Lycos Energy Inc. Announces 2024 Reserves, Exploratory Drilling Update and the Initiation of a Comprehensive Strategic Review Process to Maximize Shareholder Value

2025-03-04

TSXV - TSX Venture Exchange · Oil · Natural Gas · Canada

Calgary, Alberta--(Newsfile Corp. - March 4, 2025) - Lycos Energy Inc. (TSXV: LCX) ("Lycos" or the "Company") is pleased to provide the results of the Company's 2024 year-end reserves evaluation as prepared by Sproule International Limited ("Sproule"), an exploratory drilling update and the initiation of a comprehensive strategic review process to identify, examine and consider strategic and financial alternatives available to the Company with the ultimate view of enhancing shareholder value (the "Strategic Review").

2024 Year End Reserve Highlights

Lycos' 2024 drilling program has increased the Company's reserve volume base through pool extensions, adding Proved Developed Producing ("PDP") reserves of 98 Mboe per well and Proved plus Probable Developed Producing ("P+PDP") reserves of 109 Mboe per well.

The Company's 2024 Total Proved ("TP") and Total Proved plus Probable ("TPP") Net Asset Value ("NAV") is $3.50 per diluted share ("Diluted Share") and $5.79 per Diluted Share. Lycos' TP NAV includes 65.5 net booked locations(1), representing 18.4% of the Company's net internally identified drilling locations(1). The TP NAV and TPP NAV per Diluted Share are approximately 61% and 166% higher than Lycos' current trading price of $2.18 per share.

The Company's 2024 Reserve Report (as defined herein), net of the 2024 dispositions(1)(2) to opening 2023 reserves, is highlighted as follows:

PDP reserves increased by 33% to 4.1 MMboe from 3.1 MMboe

TP reserves increased by 26% to 10.6 MMboe from 8.4 MMboe

TPP reserves increased by 15% to 16.8 MMboe from 14.7 MMboe

Achieved Finding and Development ("F&D") costs(3) of, including changes in future development costs of $26.10 per boe on a PDP basis, $21.97 per boe on a TP basis and $17.23 per boe on a TPP basis

Production replacement(3)of 82% on a TP basis and 82% on a TPP basis

Based on a 2024 adjusted funds flow netback(4)(5)of $36.05/boe, achieved recycle ratios(3) of 1.4 on a PDP basis, 1.6 on a TP basis and 2.1 on a TPP basis

(1) Disclosure of Oil and Gas Information (2) See table titled "Reconciliation of Company Gross Reserves on Forecast Prices and Costs" below (3)See Oil and Gas Metrics (4)See Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures (5) See Unaudited Financial Information

2024 Year End Reserves

The Company's 2024 year end reserves were evaluated by independent reserves evaluator Sproule as at December 31, 2024, (the "Reserve Report") in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and in accordance with the most recent publication of the Canadian Oil and Gas Evaluation Handbook (the "COGEH"). The Reserve Report was based on the average forecast pricing of Sproule Associates Ltd. at January 1, 2025 which is available on Sproule's website at www.sproule.com. See "_Reader Advisories - Reserves and Future Net Revenue Disclosure_" for more information. The numbers in the tables below may not add due to rounding.

Reserves Summary as at December 31, 2024

| Total Company Reserves(1) | | | | | | | | Reserves Category | Heavy Oil | Light and Medium Oil | Condensate | NGL | Conventional Natural Gas | Total Oil Equivalent (Mboe) | | (Mbbl) | (Mbbl) | (Mbbl) | (Mbbl) | (MMcf) | | | | Proved Developed Producing | 4,028 | 25 | - | - | 272 | 4,098 | | Proved Developed Non-Producing | 157 | - | - | - | - | 157 | | Proved Undeveloped | 6,326 | - | - | 0 | 96 | 6,342 | | Total Proved | 10,510 | 25 | - | 0 | 368 | 10,597 | | Probable | 6,194 | 10 | - | 0 | 214 | 6,240 | | Total Proved Plus Probable | 16,705 | 35 | - | 1 | 583 | 16,837 | | (1)Reserves have been presented on a gross basis, which are the Company's total working interest share before the deduction of any royalties and without including any royalty interests of the Company. | | | | | | |

Net Present Value of Future Net Revenue

| | Net Present Value of Future Net Revenue (1) | | | | | | Total Company | Before Income Taxes, Discounted at (% / year) | | | | | | | 0% | 5% | 10% | 15% | 20% | | Reserves Category | ( M$) | ( M$) | ( M$) | ( M$) | ( M$) | | Proved Developed Producing | 110,730 | 107,308 | 100,898 | 94,231 | 88,120 | | Proved Developed Non-Producing | 3,877 | 3,434 | 3,068 | 2,763 | 2,505 | | Proved Undeveloped | 169,560 | 133,289 | 107,029 | 87,545 | 72,698 | | Total Proved | 284,168 | 244,030 | 210,995 | 184,538 | 163,323 | | Probable | 242,061 | 174,699 | 134,785 | 108,713 | 90,489 | | Total Proved Plus Probable | 526,229 | 418,729 | 345,780 | 293,251 | 253,812 | | (1)All future net revenues are stated prior to the provision for general and administrative expenses, other income and interest expenses and after the deduction of royalties, net operating expenses, estimated well and facility abandonment and reclamation costs and estimated future capital expenditures. | | | | | |

Reconciliation of Company Gross Reserves on Forecast Prices and Costs

| | Total PDP | Total Proved | Total Probable | Total Proved + | | | (Mboe) | (Mboe) | (Mboe) | Probable (Mboe) | | December 31, 2023 | 4,188 | 9,907 | 7,468 | 17,375 | | Discoveries | | - | - | - | | Extensions | 2,366 | 2,543 | 904 | 3,447 | | Infill Drilling | 3 | 793 | 389 | 1,183 | | Technical Revisions | 282 | 493 | (1,337) | (844) | | Dispositions | (1,107) | (1,512) | (1,195) | (2,707) | | Economic Factors | 4 | 9 | 11 | 20 | | Production | (1,637) | (1,637) | - | (1,637) | | December 31, 2024 | 4,098 | 10,597 | 6,240 | 16,837 |

Future Development Costs ("FDC")

The following is a summary of the estimated FDC required to bring Proved Undeveloped reserves and Proved plus Probable Undeveloped reserves on production. FDC associated with the Company's total proved reserves at year end 2024 is $98.6 million and FDC on total proved plus probable reserves is $129.0 million.

| | Proved Reserves | Proved Plus Probable Reserves | | | $M | $M | | 2025 | 60,991 | 81,410 | | 2026 | 31,041 | 36,542 | | 2027 | 6,557 | 11,076 | | Total Undiscounted | 98,589 | 129,027 |

Net Asset Value

The following table sets out a calculation of NAV based on the before-tax estimated net present value of future net revenue discounted at 10% ("NPV10 BT") associated with the TP and TPP reserves, as evaluated in the Reserve Report, including deductions for FDC and abandonment and reclamation obligations:

| Common Shares Outstanding (M) | TP | TPP | | Reserve Value NPV10 (BT) ($M) | 210,995 | 345,780 | | Less: Net Debt ($M) (1) | (17,896) | (17,896) | | Add: Warrant Proceeds ($M) | 12,432 | 12,432 | | Total Net Asset Value (M$) | 205,531 | 340,316 | | Common Shares Outstanding (M) | 53,238 | 53,238 | | Warrants Outstanding (M) | 5,550 | 5,550 | | Estimate NAV per Diluted Share ($/diluted share)(2) | 3.50 | 5.79 | | (1)See Unaudited Financial Information (2)For purposes of calculating the NAV per Diluted Share, the dilution impact from 3,885,725 stock options have been excluded as the weighted average exercise price of $4.02 at December 31, 2024 is out-of-the-money. | | |

Exploratory Drilling and Operations Update

The Company's 2025 drilling program is well underway with planned Q1 2025 activity of 9 gross (8.82 net) multi-lateral wells. As previously announced in its press release on January 6, 2025, the Company's Q1 2025 drilling program was deliberately designed for new inventory creation. To date in 2025, Lycos has drilled 6 gross (6.0 net) wells.

Lycos has extended its discovery at Moose Lake in the Middle Waseca formation with two delineation wells, both of which are demonstrating comparable early production capability to the initial Middle Waseca drilled in Q4 2024. The initial well has averaged over 260 boe/d (99% oil) in its first 90 days of production.

Additionally, Lycos completed the drilling of a deeper, medium gravity Glauconitic oil well with over 7,700 meters of multi-lateral open hole. The well has encountered virgin reservoir pressure and is currently flowing back.

Based on drilling to date in Q1 2025, Lycos expects to add more than 70 wells to its current estimated inventory.

Lycos estimated current production is approximately 4,665 boe/d (97% oil), after the disposition of 325 boe/d (99% oil) in January 2025. The Company has brought back on approximately 500 boe/d (83% oil) of the 810 boe/d (83% oil) which was shut-in due to gas egress issues as previously released.

Strategic Review

Lycos has been one of the most active drillers in the Mannville Stack, validating its technical thesis with respect to multi-lateral development with recent wells realizing strong initial production rates that consistently exceed internal type curves. Lycos is forecasting 2025 annual average production of 5,200 boe/d (99% oil), representing annual production growth of approximately 16%, while generating $69.5 million of adjusted funds flow(1).

Despite the successful delineation of its asset base, substantial additions to its inventory and ongoing operational success, the Company's Common Shares continue to trade at a significant discount to the intrinsic value of its assets. In addition, the junior oil-weighted peer group continues to lag its larger, public markets peers and suffers from a lack of liquidity. These factors have led to an increasingly wider gap between the implied Net Asset Value and the public markets value of the Company.

The Company's board of directors (the "Board"), acting in the best interests of Lycos and its shareholders, has determined that it is timely and prudent to initiate a comprehensive process to explore, review and evaluate a number of strategic repositioning alternatives available to the Company with a view to maximizing and accelerating value to its shareholders. The Strategic Review will include the evaluation of a broad range of alternatives including, but not limited to, a corporate sale, merger, corporate restructuring, sale of select assets, purchase of assets, or any combination of these potential alternatives.

Lycos has not yet established a definitive timeline to complete its Strategic Review. The Company does not intend to disclose developments with respect to the Strategic Review, periodically or otherwise, until the Board has approved a definitive transaction or strategic alternative, or otherwise determines that disclosure is necessary or appropriate. The Company cautions that there are no assurances or guarantees that the process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction. The Board and management team of the Company believe that the Strategic Review will ultimately benefit the shareholders of Lycos. The Company's business will not be impacted by the Strategic Review, and it will continue to execute on its 2025 drilling program.

Lycos has engaged National Bank Financial Inc. ("NBF") to act as its exclusive financial advisor in connection with the Strategic Review. Lycos and NBF have created a virtual data room which is available for review by interested parties upon execution of a confidentiality agreement.

(1)See Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures

About Lycos

Lycos is an oil-focused, exploration, development and production company based in Calgary, Alberta, operating high-quality, heavy-oil, development assets in the Lloydminster and Greater Lloydminster area.

Additional Information

For further information, please contact:

| Dave Burton President and Chief Executive Officer T: (403) 616-3327 E: dburton@lycosenergy.com | Lindsay Goos Vice President, Finance and Chief Financial Officer T: (403) 542-3183 E: lgoos@lycosenergy.com |

Reader Advisories

Forward-Looking and Cautionary Statements

Certain statements contained within this press release constitute forward-looking statements within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "endeavor", "continue", "estimate", "evaluate", "expect", "forecast", "monitor", "may", "will", "can", "able", "potential", "target", "intend", "consider", "focus", "identify", "use", "utilize", "manage", "maintain", "remain", "result", "cultivate", "could", "should", "believe" and similar expressions (including negatives and variations thereof). Lycos believes that the expectations reflected in such forward-looking statements are reasonable as of the date hereof, but no assurance can be given that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Without limitation, this press release contains forward-looking statements pertaining to: Lycos' business strategy, objectives, strength and focus; the Company's anticipated capital program, drilling plans, outlook and operational results for 2025; the Company's expectations regarding recently drilled wells, drilling plans, forecasted annual average production, net operating expenses, estimated well and facility abandonment and reclamation costs, estimated future capital expenditures and growth forecasts; the expectation that the Strategic Review process may elicit change and enhance shareholder value; expectations regarding commodity prices and heavy oil differentials; the performance characteristics of the Company's oil and natural gas properties; the ability of the Company to achieve drilling success consistent with management's expectations; expectations in respect of the Company's wells, including anticipated benefits and results; and the source of funding for the Company's activities. Statements relating to production, reserves, recovery, replacement, costs and valuation are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

The forward-looking statements and information are based on certain key expectations and assumptions made by Lycos, including expectations and assumptions concerning the business plan of Lycos; the timing of and success of future drilling, development and completion activities; the geological characteristics of Lycos' properties; prevailing commodity prices, price volatility, price differentials and the actual prices received for the Company's products; the availability and performance of drilling rigs, facilities, pipelines and other oilfield services; the timing of past operations and activities in the planned areas of focus; the drilling, completion and tie-in of wells being completed as planned; the performance of new and existing wells; the application of existing drilling and fracturing techniques; prevailing weather and break-up conditions; royalty regimes and exchange rates; the application of regulatory and licensing requirements; the continued availability of capital and skilled personnel; the ability to maintain or grow its credit facility; the accuracy of Lycos' geological interpretation of its drilling and land opportunities, including the ability of seismic activity to enhance such interpretation; and Lycos' ability to execute its plans and strategies.

Although Lycos believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Lycos can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to: incorrect assessments of the value of benefits to be obtained from acquisitions and exploration and development programs; failure to achieve anticipated benefits from the Strategic Review or any transactions undertaken pursuant to its Strategic Review; fluctuations in commodity prices; changes in industry regulations and political landscape both domestically and abroad; the risk that the new U.S. administration imposes tariffs on Canadian goods, including crude oil and natural gas, and that such tariffs (and/or the Canadian government's response to such tariffs) adversely affect the demand and/or market price for the Company's products and/or otherwise adversely affects the Company; wars (including Russia's military actions in Ukraine and the Israel-Hamas conflict in Gaza); hostilities; civil insurrections; foreign exchange or interest rates; increased operating and capital costs due to inflationary pressures (actual and anticipated); volatility in the stock market and financial system; impacts of pandemics; the retention of key management and employees; and risks with respect to unplanned third-party pipeline outages, including in respect of safety, asset integrity and shutting in production. Ongoing military actions between Russia and Ukraine have the potential to threaten the supply of oil and gas from the region. The long-term impacts of the actions between these nations remains uncertain. Please refer to the annual information form for the year ended December 31, 2023 ("AIF") and the Company's latest management discussion and analysis ("MD&A") for additional risk factors relating to Lycos, which can be accessed either on the Company's website at www.lycosenergy.comor under the Company's SEDAR+ profile at www.sedarplus.ca. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. Lycos undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Future Oriented Financial Information

This press release contains future oriented financial information and financial outlook information (collectively, "FOFI") about Lycos' prospective results of operations and production, future drilling locations and plans, forecasted annual average production, forecasted adjusted funds flow, expected growth rates, growth in adjusted funds flow, operating costs and expected net operating expenses, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about Lycos' proposed business activities in 2025. Lycos and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future activities or results. Lycos disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein. Changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Lycos' guidance. The Company's actual results may differ materially from these estimates.

Unaudited Financial Information

Certain financial and operating results included in this news release, including operating netbacks, capital expenditures, net debt and production information, are based on unaudited estimated results. These estimated results are subject to change upon completion of the Company's audited annual financial statements as at and for the years ended December 31, 2024 and 2023, and changes could be material. Lycos anticipates filing its audited annual financial statements and related MD&A as at and for the years ended December 31, 2024 and 2023, on or near April 8, 2025.