Paramount Resources Ltd. press release

Paramount Resources Announces Third Quarter 2026 Results, Accelerated Expansion of Willesden Green Duvernay Development, Whitemap Sale of Kaybob and 2027 Budget and Guidance

2026-11-05

TSX - Toronto Stock Exchange · Natural Gas · Oil · Natural Gas Liquids · Ethane · Canada · Corporate Finance

Canada NewsWire

CALGARY, AB, Nov. 5, 2026/CNW/ -- Paramount Resources Ltd. ("Paramount" or the "Company") (TSX: POU) is pleased to announce: (i) its third quarter 2026 financial and operating results, (ii) the sanctioning of an accelerated and upsized third phase expansion of its Duvernay development at Willesden Green, (iii) its 2027 capital expenditure budget and guidance and (iv) increased credit facilities totaling $1.25 billion.

The Company is also pleased to announce that it has entered into a purchase and sale agreement (the "Agreement") with Outwest Energy Inc. ("Outwest") pursuant to which Outwest will acquire Paramount's entire Kaybob operating area on a whitemap basis (the "Kaybob Properties") for $341 million, comprised of $198 million in cash and a 49% equity stake in Outwest (the "Kaybob Transaction").

Q3 HIGHLIGHTS

Third quarter sales volumes averaged 55,742 Boe/d (49% liquids), approximately 2,750 Boe/d above the high end of the range of previous guidance as a result of the continued strong performance of the Company's Willesden Green development.(1)

Willesden Green sales volumes averaged 37,815 Boe/d (53% liquids), an increase of approximately 10,350 Boe/d quarter-over-quarter. Runtime at the Alhambra Plant continued to be high throughout the third quarter. The Company also successfully completed its planned turnaround and expansion of the Leafland Plant and brought the pipeline interconnecting the Alhambra and Leafland Plants into service. With gas handling capacity of the facilities nearly full, the Company is continuing to choke wells to manage production within infrastructure limits.

Kaybob sales volumes averaged 17,533 Boe/d (39% liquids) compared to 19,413 Boe/d (40% liquids) in the second quarter. A number of legacy gas fields were shut-in at times throughout the quarter for maintenance and due to low natural gas prices.

| | | | (1) | In this press release, "natural gas" refers to shale gas and conventional natural gas combined, "condensate and oil" refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined, "Other NGLs" refers to ethane, propane and butane and "liquids" refers to condensate and oil and Other NGLs combined. See the "Product Type Information" section for a complete breakdown of sales volumes for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil. See also "Oil and Gas Measures and Definitions" in the Advisories section. |

Cash from operating activities was $154 million ($1.06 per basic share) in the third quarter. Adjusted funds flow was $175 million ($1.20 per basic share). Free cash flow was ($106) million (($0.73) per basic share). (1)

Operating expenses were $9.46/Boe in the third quarter of 2026, compared to $8.66/Boe in the previous quarter and $10.18/Boe in the third quarter of 2025. Willesden Green operating expenses were $4.47/Boe for the nine months ended September 30, 2026. The Company expects per-unit operating expenses to decrease in the fourth quarter to below $8.00/Boe with a full quarter of production flowing through the expanded Willesden Green facilities.

Third quarter capital expenditures totaled $273 million. Activities in the quarter included:

Willesden Green Duvernay – the construction, commissioning and start-up of expanded compression and dehydration capacity at the Leafland Plant and the pipeline interconnecting the Alhambra and Leafland Plants, the completion of water recycling facilities at the Alhambra Plant, the drilling of four (4.0 net) Duvernay wells and the bringing on production of eight (8.0 net) Duvernay wells;

Sinclair Montney – ongoing construction of the Sinclair Plant and the drilling of two (2.0 net) Montney wells; and

Kaybob – the drilling of two (2.0 net) Montney oil wells.

Paramount set two consecutive Canadian onshore drilling records in the quarter, both on the 14-02 pad at Willesden Green, with total measured depths of 9,605 meters and 9,627 meters. In addition, the Company utilized in-basin wet sand on this pad, resulting in savings of over $300,000 per well. Average well costs in Willesden Green year-to-date are approximately 5% lower on a $/meter basis compared to full year 2025.

Approximately 47% of Paramount's forecast natural gas sales volumes for the remainder of 2026 and approximately 69% of forecast natural gas sales volumes for 2027 (excluding any Kaybob sales volumes) are expected to be priced at diversified markets outside of AECO, including Dawn, Malin, Emerson and Empress.

The Company now has 7,000 Bbl/d of liquids hedged for the fourth quarter of 2026 at an average WTI price of C$109.19/Bbl, 12,000 Bbl/d of liquids hedged for 2027 at an average WTI price of C$102.09/Bbl and 2,750 Bbl/d of liquids hedged for 2028 at an average WTI price of C$101.37/Bbl.

Paramount received cash dividends of $3 million in the third quarter from one of its private company investments.

Cash and cash equivalents totaled $325 million at September 30, 2026.

In November 2026, the credit limit of the Company's financial covenant-based senior secured revolving bank credit facility was doubled to $1.0 billion and the maturity date of the facility was extended to November 2030. Combined with its $250 million delayed draw term loan, Paramount now has undrawn credit facilities totaling $1.25 billion. The size of these credit facilities will be maintained following completion of the Kaybob Transaction.

| | | | (1) | Adjusted funds flow and free cash flow are capital management measures used by Paramount. Cash from operating activities per basic share, adjusted funds flow per basic share and free cash flow per basic share are supplementary financial measures. Refer to the "Specified Financial Measures" section for more information on these measures. |

SANCTIONING OF UPSIZED WILLESDEN GREEN DUVERNAY DEVELOPMENT

Paramount is accelerating the third phase expansion of its wholly-owned and operated Alhambra Plant by approximately one year, with start-up now anticipated in the third quarter of 2028. Designed raw gas handling capacity for this phase has been doubled to 100 MMcf/d while raw liquids handling capacity will continue to be 10,000 Bbl/d. On completion, the Alhambra Plant is expected to provide raw handling capacity of over 30,000 Bbl/d of liquids and over 200 MMcf/d of natural gas. In conjunction with the expansion, Paramount will construct a new compression node in the northern portion of its Willesden Green land base to accommodate future development and gas lift requirements for the field.

The Company has also begun developing the black oil window in the eastern portion of its land base, where it has sufficient inventory to sustain a targeted plateau production level of approximately 5,000 Boe/d (>85% liquids) for over 10 years. Paramount commenced the drilling of its first four (4.0 net) well Duvernay pad in the black oil window in September. Completion operations for these wells are planned to commence next year and the pad is expected to be onstream in the second quarter of 2027. Capital expenditures in 2027 and 2028 are expected to generate incremental annualized production of over 1,500 Boe/d in 2027 and 4,000 Boe/d in 2028.

With these investments, Paramount is increasing its targeted plateau production level from the Willesden Green Duvernay development from 70,000 Boe/d to 80,000 Boe/d, which it now expects to reach in 2029.

THE KAYBOB TRANSACTION

Paramount has agreed to sell its Kaybob Properties for $341 million, comprised of $198 million in cash plus 143 million common shares of Outwest, representing approximately 49% of the equity of the company. The Kaybob Properties include Paramount's Kaybob North Duvernay and Montney Oil developments, legacy developments at Presley, Pine Creek and Fox Creek, as well as the majority-owned 8-9 natural gas processing plant and the wholly-owned 12-10 oil terminal and battery. The Kaybob Properties had 29 MMBoe (32% liquids) of proved developed producing reserves, 52 MMBoe (43% liquids) of proved reserves and 101 MMBoe (46% liquids) of proved plus probable reserves as at December 31, 2025. (1)Outwest will assume Paramount's processing and transportation commitments relating to the assets on closing. Paramount will retain all of its physical long-haul natural gas contracts. Third quarter 2026 sales volumes and netback for the Kaybob Properties were approximately 17,500 Boe/d (39% liquids) and $41 million, respectively. (2)

Outwest is a private oil and gas company based in Calgary, Alberta, recently formed with the backing of private equity funds advised by ARC Financial Corp. ("ARC"). Led by Mike Backus, Chief Executive Officer, Outwest's strong team has a track record of creating value through safe and efficient execution and will be focused on unlocking the value of the Kaybob Properties.

ARC, Canada's largest energy focused private equity manager, has worked with the Outwest team in a previous venture and brings a wealth of experience and its financial backing to support the initial capitalization of Outwest.

| _ | | | (1) | All reserves are gross reserves based on an evaluation prepared in accordance with Canadian standards by McDaniel & Associates Consultants Ltd. dated March 2, 2026 and effective December 31, 2025. See "Reserves Data" in the Advisories section. | | | | | (2) | "Netback" is a Non-GAAP financial measure. See "Specified Financial Measures" in the Advisories section. |

Following completion of the Kaybob Transaction, Paramount will own approximately 49% of the outstanding common shares of Outwest, valued at $143 million on issuance, with the balance owned by ARC and the management and employees of Outwest. Paramount will be entitled, on closing, to nominate three of the seven directors of Outwest and to certain governance and shareholder rights under a unanimous shareholders agreement.

The Kaybob Transaction will enable Paramount to:

realize significant immediate cash value for the Kaybob Properties for reinvestment in its high growth Willesden Green Duvernay, Sinclair Montney and longer-term developments;

continue to benefit from the upside potential of the Kaybob Properties through the Company's 49% equity ownership in Outwest, as Outwest's proven management team works to unlock value;

lower its overall cost structure and materially simplify and focus the Company's operational footprint; and

reduce the Company's active and inactive well counts in Alberta by approximately 80% and 87%, respectively.

The cash portion of the purchase price will be subject to adjustments based on an effective date of December 31, 2026. Closing of the Kaybob Transaction is expected to occur in the first quarter of 2027, subject to the receipt of regulatory approvals on terms satisfactory to the parties and the satisfaction of other closing conditions. The Agreement provides for a $22 million deposit by Outwest. If the Kaybob Transaction is not completed, the deposit may be forfeited by Outwest to Paramount in certain circumstances set out in the Agreement. A copy of the Agreement will be filed on Paramount's SEDAR+ profile and will be available for viewing at www.sedarplus.ca.

Paramount recorded an aggregate before-tax impairment charge of $512 million at September 30, 2026, representing the portion of the total carrying value of the Kaybob Properties in excess of the purchase price, after factoring in $257 million of discounted, inflated asset retirement obligations and provisions associated with the Kaybob Properties ($545 million undiscounted, uninflated). (1)

Scotiabank, RBC Capital Markets and ATB Cormark Capital Markets acted as strategic advisors to Paramount in connection with the Kaybob Transaction. BMO Capital Markets and National Bank of Canada Capital Markets acted as strategic advisors to Outwest in connection with the Kaybob Transaction. Norton Rose Fulbright Canada LLP acted as legal counsel to Outwest.

2026 GUIDANCE

Paramount is maintaining its full-year 2026 production guidance range of 51,000 Boe/d to 53,000 Boe/d (49% liquids) and expects sales volumes to be in the upper half of this range. The Company anticipates 2026 capital expenditures at the high end of its $1,000 million to $1,100 million prior guidance range, reflecting incremental capital associated with the drilling of the four-well pad in the black oil window at Willesden Green and long-lead equipment orders associated with the third phase expansion of the Alhambra Plant. Paramount continues to expect total abandonment and reclamation expenditures of approximately $35 million in 2026.

| _ | | | (1) | The $257 million of discounted, inflated asset retirement obligations and provisions associated with the Kaybob Properties were determined using a 6.5% per annum discount rate and a 2.0% per annum inflation rate. |

2027 BUDGET AND GUIDANCE (EXCLUDING KAYBOB)

With the pending Kaybob Transaction, the Company is providing 2027 guidance excluding any capital expenditures or sales volumes associated with the Kaybob Properties.

Paramount is budgeting capital expenditures of between $1,175 million and $1,275 million in 2027, excluding any amounts associated with the Kaybob properties.

The breakdown of capital expenditures by key area at midpoint is as follows:

Willesden Green Duvernay $685 million Sinclair Montney $505 million Hoole and NE Alberta Heavy Oil $25 million Other $10 million

The breakdown of capital expenditures by category at midpoint is as follows:

Drilling, completion, equipping and tie-ins $700 million Facilities and gathering $500 million Corporate and other $25 million

At Willesden Green, Paramount plans to commence construction of the third phase expansion of the Alhambra Plant, the northern compression node and a trunkline connecting the node to the Alhambra and Leafland facilities. In addition, the Company plans to drill 29 (29.0 net) Duvernay wells and bring on production 21 (21.0 net) Duvernay wells, including the four wells in the black oil window.

At Sinclair, construction of the Sinclair Plant, which is being designed to handle up to 400 MMcf/d of raw natural gas, is expected to continue through the third quarter of 2027, with commissioning beginning in the third quarter and start-up in the fourth quarter. Other major infrastructure, including pipelines, produced water recycling and disposal facilities, are expected to be completed in advance of start-up. Paramount plans to drill 12 (12.0 net) Montney wells and complete and bring on production 12 (12.0 net) Montney wells.

Paramount continues to advance the evaluation of its Hoole thermal oil asset. Activities for 2027 include facilities design engineering, seismic and subsurface modeling and the advancing of regulatory and stakeholder engagement.

Paramount is forecasting 2027 annual average sales volumes, excluding the Kaybob Properties, of between 46,000 Boe/d and 50,000 Boe/d (49% liquids). Sales volumes are anticipated to progressively grow each quarter, with first production from the black oil window coming onstream late in the second quarter and the Sinclair Plant coming onstream in November 2027. Forecast quarterly sales volumes for 2027 at the mid-point are:

Q1: 41,000 Boe/d (48% liquids) Q2: 44,000 Boe/d (51% liquids) Q3: 48,500 Boe/d (54% liquids) Q4: 58,500 Boe/d (45% liquids)

With cash and cash equivalents of $325 million at September 30, 2026 and undrawn credit facilities totaling $1.25 billion, Paramount is in a strong financial position to advance its development plans. Proceeds from the pending Kaybob Transaction will further strengthen the Company's financial position.

The Company remains committed to prudently managing its capital resources and has the flexibility to adjust its capital expenditure plans depending on commodity prices and other factors.

2028 CAPITAL AND PRODUCTION OUTLOOK (EXCLUDING KAYBOB)

The Company anticipates capital expenditures of between $1,100 million and $1,200 million for 2028 that will be focused on the Company's Willesden Green Duvernay and Sinclair Montney developments.

At Willesden Green, Paramount is expecting to: (i) complete the third phase of the Alhambra Plant, (ii) complete the new compression node and trunkline, and (iii) drill 44 (44.0 net) Duvernay wells and complete and bring on production 37 (37.0 net) Duvernay wells.

At Sinclair, Paramount is expecting to drill 12 (12.0 net) Montney wells and complete and bring on production 18 (18.0 net) Montney wells.

Pro forma the Kaybob Transaction, the Company expects 2028 annual average sales volumes to double from 2027 to a range of 100,000 Boe/d to 110,000 Boe/d (27% liquids). Sales volumes are expected to exceed 125,000 Boe/d (33% liquids) by the first half of 2029 following the start-up of the new compression node and trunkline at Willesden Green.

REVIEW OF OPERATIONS

WILLESDEN GREEN

Willesden Green sales volumes averaged 37,815 Boe/d (53% liquids) in the third quarter of 2026 compared to 27,466 Boe/d (55% liquids) in the second quarter. Sales volumes increased as a result of a full quarter of production flowing through the second phase expansion of the Alhambra Plant, which started-up in June 2026. Sales volumes exceeded the Company's expectations due to higher than forecast runtime at the Alhambra Plant and the benefits of incremental debottlenecking activities.

The Company has brought on production a total of 18 (18.0 net) Duvernay wells since the second quarter 2026 start-up of the Alhambra Plant expansion, of which 14 (14.0 net) wells are tied-in to the Alhambra Plant and four (4.0 net) wells are tied-in to the Leafland Plant. All of these wells continue to be choked as gas handling capacity of the facilities are nearly full. Gross 90-day peak production from the 14 new wells tied-in to the Alhambra Plant averaged approximately 1,340 Boe/d (46% liquids) per well. Gross 150-day peak production from the first five of these wells averaged approximately 1,580 Boe/d (64% liquids) per well.(1)

Several of the 16 (16.0 net) Duvernay wells brought on production through the Alhambra Plant in 2025 remain choked to manage production within infrastructure capacity. Gross 300-day peak production from these 16 wells averaged approximately 1,180 Boe/d (53% liquids) per well. Gross 360-day peak production from the first ten of these wells averaged approximately 1,060 Boe/d (54% liquids) per well.(1)Fifteen of these wells have reached payout, with an average payout period of 8.5 months.

Paramount successfully completed the turnaround of the Leafland Plant and the expansion of compression and dehydration capacity at the facility in the third quarter. The Company also completed the construction and commissioning of the pipeline interconnecting the Alhambra and Leafland Plants. Start-up of the expanded Leafland facility and the pipeline occurred in late August.

The Company has now increased the designed raw inlet processing capacity of the combined Alhambra – Leafland complex to over 27,000 Bbl/d of liquids and over 130 MMcf/d of natural gas. Duvernay wells brought on production to date have exhibited higher gas volumes than anticipated, resulting in the natural gas handling capacity of the complex being fully utilized, with some unutilized liquids handling remaining. Paramount is in the process of evaluating incremental near-term debottlenecking opportunities to further expand the gas handling capacity of the complex in order to fully utilize the liquids handling capacity.

Paramount's water recycling facilities at the Alhambra Plant are now fully operational. Following the conclusion of well completion activities that used recycled water directly from the facility, recycled water has recently begun to flow into onsite engineered containment ponds for use in future well completions. The use of recycled water significantly reduces the amount of fresh water required for the Company's Willesden Green development plans, simplifying water procurement and lowering well completion costs. Additionally, the recycling of produced water will reduce capital and operating costs associated with disposal.