that could challenge the economic modeling of future development; (ii) motivating extraordinary environmental regulation by governmental authorities that could result in changes to facility design and operating requirements, thereby increasing the cost of construction, operation and abandonment; (iii) imposing restrictions on hydraulic fracturing that could reduce the amount of crude oil and natural gas that the Company is ultimately able to produce from its reserves; and (iv) resulting in proposed pipelines not being able to receive the necessary permits and approvals, which, in turn may limit the market for the Company's crude oil and natural gas and reduce its price. Concerns over these issues may also harm the Company's corporate reputation and limit its ability to access land and joint venture opportunities.

The Company's business, operations or financial condition may be negatively impacted as a result of any negative public opinion towards the Company or as a result of any negative sentiment toward, or in respect of, the Company's reputation with stakeholders, special interest groups, political leadership, the media or other entities. Public opinion may be influenced by certain media and special interest groups' negative portrayal of the industry in which the Company operates as well as their opposition to certain oil and natural gas projects. Potential impacts of negative public opinion or reputational issues may include delays or interruptions in operations, legal or regulatory actions or challenges, blockades, increased regulatory oversight, reduced support for, delays in, challenges to, or the revocation of regulatory approvals, permits and/or licenses and increased costs and/or cost overruns. The Company's reputation and public opinion could also be impacted by the actions and activities of other companies operating in the oil and natural gas industry, particularly other producers, over which the Company has no control. Similarly, the Company's reputation could be impacted by negative publicity related to loss of life, injury or damage to property and environmental damage caused by the Company's operations. In addition, if the Company develops a reputation of having an unsafe work site, it may impact the ability of the Company to attract and retain the necessary skilled employees and consultants to operate its business. Opposition from special interest groups opposed to oil and natural gas development and the possibility of climate-related litigation against governments and hydrocarbon companies may impact the Company's reputation.

Reputational risk cannot be managed in isolation from other forms of risk. Credit, market, operational, insurance, regulatory and legal risks, among others, must all be managed effectively to safeguard the Company's reputation. Damage to the Company's reputation could result in negative investor sentiment towards the Company, which may result in limiting the Company's access to capital, increasing the cost of capital, and decreasing the price and liquidity of the Company's securities.

Changing investor sentiment towards the oil and natural gas industry may impact the Company's access to, and cost of, capital.

A number of factors, including the effects of the use of hydrocarbons on climate change, the impact of oil and natural gas operations on the environment, environmental damage relating to spills of petroleum products during production and transportation and Indigenous rights, have affected certain investors' sentiments towards investing in the oil and natural gas industry. As a result of these concerns, some institutional, retail and governmental investors have announced that they no longer are willing to fund or invest in oil and natural gas properties or companies, or are reducing the amount thereof over time. In addition, certain institutional investors are requesting that issuers develop and implement more robust social, environmental and governance policies and practices. Developing and implementing such policies and practices can involve significant costs and require a significant time commitment from the Board, management and employees of the Company. Failing to implement the policies and practices, as requested by institutional investors, may result in such investors reducing their investment in the Company, or not investing in the Company at all. Any reduction in the investor base interested or willing to invest in the oil and natural gas industry and more specifically, the Company, may result in limiting the Company's access to capital, increasing the cost of capital, and decreasing the price and liquidity of the Company's securities even if the Company's operating results, underlying asset values or prospects have not changed.

Opposition by Indigenous groups to the conduct of the Company's operations, development or exploratory activities may negatively impact the Company.

Opposition by Indigenous groups to the conduct of the Company's operations, development or exploratory activities may negatively impact it in terms of public perception, diversion of management's time and resources, legal and other advisory expenses, and could adversely impact the Company's progress and ability to explore and develop properties.

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Some Indigenous groups have established or asserted treaty, Aboriginal title and Aboriginal rights to portions of Canada. Although there are no specific Aboriginal or treaty rights claims on lands where the Company operates, there is no certainty that any lands currently unaffected by claims brought by Indigenous groups will remain unaffected by future claims. Such claims, if successful, could have a material adverse impact on its operations or pace of growth.

The Canadian federal and provincial governments have a duty to consult with Aboriginal people when contemplating actions that may adversely affect the asserted or proven Aboriginal or treaty rights and, in certain circumstances, accommodate their concerns. The scope of the duty to consult by federal and provincial governments varies with the circumstances and is often the subject of ongoing litigation. The fulfillment of the duty to consult Aboriginal people and any associated accommodations may adversely affect the Company's ability to, or increase the timeline to, obtain or renew, permits, leases, licenses and other approvals, or to meet the terms and conditions of those approvals.

In addition, the federal government has introduced legislation to implement the United Nations Declaration on the Rights of Indigenous Peoples ("UNDRIP"). Other Canadian jurisdictions have also introduced or passed similar legislation, or begun considering the principles and objectives of UNDRIP, or may do so in the future. The means and timelines associated with UNDRIP's implementation by government is uncertain; additional processes may be created or legislation amended or introduced associated with project development and operations, further increasing uncertainty with respect to project regulatory approval timelines and requirements.

An inability to recruit and retain a skilled workforce and key personnel may negatively impact the Company.

The operations and management of the Company require the recruitment and retention of a skilled workforce, including engineers, technical personnel and other professionals. The loss of key members of such workforce, or a substantial portion of the workforce as a whole, could result in the failure to implement the Company's business plans which could have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

Competition for qualified personnel in the oil and natural gas industry is intense and the Company may not be able to continue to attract and retain all personnel necessary for the development and operation of its business. The Company does not have any key personnel insurance in effect. Contributions of the existing management team to the immediate and near term operations of the Company are likely to be of central importance. In addition, certain of the Company's current employees may have significant institutional knowledge that must be transferred to other employees prior to their departure from the workforce. If the Company is unable to: (i) retain current employees; (ii) successfully complete effective knowledge transfers; and/or (iii) recruit new employees with the requisite knowledge and experience, the Company could be negatively impacted. In addition, the Company could experience increased costs to retain and recruit these professionals.

The Company's operations are subject to various laws and governmental regulations which require compliance that can be burdensome and expensive and may expose the Company's operations to significant delays, costs and liabilities.

The Company's oil, condensate and other NGLs and natural gas operations are subject to various federal, provincial and local governmental regulations that may be changed from time to time. Matters subject to regulation include the requirements surrounding facility and lease construction, discharge permits for drilling operations, drilling bonds, reports concerning operations, the spacing of wells, unitization and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil, condensate and other NGLs and natural gas wells below actual production capacity to conserve supplies of oil, condensate and other NGLs and natural gas. In addition, the production, handling, storage, transportation, remediation, emission and disposal of oil, condensate and other NGLs and natural gas, by-products thereof and other substances and materials produced or used in connection with oil, condensate and other NGLs and natural gas operations are subject to regulation under federal, provincial and local laws and regulations primarily relating to protection of human health and the environment.

These laws and regulations are complex, change frequently and have tended to become increasingly stringent over time. A failure to comply with these laws and regulations may result in the assessment of administrative, regulatory, civil and criminal penalties, imposition of cleanup and site restoration costs and liens, the suspension or revocation of necessary permits, licenses and authorizations, the requirement that additional pollution controls be installed and, in some instances, issuance of orders or injunctions limiting or requiring discontinuation of certain operations. Moreover, these laws and regulations have continually imposed increasingly strict requirements for water and air pollution control and solid waste management. The Company may incur significant expenditures and experience delays in order to maintain compliance with governmental laws and regulations applicable to it. Failure to comply with such laws and regulations could have a material adverse effect on the Company's business, financial condition, results of operations and prospects.

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Under certain environmental laws that impose strict as well as joint and several liability, the Company may be required to remediate contaminated properties currently or formerly operated by the Company or facilities of third parties that received waste generated by the Company's operations regardless of whether such contamination resulted from the conduct of others or from consequences of the Company's own actions that were in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of the Company's operations. In addition, the risk of accidental spills or releases from the Company's operations could expose it to significant liabilities under environmental laws. Moreover, public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry is likely to continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, the Company's business, financial conditions, results of operations and prospects could be materially adversely affected.

The Company has not established a separate reserve fund for the purpose of funding its estimated future environmental, including reclamation and abandonment, obligations. As a result, the Company may not be able to satisfy these obligations. Any site reclamation or abandonment costs incurred in the ordinary course in a specific period will be funded out of the Company's cash flow from operations or from its other sources of available funding. If the Company is unable to fully fund the cost of remedying an environmental obligation, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have an adverse effect on the Company's financial condition and results of operations.

Oil and natural gas companies operating in Alberta are subject to significant regulation with respect to their employees' health and safety. Companies are required to self-report accidents and infractions, and regular and random audits of operations are also part of the regulatory process. Previous violations of the same requirement are taken into account when assessing penalties and subsequent behavior may be subjected to escalating levels of oversight and loss of operating freedom. Non-compliance with regulations may in the future result in suspension or closure of the Company's operations or the imposition of other penalties against the Company.

Restrictions on operational activities intended to protect certain species of wildlife may adversely affect the Company's ability to conduct drilling and other operational activities in some of the areas where it operates.

Oil, condensate and other NGLs and natural gas operations in the Company's operating areas can be adversely affected by seasonal or permanent restrictions on construction, drilling and well completions activities designed to protect various wildlife. Seasonal restrictions may limit the Company's ability to operate in protected areas and can intensify competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages when drilling and completions activities are allowed. These constraints and the resulting shortages or high costs could delay the Company's operations and materially increase the Company's operating and capital costs. Permanent restrictions imposed to protect endangered species could prohibit development in certain areas or require the implementation of expensive mitigation measures. The designation of previously unprotected species as threatened or endangered in areas where the Company operates could cause the Company to incur increased costs arising from species protection measures or could result in limitations on the Company's exploration and production activities that could have an adverse impact on the Company's ability to develop and produce its reserves.

Risks Related to the Company's CCS Program

The Company is subject to CCS industry risk, including risk that the industry in which the Company operates may not develop at sufficient speed.

The Company is subject to various market specific risks related to the carbon capture and storage ("CCS") industry, as further outlined below, and should these risks materialize they may have a material adverse effect on the Company.

The CCS industry risks materializing in respect of a slow ramp-up of CCS in the global market, reduced or delayed CO2 tax and incentive increases, and/or uncertainty in respect of availability of supplier base, supplier capacity and logistical, and supply chain challenges in new market conditions may have a negative impact on the Company's operations and development.

Evolving climate targets and stronger investment incentives are expected to add momentum to the CCS industry; however, should such favorable regulatory policies and financial support no longer be available or be reduced, such change(s) may have an adverse effect on development of the industry in which the Company operates, which in turn may have an adverse effect on the Company's ability to expand its operations and ultimately on the Company's financial position and results. The speed of the transition into a low-carbon economy will also affect the realization of carbon capture projects and governmental support and environmental regulation are key factors that will influence the speed of this transition.

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The Company intends to derive revenue from the sale of environmental attributes including emission performance credits, emission offset credits, and other instruments created by governments to represent a price on carbon. The Company expects to sell these instruments in the open market and the price received is therefore subject to typical market risks including supply, demand and general lack of available markets and liquidity.

The Company may not be able to successfully implement its CCS cost reduction strategies or achieve its forecasted CCS cost reductions.

In order for CCS to remain a competitive alternative, it is necessary to reduce CCS costs. Cost reduction is viewed as a key strategic pillar to execute the Company's strategy to improve project economics. Should the Company fail to successfully implement strategies for CCS cost reduction, such failure may have a material adverse effect on the Company's ability to be competitive.

Tax credits or other government policies related to the development and adoption of CCS may not be implemented in the manner that the Company expects, or at all. Even if tax credits or government policies are implemented, the Company may fail to implement its CCS program in a manner that allows it to take advantage of these credits.

The Government of Canada has signaled its intention to introduce a tax credit program to incentivize and reward the development and adoption of CCS. The Company intends to be in a position to take advantage of certain contemplated government policies through its CCS program. However, the Company cannot predict when or if any new government policy will be adopted, promulgated or become effective. The Company expects to incur significant capital expenditures in connection with its CCS program. If tax credits or other government policies related to the development and adoption of CCS are not implemented in the manner that the Company expects, or at all, the Company's business, financial condition, results of operations and prospects could be materially and adversely affected.

Even if tax credits or government policies related to the development and adoption of CCS are implemented, the Company may fail to implement its CCS program in a manner that allows it to take advantage of these credits. The Company's future CCS technology may prove not to be commercially viable, efficient, or operationally effective and efforts to respond to technological innovations may require significant financial investments and resources. Additionally, CCS projects are dependent on prevailing carbon prices. A reduction in prevailing carbon prices could lead to CCS projects not being economical. Failure by the Company to respond to changes in technology and innovations may render the Company's future CCS operations non-competitive and may have a material, negative effect on the Company's results of operations, financial condition and future prospects.

The Company may be materially adversely affected by the inability of the Company to meet its emissions targets.

As discussed elsewhere in this prospectus, the Company is committed to reducing its Scope 1 and Scope 2 greenhouse gas emissions with a target of net zero by 2030. Any failure by the Company to realize its commitments to achieve this net zero emissions target could lead to adverse press coverage and other adverse public statements affecting the Company. In addition, the ability to comply with some or all of the Company's voluntary commitments may be outside of its control. For example, other companies operate some of the assets in which the Company has an interest. The Company has limited ability to exercise influence over the operation of those assets or their associated costs. Consequently, the Company is at least partially dependent on the actions of these third parties to meet its net zero emissions target. If these third parties do not sufficiently reduce GHG emissions, the Company may not achieve its net zero emissions goal. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal claims.

Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the Company's reputation, on the morale and performance of the Company's employees and on the Company's relationships with regulators, customers and commercial counterparties. It may also have a negative impact on the Company's ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on the Company's business, financial condition and results of operations.

Risks Relating to the Company's Technology, Intellectual Property and Infrastructure

Unauthorized use of intellectual property may cause the Company to engage in, or be the subject of, litigation.

Due to the rapid development of oil and natural gas technology, in the normal course of the Company's operations, the Company may become involved in, named as a party to, or be the subject of, various legal proceedings in which it is alleged that the Company has infringed, misappropriated or otherwise violated the intellectual property or proprietary rights of others, the Company may also initiate similar claims against third parties if it believes that such parties are infringing, misappropriating or otherwise violating its intellectual property or proprietary rights. The Company's involvement in any intellectual property litigation or legal proceedings could (i) result in significant expense, (ii) adversely affect the development of its assets or intellectual property, or (iii) otherwise divert the efforts of its technical and management personnel, whether or not such litigation or proceeding is resolved in the Company's favor. In the event of an adverse outcome in any such litigation or proceeding, the Company may, among other things, be required to:

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• pay substantial damages and/or cease the development, use, sale or importation of processes that infringe or violate upon the intellectual property rights of a third party;

• expend significant resources to develop or acquire the non-infringing intellectual property;

• discontinue processes incorporating the infringing technology; or

• obtain licenses to the non-infringing intellectual property.

However, the Company may not be successful in such development or acquisition of the applicable non-infringing intellectual property, or such licenses may not be available on reasonable terms. In the event of a successful claim of infringement, misappropriation or violation of third party intellectual property rights against the Company and its failure or inability to obtain a license to continue to use the such technology on reasonable terms, the Company's business, prospects, operating results and financial condition could be materially adversely affected.

Breaches of the Company's cyber-security and loss of, or unauthorized access to, data may adversely impact the Company's operations and financial position.

The Company is increasingly dependent upon the availability, capacity, reliability and security of the Company's information technology infrastructure, and the Company's ability to expand and continually update this infrastructure, to conduct daily operations. The Company depends on various information technology systems to estimate reserve quantities, process and record financial data, manage the Company's land base, manage financial resources, analyze seismic information, administer contracts with operators and lessees and communicate with employees and third-party partners. The Company currently uses, and may use in the future, outsourced service providers to help provide certain information technology services, and any such service providers may face similar security and system disruption risks. Moreover, due to the COVID-19 pandemic, an increased number of the Company's employees and service providers may be working from home and connecting to its networks remotely on less secure systems, which may further increase the risk of, and vulnerability to, a cyber-security attack or security breach to the Company's network. In addition, the Company's ability to monitor its outsourced service providers' security measures is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of the Company's personal, confidential, or other data, including data relating to individuals.

Further, the Company is subject to a variety of information technology and system risks as a part of its operations including potential breakdowns, invasions, viruses, cyber-attacks, cyber-fraud, security breaches, and destruction or interruption of the Company's information technology systems by third parties or employees. Unauthorized access to these systems by employees or third parties could lead to corruption or exposure of confidential, fiduciary or proprietary information, interruption to communications or operations or disruption to business activities or the Company's competitive position. In addition, cyber phishing attempts have become more widespread and sophisticated in recent years. If the Company becomes a victim to a cyber phishing attack, it could result in a loss or theft of the Company's financial resources or critical data and information, or could result in a loss of control of the Company's technological infrastructure or financial resources. The Company's employees are often the targets of such cyber phishing attacks by third parties using fraudulent "spoof" emails to misappropriate information or to introduce viruses or other malware through "Trojan horse" programs to the Company's computers.

Increasingly, social media is used as a vehicle to carry out cyber phishing attacks by nefarious actors. Information posted on social media sites, for business or personal purposes, may be used by attackers to gain entry into the Company's systems and obtain confidential information. Despite these efforts, there are significant risks that the Company may not be able to properly regulate social media use by its employees and preserve adequate records of business activities and client communications conducted through the use of social media platforms.

The Company maintains policies and procedures that address and implement employee protocols with respect to electronic communications and electronic devices and conducts annual cyber-security risk assessments. The Company also employs encryption protection of its confidential information, and all computers and other electronic devices. Despite the Company's efforts to mitigate such cyber phishing attacks through employee education and training, cyber phishing activities may result in unauthorized access, data theft and damage to its information technology infrastructure. The Company applies technical and process controls in line with industry-accepted standards to protect its information, assets and systems, and the Company is in the process of implementing a formal written incident response plan for responding to a cyber-security incident. However, these controls may not adequately prevent cyber-security breaches or attacks. As such, the Company may need to continuously develop, modify, upgrade or enhance its information technology infrastructure and cyber-security measures to secure its business, which can lead to increased cyber-security protection costs. Such costs may include making organizational changes, deploying additional personnel and protection technologies, training employees, and engaging third party experts and consultants. These efforts may come at the potential cost of revenues and human resources that could be utilized to continue to enhance the Company's product offerings, and such increased costs and diversion of resources may adversely affect operating margins. Disruption of critical information technology services, or breaches of information security, could have a negative effect on the Company's performance and earnings, as well as its reputation, and any damages sustained may not be adequately covered by the Company's current insurance coverage, or at all. The impact of any such cyber-security event could have a material adverse effect on the Company's business, financial condition and results of operations.

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The Company is subject to laws, rules, regulations and policies regarding data privacy and security. Many of these laws and regulations are subject to change and reinterpretation, and could result in claims, changes to its business practices, monetary penalties, increased cost of operations or other harm to its business.

The Company is subject to certain laws, regulations, standards, and other actual and potential obligations relating to privacy, data hosting and transparency of data, data protection, and data security. Such laws are evolving rapidly, and the Company expects to potentially be subject to new laws and regulations, or new interpretations of laws and regulations, in the future in various jurisdictions. These laws, regulations, and other obligations, and changes in their interpretation, could require the Company to modify its operations and practices, restrict its activities, and increase its costs. Further, these laws, regulations, and other obligations are complex and evolving rapidly, and despite the Company's reasonable efforts to monitor its potential obligations, the Company may face claims, allegations, or other proceedings related to its obligations under applicable privacy, data protection, or data security laws and regulations. The interpretation and implementation of these laws, regulations, and other obligations are uncertain for the foreseeable future and could be inconsistent with one another, which may complicate and increase the costs for compliance. As a result, the Company anticipates needing to dedicate substantial resources to comply with such laws, regulations, and other obligations relating to privacy and cyber-security. Despite the Company's reasonable efforts to comply, any failure or alleged or perceived failure to comply with any applicable laws, regulations, or other obligations relating to privacy, data protection, or data security could also result in regulatory investigations and proceedings, and misuse of or failure to secure data relating to individuals could also result in claims and proceedings against the Company by governmental entities or other third parties, penalties, fines and other liabilities, and may potentially damage our reputation and credibility, which could adversely affect the Company's business, operating results, financial condition and prospects.

Financial, Tax and Accounting Risks

Changes to applicable tax laws and regulations or exposure to additional tax liabilities could adversely affect the Company's business and future profitability.

The Company conducts operations, directly and through its subsidiaries, in Canada and is therefore subject to income taxes in Canada. The Company may also become subject to income taxes in other foreign jurisdictions in the future. The Company's effective income tax rate could be adversely affected by a number of factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws, changes in accounting and tax standards or practices, changes in the composition of operating income by tax jurisdiction, changes in the Company's operating results before taxes, and the outcome of income tax audits in Canada. The Company will regularly assess all of these matters to determine the adequacy of its tax liabilities. If any of the Company's assessments are ultimately determined to be incorrect, the Company's business, results of operations, or financial condition could be materially adversely affected.

Due to the complexity of multinational tax obligations and filings, the Company and its subsidiaries may have a heightened risk related to audits or examinations by federal, state, provincial, and local taxing authorities in the jurisdictions in which it operates. Outcomes from these audits or examinations could have a material adverse effect on the Company's business, results of operations, or financial condition.

The tax laws of Canada, as well as potentially any other jurisdiction in which the Company may operate in the future, have detailed transfer pricing rules that require that all transactions with related parties satisfy arm's length pricing principles. Although the Company believes that its transfer pricing policies have been reasonably determined in accordance with arm's length principles, the taxation authorities in the jurisdictions where the Company carries on business could challenge its transfer pricing policies. International transfer pricing is a subjective area of taxation and generally involves a significant degree of judgment. If any of these taxation authorities were to successfully challenge the Company's transfer pricing policies, the Company could be subject to additional income tax expenses, including interest and penalties. Any such increase in the Company's income tax expense and related interest and penalties could have a material adverse effect on its business, results of operations, or financial condition.

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The Company may also be adversely affected by changes in the relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions, and interpretations thereof, in each case, possibly with retroactive effect.

In the event that the Company expands its operations, including to jurisdictions in which the tax laws may not be favorable, the Company's effective tax rate may fluctuate, tax obligations may become significantly more complex and subject to greater risk of examination by taxing authorities or the Company may be subject to future changes in tax laws, in each case, the impacts of which could adversely affect the Company's after-tax profitability and financial results.

In the event that the Company expands its operating business domestically or internationally, the Company's effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by: operating losses in jurisdictions where no tax benefit can be recorded under IFRS, changes in deferred tax assets and liabilities, changes in tax laws or the regulatory environment, changes in accounting and tax standards or practices, changes in the composition of operating income by tax jurisdiction, and the pre-tax operating results of the Company's business.

Additionally, in the event the Company expands its operating business outside of Canada, it may be subject to significant income, withholding, and other tax obligations in other jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. The Company's after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, (i) the ability to structure business operations in an efficient and competitive manner, and (j) the availability of foreign income tax offsets in Canada. Outcomes from audits or examinations by taxing authorities could have an adverse effect on the Company's after-tax profitability and financial condition. Additionally, several tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with the Company's intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If the Company does not prevail in any such disagreements, its profitability may be affected.

The Company's after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect.

The Company might be a "passive foreign investment company," or "PFIC," which could result in adverse U.S. federal income tax consequences to U.S. Holders.

If the Company is a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined below in the subsection entitled "Material U.S. Federal Income Tax Considerations for U.S. Holders-U.S. Holder Defined"), the U.S. Holder may be subject to adverse U.S. federal income tax consequences with respect to the ownership and disposition of the Company's Securities and may be subject to additional reporting requirements. Because the revenue production of the Company is uncertain, and because PFIC status is based on income, assets and activities for an entire taxable year, there can be no assurance that the Company will not be treated as a PFIC under the income or asset test for the current taxable year or any future taxable year.

U.S. Holders are strongly urged to consult with their own tax advisors to determine the application of the PFIC rules to them in their particular circumstances and any resulting tax consequences. Please see the subsection entitled "Material U.S. Federal Income Tax Considerations for U.S. Holders-Passive Foreign Investment Company Rules" for a more detailed discussion with respect to the PFIC status of the Company and the resulting tax consequences to U.S. Holders.

The Company's reported financial results may be negatively impacted by changes in IFRS.

IFRS is subject to the requirements of IFRS as issued by the IASB, the interpretation by the International Financial Reporting Standards Interpretation Committee, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.

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		Barrels of Oil Equivalent (mboe)(1)
December 31, 2021		96,530.6
Extensions and discoveries		42,035.7
Technical revisions		(43,089.9	)
Conversions to developed		(13,699.7	)
December 31, 2022		81,776.7

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