HEADWATER EXPLORATION INC. ANNOUNCES THIRD QUARTER OPERATING AND FINANCIAL RESULTS AND DECLARATION OF QUARTERLY DIVIDEND

Executive Summary

• Headwater Exploration reported Q3 2025 net income of $35.9 M ($0.15/share basic) and adjusted funds flow from operations of $80.4 M ($0.34/share basic).
• Production reached a record 22,523 boe/d (up 11% YoY); operating netback including derivatives was $44.67/boe.
• The Board declared a quarterly cash dividend of $0.11 per common share (total $26.3 M), the fourth‑quarter dividend payable Jan 15 2026.

Key Details

• Financial Highlights (Q3 2025 vs Q3 2024)
• Sales, net of blending expense: $146.5 M (‑3%).
• Adjusted funds flow from operations: $80.4 M (‑5%).
• Cash flows from operating activities: $85.9 M (‑10%).
• Net income: $35.9 M (‑25%).
• Capital expenditures: $68.7 M (+18%).

• Dividends declared: $26.3 M (+11%).

• Production & Operating Metrics

• Average daily production: 22,523 boe/d (up 11% YoY).
• Heavy crude oil: 20,948 bbls/d (+6%).
• Natural gas: 8.4 mmcf/d (+147%).
• NGLs: 169 bbls/d (+164%).
• Operating netback (incl. derivatives): $44.67/boe (‑14% YoY).

• Adjusted funds flow netback: $38.49/boe (‑14% YoY).

• Capital Allocation & Operations Update

• Total Q3 capital program: $68.7 M for development, exploration and secondary recovery.
• Reallocated an additional $7 M (total $42 M) toward strategic opportunities (new play delineation, expanded secondary recovery, land acquisition).

• Initial 2025 capital budget remains at $225 M.

• Grand Rapids Formation – Marten Hills West

• 8 multi‑lateral wells on‑stream; 2,000 bbls/d production from the formation.
• Recent well results: 30‑day IP rates of 330 bbls/d (07/04‑18‑075‑01W5), 316 bbls/d (00/01‑36‑074‑02W5), and 170 bbls/d (02/08‑11‑075‑02W5).
• Average 30‑day IP across first 5 wells: ~300 bbls/d.

• Two secondary recovery pilots commissioned; additional 4–5 stratigraphic tests planned for Q1 2026 and up to 20 multi‑laterals in 2026.

• Greater Pelican Area

• Wabiskaw discovery well produced >90,000 bbls in first six months, >500 bbls/d current rate.

• First multi‑lateral polymer pilot drilling underway; second pilot and saline water source well added to 2025 program, expected on‑stream before year‑end.

• Marten Hills West Development

• Production now exceeds 15,000 bbls/d; target of 9 sections (4,500 bbls/d) by year‑end 2025, representing ~30% of area oil production.

• Plan to add 6 more secondary‑recovery sections in 2026, targeting ~50% of area production.

• McCully Asset

• Scheduled back on production early Dec 2025.

• Hedged ≈68% of Dec 2025–Apr 2026 output at C$14.72/MMBtu, expected cash flow ≈C$15 M for the winter season.

• Dividend Information

• Quarterly cash dividend: $0.11 per common share (total $26.3 M).
• Cumulative dividends paid to date: $291.4 M ($1.23 per share).

• Fourth‑quarter dividend payable Jan 15 2026; eligible dividend under the Income Tax Act.

• Liquidity & Capital Structure

• Adjusted working capital as of Sep 30 2025: $36.4 M (down 43% YoY).
• No outstanding bank debt; positive working capital position.

Notable Quotes

(Quotes not provided in the release; omitted.)