FIDDLEHEAD

FIDDLEHEAD RESOURCES CORP.

(FORMERLY ALPHA PEAK CAPITAL INC.)

(TSXV:FHR)

ANNUAL FINANCIAL STATEMENTS AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

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Independent auditor's report

To the Shareholders of Fiddlehead Resources Corp.

Our opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Fiddlehead Resources Corp. (the Company) as at December 31, 2024 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).

What we have audited

The Company's financial statements comprise:

the balance sheet as at December 31, 2024;
the statement of loss and comprehensive loss for the year then ended;
the statement of changes in shareholders' equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include material accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 1 to the financial statements, which describes events or conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

PricewaterhouseCoopers LLP
Suncor Energy Centre, 111 5th Avenue South West, Suite 3100, Calgary, Alberta, Canada T2P 5L3
T.: +1 403 509 7500, F.: +1 403 781 1825, Fax to mail: [email protected]

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter	How our audit addressed the key audit matter
Valuation of property, plant and equipment (PP&E) acquired in the business combination

Refer to note 3 – Material accounting policies, note 4 – Critical judgments and accounting estimates and note 5 – Business combination to the financial statements. | Our approach to addressing the matter included the following procedures, among others: |
| On August 29, 2024, the Company completed the acquisition of production and working interests in certain assets in the Cardium fairway in the South Ferrier, Strachan area of west central Alberta. This transaction was accounted for using the acquisition method, which requires the identifiable assets acquired and liabilities assumed to be measured at their fair values at the acquisition date. The fair value of PP&E recognized on acquisition was $31.5 million. PP&E acquired was valued using a fair value less cost of disposal methodology, using the present value of the expected future cash flows after-tax derived from a reserve report on the acquired oil and gas reserves, which was prepared by an independent qualified reserve evaluator. (management's experts). | • Tested how management determined the fair value of the acquired PP&E, which included the following: |
| The assumptions and estimates used to determine the total reserves acquired and the fair value of the acquired PP&E require significant judgment by management and include production forecasts, production costs, forecast benchmark commodity prices, timing and amounts of future development costs, and discount rate. | – Evaluated the appropriateness of the method used by management to determine the fair value of the acquired PP&E. |
| | – Tested the data used in determining the estimate. |
| | – The work of management's experts was used to perform the procedures to evaluate the reasonableness of the total reserves acquired used to determine the fair value of the PP&E. As a basis for using this work, the competence, capabilities and objectivity of management's experts were evaluated, the work performed was understood and the appropriateness of the work as audit evidence was evaluated. The procedures performed also included evaluation of the methods and assumptions used by management's experts, and an evaluation of their findings. |
| | – Evaluated the reasonableness of certain assumptions by: |
| | ○ Considering whether production forecasts, production costs and timing and amounts of future development |

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Key audit matter	How our audit addressed the key audit matter
We considered this a key audit matter due to the significant judgment applied by management, including the use of management's experts, when determining the total reserves acquired and the fair value of the acquired PP&E, including development of assumptions. This, in turn, led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the assumptions used by management. The audit effort involved the use of professionals with specialized skill and knowledge in the field of valuation.	costs were consistent with the actual performance of the acquired assets, and whether they were consistent with evidence obtained in other areas of the audit.

Key audit matter

How our audit addressed the key audit matter

We considered this a key audit matter due to the significant judgment applied by management, including the use of management's experts, when determining the total reserves acquired and the fair value of the acquired PP&E, including development of assumptions. This, in turn, led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the assumptions used by management. The audit effort involved the use of professionals with specialized skill and knowledge in the field of valuation.

costs were consistent with the actual performance of the acquired assets, and whether they were consistent with evidence obtained in other areas of the audit.

• Comparing forecast benchmark commodity prices to reputable third party industry forecasts.

• Using professionals with specialized skill and knowledge in the field of valuation, who assisted us in assessing the reasonableness of the discount rate. |

The impact of oil and gas reserves on PP&E

Refer to note 3 – Material accounting policies, note 4 – Critical judgments and accounting estimates and note 9 – Property, plant and equipment to the financial statements.

The Company had $29.5 million of PP&E as at December 31, 2024, primarily consisting of petroleum and natural gas (PNG) assets and depletion and depreciation (DD&A) expense was $2.0 million for the year then ended. PNG assets are depleted using the units of production method based on total proved plus probable oil and gas reserves as well as estimated future development costs associated with these reserves.

PP&E assets are grouped together into a cash generating unit (CGU) for the purpose of impairment testing. At each reporting date, the carrying amounts of the Company's PP&E are reviewed for indicators of impairment. If any such indicators exist, management estimates the CGU's recoverable amount, defined as the greater of its value in use and its fair value less costs to sell (FVLCD). An impairment loss is recognized if the

Our approach to addressing the matter included the following procedures, among others:

The work of management's experts was used in performing the procedures to evaluate the reasonableness of the proved plus probable oil and gas reserves used to determine the recoverable amount of the CGU and DD&A expense. As a basis for using this work, the competence, capabilities and objectivity of management's experts were evaluated, the work performed was understood and the appropriateness of the work as audit evidence was evaluated. The procedures performed also include evaluations of the methods and assumptions used by management's experts and an evaluation of their findings.
Tested how management determined the recoverable amount of the Company's CGU, which included the following:
Evaluated the appropriateness of the methods used by management in making these estimates.
Tested the data used in determining these estimates.

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Key audit matter

carrying amount of a CGU exceeds its estimated recoverable amount.

As at December 31, 2024, there were indicators of impairment present due to the occurrence that title transfer to the Company had not occurred within 90 business days of the closing date of the acquisition. The recoverable amount of the Company's CGU was estimated as the FVLCD based on the net present value of the after-tax cash flows from the proved plus probable oil and gas reserves of the CGU based on reserves estimated by management's experts. Based on the impairment test performed, it was determined that the recoverable amount was in excess of the carrying amount, and no impairment loss was recognized in the Company's statement of loss and comprehensive loss.

The significant assumptions used by management to determine the recoverable amount of the Company's PP&E assets include the discount rate, which incorporates the risk of the asset purchase being unwound as per the asset sale agreement, production forecasts, forecast benchmark commodity pricing, the timing and amounts of future development costs, and production costs.

We considered this a key audit matter due to the significant judgment by management, including the use of management's experts, when developing the estimates of proved plus probable oil and gas reserves used to determine the recoverable amount of the CGU, and the high degree of auditor judgment, subjectivity and effort in performing procedures relating to the significant assumptions. The audit effort involved the use of professionals with specialized skill and knowledge in the field of valuation.

How our audit addressed the key audit matter

Evaluated the reasonableness of key assumptions used in developing the underlying estimates, including:
Production forecasts, production costs and timing and amount of future development costs by considering actual performance of the Company and whether these assumptions were consistent with evidence obtained in other areas of the audit, as applicable.
Forecast benchmark commodity prices were reasonable by comparing them to reputable third-party industry forecasts.
Discount rate, which incorporates the risk of the asset purchase agreement being unwound as per the asset sale agreement, through the assistance of professionals with specialized skill and knowledge in the field of valuation.
Recalculated the unit of production rates used to calculate DD&A expense for the PNG assets.

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Comparative information

The financial statements of the Company for the year ended December 31, 2023 were audited by another auditor who expressed an unmodified opinion on those financial statements on February 2, 2024.

Other information

Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

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audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes

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public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Alexandra Arnell.

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

Calgary, Alberta

April 28, 2025

FIDDLEHEAD RESOURCES CORP.

Balance Sheets

(Expressed in Canadian Dollars)

	Notes	As at December 31, 2024	As at December 31, 2023
ASSETS
Current
Cash		699,989	372,153
Accounts receivable	6	914,558	16,433
Prepaid expenses		97,818	-
Total Current Assets		1,712,365	388,586
Non-Current
Property, plant and equipment	9	29,491,132
Right-of-use assets	11	510,239	-
Total Assets		31,713,736	388,586
LIABILITIES
Current
Accounts payable and accrued liabilities		612,746	32,295
Deferred consideration payable	9	1,250,000	-
Current portion of long-term debt	12	12,168,017	-
Current portion of lease obligations	11	108,406	-
Total current liabilities		14,139,169	32,295
Non-Current
Contingent consideration payable	5	502,965	-
Asset retirement obligation	10	10,754,737	-
Lease obligations	11	408,026	-
Total Liabilities		25,804,897	32,295
SHAREHOLDERS' EQUITY
Share capital	14	71,355,096	64,707,097
Warrants	14	2,760,684	-
Contributed surplus		1,006,098	595,014
Deficit		(69,213,039)	(64,945,820)
Total Shareholders' Equity		5,908,839	356,291
Total Liabilities & Shareholders' Equity		31,713,736	388,586

Going Concern (Note 1)

Commitments and Contingencies (Note 13)

Subsequent Events (Note 19)

The accompanying notes are an integral part of these Financial Statements.

Approved on behalf of the Board of Directors:

[signed] "Brent Osmond"
Brent Osmond, Chairman, President & CEO and Director

[signed] "Gregory Turnbull"
Gregory Turnbull, Director

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FIDDLEHEAD RESOURCES CORP.

Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars, except per share amounts)

	Notes	Year Ended December 31
		2024	2023
REVENUE
Oil and gas sales	7	4,843,517	-
Royalties	7	(1,313,760)	-
Oil and gas sales, net of royalties		3,529,757	-
Processing and other		29,883	-
		3,559,640	-
Gain on derivative financial instruments	5	210,148	-
EXPENSES
Operating		2,279,232	-
Transportation costs		19,587	-
General and administrative		2,191,576	235,700
Finance costs	8	1,108,053	-
Share-based compensation	15	411,084	13,429
Depletion, depreciation, and amortization	9,11	2,027,475	-
		8,037,007	249,129
NET LOSS AND COMPREHENSIVE LOSS		(4,267,219)	(249,129)
Weighted average shares
Basic¹		25,423,895	4,719,523
Diluted¹		25,423,895	4,719,523
Net loss per share
Basic¹		(0.17)	(0.05)
Diluted¹		(0.17)	(0.05)

¹ Common Shares outstanding have been adjusted as a result of the Share Consolidation.

The accompanying notes are an integral part of these Financial Statements.

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FIDDLEHEAD RESOURCES CORP.

Statements of Changes in Shareholders' Equity

(Expressed in Canadian Dollars)

	Notes	Share Capital	Warrants	Contributed Surplus	Deficit	Total
Balance at January 1, 2023		64,132,017	-	581,585	(64,696,691)	16,911
Issuance of shares for cash		581,800	-	-	-	581,800
Share issuance costs		(6,720)	-	-	-	(6,720)
Share-based compensation expense		-	-	13,429	-	13,429
Net loss and comprehensive loss		-	-	-	(249,129)	(249,129)
Balance at December 31, 2023		64,707,097	-	595,014	(64,945,820)	356,291
Issuance of subscription units	14	7,959,316	2,760,684	-	-	10,720,000
Share issuance costs	14	(1,311,317)	-	-	-	(1,311,317)
Share-based compensation	15	-	-	411,084	-	411,084
Net loss and comprehensive loss		-	-	-	(4,267,219)	(4,267,219)
Balance at December 31, 2024		71,355,096	2,760,684	1,006,098	(69,213,039)	5,908,839

The accompanying notes are an integral part of these Financial Statements.

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FIDDLEHEAD RESOURCES CORP.

Statements of Cash Flows

(Expressed in Canadian Dollars)

	Notes	Year Ended December 31
		2024	2023
OPERATING
Net loss		(4,267,219)	(249,129)
Adjustments for:
Depletion, depreciation and impairment	9,11	2,027,475	-
Share-based compensation	15	411,084	13,429
Finance costs	8	589,260	-
Gain on derivative financial instruments	5	(210,148)	-
Changes in non-cash working capital	17	(586,702)	2,945
Net cash used in operating activities		(2,036,250)	(232,755)
INVESTING
Property acquisitions	9	(18,827,959)	-
Additions to property, plant and equipment	9	(162,357)	-
Additions to right-of-use assets	11	(12,530)	-
Additions to other assets	9	(61,557)	-
Changes in non-cash working capital	17	171,208	-
Net cash used in investing activities		(18,893,195)	-
FINANCING
Issuance of share capital	14	7,959,316	581,800
Share issuance costs	14	(1,311,317)	(6,720)
Issuance of warrants	14	2,760,684	-
Increase in long-term debt	12	13,000,000	-
Debt issuance costs	12	(1,145,075)	-
Payments on lease obligations		(6,327)	-
Net cash generated by financing activities		21,257,281	575,080
NET INCREASE IN CASH		327,836	342,325
CASH, BEGINNING OF YEAR		372,153	29,828
CASH, END OF YEAR		699,989	372,153
The following are included in cash flow used in operating activities:
Interest paid in cash		391,083	-

The accompanying notes are an integral part of these Financial Statements.

FIDDLEHEAD RESOURCES CORP.

NOTES TO THE FINANCIAL STATEMENTS

As at and for the years ended December 31, 2024 and December 31, 2023

(All amounts expressed in Canadian Dollars, except as otherwise noted)

1. CORPORATE INFORMATION AND GOING CONCERN

Fiddlehead Resources Corp. ("Fiddlehead" or the "Company") was incorporated on June 24, 2011, under the Business Corporations Act of British Columbia as "Alpha Peak Capital Inc.". Articles of Amendment were filed to change its name to "Fiddlehead Resources Corp." on September 5, 2023. On September 16, 2024, the Company completed the continuance of the Company to the Province of Alberta under the Business Corporations Act from the Province of British Columbia and the adoption of new articles of continuance (Province of Alberta) effective as of September 12, 2024. The Company is engaged in oil and natural gas exploration, development and production, and the acquisition of oil and natural gas properties, focused in the South Ferrier, Strachan areas of west central Alberta. The Company's shares are traded on the TSX Venture Exchange ("TSXV") under the symbol "FHR". The Company's head office is located at Suite 1200, 715 - 5th Avenue SW, Calgary, Alberta, Canada, T2P 2X6 and its registered office address is Suite 1000, 250 - 2nd Street SW, Calgary, Alberta, Canada, T2P 0C1.

Going concern:

These Financial Statements have been prepared on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business as they become due. For the year ended December 31, 2024, the Company reported a net loss and comprehensive loss of $4.3 million and cash used in operating activities of $2.0 million. As at December 31, 2024, the Company had a cash balance of $0.7 million and a working capital deficiency of $12.4 million.

As at December 31, 2024, the Company was not in compliance with two covenants in its debt agreement (see Note 12 Long-Term Debt). Subsequent to year end, the Company received waivers for the breach of these covenants. On March 7, 2025, the Company received a waiver on the covenant breach related to the 30-day average of $WTI. Included in this waiver, there is a deferral of a principal payment in the amount of $750,000 that was due March 31, 2025. This payment is now due and payable on May 30, 2025 if the remaining loan balance has not been repaid. On April 23, 2025 the Company received a waiver from the lender on the covenant breach relating to the value of its year end Proved Developed Producing Reserves. The amount due to the lender as a result of this breach is $924,000. As per the waiver, the amount due is now payable May 30, 2025 if the remaining amount of the loan balance has not been repaid. The Company was compliant with all other covenants.

The Company's credit facility with its lender provides for a full repayment of outstanding interest and principal on November 30, 2025. The Company's ability to continue as a going concern is dependent on its ability to fulfill this obligation.

On April 10, 2025, Fiddlehead announced that it has entered into a share purchase agreement (the "Purchase Agreement") with a privately owned Central Alberta producer ("PrivateCo") to acquire upstream producing and non-producing assets near Cynthia, Alberta (the "Cynthia Assets"). Pursuant to the terms of the Purchase Agreement, Fiddlehead proposes to acquire all of the issued and outstanding shares of PrivateCo as further described below (the "Transaction") for total consideration of $21,000,000 (the "Purchase Price"), consisting of $18,000,000 cash consideration and $3,000,000 in units of Fiddlehead ("Unit"). Each Unit consists of one common share of Fiddlehead ("Common Share") valued at a price of $0.20 per share and one whole share purchase warrant ("Warrant"). Each Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.24 per share at any time up to 60 months following the completion of the Transaction.

The Purchase Price is expected to be fully funded by a new senior secured term debt facility in the amount of USD$25,000,000 (the "Debt Facility"), provided by a syndicate of North American-based private credit investors (the "Lenders"), bearing an interest rate of 12.09% per annum, pursuant to a term sheet executed on April 10, 2025 (the "Term Sheet"). The Term Sheet is conditional on a number of factors including that the licenses for the existing acquisition described in note 5 have transferred to the Company, which is subject to the uncertainties described below in the section titled "Transition Services Agreement". In addition to the funding of the acquisition, the new senior secured debt facility, if executed, would replace the Company's current lending agreement.

Concurrent with the completion of the Transaction, Fiddlehead plans to raise gross proceeds of $1,000,000 through a non-brokered private placement on identical terms as the Units issued to PrivateCo (the "Offering"), in which the Company has received commitments for the entire amount. Pursuant to the private placement, the Company plans to issue 5,000,000 units at a price of $0.20 per Unit. Certain directors and management members of Fiddlehead and large shareholders will be subscribing in the private placement for an aggregate of approximately $500,000; the remaining $500,000 has been fully committed by energy investors. The proceeds from these Offerings are expected to be used by the Company primarily for general working capital.

To meet its November 30, 2025 debt repayment obligation, as described above, it is expected the new credit agreement, raising of new equity and the incremental cash flows from the acquired company will satisfy the obligations with its current lender as described above. However, there can be no assurance any or all of these initiatives will be successful.

As per the terms of the purchase and sale agreement regarding the Company's asset acquisition which closed August 29, 2024, under a Transition Services Agreement (as described in Note 5), the Vendor operates the assets until such time that title to the assets is transferred to the Company. If the title transfer does not occur within 90 days after closing, the Vendor has the right to the reconveyance of the asset. This would effectively "unwind" the acquisition. If the Vendor exercised this reconveyance option, the Company would receive net proceeds of the "unwinding" whereby the Company receives a return of the consideration paid (net of adjustments and the payment of a break fee) and the asset is returned to the Vendor. The Company would then apply the proceeds of the unwind to satisfy all obligations to the lender. As a result, the Company would have no cash generating assets and surplus cash after the payment of its debts. As of the date of these financial statements, the Vendor has agreed to an extension of the Transition Services Agreement to May 31, 2025.

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FIDDLEHEAD RESOURCES CORP.

Subsequent to year-end, there have been significant declines in commodity prices in part due to significant economic uncertainty attributed to actions undertaken or announced by the United States regarding tariffs. The announcement of these tariffs has contributed to volatility in commodity prices, if sustained, will also negatively impact the Company's liquidity, and would give rise to additional impairments.

These considerations create material uncertainties which cast significant doubt upon the Company's ability to continue as a going concern and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. These audited Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments could be material.

2. BASIS OF PREPARATION

These financial statements as at December 31, 2024 (the "Financial Statements") have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards").

The Company prepared these Financial Statements on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business as they become due. Accordingly, these Financial Statements have been prepared on a historical cost basis, except for the following:

Certain financial assets and liabilities (including derivative instruments) and certain classes of property, plant and equipment ("PP&E") – measured at fair value or revalued amount; and
Contingent consideration - measured at fair value.

The method used to measure fair value is discussed further in Notes 3 and 6.

Unless otherwise indicated, the Financial Statements are presented and expressed in Canadian dollars ("C$"), which is the functional and presentation currency of the Company.

The Company's Board of Directors approved these Financial Statements on April 28, 2025.

3. MATERIAL ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements.

Cash

Cash comprises cash on hand. As at December 31, 2024, all of the Company's cash is on deposit with a high credit-quality financial institution.

Financial instruments

Financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods depends on the classification of the financial instrument:

Fair value through profit or loss - subsequently carried at fair value with changes recognized in net loss; and
Amortized cost - subsequently carried at amortized cost using the effective interest method. Financial instruments under this classification include cash, accounts receivable, accounts payable and accrued liabilities, lease obligations, deferred consideration payable and long-term debt.

Refer to Note 6 for the classification and measurement of these financial instruments.

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity. Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Leases

A contract is, or contains, a lease if the contract provides the right to control the use of an identified asset for a period of time in exchange for consideration. A lease obligation is recognized at the commencement of the lease term measured as the present value of the lease payments not already paid at that date. Interest expense is recognized on the lease obligations using the effective interest rate method and net payments are applied against the lease obligation. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease obligation, adjusted for lease incentives received and initial direct costs. Depreciation is recognized on the right-of-use asset over the lease term.

Property, plant and equipment

Petroleum and natural gas assets

Petroleum and natural gas ("PNG") assets and other assets are recognized at cost less accumulated depletion, depreciation and amortization, and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, including qualifying costs on reclassification from intangible exploration and evaluation ("E&E") assets, and for

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FIDDLEHEAD RESOURCES CORP.

qualifying assets, where applicable, borrowing costs. When significant parts of an item of PP&E have different useful lives, they are accounted for as separate items.

Gains and losses on disposal of items of PP&E, including oil and natural gas interests, are determined by comparing the proceeds from disposal with the carrying amount of PP&E and are recognized in net loss immediately.

Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as PNG assets or other assets only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. Such capitalized PP&E generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves, and are accumulated on a well, field or geotechnical area basis, together with the discounted value of estimated future costs of asset retirement obligations.

When components of PNG assets are replaced, disposed of or no longer in use, the carrying amount is derecognized. The costs of the day-to-day servicing of PP&E are recognized in net loss as incurred.

Depletion, depreciation and amortization

The depletion, depreciation and amortization of PNG assets and other assets are recognized in net loss.

PNG assets are depleted using a unit-of-production method based on:

Total estimated proved plus probable oil and gas reserves calculated and Standards of Disclosure for Oil and Gas Activities in accordance with National Instrument 51-101 ("NI 51-101");
Total capitalized costs including estimated FDCs of proved plus probable reserves; and
Production volumes, before royalties, converted at the energy equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil.

Furniture and fixtures are depreciated at a declining balance rate of 20% whereas computer system & equipment are depreciated at a declining balance rate of 55%.

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Impairment

Financial assets carried at amortized cost

Fiddlehead applies the simplified approach to providing for expected credit losses ("ECL") prescribed by IFRS 9 Financial Instruments ("IFRS 9") which permits the use of the lifetime expected loss provision for all trade receivables carried at amortized cost.

At each reporting date, the Company measures the lifetime expected loss provision taking into consideration Fiddlehead's historical credit loss experience as well as forward-looking information in order to establish loss rates. The amount recognized for ECL that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized in net loss.

Non-financial assets

At each reporting date, the Company's non-financial assets are reviewed for indicators of impairment. If there is an indication of impairment, the asset's recoverable amount is estimated and compared to its carrying value.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). The recoverable amount of an asset or a cash-generating unit ("CGU") is the greater of its value in use and its fair value less costs to sell. In assessing both fair value less costs to sell and value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in net loss.

For PNG assets, fair value less costs to sell and value in use is generally computed by reference to the present value of the future cash flows expected to be derived from production of proved plus probable reserves.

Impairment losses recognized in prior periods are assessed at each reporting date for indication that the loss has decreased or no longer exists. An impairment loss may be reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortization, if no impairment loss had been recognized.

Share-based payment transactions

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which equity instruments are granted and is recognized as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the

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FIDDLEHEAD RESOURCES CORP.

award. Fair value is determined by using the Black-Scholes option pricing model. An estimated forfeiture rate is taken into consideration when assigning a fair value to options granted such that no expense is recognized for awards that do not ultimately vest.

At each financial reporting date before vesting, the cumulative expense is calculated, which represents the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous financial reporting date is recognized in net loss, with a corresponding entry in contributed surplus in equity.

When the terms of an equity-settled award are modified or a new award is designated as replacing a canceled or settled award, the cost based on the original award terms continues to be recognized over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognized if this difference is negative.

Embedded Derivatives

Embedded derivatives are separated from the host contract and accounted for as a derivative when a separate item with the same terms would meet the definition of a derivative, the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, and the combined instrument is not measured at fair value with changes recognized in FVTPL.

Provisions and asset retirement obligations

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are not recognized for future operating losses.

The Company provides for asset retirement obligations on all of its operations based on current legislation and industry operating practices. The estimated present value of the asset retirement obligation is recorded as a long-term liability using a credit-adjusted-risk-free rate, with a corresponding increase in the carrying amount of the related asset. This increase is depleted with the related depletion unit and is allocated to a CGU for impairment testing. The liability is increased each reporting period to reflect the passage of time with a corresponding charge to accretion expense. The asset retirement obligation can also increase or decrease due to changes in the estimated timing of cash flows, changes in the discount rate and/or changes in the original estimated undiscounted costs. Increases or decreases in the obligation will result in a corresponding change in the carrying amount of the related asset. Actual costs incurred upon settlement of the asset retirement obligation are charged against the asset retirement obligation to the extent of the liability recorded. Asset retirement obligations are measured at each reporting period to reflect the discount rates in effect at that time. On an annual basis, the Company reviews its estimates of the expected costs to reclaim the net interest in its wells and facilities. Resulting changes are accounted for prospectively as a change in estimate.

Revenue recognition

The Company's revenue is derived exclusively from contracts with customers, except for immaterial amounts related to interest and other income. Royalties are considered to be part of the price of the sale transaction and are therefore presented as a reduction to revenue. Revenue associated with the sale of crude oil, natural gas and natural gas liquids ("NGLs") is measured based on the consideration specified in contracts with customers. Revenue from contracts with customers is recognized when the Company satisfies a performance obligation by transferring a good or service to a customer. A good or service is transferred when the customer obtains control of the good or service. The transfer of control of oil, natural gas and NGLs usually coincides with title passing to the customer and the customer taking physical possession. Fiddlehead mainly satisfies its performance obligations at a point in time and the amounts of revenue recognized relating to performance obligations satisfied over time are not significant.

Revenues from the sale of crude oil, natural gas and NGLs are recognized by reference to actual volumes delivered at contracted delivery points and prices. Prices are determined by reference to quoted market prices in active markets (crude oil - NYMEX WTI, crude oil - Edmonton light, natural gas - AECO, condensate - NYMEX WTI, and NGLs - various based on product), adjusted according to specific terms and conditions applicable per the sales contracts. Revenues are recognized prior to the deduction of transportation costs. Fiddlehead pays royalties to the Alberta provincial government and other mineral rights owners in accordance with the established royalty regime.

Revenue segregated by product type is disclosed in Note 7.

Finance revenue and costs

Finance revenue comprises interest income on funds invested. Interest income is recognized as it accrues in net loss, using the effective interest method.

Finance costs comprise interest expense on borrowings.

Borrowing costs incurred for qualifying assets are capitalized during the period of time that is required to complete and prepare the assets for their intended use or sale. Qualifying assets are comprised of those significant assets that require a period greater than one year to be available for their intended use. All other borrowing costs are recognized in net loss.

Royalties

Royalties are recorded at the time the product is produced and sold. Royalties are calculated in accordance with the applicable regulations and/or the terms of individual royalty agreements. Crown royalties for natural gas, condensate and other associated liquids are based on Alberta Government posted reference prices as all of the Company's producing assets are in Alberta.

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FIDDLEHEAD RESOURCES CORP.

Income tax

Income tax expense is comprised of current and deferred tax. Fiddlehead is subject to income taxes based on the tax legislation of each respective jurisdiction in which Fiddlehead conducts business.

Current tax

Current tax assets and liabilities for the current and prior periods are measured as the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the date of these Financial Statements.

Deferred tax

The Company determines the amount of deferred income tax assets and liabilities based on the difference between the carrying amounts of the assets and liabilities reported for financial accounting purposes from those reported for tax. Deferred income tax assets and liabilities are measured using the substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. Deferred income tax assets are recognized to the extent it is probable the Company will have sufficient future taxable earnings available against which the unused tax losses can be utilized.

Joint Arrangements

A joint arrangement involves joint control and offers joint ownership by the Company and other joint interest partners of the financial and operating policies, and of the assets associated with the arrangement. Joint arrangements are classified into one of two categories: joint operations or joint ventures.

A joint operation is a joint arrangement whereby the Company and the other parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. Parties involved in joint operations must recognize in relation to their interests in the joint operation their proportionate share of the revenues, expenses, assets and liabilities. A joint venture is a joint arrangement whereby the Company and the other parties that have joint control of the arrangement have rights to the net assets of the arrangement. Parties involved in joint ventures must recognize their interests in joint ventures as investments and must account for that investment using the equity method.

The Company conducts some of its oil and gas production activities through joint operations and the Financial Statements reflect only the Company's proportionate interest in such activities. Joint control exists for contractual agreements governing Fiddlehead's assets whereby Fiddlehead has less than 100% working interest, all of the partners have control of the arrangement collectively, and spending on the project requires the majority consent of the parties that collectively control the arrangement and share the associated risks.

Business Combination

Business combinations are accounted for using the acquisition method under IFRS 3 Business Combinations ("IFRS 3"). Management's determination of whether a transaction constitutes a business combination or an asset acquisition is determined based on the criteria in IFRS 3. The identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date. The decommissioning obligations associated with the acquired property is subsequently re-measured at the end of the reporting period using a credit-adjusted-risk-free rate, with any changes recognized in the decommissioning liabilities and PP&E on the Balance Sheet. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued, and liabilities incurred or assumed at the acquisition date. The excess of the acquisition cost over the fair value of the identifiable net assets acquired is recognized as goodwill. If the cost of the acquisition is less than the fair value of the net identifiable assets acquired, a gain on business combination is recognized immediately in Net Loss and Comprehensive Loss. Any deferred tax asset or liability arising from the business combination is recognized at the acquisition date. Transaction costs associated with a business combination are expensed as incurred. Results of acquisitions are included in the Financial Statements from the closing date of acquisition.

Future Accounting Pronouncements

On April 9, 2024, the International Accounting Standards Board issued a new standard IFRS 18 Presentation and Disclosure in Financial Statements ("IFRS 18") which will replace IAS 1. While many of the existing principles of IAS 1 are retained with limited changes, IFRS 18 introduces changes to the presentation of, and disclosure requirements related to, the Statement of Net Loss and Comprehensive Loss. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027. Fiddlehead is currently assessing the impact of adopting of IFRS 18, which will be adopted on its effective date.

In May 2024, the International Accounting Standards Board issued amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments relating to settling financial liabilities using electronic payment system and assessing contractual cash flow characteristics of financial assets. The amendments will be effective on January 1, 2026 and Fiddlehead is assessing the full impact of this amendment.

FIDDLEHEAD RESOURCES CORP.

4. CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

Timely preparation of financial statements in conformity with IFRS Accounting Standards requires that management make estimates and assumptions and use judgments that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the Financial Statements. Accordingly, actual results may differ from estimated amounts as future confirming events occur. The effect of these estimates, assumptions and the use of judgments are explained throughout the notes to the Financial Statements. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected.

The key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below.

Accounting for Joint Operation

Fiddlehead has been unsuccessful to date in achieving the license transfer for its purchase of the South Ferrier assets. Fiddlehead used significant judgement in determining the appropriate accounting for the arrangement and determined that based on the purchase agreement, it has joint control analogous to a working interest owner in an oil and gas property. Accordingly, the Company determined that it would be appropriate to reflect its interest in the assets as a joint operation until such time as the license transfer occurs. Should the license transfer occur, the Company will obtain control over the interest and will reflect a deemed disposition and reacquisition of a controlling interest in such properties. Should the Company be unsuccessful in achieving license transfer, it will continue to account for the interest as a joint operation unless the Vendor decides to exercise its reconveyance rights (as further discussed in note 5). The Company has considered the possibility of reconveyance in assessing impairment of its interest. The alternative considered to this treatment would be to deem that the Company paid a deposit on its acquisition and to account for earnings from the property as an adjustment to the purchase price which would have resulted in the Company not presenting revenues and expenses related to its interest. As this is not a typical situation, the Company has used its judgement in considering the substance of the transaction.

Recoverability of asset carrying values

The recoverability of PNG asset carrying values are assessed at the CGU level. Determination of what constitutes a CGU is subject to management judgment of the lowest level at which there are identifiable cash inflows that are largely independent of the cash inflows of other groups of assets or properties. The factors used by Fiddlehead to determine CGUs may vary by jurisdiction due to unique operating and geographic circumstances in each jurisdiction. In general, Fiddlehead assesses the following factors in determining whether a group of assets generate largely independent cash inflows:

geographic proximity of the assets within a group to one another;
geographic proximity of the group of assets to other groups of assets; and
homogeneity of the production from the group of assets and the sharing of infrastructure used to process and/or transport production.

CGUs are determined by regional geography and one CGU has been identified. The asset composition of a CGU can directly impact the recoverability of the assets included therein. In assessing the recoverability of the Company's petroleum properties, each CGU's carrying value is compared to its recoverable amount, defined as the greater of its fair value less costs to sell and value-in-use. The recoverable amounts of the Company's CGU is estimated as the fair value less costs to sell based on the net present value of the after-tax cash flows from the proved plus probable oil and gas reserves of such CGU based on reserves estimated by the Company's independent reserves evaluator.

Key input estimates used in the determination of cash flows from oil and natural gas reserves include the following:

Reserves - There are numerous uncertainties inherent in estimating oil and gas reserves. An external reserves engineering report which incorporates a full evaluation of reserves is prepared on an annual basis with internal reserves updates completed at each quarterly period. Estimating reserves is highly complex, requiring many judgments including timing and amounts of future development costs, production forecasts, forecast benchmark commodity pricing, production costs. Changes in these judgments may have a material impact on the estimated reserves. These estimates may change, resulting in either negative or positive impacts on net loss as further information becomes available and as the economic environment changes.
Commodity prices - Forward price estimates of crude oil and natural gas prices are incorporated into the determination of expected future net cash flows. Commodity prices have fluctuated significantly in recent years due to global and regional factors including supply and demand fundamentals, inventory levels, foreign exchange rates, economic, and geopolitical factors.
Discount rate - The discount rate used to determine the net present value of future cash flows is based on the Company's estimated weighted average cost of capital and the probability of a future unwinding event as described in note 5. Changes in the economic environment could change the Company's weighted average cost of capital.

Depletion of petroleum properties

Reserves and resources are used in the units of production calculation for depletion, depreciation and amortization. Depletion of petroleum properties is calculated based on total proved plus probable reserves as well as estimated future development costs associated with these reserves as determined by the Company's independent reserves evaluator. See above for discussion of estimates and judgments involved in reserves estimation.

Asset retirement obligations

The provision for site restoration and abandonment is based on current legal and regulatory requirements, technology, price levels and expected plans for remediation. The estimated present value of the asset retirement obligation is estimated using a credit-adjusted-risk-free rate. Actual costs and cash outflows can differ from estimates because of changes in laws and regulations, public expectations, market conditions, discovery and analysis of site conditions and changes in technology.

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FIDDLEHEAD RESOURCES CORP.

Business Combinations

The application of the Company's accounting policy for business combinations requires management to make certain judgments under IFRS 3, to determine whether the acquired assets meet the definition of a business combination or an asset acquisition. Where an acquisition involves a group of assets and liabilities, and does not constitute a business, the acquirer must identify and recognize the individual assets acquired and liabilities assumed. The cost of the transaction is allocated to the assets acquired and liabilities assumed based on their relative fair values at the date of purchase.

Business combinations are accounted for using the acquisition method of accounting. The determination of fair value is estimated based on information available at the date of acquisition and requires management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of E&E assets and PP&E acquired generally require the most judgement and include land evaluations, total reserves acquired and discount rate. Reserve estimates are based on production forecasts, production costs, forecast benchmark commodity prices, and timing and amounts of future development costs. Assumptions are also required to determine the fair value of decommissioning obligations associated with the properties. Initial recognition of the fair value of deferred tax liabilities or assessment of probability to recognize deferred tax assets requires judgment. Changes in any of these assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill (or gain on acquisition resulting from a bargain purchase) in the acquisition equation. Future net income (loss) will be affected as the fair value on initial recognition impacts future depletion and depreciation expenses, as well as the risk of potential impairment in future periods.

Refer to note 5 for details of the specific assumptions applied during the year ended December 31, 2024.

Determination of cash generating units ("CGUs")

The determination of CGUs requires judgement in defining a group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are determined by similar geological structure, shared infrastructure, geographical proximity, commodity type, similar exposure to market risks and materiality.

Fiddlehead has one CGU in the South Ferrier, Strachan areas of west central Alberta.

Fair value of financial instruments

The estimated fair value of derivative financial instruments is reliant upon several variables and may include forward curves for commodity prices, foreign exchange rates, or other variables depending on the nature of the underlying contract. A change in any one of these variables could materially impact the valuation of the instrument on the balance sheet date. Furthermore, as these instruments are "marked-to-market" at the end of each reporting period, unrealized gains or losses can result in volatility or net income or loss.

Management also applies judgment in assessing and determining when an embedded derivative exists within a host contract, if the embedded derivative is closely related to the host contract, and if determined not to be closely related, the unobservable inputs used to determine its fair value.

5. BUSINESS COMBINATION

In a transaction that closed on August 29, 2024 (effective date of April 1, 2024), Fiddlehead completed the acquisition of production and working interests in certain assets in the Cardium fairway in the South Ferrier, Strachan area of west central Alberta (the "Acquisition") from a senior Canadian producer ("Vendor"). The total consideration of the Acquisition was $20.8 million after adjustments ("Purchase Price"). At closing, $18.8 million was funded by a Credit Facility (the "Credit Facility") of $13.0 million and private placement of subscription receipts for aggregate gross proceeds of $10.2 million (the "Private Placement"). The net proceeds of the Private Placement were used to fund $5.8 million of the Purchase Price, and the remaining amounts for general corporate and working capital purposes. The Company shall pay the Vendor an additional $1.25 million in cash by December 31, 2025. The Company shall also pay the Vendor $1.25 million and $1.0 million if the ICE NGX AB-NIT Same Day Index 2A gas price averages greater than $2.25 per gigajoule ("GJ") and $3.75 per GJ, respectively, over a 12-month period beginning on January 1, 2025, payable by January 31, 2026.

The contract contains an embedded derivative as a result of the contingent consideration based on the 12-month ICE NGX AB-NIT Same Day Index 2A gas price average. Fiddlehead has defined the host contract as the Asset Sale Agreement with the Vendor. Fiddlehead's embedded derivative contract is classified as Level 2 within the fair value hierarchy, as the fair value has been determined using observable inputs other than quoted prices. The Company assessed this contingent consideration payable to the Vendor to be $0.7 million at acquisition as a measurement period adjustment which was applied retrospectively. The fair value of the net liability as at December 31, 2024 is $0.5 million, resulting in a $0.2 million gain on derivative financial instruments. Such adjustments were accounted for retrospectively as if they were known at the acquisition date which led to an adjustment to depletion. A 5% change in the fair value of the embedded derivative would result in an increase or decrease the fair value of the derivative of approximately $25,000.

The following table details the significant observable inputs used in the valuation of the embedded derivative and the sensitivity of the fair value of the embedded derivative from reasonably possible changes in those observable inputs:

Net liability fair value	December 31, 2024
Significant unobservable inputs:
Forward prices	A blend of observable and constructed forward curves for ICE NGX AB-NIT SameDay Index 2A gas price average

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FIDDLEHEAD RESOURCES CORP.

Transition Services Agreement

Under the terms of the Asset Sale Agreement ("ASA"), Fiddlehead has obtained joint control over its interest in the acquired assets. The assets will continue to be accounted for under joint control until the Company obtains the necessary licenses and legal title to the assets. The Company is required to deliver to the Vendor conveyances confirming the transfer of title of the assets sold once approved by the regulator. The regulator will approve or reject the transfer after evaluating certain criteria (including the License Capability Assessment) the Company must meet. Since the approval process and title transfer occurs subsequent to the executed closing date of the transaction, this was a subsequent closing condition. For the interim period between the closing date and the satisfaction of this closing condition, the Company and the Vendor entered into a Transition Services Agreement ("TSA"). The agreement was entered into at the time of closing concurrent with the execution of the ASA. The TSA provides for the Vendor to be the designated representative, registered owner, and licensee of, the Assets for all periods of time following closing and prior to the completion of the license transfer approvals. As part of the TSA, the Vendor provides transition services to maintain the assets under the ASA. In consideration for the provision of the transition services, the Company pays a fee to the Vendor. During this interim period, the Vendor will invoice to the Company for fees related to the transitional services provided. This includes a net billing for revenues and expenses attributable to the assets of behalf of the Company. These net billings are to be provided for and settled by the parties each month the TSA is in effect. The cumulative net billings will be trued-up upon issuance of the Final Statement of Adjustments after the Company delivers conveyances after the transfer of title.

As per the ASA, there is a provision where the Vendor, in its sole discretion may elect in its sole discretion to take a re-conveyance of the beneficial interests in the assets from the Company. The Vendor had this option if the title transfer to the Company had not occurred within 90 business days of the submission of the title transfer documents to the Regulator. This would effectively unwind the transaction and the Company would be subject to a break fee of $1,500,000 as per the ASA. Excluding the break fee, the Company would return the asset to the Vendor and the Vendor would return the consideration paid to the Company. In addition, all amounts in the Interim Statement of Adjustments and net billings under the TSA would be adjusted as per terms of the unwinding.

As of the date of these financial statements, the Company has not received approval from the provincial regulatory authority for the transfer of title. The Vendor has not notified the Company of its intention to elect or deliver a re-conveyance agreement and unwind the ASA. Although the Company does not have title to the assets as of December 31, 2024, joint control was established through the ASA, allowing Fiddlehead to participate jointly with the Vendor in key decisions regarding the operation of the assets. Subsequent to the year end, the Company extended the License Transfer Applications Deadline outlined in the ASA from March 17, 2025 to May 31, 2025. As part of the extension, the break fee increased from $1,500,000 to $2,200,000.

The Company recognizes the full amount of income and expenses from these assets, reflecting its 100% interest in ongoing operations. In accordance with IFRS, a property acquisition is accounted for as a business combination when certain criteria are met, such as the acquisition of inputs and processes to convert those inputs into beneficial outputs. Fiddlehead assessed the property acquisition and determined that it constitutes a business combination under IFRS. In a business combination, acquired assets and liabilities are recognized by the acquirer at their fair market value at the time of purchase. Any variance between the determined fair value of the assets and liabilities and the purchase price is recognized as either goodwill or a gain in the Statement of Net Loss and Comprehensive Loss in the period of acquisition.

The estimated fair value of the PP&E acquired through the transaction was determined based on the present value of the expected future cash flows associated with the acquired property using both internal estimates and an independent reserve evaluation. The decommissioning liabilities assumed were determined using the timing and estimated costs associated with the abandonment, restoration and reclamation of the wells and facilities acquired. The total net fair value of the acquired property was equal to the consideration paid by the Company. As a result, no bargain purchase gain or goodwill was recognized for the year ended December 31, 2024, relating to the acquisition. There were $0.37 million of transaction costs incurred by the Company and expensed through earnings.

During the measurement period the Company reassessed the value of asset retirement obligation and noted it had a value of $10.7 million, the Company also determined that the value of the property should be adjusted based on this new information about conditions existing at the acquisition date. Such adjustments were accounted for retrospectively as if they were known at the acquisition date which led to an adjustment to depletion.

The consideration paid and fair values of the identifiable assets acquired and liabilities assumed by the Company are as follows:

Total consideration
Cash	18,827,959
Deferred consideration payable	1,250,000
Contingent consideration payable	713,113
	20,791,072
Net assets acquired
Property, plant and equipment	31,486,697
Less: Asset retirement obligations assumed (Note 10)	10,695,625
	20,791,072

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FIDDLEHEAD RESOURCES CORP.

Fiddlehead assessed and determined the Acquisition to constitute a business combination in accordance with IFRS 3 and the PP&E acquired was valued using fair value less cost of disposal ("FVLCD") methodology (Level 3 fair value measurement) using the present value of the expected future cash flows after-tax. The expected future cash flows used in the FVLCD calculation were derived from a reserve report on the acquired oil and gas reserves, which was prepared by an independent qualified reserve evaluator. The cash flow estimates derived from the independent reserve report were internally updated to reflect the following changes to key assumptions as of August 29, 2024:

the long-term forecast for commodity prices and foreign exchange rates were revised based on an average of the forecasts published by three independent qualified reserve evaluators, current as of the acquisition date;
mechanical update of the reserves database to August 29, 2024, such that forecast cash flows for 2024 are for the remaining period ending December 31, 2024; and
FDC expenditures were reduced to reflect Fiddlehead's planned capital expenditures.

The Statements of Net Loss and Comprehensive Loss for the year ended December 31, 2024, includes the results of operations for the Acquisition starting from the closing date. Specifically, Fiddlehead's net income for the year ended December 31, 2024, includes $3.6 million of revenue (after royalties) and $1.3 million of operating income generated from the Acquisition for the period from August 29 to December 31, 2024. "Operating income" does not have a standardized meaning under IFRS Accounting Standards. For purposes of this disclosure, the Company has calculated operating income as revenue (after royalties), less operating and transportation expenses.

If the Acquisition had occurred on January 1, 2024, pro-forma revenue (after royalties) and operating income is estimated to be approximately $15.3 million and $4.2 million, respectively, for the year ended December 31, 2024. This pro-forma information is not necessarily indicative of the results of operations that would have resulted had the Acquisition been affected on the dates indicated, or the results that may be obtained in the future.

6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair values of financial instruments

Financial instruments include cash, accounts receivable, accounts payable and accrued liabilities, lease obligations, deferred consideration payable and long-term debt.

The Company has classified its cash and accounts receivable as assets at amortized cost; accounts payable and accrued liabilities, deferred consideration payable, lease obligations and long-term debt are classified as liabilities at amortized cost, all of which are measured initially at fair value, and subsequently at amortized cost. Transaction costs attributable to financial instruments carried at amortized cost are included in the initial measurement of the financial instrument and are subsequently amortized using the effective interest rate method.

Carrying value and fair value of financial assets and liabilities are summarized as follows:

Classification	December 31, 2024		December 31, 2023
	Carrying Value	Fair Value	Carrying Value	Fair Value
Financial assets at fair value through profit or loss	-	-	-	-
Financial assets at amortized cost	1,614,547	1,614,547	388,586	388,586
Financial liabilities at fair value through profit or loss	502,965	502,965	-	-
Financial liabilities at amortized cost	14,547,195	14,547,195	32,295	32,295

Assets and liabilities as at December 31, 2024 that are measured at fair value are classified into levels reflecting the method used to make the measurements. Fair values of assets and liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than quoted prices for which all significant inputs are observable, either directly or indirectly. Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy level. There were no transfers between levels in the fair value hierarchy in the period.

Overview of Risk Management

The Company's activities expose it to a variety of financial risks that arise as a result of its exploration, development, production and financing activities:

Credit risk
Market risk
Liquidity risk

This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.

2024

FIDDLEHEAD RESOURCES CORP.

The Board of Directors and Audit Committee oversee management's establishment and execution of the Company's risk management framework. Management has implemented and monitors compliance with risk management policies. The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities.

Credit risk

Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to fulfill their contractual obligations. The Company's exposure to credit risk primarily relates to accounts receivable, the majority of which are in respect of oil and natural gas operations. The Company generally extends unsecured credit to these parties and therefore the collection of these amounts may be affected by changes in economic or other conditions. The Company has not experienced any material credit losses in its cash investments or in the collection of accounts receivable to date.

Fiddlehead's accounts receivable related to operations are with customers and joint interest partners in the petroleum and natural gas industry and are subject to normal industry credit risks. Receivables from petroleum and natural gas marketers are normally collected in due course. The Company currently sells its production to several purchasers under standard industry sale and payment terms. Purchasers of Fiddlehead's natural gas, crude oil and natural gas liquids are subject to a periodic internal credit review to minimize the risk of non-payment. The Company has continued to closely monitor and reassess the creditworthiness of its counterparties, including financial institutions.

Trade and other receivables are analyzed in the table below.

	As at December 31, 2024	As at December 31, 2023
Within 30 days	452,451	13,910
31-60 days	292,340	-
61-90 days	86,226	-
Over 90 days	83,541	2,523
Accounts receivable	914,558	16,433

Management has reviewed past due accounts receivable balances as at December 31, 2024 and expects the accounts to be collectible. The expected credit losses provision recognized in Fiddlehead's accounts receivable at December 31, 2024 was nominal.

Market risk

Market risk is the risk or uncertainty arising from possible market price movements and the associated impact on future performance of the business. The market price movements that the Company is exposed to include commodity prices, foreign currency exchange rates and interest rates, all of which could adversely affect the value of the Company's financial assets, liabilities and financial results.

Commodity price risk

Inherent to the business of producing oil and gas, the Company's revenue and cash provided by operating activities is subject to commodity price risk. Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices are impacted by world economic events that dictate the levels of supply and demand as well as the currency exchange rate relationship between the Canadian and U.S. dollar. The Company does not currently have any commodity risk management contracts in place.

Foreign currency exchange risk

Currency risk is the risk that future cash flows will fluctuate as a result of changes in foreign exchange rates. Fiddlehead is exposed to fluctuations of the Canadian to U.S. dollar exchange rate given the Company's realized pricing in Canadian dollars is directly influenced by U.S. dollar denominated benchmark pricing. The Company does not currently have any foreign exchange risk management contracts in place.

Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate risk on any debt drawn which bears floating rates of interest. Under the Credit Facility (Note 12), interest rates fluctuate based on the bank prime rate plus an applicable margin, with a floor rate of 11.5%. The Company is also exposed to interest rate risk on its cash. As at December 31, 2024, the effect of interest rates increasing by 0.5% would increase the Company's net loss by $67,000 per annum. The Company does not currently have any interest rate risk management contracts in place.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Liquidity describes a company's ability to access cash. Companies operating in the upstream oil and gas industry require sufficient cash in order to fund capital programs necessary to maintain and increase production and proved reserves, to acquire strategic oil and gas assets and to repay liabilities.

The Company actively monitors its liquidity with an objective of ensuring that its cash flows, credit facilities and working capital are adequate to support these financial liabilities, as well as the Company's capital programs. However, please see Note 1 regarding significant doubt about our ability to continue as a going concern.

2024

FIDDLEHEAD RESOURCES CORP.

The following table outlines a contractual maturity analysis for the Company's financial liabilities and undiscounted lease liabilities as at December 31, 2024:

	1 year	2 to 3 years	4 to 5 years	> 5 years	Total
Accounts payable and accrued liabilities	612,746	-	-	-	612,746
Deferred consideration payable	1,250,000	-	-	-	1,250,000
Contingent consideration payable	-	502,965	-	-	502,965
Long-term debt and interest	13,997,349	-	-	-	13,997,349
Undiscounted lease obligations (Note 11)	110,328	278,638	176,981	-	565,947
Total	15,970,423	781,603	176,981	-	16,929,007

Capital disclosures

The Company's objective when managing capital is to ensure the Company will have the financial capacity, liquidity and flexibility to fund the ongoing development of its petroleum assets. These objectives and strategy are reviewed on an annual basis.

The Company defines and computes its capital as follows:

	Year ended December 31
	2024	2023
Long-term debt, excluding deferred debt issuance costs	13,000,000	-
Deferred consideration payable	1,250,000	-
Current assets	(1,712,365)	(388,586)
Current liabilities	721,152	32,295
Net debt obligations	13,258,787	(356,291)
Shareholders' equity	5,908,839	356,291
Total capital	19,167,626	-

7. OIL AND GAS SALES, NET OF ROYALTIES

	Year ended December 31
	2024	2023
Light oil sales	1,515,227	-
Natural gas sales	856,221	-
Natural gas liquids sales	2,472,069	-
Oil and gas sales	4,843,517	-
Less: Royalties	(1,313,760)	-
Oil and gas sales, net of royalties	3,529,757	-

The financial information presented in the table above represents 124 days of activity, following the closing of the Acquisition on August 29, 2024.

8. FINANCE COSTS

Finance costs recognized in net loss were as follows:

	Year Ended December 31
	2024	2023
Interest on long-term debt	516,053	-
Accretion of ARO	276,168	-
Amortization of deferred debt issuance costs	313,092	-
Financing costs of lease liabilities	738	-
Other financing costs	2,002	-
Finance costs	1,108,053	-

2024
15

FIDDLEHEAD RESOURCES CORP.

9. PROPERTY, PLANT AND EQUIPMENT

The Company's PP&E primarily consists of PNG assets and other assets. PNG assets include the Company's interests in developed crude oil and natural gas properties, as well as interests in facilities and pipelines.

The following tables reconcile the movements in the cost and accumulated depletion and depreciation during the periods:

Property, plant and equipment, at cost

Balance at January 1, 2023	-
Additions	-
Balance at December 31, 2023	-
Acquisitions	20,791,072
Additions	223,915
Asset retirement obligations (Note 10)	10,695,625
Change in ARO discount rate	(217,056)
Balance at December 31, 2024	31,493,556

Accumulated depreciation, depletion and impairment losses

Balance at January 1, 2023	-
Depletion and depreciation	-
Balance at December 31, 2023	-
Depletion and depreciation	2,002,424
Balance at December 31, 2024	2,002,424

Net book value

At December 31, 2023	-
At December 31, 2024	29,491,132

On August 29, 2024, Fiddlehead completed the acquisition of production and working interests in certain facilities in the Cardium fairway in the South Ferrier, Strachan area of west central Alberta for a total cash consideration to the Vendor of $20.8 million. The Acquisition has an effective date of April 1, 2024. At closing, $18.8 million was funded by the Credit Facility of $13.0 million and private placement of subscription receipts for aggregate gross proceeds of $10.2 million. The net proceeds of the Private Placement were used to fund $5.8 million the Purchase Price, and the remaining amounts for general corporate and working capital purposes. The Company shall pay the Vendor an additional $1.25 million in cash by December 31, 2025. The Company shall also pay the Vendor $1.25 million and $1.0 million if the ICE NGX AB-NIT Same Day Index 2A gas price averages greater than $2.25 per gigajoule ("GJ") and $3.75 per GJ, respectively, over a 12-month period beginning on January 1, 2025, payable by January 31, 2026.

Future development costs ("FDC") of $32.4 million were included in the determination of depletion for the year ended December 31, 2024 (nil for the year ended December 31, 2023).

Impairment of PP&E

At December 31, 2024, Fiddlehead evaluated its PP&E for indicators of impairment and determined that there were indicators present. Due to the occurrence that title transfer to the Company had not occurred within 90 business days of closing date presented an indicator of impairment. An impairment test was conducted on Fiddlehead's PP&E assets. Fiddlehead's assets are classified under one Cash Generating Unit ("CGU"). The estimated recoverable amounts were based on fair value less costs of disposal calculations using a discount rate of 27.0%. The discount rate used incorporates the risk of the asset purchase being unwound as per the ASA.

The following table details the forward pricing used in estimating the recoverable amounts of Fiddlehead's CGU at December 31, 2024:

Benchmark prices and exchange rates	2025	2026	2027	2028	2029¹
Crude oil
WTI (US$/bbl)	71.58	74.48	75.81	77.66	79.22
Edmonton light index (C$/bbl)	94.79	97.04	97.37	99.80	101.79
Natural gas
AECO (C$/MMBtu)	2.36	3.33	3.48	3.69	3.76
US/Canadian Dollar average exchange rate	0.712	0.728	0.743	0.743	0.743

¹Prices escalate at 2.0% thereafter; exchange rate is held constant at $0.743 US$/CA$ thereafter.

Based on the impairment test performed, it was determined that the recoverable amount was in excess of the carrying amount, and no impairment loss was recognized in the Company's statement of loss and comprehensive loss. The recoverable amount estimated pursuant to the FVLCD calculation is sensitive to the discount rate and forecast commodity prices. Holding all other assumptions in the calculation constant:

if the discount rate increased by 1%, it would result in an impairment of approximately $0.3 million; and
if the forecast combined average realized price decreased by 5%, it would result in an impairment of approximately $2.3 million.

2024

FIDDLEHEAD RESOURCES CORP.

The results of the impairment test performed are sensitive to changes in any key estimates, such as a revision in reserves, a change in forward commodity prices, expected royalties, required future development expenditures, or expected future production costs, which could decrease or increase the recoverable amounts of assets and result in additional impairment charges or reversal of impairment charges.

In addition, increases in the estimate of probability of the purchase being unwound could give rise to additional material increases to the discount rate. At December 31, 2024, the probability of asset reversion was assessed as low, but as the license has still not transferred at the issuance date of these financial statement, the probability may have increased and any such increase will be evaluated as part of our Q1 2025 financial statements.

10. ASSET RETIREMENT OBLIGATION

The following table reconciles the change in Fiddlehead's asset retirement obligation ("ARO"):

	As at December 31, 2024	As at December 31, 2023
Balance, beginning of year	-	-
Obligations acquired	10,695,625	-
Changes in discount rate	(217,056)	-
Accretion of decommissioning liabilities	276,168	-
Balance, end of year	10,754,737	-

Fiddlehead has estimated the net present value of its asset retirement obligation to be $10.8 million as at December 31, 2024 (2023 - nil) based on a total undiscounted future liability of $22.1 million (2023 - nil). These payments are expected to be made between 2026 and 2048. Fiddlehead calculated the present value of the obligations as at August 29, 2024 using credit-adjusted-risk-free rate of 7.88% to reflect the market assessment of the time value of money as well as risks specific to liabilities that have not been included in the cash flow estimates. As at December 31, 2024, the carrying amount of ARO is based on a credit-adjusted-risk-free rate of 8.09% (2023 - nil). The inflation rate used in determining the cash flow estimate was 2% per annum (2023 - nil). If the credit-adjusted-risk-free rate increased by 1%, the decommissioning liabilities would decrease by approximately $0.9 million.

During the measurement period the Company reassessed the value of the asset retirement obligation and noted it had a value of $10.7 million, the Company also determined that the value of the property should be adjusted based on this new information about conditions existing at the acquisition date. Such adjustments were accounted for retrospectively as if they were known at the acquisition date which led to an adjustment to depletion.

11. LEASES

The Company has various lease contracts in place for vehicles and office space. Fiddlehead's lease liabilities and corresponding ROU assets are recognized initially based on the present value of the remaining lease payments, except for certain short-term leases which have been charged to general and administrative expenses or operating expenses, if applicable depending on the nature of the lease, in the Statements of Loss and Comprehensive Loss.

The following table discloses the carrying amount and depreciation of right-of-use assets by class of underlying asset, as at and for the year ended December 31, 2024:

Right-of-use asset, at cost
Balance at January 1, 2023	-
Additions	-
Balance at December 31, 2023	-
Additions	535,289
Balance at December 31, 2024	535,289
Accumulated depreciation
---	---
Balance at January 1, 2023	-
Depreciation expense	-
Balance at December 31, 2023	-
Depreciation expense	25,050
Balance at December 31, 2024	25,050
Right-of-use asset, net carrying value
---	---
At December 31, 2023	-
At December 31, 2024	510,239

2024

FIDDLEHEAD RESOURCES CORP.

As at December 31, 2024, the present value of the Company's total lease liabilities are $0.5 million, of which approximately $0.1 million is expected to be settled in the next twelve months. A continuity of the lease obligations is provided below:

	As at December 31, 2024	As at December 31, 2023
Balance, beginning of year	-	-
Additions	522,759	-
Lease payments	(7,034)	-
Financing costs	738	-
Balance, end of year	516,433	-
Expected to be settled within one year	108,409	-
Expected to be settled beyond one year	408,024	-

During the year ended December 31, 2024, the Company spent $738 (2023 – nil) on interest expense and paid a total cash outflow of $7,034 (2023 – nil) relating to lease obligations.

12. LONG-TERM DEBT

The following table reconciles the changes in Fiddlehead's long-term debt:

Principal	As at December 31, 2024	As at December 31, 2023
Balance, beginning of year	-	-
Additions	13,000,000	-
Balance, end of year	13,000,000	-
Debt issue costs
Additions, debt issue costs	(1,145,075)	-
Amortization	313,092	-
Balance, end of year	(831,983)	-
Carrying value	12,168,017	-
Current portion of long-term debt	12,168,017	-

The Company's interest-bearing loans and borrowings are measured at amortized cost. As at December 31, 2024, the only significant interest-bearing loan and borrowings are related to the Credit Facility as described below.

Facility

	As at December 31, 2024	As at December 31, 2023
Credit Facility – amount drawn	13,000,000	-

On August 27, 2024, the Company entered into a secured credit facility with a private lender. The authorized borrowing base available under the Credit Facility is $13.0 million. As at December 31, 2024, Fiddlehead has drawn $13.0 million and is to make an initial repayment of $400,000 towards the Credit Facility, and $750,000 every quarter thereafter, until the term date of November 30, 2025, at which the outstanding balance is due. The Company is not to exceed an outstanding principal amount drawn against the Credit Facility in excess of 50% of the Proved Developed Producing ("PDP") reserves value at a 10% discount based on the year end reserve report. In the event the price of WTI falls below US$70 on average for any 30-day period, the Company is required to make principal repayments in the amount of $250,000 on the last business day of each of the 6 calendar months following such 30-day period. In the event the price of WTI falls below US$60 on average for any 30-day period, the Company is required to make principal repayments in the amount of $1,000,000 on the last business day of each of the 6 calendar months following such 30-day period.

The contract contains an embedded derivative as a result of the accelerated principal repayments based on the WTI price and the Company's credit spread. Fiddlehead has defined the host contract as the Credit Agreement with the Lender. Fiddlehead's embedded derivative contract is classified as Level 2 within the fair value hierarchy, as the fair value has been determined using observable inputs other than quoted prices. The net liability fair value of this embedded derivative contract was determined to be $0.1 million. A 5% change in the fair value of the embedded derivative would result in an increase or decrease in the fair value of the derivative of $5,859.

2024
18

FIDDLEHEAD RESOURCES CORP.

December 31, 2024

Net liability fair value	$117,173
Significant unobservable inputs:
Credit spread	4.75%
Forward prices	A blend of observable and constructed forward curves for WTI price average

The Credit Facility bears interest at a rate of the greater of the Royal Bank of Canada Prime Rate plus applicable margin of $4.75\%$ , or $11.50\%$ per annum for the first 12 months and at $18.00\%$ per annum beginning August 28, 2025, payable monthly.

As at December 31, 2024, the Company was not in compliance with its PDP reserve value covenant. In addition, the average price of WTI fell below US $70 during the period between November 26, 2024 and December 31, 2024 which triggers installment payments of the principal amount equal to$ 250,000 payable starting on December 31, 2024. On March 7, 2025 a waiver was obtained from the private lender waiving the Company's obligations to pay amounts triggered as a result of the breach of the WTI average price. In addition, this waiver also deferred an installment payment in the amount of $750,000 that was due March 31, 2025. This payment is now due May 30, 2025 if the outstanding balance of the loan has not been repaid. On April 23, 2025, the Company received a waiver from the lender on the covenant breach relating to the value of its year end Proved Developed Producing Reserves. The amount due to the lender as a result of this breach is $924,000. As per the waiver, the amount due is now payable May 30, 2025 if the remaining amount of the loan balance has not been repaid.

Based on the Company's current forecast of future production and prices the estimated future debt payments on long-term debt as of December 31, 2024 are as follows:

Year	Credit Facility
2025	13,000,000

Subsequent to year end, the Company repaid $400,000 of the Credit Facility due on December 31, 2024 on January 8, 2025 in coordination with the lender.

13. COMMITMENTS AND CONTINGENCIES

As part of its normal business, the Company entered into arrangements and incurred obligations that will impact the Company's future operations and liquidity. The Company's financial liabilities and undiscounted liabilities are discussed further in Note 6.

In the normal course of its operations, the Company may be subject to litigation and claims. Although it is not possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of such contingencies would not have a material adverse impact on the results of operations, financial position or liquidity of the Company.

The Company is not aware of any material provisions or other contingent liabilities as at December 31, 2024.

14. SHARE CAPITAL

The Company is authorized to issue an unlimited number of common shares, each with no par value.

On July 31, 2024, the Corporation completed a share consolidation of one post-consolidation Common Share for every two pre-consolidation Common Shares outstanding (the "Share Consolidation"). Prior to completing the Consolidation, the Corporation had 13,841,757 Common Shares outstanding and following the completion of the Consolidation, the Corporation had approximately 6,920,881 Common Shares outstanding.

On August 23, 2024, Fiddlehead completed the two brokered financings in the Private Placement for a total of 53.6 million subscription receipts at a price of $0.20 per subscription receipt for aggregate gross proceeds of$ 10.2 million. The net proceeds of the subscription receipts were used to fund the Purchase Price of the Acquisition, and the remaining amounts for general corporate and working capital purposes. The subscription receipts were each exchanged for one unit of Fiddlehead ("Fiddlehead Unit").

Each Fiddlehead Unit consists of one Fiddlehead Share and one common share purchase warrant of Fiddlehead ("Fiddlehead Warrant"). Each Fiddlehead Warrant entitles the holder thereof to purchase one Fiddlehead Share at an exercise price of $0.24 per Fiddlehead Share at any time up to 60 months.

The Fiddlehead Shares and Fiddlehead Warrants commenced trading on the TSXV on September 10, 2024.

Common shares issued as part of the Private Placement were valued at $0.15 per common share based on a proration of the Private Placement value of$ 0.20 per share less the value attributed to the Fiddlehead Warrants of $0.05 per Fiddlehead Warrant.

2024

FIDDLEHEAD RESOURCES CORP.

The following table summarizes the change in common shares issued and outstanding.

	As at December 31, 2024		As at December 31, 2023
	Shares	Amount	Shares¹	Amount
Balance, beginning of year¹	6,920,881	64,707,097	4,496,714	64,132,017
Issuance of shares for cash	53,600,000	7,959,316	2,424,167	581,800
Share issuance costs	-	(1,311,317)	-	(6,720)
Balance, end of year	60,520,881	71,355,096	6,920,881	64,707,097

¹ Common Shares outstanding have been adjusted as a result of the Share Consolidation.

Warrants

The following table summarizes the change in common share purchase warrants issued and outstanding:

	December 31, 2024			December 31, 2023
	Warrants	Amount	Weighted average exercise price	Warrants	Amount	Weighted average exercise price
Balance, beginning of year	-	-	-	-	-	-
Expired	-	-	-	-	-	-
Issued	53,600,000	2,760,684	0.24	-	-	-
Balance, end of year	53,600,000	2,760,648	0.24	-	-	-

Each Fiddlehead Warrant entitled the holder to purchase one Fiddlehead Share at an exercise price of $0.24 per common share expiring on August 29, 2029. During the year ended December 31, 2024, no Fiddlehead Warrants were exercised and no Fiddlehead Warrants were forfeited or expired.

The fair value of the Fiddlehead Warrants was estimated on the date of issue using the Black Scholes option pricing model with the following assumptions:

	Fiddlehead Warrants
Risk free interest rate	2.73%
Expected volatility¹	47.00%
Expected dividend yield	0.00%
Expected life	5 Years
Average fair value of warrants granted ($/share)	0.05

¹ Fiddlehead has estimated the expected volatility over the life of the warrant based on a peer group average for junior oil and gas companies.

15. SHARE-BASED COMPENSATION

Stock option plan

The Company operates an omnibus incentive plan (the "Plan") to provide equity-settled share-based remuneration to directors, officers and employees. The number of common shares that may be issued pursuant to the exercise of options awarded under the Plan is 10% of the common shares outstanding from time to time. Each tranche of awards with different vesting dates is considered a separate grant for the calculation of fair value and the resulting fair value is amortized over the vesting period of the respective tranche.

On October 17, 2024, the Company granted a total of 4,200,000 stock options (the "Options") to certain directors, officers and employees of the Company under Fiddlehead's omnibus incentive plan. Options were issued with an exercise price of $0.20 per share an expiry date of October 3, 2034, and vest immediately. Following the issuance of the Options, Fiddlehead has 4,792,500 options issued and outstanding.

The fair value of the Options was estimated on the date of issue using the Black Scholes option pricing model with the following assumptions:

	Options Granted
Risk free interest rate	3.15%
Expected volatility¹	47.00%
Expected dividend yield	0.00%
Expected forfeiture rate	0.00%
Expected life	10 Years
Average fair value of options granted (CA$/share)	0.09

¹ Fiddlehead has estimated the expected volatility over the life of the warrant based on a peer group average for junior oil and gas companies.

2024

FIDDLEHEAD RESOURCES CORP.

The following tables summarize information about the stock options outstanding and exercisable at the dates indicated:

	Year Ended
	December 31, 2024		December 31, 2023
	Number of Options	Weighted-Average Exercise Price	Number of Options¹	Weighted-Average Exercise Price
Options outstanding, beginning of year¹	630,000¹	0.18	380,000	0.14
Granted	4,200,000	0.20	250,000	0.24
Exercised	-	-	-	-
Expired	37,500¹	0.14	-	-
Options outstanding, end of year	4,792,500	0.19	630,000	0.18
Options exercisable, end of year	4,792,500	0.19	380,000	0.18

¹ Options outstanding have been adjusted as a result of the Share Consolidation.

Options Outstanding				Options Exercisable
Exercise Price	Number Outstanding at December 31, 2024	Weighted-Average Remaining Contractual Life (Years)	Weighted-Average Exercise price	Number Exercisable at December 31, 2024	Weighted-Average Remaining Contractual Life (Years)	Weighted-Average Exercise price
0.14	342,500¹	0.4	0.01	342,500¹	0.4	0.01
0.24	250,000¹	3.7	0.01	250,000¹	3.7	0.01
0.20	4,200,000	9.8	0.17	4,200,000	9.8	0.17
	4,792,500	8.7	0.19	4,792,500	8.7	0.19

¹ Options outstanding have been adjusted as a result of the Share Consolidation.

Share-based compensation expense of $411,084 was recorded during the year ended December 31, 2024 (December 31, 2023 - $13,429) in the Statements of Loss and Comprehensive Loss and Changes in Shareholders' Equity in respect of stock options.

16. INCOME TAXES

As at December 31, 2024, total tax pools available to the Company are estimated to be $24.7 million (December 31, 2023 – $0.2 million).

The following table reconciles income taxes calculated at the weighted average Canadian statutory rate with the actual provision for income taxes per the Statements of Net Income (Loss) and Comprehensive Income (Loss):

	2024	2023
Net loss before income taxes	(4,267,219)	(249,129)
Canadian statutory tax rate¹	23.0%	23.0%
Expected income tax recovery	(981,460)	(57,300)
Increase resulting from:
Share based compensation	94,549	3,089
Non-deductibles	2,043	-
Changes in unrecognized tax benefits	884,868	54,211
Deferred income tax expense	-	-
Current income tax expense	-	-
Income tax expense	-	-

¹ The Canadian statutory tax rate per the rate reconciliation represents the average combined federal and provincial corporate tax rate.

The movement in deferred tax assets and liabilities, without taking into consideration the offsetting balances within the same tax jurisdiction, are as follows:

	Balance at Dec 31, 2023	Recognized in net income	Recognized in balance sheet	Balance at Dec 31, 2024
Property, plant, and equipment	-	(2,459,724)	-	(2,459,724)
Right-of-use assets	-	(117,355)	-	(117,355)
Deferred consideration payable	-	115,682	-	115,682
Asset retirement obligation	-	2,461,398	-	2,461,398
Deferred income tax liability	-	-	-	-

Under IFRS Accounting Standards, deferred income tax assets may only be recognized to the extent that it is probable that future taxable profits will be available against which unused tax losses and deductible temporary differences can be utilized.

2024

FIDDLEHEAD RESOURCES CORP.

The Company has gross temporary differences for which no deferred taxes have been recognized as follows:

	2024	2023
Undepreciated capital cost	3,358,829	238
Resource pools	15,438,088	-
Share and debt issuance costs	1,969,402	5,376
Non-capital losses¹	3,885,404	237,044
Total temporary differences	24,651,723	242,658

¹Non-capital losses ("NCLs") expire in years 2043 to 2044.

The Company has available the following non-capital losses:

	Year of Expiry	$
	2043	5,376
	2044	1,964,026
Total non-capital losses		1,969,402

17. RELATED PARTY DISCLOSURES

The Company's key management includes directors (executive and non-executive), the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. The remuneration of key management of the Company for the year ended December 31, 2024, and 2023 was as follows:

	Year ended December 31
	2024	2023
Consulting fees (included in general and administrative expenses)	138,900	92,450
Salary & benefits (included in general and administrative expenses)	273,678	-
Share-based compensation	296,170	13,429
Total related party transactions	708,748	105,879

18. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital consisted of the following:

	Year Ended December 31
	2024	2023
Operating activities
Increase in current assets
Accounts receivable	(898,125)	-
Prepaids and other	(97,818)	-
Increase (decrease) in current liabilities
Accounts payable and accrued liabilities	409,241	2,945
Change in non-cash working capital	(586,702)	2,945
Relating to:
Operating activities	(586,702)	2,945
Investing activities	171,208	-
Change in non-cash working capital	(415,494)	2,945

19. SUBSEQUENT EVENTS

Concurrent with the completion of the Transaction, Fiddlehead will raise gross proceeds of $1,000,000 through a non-brokered private placement on identical terms as the Units issued to PrivateCo (the "Offering"), in which the Company has received commitments for the entire amount. Pursuant to the private placement, the Company will issue 5,000,000 units at a price of $0.20 per Unit. Certain directors and management members of Fiddlehead and large shareholders will be subscribing in the private placement for an aggregate of approximately $500,000 and the remaining $500,000 has been fully committed. The proceeds from this Offering will be used by the Company primarily for general working capital.

2024
22

2024
23

FIDDLEHEAD RESOURCES CORP.

Assuming the Company is able to meet the conditions of financing (including the transfer of the licenses related to the South Ferrier property), closing of the Transaction, Offering and Debt Facility is expected to occur on or before May 30, 2025, and is subject to customary TSX Venture Exchange approvals. All securities issued pursuant to the Offering will be subject to a hold period of four months plus a day from the date of issuance. The Transaction will have an effective date of May 1, 2025.

The oil and gas industry and global economy has recently been impacted by new tariffs imposed by the United States and the residual impact on oil prices and foreign exchange rates. The possibility of retaliatory tariffs could have a significant adverse impact on the Company's future sales and profitability.

AI assistant

Fiddlehead Resources Corp. — Audit Report / Information 2024

47001_rns_2025-04-29_6d2c668e-113f-4cc4-83be-906599cc2872.pdf

FIDDLEHEAD RESOURCES CORP.

Independent auditor's report

Our opinion

What we have audited

Basis for opinion

Independence

Material uncertainty related to going concern

Key audit matters

The impact of oil and gas reserves on PP&E

Key audit matter

How our audit addressed the key audit matter

Comparative information

Other information

Responsibilities of management and those charged with governance for the financial statements

Auditor’s responsibilities for the audit of the financial statements

FIDDLEHEAD RESOURCES CORP.

Balance Sheets

FIDDLEHEAD RESOURCES CORP.

Statements of Loss and Comprehensive Loss

Statements of Changes in Shareholders' Equity

FIDDLEHEAD RESOURCES CORP.

Statements of Cash Flows

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION AND GOING CONCERN

2. BASIS OF PREPARATION

3. MATERIAL ACCOUNTING POLICIES

Cash

Financial instruments

Share capital

Leases

Property, plant and equipment

Petroleum and natural gas assets

Subsequent costs

Depletion, depreciation and amortization

Impairment

Financial assets carried at amortized cost

Non-financial assets

Share-based payment transactions

Equity-settled transactions

Embedded Derivatives

Provisions and asset retirement obligations

Revenue recognition

Finance revenue and costs

Royalties

Income tax

Current tax

Deferred tax

Joint Arrangements

Business Combination

Future Accounting Pronouncements

4. CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES

Accounting for Joint Operation

Recoverability of asset carrying values

Depletion of petroleum properties

Asset retirement obligations

Business Combinations

Determination of cash generating units ("CGUs")

Fair value of financial instruments

5. BUSINESS COMBINATION

Transition Services Agreement

6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair values of financial instruments

Overview of Risk Management

Credit risk

Market risk

Commodity price risk

Foreign currency exchange risk

Interest rate risk

Liquidity risk

FIDDLEHEAD RESOURCES CORP.

Capital disclosures

7. OIL AND GAS SALES, NET OF ROYALTIES

8. FINANCE COSTS

9. PROPERTY, PLANT AND EQUIPMENT

Impairment of PP&E

10. ASSET RETIREMENT OBLIGATION

11. LEASES

Fiddlehead Resources Corp. Audit Report / Information 2024