FrontFour Formally Provides Advance Notice of the Nomination of Four Highly Qualified Directors for Election at Obsidian’s 2018 Annual and Special Meeting

GREENWICH, Conn., April 3, 2018 /PRNewswire/ — FrontFour Capital Group LLC, together with its affiliates (“FrontFour” or “we”), a significant shareholder of Obsidian Energy Ltd. (“Obsidian” or, the “Company”) (TSX/NYSE: OBE) with an ownership interest of approximately 6.3% of the Company’s outstanding shares, today announced that it has formally provided advance notice to the Company of the nomination of a slate of four highly-qualified candidates for election to the Board of Directors (the “Board”) at the Company’s 2018 Annual and Special Meeting of Shareholders (“2018 AGM”) to be held on May 11, 2018.

FrontFour has also issued the following open letter to Obsidian shareholders:

A LETTER TO THE SHAREHOLDERS OF OBSIDIAN ENERGY LTD.

April 3, 2018

Dear Fellow Shareholders,

As previously disclosed, FrontFour and its principals are significant long-term shareholders of Obsidian, collectively beneficially owning over 31 million shares, representing approximately 6.3% of Obsidian’s outstanding shares. In contrast to Obsidian’s current Board, our interests are directly aligned with yours. After years of enduring substantial share price underperformance at Obsidian, our goal is to drive significant value creation for the benefit of all Obsidian shareholders.

On April 2, 2018, Obsidian publicly announced that it had commenced a process to explore the sale of the Alberta Viking and Peace River assets as part of an effort to focus on growth in the Cardium. This followed an announcement late last week that Obsidian scheduled its 2018 AGM for May 11, 2018, with a record date of April 4, 2018, although its annual meeting is customarily held in June.  We interpret the incumbent Board’s action in setting a significantly earlier meeting date as an attempt to minimize the time that FrontFour has to conduct its campaign and use historically low voter turn-out to its advantage.

The Board’s Recent Strategic Review Announcement Validates FrontFour’s Strategy, is Reactionary and Represents Yet Another About-Face on Strategy

On January 17, 2018, FrontFour first publicly expressed concerns with the Board and laid out an action plan to streamline the Company’s asset footprint to focus on becoming a standout light oil growth player and Cardium champion. Obsidian quickly responded by stating that its business plan, centered on sustaining a low-decline production base while leveraging significant development optionality, was working, and that “a change of course would hinder Obsidian’s progress.”

On March 20, 2018, we announced our intention to nominate four directors for election to the Board, vote against the proposed reverse stock split, and outlined a plan to dispose of Peace River and the Alberta Viking and redeploy the proceeds into debt repayment, stock buybacks and jump-starting production growth in the Cardium. Obsidian almost immediately responded to this with a press release on March 21, 2018 headlined “FrontFour is Risking the Company’s Progress.”

This is proof positive that Obsidian’s Board is out of touch with its shareholder base and in need of significant refreshment. We strongly disagree that Obsidian’s stated strategy as of June 2017 represents “progress” when it has led to anemic production and cash-flow growth, a track record of blown operating targets and disastrous hedge losses culminating in the receipt of a NYSE delisting notice.

It is also quite remarkable that less than two weeks after decrying FrontFour’s articulated strategy as “risking [the Company’s] progress,” Obsidian has now announced its intention to implement ALL publicly disclosed aspects of FrontFour’s value creation plan, with David French claiming, “[t]oday’s announcement is the natural next step in our ongoing strategy to unlock shareholder value and establish Obsidian Energy as a growth company focused on optimizing our industry-leading position in the Cardium.” This announcement is anything but “natural” and represents another clear about-face on strategy.

Obsidian’s proposed asset sales and related strategic process are clearly material developments. In commenting upon them, Board chair Jay Thornton noted that “[t]he process started in Q3 last year and accelerated in October when the Board selected RBC Capital Markets as our lead financial advisor.” This flies in the face of recent trading activity by Obsidian’s directors. Over the last few months, Obsidian directors have made market purchases of Obsidian shares, including as recently as March 13, 2018. Had the so-called process including asset sales been fulsome and truly active, then insiders would have been precluded from trading Obsidian shares.  The insider purchases suggest that Obsidian’s April 2^nd strategic review announcement is a recent development and a reaction to significant shareholder pressure.

The Current Board Has Overseen Significant Value Destruction While Underperforming All Relevant Industry Indices

As evidenced by the chart below, Obsidian’s Board has overseen the destruction of significant long-term shareholder value as reflected by the stark underperformance of Obsidian’s shares relative to three prominent energy indices: (i) the S&P/Canadian Energy Index (XEG ETF), (ii) the Energy Select Sector Index (XLE ETF), and (iii) the S&P Oil & Gas Exploration & Production Select Industry index (XOP ETF).

Astonishingly, Obsidian’s shares have traded down approximately 96% during the tenure of George Brookmanas a director and 45% since David French became CEO in October of 2016.

The Board’s disastrous historical record of oversight of management’s repeated strategic missteps has resulted in an overhang on Obsidian’s share price that, despite the recent announcement, in our view may only be lifted by a substantial overhaul in Board composition. We now urge our fellow shareholders to support FrontFour’s efforts to drive value for all shareholders.

Board Compensation: Taking Equity at the Bottom

In Obsidian’s April 2^nd press release, the Board announced their intention to receive all director fees in equity in lieu of cash.  We find it interesting that the Board waited until now to finally align their interests with shareholders. As depicted in the charts below, the Board’s historical actions have been anything but aligned. Per Obsidian’s two most recent information circulars, only one director elected to receive more than 50% of his or her Board compensation in share-based awards. Additionally, as of the most recently available public data, four directors currently own significantly less than the minimum 100,000 share requirement, including George Brookman, despite his nearly 13-year Board tenure.

The stated intention in the Company’s April 2^nd announcement is simply too little, too late. While Obsidian’s shareholders have suffered significant losses, a majority of Obsidian’s legacy directors (excluding Ritchie and Kernaghan) have continued to enrich themselves by electing to take the vast majority of their director compensation in cash.

FrontFour’s Highly- Qualified Director Nominees Will Bring Technical Expertise, Oversight and Accountability to Help Steward Obsidian’s Asset Optimization Strategy

As long-term shareholders, our goal is to hold the Board accountable for their performance and to ensure that the Board’s interests are aligned with those of shareholders. Given the Obsidian Board’s poor track record, continued failure to communicate, let alone execute, a clear and consistent corporate strategy to investors and the misalignment of the Board’s interests with those of shareholders, we believe substantial change is warranted, especially as industry consolidation in the Cardium appears on the horizon. The incumbent Board cannot be counted on to take the appropriate value maximizing steps. Accordingly, FrontFour has formally provided advance notice of the nomination of four highly qualified nominees. If elected, we expect that our nominees would spearhead the implementation of a revised corporate strategy focused on streamlining the Company portfolio and growing Obsidian’s light oil-weighted production in the Cardium. Our nominees would bring significant technical and financial expertise, as well as additional fresh perspectives and renewed accountability, to Obsidian’s Board for the benefit of all shareholders. We are highly confident that such a dynamic will put Obsidian on a path towards unlocking the significant shareholder value embedded within its asset base.

Quite clearly, the incumbent Board has failed shareholders and has a demonstrable track record of entrenchment.  When FrontFour approached the Board in October 2017 as part of an effort to work constructively and privately towards unlocking value for shareholders, their immediate reaction was to take aggressive and defensive steps towards entrenchment and self-preservation, as opposed to anything related to enhancing shareholder value. When FrontFour stood firm, the Board opted to install Edward Kernaghanonto the Board, despite having resisted doing so since March 2016.  This was principally due to Mr. Kernaghan’s ability to further entrench the incumbent Board by virtue of his willingness to sign an off-market standstill and voting agreement obliging him to vote blindly for Obsidian’s slate at the 2018 AGM. This behavior – on both sides of the negotiation – is a prime example of the insular, “clubby” mentality that now permeates Obsidian’s boardroom to the detriment of shareholders. FrontFour and its nominees are committed to changing this culture for the benefit of all shareholders.

Over the coming weeks, we look forward to engaging with you.

Biographies of FrontFour’s Nominees:

Steven P. Evans
Mr. Evans had a 31-year career with Chevron / Texaco until his retirement in 2012. Most recently he held the position of general manager, North America exploration at Chevron.

• In this role, Mr. Evans was responsible for leading exploration activities in the Gulf of Mexico (both shelf and deepwater), onshore United States, onshore Canada, offshore the Atlantic Coast in Canada, and Alaska with annual budgets ranging from US$500 million to US$1.2 billion;
• Asked by CEO of Texaco to participate on the Chevron/Texaco merger team. Served in this capacity from November 2000 through December 2001 and helped generate over US$300 million in expense savings for the new organization;
• Previously, Mr. Evans started with Texaco as manager of finance, planning and portfolio for E&P technology in 1989 and assumed various leadership roles in strategy and planning;
• Prior to 1989, Mr. Evans completed assignments in reservoir engineering, operations research and planning. He started his career with Pennzoil in 1980; and
• Currently a director of Venari Resources, a private-equity backed deepwater Gulf of Mexico start-up.

Michael J. Faust
Mr. Faust has 34 years of industry, financial and leadership experience within the oil and gas sector, including diverse geological, geophysical and technical reservoir experience spanning many different basins and formations throughout the world.

• Mr. Faust was most recently the Vice President of Exploration and Land at ConocoPhillips Alaska, Inc. where he oversaw and managed the company’s exploration organization and strategy in Alaska;
• Mr. Faust previously served as the Vice President of Exploration and Land at ConocoPhillips Canada Resources Ltd. where he was responsible for Conoco’s Canadian exploration activities with significant experience within the Deep Basin and various formations within the Western Canadian Sedimentary Basin;
• Joined Arco Alaska, Inc. in 1997 where he held multiple senior positions up to and following Phillips Petroleum Co.’s acquisition of Arco Alaska in 2000 and the subsequent merger between Phillips and Conoco Inc., which created ConocoPhillips Alaska, Inc. in 2002;
• Positions of increasing responsibility at Arco Alaska included Chief Geophysicist, Development Geoscience Manager, Technology and Operations Manager, and Offshore Exploration Manager;
• Prior to Arco Alaska, Mr. Faust held various positions with Exxon Exploration Company and Esso Norge A.S. after beginning his career with Exxon Co. USA in 1983; and
• Mr. Faust is currently the lead independent director at SAExploration, an oilfield service company.

Matthew (“Matt”) Goldfarb
Mr. Goldfarb has over 20 years of diverse experience as an investor, in senior management roles at companies undergoing financial restructurings, legal counsel, and board director across numerous industries where he has helped drive successful outcomes for shareholders.

• Mr. Goldfarb is a founding partner and managing member of Southport Midstream Partners LLC, a private-equity backed investment vehicle focused on energy infrastructure projects in North America;
• Mr. Goldfarb also serves as Chief Restructuring Officer and Acting Chief Executive Officer of Cline Mining Corporation;
• Mr. Goldfarb previously served as Chief Executive Officer of Xinergy Ltd., having earlier served as its Vice Chairman and lead independent director;
• Mr. Goldfarb was previously a restructuring and M&A lawyer at Schulte Roth & Zabel LLP; and
• Mr. Goldfarb has served on the Boards of Sevcon, Inc., Midway Gold Corporation, The Pep Boys – Manny, Moe & Jack, Huntingdon Capital Corp., Fisher Communications, Inc., CKE Restaurants, Inc., and James River Coal Company.

Stephen E. Loukas
Mr. Loukas has nearly 20 years of experience as an investor, investment banker, and financial restructuring consultant with significant experience across a broad-based number of industries.

• Mr. Loukas has been a Managing Member and Portfolio Manager of FrontFour Capital Group LLC since February 2009 where he helps oversee the firm’s investment portfolio;
• Previously, Mr. Loukas held roles including Director at Credit Suisse Securities where he was a Portfolio Manager and Head of Investment Research of the Multi-Product Event Proprietary Trading Group, and at Pirate Capital where he was a senior investment analyst;
• Mr. Loukas has also worked within the Corporate Finance & Distribution Group of Scotia Capital where he focused on the structuring and syndication of leveraged loans and high yield debt;
• Mr. Loukas started his career at financial restructuring firm Zolfo Cooper where he assisted corporate clients in the development and implementation of operational and financial restructuring plans; and
• Mr. Loukas has previously served as a director of Xinergy Ltd.

Sincerely,

FRONTFOUR CAPITAL GROUP LLC
FrontFour Capital Group LLC, located in the United States at 35 Mason Street, Greenwich, CT 06830, was formed in December 2006. FrontFour Capital Group LLC is registered with the Securities & Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended.

ADDITIONAL INFORMATION CONCERNING FRONTFOUR’S PROPOSED BOARD NOMINEES

Each of FrontFour’s proposed Board nominees has been indemnified by affiliates of FrontFour in connection with such Board nominee’s nomination for election at the 2018 AGM, and Messrs. Evans, Faust and Goldfarb have each provided a power of attorney in favour of Stephen E. Loukas for the purposes of various corporate and securities law filings in connection with the 2018 AGM and related matters.

Penalties or Sanctions
To the knowledge of FrontFour, none of FrontFour’s proposed Board nominees has: (i) been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable security holder in deciding whether to vote for a proposed director.

Individual Bankruptcies
To the knowledge of FrontFour, none of FrontFour’s proposed Board nominees is or has, within the 10 years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.

Corporate Cease Trade Orders or Bankruptcies
To the knowledge of FrontFour and except as set out below, none of FrontFour’s proposed Board nominees is, or has been within the past ten years, a director or executive officer of any company that, while such person was acting in that capacity: (i) was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemptions under securities legislation that was in effect for a period of more than 30 consecutive days; (ii) was subject to an event that resulted, after that individual ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the company access to any exemptions under securities legislation that was in effect for a period of more than 30 consecutive days; or (iii) within a year of that individual ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

In December 2013, and in contemplation of a financial restructuring, Mr. Goldfarb was retained by the Cline Mining Corporation board of directors, at the instruction of its senior lenders, to lead the financial restructuring and optimization of the mining assets of the Toronto Stock Exchange-listed issuer. Companies’ Creditors Arrangement Act (Canada) (“CCAA”) insolvency proceedings and related Chapter 15 “recognition” proceedings relating to the “work-out” of Cline Mining Corporation were initiated in December 2014, and the company emerged therefrom in July 2015.

On June 22, 2015, Midway Gold Corporation and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Colorado, seeking ancillary relief in Canada pursuant to the CCAA in the Supreme Court of British Columbia in Vancouver, Canada. On January 29, 2016, Mr. Goldfarb was appointed as an independent director of Midway to assist the issuer in its ongoing financial restructuring and asset-sale efforts.

In connection with Obsidian’s 2018 AGM, FrontFour intends to file a dissident information circular in due course. FrontFour is providing the following disclosure required under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations. Any solicitation made by FrontFour will be made by it and not by or on behalf of the management of Obsidian. All costs incurred for any solicitation will be borne by FrontFour, provided that, subject to applicable law, FrontFour may seek reimbursement from Obsidian of FrontFour’s out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with any successful result at a meeting of Obsidian shareholders. Proxies may be solicited by FrontFour pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of FrontFour by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of FrontFour, who will not be specifically remunerated therefor. FrontFour may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. FrontFour may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf, which agents would receive customary fees for such services. In particular, The Laurel Hill Advisory Group Company (the “Proxy Solicitor”) has been engaged to solicit proxies in the United States and Canada. Pursuant to this engagement, the Proxy Solicitor will receive an initial fee of C$100,000 plus a customary fee for each call to and from shareholders. In addition, the Proxy Solicitor may be entitled to a fee of up to C$125,000 in connection with a successful solicitation campaign. Proxies may be revoked by instrument in writing by a shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the articles or by-laws of Obsidian. None of FrontFour nor, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect: (i) in any transaction since the beginning of Obsidian’s most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Obsidian or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on by Obsidian, other than the election of directors to the board of Obsidian. Obsidian’s principal office address is 200, 207 – 9th Avenue SW Calgary, Alberta T2P 1K3.