Journey Energy Announces Private Company Acquisition to 2022 Guidance

Source: 3/23/2022, Location: North America

Journey Energy Inc. has entered into two definitive agreements, one for the acquisition of a private company, and the other for the acquisition of plant and gathering infrastructure. Both acquisitions are located in Journey's Central Core Region.

Journey entered into a definitive agreement to purchase a private company ("Privateco") producing approximately 625 boe/d (52% oil and NGL's) from a large contiguous land base geographically focused in the Carrot Creek area, which is within Journey's Central Core area. The acquisition price will be paid for through the issuance of 1.75 million Journey shares plus $8.0 million of cash. The acquisition comes with significant development drilling upside. In the first quarter of 2022, Privateco participated in a 1.5 mile Ellerslie horizontal well (31% working interest). This well was tested in March and will be connected to Privateco's 79% working interest, operated, natural gas processing plant in April. This well is forecast to add approximately 75-100 boe/d net to Privateco in May.

In addition to the extensive operated and non-operated infrastructure, the acquired assets feature an extremely low corporate decline rate below 10%. The Carrot Creek area is characterized by multi zone targets for light oil and liquid rich natural gas. The LMR for the asset is similar to that of Journey.

Privateco is currently controlled by a small group of major shareholders, who are supportive of this business combination. The acquisition is currently expected to close on April 1, 2022. Annualized April 2022 Adjusted Funds Flow from this low decline asset base is approximately $7.5 million.

Journey has entered into a definitive agreement to purchase certain assets (the "Assets") from a midstream company, thereby doubling Journey's working interests in those assets. The Assets are comprised of a 43.75% working interest in a natural gas processing facility, and a 50% working interest in the main gathering system serving the facility. With the acquisition, Journey will become operator of the Assets. The purchase price is $5 million prior to closing adjustments and will be funded with Journey's existing cash on hand. The Assets are located in the Gilby area, which is contained within Journey's central core area. Journey views this as a strategic acquisition for the following reasons:

- Journey has over 25 BCF of undeveloped liquid rich natural gas reserves booked to future locations in its December 31, 2021 reserve report, which will be serviced by this infrastructure.
- Journey has identified significant cost savings synergies and potential production optimization synergies associated with the operation and control of this facility.
- Journey sees additional consolidation opportunities in the area. These opportunities along with Journey's existing production and development wedge will all benefit from the lower cost structure.
- Preliminary studies indicate Journey's existing production, future inventory, and asset location are supportive for the installation of Journey's second power project (the first one is at Countess).
- In addition to providing additional revenue, the power project, if constructed, would provide Journey with a competitive advantage for both consolidation and asset development.
- There is significant unutilized infrastructure associated with this purchase.
- A minor portion of the plants' working interest purchase is subject to a right of first refusal. The infrastructure purchase is expected to close early in the second quarter after regulatory approvals are received, and is expected to improve operating expenses and processing revenue of the Company by approximately $1.25 million per year. This payout is exclusive of any of the benefits listed above. Acquisitions of strategic infrastructure confer benefits on the Company that are independent of commodity price fluctuations contributing to the longer term sustainability of the business.

The continued strength in commodity prices, coupled with favorable price differentials, and a lower cost structure are combining to make Journey more sustainable well into the future. While Journey made great progress in 2021 in reducing its net debt, the Company will remain steadfast in its desire to reduce leverage and improve sustainability. In order to enhance financial flexibility, on March 18, 2022, Journey closed an equity offering of 2.85 million Canadian Development Expense flow through shares at a price of $4.25/share. Proceeds of this offering will be utilized for Journey's active 2022 exploration and development program freeing up cash on hand to pursue these acquisitions.

After incorporating the impact of the above acquisitions Journey's 2022 guidance is revised to the following:
Journey's 2022 forecasted Adjusted Funds Flow is based upon the following assumed average prices: WTI of $87.50/bbl USD; Company differentials of $4/bbl USD for oil from Edmonton mixed sweet prices; Company realized natural gas price of CDN$4.00/mcf CDN; and a foreign exchange rate of $0.79 US$/CDN$. Readers are encouraged to view the sensitivity table in Journey's Corporate Presentation to assess the impacts of recent price fluctuations on our business plan.

To date in 2022 Journey has drilled 3 (3.0 net) wells in Skiff and the plans are to drill 16 (15.0 net) wells for the entire year. This includes the 31% WI well in the acquired Privateco described herein. Journey is currently drilling the first of two, 1.5 mile horizontal wells in its Viking light oil pool in Crystal.

Recent Events
Journey's practice is to continuously review our capital program throughout the year. Recent world events have resulted in a significant upward bias for commodity prices and cash flows. The duration of this impact remains uncertain. Journey's current guidance is not reflective of the full magnitude of these events and includes no component for acquisitions other than those included in this press release. Journey will continue to review our capital program throughout the year and we will communicate these revisions in due course.

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