Obsidian Energy Announces Strong Third Quarter 2020 Results Driven by Successful First Half Development Program and Continued Improvements to our Cost Structure

CALGARY, AB, Nov. 2, 2020

"Our strong third quarter performance is a direct result of the improvements we are driving across our business" said Stephen Loukas, Interim President and Chief Executive Officer of Obsidian Energy. "Our strategically-focused capital program in the first half of 2020 has strengthened our underlying production base, driving impressive performance and resulting in third quarter production volumes down only slightly year over year, even with a 33% lower capital investment to date in 2020. Combined with the significant improvements across our cost structure, we successfully generated free cash flow in the third quarter, allowing us to lower debt levels despite the challenging macro environment. Our improved efficiency and strong operational base position us well as we look into 2021 and at the opportunities we see ahead".

All figures are in Canadian dollars unless otherwise stated. Obsidian Energy's unaudited interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") as at and for the three and nine months ended September 30, 2020 can be found on our website at www.obsidianenergy.com. The documents will also be filed on SEDAR and EDGAR in due course.

FINANCIAL HIGHLIGHTS

• FFO in the third quarter of 2020 increased to $30 million ($0.41 per share) up from $25 million ($0.34 per share) for the second quarter of 2020 and $29 million ($0.40 per share) for the third quarter of 2019. FFO increased in the third quarter of 2020 as a result of higher commodity prices (compared to Q2 2020) as restrictions around the COVID-19 pandemic eased, which improved demand. In addition, the Company continues to benefit from lower Operating Expenses ("Opex") and General and Administrative ("G&A") expenses (compared to Q3 2019) as a result of our cost reduction initiatives.
• Year to date, we have generated free cash flow of approximately $37 million, as FFO of $92 million have exceeded capital and decommissioning expenditures in the same period of $55 million.
• As a result of our strong third quarter performance, net debt decreased in the quarter by $17 million to $479 million, including $395 million drawn on our syndicated credit facility and $63 million of senior notes at September 30, 2020, primarily due to free cash flow being applied to our syndicated credit facility.
• In the third quarter the Company continued to receive payments from the Federal Government's Canadian Emergency Wage Subsidy program ("CEWS"). These payments reduced our Opex by $0.08 per boe and reduced G&A expenses by $0.05 per boe in the third quarter of 2020.
• Net loss was $4 million ($0.05 per share) in third quarter compared to $22 million ($0.30 per share) during the second quarter of 2020 and $28 million ($0.38 per share) in the third quarter of 2019. The improvement from the second quarter was largely due to higher realized crude oil prices. The improvement from the previous year was driven by our improved cost structure and higher light oil volumes.
• On September 21, 2020, we formally launched our bid to acquire Bonterra Energy Corp in a value enhancing transaction that will create the "Cardium Champion". 
• Subsequent to quarter end, we successfully extended our syndicated credit facility to January 29, 2021.

OPERATIONAL HIGHLIGHTS

• Average production in the third quarter remained relatively stable as the success of our development program earlier in 2020, largely offset the impact of our lower capital investment driven by lower commodity prices. Production averaged 25,031 boe/d in the third quarter, down 3% from the second quarter of 2020 and 2% from the third quarter of 2019.     
• Opex was $11.36 per boe in the third quarter of 2020 compared to $8.51 per boe in the previous quarter of 2020, and $14.65 per boe in the third quarter of 2019. While year-over-year operating expenses were down 22%, reflecting the improvements we have made in 2020, operating expenses increased from the second quarter of 2020 as we completed scheduled turnarounds and resumed routine repairs on downhole pumps and other related activities. 
• G&A expenses were $1.40 per boe in the third quarter of 2020, compared to $1.36 per boe in the previous quarter and $2.25 per boe in the third quarter of 2019. G&A costs were down 38% from the same quarter last year and remained largely in line with the second quarter as we continue to benefit from efficiency improvements made starting in 2019 and continuing to date in 2020. Additionally, in response to a continued weak commodity price environment, we continue to seek opportunities to remove costs from the business where possible.
• Our first half 2020 development program continues to exceed expectations with some of the strongest new well production rates seen to date in our multi-year Cardium program.     
• Development capital and decommissioning expenditures were $6 million in the third quarter of 2020 as the Company restricted development spending in response to lower crude oil prices driven by the COVID-19 pandemic. For the first nine months of 2020, capital and decommissioning expenditures totaled $55 million.
• During the third quarter of 2020, in partnership with our service providers, the Company received grants under the Alberta Site Rehabilitation Program ("ASRP") totaling $17 million and an additional $4 million in allocation eligibility as an Area Based Closure participant. These awards will allow the Company to expand our decommissioning activities for inactive Legacy sites starting in the fourth quarter of this year and further reduce our decommissioning liability.

2020 DEVELOPMENT PROGRAM AND OPERATIONS UPDATE

Over the past several months, our staff continued to work diligently under the volatile commodity price environment which has resulted in continued strong production and netback results.  Results by area for the third quarter of 2020 are as follows: