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Birchcliff Announces Second Quarter 2017 Results and Updated Guidance – Part 3


Elmworth Gas Plant

We have commenced the preliminary planning for the construction of a 100% owned and operated natural gas plant in the Elmworth area (the "Elmworth Gas Plant") with a planned processing capacity of 40 MMcf/d. We had initially planned for an on-stream date in the fall of 2021; however, Birchcliff has also made the decision to defer this date by one year to 2022 for similar reasons set forth above with respect to the Pouce Coupe Gas Plant.

Update on Processing Arrangements at the AltaGas Facility

We have access to 90 MMcf/d of firm processing capacity at the AltaGas Facility and a right of first refusal with respect to firm processing capacity in excess of 90 MMcf/d. Our processing agreement with AltaGas also contains a take-or-pay obligation. On June 29, 2017, we modified our take-or-pay agreement with AltaGas effective January 1, 2017 to incent volumes above our existing take-or-pay commitment at the AltaGas Facility. Effective January 1, 2017, all volumes over our existing take-or-pay volumes (the "Additional Volumes") will be processed for a significantly reduced fee. Additional Volumes shall not apply to satisfy any portion of our existing take-or-pay obligations and the Reduced Fee only applies to Additional Volumes.

As a result of this revised arrangement, we expect that our operating costs will be reduced by approximately $4.7 million in 2017. In addition, as we now expect that our take-or-pay obligation will not be fulfilled until 2020, we will not be required to build our own plant until that time. This removes the requirement to spend any material capital in 2017 and 2018 on our Phase VII expansion as discussed above.

Expansion to 2017 Capital Expenditure Budget

Given our completed and planned dispositions for 2017, our Board of Directors has approved an increased 2017 capital expenditure budget to approximately $404 million, from the $355 million that was previously announced. Net capital expenditures in 2017 are expected to be approximately $262 million.

The additional capital under our increased 2017 capital program (the "2017 Capital Program") will be primarily directed towards the infrastructure needed for the Phase VI expansion of our Pouce Coupe Gas Plant and the drilling of eight additional wells as outlined below. The following table provides the details of our 2017 Capital Program, including a comparison to our original 2017 capital expenditure program:

/T/

2017 Capital Program(1)

Gross Wells Net Wells ---------------------------------------- New Old New Old ---------------------------------------------------------------------------- Drilling & Development Pouce Coupe - Montney D1 HZ Gas Wells 26 22 26.0 22.0 Pouce Coupe - Basal Doig/Upper Montney HZ Gas Wells 7 7 7.0 7.0 Pouce Coupe - Montney D4 HZ Gas Wells 3 3 3.0 3.0 Pouce Coupe - Montney/Doig Vertical Science/Technology Well(2) 1 - 1.0 - Gordondale - Montney D2 HZ Oil Wells 9 7 9.0 7.0 Gordondale - Montney D1 HZ Oil Wells 5 5 5.0 5.0 Gordondale - Montney D1 HZ Gas Wells 2 2 2.0 2.0 2018 Pre-Spend Capital(3) 1 - 1.0 - 2016 Carry Forward Capital(4) - - - - ---------------------------------------------------------------------------- Total Drilling & Development(5) 54 46 54.0 46.0

Facilities & Infrastructure(6)
Production Optimization(7)
Land & Seismic
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Other
TOTAL CAPITAL
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Acquisitions & Dispositions(8)
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TOTAL NET CAPITAL
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2017 Capital Program(1)

Difference in Capital Capital (MM$)(1) (MM$)(1) ------------------------- New Old --------------------------------------------------------------------------- Drilling & Development Pouce Coupe - Montney D1 HZ Gas Wells 113.9 86.1 27.8 Pouce Coupe - Basal Doig/Upper Montney HZ Gas Wells 30.6 30.2 0.4 Pouce Coupe - Montney D4 HZ Gas Wells 13.0 12.9 0.1 Pouce Coupe - Montney/Doig Vertical Science/Technology Well(2) 3.0 - 3.0 Gordondale - Montney D2 HZ Oil Wells 45.9 40.7 5.3 Gordondale - Montney D1 HZ Oil Wells 27.2 28.9 (1.7) Gordondale - Montney D1 HZ Gas Wells 11.4 11.6 (0.2) 2018 Pre-Spend Capital(3) 9.9 - 9.9 2016 Carry Forward Capital(4) 17.0 19.4 (2.4) --------------------------------------------------------------------------- Total Drilling & Development(5) 272.0 229.8 42.2
Facilities & Infrastructure(6) 87.7 85.6 2.1 Production Optimization(7) 23.9 19.4 4.5 Land & Seismic 4.5 4.6 (0.0) --------------------------------------------------------------------------- Other 15.9 15.9 0.0 TOTAL CAPITAL 404.0 355.2 48.8 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Acquisitions & Dispositions(8) (141.6) (0.2) (141.4) --------------------------------------------------------------------------- --------------------------------------------------------------------------- TOTAL NET CAPITAL 262.4 355.0 (92.6) --------------------------------------------------------------------------- --------------------------------------------------------------------------- (1) Numbers may not add due to rounding. (2) Capital includes pad construction, drilling and core cutting and analysis. (3) Capital includes the drilling of 1 (1.0) Montney D1 horizontal natural gas well in Pouce Coupe, 3 surface holes and surface pad construction in anticipation of our 2018 drilling program. (4) Primarily completion, equipping and tie-in costs associated with 10 (10.0 net) wells rig released at the end of 2016. (5) All drilling and development costs have been presented on a drill, case, complete, equip and tie-in basis except for 1 Montney D1 well referred to in note (3) above and the Montney/Doig vertical science/technology well. (6) Includes approximately $26.3 million of capital in 2017 for the Phase V expansion and $26.5 million of capital in 2017 for the Phase VI expansion. (7) Includes $12.3 million of sustaining capital. (8) The 2017 Capital Program has been presented on both a total and net basis (net of acquisitions and dispositions). Dispositions that have been completed or announced at the date of this press release have been accounted for in the table above. See "Advisories - Capital Expenditures".

/T/

The additional 8 (8.0 net) wells consist of 2 Montney D2 horizontal oil wells in Gordondale, 5 Montney D1 horizontal natural gas wells in Pouce Coupe and 1 Montney/Doig vertical science and technology well in Pouce Coupe (see "Science and Technology Multi-Well Pad Program"). Of these additional wells, the 2 Montney D2 horizontal oil wells in Gordondale are expected to be brought on production in October 2017 and 4 Montney D1 horizontal natural gas wells in Pouce Coupe are expected to be brought on production in late December 2017. The remaining D1 horizontal well in Pouce Coupe will not be brought on production until 2018. See "Operational Update" below.

The expanded portion of our 2017 Capital Program also includes capital for longer-lead time items related to our 2018 capital program and the Phase VI expansion of our Pouce Coupe Gas Plant, including the construction of multi-well pads for use in 2018, the commencement of part of our 2018 drilling program in December 2017 and pipeline infrastructure commitments for Phase VI (which is scheduled to come on-stream in October 2018).

Operational Update

Our 2017 Capital Program is progressing well, is on schedule and is meeting our expectations for capital costs and results. Our increased 2017 Capital Program contemplates the drilling of a total of 54 (54.0 net) wells during 2017, 38 (38.0 net) in Pouce Coupe and 16 (16.0 net) in Gordondale. The following table summarizes the wells we have drilled and brought on production year-to-date, as well as the remaining wells to be drilled and brought on production during 2017:

/T/

Wells Drilled - 2017

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Remaining wells to be Total wells Wells drilled drilled to be drilled Area to-date in 2017 in 2017 --------------------------------------------------------------------------- Pouce Coupe Montney D1 HZ Gas Wells 21 6 27 Basal Doig/Upper Montney HZ Gas Wells 7 0 7 Montney D4 HZ Gas Wells 3 0 3 Montney/Doig Vertical Science/Tech Well 0 1 1 ------------------------------------------------------------------------- Total - Pouce Coupe 31 7 38

Gordondale

Montney D2 HZ Oil Wells 9 0 9 Montney D1 HZ Oil Wells 5 0 5 Montney D1 HZ Liquids Rich Gas Wells 2 0 2 ------------------------------------------------------------------------- Total - Gordondale 16 0 16
--------------------------------------------------------------------------- TOTAL - COMBINED 47 7 54 ---------------------------------------------------------------------------

Wells Drilled and Brought on Production - 2017
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Remaining wells to be Total wells Wells brought brought on to be brought on production production in on production Area to-date 2017 in 2017 --------------------------------------------------------------------------- Pouce Coupe Montney D1 HZ Gas Wells 8 18 26(1) Basal Doig/Upper Montney HZ Gas 1 6 7 Wells Montney D4 HZ Gas Wells 1 2 3 Montney/Doig Vertical N/A N/A N/A(1) Science/Tech Well ------------------------------------------------------------------------- Total - Pouce Coupe 10 26 36(1)

Gordondale

Montney D2 HZ Oil Wells 3 6 9 Montney D1 HZ Oil Wells 4 1 5 Montney D1 HZ Liquids Rich Gas 2 0 2 Wells ------------------------------------------------------------------------- Total - Gordondale 9 7 16
--------------------------------------------------------------------------- TOTAL - COMBINED 19 33 52(1) ---------------------------------------------------------------------------

(1) A total of 27 Montney D1 horizontal natural gas wells are expected to

be drilled in Pouce Coupe in 2017. Of these 27 wells, one well is expected be drilled in December 2017 and will not be completed or brought production until 2018. Accordingly, only 26 of the Montney D1 horizontal natural gas wells drilled in 2017 are expected to be brought on production during the year. In addition, the Montney/Doig vertical science/technology well will not be a producing well and will not brought on production. Accordingly, of the 54 wells expected to be drilled during 2017, only 52 will be brought on production during 2017.

/T/

We have drilled a total of 47 (47.0 net) wells year-to-date (21 during the first quarter, 22 during the second quarter and an additional 4 wells subsequent to the end of the second quarter), all of which were successful. Of the 54 (54.0 net) wells planned to be drilled during 2017, a total of 52 wells are anticipated to be brought on production this year as one Montney D1 horizontal natural gas well is scheduled to be drilled in December 2017 and will not be brought on production until 2018 and the Montney/Doig vertical science/technology well will not be a producing well. In addition, our 2017 Capital Program also included the capital associated with the completion, equipping and tie-in of 10 wells drilled in 2016, all of which were brought on production in the first quarter of 2017. Accordingly, a total of 62 (62.0 net) wells are expected to be brought on production during 2017. Of the 33 wells remaining to be brought on production, 15 have already been completed, 13 are awaiting completion and 5 are remaining to be drilled.



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