Fourth Quarter (4Q) Update | Reserves | Financial Results | Capital Markets | Capital Expenditure | Capex Decrease | Capital Expenditure - 2021

Advantage Oil & Gas Adjusts 2021 Outlook as Drilling Outperforms

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Advantage Oil & Gas Ltd. has reported its updated 2021 plan as well as its Q4/full year 2020 results.

2021 Plan

Results from Advantage's 2020 drilling program have exceeded expectations both in costs and well performance, positively impacting our 2020 reserves, financial outlook and 2021 guidance.  Drilling in 2020 was entirely gas-focused at Glacier, with the first wells drilled in July and brought onstream in November.

Increasing 2021 production guidance range to 48,000 to 51,000 boe/d (from 47,000 to 49,000 boe/d)

• Average initial well productivity at Glacier from 2020 wells increased 87% over prior programs
• Only six of 13 wells drilled in 2020 were brought on-production prior to year-end, with the remainder brought on-production in early 2021 while gas prices were escalating
• Improved cycle times to equip wells and deliver production to market within 3 days
• Five wells drilled in Q1 2021 will be completed after spring breakup with production anticipated to begin in third quarter 2021
• Frac intensity and well design will continue to be progressed through the 2021 program

Reducing 2021 capital guidance range to $115 million to $135 million (from $125 million to $150 million)

• 2021 capital efficiency^(a) expected to be approximately $8,400/boe/d
• Reduced drilling, completions and tie-in costs by 20%, allowing 2 wells to be added to the winter program without increasing total capital
• Focus will remain on gas drilling, and additional oil infrastructure has been deferred into 2022
• Significant flexibility remains in the capital spending plan, with optionality to throttle capital between oil-weighted and gas-weighted assets and strategic investments

Quarterly Results

2020 Financial Highlights

• Annual 2020 cash provided by operating activities of $101 million and adjusted funds flow^(a) of $105 million or $0.56/share
• Maintained low cash costs including operating costs of $2.43/boe, royalties of $0.64/boe, transportation expenses of $3.39/boe, general and administrative costs of $0.69/boe and finance costs of $1.11/boe
• Sold 12.5% working interest in the Glacier Gas Plant for $100 million
• Reduced net debt^(a) to $251 million from $304 million
• Year-end net debt to AFF^(a) was 2.4 with bank debt of $247 million drawn on the Corporation's $350 million credit facility

Although commodity pricing was unusually volatile, Advantage successfully exited 2020 in a stronger position than it entered.  By reducing capital spending, fortifying the balance sheet and focusing on highest return development projects, Advantage is accelerating into 2021 and capitalizing on the constructive natural gas pricing fundamentals.

• Record annual production of 44,922 boe/d (243 mmcf/d natural gas, 2,379 bbls/d crude oil and condensate, and 2,029 bbls/d NGLs). Exit production was 45,850 boe/d (247 mmcf/d natural gas, 2,219 bbls/d crude oil and condensate, and 2,464 bbls/d NGLs).
• Record annual liquids production of 4,408 bbls/d (up 63%).
• Drilled 13 wells at Glacier. Initial well productivity increased by 87%, resulting from enhanced execution strategies. The first 10 wells drilled at Glacier were producing 95 mmcf/d after an average of 60 days on production and the remaining wells recently came onstream at similar per well levels.
• Cycle times between completion and permanent production reduced to 3 days.
• De-risked two new liquids-weighted core areas (Progress and Wembley), resulting in annual liquids production increase of 63%.
• Constructed and commissioned Wembley oil battery and expanded Progress infrastructure
• Capital efficiency^(a) was $14,650/boe/d, including $70 million for major facilities projects, and $8,150/boe/d excluding major facilities expenditures.

• Proved Developed Producing ("PDP") additions were 120% of 2020 total production, at a finding and development ("F&D") cost of $8.41/boe.
• Proved plus Probable ("2P") additions were 500% of 2020 total production, at an F&D cost of $2.80/boe.
• Average 2P reserves per booked location increased 18% as a result of enhanced geological targeting and frac designs, leading to increased confidence in higher reserve recoveries. These results were the basis for 367 bcfe of positive technical revision.
• PDP reserves increased 4%, 1P reserves increased 10%, 2P reserves increased 14%
• Corporate decline is less than 23%.
• Reserves life index ("RLI") for PDP was 7 years, 1P was 24 years, 2P was 34 years based on the Corporation's average fourth quarter 2020 production rate of approximately 43,532 boe/d.