Paramount Resources Ltd. — Interim / Quarterly Report 2023

May 3, 2023

==> picture [176 x 76] intentionally omitted <==

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

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 Management's Discussion & Analysis

1

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 Management's Discussion & Analysis 2

FINANCIAL AND OPERATING HIGHLIGHTS

Three months ended March 31	2023	2022	% Change	% 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 Management's Discussion & Analysis 3

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 Management's Discussion & Analysis 4

UPDATED 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% to growth)
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% 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 Management's Discussion & Analysis

5

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 Management's Discussion & Analysis 6

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 Management's Discussion & Analysis 7

OPERATING RESULTS

Netback

Three months ended March 31	2023		2022	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 Management's Discussion & Analysis 8

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.

==> picture [468 x 196] intentionally omitted <==

----- Start of picture text -----

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
----- End of picture text -----

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 Management's Discussion & Analysis

9

Commodity Prices

Three months ended March 31	2023	2022	% Change	% 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) -	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 Management's Discussion & Analysis 10

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 Management's Discussion & Analysis 11

==> picture [468 x 195] intentionally omitted <==

----- Start of picture text -----

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
----- End of picture text -----

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.

==> picture [468 x 196] intentionally omitted <==

----- Start of picture text -----

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
----- End of picture text -----

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 Management's Discussion & Analysis 12

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.

==> picture [468 x 196] intentionally omitted <==

----- Start of picture text -----

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
----- End of picture text -----

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 Management's Discussion & Analysis 13

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 Management's Discussion & Analysis 14

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

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.

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 Management's Discussion & Analysis 15

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 Management's Discussion & Analysis 16

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 Management's Discussion & Analysis 17

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 Management's Discussion & Analysis 18

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 Management's Discussion & Analysis

19

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 Management's Discussion & Analysis 20

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 Management's Discussion & Analysis 21

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 Management's Discussion & Analysis 22

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 Management's Discussion & Analysis 23

	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

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).

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 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.

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 Management's Discussion & Analysis 24

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 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 Management's Discussion & Analysis 25

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.

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 document:

• 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 Management's Discussion & Analysis

26

• 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 Management's Discussion & Analysis

27

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 Management's Discussion & Analysis 28

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 Management's Discussion & Analysis

29