HEADWATER EXPLORATION INC. ANNOUNCES 2025 RESERVES, FOURTH QUARTER PRODUCTION RESULTS AND OPERATIONS UPDATE

Executive Summary

• Headwater reported a strong Q4 2025 average production of ~24,250 boe/d and full‑year 2025 production of ~22,750 boe/d – a 12% year‑over‑year increase.
• 2025 reserve additions were material: proved developed producing reserves rose 53% to 44.5 mmboe (285% production replacement) and total proved plus probable reserves grew 54% to 104.5 mmboe (541% production replacement).
• Adjusted funds flow from operations estimated at $326 M with a netback of $39.25/boe; recycle ratios now range from 3.6‑4.1, indicating strong profitability.

Key Details

• Production Highlights
• Q4 2025 average: ~24,250 boe/d (22,100 bbls/d heavy oil, 140 bbls/d NGL, 12.1 mmcf/d gas).

• Full‑year 2025 average: ~22,750 boe/d (20,700 bbls/d heavy oil, 160 bbls/d NGL, 11.4 mmcf/d gas).

• Reserve Highlights

• Proved developed producing reserves: 44.5 mmboe (+53%).
• Total proved reserves: 68.3 mmboe (+59%).
• Total proved + probable reserves: 104.5 mmboe (+54%).
• Production replacement ratios: 285% (PD‑P), 403% (Total Proved), 541% (Proved + Probable).

• Reserve Life Index (RLI): 5.0 yr (PD‑P), 7.6 yr (Total Proved), 11.7 yr (Proved + Probable).

• Financial Metrics

• Adjusted funds flow from operations: ~$326 M (unaudited).
• Adjusted funds flow netback: $39.25/boe.
• F&D costs: $9.65/boe (PD‑P), $11.04/boe (Total Proved), $9.97/boe (Proved + Probable).

• Recycle ratios: 4.1 (PD‑P), 3.6 (Total Proved), 3.9 (Proved + Probable).

• Capital Expenditure 2025

• Total capex: ~$228 M (unaudited) – $60 M waterflood, $58 M land & exploration, $110 M development.

• Operations Update – Key Wells

• Grand Rapids Formation: first production started May 2025; now >2,000 bbls/d, with >750 bbls/d slated for water‑flood support by Feb 2026.
• Well 03/13‑22‑075‑02W5 (3‑mile step‑out): 15‑day IP of 300 bbls/d (19 API). Injection well to start Feb 2026.
• Greater Pelican: two 4‑leg laterals IP 382 bbls/d and 470 bbls/d; polymer injection support ongoing.

• Wabiskaw test (13‑34‑079‑23W4): 30‑day IP 80 bbls/d, 70% water cut; follow‑up lateral IP 37 bbls/d.

• Secondary Recovery

• End‑2025: 10 sections, 11,500 bbls/d supported (≈50% of oil production).

• Target by year‑end 2026: 14,000 bbls/d (~60% of production).

• Future Development Costs (Undiscounted)

• Proved undeveloped reserves: $401 M (2026‑2029).

• Proved + probable undeveloped reserves: $588 M (2026‑2029).

• Pricing Assumptions (as of Jan 1 2026)

• WTI forecast 2026–2036 ranging from $59.9 to $82.6 per barrel.

• Natural gas (AECO) forecast $3.00–$4.52 per MMBtu.

• Forward‑Looking Statements Highlights

• Expectation of 750 bbls/d water‑flood support in Grand Rapids by Feb 2026.
• Anticipated polymer flood expansion and 2‑3 new exploration drills in Greater Pelican during 2026.
• Forecasted decline rate <20% and maintenance capex ≈30% of adjusted funds flow at $60 WTI by year‑end 2026.

Notable Quotes

• “Exceptional results across our asset base positioned Headwater for strong fourth quarter production volumes…,” – Executive Chairman Neil Roszell.
• “Our unwavering commitment to secondary recovery continues to result in industry‑leading sustainability and asset duration,” – CEO Jason Jaskela.