Highwood Asset Management Ltd. Announces Closing Of Acquisitions And Conversion Of Subscription Receipts

CALGARY, Aug. 3, 2023 - Highwood Asset Management Ltd. ("Highwood" or the "Company") (TSXV: HAM) is pleased to announce that, further to the Company's press releases dated July 5, 2023, July 10, 2023, and July 27, 2023 it has completed the acquisitions of each of Castlegate Energy Ltd. ("Castlegate"), Boulder Energy Ltd. ("Boulder") and Shale Petroleum Ltd. ("Shale") (collectively, the "Acquisitions"). The cash portion of the purchase price was funded through the net proceeds of the Company's previously ?announced $35 million equity financing (the "Offering"), which included at $10 million participation by HR Exploration & Energy Gmbh ("HR Exploration"), the Private Placement by ?1080766 Alberta Ltd., a company controlled by Joel MacLeod ("1080766") as? discussed below, and proceeds from a credit facility with Royal Bank ?of Canada and ATB Financial. The Offering was conducted pursuant to an agency agreement with a syndicate of agents led ?by RBC ?Capital Markets, ?Echelon Wealth Partners Inc. and Raymond James Ltd. (the "Agents").

Concurrently with the completion of the Acquisitions, in accordance with their terms, each subscription receipt of the Company issued pursuant to the Offering will be exchanged effective August 3, 2023, for one common share of the Company (a "Common Share") and one-half of one Common Share purchase warrant (each full warrant, a "Warrant") with each Warrant exercisable into ?one Common Share (each a "Warrant Share") at an exercise price of $7.50 per Warrant Share until August 3, 2026. The net proceeds of approximately $32.7 million were released from escrow to fund a portion of the purchase price of the Acquisitions. Holders of subscription receipts are not required to take any action in order to receive the underlying Common Shares and Warrants, and the subscription receipts are expected to be halted and subsequently de-listed from trading on the TSX Venture Exchange on August 3, 2023.

Commenting on the Acquisitions, Joel MacLeod , Executive Chairman of Highwood said "We are grateful ?for the institutional equity and shareholder support on our financing and encouraged by the approximate ??$10/bbl improvement in oil price since the announcement of the acquisitions. We remain excited about ?the opportunity to acquire high quality, low ARO (asset retirement obligation) assets with significant ?depth of inventory with sub 12-month payouts at a combined 2.2x EV to NTM Field NOI¹ purchase multiple. Further, we believe having a clean capital structure with a advantaged cost and structure of debt financing supported by a $100 million credit facility from Canadian financial institutions is a significant advantage for Highwood as we look to grow Highwood to ??30,000+ boe/d. With an estimated initial leverage of approximately 1.2x on 2024E Adjusted EBITDA² and spending approximately 60% of anticipated cash flow to grow production ?over 20% while de-leveraging to approximately 0.9x by year-end 2024², we feel Highwood will be in a ?strong position to grow free cash flow per share over the next three to five years. These acquisitions are ?expected to provide a strong production and cash flow base as a platform for further consolidation of ?conventional oil and gas assets in the Western Canadian Sedimentary Basin. The assets bring highly economic multi-lateral drilling ?inventory with anticipated relatively quick payback periods, which are expected to drive near-term ?growth while generating free cash flow. We look forward to commencing our capital program in ?approximately 30-60 days and expect to increase production approximately 20% over the next ??6-8 months to approximately 5,000 boe/d. We remain committed to de-leveraging to approximately 0.9x ?by year-end 2024."?

Acquisitions

The final consideration for the Shale Acquisition was 1,277,025 Common Shares. ?The final consideration for the Castlegate Acquisition was comprised of $37.6 million in cash. The final consideration for the Boulder Acquisition was $75.1 million in cash, the issuance of 1,500,000 common shares in the capital of the Company ("Common Shares") and a $14 million note payable to the Boulder shareholder (the "Boulder Note"). The Boulder Note matures on July 1, 2025 ?and provides for payments, equal to $3,500,000, ?commencing October 1, 2024 and thereafter ?on ?January 1, 2025, April 1, 2025 ?and July 1, 2025, with the ?outstanding principal (if any) due in full on maturity?. The Boulder Note will pay ?interest at 13% per annum payable ??quarterly on October 1, 2024, January 1, 2025, April 1, 2025 and July ??1, 2025; all payments/repayments (of both ?principal and interest) under the Boulder Note are subject to certain terms and conditions under ?the New Credit Facilities discussed below. All obligations under the Boulder Note are fully and unconditionally personally guaranteed by Joel ?MacLeod, the Executive ?Chairman of the ?Company, in an amount limited to $3 million, plus costs and expenses of ?enforcement plus interest (the "Guarantee").

New Credit Facilities

In connection with the Acquisitions, the Company entered into a new senior secured extendible revolving credit facilities in the aggregate principal amount of up to $100 million (the "New Credit Facilities"). The New Credit Facilities are comprised of extendible revolving credit facilities consisting of a $10? million ?operating facility and an up to $?90? million syndicated loan facility.

The New Credit Facilities have a revolving ?period of 364 days, extendible annually at the request of the Company, subject to approval of the lenders thereunder. If not ?extended, the New Credit Facilities are anticipated to automatically convert to a term loan and all outstanding obligations will be repayable ?one year after the expiry of the revolving period. The borrowing base for the New Credit Facilities is $?100? ?million, and to be subject to semi-annual redeterminations, based upon the Company's annual report of the Company's independent qualified reserves evaluator or updates thereto. The New Credit Facilities are secured by a first fixed ?and floating charge over all the Company's assets. The New Credit Facilities include ?operating restrictions on the Company, including (among other things), limitations on acquisitions, distributions, ?dividends and hedging arrangements.?

Board Updates

In connection with the completion of the Acquisitions, the Company has added David Gardner and Garrett Ulmer to the Board of Directors.

Mr. Gardner has over 30 years of experience in the global oil and gas industry, initially as a geologist with Exxon; and after completing an MBA, progressed his commercial career to the corporate executive level with a growing focus on general management, strategy, business development and M&A. He spent nearly 17 years with BP, including in BP's corporate center and M&A group, and leading Exploration new access globally and Upstream business development across Europe and Africa. From 2014, Mr. Gardner was SVP of Business Development for Husky Energy in Calgary culminating in Husky's combination with Cenovus Energy in January 2021. Mr. Gardner, also, was a Special Adviser with Kirk Lovegrove & Company Ltd in London in 2021. Since December 2021, Mr Gardner has been the CEO of Shale Petroleum Ltd. Mr. Gardner has a BS degree in Geology from the College of William and Mary in Virginia, an MS ?degree in Geology from the University of Wisconsin-Madison and an MBA degree from the ?University of California, Los Angeles.?

Mr. Ulmer is currently serving as Chief Executive Officer of private oil and gas company West Lake Energy following approximately 2 years as Chief Operating Officer. Prior thereto, he worked in roles of increasing responsibility at Bellatrix Exploration from 2009 up to the role of Chief Operating Officer from 2017 to 2020. He has over 30 years experience in the upstream oil and gas industry including extensive service with Imperial Oil (Exxon Mobil) and ConocoPhillips in various roles.

The Board now consists of: Joel Macleod (Executive Chairman), Greg Macdonald, Stephen Holyoake, Ryan Mooney, David Gardner and Garrett Ulmer. The officers consist of: Joel Macleod (Executive Chairman), Greg Macdonald (Chief Executive Officer), Chris Allchorne (Chief Financial Officer), Kelly McDonald ?(Vice President, Exploration) and Trevor Wong-Chor (Corporate Secretary).

Mr. Gardner is the nominee pursuant to a board nomination agreement ("HR Board Nomination Agreement") between the Company and HR Exploration whereby HR Exploration shall, for so long as it and its affiliates together shall own or control or exercise discretion over, directly or indirectly, not less than 10% of the issued and outstanding Common Shares, be entitled to nominate for election or appointment to the board of directors of the Company (the "Board"), as applicable, the greater ?of: (i) one nominee and (ii) such number of nominees that, when compared to the authorized ?number of directors on the Board at such time, is closest to but not less than proportional to the ?total number of Common Shares which HR Exploration and its affiliates together own or exercise ?control or direction over, directly or indirectly, relative to the total number of Common Shares ?then issued and outstanding. The Company shall use commercially reasonable efforts to ensure that the nominee(s) of HR Exploration shall be elected or appointed to the Board. The HR Board Nomination Agreement further provides HR Exploration with participation rights for future offerings to maintain its percentage ownership interest in the issued and outstanding Common Shares up to a maximum of a percentage ownership interest of 17% of the issued and outstanding Common Shares. HR Exploration also has the right to appoint an observer to the Board for so long as it is entitled to designate a Board nominee for election or appointment under the HR Board Nomination Agreement.

Mr. Ulmer is the nominee pursuant to a board nomination agreement between the Company and West Lake ("WL Board Nomination Agreement") whereby West Lake shall, for so long as it shall own or control, directly or indirectly, not less than 9% of the issued and outstanding Common Shares, be entitled to designate for election or appointment to the Board, as applicable, one nominee. The Company shall use commercially reasonable efforts to ensure that West Lake's nominee shall be elected to the Board.

Private Placement

In connection with the closing of ?the Acquisitions, 1080766 has purchased an aggregate amount of ??$2.8 million in units of the Company (the "Private Placement Units") comprised of one Common Share and one-half of one Warrant (the "Private Placement"). Each Private Placement Warrant is exercisable into ?one Warrant Share at an exercise price of $7.50 per Warrant ?Share until August 3, 2026.?

The Private Placement Units purchased pursuant to the Private Placement (including the Common Shares and Warrants comprising such Private Placement Units, and the Warrant Shares issuable upon the exercise of such Warrants) are subject to a statutory ?hold ?period until December 4, 2023. ??

1080766 (and Joel MacLeod) also participated in the Offering for an additional $2.2 million, bringing the aggregate equity commitment from 1080766 (and Joel MacLeod) to $5 million.

Early Warning Requirements

Following completion of the Acquisitions, conversion of Subscription Receipts and the Private Placement, Highwood now has 15,114,323 Common Shares outstanding.

1080766 Alberta Ltd. ("1080766") (a company controlled by Joel MacLeod, a Director and Executive Chairman of the Company) acquired 309,416 Subscription Receipts pursuant to the Offering. Further, Joel MacLeod directly acquired 57,250 Subscription Receipts pursuant to the Offering. All of these Subscription Receipts will be converted to Common Shares and Warrants effective August 3, 2023 in connection with closing of the Acquisitions. For the purposes of this press release, all securities acquired or to be acquired ?directly by Joel MacLeod are included in the amount of securities that 1080766 ?owns and exercises control and direction over?.

1080766 completed the Private Placement for $2.8 million and received 466,666 Common Shares and 233,333 Warrants in connection with the Private Placement.

Following completion of the Private Placement and Conversion of the Subscription Receipts, 1080766 and Joel MacLeod will own and exercise control or direction over 4,879,193 Common Shares ?and 416,666 Warrants, representing approximately 32% of the issued and outstanding ?Common Shares on a non-diluted basis and approximately 34% of the issued and outstanding ?Common Shares on a partially-diluted basis (assuming the exercise of all Warrants held by ?1080766 and Joel MacLeod). ?Joel MacLeod is the sole control person of the 1080766. Joel MacLeod and 1080766 participated in the Offering for investment purposes.

HR Exploration acquired 1,666,666 Subscription ?Receipts pursuant to the Offering at an aggregate purchase price of ??$10,000,000 ($6.00 per Subscription Receipt). All of these Subscription Receipts will be converted into an aggregate of ??1,666,666 Common Shares and 833,333 Warrants effective August 3, 2023 in connection with closing of the Acquisitions.? On August 3, 2023, HR ?Exploration also received 943,741 Common Shares in connection with the closing of the Shale Acquisition. HR Exploration ?will own and exercise control or direction over 2,610,407 ??Common Shares ?and 833,333 Warrants, representing ?approximately 17% of the issued and outstanding ??Common Shares on a non-?diluted basis and approximately 21% of the ?issued and outstanding ?Common Shares on a ?partially-diluted basis (?assuming the exercise of all Warrants held by ?HR ?Exploration). HR Exploration may acquire or dispose of additional securities of the Company in the future through the ?market, ?privately, or otherwise, as circumstances or market conditions warrant?. ?

The involvement of 1080766 in the Private Placement and Guarantee are "related party transactions" ?within ?the ?meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ??("MI 61-101") and the Company is relying on the exemptions in sections 5.5(a) and 5.7(a) [Fair ?Market ?Value Not ?More Than 25% of Market Capitalization] of MI 61-101 in order to be exempt from the formal valuation and ?minority shareholder approval requirements therein, as the ??aggregate fair market value of such transactions does ?not exceed 25% of the Company's current market capitalization, ?as determined in accordance with MI 61-101?.??

Common Share and Warrant Listing on TSX Venture Exchange

The Warrants underlying the Subscription Receipts are expected to be listed for trading on the TSX Venture Exchange under the ?symbol "HAM.WT" effective as of the opening of markets on, or about, August 4, 2023.? The Common Shares underlying the Subscription Receipts are expected to be listed for trading on the TSX Venture Exchange effective as of the opening of markets on, or about, August 4, 2023.?

?Financial and Strategic Advisors

RBC Capital Markets acted as financial advisor to Highwood on the Acquisitions and Echelon Capital Markets, Raymond James and ATB Capital Markets acted as strategic advisors to Highwood on the Acquisitions.

About Highwood Asset Management Ltd.

Highwood Asset Management Ltd. (TSXV: HAM) is a growth orientated oil and gas exploration and production company committed to shareholder alignment with high insider ownership while creating long-term value for its shareholders. The Company has an extensive inventory of low-risk, oil development drilling locations focused primarily on horizontal multi-lateral development of its assets. Operating as a responsible corporate citizen is a key focus to ensure we deliver on our environmental, social and governance (ESG) commitments and goals. For more information, please visit the Company's website at www.highwoodmgmt.com.

Cautionary Note Regarding Forward-Looking Information

This news release contains certain statements and information, including forward-looking statements within the meaning of the "safe harbor" provisions of applicable securities laws, and which are collectively referred to herein as "forward-looking statements". The forward-looking statements contained in this news release are based on Highwood's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. When used in this news release, the words ?"seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", ??"could", "might", "should", "believe" and similar expressions, as they relate to Highwood or the proposed Acquisitions, are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Actual operational and financial results may differ materially from Highwood's expectations contained in the forward-looking statements as a result of various factors, many of which are beyond the control of the Company.

Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements may include, but are not limited to, statements with respect to:

• expectations regarding future share ownership of Highwood by insiders;
• anticipated benefits of each of the Acquisitions, including anticipated acquisition metrics used in this news release;
• the listing of the Warrants on the TSX-V;
• pending approximately 60% of anticipated cash flow;
• growing production over 25%;
• de-leveraging to ?approximately 0.9x by year-end 2024;
• drilling plans, timing of drilling and results expectations;
• the Company's expectations with respect to Highwood's financial and operational results following completion of the Acquisitions;
• the Company's estimates of the drilling locations inventory and tax pools associated with the Acquisitions;
• the Company's expectations regarding capacity of infrastructure associated with its business and the businesses of Shale, Boulder and Castlegate;
• the performance characteristics of the Company and the oil and natural gas properties subject to the Acquisitions;
• the quantity of the Company's and the acquired businesses' oil and natural gas reserves and anticipated future cash flows from such reserves;
• the Company's expectations regarding commodity prices and costs;
• the Company's expectations regarding supply and demand for oil and natural gas;
• expectations regarding the Company's ability to raise capital and to continually add to reserves through acquisitions and development;
• the Company's expectation regarding its ability to return of capital to shareholders;
• treatment under governmental regulatory regimes and tax laws;
• fluctuations in depletion, depreciation, and accretion rates;
• expected changes in regulatory regimes in respect of royalty curves and regulatory improvements and the effects of such changes; and
• Highwood's business and acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom.

These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially, including, but not limited to:

• failure to realize the anticipated benefits of acquisitions, including results and/or synergies of each of the proposed Acquisitions;
• unexpected costs or liabilities related to each of the Acquisitions;
• volatility in market prices for oil and natural gas;
• operational risks and liabilities inherent in oil and natural gas operations;
• uncertainties associated with estimating oil and natural gas reserves;
• changes in royalty regimes;
• competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
• incorrect assessments of the value of benefits to be obtained from acquisitions and exploration and development programs;
• unforeseen difficulties in integrating assets acquired through acquisitions (including each of the Acquisitions) into the Company's operations;
• that the Company's ability to maintain strong business relationships with its suppliers, service providers and other third parties will be maintained;
• geological, technical, drilling and processing problems;
• fluctuations in foreign exchange or interest rates and stock market volatility;
• liquidity;
• commodity price volatility and adverse general economic, political and market conditions;
• the accuracy of oil and gas reserves estimates and estimated production levels as they are affected by exploration and development drilling and estimated decline rates;
• the uncertainties in regard to the timing of Highwood's exploration and development program;
• fluctuations in the costs of borrowing;
• political or economic developments;
• uncertainty related to geopolitical conflict;
• ability to obtain regulatory approvals; and
• the results of litigation or regulatory proceedings that may be brought against the Company;
• changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

Caution Respecting Reserves Information

Readers should see the "Selected Technical Terms" in the Annual Information Form filed on April 28, 2023 for the definition of certain oil and gas terms.

Disclosure in this news release of oil and gas information is presented in accordance with generally accepted industry practices in Canada and National Instrument 51-101- Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Specifically, other than as noted herein, the oil and gas information regarding the potential Acquisitions presented in this news release is based on: (i) in respect of Boulder, the reserves report prepared by McDaniel & Associates Consultants Ltd. and dated April 3, 2023 evaluating oil, natural gas liquids ?and natural gas interests ?attributable to Boulder's properties at January 1, 2023 (the "Brazeau Reserves Report"), (ii) in respect of Castlegate, the reserves report prepared by GLJ Ltd. and dated May 24, 2023 evaluating Castlegate's oil, natural gas liquids ?and natural gas interests at January 1, 2023 (the "Castlegate Reserves Report"), and (iii) in respect of Shale, the reserves report prepared by GLJ Ltd. and dated January 18, 2023 evaluating Shale's oil and gas reserves in aggregate? at January 1, 2023 (the "Shale Reserves Report", and together with the Brazeau Report and the Castlegate Report, the "Acquisition Reserves Reports"). Neither Highwood nor the Agents have engaged in any independent verification of any of the Brazeau Reserves Report, the Castlegate Reserves Report or the Shale Reserves Report, nor any of the contents thereof. Other than as noted herein, the oil and gas information regarding the Company presented in this news release is based on the reserves report prepared by GLJ Ltd. ?evaluating the crude oil, natural gas and natural gas liquids attributable to the Company's properties at January 1, 2023 (the "2022 Reserves Report").

Reserves are classified according to the degree of certainty associated with the estimates as follows:

"Proved reserves" or "1P" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

"Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves.

"Proved plus probable reserves" or "2P" is the total of proved reserves and probable reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

"Proved Developed Producing" or "PDP" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.

This news release contains oil and gas metrics commonly used in the oil and gas industry, including those set out below, which do not have standardized meanings or standard methods of calculation and may not be comparable to similar measures presented by other companies. Such metrics have been included in this news release to provide readers with an additional method to evaluate the Company's performance. However, such measures are not reliable indicators of the Company's future performance and should therefore not be unduly relied upon or used to make comparisons to other companies. Further, these metrics have not been independently evaluated, audited or reviewed and are based on historical data, extrapolations therefrom and management's professional judgement, which involves a high degree of subjectivity. For these reasons, actual metrics attributable to any particular group of properties may differ from our estimates herein and the differences could be significant.

?"2P RLI" means proven and probable reserves life index and is calculated as proven and probable reserves divided by ?total estimated NTM production.?

?"NPV10" represents the anticipated net present value of the future net revenue discounted at a rate of 10% associated ?with the applicable reserves.?

?"Payback Period" is measured as the time from the start of production to recovery of the capital investment.?

?"RLI" means reserves life index and is calculated based on the amount for the relevant reserves category divided by total ?estimated NTM production.?

The net present value of future net revenues attributable to reserves and resources included in this news release do not represent the fair market value of such reserves and resources. There is no assurance that the forecast prices and costs assumptions will be attained, and variances could be material. The recovery and reserve estimates of reserves and resources provided in this news release are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. Actual reserves and resources may be greater or less than the estimates provided in this news release. The estimates of reserves and future net revenue for individual properties in this news release may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

This news release discloses potential future drilling locations in two categories: (a) booked locations; and (b) unbooked locations. Booked locations are proposed drilling locations identified in the Acquisition Reserves Reports that have proved and/or probable reserves, as applicable, attributed to them in the Acquisition Reserves Reports. Unbooked locations are internal estimates based on prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal technical analysis review. Unbooked locations have been identified by members of management who are qualified reserves evaluators in accordance with NI 51-101 based on evaluation of applicable geologic, seismic, engineering, production and reserves information. Unbooked locations do not have proved or probable reserves attributed to them in the Acquisition Reserves Reports. Highwood's ability to drill and develop these locations and the drilling locations on which Highwood actually drills wells depends on a number of known and unknown risks and uncertainties. As a result of these risks and uncertainties, there can be no assurance that the potential future drilling locations identified in this news release will ever be drilled or if Highwood will be able to produce crude oil, natural gas and natural gas liquids from these or any other potential drilling locations.

Basis of Barrels of Oil Equivalent - In this news release, the abbreviation boe means a barrel of oil equivalent on the basis of 1 boe to 6 Mcf of natural gas when converting natural gas to boes. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf to 1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion ratio at 6:1 may be misleading.

References to "liquids" in this news release refer to, collectively, heavy crude oil, light crude oil and medium crude oil combined, and natural gas liquids.

Non-GAAP and other Specified Financial Measures

This news release contains financial measures commonly used in the oil and natural gas industry, including "Field Net ?Operating Income" and "Adjusted EBITDA". These financial measures do not have any standardized meaning under IFRS ?and therefore may not be comparable to similar measures presented by other companies. Readers are cautioned that these ?non-IFRS measure should not be construed as an alternative to other measures of financial performance calculated in ?accordance with IFRS. These non-IFRS measures provides additional information that Management believes is meaningful ?in describing the Company's operational performance, liquidity and capacity to fund capital expenditures and other ?activities. Management believes that the presentation of these non-IFRS measures provide useful information to investors ?and shareholders as the measures provide increased transparency and the ability to better analyze performance against ?prior periods on a comparable basis.?

"Adjusted EBITDA" is calculated as cash flow ?from (used in) operating activities, adding back changes in non-cash working capital, decommissioning obligation ?expenditures, transaction costs and interest expense. The Company considers Adjusted EBITDA ?to be a key capital management measure as it is both used within certain financial covenants anticipated to be prescribed ?under the New Credit Facilities and demonstrates Highwood's standalone profitability, operating and financial ?performance in terms of cash flow generation, adjusting for interest related to its capital structure. The most directly ?comparable GAAP measure is cash flow from (used in) operating activities. ?

?"Field Net Operating Income" or "Field NOI" is used a measure to calculate NOI at the field level. The most directly comparable GAAP measure is cash flow from (used in) operating activities. Field NOI is calculated as cash flow from (used in) operating activities, adding back decommissioning obligation expenditures and any costs incurred at the corporate level. There are no general and administrative expenses included in Field Cash Flow as those costs are incurred at the corporate level.

?"Free Cash Flow" or "FCF" is used as an indicator of the efficiency and liquidity of the Company's business, measuring ?its funds after capital expenditures available to manage debt levels, pursue acquisitions and assess the optionality to ?pay dividends and/or return capital to shareholders though activities such as share repurchases. The most directly ?comparable GAAP measure is cash flow from (used in) operating activities. Free Cash Flow is calculated as cash flow ?from (used in) operating activities, less interest, office lease expenses, cash taxes and capital expenditures.??

All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.

Neither TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

SOURCE Highwood Oil Company Ltd.