Paramount Resources Ltd.

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Paramount Resources Ltd. Announces First Quarter 2023 Results

Calgary, Alberta – May 3, 2023

Paramount Resources Ltd. ("Paramount" or the "Company") (TSX:POU) is pleased to announce first quarter 2023 financial and operating results highlighted by record production in the Grande Prairie Region, an active capital program that will drive second half 2023 production growth and continued strong free cash flow generation.

HIGHLIGHTS

First quarter sales volumes averaged 97,269 Boe/d (45% liquids), similar to the fourth quarter of 2022 even with the impact of 4,700 Boe/d in property dispositions in January 2023. Grande Prairie Region sales volumes averaged a record 69,507 Boe/d (51% liquids).[(1)]
Cash from operating activities was $271 million ($1.91 per basic share) in the first quarter. Adjusted funds flow was $268 million ($1.89 per basic share).[(2)]
Free cash flow was $60 million ($0.42 per basic share) in the first quarter.[(2)] In addition, Paramount closed the sale of its Kaybob Smoky and Kaybob South Duvernay properties and certain other minor interests in the Kaybob Region (the "Kaybob Disposition") for cash proceeds of $371 million in January 2023.
Capital expenditures in the quarter totaled $184 million. Activities were focused on development in the Grande Prairie Region where Paramount drilled six (6.0 net) Montney wells and completed 14 (14.0 net) Montney wells and in the Kaybob Region where it drilled four (3.4 net) wells, including the longest well by measured depth in the Company’s history of approximately 7,800 meters at its Kaybob North Duvernay property. Abandonment and reclamation expenditures in the first quarter totaled $22 million.
The Company’s infrastructure debottlenecking project in the Grande Prairie Region is now complete. This will facilitate production growth in the region to between 77,000 Boe/d and 82,000 Boe/d in the second half of 2023 as additional wells are brought onstream. Paramount began bringing new Montney wells from the ten well Karr 4-2 pad on production in mid-April.

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

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

Following the Kaybob Disposition, the Company repaid all remaining drawings under its $1.0 billion revolving credit facility and paid a special cash dividend of $1.00 per class A common share ("Common Share").
At March 31, 2023, Paramount held $82 million in cash and cash equivalents and its revolving credit facility remained undrawn.
The carrying value of the Company's investments in securities at March 31, 2023 was $498 million.

GUIDANCE

Paramount is reaffirming its 2023 and preliminary 2024 annual average sales volumes and capital expenditure guidance. Capital expenditures in 2023 and 2024 are expected to be evenly split between: (i) sustaining and maintenance capital; and (ii) growth capital. Paramount is revising its free cash flow expectations to reflect higher operating and transportation expenses due to inflationary cost pressures and to incorporate updated NGLs pricing following the execution of new propane contracts in April 2023. If inflationary cost pressures persist into 2024, Paramount expects capital expenditures to be on the higher end of the guided range in 2024.

Paramount remains committed to prudently managing its capital resources and has the flexibility to adjust its capital expenditure plans depending on commodity prices, inflationary cost pressures and other factors.

2023 Guidance

Annual average sales volumes(Boe/d)	100,000 to 105,000(46% liquids)
First half average sales volumes(Boe/d)	96,000 to 101,000(45% liquids)
Second half average sales volumes(Boe/d)	104,000 to 109,000(47% liquids)
Capital expenditures	$700 to $750 million(~50% togrowth)
Abandonment and reclamation expenditures	$55 million
Free cash flow(1)	$335 million($375 millionpriorguidance)

The Company’s midpoint 2023 sustaining and maintenance capital program and regular monthly dividend would remain fully funded down to an average WTI price of about US$50/Bbl over the last three quarters of 2023.[(2)] The Company’s total midpoint 2023 capital program and regular monthly dividend would remain fully funded down to an average WTI price of about US$71/Bbl over the last three quarters of 2023.[ (2)]

Preliminary 2024 Guidance[ (3)]

Annual average sales volumes(Boe/d)	110,000 to 120,000(48% liquids)
Capital expenditures	$700 to$800 million(~50% togrowth)
Abandonment and reclamation expenditures	$40 million
Free cash flow(4)	$445 million($465 millionpriorguidance)

Planning for the second phase of development at Willesden Green is ongoing, including the design of a new processing facility and the advancement of commercial arrangements for sales volumes egress. Paramount intends to update its five-year outlook later this year.

(1) Free cash flow is a capital management measure used by Paramount. Refer to "Advisories - Specified Financial Measures" for more information on this measure. The stated free cash flow forecast is based on the following assumptions for 2023: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $55 million in abandonment and reclamation costs, (iii) $7 million in geological and geophysical expenses, (iv) realized pricing of $55.50/Boe (US$79.04/Bbl WTI, US$3.48/MMBtu NYMEX, $3.33/GJ AECO), (v) a $US/$CAD exchange rate of $0.751, (vi) royalties of $8.40/Boe, (vii) operating costs of $12.00/Boe and (vii) transportation and NGLs processing costs of $3.85/Boe. Assumed pricing of US$80.00/Bbl WTI, US$3.50/MMBtu NYMEX and $3.08/GJ AECO and an assumed $US/$CAD exchange rate of $0.755 for the remaining three quarters of 2023 is unchanged from previous guidance provided on March 7, 2023 but the stated amounts have been adjusted to incorporate actual results for the first quarter of 2023.

(2) Assuming no changes to the other forecast assumptions for 2023.

(3) All 2024 guidance is based on preliminary planning and current market conditions and is subject to change.
(4) The stated free cash flow estimate is based on the following assumptions for 2024: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $40 million in abandonment and reclamation costs, (iii) $7 million in geological and geophysical expenses, (iv) realized pricing of $53.60/Boe (US$75.00/Bbl WTI, US$3.50/MMBtu NYMEX, $3.08/GJ AECO), (v) a $US/$CAD exchange rate of $0.755, (vi) royalties of $8.15/Boe, (vii) operating costs of $11.25/Boe and (vii) transportation and NGLs processing costs of $3.65/Boe.

Paramount Resources Ltd. First Quarter 2023 2

MAY DIVIDEND

Paramount’s Board of Directors has declared a cash dividend of $0.125 per Common Share that will be payable on May 31, 2023 to shareholders of record on May 15, 2023. The dividend will be designated as an "eligible dividend" for Canadian income tax purposes.

REVIEW OF OPERATIONS

GRANDE PRAIRIE REGION

Sales volumes and netbacks in the Grande Prairie Region are summarized below:

	Q1	2023		Q4 2022		_% Change _
Sales volumes
Natural gas (MMcf/d)	204.4			189.9		8
Condensate and oil (Bbl/d)	31,367			29,146		8
Other NGLs (Bbl/d)	4,074			3,631		12
Total (Boe/d)	69,507			64,434		8
*% liquids*		*51%*		51%
						Change in $
Netback(1)	($millions)		($/Boe)	($millions)	($/Boe)	millions (%)
Natural gas revenue(2)	79.4		4.31	125.4	7.18	(37)
Condensate and oil revenue	286.9		101.64	293.9	109.60	(2)
Other NGLs revenue	16.9		46.21	17.1	51.22	(1)
Petroleum and natural gas sales	383.2		61.26	436.4	73.62	(12)
Royalties	(56.7)		(9.07)	(66.4)	(11.21)	(15)
Operating expense	(70.3)		(11.24)	(69.9)	(11.80)	1
Transportation and NGLsprocessing	(28.7)		(4.58)	(22.1)	(3.70)	30
	227.5		36.37	278.0	46.91	(18)

(1) "Netback" is a Non-GAAP financial measure. When presented on a $/Boe or $/Mcf basis, each of the components of Netback is a supplementary financial measure and Netback is a non-GAAP ratio. Refer to the "Specified Financial Measures" section for more information on these measures. (2) Per unit natural gas revenue presented as $/Mcf.

First quarter 2023 sales volumes in the Grande Prairie Region averaged a record 69,507 Boe/d (51% liquids) compared to 64,434 Boe/d (51% liquids) in the fourth quarter of 2022. The Company brought a total of six (6.0 net) new Montney wells at Karr and Wapiti on production in the first quarter.

Development activities in the Grande Prairie Region in the first quarter included the drilling of six (6.0 net) Montney wells and the completion of 14 (14.0 net) Montney wells.

At Karr, all four (4.0 net) wells at the 1-2 North pad were brought on production in the first quarter. The pad included a well with one of the longest lateral lengths in corporate history and a total measured depth of 7,060 metres. All-in drilling, completion, equipping and tie-in ("DCET") costs for the pad averaged $10.5 million per well. Production results from these four wells are consistent with expectations, averaging gross peak 30-day production per well of 1,904 Boe/d (6.3 MMcf/d of shale gas and 846 Bbl/d of NGLs) with an average CGR of 133 Bbl/MMcf.[(1)]

(1) Production measured at the wellhead. Natural gas sales volumes were lower by approximately 10% and liquids sales volumes were lower by approximately 6% due to shrinkage. Excludes days when the wells did not produce. The production rates and volumes stated are over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells. CGR means condensate to gas ratio and is calculated by dividing raw wellhead liquids volumes by raw wellhead natural gas volumes. See "Oil and Gas Measures and Definitions" in the Advisories section.

Paramount Resources Ltd. First Quarter 2023 3

The Company completed all ten (10.0 net) wells on the Karr 4-2 pad during the quarter and began bringing the wells on production in mid-April. Paramount also commenced drilling at the five (5.0 net) well 7-33 South pad at Karr in the first quarter, with the wells expected to be on production in the third quarter.

At Wapiti, the remaining two wells on the eight (8.0 net) well 16-15 pad were brought onstream in the first quarter. Paramount began drilling the eight (8.0 net) well 8-15 pad in the first quarter, with the wells expected to come on production in the third quarter.

The Company’s Grande Prairie Region infrastructure debottlenecking project is now complete. This will facilitate sales volumes growth in the region to between 77,000 Boe/d and 82,000 Boe/d in the second half of 2023 as additional wells are brought onstream.

As previously disclosed, a planned 11 day outage in the second quarter and a planned four day outage in the fourth quarter at the third-party Wapiti natural gas processing plant will impact Grande Prairie Region sales volumes.

KAYBOB REGION

Kaybob Region sales volumes averaged 19,201 Boe/d (29% liquids) in the first quarter of 2023 compared to fourth quarter 2022 sales volumes of 24,477 Boe/d (34% liquids) (which included approximately 4,700 Boe/d from properties sold in the January 2023 Kaybob Disposition).

Development activities at the Company’s Kaybob North Duvernay property are ongoing with Paramount recently completing the drilling of the three (3.0 net) well 4-13 pad that is expected to be brought onstream in the third quarter. The wells on this pad have the longest average well length by total measured depth in the Company’s history and include the single longest well at approximately 7,800 meters of total measured depth. The Company is applying its learnings from the drilling of long reach wells, achieving another record by drilling 1,130 meters of lateral length in a 24-hour period on one of the wells.

The drilling of the five (5.0 net) well 15-7 pad at Kaybob North Duvernay commenced in the second quarter, with all five wells expected to be onstream in the fourth quarter. As a result of the optimization of existing infrastructure and improved surface facility design, the 4-13 and 15-7 pads are not expected to be subject to the production restrictions that impacted the three-well 12-21 pad brought on production in 2022.

Development activities in the Kaybob Region also included the drilling and completion of two (1.4 net) Montney gas wells. Paramount is deferring bringing these wells onstream until the winter when natural gas prices are expected to strengthen.

CENTRAL ALBERTA AND OTHER REGION

Central Alberta and Other Region sales volumes averaged 8,561 Boe/d (32% liquids) in the first quarter of 2023 compared to 8,459 Boe/d (31% liquids) in the fourth quarter of 2022.

The Company plans to commence the drilling of four (4.0 net) Duvernay wells at Willesden Green late in the second quarter with first production anticipated in early 2024 to coincide with the start-up of the liquids handling expansion at the Leafland natural gas processing plant. Drilling operations at a second four (4.0 net) Duvernay well pad at Willesden Green will commence in late 2023.

Planning for the second phase of development at Willesden Green is ongoing, including the design of a new processing facility ("New Facility") and the advancement of commercial arrangements for sales volumes egress. It is currently anticipated that the New Facility will be capable of handling approximately 150 MMcf/d of raw gas and 30,000 Bbl/d of raw liquids upon completion. Additional gathering, compression and associated infrastructure will also be required. Paramount now expects that the New Facility will be

Paramount Resources Ltd. First Quarter 2023 4

constructed in three phases of approximately 50 MMcf/d of raw gas handling and 10,000 Bbl/d of raw liquids handling each, with the first train to start up in late 2025, approximately six months later than previously estimated.

Paramount controls approximately 240,000 net acres of contiguous land at Willesden Green with over 700 internally estimated Duvernay drilling locations, which supports targeted full field development plateau production of over 50,000 Boe/d that can be sustained for over 20 years.[(1)]

HEDGING

The Company’s current commodity and foreign exchange contracts are summarized below:

	Q2 2023 Q3 2023 Q4 2023 2024 Average Price(2)
Oil Sweet Crude Oil – Basis (Physical Sale) (Bbl/d) 3,112 3,078 3,078 – WTI – US$3.73/Bbl Natural Gas AECO – Basis (Physical Sale) (MMBtu/d) 35,000 35,000 11,793 – NYMEX – US$0.94/MMBtu Dawn – Basis (Physical Sale) (MMBtu/d) 25,000 25,000 8,424 – NYMEX – US$0.20/MMBtu Foreign Currency Exchange Forward Sales / Swaps (US$MM/Month) $60 – – – 1.3293 CAD$ / US$ Swaps (US$MM/Month) – $40 $40 – 1.3427 CAD$ / US$ Swaps (US$MM/Month) – – – $20 1.3425 CAD$ / US$

Q2
2023
Q3
2023
Q4
2023
2024
Average Price(2)

Oil
Sweet Crude Oil – Basis (Physical Sale) (Bbl/d)
3,112
3,078
3,078
–
WTI – US$3.73/Bbl
Natural Gas
AECO – Basis (Physical Sale) (MMBtu/d)
35,000
35,000 11,793
–
NYMEX – US$0.94/MMBtu
Dawn – Basis (Physical Sale) (MMBtu/d)
25,000
25,000
8,424
–
NYMEX – US$0.20/MMBtu
Foreign Currency Exchange
Forward Sales / Swaps (US$MM/Month)
$60
–
–
–
1.3293 CAD$ / US$ Swaps (US$MM/Month)
–
$40
$40
–
1.3427 CAD$ / US$ Swaps (US$MM/Month)
–
–
–
$20
1.3425 CAD$ / US$

(2) Average price is calculated on a volume weighted average basis.

ANNUAL GENERAL MEETING

Paramount will hold its annual general meeting of shareholders on Wednesday, May 3, 2023 at 10:30 a.m. (Calgary time) in the McMurray Room of the Calgary Petroleum Club, located at 319 – 5[th] Avenue S.W., Calgary Alberta. A webcast of the meeting will be available on the Company’s website at www.paramountres.com/investors/presentations.

(1) See "Oil and Gas Measures and Definitions" in the Advisories section for additional information respecting internally estimated drilling locations.

Paramount Resources Ltd. First Quarter 2023

ABOUT PARAMOUNT

Paramount is an independent, publicly traded, liquids-rich natural gas focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas, including longer-term strategic exploration and pre-development plays, and holds a portfolio of investments in other entities. The Company’s principal properties are located in Alberta and British Columbia. Paramount’s Common Shares are listed on the Toronto Stock Exchange under the symbol "POU".

Paramount’s first quarter 2023 results, including Management’s Discussion and Analysis and the Company’s Consolidated Financial Statements, can be obtained on SEDAR at www.sedar.com or on Paramount’s website at www.paramountres.com/investors/financial-shareholder-reports.

A summary of historical financial and operating results is also available on Paramount’s website at www.paramountres.com/investors/financial-shareholder-reports.

For further information, please contact:

J.H.T. (Jim) Riddell, President and Chief Executive Officer and Chairman Paul R. Kinvig, Chief Financial Officer Rodrigo (Rod) Sousa, Executive Vice President, Corporate Development and Planning www.paramountres.com Phone: (403) 290-3600

Paramount Resources Ltd. First Quarter 2023 6

FINANCIAL AND OPERATING RESULTS (1)

($ millions, except as noted) Q1 2023 Q4 2022	Q1 2022
Net income 197.0 259.9 per share – basic ($/share) *1.39* 1.83 per share – diluted ($/share) *1.33* 1.76 Cash from operating activities 271.4 306.9 per share – basic ($/share) *1.91* 2.17 per share – diluted ($/share) *1.84* 2.08 Adjusted funds flow 268.2 340.7 per share – basic ($/share) *1.89* 2.40 per share – diluted ($/share) *1.81* 2.31 Free cash flow 59.8 162.0 per share – basic ($/share) *0.42* 1.14 per share – diluted ($/share) *0.40* 1.10 Total assets 4,114.6 4,337.3 Investments in securities 498.3 557.1 Net (cash) debt (43.6) 161.2 Long-term debt – 159.4 Common shares outstanding (millions) (2) 142.4 142.0	16.6
	*0.12*
	*0.11*
	174.9
	*1.25*
	*1.20*
	237.8
	*1.70*
	*1.63*
	103.4
	*0.74*
	*0.71*
	4,095.5
	479.2
	361.2
	302.6
	140.0
Sales volumes(3)
Natural gas(MMcf/d) 320.6 321.9	272.9
Condensate and oil(Bbl/d) 37,916 37,580	31,375
Other NGLs(Bbl/d) 5,916 6,143	5,276
Total(Boe/d) 97,269 97,370	82,137
*% liquids* *45%* 45%	*45%*
Grande Prairie Region(Boe/d) 69,507 64,434	54,737
Kaybob Region(Boe/d) 19,201 24,477	20,726
Central Alberta & Other Region(Boe/d) 8,561 8,459	6,674
Total(Boe/d) 97,269 97,370	82,137
Netback $/Boe(4) $/Boe(4) Natural gas revenue 122.0 *4.23* 194.2 6.56 Condensate and oil revenue 343.5 *100.66* 375.1 108.50 Other NGLs revenue 23.4 *43.93* 27.3 48.25 Royaltyand other revenue 0.8 ─ 1.1 ─	$/Boe(4)
	127.1 *5.18*
	331.9 *117.53*
	29.3 *61.64*
	11.3 ─
Petroleum and natural gas sales 489.7 *55.94* 597.7 66.72 Royalties (69.1) *(7.90)* (84.4) (9.43) Operating expense (108.8) *(12.43)* (119.2) (13.31) Transportation and NGLs processing (36.3) *(4.15)* (27.2) (3.03) Sales of commodities purchased(5) 115.1 *13.15* 102.7 11.47 Commoditiespurchased(5) (114.3) *(13.05)* (100.4) (11.21)	499.6 *67.59*
	(76.2) *(10.31)*
	(89.2) *(12.07)*
	(31.3) *(4.24)*
	48.8 *6.59*
	(49.1) *(6.64)*
Netback 276.3 *31.56* 369.2 41.21 Risk management contract settlements 6.1 *0.70* (23.0) (2.57)	302.6 *40.92*
	(49.7) *(6.72)*
Netback including risk management contract settlements 282.4 *32.26* 364.2 38.64	252.9 *34.20*
Capital expenditures
Grande Prairie Region 121.1 135.8	76.8
Kaybob Region 39.0 11.4	31.1
Central Alberta & Other Region 5.6 1.0	0.1
Fox Drilling and Cavalier Energy 12.7 12.1	1.1
Corporate 5.7 9.3	7.9
Total 184.1 169.6	117.0
Asset retirement obligations settled 21.8 7.0	14.8

(1) Adjusted funds flow, free cash flow and net (cash) debt are capital management measures used by Paramount. Netback and netback including risk management contract settlements are non-GAAP financial measures. Netback and Netback including risk management contract settlements presented on a $/Boe or $/Mcf basis are nonGAAP ratios. Each measure, other than net income, that is presented on a per share, $/Mcf or $/Boe basis is a supplementary financial measure. Refer to the "Specified Financial Measures" section for more information on these measures.

(2) Common shares are presented net of shares held in trust under the Company’s restricted share unit plan: Q1 2023: 0.8 million, Q4 2022: 0.8 million, Q1 2022: 1.5 million.

(3) Refer to the Product Type Information section of this document for a complete breakdown of sales volumes for applicable periods by specific product type.

(4) Natural gas revenue presented as $/Mcf.

(5) Sales of commodities purchased and commodities purchased are treated as corporate items and not allocated to individual regions or properties.

PRODUCT TYPE INFORMATION

This press release includes references to sales volumes of "natural gas", "condensate and oil", "NGLs", "Other NGLs" and "liquids". "Natural gas" refers to shale gas and conventional natural gas combined. "Condensate and oil" refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined. "NGLs" refers to condensate and Other NGLs combined. "Other NGLs" refers to ethane, propane and butane. "Liquids" refers to condensate and oil and Other NGLs combined. Below is a complete breakdown of sales volumes for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil. Numbers may not add due to rounding.

not add due to rounding.
	Total
	Q1 2023 Q4 2022 Q1 2022
Shale gas (MMcf/d) Conventional naturalgas(MMcf/d)	265.2 260.0 213.1 55.4 61.9 59.8
Naturalgas (MMcf/d)	320.6 321.9 272.9
Condensate (Bbl/d)	34,706 34,616 29,064
Other NGLs (Bbl/d)	5,916 6,143 5,276
NGLs (Bbl/d)	40,622 40,759 34,340
Light and medium crude oil (Bbl/d) Tight oil (Bbl/d) Heavycrude oil(Bbl/d)	2,151 2,335 1,874 599 629 437 460 - -
Crude oil (Bbl/d)	3,210 2,964 2,311
Total (Boe/d)	97,269 97,370 82,137

	Grande Prairie Region	Kaybob Region	Kaybob Region	Central Alberta and Other Region
	Q1 2023 Q4 2022 Q1 2022	Q1 2023	Q4 2022 Q1 2022	Q1 2023 Q4 2022 Q1 2022
Shale gas (MMcf/d) Conventional naturalgas(MMcf/d)	204.0 188.4 151.4	31.8	41.9 35.7	29.4 29.7 26.0 5.4 5.4 5.1
	0.4 1.5 1.1	49.6	55.0 53.6
Naturalgas (MMcf/d)	204.4 189.9 152.5	81.4	96.9 89.3	34.8 35.1 31.1
Condensate (Bbl/d)	31,367 29,146 26,042	2,315	4,354 2,130	1,024 1,116 892
Other NGLs (Bbl/d)	4,074 3,631 3,267	988	1,671 1,558	854 841 451
NGLs (Bbl/d)	35,441 32,777 29,309	3,303	6,025 3,688	1,878 1,957 1,343
Light and medium crude oil (Bbl/d) Tight oil (Bbl/d) Heavycrude oil(Bbl/d)	– – 6	2,121	2,045 1,832	30 290 36 393 367 115 460 – –
	– – –	206	262 322
	– – –	–	– –
Crude oil (Bbl/d)	– – 6	2,327	2,307 2,154	883 657 151
Total (Boe/d)	69,507 64,434 54,737	19,201	24,477 20,726	8,561 8,459 6,674

The Company forecasts that 2023 annual sales volumes will average between 100,000 Boe/d and 105,000 Boe/d (54% shale gas and conventional natural gas combined, 40% condensate, light and medium crude oil, tight oil and heavy crude oil combined and 6% other NGLs). First half 2023 sales volumes are expected to average between 96,000 Boe/d and 101,000 Boe/d (55% shale gas and conventional natural gas combined, 39% condensate, light and medium crude oil, tight oil and heavy crude oil combined and 6% other NGLs). Second half 2023 sales volumes are expected to average between 104,000 Boe/d and 109,000 Boe/d (53% shale gas and conventional natural gas combined, 40% condensate, light and medium crude oil, tight oil and heavy crude oil combined and 7% other NGLs). The Company’s preliminary 2024 guidance provides for annual sales volumes that will average between 110,000 Boe/d and 120,000 Boe/d (52% shale gas and conventional natural gas combined, 41% condensate, light and medium crude oil, tight oil and heavy crude oil combined and 7% other NGLs).

Paramount Resources Ltd. First Quarter 2023 8

SPECIFIED FINANCIAL MEASURES

Non-GAAP Financial Measures

Netback and netback including risk management contract settlements are non-GAAP financial measures. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures presented by other issuers. These measures should not be considered in isolation or construed as alternatives to their most directly comparable measure disclosed in the Company’s primary financial statements or other measures of financial performance calculated in accordance with IFRS.

Netback equals petroleum and natural gas sales (the most directly comparable measure disclosed in the Company’s primary financial statements) plus sales of commodities purchased less royalties, operating expense, transportation and NGLs processing expense and commodities purchased. Sales of commodities purchased and commodities purchased are treated as Corporate items and not are allocated to individual regions or properties. Netback is used by investors and Management to compare the performance of the Company’s producing assets between periods.

Netback including risk management contract settlements equals netback after including (or deducting) risk management contract settlements received (paid). Netback including risk management contract settlements is used by investors and Management to assess the performance of the producing assets after incorporating Management’s risk management strategies.

Refer to the table under the heading "Financial and Operating Results" in this press release for the calculation of netback and netback including risk management contract settlements for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022.

Non-GAAP Ratios

Netback and netback including risk management contract settlements presented on a $/Boe basis are nonGAAP ratios as they each have a non-GAAP financial measure (netback and netback including risk management contract settlements, respectively) as a component. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures presented by other issuers. These measures should not be considered in isolation or construed as alternatives to their most directly comparable measure disclosed in the Company’s primary financial statements or other measures of financial performance calculated in accordance with IFRS.

Netback on a $/Boe basis is calculated by dividing netback (a non-GAAP financial measure) for the applicable period by the total production during the period in Boe. Netback including risk management contract settlements on a $/Boe basis is calculated by dividing netback including risk management contract settlements for the applicable period by the total production during the period in Boe. These measures are used by investors and management to assess netback and netback including risk management contract settlements on a unit of production basis.

Capital Management Measures

Adjusted funds flow, free cash flow and net (cash) debt are capital management measures that Paramount utilizes in managing its capital structure. These measures are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities. Refer to Note 15 – Capital Structure in the unaudited Interim Condensed Consolidated Financial Statements of Paramount as at and for the three months ended March 31, 2023 for: (i) a description of the composition and use of these measures, (ii) reconciliations of adjusted funds flow and free cash flow to cash from operating activities, the most directly comparable measure disclosed in the Company’s primary financial statements, for the three months ended March 31, 2023 and 2022 and (iii) a calculation of net (cash) debt as at March 31, 2023 and December 31, 2022.

Paramount Resources Ltd. First Quarter 2023 9

Supplementary Financial Measures

This press release contains supplementary financial measures expressed as: (i) cash from operating activities, adjusted funds flow and free cash flow on a per share – basic and per share – diluted basis and (ii) petroleum and natural gas sales, revenue, royalties, operating expenses, transportation and NGLs processing expenses, sales of commodities purchased and commodities purchased on a $/Boe or $/Mcf basis.

Cash from operating activities, adjusted funds flow and free cash flow on a per share – basic basis are calculated by dividing cash from operating activities, adjusted funds flow or free cash flow, as applicable, over the referenced period by the weighted average basic shares outstanding during the period determined under IFRS. Cash from operating activities, adjusted funds flow and free cash flow on a per share – diluted basis are calculated by dividing cash from operating activities, adjusted funds flow or free cash flow, as applicable, over the referenced period by the weighted average diluted shares outstanding during the period determined under IFRS.

Petroleum and natural gas sales, revenue, royalties, operating expenses, transportation and NGLs processing expense, sales of commodities purchased and commodities purchased on a $/Boe or $/Mcf basis are calculated by dividing the petroleum and natural gas sales, revenue, royalties, operating expenses, transportation and NGLs processing expense, sales of commodities purchased or commodities purchased, as applicable, over the referenced period by the aggregate units (Boe or Mcf) produced during such period.

ADVISORIES

Forward-looking Information

Certain statements in this press release constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward-looking information in this press release includes, but is not limited to:

expected growth in sales volumes in the Grande Prairie Region in the second half of 2023;
forecast sales volumes for 2023 and certain periods therein;
planned capital expenditures in 2023;
planned abandonment and reclamation expenditures in 2023;
forecast free cash flow in 2023;
preliminary 2024 sales volumes, capital expenditures, abandonment and reclamation expenditures and free cash flow guidance;
the expectation that capital expenditures in 2023 and 2024 will be evenly split between sustaining and maintenance capital and growth capital;
Paramount’s expectation that capital expenditures in 2024 will be on the higher end of the guided range in the event inflationary cost pressures persist into 2024;
Paramount’s intention to update its five-year outlook later this year;
planned exploration, development and production activities, including the expected timing of drilling, completing and bringing new wells on production and the expected timing of completion and capacity of planned facilities;
the expectation that planned outages at the third-party Wapiti natural gas processing plant will impact Grande Prairie sales volumes;
the expectation that the 4-13 and 15-7 pads at Kaybob North Duvernay will not be subject to the production restrictions that impacted the 12-21 pad;
the anticipated capacity and timing of completion of the planned New Facility at Willesden Green;
the number of internally estimated drilling locations at Willesden Green and the plateau production that can be sustained by such locations; and
the payment of future dividends under the Company’s monthly dividend program.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this press release:

future commodity prices;
the impact of the Russian invasion of the Ukraine;
royalty rates, taxes and capital, operating, general & administrative and other costs;

Paramount Resources Ltd. First Quarter 2023 10

foreign currency exchange rates, interest rates and the rate and impacts of inflation;
general business, economic and market conditions;
the performance of wells and facilities;
the availability to Paramount of the required capital to fund its exploration, development and other operations and meet its commitments and financial obligations;
the ability of Paramount to obtain equipment, materials, services and personnel in a timely manner and at expected and acceptable costs to carry out its activities;
the ability of Paramount to secure adequate processing, transportation, fractionation and storage capacity on acceptable terms and the capacity and reliability of facilities;
the ability of Paramount to market its production successfully;
the ability of Paramount and its industry partners to obtain drilling success (including in respect of anticipated production volumes, reserves additions, product yields and resource recoveries) and operational improvements, efficiencies and results consistent with expectations;
the timely receipt of required governmental and regulatory approvals, including approvals required for the construction of the New Facility at Willesden Green;
the application of regulatory requirements respecting abandonment and reclamation; and
anticipated timelines and budgets being met in respect of drilling programs and other operations (including well completions and tieins, the construction, commissioning and start-up of new and expanded facilities, including the New Facility at Willesden Green and third-party facilities, and facility turnarounds and maintenance).

Although Paramount believes that the expectations reflected in such forward-looking information are reasonable based on the information available at the time of this press release, undue reliance should not be placed on the forward-looking information as Paramount can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Paramount and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

fluctuations in commodity prices;
changes in capital spending plans and planned exploration and development activities;
the potential for changes to preliminary 2024 sales volumes, capital expenditures, abandonment and reclamation expenditures and free cash flow guidance prior to finalization;
changes in foreign currency exchange rates, interest rates and the rate of inflation;
the uncertainty of estimates and projections relating to production, future revenue, free cash flow, reserve additions, product yields (including condensate to natural gas ratios), resource recoveries, royalty rates, taxes and costs and expenses;
the ability to secure adequate processing, transportation, fractionation, and storage capacity on acceptable terms;
operational risks in exploring for, developing, producing and transporting natural gas and liquids, including the risk of spills, leaks or blowouts;
the ability to obtain equipment, materials, services and personnel in a timely manner and at expected and acceptable costs, including the potential effects of inflation and supply chain disruptions;
potential disruptions, delays or unexpected technical or other difficulties in designing, developing, expanding or operating new, expanded or existing facilities (including third-party facilities);
processing, pipeline, and fractionation infrastructure outages, disruptions and constraints;
risks and uncertainties that may result in changes to the planned construction of the New Facility at Willesden Green, including the potential for changes to facility design or the timelines for construction prior to finalization or the failure to obtain required governmental and regulatory approvals;
risks and uncertainties involving the geology of oil and gas deposits;
the uncertainty of reserves estimates;
general business, economic and market conditions;
the ability to generate sufficient cash from operating activities to fund, or to otherwise finance, planned exploration, development and operational activities and meet current and future commitments and obligations (including processing, transportation, fractionation and similar commitments and obligations);
changes in, or in the interpretation of, laws, regulations or policies (including environmental laws);
the ability to obtain required governmental or regulatory approvals in a timely manner, and to obtain and maintain leases and licenses;
the effects of weather and other factors including wildlife and environmental restrictions which affect field operations and access;
uncertainties as to the timing and cost of future abandonment and reclamation obligations and potential liabilities for environmental damage and contamination;
uncertainties regarding Indigenous claims and in maintaining relationships with local populations and other stakeholders;
the outcome of existing and potential lawsuits, insurance claims, regulatory actions, audits and assessments; and
other risks and uncertainties described elsewhere in this document and in Paramount’s other filings with Canadian securities authorities.

Paramount Resources Ltd. First Quarter 2023 11

requirements under debt agreements and applicable laws respecting the declaration and payment of dividends. There are no assurances as to the continuing declaration and payment of future dividends by the Company or the amount or timing of any such dividends.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled " Risk Factors " in Paramount's annual information form for the year ended December 31, 2022, which is available on SEDAR at www.sedar.com or on the Company’s website at www.paramountres.com. The forward-looking information contained in this press release is made as of the date hereof and, except as required by applicable securities law, Paramount undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

Certain forward-looking information in this press release, including forecast free cash flow in 2023 and future periods, may also constitute a "financial outlook" within the meaning of applicable securities laws. A financial outlook involves statements about Paramount’s prospective financial performance or position and is based on and subject to the assumptions and risk factors described above in respect of forward-looking information generally as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this press release. Such assumptions are based on management's assessment of the relevant information currently available and any financial outlook included in this press release is provided for the purpose of helping readers understand Paramount’s current expectations and plans for the future. Readers are cautioned that reliance on any financial outlook may not be appropriate for other purposes or in other circumstances and that the risk factors described above or other factors may cause actual results to differ materially from any financial outlook.

Oil and Gas Measures and Definitions

Liquids Bbl Barrels Bbl/d Barrels per day MBbl Thousands of barrels NGLs Natural gas liquids Condensate Pentane and heavier hydrocarbons Oil Equivalent Boe Barrels of oil equivalent MBoe Thousands of barrels of oil equivalent MMBoe Millions of barrels of oil equivalent Boe/d Barrels of oil equivalent per day	Natural Gas
	GJ Gigajoules GJ/d Gigajoules per day MMBtu Millions of British Thermal Units MMBtu/d Millions of British Thermal Units per day Mcf Thousands of cubic feet MMcf Millions of cubic feet MMcf/d Millions of cubic feet per day AECO AECO-C reference price WTI West Texas Intermediate

This press release contains disclosures expressed as "Boe", "$/Boe" and "Boe/d". Natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil when converting natural gas to Boe. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. For the three months ended March 31, 2023, the value ratio between crude oil and natural gas was approximately 24:1. This value ratio is significantly different from the energy equivalency ratio of 6:1. Using a 6:1 ratio would be misleading as an indication of value.

This press release refers to "CGR", a metric commonly used in the oil and natural gas industry. "CGR" means condensate to gas ratio and is calculated by dividing wellhead raw liquids volumes by wellhead raw natural gas volumes. This metric does not have a standardized meaning and may not be comparable to similar measures presented by other companies. As such, it should not be used to make comparisons. Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare the Company's performance over time; however, such measures are not reliable indicators of the Company's future performance and future performance may not compare to the performance in previous periods and therefore should not be unduly relied upon.

This document contains information respecting Paramount's internal estimate of Duvernay drilling locations at Willesden Green. The referenced drilling locations represent future potential undeveloped gross locations as estimated effective December 31, 2022 by internal qualified reserves evaluators from Paramount. The referenced drilling locations were determined by Paramount's internal evaluators based on, among other matters, their assessment of available reservoir, geological and technical information, the economic thresholds necessary for development and potential future development plans. There is no certainty that the Company will drill any of the identified future potential undeveloped locations and there is no certainty that such locations will result in any reserves or production. The locations on which the Company will actually drill wells, including the number and timing thereof, will be dependent upon the availability of funding, regulatory approvals, seasonal restrictions, oil, NGLs and natural gas prices, costs, actual drilling results, additional reservoir, geological and technical information that is obtained and other factors. While certain of the estimated undeveloped locations have been de-risked by drilling existing wells in relative close proximity to such locations, many of the locations are further away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty as to whether wells will be drilled in such locations, and if wells are drilled in such locations there is more uncertainty that such wells will result in any reserves or production. There is no guarantee that any internally estimated future potential development locations will be included and assigned reserves in any future reserves report prepared for the Company.

Additional information respecting the Company’s oil and gas properties and operations is provided in the Company’s annual information form for the year ended December 31, 2022 which is available on SEDAR at www.sedar.com.

Paramount Resources Ltd. First Quarter 2023 12

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Management’s Discussion and Analysis For the three months ended March 31, 2023

Paramount Resources Ltd. First Quarter 2023 13

This Management’s Discussion and Analysis ("MD&A"), dated May 2, 2023 should be read in conjunction with the unaudited Interim Condensed Consolidated Financial Statements of Paramount Resources Ltd. ("Paramount" or the "Company") as at and for the three months ended March 31, 2023 (the "Interim Financial Statements") and Paramount’s audited Consolidated Financial Statements as at and for the year ended December 31, 2022 (the "Annual Financial Statements"). Financial data included in this MD&A has been prepared in accordance with International Financial Reporting Standards ("IFRS" or "GAAP") and is stated in millions of Canadian dollars, unless otherwise noted. The Company’s accounting policies have been applied consistently to all periods presented. Certain comparative figures have been reclassified to conform to the current year’s presentation.

ABOUT PARAMOUNT

Paramount is an independent, publicly traded, liquids-rich natural gas focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas. Paramount’s principal properties are located in Alberta and British Columbia. Paramount commenced operations as a public company in 1978 and has adapted to a multitude of operating and economic climates over the years. The Company’s class A common shares ("Common Shares") are listed on the Toronto Stock Exchange ("TSX") under the symbol "POU". Additional information concerning Paramount, including its Annual Information Form for the year ended December 31, 2022 ("Annual Information Form"), can be found on the SEDAR website at www.sedar.com.

Paramount’s operations are organized into the following three regions:

the Grande Prairie Region, located in the Peace River Arch area of Alberta, which is focused on Montney developments at Karr and Wapiti;
the Kaybob Region, located in west-central Alberta, which includes the Kaybob North Duvernay development, the Kaybob North Montney oil development and other shale gas and conventional natural gas producing properties; and
the Central Alberta and Other Region, which includes the Willesden Green Duvernay development in central Alberta and shale gas producing properties in the Horn River Basin in northeast British Columbia.

The Company’s assets also include: (i) strategic investments in exploration and pre-development stage assets, including prospective shale gas acreage in the Liard Basin in northeast British Columbia and the Northwest Territories, prospective natural gas and oil acreage in the Mackenzie Delta and Central Mackenzie in the Northwest Territories and interests held by the Company’s wholly-owned subsidiary Cavalier Energy Inc. ("Cavalier") prospective for cold flow heavy oil and in-situ thermal oil recovery; (ii) five triple-sized drilling rigs owned by the Company’s wholly-owned limited partnership Fox Drilling Limited Partnership ("Fox Drilling"); and (iii) investments in other entities.

Paramount Resources Ltd. First Quarter 2023 14

SPECIFIED FINANCIAL MEASURES, PRODUCT TYPES AND OTHER ADVISORIES

This MD&A includes references to: (i) "netback" and "netback including risk management contract settlements", which are non-GAAP financial measures; (ii) certain non-GAAP ratios; (iii) "adjusted funds flow", "free cash flow", "net (cash) debt" and "net debt to adjusted funds flow", which are capital management measures used by Paramount; and (iv) certain supplementary financial measures. Readers are referred to the Specified Financial Measures section of this MD&A for important additional information concerning these measures.

This MD&A includes references to sales volumes of "natural gas", "condensate and oil", "NGLs", "Other NGLs" and "liquids". "Natural gas" refers to shale gas and conventional natural gas combined. "Condensate and oil" refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined. "NGLs" refers to condensate and Other NGLs combined. "Other NGLs" refers to ethane, propane and butane. "Liquids" refers to condensate and oil and Other NGLs combined. Readers are referred to the Product Type Information section of this document for a complete breakdown of sales volumes and revenues for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil.

The disclosures in this MD&A include forward-looking information and certain oil and gas measures. Readers are referred to the Advisories section of this MD&A concerning such matters.

Paramount Resources Ltd. First Quarter 2023 15

FINANCIAL AND OPERATING HIGHLIGHTS

Three months ended March 31	2023	2022	% Change
FINANCIAL
Petroleum and natural gas sales	489.7	499.6	(2 )
Net income	197.0	16.6	NM
Per share – basic ($/share)	*1.39*	0.12
Per share – diluted ($/share)	*1.33*	0.11
Cash from operating activities	271.4	174.9	55
Per share – basic ($/share)(1)	*1.91*	1.25
Per share – diluted ($/share)(1)	*1.84*	1.20
Adjusted funds flow(1)	268.2	237.8	13
Per share – basic ($/share)	*1.89*	1.70
Per share – diluted ($/share)	*1.81*	1.63
Free cash flow (1)	59.8	103.4	(42 )
Per share – basic ($/share)	*0.42*	0.74
Per share – diluted ($/share)	*0.40*	0.71
Total assets	4,114.6	4,095.5	–
Investments in securities	498.3	479.2	4
Long-term debt	–	302.6	(100 )
Net (cash) debt(1)	(43.6 )	361.2	NM
Total liabilities	785.7	1,343.3	(42 )
Common shares outstanding (millions)(2)	142.4	140.0	2
OPERATING
Sales volumes
Natural gas (MMcf/d)	320.6	272.9	17
Condensate and oil (Bbl/d)	37,916	31,375	21
Other NGLs (Bbl/d)	5,916	5,276	12
Total (Boe/d)	97,269	82,137	18
% Liquids	*45%*	45%
Realized prices(1)
Natural gas ($/Mcf)	4.23	5.18	(18 )
Condensate and oil ($/Bbl)	100.66	117.53	(14 )
Other NGLs ($/Bbl)	43.93	61.64	(29 )
Petroleum and natural gas sales ($/Boe)	55.94	67.59	(17 )
Capital expenditures	184.1	117.0	57

(1) Adjusted funds flow, free cash flow and net (cash) debt are capital management measures used by Paramount. Each measure, other than net income, presented on a $/share, $/Bbl, $/Mcf or $/Boe basis is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information on these measures.

(2) Common Shares are presented net of shares held in trust under the Company’s restricted share unit plan (Common Shares): 2023: 0.8 million and 2022: 1.5 million. NM means not meaningful.

Paramount Resources Ltd. First Quarter 2023 16

Q1 2023 OVERVIEW

In the first quarter of 2023:

Sales volumes averaged 97,269 Boe/d (45% liquids) compared to 97,370 Boe/d (45% liquids) in the fourth quarter of 2022.
Sales volumes in the Grande Prairie Region averaged a record 69,507 Boe/d (51% liquids), compared to 64,434 Boe/d (51% liquids) in the fourth quarter of 2022. Sales volumes were higher mainly as a result of production from new wells brought onstream and less infrastructure downtime. Unplanned outages and curtailments at third-party processing facilities in the first quarter negatively impacted sales volumes by approximately 4,100 Boe/d.
Sales volumes in the Kaybob Region averaged 19,201 Boe/d (29% liquids) compared to 24,477 Boe/d (34% liquids) in the fourth quarter of 2022. First quarter sales volumes were lower mainly due to the sale of the Company's Kaybob Smoky and Kaybob South Duvernay properties and certain other minor interests in the Kaybob cash-generating unit ("CGU") in January 2023 (the "Kaybob Disposition").
Sales volumes in the Central Alberta and Other Region averaged 8,561 Boe/d (32% liquids) in the first quarter of 2023 compared to 8,459 Boe/d (31% liquids) in the fourth quarter of 2022.
Cash from operating activities was $271.4 million ($1.91 per basic share) compared to $306.9 million ($2.17 per basic share) in the fourth quarter of 2022. Adjusted funds flow was $268.2 million ($1.89 per basic share) compared to $340.7 million ($2.40 per basic share) in the fourth quarter.[(1)]
Free cash flow was $59.8 million ($0.42 per basic share) compared to $162.0 million ($1.14 per basic share) in the fourth quarter.[(1)] In addition, the Company received cash proceeds of $370.6 million and recorded a gain of $121.1 million on closing of the Kaybob Disposition in January 2023.
Capital expenditures totaled $184.1 million compared to $169.6 million in the fourth quarter of 2022 and were focused on drilling and completion operations in the Grande Prairie and Kaybob Regions.
Net (cash) debt was ($43.6) million at March 31, 2023 compared to net (cash) debt of $161.2 million at December 31, 2022.[(1)]
Abandonment and reclamation expenditures totaled $21.8 million compared to $7.0 million in the fourth quarter of 2022. Activities included the abandonment of 33 wells, including 20 wells at Zama.
Following the closing of the Kaybob Disposition, Paramount repaid all remaining drawings under its $1.0 billion revolving credit facility and paid a special cash dividend of $1.00 per Common Share.

The Company continued to observe inflationary cost pressures across its operations during the quarter. Paramount’s response measures, including advance planning and ordering aimed at mitigating increases, have not fully offset these pressures. See "Risk Factors" in this MD&A for a further description of the risks posed by inflation and other risks that may affect the Company.

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

Paramount Resources Ltd. First Quarter 2023 17

UPDATED GUIDANCE

2023 Guidance

Annual average sales volumes(Boe/d)	100,000 to 105,000(46% liquids)
First half average sales volumes(Boe/d)	96,000 to 101,000(45% liquids)
Second half average sales volumes(Boe/d)	104,000 to 109,000(47% liquids)
Capital expenditures	$700 to $750 million (~50% to growth)
Abandonment and reclamation expenditures	$55 million
Free cash flow(1)	$335 million($375 millionpriorguidance)

Preliminary 2024 Guidance[(3) ]

Annual average sales volumes (Boe/d)	110,000 to 120,000 (48% liquids)
Capital expenditures	$700 to $800 million (~50% to growth)
Abandonment and reclamation expenditures	$40 million
Free cash flow(4)	$445 million ($465 million prior guidance)

(1) The stated free cash flow forecast is based on the following assumptions for 2023: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $55 million in abandonment and reclamation costs, (iii) $7 million in geological and geophysical expenses, (iv) realized pricing of $55.50/Boe (US$79.04/Bbl WTI, US$3.48/MMBtu NYMEX, $3.33/GJ AECO), (v) a $US/$CAD exchange rate of $0.751, (vi) royalties of $8.40/Boe, (vii) operating costs of $12.00/Boe and (vii) transportation and NGLs processing costs of $3.85/Boe. Assumed pricing of US$80.00/Bbl WTI, US$3.50/MMBtu NYMEX and $3.08/GJ AECO and an assumed $US/$CAD exchange rate of $0.755 for the remaining three quarters of 2023 is unchanged from previous guidance provided on March 7, 2023 but the stated amounts have been adjusted to incorporate actual results for the first quarter of 2023.

(2) Assuming no changes to the other forecast assumptions for 2023.

(3) All 2024 guidance is based on preliminary planning and current market conditions and is subject to change.

(4) The stated free cash flow estimate is based on the following assumptions for 2024: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $40 million in abandonment and reclamation costs, (iii) $7 million in geological and geophysical expenses, (iv) realized pricing of $53.60/Boe (US$75.00/Bbl WTI, US$3.50/MMBtu NYMEX, $3.08/GJ AECO), (v) a $US/$CAD exchange rate of $0.755, (vi) royalties of $8.15/Boe, (vii) operating costs of $11.25/Boe and (vii) transportation and NGLs processing costs of $3.65/Boe.

Paramount Resources Ltd. First Quarter 2023 18

CONSOLIDATED RESULTS

Net Income

Paramount recorded net income of $197.0 million for the three months ended March 31, 2023 compared to net income of $16.6 million in the same period in 2022. Significant factors contributing to the change are shown below:

Three months ended March 31	Three months ended March 31
Net	income – 2022	16.6
●	Lower loss on risk management contracts in 2023	150.1
●	Higher gain on sale of oil and gas assets in 2023	119.4
●	Lower exploration and evaluation expense in 2023	13.2
●	Higher income tax expense in 2022	(52.4 )
●	Lower netback in 2023	(26.3 )
●	Higher depletion and depreciation expense in 2023	(22.2 )
●	Other	(1.4 )
Net	income – 2023	197.0

Cash From Operating Activities

Cash from operating activities for the three months ended March 31, 2023 was $271.4 million compared to $174.9 million in the same period in 2022. Significant factors contributing to the change are shown below:

Three months ended March 31
Cash from operating activities – 2022	174.9
● Change in non-cash working capital	75.5
● Receipts on risk management contract settlements in 2023 compared to payments in 2022	55.8
● Lower netback in 2023	(26.3 )
● Higher asset retirement obligations settled in 2023	(7.0 )
● Other	(1.5 )
Cash from operating activities – 2023	271.4

Adjusted Funds Flow

The following is a reconciliation of adjusted funds flow to cash from operating activities, the most directly comparable measure disclosed in the primary financial statements of the Company:

Three months ended March 31	2023	2022
Cash from operating activities	271.4	174.9
Change in non-cash working capital(1)	(30.0 )	45.5
Geological and geophysical expense(2)	2.5	2.6
Asset retirement obligations settled(1)	21.8	14.8
Provisions(3)	2.5	–
Adjusted funds flow(4)	268.2	237.8
Adjusted funds flow($/Boe) (5)	30.64	32.17

(1) Refer to the "Interim Condensed Consolidated Statements of Cash Flows" in the Interim Financial Statements.

(2) Refer to Note 2 in the Interim Financial Statements.

(3) Refer to Note 13 in the Interim Financial Statements.

(4) Adjusted funds flow is a capital management measure used by Paramount. Refer to the "Specified Financial Measures" section of this MD&A for more information on this measure.

(5) Adjusted funds flow ($/Boe) is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information.

Paramount Resources Ltd. First Quarter 2023 19

Adjusted funds flow for the three months ended March 31, 2023 was $268.2 million compared to $237.8 million in the same period in 2022. Significant factors contributing to the change are shown below:

Three months ended March 31
Adjusted funds flow – 2022	237.8
● Receipts on risk management contract settlements in 2023 compared to payments in 2022	55.8
● Lower netback in 2023	(26.3 )
● Other	0.9
Adjusted funds flow – 2023	268.2

Free Cash Flow

The following is a reconciliation of free cash flow to cash from operating activities, the most directly comparable measure disclosed in the primary financial statements of the Company:

Three months ended March 31	2023	2022
Cash from operating activities	271.4	174.9
Change in non-cash working capital(1)	(30.0 )	45.5
Geological and geophysical expense(2)	2.5	2.6
Asset retirement obligations settled(1)	21.8	14.8
Provisions(3)	2.5	–
Adjusted funds flow	268.2	237.8
Capital expenditures(1)	(184.1 )	(117.0 )
Geological and geophysical expense(2)	(2.5 )	(2.6 )
Asset retirement obligations settled(1)	(21.8 )	(14.8 )
Free cash flow(4)	59.8	103.4

(1) Refer to the "Interim Condensed Consolidated Statements of Cash Flows" in the Interim Financial Statements.

(2) Refer to Note 2 in the Interim Financial Statements.

(3) Refer to Note 13 in the Interim Financial Statements.

(4) Free cash flow is a capital management measure used by Paramount. Refer to the "Specified Financial Measures" section of this MD&A for more information on this measure.

Free cash flow for the three months ended March 31, 2023 was $59.8 million compared to $103.4 million for the three months ended March 31, 2022. Significant factors contributing to the change are shown below:

Three months ended March 31
Free cash flow – 2022	103.4
● Higher capital expenditures in 2023	(67.1 )
● Higher asset retirement obligations settled in 2023	(7.0 )
● Higher adjusted funds flow (described in "Adjusted Funds Flow" section above)	30.4
● Lower geological and geophysical expense in 2023	0.1
Free cash flow – 2023	59.8

Paramount Resources Ltd. First Quarter 2023 20

OPERATING RESULTS

Netback

Three months ended March 31	2023		2022
		*($/Boe)(1)(2)*		($/Boe)(1)(2)
Natural gas revenue(3)	122.0	*4.23*	127.1	5.18
Condensate and oil revenue(3)	343.5	*100.66*	331.9	117.53
Other NGLs revenue(3)	23.4	*43.93*	29.3	61.64
Royalty and other revenue(3)	0.8	–	11.3	–
Petroleum and natural gas sales (4)	489.7	*55.94*	499.6	67.59
Royalties(4)	(69.1 )	*(7.90* )	(76.2 )	(10.31 )
Operating expense(4)	(108.8 )	*(12.43* )	(89.2 )	(12.07 )
Transportation and NGLs processing(4)	(36.3 )	*(4.15* )	(31.3 )	(4.24 )
Sales of commodities purchased(4)	115.1	*13.15*	48.8	6.59
Commodities purchased(4)	(114.3 )	*(13.05* )	(49.1 )	(6.64 )
Netback(5)	276.3	*31.56*	302.6	40.92
Risk management contract settlements(6)	6.1	*0.70*	(49.7 )	(6.72 )
Netback including risk management contract settlements(7)	282.4	*32.26*	252.9	34.20

(1) Natural gas revenue shown per Mcf.

(2) When presented on a $/Boe or $/Mcf basis, each of the components of Netback is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information on these measures.

(3) Refer to Note 12 in the Interim Financial Statements. Royalty and other revenue for the three months ended March 31, 2022 includes $10.6 million related to a business interruption insurance claim.

(4) Refer to "Interim Condensed Consolidated Statements of Comprehensive Income" in the Interim Financial Statements.

(5) Netback is a non-GAAP financial measure. Netback presented on a $/Boe basis is a non-GAAP ratio. Refer to the "Specified Financial Measures" section of this MD&A for more information on these measures.

(6) Refer to Note 11 in the Interim Financial Statements.

(7) Netback including risk management contract settlements is a non-GAAP financial measure. Netback including risk management contract settlements presented on a $/Boe basis is a non-GAAP ratio. Refer to the "Specified Financial Measures" section of this MD&A for more information on these measures.

Petroleum and natural gas sales were $489.7 million in the first quarter of 2023 compared to $499.6 million in the first quarter of 2022.

The impact of changes in prices and sales volumes on petroleum and natural gas sales are as follows:

	Natural	Condensate	Other	Royalty and
	gas	and oil	NGLs	other	Total
Three months ended March 31, 2022	127.1	331.9	29.3	11.3	499.6
Effect of changes in prices	(27.3 )	(57.6 )	(9.4 )	–	(94.3 )
Effect of changes in sales volumes	22.2	69.2	3.5	–	94.9
Change in royalty and other revenue	–	–	–	(10.5 )	(10.5 )
Three months ended March 31, 2023	122.0	343.5	23.4	0.8	489.7

Royalty and other revenue for the three months ended March 31, 2022 includes $10.6 million related to a business interruption insurance claim.

Paramount Resources Ltd. First Quarter 2023 21

Sales Volumes

Three months ended March 31	Three months ended March 31	Three months ended March 31	Three months ended March 31
Natural gas (MMcf/d)(1) Condensate and oil (Bbl/d)(1) Other NGLs (Bbl/d)(1) Total (Boe/d)(1)
2023 2022 % *Chg*	2023 2022 % *Chg*	2023 2022 % *Chg*	2023 2022 % *Chg*
Grande Prairie 204.4 152.5 34	31,367 26,048 20	4,074 3,267 25	69,507 54,737 27
Kaybob 81.4 89.3 (9 )	4,642 4,284 8	988 1,558 (37 )	19,201 20,726 (7 )
Central Alberta and Other 34.8 31.1 12	1,907 1,043 83	854 451 89	8,561 6,674 28
Total 320.6 272.9 17	37,916 31,375 21	5,916 5,276 12	97,269 82,137 18

(1) Readers are referred to the "Product Type Information" section of this document for more information respecting the composition of sales volumes by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil.

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120,000
46%
45% 45% 45% 45%
44%
100,000 43% 42%
80,000
60,000
40,000
20,000
-
Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023
Natural gas Condensate and oil Other NGLs Liquids %
Boe/d
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Sales volumes were 97,269 Boe/d (45% liquids) in the first quarter of 2023, compared to 82,137 Boe/d (45% liquids) in the same period in 2022.

Grande Prairie Region sales volumes in the first quarter of 2023 increased 27 percent to 69,507 Boe/d (51% liquids), compared to 54,737 Boe/d (54% liquids) in the same period in 2022, mainly due to new wells brought onstream since the first quarter of 2022. First quarter 2023 Grande Prairie Region production was impacted by an estimated 4,100 Boe/d due to unplanned outages and curtailments at third-party midstream facilities (first quarter 2022 – approximately 5,100 Boe/d).

Kaybob Region sales volumes averaged 19,201 Boe/d (29% liquids) in the first quarter of 2023, compared to 20,726 Boe/d (28% liquids) in the first quarter of 2022. The impacts of the Kaybob Disposition completed in January 2023 of approximately 2,800 Boe/d (42% liquids) and natural declines were mostly offset by production from new wells brought onstream since the first quarter of 2022. Additional information concerning the Kaybob Disposition is provided in this MD&A under "Operating Results – Other Items".

Sales volumes in the Central Alberta and Other Region were 8,561 Boe/d (32% liquids) in the first quarter of 2023 compared to 6,674 Boe/d (22% liquids) in the same period of 2022. The increase was mainly due to two Willesden Green Duvernay property acquisitions completed in 2022 that added approximately 2,600 Boe/d (54% liquids) of production.

Paramount Resources Ltd. First Quarter 2023 22

Commodity Prices

Three months ended March 31	2023	2022	% Change
Natural Gas(1)
Paramount realized natural gas price ($/Mcf)	4.23	5.18	(18 )
AECO daily spot ($/GJ)	3.05	4.49	(32 )
AECO monthly index ($/GJ)	4.12	4.35	(5 )
Dawn ($/MMBtu)	3.70	5.63	(34 )
NYMEX (US$/MMBtu)	2.76	4.57	(40 )
Malin daily index (US$/MMBtu)	9.30	4.60	102
Condensate and Oil(1)
Paramount realized condensate & oil price ($/Bbl)	100.66	117.53	(14 )
Edmonton light sweet crude oil ($/Bbl)	99.73	117.66	(15 )
Edmonton condensate ($/Bbl)	107.00	122.24	(12 )
West Texas Intermediate crude oil (US$/Bbl)	76.13	94.29	(19 )
Other NGLs(1)
Paramount realized Other NGLs price ($/Bbl)	43.93	61.64	(29 )
Conway – propane ($/Bbl)	44.58	68.42	(35 )
Belvieu – butane ($/Bbl)	62.86	84.46	(26 )
Foreign Exchange
$CAD / 1$US	1.35	1.27	6

(1) Realized prices per Mcf and Bbl are supplementary financial measures. Refer to the "Specified Financial Measures" section of this MD&A for more information.

Paramount’s natural gas portfolio primarily consists of sales priced at Alberta, British Columbia, California, Chicago, Ventura and Eastern Canada markets, which are sold in a combination of daily, monthly, seasonal and fixed-priced physical contracts. The Company’s natural gas portfolio includes arrangements to sell approximately 60,000 GJ/d of natural gas at Dawn, to sell approximately 22,000 GJ/d of natural gas at Malin and 40,000 GJ/d of natural gas sales priced in the US Midwest.

The Company ships the majority of its condensate and crude oil production on third-party pipelines for sale in Edmonton, Alberta. A minimal portion of Paramount’s production is sold at the lease when warranted by economic or operational factors. Sales prices for condensate and oil are based on West Texas Intermediate reference prices, adjusted for transportation, quality and density differentials.

Paramount's propane and butane volumes are sold under monthly and long-term contracts. The decrease in the Company's realized Other NGLs price in the first quarter of 2023 was relatively consistent with changes in benchmark prices over the same period in 2022.

The Company had the following basis differential physical sale contracts at March 31, 2023:

	Q2 2023	Q3 2023	Q4 2023	Average Price(1) -
Oil
Sweet Crude Oil – Basis (Physical Sale) (Bbl/d)(2)	3,112	3,078	3,078	WTI – US$3.73/Bbl
Natural gas
AECO – Basis (Physical Sale) (MMBtu/d)	35,000	35,000	11,793	NYMEX – US$0.94/MMBtu
Dawn – Basis(Physical Sale) (MMBtu/d)	25,000	25,000	8,424	NYMEX – US$0.20/MMBtu

(1) Average price is calculated using a weighted average of notional volumes and prices. "NYMEX" refers to NYMEX pricing at Henry Hub.

(2) Sweet crude oil located at the Peace Pipeline at Edmonton.

Paramount Resources Ltd. First Quarter 2023 23

Risk Management Contracts

Commodity Contracts

From time-to-time Paramount uses financial commodity contracts to manage exposure to commodity price volatility. Changes in the fair value of the Company’s financial commodity contracts are as follows:

	Three months ended
	March 31, 2023
Fair value, beginning of period	11.8
Changes in fair value	2.6
Settlements received	(14.4 )
Fair value, end ofperiod	–

For further details on the Company’s financial commodity contracts, refer to Note 11 in the Interim Financial Statements.

Foreign Currency Exchange Contracts

Paramount uses foreign currency exchange contracts from time-to-time to manage risks of volatility in foreign currency exchange related to its U.S. dollar denominated petroleum and natural gas sales revenue. Changes in the fair value of the Company’s foreign currency exchange contracts are as follows:

	Three months ended
	March 31, 2023
Fair value, beginning of period	(9.8 )
Changes in fair value	(4.5 )
Settlements paid	8.3
Fair value, end ofperiod	(6.0 )

For further details on the Company’s foreign currency exchange contracts, refer to Note 11 in the Interim Financial Statements.

The Company had the following foreign currency exchange contracts at March 31, 2023:

	Aggregate
Instruments	amount / notional	Average rate(1)	Remaining term -
Forwards and Swaps (Sale)	US$60 million / month	1.3293 CAD$/US$1.00	April 2023 – June 2023
Swaps (Sale)	US$40 million / month	1.3427 CAD$/US$1.00	July 2023 – December 2023
Swaps (Sale)	US$30 million / month	1.3433 CAD$/US$1.00	January 2024 – June 2024
Swaps(Sale)	US$10 million / month	1.3400 CAD$/US$1.00	July2024 – December 2024

(1) Average rate is calculated using a weighted average of notional volumes and foreign currency exchange rates.

Royalties

Three months ended March 31	2023	Rate	2022	Rate
Royalties	69.1	14.1%	76.2	15.6%
$/Boe(1)	*7.90*		10.31

(1) Royalty rate and royalties per Boe are supplementary financial measures. Refer to the "Specified Financial Measures" section of this MD&A for more information.

Paramount Resources Ltd. First Quarter 2023 24

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100 15.6% 16.0% 14.5%
90 14.1%
14.1%
80
12.1%
70
60
8.3% 8.4%
50
40
30
20
10
0
Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023
Royalties Royalty rate
$ millions
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Royalties were $69.1 million in the first quarter of 2023, $7.1 million lower than the same period in 2022. Royalties and royalty rates decreased in 2023 mainly as a result of higher gas cost allowance. Otherwise, the impact of lower commodity prices was offset by a greater proportion of wells having fully utilized new well incentives in the Grande Prairie Region.

Operating Expense

Three months ended March 31	2023	2022	% Change
Operating expense	108.8	89.2	22
$/Boe(1)	*12.43*	12.07	3

(1) Operating expense per Boe is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information.

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140 $13.31
$12.07 $12.61 $12.25 $12.43
120 $11.23 $11.02 $11.61
100
80
60
40
20
0
Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023
Operating expense ($/Boe)
$ millions
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Operating expenses were $108.8 million in the first quarter of 2023 compared to $89.2 million in the same period in 2022. Operating expenses in the first quarter of 2023 were higher mainly as a result of higher processing fees from increased production and higher costs for labour and water disposal. Operating expenses in 2023 include the impact of inflationary cost pressures, particularly in processing fees and labour.

Paramount Resources Ltd. First Quarter 2023 25

First quarter 2023 operating costs in the Grande Prairie Region were $70.3 million or $11.24/Boe compared to $53.7 million or $10.89/Boe in the same period in 2022. Per unit operating costs in 2023 in the Grande Prairie Region increased mainly due to higher third-party processing fee rates and the impact of 13[th] month adjustments recorded in the first quarter of 2023.

Total Company operating expenses were $12.43/Boe in the first quarter of 2023 compared to $12.07/Boe in the same period in 2022, mainly due to the changes described above.

Transportation and NGLs Processing

Three months ended March 31	2023	2022	% Change
Transportation and NGLs processing	36.3	31.3	16
$/Boe (1)	*4.15*	4.24	(2 )

(1) Transportation and NGLs processing per Boe is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information.

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40
$4.37 $4.15
$4.16 $4.24 $3.83
35 $4.01
$3.33
30 $3.03
25
20
15
10
5
0
Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023
Transportation and NGLs processing ($/Boe)
$ millions
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Transportation and NGLs processing expense was $36.3 million in the first quarter of 2023 compared to $31.3 million in the same period in 2022. Transportation and NGLs processing costs increased in 2023 mainly as a result of higher production. Fourth quarter 2022 transportation and NGLs processing expense includes the impact of 13[th] month adjustments for volumes shipped in 2022.

Sales of Commodities Purchased and Commodities Purchased

Three months ended March 31	2023	2022	% Change
Sales of commodities purchased	115.1	48.8	136
Commoditiespurchased	(114.3 )	(49.1 )	133

Paramount purchases commodities from third parties from time-to-time to fulfill sales commitments and for blending purposes. The Company sells these products to its customers. These transactions are presented as separate revenue and expense items in the consolidated statements of comprehensive income.

Paramount Resources Ltd. First Quarter 2023 26

Other Items

Three months ended March 31	2023	2022
Depletion and depreciation	97.1	72.6
Change in asset retirement obligations	4.4	11.5
Alberta site rehabilitation program funding	–	(4.8 )
Exploration and evaluation expense	2.8	16.0
Gain on sale of oil and gas assets	(121.1 )	(1.7 )
Accretion of asset retirement obligations	10.7	10.8

Depletion and depreciation expense was $97.1 million in the first quarter of 2023, compared to $72.6 million in the first quarter of 2022. The increase in depletion and depreciation expense in 2023 was mainly attributable to both higher sales volumes and higher depletion rates.

For the three months ended March 31, 2023, the Company recorded a charge of $4.4 million (March 31, 2022 – $11.5 million) to earnings related to changes in the discounted carrying value of estimated asset retirement obligations in respect of properties that had a nil carrying value ascribed to property, plant and equipment. The changes resulted from revisions to the estimated costs.

Exploration and evaluation expense was $2.8 million in the first quarter of 2023 compared to $16.0 million in the first quarter of 2022. The decrease in the first quarter of 2023 was primarily due to lower expenses related to expired mineral leases.

In January 2023, Paramount closed the Kaybob Disposition for cash proceeds of $370.6 million. A gain of $121.1 million was recognized on the sale. The properties sold had average sales volumes of approximately 4,700 Boe/d (13.8 MMcf/d of shale gas and 2,400 Bbl/d of NGLs) and a netback of approximately $21 million in the fourth quarter of 2022, the last full quarter prior to sale. The assets and liabilities associated with the Kaybob Disposition were presented as held for sale at December 31, 2022.

Accretion of asset retirement obligations was $10.7 million in the first quarter of 2023, relatively consistent compared to $10.8 million in the same period in 2022.

ASSET RETIREMENT OBLIGATIONS

Paramount’s strategy is to utilize the advantages of the Alberta Energy Regulator’s area-based closure program to advance its abandonment and reclamation activities in an efficient and cost-effective manner by targeting its efforts in concentrated areas.

Abandonment and reclamation expenditures in the first quarter of 2023 totaled $21.8 million. Activities in the first quarter of 2023 included the abandonment of 33 wells, including 20 wells under the Company’s ongoing area-based closure program at Zama.

At March 31, 2023, estimated undiscounted, uninflated asset retirement obligations were $1,283.7 million (December 31, 2022 – $1,296.0 million). As at March 31, 2023, the Company’s discounted asset retirement obligations were $534.0 million (discounted at 8.5 percent per annum and using an inflation rate of 2.0 percent per annum) compared to $540.1 million as at December 31, 2022 (discounted at 8.5 percent per annum and using an inflation rate of 2.0 percent per annum). For further details concerning the Company’s asset retirement obligations, refer to Note 6 in the Interim Financial Statements.

Paramount Resources Ltd. First Quarter 2023 27

OTHER ASSETS

Investments in Securities

As at	March 31, 2023 December 31, 2022
Level one fair value hierarchy securities	418.7 477.3
Level three fair value hierarchy securities	79.6 79.8
	498.3 557.1

For the three months ended March 31, 2023, the Company recorded a charge of $58.6 million before tax, to other comprehensive income related to changes in the fair value estimates of its investments in securities.

Changes in the fair value of investments in securities are as follows:

	Three months ended March 31, 2023 Twelve months ended December 31, 2022
Investments in securities, beginning of period	557.1 372.1
Changes in fair value of Level One Securities	(58.6 ) 222.4
Changes in fair value of Level Three Securities	– 12.9
Changes in fair value of warrants – recorded in earnings	(0.2 ) 0.4
Acquired – cash	– 1.8
Acquired – non-cash	– 4.3
Proceeds of dispositions – cash	– (52.8 )
Proceeds of dispositions–non-cash	– (4.0 )
Investments in securities, end ofperiod	498.3 557.1

For further details concerning the Company’s investments in securities, refer to Note 4 in the Interim Financial Statements.

CORPORATE

Three months ended March 31	2023	2022
General and administrative	15.0	9.3
Share-based compensation	6.9	7.5
Interest and financing	1.5	4.7
Deferred income tax expense	59.7	7.3
Other	0.4	0.8

General and administrative expense was $15.0 million in the first quarter of 2023 compared to $9.3 million in the first quarter of 2022. The increase in general and administrative expense mainly related to higher employee incentive amounts.

Paramount Resources Ltd. First Quarter 2023 28

Interest and financing expense was lower in the first quarter of 2023 compared to the same period in 2022. The Company repaid all remaining drawings under its $1.0 billion financial covenant-based senior secured revolving bank credit facility (the "Paramount Facility") in January 2023 following the closing of the Kaybob Disposition.

Deferred income tax expense was $59.7 million in the first quarter of 2023 compared to $7.3 million in the first quarter of 2022.

CAPITAL EXPENDITURES AND LAND AND PROPERTY ACQUISITIONS

Capital Expenditures

Three months ended March 31	2023	2022
Drilling, completion, equipping and tie-ins	141.7	104.8
Facilities and gathering	33.6	3.3
Drilling rigs	3.1	1.0
Corporate	5.7	7.9
Capital expenditures	184.1	117.0
Grande Prairie Region	121.1	76.8
Kaybob Region	39.0	31.1
Central Alberta and Other Region	5.6	0.1
Fox Drilling and Cavalier	12.7	1.1
Corporate	5.7	7.9
Capital expenditures	184.1	117.0

Land and Property Acquisitions

Three months ended March 31	2023	2022
Land andproperty acquisitions	26.6	29.2

Capital expenditures totaled $184.1 million in the first quarter of 2023 compared to $117.0 million in the first quarter of 2022. Expenditures in the first quarter of 2023 were mainly directed to drilling and completion programs in the Grande Prairie and Kaybob Regions and included the following:

In the Grande Prairie Region, the Company drilled six (6.0 net) operated wells, completed 14 (14.0 net) wells and brought-on production six (6.0 net) wells. In the second quarter of 2023, the Company also completed an infrastructure debottlenecking project to facilitate future production growth in the region.
In the Kaybob Region, the Company drilled four (3.4 net) wells.
Fox Drilling and Cavalier capital expenditures included the drilling of two (2.0 net) wells, completion of one (1.0 net) well and costs related to the construction of a fifth super-spec walking rig that is expected to be completed and deployed in mid-2023.

Paramount Resources Ltd. First Quarter 2023 29

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary objectives in managing its capital structure are to:

i. ensure liquidity to fund ongoing operations and capital programs, the settlement of obligations when due and the payment of regular monthly dividends;
ii. preserve financial flexibility and access to capital markets, including for the pursuit of strategic initiatives; and
iii. maximize shareholder returns considering the risk environment.

Paramount monitors and assesses its capital structure for alignment with its current and long-term business plans and will, guided by its primary capital management objectives, seek to adjust the structure as necessary in response to changes in its business plans, plans for shareholder returns, economic and operating conditions, financial and operating results, strategic initiatives and the Company’s assessment of the risk environment. Paramount may adjust its capital structure through a number of means, including by modifying capital spending programs, seeking to issue or repurchase shares, altering debt levels, modifying dividend levels or acquiring or disposing of assets.

The key capital management measures used by the Company in monitoring and assessing its capital structure are net (cash) debt, adjusted funds flow, the ratio of net debt to adjusted funds flow and free cash flow. These measures are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities. Readers are referred to the Specified Financial Measures section of this MD&A and Note 15 – Capital Structure in the Interim Financial Statements for important additional information concerning these measures.

As at	March 31, 2023	December 31, 2022
Cash and cash equivalents	(81.9 )	(2.5 )
Accounts receivable(1)	(178.9 )	(216.5 )
Prepaid expenses and other	(10.9 )	(9.1 )
Accounts payable and accrued liabilities	228.1	229.9
Long-term debt	–	159.4
Net(cash) debt	(43.6 )	161.2

(1) Excludes accounts receivable relating to lease incentives and subleases (March 31, 2023 – $3.4 million, December 31, 2022 – $6.7 million).

Net (cash) debt does not account for the $498.3 million carrying value of the Company’s investments in securities as at March 31, 2023.

Paramount’s operations are capital intensive and adequate sources of liquidity are required to fund ongoing exploration and development activities, discharge asset retirement obligations and satisfy its other contractual obligations and commitments. Paramount’s available capital resources include cash from operating activities, available capacity under the Paramount Facility, the terms of which are described further below, and from time to time, cash and cash equivalents.

Based on the forecasts of 2023 sales volumes and the pricing assumptions set out in this MD&A under "Updated Guidance", Paramount expects to fully fund budgeted 2023 capital expenditures and abandonment and reclamation expenditures from cash from operating activities. Paramount may utilize borrowing capacity under the Paramount Facility for liquidity from time to time to temporarily fund operations during certain periods should expenditures exceed cash from operating activities and cash and cash equivalents.

Paramount Resources Ltd. First Quarter 2023 30

The ability of cash from operating activities to satisfy the Company’s funding requirements in 2023 and future years is dependent on a number of factors, including commodity prices, sales volumes, royalties, operating and transportation costs, general and administrative and interest expenses and foreign currency exchange rates.

Paramount may also determine to divest of assets or investments in securities from time to time to reduce indebtedness or fund operations. In the first quarter of 2023, Paramount completed the Kaybob Disposition for cash proceeds of $370.6 million and repaid all remaining drawings under the Paramount Facility. Subject to market conditions and availability, proceeds from new debt and/or equity financings may also provide additional sources of capital from time to time.

Paramount Facility

The Paramount Facility is a $1.0 billion financial covenant-based senior secured revolving bank credit facility. The maturity date of the Paramount Facility is May 3, 2026. At Paramount's request, the credit limit of the Paramount Facility can be increased by up to $250 million pursuant to an accordion feature in the facility, subject to incremental lender commitments.

Paramount was in compliance with the financial covenants under the Paramount Facility at March 31, 2023.

The Company had undrawn letters of credit outstanding under the Paramount Facility totaling $2.3 million at March 31, 2023 (December 31, 2022 – $2.2 million) that reduce the amount available to be drawn on the facility.

For additional information concerning the Paramount Facility, refer to Note 8 of the Annual Financial Statements.

Unsecured Letter of Credit Facility

The Company has a $70 million unsecured demand revolving letter of credit facility (the "LC Facility") with a Canadian bank. Paramount’s obligations under the LC Facility are supported by a performance security guarantee ("PSG") from Export Development Canada. The PSG is valid to June 30, 2023. At March 31, 2023, $25.1 million in undrawn letters of credit were outstanding under the LC Facility (December 31, 2022 – $24.2 million).

Cash Flow Hedges

The Company had the following floating-to-fixed electricity swaps at March 31, 2023:

	Aggregate		Average fixed
Contract type	notional	Remaining term	contract rate	Reference(1)	Fair value
Electricity Swaps	240 MWh/d	April 2023 – December 2023	$84.00/MWh	AESO Pool Price	4.0
Electricity Swaps	240 MWh/d	January 2024 – December 2024	$66.13/MWh	AESO Pool Price	2.3
Electricity Swaps	120 MWh/d	January 2025–December 2025	$73.25/MWh	AESO Pool Price	0.2
					6.5

(1) Floating hourly rate established by the Alberta Electric System Operator. "MWh" means megawatt-hour.

The Company has classified its floating-to-fixed electricity swaps as cash flow hedges and applied hedge accounting. There were no changes to the critical terms of the hedging relationships and no hedge ineffectiveness was identified at March 31, 2023.

Paramount Resources Ltd. First Quarter 2023 31

Share Capital

At April 28, 2023, Paramount had 143.1 million Common Shares outstanding (net of 0.3 million Common Shares held in trust under the Company’s restricted share unit plan) and 10.7 million options to acquire Common Shares outstanding, of which 2.4 million options are exercisable.

For the three months ended March 31, 2023, Paramount issued 0.4 million Common Shares on the exercise of options to acquire Common Shares.

Dividends

Paramount declared total dividends of $1.375 per Common Share, or $196.5 million, in the three months ended March 31, 2023 (March 31, 2022 – $0.20 per Common Share or $28.2 million), comprised of a special dividend of $1.00 per Common Share and aggregate regular monthly dividends of $0.375 per Common Share. The Company also paid a regular monthly dividend of $0.125 per Common Share on April 28, 2023 to shareholders of record on April 14, 2023.

Normal Course Issuer Bid

In June 2022, Paramount implemented a normal course issuer bid (the ʺ2022 NCIBʺ) under which the Company may purchase up to 7.6 million Common Shares for cancellation. The 2022 NCIB will terminate on the earlier of June 29, 2023 and the date on which the maximum number of Common Shares that can be acquired pursuant to the 2022 NCIB are purchased. Purchases of Common Shares under the 2022 NCIB will be effected through the facilities of the TSX or alternative Canadian trading systems at the market price at the time of purchase. The Company has not made any purchases of Common Shares under the 2022 NCIB to date.

Paramount Resources Ltd. First Quarter 2023 32

QUARTERLY INFORMATION

2023 2022 2021	2023 2022 2021	2023 2022 2021	2023 2022 2021
Q1	Q4 - Q3	Q2 - Q1 -	Q4 - Q3 - Q2 -
Petroleum and natural gas sales 489.7 597.7 618.9		536.2 499.6	434.5 369.2 299.8

Revenue 535.7 616.0 607.4		493.7 472.2	404.1 369.6 288.4

Net income (loss) 197.0 259.9 221.9		182.2 16.6	101.0 292.7 (74.3)
Per share – basic ($/share) *1.39* 1.83 1.57		1.29 0.12	0.75 2.20 (0.56)
Per share – diluted ($/share) *1.33* 1.76 1.51		1.24 0.11	0.70 2.06 (0.56)

Cash from operating activities(1) 271.4 306.9 248.9		318.9 174.9	191.8 97.0 112.1
Per share – basic ($/share) *1.91* 2.17 1.76		2.26 1.25	1.42 0.73 0.84
Per share – diluted ($/share) *1.84* 2.08 1.69		2.16 1.20	1.33 0.68 0.84

Adjusted funds flow(1) 268.2 340.7 334.3		258.3 237.8	174.6 148.4 86.0
Per share – basic ($/share) *1.89* 2.40 2.37		1.83 1.70	1.29 1.12 0.65
Per share – diluted ($/share) *1.81* 2.31 2.27		1.75 1.63	1.21 1.04 0.65

Free cash flow(1) 59.8 162.0 137.5		68.3 103.4	99.0 73.8 (2.4)
Per share – basic ($/share) *0.42* 1.14 0.97		0.48 0.74	0.73 0.56 (0.02)
Per share – diluted ($/share) *0.40* 1.10 0.93		0.46 0.71	0.69 0.52 (0.02)

Dividends declared ($/share) 1.375 0.35 0.30		0.28 0.20	0.14 0.06 –

Sales volumes
Natural gas (MMcf/d) 320.6 321.9 315.9		267.2 272.9	284.8 269.7 273.1
Condensate and oil (Bbl/d) 37,916 37,580 38,804		27,750 31,375	32,342 32,177 29,543
Other NGLs (Bbl/d) 5,916 6,143 6,144		5,021 5,276	5,462 5,017 4,938
Total (Boe/d) 97,269 97,370 97,601		77,312 82,137	85,265 82,150 79,995
Liquids % *45%* 45% 46%		42% 45%	44% 45% 43%

Realized prices(1)
Natural gas ($/Mcf) 4.23 6.56 6.39		6.75 5.18	4.76 3.89 3.01
Condensate and oil ($/Bbl) 100.66 108.50 112.56		134.65 117.53	94.46 84.42 77.96
Other NGLs ($/Bbl) 43.93 48.25 51.20		62.80 61.64	54.61 47.05 32.11
Petroleum and naturalgas($/Boe) 55.94 66.72 68.92		76.22 67.59	55.40 48.86 41.18

(1) Adjusted funds flow and free cash flow are capital management measures used by Paramount. Each measure presented on a per share, $/Bbl, $/Mcf or $/Boe basis, other than net income (loss) per share, is a supplementary financial measure. Refer to the "Specified Financial Measures" section of this MD&A for more information on these measures.

Significant Items Impacting Quarterly Results

Quarterly earnings variances include the impacts of changing production volumes and realized prices.

First quarter 2023 earnings include a $121.1 million gain on the sale of oil and gas assets.
Fourth quarter 2022 earnings include deferred income tax expense of $68.5 million, a provision reversal of $24.0 million and $6.9 million related to the impacts of $500 million of floating-to-fixed interest rate swaps that were terminated in December 2022.
Third quarter 2022 earnings include the impacts of higher production volumes and petroleum and natural gas sales revenue.
Second quarter 2022 earnings include deferred income tax expense of $55.5 million, a recovery of $46.9 million related to changes in the discounted carrying value of asset retirement obligations in

Paramount Resources Ltd. First Quarter 2023 33

respect of properties that had a nil carrying value and a $41.3 million loss on risk management contracts.

First quarter 2022 earnings include a $152.0 million loss on risk management contracts.
Fourth quarter 2021 earnings include a charge of $19.9 million related to changes in the discounted carrying value of estimated asset retirement obligations in respect of properties that had a nil carrying value and a $14.1 million loss on risk management contracts.
Third quarter 2021 earnings include aggregate impairment reversals of $282.6 million from previously recorded impairment charges of petroleum and natural gas assets and a $32.3 million gain on the sale of oil and gas assets, partially offset by a $47.0 million loss on risk management contracts.
The second quarter 2021 loss includes a $75.7 million loss on risk management contracts and a charge of $42.0 million related to changes in the discounted carrying value of estimated asset retirement obligations in respect of properties that had a nil carrying value.

OTHER INFORMATION

Contingencies

In the normal course of Paramount’s operations, the Company may become involved in, named as a party to, or be the subject of, various legal proceedings, including regulatory proceedings, tax proceedings and legal actions. The outcome of outstanding, pending or future proceedings cannot be predicted with certainty. Paramount does not anticipate that these claims will have a material impact on its financial position.

Tax and royalty legislation and regulations, and government interpretation and administration thereof, continually change. As a result, there are often tax and royalty matters under review by government authorities. All tax and royalty filings are subject to subsequent government audit and potential reassessments. Accordingly, the final amounts may differ materially from amounts estimated and recorded.

INTERNAL CONTROL OVER FINANCIAL REPORTING

During the three months ended March 31, 2023, there was no change in the Company’s internal control over financial reporting ("ICFR") that materially affected, or is reasonably likely to materially affect, the Company’s ICFR.

Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

RISK FACTORS

Readers should, in conjunction with their review of this MD&A, carefully review the "Risk Factors" section in the Annual Information Form, which is available under the Company’s profile on SEDAR at www.sedar.com.

Global economies, including that of Canada, have recently experienced inflation across broad categories of goods and services. In addition, the Russian invasion of the Ukraine has resulted in additional volatility in global financial and commodity markets and has increased the potential for supply chain constraints and disruptions.

Paramount Resources Ltd. First Quarter 2023 34

The Company continues to monitor its supply chain and the availability and cost of materials and third-party services. While the Company has not, to date, experienced material interruptions in the availability of supplies or services, it has experienced inflationary cost pressures across its operations. Paramount has responded to these pressures by seeking additional efficiencies in its capital program and operations and through advance planning and ordering aimed at mitigating future cost increases and potential shortages of supplies and services. However, these response measures have not fully offset the inflationary cost pressures that have been experienced.

The existence and economic impact of these conditions and the response thereto increases the Company’s exposure to the risks described in the Risk Factors of the Annual Information Form section under "Volatility of NGLs, Natural Gas and Oil Prices and Price Differentials", "Uncertainty as to Costs", "Availability of Equipment, Materials and Services", "Market Price of Common Shares", "Investment Risk" and "Hedging, Interest Rates and Foreign Currency Exchange Rates".

Paramount Resources Ltd. First Quarter 2023 35

PRODUCT TYPE INFORMATION

This MD&A includes references to sales volumes of "natural gas", "condensate and oil", "NGLs", "Other NGLs" and "liquids". "Natural gas" refers to shale gas and conventional natural gas combined. "Condensate and oil" refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined. "NGLs" refers to condensate and Other NGLs combined. "Other NGLs" refers to ethane, propane and butane. "Liquids" refers to condensate and oil and Other NGLs combined. Below is a complete breakdown of sales volumes for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil. Numbers may not add due to rounding.

	2023	2022	2022	2022	2022	2021	2021	2021	2021	Annual	Annual
	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1	2022	2021
SALES VOLUMES– TOTAL COMPANY BY PRODUCT TYPE
Shale gas (MMcf/d)	265.2	260.0	253.8	203.7	213.1	220.4	207.1	205.8	197.8	232.9	207.9
Conventional natural gas (MMcf/d)	55.4	61.9	62.1	63.5	59.8	64.4	62.6	67.3	75.3	61.8	67.3
Natural gas (MMcf/d)	320.6	321.9	315.9	267.2	272.9	284.8	269.7	273.1	273.1	294.7	275.2
Condensate (Bbl/d)	34,706	34,616	35,747	25,374	29,064	29,797	29,670	26,784	27,017	31,228	28,328
Other NGLs (Bbl/d)	5,916	6,143	6,144	5,021	5,276	5,462	5,017	4,938	5,170	5,650	5,147
NGLs (Bbl/d)	40,622	40,759	41,891	30,395	34,340	35,259	34,687	31,722	32,187	36,878	33,475
Light and medium crude oil (Bbl/d)	2,151	2,335	2,608	1,974	1,874	2,048	2,032	2,265	2,358	2,200	2,174
Tight oil (Bbl/d)	599	629	449	402	437	497	475	494	479	480	487
Heavy crude oil (Bbl/d)	460	–	–	–	–	–	–	–	–	–	–
Crude oil (Bbl/d)	3,210	2,964	3,057	2,376	2,311	2,545	2,507	2,759	2,837	2,680	2,661
Total(Boe/d)	97,269	97,370	97,601	77,312	82,137	85,265	82,150	79,995	80,540	88,672	82,001

SALES VOLUMES– BY REGION BY PRODUCT TYPE
GRANDE PRAIRIE REGION
Shale gas (MMcf/d)	204.0	188.4	188.2	138.8	151.4	156.5	145.8	132.2	120.6	166.9	138.8
Conventional natural gas (MMcf/d)	0.4	1.5	1.4	1.0	1.1	2.4	2.2	2.1	2.0	1.3	2.2
Natural gas (MMcf/d)	204.4	189.9	189.6	139.8	152.5	158.9	148.0	134.3	122.6	168.2	141.0
Condensate (Bbl/d)	31,367	29,146	30,610	22,511	26,042	26,272	26,639	24,086	23,974	27,095	25,253
Other NGLs (Bbl/d)	4,074	3,631	3,758	2,914	3,267	3,276	3,274	2,874	2,984	3,394	3,103
NGLs (Bbl/d)	35,441	32,777	34,368	25,425	29,309	29,548	29,913	26,960	26,958	30,489	28,356
Light and medium crude oil (Bbl/d)	–	–	5	5	6	6	9	4	–	4	5
Crude oil (Bbl/d)	–	–	5	5	6	6	9	4	–	4	5
Total(Boe/d)	69,507	64,434	65,981	48,736	54,737	56,035	54,586	49,345	47,385	58,519	51,869

KAYBOB REGION
Shale gas (MMcf/d)	31.8	41.9	38.5	37.9	35.7	35.6	36.9	39.3	42.1	38.5	38.6
Conventional natural gas (MMcf/d)	49.6	55.0	54.8	56.7	53.6	56.8	54.4	58.0	65.8	55.0	58.6
Natural gas (MMcf/d)	81.4	96.9	93.3	94.6	89.3	92.4	91.3	97.3	107.9	93.5	97.2
Condensate (Bbl/d)	2,315	4,354	4,157	2,092	2,130	2,184	2,072	2,319	2,611	3,192	2,295
Other NGLs (Bbl/d)	988	1,671	1,666	1,585	1,558	1,788	1,415	1,569	1,677	1,620	1,612
NGLs (Bbl/d)	3,303	6,025	5,823	3,677	3,688	3,972	3,487	3,888	4,288	4,812	3,907
Light and medium crude oil (Bbl/d)	2,121	2,045	2,434	1,946	1,832	2,000	1,979	2,224	2,321	2,066	2,129
Tight oil (Bbl/d)	206	262	208	253	322	355	368	354	342	261	355
Crude oil (Bbl/d)	2,327	2,307	2,642	2,199	2,154	2,355	2,347	2,578	2,663	2,327	2,484
Total(Boe/d)	19,201	24,477	24,021	21,642	20,726	21,725	21,054	22,688	24,938	22,730	22,588

Paramount Resources Ltd. First Quarter 2023 36

	2023	2022	2021	Annual
	Q1	Q4 Q3 Q2 Q1	Q4 Q3 Q2 Q1	2022 2021
CENTRAL ALBERTA AND OTHER REGION
Shale gas (MMcf/d)	29.4	29.7 27.1 27.0 26.0	28.2 24.4 34.3 35.1	27.5 30.5
Conventional natural gas (MMcf/d)	5.4	5.4 5.9 5.8 5.1	5.3 6.0 7.2 7.5	5.5 6.5
Natural gas (MMcf/d)	34.8	35.1 33.0 32.8 31.1	33.5 30.4 41.5 42.6	33.0 37.0
Condensate (Bbl/d)	1,024	1,116 980 771 892	1,341 959 379 433	941 781
Other NGLs (Bbl/d)	854	841 720 522 451	398 328 495 509	636 432
NGLs (Bbl/d)	1,878	1,957 1,700 1,293 1,343	1,739 1,287 874 942	1,577 1,213
Light and medium crude oil (Bbl/d)	30	290 169 23 36	42 44 37 37	130 40
Tight oil (Bbl/d)	393	367 241 149 115	142 107 140 136	219 131
Heavy crude oil (Bbl/d)	460	– – – –	– – – –	– –
Crude oil (Bbl/d)	883	657 410 172 151	184 151 177 173	349 171
Total(Boe/d)	8,561	8,459 7,599 6,934 6,674	7,505 6,510 7,962 8,217	7,423 7,544

SPECIFIED FINANCIAL MEASURES

Non-GAAP Financial Measures

Netback equals petroleum and natural gas sales (the most directly comparable measure disclosed in the Company’s primary financial statements) plus sales of commodities purchased less royalties, operating expense, transportation and NGLs processing expense and commodities purchased. Sales of commodities purchased and commodities purchased are treated as corporate items and not allocated to individual regions or properties. Netback is used by investors and Management to compare the performance of the Company’s producing assets between periods.

A calculation of netback and netback including risk management contract settlements for the three months ended March 31, 2023 and 2022 is provided in this MD&A under "Operating Results - Netback".

Paramount Resources Ltd. First Quarter 2023 37

Non-GAAP Ratios

Netback on a $/Boe basis is calculated by dividing netback for the applicable period by the total production during the period in Boe. Netback including risk management contract settlements on a $/Boe basis is calculated by dividing netback including risk management contract settlements for the applicable period by the total production during the period in Boe. These measures are used by investors and Management to assess netback and netback including risk management contract settlements on a unit of production basis.

Capital Management Measures

Adjusted funds flow, free cash flow, net (cash) debt and net debt to adjusted funds flow are capital management measures that Paramount utilizes in managing its capital structure. These measures are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities. Refer to Note 15 – Capital Structure in the Interim Financial Statements for a description of the composition and use of these measures. Refer also to "Liquidity and Capital Resources" in this MD&A.

A reconciliation of adjusted funds flow to cash from operating activities, the most directly comparable measure disclosed in the Company’s primary financial statements, for the three months ended March 31, 2023 and 2022 is provided in this MD&A under "Consolidated Results – Adjusted Funds Flow".

A reconciliation of free cash flow to cash from operating activities, the most directly comparable measure disclosed in the Company’s primary financial statements, for the three months ended March 31, 2023 and 2022 is provided in this MD&A under "Consolidated Results – Free Cash Flow".

A calculation of net (cash) debt as at March 31, 2023 and December 31, 2022 is provided in this MD&A under "Liquidity and Capital Resources". The label of the net (cash) debt capital management measure has been revised from the previous label of net debt to allow for the description of negative amounts as net (cash). Paramount’s net debt to adjusted funds flow (determined on a trailing four quarter basis) was considered not meaningful at March 31, 2023, as the Company did not have any outstanding debt to service and was not in a net debt position (December 31, 2022 – 0.9x).

Supplementary Financial Measures

This MD&A contains supplementary financial measures expressed as: (i) cash from operating activities, adjusted funds flow and free cash flow on a per share – basic and per share – diluted basis, (ii) petroleum and natural gas sales, adjusted funds flow, revenue, royalties, operating expenses, transportation and NGLs processing expenses, sales of commodities purchased and commodities purchased on a $/Bbl, $/Mcf or $/Boe basis and (iii) royalty rate.

Cash from operating activities, adjusted funds flow and free cash flow on a per share – basic basis are calculated by dividing the cash from operating activities, adjusted funds flow or free cash flow, as applicable, over the referenced period by the weighted average basic shares outstanding during the period determined

Paramount Resources Ltd. First Quarter 2023 38

under IFRS. Cash from operating activities, adjusted funds flow and free cash flow on a per share – diluted basis are calculated by dividing the cash from operating activities, adjusted funds flow or free cash flow, as applicable, over the referenced period by the weighted average diluted shares outstanding during the period determined under IFRS.

Petroleum and natural gas sales, adjusted funds flow, revenue, royalties, operating expenses, transportation and NGLs processing expenses, sales of commodities purchased and commodities purchased on a $/Bbl, $/Mcf or $/Boe basis are calculated by dividing petroleum and natural gas sales, adjusted funds flow, revenue, royalties, operating expenses, transportation and NGLs processing expenses, sales of commodities purchased and commodities purchased, as applicable, over the referenced period by the aggregate units (Bbl, Mcf or Boe) produced during such period.

Royalty rate is calculated by dividing royalties by petroleum and natural gas sales less royalty and other revenue.

ADVISORIES

Forward-looking Information

Certain statements in this MD&A constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:

forecast sales volumes for 2023 and certain periods therein;
planned capital expenditures in 2023;
planned abandonment and reclamation expenditures in 2023;
forecast free cash flow in 2023;
preliminary 2024 sales volumes, capital expenditures, abandonment and reclamation expenditures and free cash flow guidance;
the expectation that capital expenditures in 2023 and 2024 will be evenly split between sustaining and maintenance capital and growth capital;
Paramount’s expectation that capital expenditures in 2024 will be on the higher end of the guided range in the event inflationary cost pressures persist into 2024;
the expected timing of the completion and deployment of a fifth super-spec walking rig;
the expectation that the Company will be able to fund budgeted capital expenditures and net abandonment and reclamation expenditures in 2023 with cash from operating activities;
the anticipation that legal proceedings will not have a material impact on Paramount’s financial position; and
the potential payment of future dividends.

future commodity prices;
the impact of the Russian invasion of Ukraine;
royalty rates, taxes and capital, operating, general & administrative and other costs;
foreign currency exchange rates, interest rates and the rate and impacts of inflation;
general business, economic and market conditions;

Paramount Resources Ltd. First Quarter 2023 39

the performance of wells and facilities;
the availability to Paramount of the required capital to fund its exploration, development and other operations and meet its commitments and financial obligations;
the ability of Paramount to obtain equipment, materials, services and personnel in a timely manner and at expected and acceptable costs to carry out its activities;
the ability of Paramount to secure adequate product processing, transportation, fractionation and storage capacity on acceptable terms and the capacity and reliability of facilities;
the ability of Paramount to market its production successfully;
the ability of Paramount and its industry partners to obtain drilling success (including in respect of anticipated production volumes, reserves additions, product yields and resource recoveries) and operational improvements, efficiencies and results consistent with expectations;
the timely receipt of required governmental and regulatory approvals;
the application of regulatory requirements respecting abandonment and reclamation;
the merits of outstanding and pending legal proceedings; and
anticipated timelines and budgets being met in respect of drilling programs and other operations (including well completions and tie-ins, the construction, commissioning and start-up of new and expanded facilities, including third-party facilities, and facility turnarounds and maintenance).

Although Paramount believes that the expectations reflected in such forward-looking information are reasonable based on the information available at the time of this MD&A, undue reliance should not be placed on the forward-looking information as Paramount can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Paramount and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

those risks set out in this MD&A under "Risk Factors";
fluctuations in commodity prices;
changes in capital spending plans and planned exploration and development activities;
the potential for changes to preliminary 2024 sales volumes, capital expenditures, abandonment and reclamation expenditures and free cash flow guidance prior to finalization;
changes in foreign currency exchange rates, interest rates and the rate of inflation;
the uncertainty of estimates and projections relating to future production, revenue, free cash flow, reserves additions, product yields (including condensate to natural gas ratios), resource recoveries, royalty rates, taxes and costs and expenses;
the ability to secure adequate product processing, transportation, fractionation, and storage capacity on acceptable terms;
operational risks in exploring for, developing, producing and transporting sales volumes, including the risk of spills, leaks or blowouts;
the ability to obtain equipment, materials, services and personnel in a timely manner and at expected and acceptable costs, including the potential effects of inflation and supply chain disruptions;
potential disruptions, delays or unexpected technical or other difficulties in designing, developing, expanding or operating new, expanded or existing facilities (including third-party facilities);
processing, pipeline and fractionation infrastructure outages, disruptions and constraints;
risks and uncertainties involving the geology of oil and gas deposits;
the uncertainty of reserves estimates;
general business, economic and market conditions;
the ability to generate sufficient cash from operating activities to fund, or to otherwise finance planned exploration, development and operational activities and meet current and future

Paramount Resources Ltd. First Quarter 2023 40

commitments and obligations (including product processing, transportation, fractionation and similar commitments and obligations);

changes in, or in the interpretation of, laws, regulations or policies (including environmental laws);
the ability to obtain required governmental or regulatory approvals in a timely manner, and to enter into and maintain leases and licenses;
the effects of weather and other factors including wildlife and environmental restrictions which affect field operations and access;
uncertainties as to the timing and cost of future abandonment and reclamation obligations and potential liabilities for environmental damage and contamination;
uncertainties regarding Indigenous claims and in maintaining relationships with local populations and other stakeholders;
the outcome of existing and potential lawsuits, regulatory actions, audits and assessments; and
other risks and uncertainties described elsewhere in this document and in Paramount’s other filings with Canadian securities authorities.

There are risks that may result in the Company changing, suspending or discontinuing its monthly dividend program, including changes to free cash flow, operating results, capital requirements, financial position, market conditions or corporate strategy and the need to comply with requirements under debt agreements and applicable laws respecting the declaration and payment of dividends. There are no assurances as to the continuing declaration and payment of future dividends or the amount or timing of any such dividends.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled "Risk Factors" in Paramount's annual information form for the year ended December 31, 2022, which is available on SEDAR at www.sedar.com. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities law, Paramount undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

Certain forward-looking information in this MD&A, including forecast free cash flow in 2023 and future periods, may also constitute a "financial outlook" within the meaning of applicable securities laws. A financial outlook involves statements about Paramount’s prospective financial performance or position and is based on and subject to the assumptions and risk factors described above in respect of forward-looking information generally as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this MD&A. Such assumptions are based on management's assessment of the relevant information currently available and any financial outlook included in this MD&A is provided for the purpose of helping readers understand Paramount’s current expectations and plans for the future. Readers are cautioned that reliance on any financial outlook may not be appropriate for other purposes or in other circumstances and that the risk factors described above or other factors may cause actual results to differ materially from any financial outlook.

Paramount Resources Ltd. First Quarter 2023 41

Oil and Gas Measures and Definitions

The term "liquids" includes oil, condensate and Other NGLs (ethane, propane and butane). NGLs consist of condensate and Other NGLs.

Abbreviations

Liquids		Natural Gas
Bbl	Barrels	Mcf	Thousands of cubic feet
Bbl/d	Barrels per day	MMcf/d	Millions of cubic feet per day
NGLs	Natural gas liquids	GJ	Gigajoules
Condensate	Pentane and heavier hydrocarbons	GJ/d	Gigajoules per day
WTI	West Texas Intermediate	MMBtu	Millions of British Thermal Units
		MMBtu/d	Millions of British Thermal Units per day
Oil Equivalent		NYMEX	New York Mercantile Exchange
Boe	Barrels of oil equivalent	AECO	AECO-C reference price
Boe/d	Barrels of oil equivalent per day

This MD&A contains disclosures expressed as "Boe", "$/Boe" and "Boe/d". Natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil when converting natural gas to Boe. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. For the three months ended March 31, 2023, the value ratio between crude oil and natural gas was approximately 24:1. This value ratio is significantly different from the energy equivalency ratio of 6:1. Using a 6:1 ratio would be misleading as an indication of value.

Paramount Resources Ltd. First Quarter 2023 42

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Interim Condensed Consolidated Financial Statements (Unaudited) For the three months ended March 31, 2023

Paramount Resources Ltd. First Quarter 2023 43

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

($ millions)

		March 31	December 31
As at	Note	2023	2022
ASSETS
Current assets
Cash and cash equivalents	14	81.9	2.5
Accounts receivable		182.3	223.2
Risk management – current	11	5.3	19.7
Prepaid expenses and other		10.9	9.1
Assets held for sale	3	–	251.7
		280.4	506.2
Investments in securities	4	498.3	557.1
Risk management – long-term	11	1.2	2.9
Exploration and evaluation	2	512.1	485.7
Property, plant and equipment, net	3	2,545.5	2,456.3
Deferred income tax		277.1	329.1
		4,114.6	4,337.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		228.1	229.9
Risk management – current	11	5.5	9.8
Asset retirement obligations and other – current	6	39.4	40.7
Liabilities associated with assets held for sale	3	–	2.0
		273.0	282.4
Long-term debt	5	–	159.4
Risk management – long-term	11	0.5	–
Asset retirement obligations and other– long-term	6	512.2	517.4
		785.7	959.2
Commitments and contingencies	16
Shareholders’ equity
Share capital	7	2,272.0	2,267.1
Retained earnings		518.1	517.6
Reserves	8	538.8	593.4
		3,328.9	3,378.1
		4,114.6	4,337.3

See the accompanying notes to these Interim Condensed Consolidated Financial Statements

Paramount Resources Ltd. First Quarter 2023 44

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

($ millions, except as noted)

Three months ended March 31	Note	2023	2022
Petroleum and natural gas sales		489.7	499.6
Royalties		(69.1 )	(76.2 )
Sales of commodities purchased		115.1	48.8
Revenue	12	535.7	472.2
Loss on risk management contracts	11	(1.9 )	(152.0 )
		533.8	320.2
Expenses
Operating expense		108.8	89.2
Transportation and NGLs processing		36.3	31.3
Commodities purchased		114.3	49.1
General and administrative		15.0	9.3
Share-based compensation	9	6.9	7.5
Depletion and depreciation	3	101.5	79.3
Exploration and evaluation	2	2.8	16.0
Gain on sale of oil and gas assets	3	(121.1 )	(1.7 )
Interest and financing		1.5	4.7
Accretion of asset retirement obligations	6	10.7	10.8
Other	13	0.4	0.8
		277.1	296.3
Income before tax		256.7	23.9
Income tax expense
Deferred	10	59.7	7.3
		59.7	7.3
Net income		197.0	16.6
Other comprehensive income (loss), net of tax	8
Items that will be reclassified to net income
Change in fair value of cash flow hedges, net of tax		(2.0 )	6.9
Reclassification to net income, net of tax		(1.3 )	1.5
Items that will not be reclassified to net income
Change in fair value of securities, net of tax	4	(52.1 )	140.2
Comprehensive income		141.6	165.2
Net income per common share($/share)	7
Basic		1.39	0.12
Diluted		1.33	0.11

See the accompanying notes to these Interim Condensed Consolidated Financial Statements

Paramount Resources Ltd. First Quarter 2023 45

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ millions)

Three months ended March 31	Note	2023	2022
Operating activities
Net income		197.0	16.6
Add (deduct):
Items not involving cash	14	66.2	218.6
Asset retirement obligations settled	6	(21.8 )	(14.8 )
Change in non-cash working capital		30.0	(45.5 )
Cash from operating activities		271.4	174.9
Financing activities
Net repayment of revolving long-term debt	5	(161.8 )	(84.3 )
Lease liabilities – principal repayments	6	(1.6 )	(2.0 )
Dividends	7	(196.5 )	(28.2 )
Common Shares issued, net of issue costs	7	3.0	6.0
Common Shares purchased under RSU plan	9	(0.8 )	–
Cash used in financing activities		(357.7 )	(108.5 )
Investing activities
Capital expenditures	2,3	(184.1 )	(117.0 )
Land and property acquisitions	2,3	(26.6 )	(29.2 )
Proceeds of disposition	3	371.1	51.3
Change in non-cash working capital		5.5	28.5
Cash from (used in) investing activities		165.9	(66.4 )
Net increase		79.6	–
Foreign exchange on cash and cash equivalents		(0.2 )	(0.2 )
Cash and cash equivalents, beginning of period		2.5	1.7
Cash and cash equivalents, end ofperiod		81.9	1.5

See the accompanying notes to these Interim Condensed Consolidated Financial Statements

Supplemental cash flow information 14

Paramount Resources Ltd. First Quarter 2023 46

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

($ millions, except as noted)

Three months ended March 31	Note	2023		2022
		*Shares*		Shares
		*(millions)*		(millions)
Share capital
Balance, beginning of period		*142.0*	2,267.1	139.2	2,251.9
Issued on exercise of Paramount Options	7,9	*0.4*	3.9	0.8	7.9
Change in Common Shares for RSU plan	9	–	1.0	–	0.7
Balance, end of period		*142.4*	2,272.0	140.0	2,260.5
Retained earnings (accumulated deficit)
Balance, beginning of period			517.6		(15.5 )
Net income			197.0		16.6
Dividends			(196.5 )		(28.2 )
Reclassification of accumulated gain on securities	4		–		11.1
Balance, end of period			518.1		(16.0 )
Reserves	8
Balance, beginning of period			593.4		370.0
Other comprehensive income (loss)			(55.4 )		148.6
Contributed surplus			0.8		0.2
Reclassification of accumulated gain on securities	4		–		(11.1 )
Balance, end of period			538.8		507.7
Total Shareholders’ Equity			3,328.9		2,752.2

See the accompanying notes to these Interim Condensed Consolidated Financial Statements

Paramount Resources Ltd. First Quarter 2023 47

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

1. Basis of Presentation

Paramount Resources Ltd. ("Paramount" or the "Company") is an independent, publicly traded, liquids-rich natural gas focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas. The Company also pursues longer-term strategic exploration and pre-development plays and holds a portfolio of investments in other entities. Paramount’s principal properties are located in Alberta and British Columbia.

Paramount is the ultimate parent company of a consolidated group of companies and is incorporated and domiciled in Canada. The address of its registered office is Suite 4700, 888 – 3[rd] Street SW, Calgary, Alberta T2P 5C5. The consolidated group includes wholly-owned subsidiaries Fox Drilling Limited Partnership, Cavalier Energy Inc. and MGM Energy. The financial statements of Paramount’s subsidiaries and partnerships are prepared for the same reporting periods as the parent in accordance with the Company’s accounting policies. Intercompany balances and transactions have been eliminated.

These unaudited interim condensed consolidated financial statements of the Company, as at and for the three months ended March 31, 2023 (the "Interim Financial Statements"), were authorized for issuance by the Audit Committee of Paramount’s Board of Directors on May 2, 2023.

These Interim Financial Statements have been prepared in accordance with IAS 34 – Interim Financial Reporting on a basis consistent with the accounting, estimation and valuation policies described in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2022 (the "Annual Financial Statements").

These Interim Financial Statements are stated in millions of Canadian dollars, unless otherwise noted, and have been prepared on a historical cost basis, except for certain financial instruments which are stated at fair value. Certain information and disclosures normally required to be included in the notes to the Annual Financial Statements have been condensed or omitted. These Interim Financial Statements should be read in conjunction with the Annual Financial Statements.

Paramount Resources Ltd. First Quarter 2023 48

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

2. Exploration and Evaluation

	Three months ended March 31, 2023 Twelve months ended December 31, 2022
Balance, beginning of period	485.7 539.9
Additions	– 0.4
Acquisitions	26.9 34.7
Change in asset retirement provision	0.2 (0.2 )
Transfers to property, plant and equipment	– (33.1 )
Expired lease costs	(0.3 ) (21.8 )
Dispositions	(0.4 ) (0.2 )
Transfer to assets held for sale (see Note 3)	– (34.0 )
Balance, end ofperiod	512.1 485.7

Exploration and Evaluation Expense
Three months ended March 31	2023	2022
Geological and geophysical expense	2.5	2.6
Expired lease costs	0.3	13.4
	2.8	16.0

At March 31, 2023, the Company assessed its exploration and evaluation assets for indicators of potential impairment or impairment reversal and none were identified.

3. Property, Plant and Equipment

	Petroleum
	and natural	Drilling	Right-of-use
Three months ended March 31, 2023	gas assets	rigs	assets	Other	Total
Cost
Balance, beginning of period	4,657.3	153.0	24.8	59.5	4,894.6
Additions	179.3	3.1	1.5	3.2	187.1
Transfers	(0.9 )	0.9	–	–	–
Dispositions	(0.5 )	–	–	–	(0.5 )
Derecognition	–	–	(8.3 )	(10.6 )	(18.9 )
Change in asset retirement provision	1.2	–	–	–	1.2
Cost, end of period	4,836.4	157.0	18.0	52.1	5,063.5
Accumulated depletion and depreciation
Balance, beginning of period	(2,298.3 )	(86.8 )	(14.9 )	(38.3 )	(2,438.3 )
Depletion and depreciation	(94.4 )	(2.7 )	(0.9 )	(0.8 )	(98.8 )
Dispositions	0.2	–	–	–	0.2
Derecognition	–	–	8.3	10.6	18.9
Accumulated depletion and depreciation	(2,392.5 )	(89.5 )	(7.5 )	(28.5 )	(2,518.0 )
Net book value, December 31, 2022	2,359.0	66.2	9.9	21.2	2,456.3
Net book value, March 31, 2023	2,443.9	67.5	10.5	23.6	2,545.5

In December 2022, Paramount entered into an agreement to sell its Kaybob Smoky and Kaybob South Duvernay properties and certain other minor interests in the Kaybob region, all of which were included in the Kaybob cash-generating unit. The assets and liabilities associated with the sale were presented as held for sale at December 31, 2022. Paramount received cash proceeds of $370.6 million on closing of the transaction in January 2023, resulting in a gain of $121.1 million being recognized for the three months ended March 31, 2023.

Paramount Resources Ltd. First Quarter 2023 49

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

Depletion and Depreciation

Three months ended March 31	2023 2022
Depletion and depreciation	97.1 72.6
Change in asset retirement obligations	4.4 11.5
Alberta site rehabilitation program funding	– (4.8 )
	101.5 79.3

At March 31, 2023, the Company assessed its property, plant and equipment assets for indicators of potential impairment and none were identified.

4. Investments in Securities

As at	March 31, 2023 December 31, 2022
Level one fair value hierarchy securities	418.7 477.3
Level three fair value hierarchy securities	79.6 79.8
	498.3 557.1

Paramount holds investments in a number of publicly-traded and private corporations as part of its portfolio of investments. Investments that are categorized as level one fair value hierarchy securities ("Level One Securities") are carried at their period-end trading prices. Estimates of fair values for investments that are categorized as level three fair value hierarchy securities ("Level Three Securities") are based on valuation techniques that incorporate unobservable inputs. The valuation techniques utilize market-based metrics of comparable companies and transactions, indicators of value based on equity transactions of the entities and other indicators of value including financial and operating results of the entities. Fair value estimates of Level Three Securities are updated at each balance sheet date to confirm whether the carrying value of the investment continues to fall within a range of possible fair values indicated by such techniques.

For the three months ended March 31, 2023, the Company recorded a charge of $58.6 million before tax, to other comprehensive income ("OCI") related to changes in the fair value estimates of its investments in securities.

In the first quarter of 2022, Paramount sold a portion of its Level One Securities for cash proceeds of $51.0 million, resulting in $11.1 million of accumulated gains, net of tax, being reclassified from reserves to retained earnings.

Paramount Resources Ltd. First Quarter 2023 50

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

Changes in the fair value of investments in securities are as follows:

	Three months ended March 31, 2023 Twelve months ended December 31, 2022
Investments in securities, beginning of period	557.1 372.1
Changes in fair value of Level One Securities	(58.6 ) 222.4
Changes in fair value of Level Three Securities	– 12.9
Changes in fair value of warrants – recorded in earnings	(0.2 ) 0.4
Acquired – cash	– 1.8
Acquired – non-cash	– 4.3
Proceeds of dispositions – cash	– (52.8 )
Proceeds of dispositions–non-cash	– (4.0 )
Investments in securities, end ofperiod	498.3 557.1

5. Long-Term Debt

As at	March 31, 2023	December 31, 2022
Paramount Facility (1)	–	159.4

(1) Presented net of $2.4 million in unamortized transaction costs at December 31, 2022.

Paramount Facility

The Company has a $1.0 billion financial covenant-based senior secured revolving bank credit facility (the "Paramount Facility"). The maturity date of the Paramount Facility is May 3, 2026. At Paramount's request, the credit limit of the Paramount Facility can be increased by up to $250 million pursuant to an accordion feature in the facility, subject to incremental lender commitments.

Paramount was in compliance with the financial covenants under the Paramount Facility at March 31, 2023.

For additional information concerning the Paramount Facility, refer to Note 8 of the Annual Financial Statements.

Unsecured Letter of Credit Facility

Paramount Resources Ltd. First Quarter 2023 51

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

6. Asset Retirement Obligations and Other

As at March 31, 2023	Current	Long-term	Total
Asset retirement obligations	37.9	496.1	534.0
Lease liabilities	1.5	16.1	17.6
Asset retirement obligations and other	39.4	512.2	551.6
As at December 31, 2022	Current	Long-term	Total
Asset retirement obligations	37.7	502.4	540.1
Lease liabilities	3.0	15.0	18.0
Asset retirement obligations and other	40.7	517.4	558.1

Asset Retirement Obligations

	Three months ended	Twelve months ended
	March 31, 2023	December 31, 2022
Asset retirement obligations, beginning of period	540.1	651.1
Additions	0.3	4.7
Change in estimates	4.7	(16.3 )
Change in discount rate	–	(95.7 )
Obligations settled – cash	(21.8 )	(36.1 )
Obligations settled – funding under Alberta site rehabilitation program	–	(10.0 )
Dispositions	–	(0.5 )
Transfer to liabilities associated with assets held for sale (see Note 3)	–	(2.0 )
Accretion expense	10.7	44.9
Asset retirement obligations, end ofperiod	534.0	540.1

As at March 31, 2023, estimated undiscounted, uninflated asset retirement obligations were $1,283.7 million (December 31, 2022 – $1,296.0 million). Asset retirement obligations have been determined using a credit-adjusted risk-free discount rate of 8.5 percent per annum (December 31, 2022 – 8.5 percent per annum) and an inflation rate of 2.0 percent per annum (December 31, 2022 – 2.0 percent per annum).

Lease Liabilities

Paramount has lease liabilities in respect of office space and vehicles, which have been recognized at the discounted value of the remaining fixed lease payments. For the three months ended March 31, 2023, total cash principal payments made in respect of these lease liabilities, net of sublease arrangements, were $1.6 million, (March 31, 2022 – $2.0 million).

For the three months ended March 31, 2023, expenses related to arrangements containing variable operating costs, short-term and low value leases which have not been included in the lease liability were approximately $0.7 million (March 31, 2022 – $0.6 million).

At March 31, 2023, $3.4 million was receivable by the Company relating to lease incentives (December 31, 2022 – $6.3 million). For the three months ended March 31, 2023, $0.5 million (March 31, 2022 – $0.6 million) was received in respect of sublease arrangements.

Paramount Resources Ltd. First Quarter 2023 52

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

7. Share Capital

At March 31, 2023, 142.4 million (December 31, 2022 – 142.0 million) class A common shares of Paramount ("Common Shares") were outstanding, net of 0.8 million (December 31, 2022 – 0.8 million) Common Shares held in trust under the Company’s restricted share unit ("RSU") plan.

For the three months ended March 31, 2023, the Company paid total dividends of $196.5 million (March 31, 2022 – $28.2 million) comprised of a special cash dividend of $1.00 per Common Share or $142.9 million and regular monthly dividends totaling $0.375 per Common Share or $53.6 million. On April 28, 2023, the Company paid a regular monthly dividend of $17.9 million, or $0.125 per Common Share.

In June 2022, Paramount implemented a normal course issuer bid (the ʺ2022 NCIBʺ) under which the Company may purchase up to 7.6 million Common Shares for cancellation. The 2022 NCIB will terminate on the earlier of June 29, 2023 and the date on which the maximum number of Common Shares that can be acquired pursuant to the 2022 NCIB are purchased. Purchases of Common Shares under the NCIB will be effected through the facilities of the Toronto Stock Exchange or alternative Canadian trading systems at the market price at the time of purchase. The Company has not made any purchases of Common Shares under the 2022 NCIB to date.

For the three months ended March 31, 2023, Paramount issued 0.4 million Common Shares on the exercise of options to acquire Common Shares (ʺParamount Optionsʺ) (see Note 9).

Weighted Average Common Shares

Three months ended March 31	2023	2023	2022
	*Wtd. Avg.*		Wtd. Avg.
	*Shares*		Shares
	*(millions)*	Net income	(millions)	Net income
Net income – basic	*142.2*	197.0	139.5	16.6
Dilutive effect of Paramount Options	*5.6*	–	6.3	–
Net income – diluted	*147.8*	197.0	145.8	16.6

Paramount Options can be exchanged for Common Shares, are potentially dilutive and are included in the diluted per share calculations when they are dilutive to net income per share. Common Shares held in trust under the Company’s RSU plan are not included in the calculation of weighted average shares outstanding. For the three months ended March 31, 2023, 2.6 million Paramount Options were anti-dilutive (three months ended March 31, 2022 – 0.1 million).

8. Reserves

	Unrealized
	gains (losses)	Unrealized
	on cash flow	gains (losses)	Contributed	Total
Three months ended March 31, 2023	hedges	on securities	surplus	reserves
Balance, beginning of period	8.3	399.9	185.2	593.4
Other comprehensive loss, before tax	(4.3 )	(58.6 )	–	(62.9 )
Deferred tax	1.0	6.5	–	7.5
Share-based compensation (see Note 9)	–	–	1.7	1.7
Paramount Options exercised	–	–	(0.9 )	(0.9 )
Balance, end ofperiod	5.0	347.8	186.0	538.8

Paramount Resources Ltd. First Quarter 2023 53

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

9. Share-Based Compensation

Paramount Options

	Three months ended	Three months ended	Three months ended	Twelve months ended	Twelve months ended
	March	31,	2023	December	31, 2022
			Weighted		Weighted
			average		average
	*Paramount*		exercise	*Paramount*	exercise
	*Options*		price	*Options*	price
	*(millions)*		($/share)	*(millions)*	($/share)
Balance, beginning of period	*11.3*		13.55	11.0	9.55
Granted	*0.1*		28.65	2.5	28.65
Exercised(1)	*(0.4* )		7.93	(2.1 )	10.73
Cancelled or forfeited	–		–	(0.1 )	10.90
Balance, end of period	*11.0*		13.84	11.3	13.55
Options exercisable, end ofperiod	*2.7*		8.33	3.1	8.28

(1) For Paramount Options exercised during the three months ended March 31, 2023, the weighted average market price of Common Shares on the dates exercised was $29.14 per share (twelve months ended December 31, 2022 – $30.12 per share).

Restricted Share Unit Plan – Shares Held in Trust

	Three months ended	Three months ended	Three months ended	Twelve months ended	Twelve months ended
	March	31,	2023	December	31, 2022
	*Shares*			*Shares*
	*(millions)*			*(millions)*
Balance, beginning of period	*0.8*		16.2	1.5	3.5
Shares purchased	*0.1*		0.8	0.5	17.2
Change in vested and unvested shares	*(0.1* )		(1.8 )	(1.2 )	(4.5 )
Balance, end ofperiod	*0.8*		15.2	0.8	16.2

10. Income Tax

The following table reconciles income taxes calculated at the statutory rate to Paramount’s income tax expense:

Three months ended March 31	2023	2022
Income before tax	256.7	23.9
Effective statutory income tax rate	23.0%	23.0%
Expected income tax expense	59.0	5.5
Effect on income taxes of:
Change in statutory and other rates	–	1.1
Share-based compensation	0.6	0.5
Change in unrecognized deferred income tax asset	(0.2 )	0.3
Non-deductible items and other	0.3	(0.1 )
Income tax expense	59.7	7.3

Paramount Resources Ltd. First Quarter 2023 54

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Tabular amounts stated in $ millions, except as noted)

11. Financial Instruments and Risk Management

Financial Instruments

Financial instruments at March 31, 2023 consist of cash and cash equivalents, accounts receivable, risk management assets and liabilities, investments in securities, accounts payable and the Paramount Facility. The carrying values of these financial instruments approximate their fair values.

Risk Management

From time-to-time, Paramount enters into derivative financial instruments to manage commodity price, interest rate and foreign currency exchange risks.

The fair values of risk management financial instruments are estimated using a market approach incorporating level two fair value hierarchy inputs, including forward market curves and price quotes for similar instruments, provided by financial institutions.

Changes in the fair value of risk management assets and liabilities for the three months ended March 31, 2023 are as follows:

		Foreign
	Financial	currency
	commodity	exchange	Electricity
Three months ended March 31, 2023	contracts	contracts	swaps	Total
Fair value of asset (liability), December 31, 2022	11.8	(9.8 )	10.8	12.8
Changes in fair value – profit or loss(1)	2.6	(4.5 )	–	(1.9 )
Changes in fair value – OCI	–	–	(3.0 )	(3.0 )
Risk management contract settlements (received) paid(2)	(14.4 )	8.3	(1.3 )	(7.4 )
Fair value of asset(liability), March 31, 2023	–	(6.0 )	6.5	0.5
Risk management asset – current	–	–	5.3	5.3
Risk management asset–long-term	–	–	1.2	1.2
Risk management asset, March 31, 2023	–	–	6.5	6.5
Risk management liability – current	–	(5.5 )	–	(5.5 )
Risk management liability–long-term	–	(0.5 )	–	(0.5 )
Risk management liability, March 31, 2023	–	(6.0 )	–	(6.0 )

(1)

(1) Changes in fair value of ($1.9) million related to financial commodity and foreign currency exchange contracts are recorded as loss on risk management contracts. (2) Receipts on risk management contract settlements related to financial commodity and foreign currency exchange contracts totaled $6.1 million. Risk management contract settlements relating to electricity swap contracts are recorded in operating expenses.

Paramount Resources Ltd. First Quarter 2023 55

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

The Company had the following risk management contracts as at March 31, 2023:

		Aggregate	Average
Instruments	amount / notional		price or rate	Remaining term	-
*Foreign Currency Exchange*	*Contracts*
Forward Sales / Swaps	US$60	million / month	1.3293 CAD$/US$1.00	April 2023 – June 2023
Swaps	US$40	million / month	1.3427 CAD$/US$1.00	July 2023 – December 2023
Swaps	US$30	million / month	1.3433 CAD$/US$1.00	January 2024 – June 2024
Swaps	US$10	million / month	1.3400 CAD$/US$1.00	July 2024 – December 2024
*Electricity Contracts(1)*
Swaps		240 MWh/d	$84.00/MWh	April 2023 – December 2023
Swaps		240 MWh/d	$66.13/MWh	January 2024 – December 2024
Swaps		120 MWh/d	$73.25/MWh	January2025 – December 2025

(1) Reference electricity rate: Floating hourly rate established by the Alberta Electric System Operator. "MWH" means megawatt-hour.

The Company has classified its electricity swaps as cash flow hedges and applied hedge accounting. There were no changes to the critical terms of the hedging relationships and no hedge ineffectiveness was identified at March 31, 2023.

12. Revenue By Product

Three months ended March 31	2023 2022
Natural gas	122.0 127.1
Condensate and oil	343.5 331.9
Other natural gas liquids	23.4 29.3
Royalty and other	0.8 11.3
Royalties	(69.1 ) (76.2 )
Sales of commodities purchased	115.1 48.8
	535.7 472.2

Royalty and other revenue for the three months ended March 31, 2022 includes $10.6 million related to a business interruption insurance claim.

13. Other

Three months ended March 31	2023	2022
Provisions	2.5	–
Interest income	(1.6 )	–
Other	(0.5 )	0.8
	0.4	0.8

Paramount Resources Ltd. First Quarter 2023 56

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

14. Consolidated Statement of Cash Flows – Selected Information

Items Not Involving Cash

Three months ended March 31	2023 2022
Risk management contracts	8.0 102.3
Share-based compensation	6.9 7.5
Depletion and depreciation	101.5 79.3
Exploration and evaluation	0.3 13.4
Gain on sale of oil and gas assets	(121.1 ) (1.7 )
Accretion of asset retirement obligations	10.7 10.8
Deferred income tax	59.7 7.3
Other	0.2 (0.3 )
	66.2 218.6

Supplemental Cash Flow Information

Three months ended March 31	2023	2022
Interest paid	0.2	4.2
Interest received	1.6	–

Components of Cash and Cash Equivalents

As at	March 31, 2023	December 31, 2022
Cash	81.9	2.5
Cash equivalents	–	–
	81.9	2.5

15. Capital Structure

Paramount’s capital structure consists of shareholders’ equity and net (cash) debt.

The Company’s primary objectives in managing its capital structure are to:

i. ensure liquidity to fund ongoing operations and capital programs, the settlement of obligations when due and the payment of regular monthly dividends;
ii. preserve financial flexibility and access to capital markets, including for the pursuit of strategic initiatives; and
iii. maximize shareholder returns considering the risk environment.

Paramount Resources Ltd. First Quarter 2023 57

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

The key capital management measures used by the Company in monitoring and assessing its capital structure are net (cash) debt, adjusted funds flow, the ratio of net debt to adjusted funds flow and free cash flow. The use and composition of each of these measures is described below. These measures are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities.

Net (Cash) Debt

Net (cash) debt, in conjunction with capacity under existing credit facilities, is used to monitor and assess liquidity by providing Management and investors with a measure of the Company’s overall leverage position. The label of this capital management measure has been revised from the previous label of net debt to allow for the description of negative amounts as net (cash).

The calculation of net (cash) debt is as follows:

As at	March 31, 2023 December 31, 2022
Cash and cash equivalents	(81.9 ) (2.5 )
Accounts receivable(1)	(178.9 ) (216.5 )
Prepaid expenses and other	(10.9 ) (9.1 )
Accounts payable and accrued liabilities	228.1 229.9
Long-term debt	– 159.4
Net(cash) debt	(43.6 ) 161.2

(1) Excludes accounts receivable relating to lease incentives and subleases (March 31, 2023 – $3.4 million, December 31, 2022 – $6.7 million).

Adjusted Funds Flow

Adjusted funds flow is used to monitor and assess liquidity and the flexibility of the Company’s capital structure by providing Management and investors with a measure of the cash flows generated by the Company’s assets available to fund capital programs and meet financial obligations, including the settlement of asset retirement obligations.

The calculation of adjusted funds flow is as follows:

Three months ended March 31	2023 2022
Cash from operating activities	271.4 174.9
Change in non-cash working capital	(30.0 ) 45.5
Geological and geophysical expense	2.5 2.6
Asset retirement obligations settled	21.8 14.8
Closure costs	– –
Provisions	2.5 –
Settlements	– –
Transaction and reorganization costs	– –
Adjusted funds flow	268.2 237.8

Net Debt to Adjusted Funds Flow Ratio

The ratio of net debt to adjusted funds flow is used to monitor and assess liquidity and the flexibility of the Company’s capital structure by showing the relation of the cash flows generated by the Company’s assets to its overall leverage position.

Paramount Resources Ltd. First Quarter 2023 58

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

The net debt to adjusted funds flow ratio is calculated as the period end net debt divided by adjusted funds flow for the trailing four quarters. When the Company is not in a net debt position, the ratio of net debt to adjusted funds flow is not considered meaningful.

As at	March 31, 2023 December 31, 2022
Net (cash) debt	(43.6 ) 161.2
Adjusted funds flow, trailing four quarters	1,201.5 1,171.0
Net debt to adjusted funds flow ratio	NM(1) 0.1x

(1) NM means not meaningful.

Free Cash Flow

Free cash flow is used to monitor and assess liquidity, the flexibility of the Company’s capital structure and the financial capacity to maximize shareholder returns by providing Management and investors with a measure of the internally generated cash available, after funding capital programs and asset retirement obligation settlements, to service the Company’s financial obligations, pay dividends, repurchase Common Shares and fund additional growth opportunities.

The calculation of free cash flow is as follows:

Three months ended March 31	2023	2022
Cash from operating activities	271.4	174.9
Change in non-cash working capital	(30.0 )	45.5
Geological and geophysical expense	2.5	2.6
Asset retirement obligations settled	21.8	14.8
Closure costs	–	–
Provisions	2.5	–
Settlements	–	–
Transaction and reorganization costs	–	–
Adjusted funds flow	268.2	237.8
Capital expenditures	(184.1 )	(117.0 )
Geological and geophysical expense	(2.5 )	(2.6 )
Asset retirement obligations settled	(21.8 )	(14.8 )
Free cash flow	59.8	103.4

16. Commitments and Contingencies

Commitments – Physical Sales Contracts

The Company had the following basis differential physical sale contracts at March 31, 2023:

	Volume	Location	Average price	Remaining term
Peace sweet crude oil	3,089 Bbl/d	Peace(1)	WTI – US$3.73/Bbl	April 2023 – December 2023
Natural gas	35,000 MMBtu/d	AECO	NYMEX – US$0.94/MMBtu(2)	April 2023 – October 2023
Naturalgas	25,000 MMBtu/d	Dawn	NYMEX – US$0.20/MMBtu(2)	April 2023 – October 2023

(1) Peace refers to the Peace Pipeline at Edmonton.

(2) "NYMEX" refers to NYMEX pricing at Henry Hub.

Paramount Resources Ltd. First Quarter 2023 59

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts stated in $ millions, except as noted)

Contingencies

Paramount Resources Ltd. First Quarter 2023 60

CORPORATE INFORMATION

EXECUTIVE OFFICERS

J. H. T. Riddell President and Chief Executive Officer and Chairman

P. R. Kinvig Chief Financial Officer

B. K. Lee Executive Vice President, Finance

D. B. Reid Executive Vice President, Operations

R. R. Sousa Executive Vice President, Corporate Development and Planning

J. B. Williams Executive Vice President, Kaybob Region

G. W. J. Stotts Executive Vice President, Development and Reserves

DIRECTORS

J. H. T. Riddell[(2)] President and Chief Executive Officer and Chairman Paramount Resources Ltd. Calgary, Alberta

J. G. M. Bell[(1) (3) (4) ] President and Chief Executive Officer Dominion Lending Centres Inc. Calgary, Alberta

W. A. Gobert[(1) (3) (4) (5)] Independent Businessman Calgary, Alberta

D. Jungé C.F.A.[(2) (4)] Independent Businessman Bryn Athyn, Pennsylvania

K. Lynch Proctor[(1) (4) (5)] Independent Businesswoman Calgary, Alberta

R. M. MacDonald Independent Businessman Oakville, Ontario

R. K. MacLeod[(2) (3) (4) (5)] Independent Businessman Calgary, Alberta

CORPORATE OFFICE

4700 Bankers Hall West 888 Third Street S.W. Calgary, Alberta Canada T2P 5C5 Telephone: (403) 290-3600 Facsimile: (403) 262-7994 www.paramountres.com

REGISTRAR AND TRANSFER AGENT

Computershare Trust Company of Canada Calgary, Alberta Toronto, Ontario

RESERVES EVALUATORS

McDaniel & Associates Consultants Ltd. Calgary, Alberta

AUDITORS

Ernst & Young LLP Calgary, Alberta

STOCK EXCHANGE LISTING

S. L. Riddell Rose

President and Chief Executive Officer Perpetual Energy Inc. Rubellite Energy Inc. Calgary, Alberta

The Toronto Stock Exchange (“POU”)

(1) Member of Audit Committee
(2) Member of Environmental, Health and Safety Committee
(3) Member of Compensation Committee
(4) Member of Corporate Governance Committee
(5) Member of Reserves Committee

Paramount Resources Ltd. First Quarter 2023 61

AI assistant

Paramount Resources Ltd. — Interim / Quarterly Report 2023

43230_rns_2023-05-03_61df6196-23a0-4c19-9ff5-368bae7ba596.pdf