Lycos Energy Inc. press release

Lycos Energy Inc. Announces Strategic Acquisition of Sparky Waterflood Assets, $30.0 Million Equity Financing, Expanded Credit Facility, Operations Update and Increased 2026 Guidance

2026-07-20

TSXV - TSX Venture Exchange · Oil · Natural Gas · Canada · M&A / Asset Transactions

Calgary, Alberta--(Newsfile Corp. - July 20, 2026) - Lycos Energy Inc.(TSXV: LCX)("Lycos" or the "Company") is pleased to announce that it has entered into a definitive agreement today to acquire high netback assets under waterflood targeting the Sparky formation in the Greater Provost area of Alberta (the "Assets") for cash consideration of $70.0 million, prior to closing adjustments, with an effective date of June 1, 2026 (the "Acquisition").

The Acquisition will be funded through a $30.0 million bought deal equity financing (the "Equity Financing") and an expanded $75.0 million credit facility (the "ExpandedCredit Facility"). Closing of the Acquisition, the Equity Financing and the Expanded Credit Facility is expected to occur on August 6, 2026.

With the strong performance demonstrated from its existing asset base, Lycos is pleased to increase its previously announced exit 2026 production guidance. This performance alone, prior to giving effect to the Acquisition, supports an increase from 2,500 – 3,000 boe/d to 3,000 – 3,500 boe/d. Alongside this guidance revision, the Company is also increasing its previously announced 2026 capital expenditure budget from $35 – 40 million to $50 – 55 million. The $15 million increase will fund an expanded drilling program across Lycos' existing assets, as well as optimization and development activity on the newly acquired Assets. The additional capital will also support testing of three new zones at Moonshine and High Velocity Solids Management ("HVSM") testing in two new areas. After giving effect to the Acquisition, the Company now expects exit 2026 production of 4,000 – 4,500 boe/d.

Dave Burton, President and CEO of Lycos, stated: "Our base business continues to outperform expectations, giving us the confidence to raise our exit production guidance. This Acquisition reflects our commitment to strategic M&A, the second pillar of our growth strategy, and adds a high-quality, high netback asset base in a region where our team has deep operating experience. Together with the Equity Financing and Expanded Credit Facility, we are well positioned to keep executing on all fronts of our growth strategy."

Acquisition Highlights

Stable, High Netback Production Base Supported by Waterflood Adds approximately 1,000 boe/d of base production supported by proven waterflood operations, generating an operating netback of approximately $45/boe (US $70 WTI) with opportunity for further optimization Production base that enhances the Company's corporate netback profile, with an estimated sustaining breakeven price of US$37.50/bbl WTI, driving incremental free funds flow and further supporting the Company's future growth initiative

Large Oil-in-Place Field with Significant Running Room Total petroleum initially-in-place of approximately 47.5 MMbbl, with 1.2 MMbbl produced to date (approximately 2.5% current recovery factor) Proved plus probable reserves of 4.1 MMboe, effective December 31, 2025 (approximately 11.2% ultimate recovery factor) Analogous Mannville waterflood assets are expected to achieve recovery factors greater than 20%

Diversifies Lycos' Asset Portfolio with New Strategic Core Area Lycos' management team has direct operating experience with Mannville waterfloods Existing infrastructure supports high impact development and exploitation opportunities with minimal incremental capital requirements

Meaningful Accretion to Lycos Shareholders Increase greater than 15% in production per share and annualized adjusted funds flow per share over the next twelve months, with free funds flow per share expected to increase even more meaningfully given the low maintenance capital requirements of the Assets Lycos intends to maintain current production levels of the Assets through the remainder of 2026 and to accelerate the development of the Assets to grow production to approximately 1,500 boe/d in 2027

Maintains Balance Sheet Strength and Financial Flexibility Pro forma the closing of the Acquisition and the Equity Financing, Lycos expects to have approximately $36 million of Net Debt, with ample capacity available on its Expanded Credit Facility to fund future development Net Debt to Annualized Adjusted Funds Flow is estimated to be less than 1.0x at closing of the Acquisition and the Equity Financing, with Lycos forecasting to exit the year at approximately 0.7x

Overview of the Acquisition

Lycos has entered into an asset purchase agreement (the "Acquisition Agreement") with a privately held arm's length oil producer (the "Vendor"), to acquire the Vendor's assets in the Greater Provost area of Alberta for cash consideration of $70.0 million, prior to closing adjustments. The Acquisition will have an effective date of June 1, 2026.

The Acquisition is expected to close on August 6, 2026, subject to the satisfaction or waiver of customary closing conditions.

Acquisition Attributes and Metrics

| Purchase Price | $70.0 million | | Attributes | | | Current and 2026E Exit Production | 1,000 boe/d (92% crude oil) | | 2027E Production | 1,500 boe/d (86% crude oil) | | 2027E Net Operating Income(1)(at US$70 WTI) | $25 million | | Proved Plus Probable Reserves Volumes(2) | 4.1 MMboe | | Proved Plus Probable Reserves Life Index | ~9 years | | Total ARO (Undiscounted) / Total ARO (NPV-10%) | ~$1.6 / $0.2 million | | Metrics | | | TV / 2027E Production | ~$47,000/boe/d | | TV / 2027 Net Operating Income(1)(at US$70 WTI) | ~2.8x | | TV / Proved Plus Probable Reserves Volumes | ~$17.09/boe | | | | | (1) See Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures. | | | (2) See "Reserves and Future Net Revenue Disclosure" below. | |

Equity Financing

Lycos has entered into an agreement (the "Equity Agreement") with a syndicate of underwriters (the "Underwriters") led by National Bank of Canada Capital Markets and Peters & Co. Limited, as co-bookrunners and co-lead underwriters (together the "Co-Bookrunners"), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought-deal basis, an aggregate of 19,737,000 common shares ("CommonShares") of Lycos at a price of $1.52 per Common Share (the "Issue Price") for gross proceeds of approximately $30.0 million. The Underwriters have been granted an option to purchase up to an additional 15% of the Common Shares issued under the Equity Financing at the Issue Price to cover over-allotments and for stabilization, exercisable in whole or in part at any time until 30 days after the closing.

The Common Shares issued pursuant to the Equity Financing will be distributed by way of a short form prospectus in all provinces of Canada (excluding Québec) and may also be placed privately in the United States to Qualified Institutional Buyers (as defined under Rule 144A under the United States Securities Act of 1933, as amended (the "U.S. Securities Act")) pursuant to an exemption under Rule 144A, and may be distributed outside Canada and the United States on a basis which does not require the qualification or registration of any of the Company's securities under domestic or foreign securities laws.

The Equity Financing is expected to close immediately prior to the completion of the Acquisition on August 6, 2026 and is conditional on all conditions, undertakings and other matters to be satisfied, completed and otherwise met prior to the completion of the Acquisition to the completion of the Acquisition (other than the payment of the purchase price) having been satisfied, waived or otherwise met in accordance with the terms of the Acquisition Agreement and the Equity Agreement, and is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange (the "TSXV").

Prior to giving effect to the Equity Financing, the Company currently has 109,155, 212 Common Shares outstanding. After giving effect to the Equity Financing, the Company will have 128,892,212 Common Shares outstanding excluding the exercise of the over-allotment, and 131,852,762 Common Shares outstanding assuming the exercise of the over-allotment in full.

It is anticipated that certain directors, officers and employees of the Company will subscribe for approximately $2.5 million of the Equity Financing.

Operations Update

Lycos completed the drilling of six additional HVSM wells at the 01-32 pad at Moonshine in the second quarter of 2026 targeting the General Petroleum ("GP") formation. The pad production facilities were fully commissioned on June 29, 2026, with all 6 wells currently on production. Current aggregate oil production for the 01-32 pad is approximately 700 bbl/d.

The Company's most established HVSM well, 100/01-33-057-02W4/00, has been on production since March 22, 2026 and has produced more than 21,000 bbl of oil, representing average daily production of approximately 190 bbl/d.

The Company's step-out HVSM well adjacent to the 01-32 pad, 103/13-10-058-02W4/00, has been on production since May 25, 2026 with an IP30 of 75 bbl/d. Located in a slightly heavier oil area of the pool, this well was instrumental in demonstrating that Lycos' circulating string approach will perform consistently across the expected range of API gravities across Moonshine and reinforces the Company's go-forward development plan. The well is currently producing at approximately 120 bbl/d.

In early July 2026, Lycos spudded an additional HVSM step-out well at Moonshine targeting the GP zone, continuing the Company's delineation program across the play. In addition, Lycos will be testing a new formation in Moonshine with a Sparky HVSM test that will be drilled before the end of July 2026.

Increase to Credit Facility

Lycos is pleased to announce it has received a commitment from National Bank of Canada for the Expanded Credit Facility providing for an available facility of $55.0 million, with an uncommitted accordion feature to increase total capacity up to $75.0 million. The Expanded Credit Facility will close concurrently with the Acquisition on August 6, 2026.

Increased 2026 Guidance

To reflect the contribution of the Assets on a pro-forma basis, and the Company's successful operational performance, Lycos has elected to increase its 2026 capital program and guidance as follows:

| 2026 Guidance | | April 22, 2026 Guidance | | Updated Guidance | | Capital Budget ($MM) | | $35 - $40 | | $50 - $55 | | Exit 2026 Production (boe/d) | | 2,500 - 3,000 | | 4,000 - 4,500 |

Advisors

Peters & Co. Limited is acting as exclusive financial advisor to Lycos in connection with the Acquisition.

National Bank of Canada Capital Markets is acting as exclusive financial advisor to the Vendor in connection with the Acquisition.

Stikeman Elliott LLP is acting as legal counsel to Lycos in respect of the Acquisition, the Equity Financing and the Expanded Credit Facility.

Burnet, Duckworth & Palmer LLP is acting as legal counsel to the Underwriters in respect of the Equity Financing.

About Lycos Energy Inc.

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

For additional 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

This press release is not an offer of the securities for sale in the United States. The securities offered have not been, and will not be, registered under the U.S. Securities Act or any U.S. state securities laws and may not be offered or sold in the United States absent registration or an available exemption from the registration requirement of the U.S. Securities Act and applicable U.S. state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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", "could", "should", "believe" and similar expressions. 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 completion of the Acquisition, including anticipated funding and timing thereof; the completion of the Equity Financing and the Expanded Credit Facility and the terms, timing and use of proceeds therefrom; satisfaction or waiver of the closing conditions to the Acquisition and the Equity Financing; receipt of required legal, court and regulatory approvals for the completion of the Acquisition and the Equity Financing; the anticipated benefits of the Acquisition, including the impact of the Acquisition on the Company's operations, inventory and opportunities, financial condition, access to capital and overall strategy; the Company's revised 2026 guidance; the Company's expectations regarding its HVSM wells and the anticipated benefits therefrom; the planned testing of a new formation in Moonshine and the anticipated timing thereof; anticipated pro forma capital program and operational results for the remainder of 2026 including, but not limited to, estimated or anticipated growth, production levels, capital expenditures, drilling plans and waterflood strategy; expectations regarding commodity prices; 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; and the source of funding for the Company's activities including development costs. Statements relating to reserves, production, 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 oil exists in the quantities predicted or estimated and that the oil 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 receipt of all approvals and satisfaction of all conditions to the completion of the Acquisition and the Equity Financing; 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, counterparty risk to closing the Acquisition, the Equity Financing and the Expanded Credit Facility; unforeseen difficulties in integrating the assets to be acquired pursuant to the Acquisition into Lycos' operations; incorrect assessments of the value of benefits to be obtained from acquisitions and exploration and development programs (including the Acquisition); fluctuations in commodity prices, changes in industry regulations and political landscape both domestically and abroad, wars (including Russia's military actions in Ukraine), 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, risks with respect to unplanned third-party pipeline outages and risks relating to the Alberta wildfires, including in respect of safety, asset integrity and shutting in production, risks relating to environmental regulations and climate-related policy changes, risks associated with the Company's ability to obtain regulatory approvals and maintain necessary licences, and risks relating to the availability of adequate water supply and disposal capacity for operations. Ongoing military actions in the Middle East 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 remain uncertain. Please refer to the annual information form for the year ended December 31, 2025, and management's discussion and analysis for the period ended March 31, 2026 (the "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.

FutureOrientedFinancialInformation

This press release contains future oriented financial information and financial outlook information (collectively, "FOFI") about Lycos' prospective results of operations and production (including, in respect of the Assets, maintaining current production through the remainder of 2026 and achieving 2027E production of greater than 1,500 boe/d and 2027E Net Operating Income of $25 million), pro forma 2026 capital expenditures of $50 million to $55 million and drilling program, including anticipated 2026 exit production of 4,000 to 4,500 boe/d and estimated sustaining breakeven price of US$37.50/bbl WTI, and the Company increasing production per share and annualized adjusted funds flow per share by more than 15% over the next twelve months, including pro forma the completion of the Acquisition, the Equity Financing and the Expanded Credit Facility, 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 2026. 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, exchange rates, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the Company's 2026 pro forma guidance. The Company's actual results may differ materially from these estimates.