Expansion of Key Infrastructure at Brooks Alberta

Calima Energy Limited is pleased to announce that it has executed an agreement (the “Agreement”) with Pivotal Energy Partners Inc, a strategic infrastructure and midstream company, in respect of the financing and constructing of a key pipeline (the “Pipeline”) connecting the Company’s 02-29 oil battery in the northern portion of the field, to the recently drilled wells (Gemini #5-#7 and Pisces #3) in the southern portion of the field and, most importantly will provide egress for planned production growth in the pipeline corridor located in the heart of the Brooks play.

Jordan Kevol, CEO and President:
“The Pipeline is a key piece of infrastructure that the team has been working towards for the past number of months, including design, securing of all right of way approvals, and negotiating the related financing partnership. The Pipeline provides significant benefits including the ability to tie-in recently drilled, and upcoming wells, and reduces emulsion trucking for some existing wells providing immediate operating costs reductions.

We are pleased with the environmental and safety benefits related to getting more trucks off the road, and previously trucked fluid into a pipeline, which has been proven to be the safest, most environmentally friendly method of transporting our product. Once this Pipeline is completed and operational, Gemini #5-#7 and Pisces #3 will be connected, however most importantly it will provide long term capacity for planned growth in oil and gas volumes from our core Brooks acreage, which will translate into enhanced operating economics. This Pipeline is capable of handling the capacity of our growth plans in the area for the next 3-5 years.”

Economic and ESG Benefits
• Provides egressfor multiple future locationsin the Sunburst and Glauconitic Formations, with improved full cycle economics on the development of future drilling locations
• Economic benefits expected to be realized in 3rd party reserve reports in the PDP, 1P, 2P and 3P reserve categories
• The Pipeline will be completed by late March 2022 and will connect the recently drilled Gemini #5-#7 and Pisces #3 to the 2-29 oil battery
• Upon completion, reduced trucking costs (~C$55,000) and other operating costs savings of the Pipeline are expected to mostly offset the loan repayments of the Pipeline.
• Operating costsavingsfrom future well developments will exceed Pipeline repayments with an increase to free cash flow
• The pipeline will provide a number of ESG benefits:
o Eliminates the need to flare new wells during testing in the range of 400-800 tCO2e for each new well tied-into the pipeline; and
o Reduces trucked volumes of emulsion from existing, newly drilled, and future wells pipeline connected to the 2-29 battery. Reducing trucking improves the Company’s safety and spill prevention profile and ESG score. Pipelines are safer, more environmentally friendly, and more economic, when compared to the trucking of oilfield fluids

Commercial Terms
The Pipeline will be owned by Blackspur Oil Corp. Construction and ancillary costs are estimated to total C$4.3 million, and the Agreement allows for a maximum of C$5 million. Repayments are ~$76,000 per month. The Agreement is structured over a maximum term of 7 years, with termination possible after the 3rd anniversary, subject to early termination provisions.

Sunburst Formation
The Sunburst Formation does not require hydraulic fracture stimulation and can be developed at low cost ($1.2M per well) delivering attractive rates of return.

The Brooks reservoirs contain a low CO2 content at ~2%, and the Company’s multi-well pad drilling reduces the environmental footprint. The Brooks area contains significant infrastructure that creates a foundation for growth and expansion with year-round access. Blackspur’s existing processing capacity in the Brooks area is ~7,000 bbl/d oil.

In 2021, the Company drilled seven (net) Sunburst wells in the Brooks area, four of which were drilled subsequent to the Blackspur Acquisition by Calima (Gemini #1-#4). Gemini #5- #7 Sunburst Formation wells in the Brooks area were drilled in January 2022 and will be connected into the Company’s 2- 29 oil battery in Q1 2022 via the Pipeline described above.

Glauconitic Formation
The Glauconitic Formation is a shallower (younger) formation than Calima’s core Sunburst conventional play and requires hydraulic fracture stimulation. The combination of the shallow target depth and short tie-in, results in an all-in cost for each well of C$2-$3M, depending on chosen horizontal length of the wellbore.

The Company has three new Glauconitic wells (Pisces #1-#3) from its recent program. Pisces #1 - #2 are completed, tied in, and producing whilst Pisces #3 was drilled early January 2022 and is expected to be on stream in late Q1 2022. These Glauconitic wells are expected to be impactful to corporate production levels and future reserve bookings.

This release has been approved by the Board.