Obsidian Energy Announces Sale of Operated Pembina Assets for $320 Million in Cash, Equity and Assets

Press Release

• Obsidian Energy to receive $220 million in cash, $85 million in equity and a 34.6 percent interest in the Willesden Green Cardium Unit #2 Field, subject to adjustment in certain circumstances
• Transaction results in significantly reduced debt and enhanced liquidity
• Positions Obsidian Energy to continue growth and delineation of Peace River asset with additional optionality from remaining light oil business

Calgary, Alberta–(February 19, 2025) – OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) (“Obsidian Energy“, the “Company“, “we“, “us” or “our“) is pleased to announce that the Company has entered into a definitive asset purchase and sale agreement (the “Agreement“) with Calgary-based InPlay Oil Corp. (“InPlay“) (TSX: IPO).

OBE Announces Sale of Operated Pembina Assets….

Under the terms of the Agreement, Obsidian Energy will divest our operated Pembina assets (the “Pembina Assets“) but will retain our non-operated holdings in the Pembina Cardium Unit #11 (“PCU#11“). The Company will receive approximately $320 million from InPlay in three components (collectively, the “Transaction“), subject to closing and other adjustments, as follows:

• $220 million in cash (the “Cash Proceeds“);
• $85 million of InPlay’s common shares, (the “InPlay Shares”^[1]; and, together with the Cash Proceeds, the “Non-Unit Consideration”); and
• InPlay’s 34.6 percent working interest in the Willesden Green Cardium Unit #2 (“WGCU#2“) oil field, bringing Obsidian Energy’s ownership of WGCU#2 to 99.8^[2] percent. The additional interest is estimated by Obsidian Energy to be valued at $15 million.

Cash Proceeds are expected to be used to initially pay down debt, improving Obsidian Energy’s balance sheet and overall liquidity. Pro forma year-end 2024 estimated (“2024E“) net debt would be reduced to approximately $192 million (assuming $220 million of Cash Proceeds) from $412 million (unaudited) (subject to closing and other adjustments and transaction costs), implying our syndicated credit facility (the “Credit Facility“) would be drawn at approximately $5 million post-closing. As part of the Transaction, InPlay will assume all assets and liabilities associated with the Pembina Assets.

“The successful execution of our growth plan to date has put us in a position to rationalize our asset portfolio at a value that we believe to be accretive to our shareholders, while securing increased financial flexibility and meaningfully reducing asset retirement obligations,” said Stephen Loukas, Obsidian Energy’s President and CEO. “Upon Transaction close, we emerge as a significantly more focused company with an ability to accelerate our shareholder value creation strategy. Pro forma, Obsidian Energy will have a production base of over 29,000 boe/d (based on estimated fourth quarter 2024 production) with Peace River now becoming our largest asset, where we will continue to execute on our growth plan and further grow our Clearwater and Bluesky production. Our Willesden Green and Viking light oil assets will continue to generate stable production and free cash flow to support Peace River’s development while maintaining optionality of growing both assets during periods when commodity prices and returns are conducive to doing so.”

Mr. Loukas continued, “We also expect to secure additional future share price appreciation from our InPlay Share position as the addition of the Pembina Assets is both financially and strategically accretive to InPlay. During the second half of 2025, Obsidian Energy will consider different monetization options for our InPlay Share position with the goal of recycling that capital.”

TRANSACTION HIGHLIGHTS

As a result of this transformative divestiture, Obsidian Energy will be well positioned to leverage our strong balance sheet and asset base to further build on our development and exploration/appraisal success at Peace River. Anticipated benefits of the Transaction for the Company include:

• Compelling Economics: Non-Unit Consideration of $305 million for the Pembina Assets plus $15 million in value for the additional WGCU#2 working interest represents an approximate 2.7x 2024E net operating income. In terms of production volume and value, Obsidian Energy:
  • Sells approximately 10,300 boe/d average production (based on 2024E results), implying a production multiple of approximately $31,000 per boe/d.
  • Reduces net operating costs by approximately $2.20/boe on a pro forma 2024E basis, improving the Company’s total netback.
• Streamlines Light Oil Assets: Allows the Company to focus our light oil development in Willesden Green, while maintaining our interest in our highly economic PCU#11 non-operated assets. At current commodity prices, these high return, quick payout assets generate meaningful free cash flow to help fund growth at Peace River.
  • Willesden Green: The additional interest in WGCU#2 to 99.8² percent increases our production by approximately 150 net boe/d based on estimated fourth quarter 2024 results. Our net 2P booked locations increase to 30.5 in this underdeveloped portion of Willesden Green where we drilled our successful Open Creek 9-17 Pad Cardium formation wells. This Transaction streamlines the future development of the asset in parallel with the Belly River formation prospects in the area.
  • Pembina: Obsidian Energy’s remaining assets in Pembina will consist of our non-operated holdings in PCU#11, which had estimated fourth quarter 2024 average production of approximately 2,500 net boe/d^[3].
  • Viking: Our Viking assets continue to generate free cash flow and provide optionality to economically add light oil production to our production base.
• Increases Focus on Peace River Growth: Post-Transaction, our Peace River assets will account for over 42 percent of total production (estimated, fourth quarter 2024) and 33 percent of our total proved plus probable reserves (December 31, 2024), increasing our weighting towards our high-quality Bluesky and Clearwater heavy oil resource.
• Improves Leverage and Liquidity Position: Cash Proceeds from the Transaction will initially be used to repay bank indebtedness, reducing Obsidian Energy’s outstanding obligations under the Credit Facility in aggregate by $220 million, subject to closing and other adjustments and transaction costs. Obsidian Energy anticipates that leverage and liquidity going forward will also benefit from a reduction in asset retirement obligations.
• Sets Up Credit Facility Plans: Obsidian Energy will complete our semi-annual borrowing base redetermination, anticipating that we will reduce our Credit Facility commitment amount to $245 million (previously $300 million) and extend our revolving and maturity periods by one year to May 31, 2026, and May 31, 2027, respectively, at Transaction close. The Transaction requires approval from our credit facility lenders, which is expected in due course.
• Provides Future Optionality to Realize Value from InPlay Shares: Subject to a six-month hold period^[4], the Company will evaluate various opportunities in the second half of 2025 to realize additional value for Obsidian Energy’s shareholders.
  • Until such time, Obsidian Energy will receive dividend income based on InPlay’s expected policy, estimated at approximately $0.8 million per month.
  • As part of the Transaction, Obsidian Energy will be entitled to two nominees on the InPlay Board of Directors at Transaction close and will have customary registration rights.

TRANSACTION DETAILS AND METRICS

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