Cardinal Energy Ltd. — Proxy Solicitation & Information Statement 2020

May 28, 2020

This document should be read in conjunction with, and is incorporated into, the Information Circular and Proxy Statement of Cardinal Energy Ltd. dated May 24, 2020 (the "Information Circular"). Capitalized terms not otherwise defined herein have the meaning ascribed thereto in the Information Circular. This document is for information purposes only and does not constitute an offer to sell, or a solicitation of an offer to purchase Debentures in connection with the Amendments, or the solicitation of a proxy, in any jurisdiction, to or from any person to whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction. The delivery of this document does not under any circumstances, imply or represent that there has been no change in the information set forth herein since the date of the Information Circular. Debentureholders should not construe the contents of this document as legal, tax or financial advice and should consult with their own professional advisors in considering the relevant legal, tax, financial or other matters contained herein.

Proposed Debenture Amendments

May 2020

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Proposed Amendments to the

5.50% Extendible Convertible Unsecured Subordinated Debentures

to include an optional election to exchange for new 8.00% Convertible Unsecured Subordinated Debentures

Summary

Cardinal Energy Ltd. (“Cardinal” or the “Company”) is proposing to amend the currently outstanding 5.50% Extendible Convertible Unsecured Subordinated Debentures (the “2020 Debentures”) with the addition of the Exchange Right.

The Exchange Right would provide holders of the 2020 Debentures (the “Debentureholders”) the right, but not the obligation, to exchange the 2020 Debentures for a new second series of 8.00% Convertible Unsecured Subordinated Debentures (the “Extended Debentures"). The Exchange Right is a voluntary election and Debentureholders may elect not to exercise the Exchange Right and to keep their 2020 Debentures until maturity.

The terms of the Extended Debentures would be substantially similar to the terms of the 2020 Debentures except for the maturity date, coupon rate, conversion price (and applicable make-whole premium) and the redemption date. A summary of the amended terms is below.

			2020 Debentures			Extended Debentures
	Principal Amount		$1,000 per Debenture			$1,000 per Debenture		Principal amount unchanged maintaining
								value
	Maturity Date		December 31, 2020			December 31, 2022		Term to maturity extended two years allowing a longer stream of interest
								payments
	Annual Coupon		5.50%			8.00%		Coupon increased 2.50% providing increased cash payments to holders
								Conversion price reduced
	Conversion Price		$10.50/share			$1.25/share		88% providing significantly more common shares on
								conversion
			Subordinate to senior debt			Subordinate to senior debt		Ranking in a bankruptcy
	Priority Ranking		Senior to common shares			Senior to common shares		ahead of the common shares is preserved

The Meeting to consider the proposed amendments will be held at the office of Burnet, Duckworth & Palmer LLP in Calgary, Alberta on June 19, 2020, at 9:00 a.m. (Calgary time). To be valid, any proxies must be received by Computershare Trust Company of Canada before June 17, 2020, at 9:00 a.m. (Calgary time).

Reasons to Approve the Amendments and Anticipated Benefits of the Exchange Right

• Cash repayment of the 2020 Debentures is not expected to be possible and is impacting trading value

• The Company does not expect to have bank capacity to repay the 2020 Debentures and has no other currently known sources of liquidity available that would allow the repayment of the 2020 Debentures with cash

As at May 22, 2020, the last trading date before the date of the Information Circular, the closing price of the 2020 Debentures was $45.50, or a 65% discount to par value

2020 Debentures Trading Price and Volume

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 Repayment with Common Shares is not an attractive option for Debentureholders

• Repayment with common shares ("Common Shares") of Cardinal deteriorates the seniority position of the Debentureholders and eliminates all current interest and dividends

• Repayment of the 2020 Debentures with Common Shares would cause the Debentureholders to have their priority ranking in a bankruptcy reduced as the Common Shares rank behind the 2020 Debentures

• The Debentureholders would no longer receive any current cash interest payments as the Common Shares do not currently pay a dividend

• Repayment with Common Shares would cause significant dilution to all holders of Common Shares  Repayment of the 2020 Debentures with Common Shares at the current trading price levels would cause significant dilution to the holders of Common Shares that could be expected to cause the trading price of the Common Shares to decline

• The significant number of Common Shares issued could also be expected to reduce the per share benefits of any improvement in the future macro environment due to the total number of Common Shares then outstanding

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Common Shares Trading Price and Volume
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• Exchanging the 2020 Debentures for Extended Debentures provides the greatest seniority, current cash payments, likelihood of future full cash repayment, and an improved conversion option

• The Extended Debentures will maintain the priority ranking for the holder in line with the existing 2020 Debentures and ahead of the Common Shares in any bankruptcy situation

• The Extended Debentures will receive an increased annual cash coupon of 8.00% compared to the existing 2020 Debentures at 5.50% and the Common Shares currently not paying any current cash dividends

• The Extended Debentures will continue to have the option to be converted into Common Shares but at a lower implied conversion price than the 2020 Debentures at the holder's option

• The extended maturity date of the Extended Debentures lessens the likelihood that the Company will elect to issue Common Shares to satisfy the repayment of the 2020 Debentures and will allow Cardinal to defer the repayment of principal for those 2020 Debentures so exchanged to a time when commodity markets may be improved and a cash payment is then viable for the Company

• An increase in the trading value of the Extended Debentures is expected above where the 2020 Debentures are currently trading

• The combination of the increased annual interest rate from 5.50% to 8.00%, the decrease in the conversion price from $10.50 to $1.25 per share, and the extended term to maturity to December 31, 2022, are expected to cause the Extended Debentures to trade at a higher value than the 2020 Debentures

• Debentureholders will be provided with the flexibility to voluntarily elect to exchange their 2020 Debentures at their own discretion, and the terms and form of the 2020 Debentures will not be materially impacted by the Amendments if Debentureholders elect not to exchange

• Debentureholders can vote in favor of the amendment to the 2020 Debenture and not elect to exercise the Exchange Right, substantially maintaining their current ownership and terms

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Summary of the Proposed Amendments

The Amendments: The Company is asking the Debentureholders to consider and, if deemed advisable, pass an Extraordinary Resolution approving certain amendments to the Indenture governing the 2020 Debentures to:

• amend the terms of the 2020 Debentures to provide Debentureholders with the Exchange Right, pursuant to which each Debenture Holder will be provided with a right, but not an obligation, to exchange, at the Debentureholder's sole discretion and upon their election, the principal amount of their 2020 Debentures, in increments of $1,000, for an equal principal amount of Extended Debentures, being a newly created second series of debentures designated as 8.00% convertible unsecured subordinated debentures due December 31, 2022; and

• make such other consequential amendments as required to give effect to the forgoing (the "Amendments").

If the Extraordinary Resolution is approved by the Debentureholders, the effective date of the Amendments will be the date that the Company enters into the Supplemental Indenture. Although Cardinal intends to enter into the Supplemental Indenture as soon as possible following approval of the Extraordinary Resolution, the Cardinal Board has retained the discretion, without further notice to or approval of the Debentureholders, to revoke the Extraordinary Resolution at any time prior to Cardinal entering into the Supplemental Indenture.

Other than removing the requirement in the Indenture that Cardinal maintain the listing of the 2020 Debentures on the TSX if the exercise of the Exchange Right results in the 2020 Debentures no longer meeting the listing requirements of the TSX. Debentureholders are encouraged to read the full text of the Extraordinary Resolution and the Supplemental Indenture in their entirety.

The Exchange Right:

Currently, pursuant to the terms of the Indenture, Debentures may only be exchanged for Debentures of the same series and date of maturity, bearing the same interest rate and of the same aggregate principal amount as the Debentures so exchanged.

Following the Meeting, and provided the Debentureholders approve the Amendments, the Debentureholders will have the benefit of the Exchange Right pursuant to which Debentureholders may exchange their 2020 Debentures, in increments of $1,000 principal amounts, for an equal principal amount of Extended Debentures. The Exchange Right is a voluntary election of the Debentureholders, and Debentureholders may elect not to exercise the Exchange Right and to keep their 2020 Debentures until maturity.

The Exchange Right and all deposits of Debentures for exchange are subject to the terms and conditions set forth in the Indenture, as amended by the Supplemental Indenture, and the Information Circular.

Debentureholder The Amendments must be approved by at least 66 2/3% of the principal amount of 2020 Debentures held Approval: by the Debentureholders that vote at the Meeting.

Exchange Period:

Voting:

Debentureholders will be able to elect to exchange their 2020 Debentures for Extended Debentures pursuant to the Exchange Right as of the date of the Supplemental Indenture up until the Expiration Time on the Expiration Date. The Exchange Right will expire at the Expiration Time on the Expiration Date, being the date that is 30 days from the date of the Supplemental Indenture, unless otherwise terminated, extended or amended by Cardinal, which is currently expected to be July 19, 2020. Promptly following the Expiration Date, the Company will exchange all 2020 Debentures for which the exercise of the Exchange Right has been validly exercised and has not been rescinded prior to the Expiration Time for an equal principal amount of Extended Debentures. The Exchange Date is currently expected to be July 20, 2020.

All of the 2020 Debentures are held in book-entry form through the facilities of CDS & Co. (the registration name for the Canadian Depository for Securities Limited) ("CDS"). Accordingly, in order for a beneficial holder of 2020 Debentures to have its 2020 Debentures voted at the Meeting, it must complete and sign the applicable instrument of proxy or other voting instruction form provided by its investment dealer, broker, other nominee or intermediary and return such instrument of proxy or other voting instruction form in accordance with the instructions provided therein well in advance of the Meeting. Failure to do so will result in such 2020 Debentures not being voted at the Meeting.

To be valid, any proxies must be received by Computershare Trust Company of Canada by not later than forty-eight (48) hours (exclusive of Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of the Meeting or any postponement or adjournment thereof.

Meeting:

The Meeting of the Debentureholders will held at the offices of Burnet, Duckworth & Palmer LLP at Suite 2400, 525-8th Avenue SW, Calgary, Alberta at 9:00 a.m. (Calgary time) on June 19, 2020.

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BACKGROUND AND RECOMMENDATION

Cardinal is a junior oil and gas producer that differentiates itself by the long life nature of its assets. These assets, which have a lower than average decline rate of 10% per year also have a higher than average operating cost per barrel as the Company injects water or CO2 into the majority of its oil properties to maintain its low decline rate. The greatest attribute that these properties afford the Company is time as the assets do not change materially from year to year.

In Cardinal’s original 2020 budget, announced on December 9, 2019, the Company used an average oil price for the year of $55 WTI per barrel. The original 2020 budget contemplated that the Company would generate sufficient cash flow from operating activities to repay 2020 Debentures in full at December 31, 2020. Now with the effects of the Saudi/Russia oil price war in March of this year, quickly followed by the COVID-19 global pandemic’s broad negative effect on oil demand, oil prices have been negatively affected and have ranged between a negative number and a current price of approximately $33 WTI per barrel. With today’s reduced oil pricing, the Company will not generate enough cash flow from operating activities to repay the 2020 Debentures.

When Cardinal’s original 2020 budget was established, Cardinal had ample room on its Credit Facility to use it to repay the outstanding debentures. With the effects of COVID-19 on oil prices, the Company’s cash flow from operating activities are lower at a time when the Credit Facility is being renewed. The Company's $325 million Credit Facility was available on a revolving basis until May 23, 2020. On May 22, 2020, subject to certain conditions, the Company and its lenders agreed to extend the Credit Facility until June 30, 2020 in order for the lenders to have more time to assess current market conditions and the effect of potential government assistance programs on the Credit Facility. Among others, the conditions include a cap on the drawings available to the Company and that no drawings can be used to redeem or repay the 2020 Debentures. The available lending limit of the Credit Facility is based on a number of factors, including the syndicate's interpretation of the Company's reserves, future commodity prices and costs. Although the Company expects that the Credit Facility will be renewed following the extension period, the Credit Facility is not likely to be renewed by the syndicate at its original level although the credit availability may be higher or lower than the cap imposed during the 30-day extension period. In addition, there is no certainty as to whether a renewed Credit Facility will permit the Company to draw on the Credit Facility in order to repay all or any portion of the 2020 Debentures on their maturity date.

The downside risk to both Debentureholders and the Company is that if the Company does not have sufficient cash to repay the 2020 Debentures on maturity, Cardinal will exercise its option to issue Common Shares to repay the outstanding principal amount. This is not an ideal situation for either the Company or Debentureholders as the equity dilution from the repayment of the Debentures would seriously impair the per share value of the Common Shares for all holders. Debentureholders will also have increased downside risk as Debentureholders will lose the priority position they currently enjoy in the capital structure of the Company if their ownership is changed to Common Shares.

Cardinal treats the obligation to repay these debentures seriously and is focused on providing Debentureholders with the opportunity to receive full repayment of their investment in cash. The Board of Directors of Cardinal (the "Cardinal Board") believes that time will fix Cardinal’s current liquidity crunch and as its assets won’t materially change over the next few years, the opportunity to repay the Debentures out of future cash flow from operating activities is a better option than equity dilution. The Cardinal Board has unanimously determined that the Amendments are in the best interests of Cardinal and the Debentureholders. The Cardinal Board unanimously recommends that Debentureholders vote in favour of the Extraordinary Resolution.

Your vote is important. The creation and issuance of the Extended Debentures will be conditional on the approval by the Debentureholders of the Amendments.

Voting on the Extraordinary Resolution is not a yes or no vote on whether or not you, as a Debenture holder want to exchange your Debentures. This vote is to allow the Company to amend its Debentures to give you and other Debentureholders with the option of either: keeping your existing 2020 Debenture or exchanging your existing 2020 Debenture for the Extended Debenture that pays a higher interest rate and offers a lower conversion price.

The Company hopes that you carefully consider this amendment as a yes vote does not change your position as it stands today but offers you and other Debentureholders with an additional option of accepting a new debenture with better terms.

Exchange Agent – Computershare Investor Services Inc.

For Delivery by Mail, Hand or Courier:

100 University Avenue 8[th] Floor, North Tower Toronto, ON M5J 2Y1 E-mail: corporateactions@computershare.com Toll Free: 1-800-564-6253

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ADVISORIES

Forward-Looking Statements

This document contains forward-looking statements and forward-looking information (collectively referred to herein as "forwardlooking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "will", "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "may", "project", "should" and variations of such words and similar expressions are intended to identify forward-looking statements. Specifically, and without limiting the generality of the foregoing, all statements included in this document that address activities, events or developments that Cardinal expects or anticipates will or may occur in the future, including, but not limited to statements with respect to: the long life nature of the Company's assets; the decline rate of Cardinal's assets; that the Company will not generate enough cash flow from operating activities to repay the 2020 Debentures; sources of liquidity available to the Company; plans to provide Debentureholders with the opportunity to receive full repayment of their investment in cash; that time will fix Cardinal’s current liquidity crunch and that its assets won’t materially change over the next few years; that the opportunity to repay the Extended Debentures out of future cash flow from operating activities is a better option than equity dilution; the proposed Amendments and timing of completion of the Amendments; the Expiration Date and the Exchange Date; the benefits of the Amendments; trading prices; the renewal of the Credit Facility, if any, and the terms and conditions of such renewal; and plans with respect to the repayment of the 2020 Debentures and the impact of such plans on the trading price of the Common Shares, may constitute forward-looking statements under applicable Canadian securities laws and necessarily involve known and unknown risks and uncertainties, most of which are beyond Cardinal's control. These risks may cause actual financial and operating results, performance, levels of activity and achievements to differ materially from those expressed in, or implied by, such forward-looking statements.

Forward-looking statements regarding Cardinal are based on certain key expectations and assumptions of Cardinal concerning various matters including that the Credit Facility will be renewed and on the terms expected, future liquidity, that applicable regulatory approvals for the Amendments will be obtained, anticipated financial performance, business prospects, strategies, regulatory developments, future production, the impact (and the duration thereof) the COVID-19 pandemic the ability of OPEC+ nations and other major producers of crude oil to reduce crude oil production and thereby arrest and reverse the steep decline in world crude oil prices, future production rates, current and future commodity prices and exchange rates, applicable royalty rates, tax laws, future well production rates and reserve volumes, future operating costs, the performance of existing and future wells, the success of the Company's exploration and development activities, the sufficiency and timing of budgeted capital expenditures in carrying out planned activities, the timing and success of cost cutting initiatives, the availability and cost of labour and services, the impact of competition, conditions in general economic and financial markets, availability of drilling and related equipment, effects of regulation by governmental agencies.

These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Cardinal's control. Such risks and uncertainties include, without limitation: the risk that the Credit Facility will not be renewed following the extension period, the terms of any such renewal, including, as to whether a renewed Credit Facility will permit the Company to draw on the Credit Facility in order to repay all or any portion of the Debentures on their maturity date, that the Amendments may not be effected when planned, or at all, the impact of the COVID-19 pandemic, general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; Cardinal's ability to access sufficient capital from internal and external sources, currency fluctuations; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel, drilling rigs or other services; changes in income tax laws or changes in royalty rates and incentive programs relating to the oil and gas industry; and hazards such as fire, explosion, blowouts, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury.

Management of Cardinal has included the forward-looking statements above and a summary of assumptions and risks related to forward-looking statements provided in this document in order to provide readers with a more complete perspective on Cardinal's future operations and such information may not be appropriate for other purposes. Cardinal makes no representations or warranty that the expectations conveyed by the forward-looking statements will prove to be correct. Cardinal's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Cardinal will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. All of the forward-looking statements made in this document are qualified by these cautionary statements and are made as of the date of this document. Cardinal disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

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