PetrusResources

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

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

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Independent auditor's report

To the Audit Committee of Petrus Resources Ltd.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Petrus Resources Ltd. and its subsidiaries (together, the Company) as at December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).

What we have audited

The Company's consolidated financial statements comprise:

the consolidated balance sheets as at December 31, 2024 and 2023;
the consolidated statements of net income (loss) and comprehensive income (loss) for the years then ended;
the consolidated statements of changes in shareholders' equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information.

Basis for opinion

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

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

Independence

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

PricewaterhouseCoopers LLP

Suncor Energy Centre, 111 5th Avenue South West, Suite 3100, Calgary, Alberta, Canada T2P 5L3

T.: +1 403 509 7500, F.: +1 403 781 1825, Fax to mail: [email protected]

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

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter	How our audit addressed the key audit matter
The impact of proved and probable reserves on property, plant & equipment (PP&E) of the Ferrier cash generating unit (CGU)

Refer to note 2 – Basis of Presentation, note 3 – Material Accounting Policies and note 5 – Property, Plant and Equipment to the consolidated financial statements. | Our approach to addressing the matter included the following procedures, among others: |
| The Company has $350.9 million of PP&E as at December 31, 2024 and recorded depletion and depreciation (D&D) expense of $41.3 million for the year then ended. Petroleum and natural gas assets within PP&E are depleted using the unit of production method based on either proved developed producing or proved and probable reserves. The majority of the petroleum and natural assets relate to the Ferrier CGU and are depleted based on proved and probable reserves. PP&E is aggregated into CGUs for purposes of impairment testing. Management assesses its CGUs for indicators of impairment each quarter. If indicators of impairment exist, management estimates the recoverable amounts of impacted CGUs. If the carrying amount of a CGU exceeds the recoverable amount, the CGU is written down with an impairment recognized in net income. As at December 31, 2024, management identified indicators of impairment for its Ferrier CGU and conducted an impairment test. No impairment was recognized by management as a result of this impairment test. Management determined the recoverable amount of the Ferrier CGU based on its fair value less costs to disposal using a | • The work of management's experts was used in performing the procedures to evaluate the reasonableness of the proved and probable reserves used to determine D&D expense and the recoverable amount of the Ferrier CGU. As a basis for using this work, the competence, capabilities and objectivity of management's experts were evaluated, the work performed was understood and the appropriateness of the work as audit evidence was evaluated. The procedures performed also included evaluation of the methods and assumptions used by management's experts, tests of the data used by management's experts and an evaluation of their findings.

• Tested how management determined the recoverable amount of the Ferrier CGU and proved and probable reserves, which included the following:
- Evaluated the appropriateness of the methods used by management in making these estimates.
- Tested the data used in determining these estimates.
- Evaluated the reasonableness of key assumptions used in developing these estimates: |

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Key audit matter	How our audit addressed the key audit matter
discounted after-tax future cash flow model based on proved and probable reserves. Proved and probable reserves are evaluated by the Company's independent reservoir engineers (management's experts). Key assumptions used by management to determine the recoverable amount of the Ferrier CGU and the proved and probable reserves include expected future production volumes, forecasted commodity prices, future development costs, future operating costs and the discount rate, as applicable.	○ Expected future production volumes, future development costs and future operating costs by considering the past performance of the Ferrier CGU, and whether these assumptions were consistent with evidence obtained in other areas of the audit.
We considered this a key audit matter due to (i) the significant judgment by management, including the use of management's experts, when estimating proved and probable reserves and developing the expected future cash flows used to determine the recoverable amount of the Ferrier CGU; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures relating to the significant assumptions; and (iii) the audit effort that involved the use of professionals with specialized skill and knowledge in the field of valuation.	○ Forecasted commodity prices by comparing those forecasts with other reputable third party industry forecasts.
	○ The discount rate, with the assistance of professionals with specialized skill and knowledge in the field of valuation.
	• Recalculated the unit-of-production rates used to calculate D&D expense for the Ferrier CGU.

Other information

Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis and the information, other than the consolidated financial statements and our auditor's report thereon, included in the annual report.

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

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

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

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

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

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

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

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Company as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

Calgary, Alberta

March 24, 2025

CONSOLIDATED BALANCE SHEETS

(Presented in 000's of Canadian dollars)

As at	December 31, 2024	December 31, 2023
ASSETS
Current
Cash	68	375
Carbon credits	590	1,842
Deposits and prepaid expenses (note 21)	2,740	2,536
Accounts receivable	11,553	17,282
Risk management asset (note 9)	2,632	8,770
Total current assets	17,583	30,805
Non-current
Risk management asset (note 9)	—	1,685
Exploration and evaluation assets (note 4)	30,758	30,628
Property, plant and equipment (note 5)	350,937	355,103
Deferred income taxes (note 22)	20,846	19,621
Total non-current assets	402,541	407,037
Total assets	420,124	437,842
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness	—	208
Revolving loan facility (note 6)	32,744	24,175
Accounts payable and accrued liabilities	17,287	34,003
Dividends payable	—	1,245
Risk management liability (note 9)	—	396
Lease obligations (note 7)	164	258
Current portion of decommissioning obligation (note 8)	1,073	1,470
Total current liabilities	51,268	61,755
Non-current liabilities
Long term debt (note 6)	25,000	25,000
Lease obligations (note 7)	829	105
Decommissioning obligation (note 8)	39,607	35,821
Risk management liability (note 9)	39	—
Total liabilities	116,743	122,681
Shareholders' equity
Share capital (note 10)	491,875	492,205
Contributed surplus	35,325	31,848
Deficit	(223,819)	(208,892)
Total shareholders' equity	303,381	315,161
Total liabilities and shareholders' equity	420,124	437,842

Commitments (note 18)
See accompanying notes to the consolidated financial statements

Approved by the Board of Directors,

(signed) "Don T. Gray"

(signed) "Donald Cormack"

Don T. Gray

Chairman

Donald Cormack

Director

CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Presented in 000's of Canadian dollars, except per share amounts)

| | Year ended
Dec. 31, 2024 | Year ended
Dec. 31, 2023 |
| --- | --- | --- |
| REVENUE | | |
| Oil and natural gas sales (note 19) | 93,721 | 125,605 |
| Royalty expense | (12,572) | (17,255) |
| Gain on risk management activities | — | 1,522 |
| | 81,149 | 109,872 |
| Other income | 318 | 1,302 |
| Net gain (loss) on financial instruments | (536) | 12,989 |
| Total revenue and other income | 80,931 | 124,163 |
| EXPENSES | | |
| Operating (note 12) | 20,376 | 23,505 |
| Transportation | 5,316 | 6,115 |
| General and administrative (note 13) | 5,291 | 4,183 |
| Share-based compensation (note 10) | 2,132 | 1,863 |
| Finance (note 16) | 7,958 | 6,454 |
| Exploration and evaluation (note 4) | 265 | 4,706 |
| Depletion and depreciation (note 5) | 41,263 | 46,623 |
| Unrealized loss (gain) on foreign exchange | 388 | (396) |
| Writedown of carbon credits | 413 | — |
| Total expenses | 83,402 | 93,053 |
| INCOME (LOSS) BEFORE INCOME TAX | (2,471) | 31,110 |
| Income tax recovery (note 22) | 1,225 | 19,621 |
| NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) | (1,246) | 50,731 |
| Net income (loss) per common share | | |
| Basic (note 11) | (0.01) | 0.41 |
| Diluted (note 11) | (0.01) | 0.40 |

See accompanying notes to the consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(Presented in 000's of Canadian dollars)

	Share Capital	Contributed Surplus	Deficit	Total
Balance, December 31, 2022	492,241	29,061	(254,661)	266,641
Net income	—	—	50,731	50,731
Common shares repurchased	(789)	—	—	(789)
Issuance of common shares	753	147	—	900
Share-based compensation	—	2,640	—	2,640
Dividends	—	—	(4,962)	(4,962)
Balance, December 31, 2023	492,205	31,848	(208,892)	315,161
Net loss	—	—	(1,246)	(1,246)
Common shares issued for dividend reinvestment	459	—	—	459
Common shares repurchased	(1,568)	1,054	—	(514)
Issuance of common shares on exercise of stock options	779	(501)	—	278
Share-based compensation	—	2,924	—	2,924
Dividends	—	—	(13,681)	(13,681)
Balance, December 31, 2024	491,875	35,325	(223,819)	303,381

See accompanying notes to the consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(Presented in 000's of Canadian dollars)

| | Year ended
Dec. 31, 2024 | Year ended
Dec. 31, 2023 |
| --- | --- | --- |
| OPERATING ACTIVITIES | | |
| Net income (loss) | (1,246) | 50,731 |
| Adjust items not affecting cash: | | |
| Share-based compensation (note 10) | 2,132 | 1,863 |
| Unrealized loss/(gain) on financial derivatives (note 9) | 7,466 | (4,938) |
| Non-cash finance expenses (note 16) | 1,540 | 1,653 |
| Depletion and depreciation (note 5) | 41,263 | 46,623 |
| Exploration and evaluation expense (note 4) | 265 | 4,706 |
| Writedown of carbon credits | 293 | (1,223) |
| Unrealized loss (gain) on foreign exchange | 388 | (396) |
| Deferred income tax recovery (note 22) | (1,225) | (19,621) |
| Proceeds from carbon credit sale | 958 | — |
| Decommissioning expenditures (note 8) | (1,776) | (1,374) |
| Funds flow | 50,058 | 78,024 |
| Change in operating non-cash working capital (note 17) | 8,669 | (3,654) |
| Cash flows from operating activities | 58,727 | 74,370 |
| FINANCING ACTIVITIES | | |
| Shares repurchased (note 10) | (514) | (285) |
| Stock options exercised (note 10) | 278 | 772 |
| Cash dividends paid | (14,368) | (3,716) |
| Draw down of revolving loan facility | 8,181 | 20,623 |
| Decrease in bank indebtedness | (208) | (451) |
| Transaction costs on debt | (457) | (315) |
| Repayment of lease liabilities (note 7) | (277) | (277) |
| Change in financing non-cash working capital (note 17) | 30 | — |
| Cash flows from (used in) financing activities | (7,335) | 16,351 |
| INVESTING ACTIVITIES | | |
| Property, plant and equipment acquisitions (note 5) | — | (50) |
| Property, plant and equipment dispositions (note 5) | — | 150 |
| Exploration and evaluation asset acquisitions (note 4) | (485) | (1,064) |
| Petroleum and natural gas property expenditures (note 5) | (31,329) | (85,495) |
| Exploration and evaluation asset expenditures (note 4) | — | (284) |
| Change in investing non-cash working capital (note 17) | (19,885) | (3,643) |
| Cash flows used in investing activities | (51,699) | (90,386) |
| Increase (decrease) in cash | (307) | 335 |
| Cash, beginning of year | 375 | 40 |
| Cash, end of year | 68 | 375 |
| Cash interest paid (note 16) | 6,418 | 4,801 |

See accompanying notes to the consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2024 and 2023

1. NATURE OF THE ORGANIZATION

Petrus Resources Ltd. (the "Company" or "Petrus") was incorporated under the laws of the Province of Alberta, Canada on November 25, 2015. The principal undertaking of Petrus is the investment in energy business-related assets. The operations of the Company consist of the acquisition, development, exploration and exploitation of these assets. These consolidated financial statements reflect only the Company's proportionate interest in such activities and are comprised of the Company and its subsidiaries, Petrus Resources Corp. and Petrus Resources Inc. The Company's head office is located at 1110, 240 - 4th Avenue SW, Calgary, Alberta, Canada.

These consolidated financial statements for the years ended December 31, 2024 and 2023 were approved by the Company's Audit Committee and Board of Directors on March 24, 2025.

2. BASIS OF PRESENTATION

Statement of Compliance

These consolidated financial statements have been prepared by management in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards").

Measurement Basis

These consolidated financial statements were prepared on the basis of historical cost unless otherwise required. This method is consistent with the method used in prior years. These consolidated financial statements are presented in Canadian dollars.

Consolidation

These consolidated financial statements include the accounts of Petrus and its 100% owned subsidiaries, Petrus Resources Corp. and Petrus Resources Inc. Subsidiaries are consolidated from the date control is obtained until the date control ends. Control exists where the Company has power over the investee, exposure or rights to variable returns from the investee and the ability to use its power over the investee to affect returns. All intra-group balances and transactions are eliminated on consolidation.

Critical Accounting Estimates

The timely preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities and income and expenses. Accordingly, actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant estimates and judgments made by management in the preparation of the financial statements are outlined below.

i. Depletion and reserve estimates

Petroleum and natural gas assets are depleted on a unit of production basis at a rate calculated by reference to proved developed producing reserves or proved and probable reserves determined in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). For assets depleted based on proved and probable reserves, the calculation incorporates the estimated future cost of developing and extracting those reserves. Reserves are estimated using independent reservoir engineering reports and represent the estimated quantities of crude oil, natural gas and natural gas liquids for which recoverability in future years from known reservoirs is deemed to be technically feasible and which are considered commercially producible. Reserves estimates, although not reported as part of the Company's financial statements, can have a significant effect on net income (loss), assets and liabilities as a result of their impact on depletion and depreciation, decommissioning liabilities, deferred taxes, asset impairments and business combinations.

An independent qualified reserves evaluator ("IQRE") performs evaluations of the Company's petroleum and natural gas reserves on an annual basis. The estimation of reserves is an inherently complex process requiring significant judgment. Estimates of economically recoverable petroleum and natural gas reserves are based upon a number of variables and assumptions including expected future production volumes, forecasted commodity prices, future operating costs and future development costs, all of which may vary considerably from actual results. These estimates are expected to be revised upward or downward over time, as additional information such as reservoir performance becomes available or as economic conditions change.

ii. Impairment indicators and cash-generating units

For purposes of impairment testing, exploration and evaluation assets and petroleum and natural gas assets are aggregated into cash-generating units ("CGUs"), based on separately identifiable and largely independent cash inflows. The determination of the Company's CGUs is subject to judgment.

The recoverable amounts of CGUs and individual assets have been determined based on the higher of the value-in-use ("VIU") and fair value less costs of disposal (FVLCOD). These calculations require the use of estimates and assumptions, including expected future production volumes, forecasted commodity prices, future operating costs, future development costs and the discount rate. These assumptions are subject to change

as new information becomes available and changes in economic conditions take place. Changes may impact the estimated life of the assets and economical reserves recoverable and may require a material adjustment to the carrying value of exploration and evaluation assets and petroleum and natural gas assets. The Company monitors internal and external indicators of impairment relating to its tangible assets.

iii. Technical feasibility and commercial viability of exploration and evaluation assets

The determination of technical feasibility and commercial viability, based on the presence of proved and probable reserves, results in the transfer of assets from exploration and evaluation assets to property, plant and equipment. As discussed above, the estimate of proved and probable reserves is inherently complex and requires significant judgment. Thus, any material change to reserve estimates could affect the technical feasibility and commercial viability of the underlying assets.

iv. Financial instruments

Financial instruments are subject to valuations at the end of each reporting period. Generally, the valuation is based on active and efficient markets. However, certain financial instruments may not be traded on an efficient market or the market may disappear or be subject to conditions that impede the efficiency of the market.

v. Decommissioning obligation

At the end of the operating life of the Company's facilities and properties and upon retirement of its petroleum and natural gas assets, decommissioning costs will be incurred by the Company. This requires judgment regarding abandonment date, future environmental and regulatory legislation, the extent of reclamation activities, the engineering methodology for estimating cost, future removal technologies in determining the removal cost and discount rates to determine the present value of these cash flows.

vi. Income taxes

Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in income or loss both in the period of change, which would include any impact on cumulative provisions, and in future periods. Changes in tax laws in the jurisdictions in which the Company operates could limit the ability of the Company to obtain tax deductions in future periods. Income taxes are subject to measurement uncertainty. Deferred income tax assets are recorded to the extent that it is probable that the deductible temporary differences will be recoverable in future periods. The recoverability assessment involves a significant amount of estimation including an evaluation of when the temporary differences will reverse, an analysis of the amount of future taxable earnings, the availability of cash flow to offset the tax assets when the reversal occurs and the application of tax laws.

vii. Measurement of share-based compensation

Share-based compensation recorded pursuant to share-based compensation plans is subject to estimated fair values, forfeiture rates and the future attainment of performance criteria.

MATERIAL ACCOUNTING POLICIES

(a) Revenue recognition

Revenue from contracts with customers is recognized when or as Petrus satisfies a performance obligation by transferring a promised good or service to a customer. The transfer of control of oil, natural gas, natural gas liquids usually occurs at a point in time and coincides with title passing to the customer and the customer taking physical possession. The transaction price for variable price contracts is based on the commodity price, adjusted for quality, location and other factors. The amount of revenue recognized is based on the agreed transaction price with any variability in transaction price recognized in the same period. Payments are normally received from customers within 30 days following the end of the production month. The Corporation does not have any long-term contracts with unfulfilled performance obligations and does not disclose information about remaining performance obligations with an expected duration of 12 months or less.

(b) Exploration & evaluation assets

Capitalization

All costs incurred after the rights to explore an area have been obtained, such as geological and geophysical costs, other direct costs of exploration (drilling, testing and evaluating the technical feasibility and commercial viability of extraction) and appraisal and including any directly attributable general and administration costs and share-based payments, are accumulated and capitalized as exploration and evaluation assets.

Certain costs incurred prior to acquiring the legal rights to explore are charged directly to net income (loss).

Depletion & depreciation

Exploration and evaluation costs are not amortized prior to the conclusion of appraisal activities. At the completion of appraisal activities, if technical feasibility is demonstrated and commercial reserves are discovered, then the carrying value of the relevant exploration and evaluation asset will be reclassified as a property, plant and equipment asset into the CGU to which it relates, but only after the carrying value of the relevant exploration and evaluation asset has been assessed for impairment and, where appropriate, its carrying value adjusted. Technical feasibility and commercial viability are considered to be demonstrable when proved or probable reserves are determined to exist. If it is determined that technical feasibility and

commercial viability have not been achieved in relation to the exploration and evaluation assets appraised, all other associated costs are written down to the recoverable amount in net income (loss).

Expired land leases included as undeveloped land in exploration and evaluation assets are recognized in exploration and evaluation cost in net income (loss) upon expiry and are considered prior to expiry. Management considers upcoming land lease expiries and may recognize the costs in advance of expiry.

Impairment

Indicators of impairment of exploration and evaluation assets are assessed at each reporting date which can include upcoming land lease expiries, third party land valuations and other information. When there are such indications, an impairment test is carried out and any resulting impairment loss is written off to net income (loss). The recoverable amount is the greater of fair value, less costs of disposal, or value-in-use.

(c) Property, plant and equipment

The Company's property, plant and equipment is comprised of petroleum and natural gas assets and corporate assets.

Capitalization

Petroleum and natural gas assets are measured at cost less accumulated depletion and depreciation and accumulated impairment losses, if any. Petroleum and natural gas assets consists of the purchase price and costs directly attributable to bringing the asset to the location and condition necessary for its intended use. Petroleum and natural gas assets include developing and producing interests such as land acquisitions, geological and geophysical costs, facility and production equipment, including any directly attributable general and administration costs and share-based payments and the initial estimate of the costs of dismantling and removing an asset and restoring the site on which it was located.

Subsequent costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability are recognized as developing and producing petroleum and natural gas interests when they increase the future economic benefits embodied in the specific asset to which they relate. Such capitalized petroleum and natural gas interests generally represent costs incurred in developing proved and/or probable reserves, and are accumulated on a field or geotechnical area basis. The cost of day-to-day servicing of an item of petroleum and natural gas assets is expensed in income or loss as incurred. Petroleum and natural gas assets are derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from the disposal of an asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in net income or loss.

Depletion and depreciation

The costs for petroleum and natural gas properties, including related pipelines and facilities, are depleted using a unit-of-production method based on the commercial proved and probable reserves.

Petroleum and natural gas assets are not depleted until production commences. This depletion calculation includes actual production in the period and total estimated proved and probable reserves attributable to the assets being depleted, taking into account total capitalized costs plus estimated future development costs necessary to bring those reserves into production. Relative volumes of reserves and production (before royalties) are converted at the energy equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil.

Proved and probable reserves are estimated using independent reservoir engineering reports and represent the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible.

Corporate assets are recorded at cost less accumulated depreciation. Depreciation is calculated on a declining balance method so as to write off the cost of these assets, less estimated residual values, over their estimated useful lives consistent with the treatment used for tax purposes.

Impairment

The assessment for impairment entails comparing the carrying value of the CGU with its recoverable amount: that is, the higher of fair value, less costs of disposal, and value in use. Petrus' property, plant and equipment are grouped into CGUs based on separately identifiable and largely independent cash inflows considering geological characteristics, shared infrastructure and exposure to market risks. Estimates of future cash flows used in the calculation of the recoverable amount are based on reserve evaluation reports prepared by independent reservoir engineers.

The CGU's are reviewed quarterly for indicators of impairment. Indicators are events or changes in circumstances that indicate that the carrying amount may not be recoverable. If indicators of impairment exist, the recoverable amount of the CGU is estimated. If the carrying amount of the CGU exceeds the recoverable amount, the CGU is written down with an impairment recognized in net income (loss).

The recoverable amount is the higher of fair value, less costs of disposal, and the value-in-use. Fair value, less costs of disposal, is derived by estimating the discounted after-tax future net cash flows. Discounted future net cash flows are based on forecast commodity prices and costs over the expected economic life of the reserves and discounted using market-based rates to reflect a market participant's view of the risks associated with the assets. Value-in-use is assessed using the expected future cash flows discounted at a pre-tax rate.

Impairments of property, plant and equipment are reversed when there is significant evidence that the impairment has been reversed, but only to the extent of what the carrying amount would have been had no impairment been recognized.

(d) Decommissioning obligations

The Company's activities give rise to dismantling, decommissioning and reclamation requirements. Costs related to these abandonment activities are estimated by management in consultation with the Company's engineers based on risk-adjusted current costs which take into consideration current technology in accordance with existing legislation and industry practices.

Decommissioning obligations are measured at the present value of the best estimate of expenditures required to settle the obligations at the reporting date. When the fair value of the liability is initially measured, the estimated cost, discounted using a risk-free rate, is capitalized by increasing the carrying amount of the related petroleum and natural gas assets. The increase in the provision due to the passage of time, or accretion, is recognized as a finance expense. Increases and decreases due to revisions in the estimated future cash flows are recorded as adjustments to the carrying amount of the related petroleum and natural gas assets.

Actual costs incurred upon settlement of the liability are charged against the obligation to the extent that the obligation was previously established. The carrying amount capitalized in petroleum and natural gas assets is depleted in accordance with the Company's depletion policy. The Company reviews the obligation at each reporting date and revisions to the estimated timing of cash flows, discount rates and estimated costs will result in an increase or decrease to the obligations. Any difference between the actual costs incurred upon settlement of the obligation and recorded liability is recognized as an increase or reduction in income.

(e) Finance expenses

Finance expense may be comprised of interest expense on borrowings, acquisition related (transaction) costs, foreign exchange expenses and accretion of the discount on decommissioning obligations.

(f) Financial instruments

Financial instruments are recognized initially at fair value. Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants in its principal or most advantageous market at the measurement date.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are further categorized using a three-level hierarchy that reflects the significance of the lowest level or inputs used in determining fair value:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value, and volatility factors, which can be substantially observed or corroborated in the marketplace.
Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data

At each reporting date, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing the level of classification for each financial asset and financial liability measured or disclosed at fair value in the financial statements based on the lowest level of input that is significant to the fair value measurement as a whole. Assessment of the significance of a particular input to the fair value measurement requires judgement and may affect the placement within the fair value hierarchy.

Subsequent to initial recognition, financial instruments are measured based on their classification as described below:

Fair value through profit or loss: Financial instruments under this classification include risk management assets and liabilities.
Amortized cost: Financial instruments under this classification include cash, accounts receivable, deposits, bank indebtedness, accounts payable and long term debt.

(g) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a reduction in share capital, net of any tax effects.

(h) Income taxes

The Company's income tax expense is comprised of current and deferred tax. Income tax expense is recognized through income or loss except to the extent that it relates to items recognized directly in equity, in which case the related income taxes are also recognized in equity.

Current tax is the expected tax payable on taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable income. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable income

will be available against which those deductible temporary differences can be utilized. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in the jurisdictions of Alberta and Canada. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

(i) Joint arrangements

A portion of the Company's exploration, development and production activities are conducted jointly with others through unincorporated joint operations. These financial statements reflect only the Company's proportionate interest of these joint operations and the proportionate share of the relevant revenue and related costs.

(j) Share-based compensation plans

The Company's award plans consist of grants of stock option units and restricted share units ("RSUs") to officers and employees pursuant to an award plan as well as grants of deferred share units ("DSUs") to non-executive Directors.

Share-based compensation expense is determined based on the estimated fair value of shares on the date of grant. Forfeitures are estimated at the grant date and are subsequently adjusted to reflect actual forfeitures. The expense is recognized over the service period, with a corresponding increase to contributed surplus. The Company capitalizes the qualifying portion of share-based compensation expense directly attributable to the exploration and development activities of exploration and evaluation assets and petroleum and natural gas assets, with a corresponding decrease to share-based compensation expense. At the time the stock options or performance warrants are exercised, the issuance of common shares is recorded as an increase to shareholders' capital and a corresponding decrease to contributed surplus.

For deferred share units ("DSUs") that can be settled in cash or equity at the option of the Company, the fair value of the DSUs is recognized as stock-based compensation expense, with a corresponding increase in contributed surplus.

(k) Earnings per share

Earnings per share are presented for basic and diluted earnings. Basic per share information is computed by dividing the net income (loss) for the period attributable to equity owners of the Company by the weighted average number of common shares outstanding during the period. The weighted average number of shares for diluted earnings per share information is calculated using the treasury stock method whereby it is assumed that proceeds obtained upon exercise of performance warrants and stock options would be used to purchase common shares at the average market price during the period. The treasury stock method also assumes that the deemed proceeds related to unrecognized share-based payments expense are used to repurchase shares at the average market price during the period. Under the treasury stock method, stock options and share warrants have a dilutive effect only when the average market price of the common shares during the period exceeds the exercise price of the options or warrants (they are "in-the-money"). Exercise of in-the-money stock options and share warrants is assumed at the beginning of the year or date of issuance, if later. Should the Company have a loss for the period, stock options and share warrants would be anti-dilutive and therefore will have no effect on the determination of loss per share.

(l) Leases

At inception of a contract, the Company assesses whether a contract is, or contains a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, the asset is not identified;
the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
the Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
the Company has the right to operate the asset; or
the Company designed the asset in a way that predetermines how and for what purpose it will be used.

i) As a lessee

The Company recognizes a right-of-use ("ROU") asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The ROU asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. The estimated useful lives of ROU assets are determined on the same basis as those of property and equipment. In addition, the ROU asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the intrest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

(m) Government grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to it, and that the grant will be received. Grants related to income are presented in the Consolidated Statement of Comprehensive Income and are deducted in reporting the related expense. Grants related to assets are presented in the Consolidated Balance Sheet by deducting the grant in arriving at the carrying amount of the asset or recognized as other income.

(n) Carbon credits

Carbon credits that are held for sale in the ordinary course of business are recognized as inventory in the year credits are verified and are measured at the lower of cost or net realizable value. The cost of emission credits is determined at the market value of the credits in the year credits are verified.

Upon sale of the carbon credits, the carrying amount is derecognized from inventory on the Consolidated Balance Sheet, recording any gain or loss on the Statements of Net Income and Comprehensive Income.

(o) New standards and interpretations

IAS 1 - Presentation of Financial Statements

In January 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements ("IAS 1"), to clarify its requirements for the presentation of liabilities as current or non-current in the statement of financial position. The amendments were adopted on January 1, 2024 and had no impact on the Company's consolidated financial statements.

New Accounting Standards

In April 2024, the IASB issued IFRS 18 "Presentation and Disclosure in Financial Statements", which provides presentation and disclosure requirements for the primary financial statements and related notes, replacing IAS 1 "Presentation of Financial Statements". IFRS 18 introduces defined categories for income and expenses and requires disclosure of new defined subtotals, including operating profit. The new standard also requires additional notes for management performance measures and disclosure of certain expenses by nature. There are some associated changes to the statement of cash flows, including the starting point for the calculation of cash flows from operating activities and the categorization of interest and dividends. IFRS 18 is effective January 1, 2027, with early adoption permitted. The new standard is to be adopted retrospectively. The Company is assessing the impact of IFRS 18 on the Company's consolidated financial statements.

In May, 2024, the IASB issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures to clarify the date of recognition and derecognition of financial assets and liabilities and provide further clarification on the classification of certain financial assets. The amendments are effective January 1, 2026 and are to be applied retrospectively. The Company is evaluating the impact that the amendments will have on the consolidated financial statements.

4. EXPLORATION AND EVALUATION ASSETS

The components of the Company's exploration and evaluation ("E&E") assets are as follows:

$000s
Balance, December 31, 2022	34,837
Additions	1,064
Exploration and evaluation expense	(4,706)
Capitalized G&A	284
Capitalized share-based compensation	194
Transfers to property, plant and equipment (note 5)	(1,045)
Balance, December 31, 2023	30,628
Additions	485
Exploration and evaluation expense	(265)
Transfers to property, plant and equipment (note 5)	(90)
Balance, December 31, 2024	30,758

During the year ended December 31, 2024, the Company incurred exploration and evaluation expenses of $0.3 million which relates to expired and nearly expired undeveloped, non-core land (year ended December 31, 2023 – $4.7 million).

During the year ended December 31, 2024, the Company did not capitalize any of its general and administrative expenses ("G&A") (year ended December 31, 2023 – $0.3 million) nor its non-cash share-based compensation as the Company did not have any exploration activities during the periods (year ended December 31, 2023 – $0.2 million).

The Company did not identify any indicators of impairment at December 31, 2024.

5. PROPERTY, PLANT AND EQUIPMENT

The components of the Company's property, plant and equipment ("PP&E") assets are as follows:

$000s	Cost	Accumulated DD&A	Net book value
Balance, December 31, 2022	962,616	(646,864)	315,752
Additions	85,220	—	85,220
Property acquisitions	50	—	50
Property dispositions	(150)	—	(150)
Capitalized G&A	852	—	852
Capitalized share based compensation	583	—	583
Transfer from exploration and evaluation assets (note 4)	1,045	—	1,045
Depletion & depreciation	—	(46,623)	(46,623)
Decrease in decommissioning provision (note 8)	(1,626)	—	(1,626)
Balance, December 31, 2023	1,048,590	(693,487)	355,103
Additions	30,168	—	30,168
Addition of right of use asset	888	—	888
Capitalized G&A	1,161	—	1,161
Capitalized share-based compensation (note 10)	792	—	792
Transfers from exploration and evaluation assets (note 4)	90	—	90
Depletion & depreciation	—	(41,263)	(41,263)
Increase in decommissioning provision (note 8)	3,998	—	3,998
Balance, December 31, 2024	1,085,687	(734,750)	350,937

At December 31, 2024, estimated future development costs of $487.5 million (December 31, 2023 – $507.0 million) associated with the development of the Company's proved plus probable undeveloped reserves were included with the costs subject to depletion. During the year ended December 31, 2024, the Company capitalized $1.2 million of general and administrative expenses ("G&A") (year ended December 31, 2023 – $0.9 million) and non-cash share-based compensation of $0.8 million, (year ended December 31, 2023 – $0.6 million), directly attributable to development activities.

For the year ended December 31, 2024, due to the decrease in natural gas prices, the Company identified indicator of impairment and conducted an impairment test on the Ferrier CGU. No impairment was recorded as the carrying amount exceeded the recoverable amount. The Company did not identify any indicators of impairment or impairment reversal on the Foothills and Central Alberta CGUs for the twelve months ended December 31, 2024.

The recoverable amount, a level 3 input on the fair value hierarchy, was estimated at its fair value less costs of disposal, using an after-tax discount rate of 11.0%. A increase or decrease of one percent in the discount rate or five per cent in the cash flow estimates would not result in any impairment. The Company uses the following forward commodity price estimates:

Year	WTI in CAD$	AECO $/MMbtu
2025	101.41	2.35
2026	102.07	3.42
2027	102.01	3.60
2028	104.05	3.67
2029	106.13	3.75
2030	108.26	3.82
2031	110.42	3.90
2032	112.63	3.98
2033	114.88	4.05
2034	117.18	4.14
2035	119.52	4.22

Escalation rate of 2.0% thereafter.

At December 31, 2024, the carrying balance of the right of use assets was $1.0 million, net of accumulated depreciation of $1.4 million.

6. DEBT

At December 31, 2024, Petrus had two debt instruments outstanding; a reserve-based, secured operating revolving loan facility with an Alberta-based financial institution (the "Revolving Loan Facility" or "RLF") and a second lien secured term facility (the "Second Lien Facility").

Revolving Loan Facility

At December 31, 2024, the RLF was comprised of a $60.0 million operating facility payable on demand by the lender and has an interest rate of Canada Prime plus 2.5%. The amount of the RLF is subject to a borrowing base review performed on a semi-annual basis by the lender, based primarily on reserves and commodity prices estimated by the lenders as well as other factors. The next semi-annual review is due on May 31, 2025.

At December 31, 2024, the Company had a $0.7 million letter of credit outstanding against the RLF (December 31, 2023 – $0.7 million) and had drawn $32.7 million against the RLF (December 31, 2023 – $24.2 million).

Second Lien Facility

At December 31, 2024 the Company had $25.0 million outstanding on the $25 million Second Lien Facility. The Second Lien Facility is a three-year term facility (maturity date May 31, 2027) with a fixed interest rate of 11% per annum and can be repaid at the discretion of the Company. The Second Lien Facility is a related party transaction with a major shareholder who owns approximately 21% of the outstanding shares of the Company. The total interest paid during the year ended December 31, 2024 to the major shareholder, related to the Second Lien facility, was $2.8 million.

Financial Covenants

The Company's RLF agreement contains various positive covenants in the normal course of business, including certain financial covenants. The following definitions are used in the covenant calculations for the debt instrument:

Working Capital

Working Capital means Current Assets to Current Liabilities whereby Current Assets means on any date of determination, the current assets of Petrus that would, in accordance with IFRS, be classified as of that date as current assets plus any undrawn availability under the RLF, less any non-cash amount required to be included in current assets as the result of the application of IFRS including non-cash commodity and interest rate hedges assets and liabilities and whereby Current Liabilities means, on any date of determination, the liabilities of Petrus that would, in accordance with IFRS, be classified as of that date as current liabilities, excluding (a) non-cash obligations under IFRS including non-cash commodity and interest rate hedges assets and liabilities, and (b) the current portion of long-term debt.

Working Capital Ratio means the ratio of Current Assets to Current Liabilities as defined above, less any amounts outstanding under the Company's RLF.

The Company's RLF is subject to certain financial covenants. The key financial covenant as at December 31, 2024 is summarized in the following table. At December 31, 2024 the Company is in compliance with all financial covenants.

Financial Covenant Description	Required Ratio	As at December 31, 2024
Working Capital Ratio (as defined in the RLF agreement)	Over 1.00	2.26

7. LEASES

The Company's lease obligations are as follows:

$000s
Balance, December 31, 2023	363
Additions	888
Finance expense	19
Lease payments	(277)
Balance, December 31, 2024	993

The Company's future commitments associated with its lease obligations are as follows:

In July, 2024, the Company entered into a new office lease. The Company has recognized a right of use asset of $0.9 million. The asset was measured at amounts equal to the present value of the lease obligation. The weighted average incremental borrowing rate used to determine the lease obligation at adoption was 8%.

8. DECOMMISSIONING OBLIGATION

The decommissioning liability was estimated based on the Company's net ownership interest in all wells and facilities, the estimated costs to abandon and reclaim the wells and facilities and the estimated timing of the costs to be incurred in future periods. The estimated future cash flows have been discounted using an average risk free rate of 3.32% and an inflation rate of 2.0% (3.05% and 2.0%, respectively at December 31, 2023). Changes in estimates in 2023 and 2024 are due to the changes in the risk free and inflation rates and changes in the estimated future cash flow to reclaim the wells and facilities. The Company has estimated the net present value of the decommissioning obligations to be $40.7 million as at December 31, 2024 ($37.3 million at December 31, 2023). The undiscounted, uninflated total future liability at December 31, 2024 is $50.1 million ($44.3 million at December 31, 2023). The payments are expected to be incurred over the operating lives of the assets with the majority expected to settle between 2023 and 2057.

The following table reconciles the decommissioning liability:

$000s
Balance, December 31, 2022	39,015
Liabilities incurred	525
Liabilities settled	(1,374)
Change in estimates or discount rate	(2,152)
Accretion expense	1,277
Balance, December 31, 2023	37,291
Liabilities incurred	299
Liabilities settled	(1,776)
Change in estimates or discount rate	3,699
Accretion expense	1,167
Balance, December 31, 2024	40,680
Current portion of decommissioning obligation	1,073
Non-current portion of decommissioning obligation	39,607

9. FINANCIAL RISK MANAGEMENT

The Company utilizes commodity contracts as a risk management technique to mitigate exposure to commodity price volatility.

The following table summarizes the financial derivative contracts Petrus had outstanding at December 31, 2024:

Contract Period	Type	Total Daily Volume (GJ)	Average Price (CDN$/GJ)
Natural Gas Swaps
Jan. 1, 2025 to Mar. 31, 2025	Fixed price	19,000	$3.12
Apr. 1, 2025 to Oct. 31, 2025	Fixed price	14,000	$2.62
Nov. 1, 2025 to Mar. 31, 2026	Fixed price	11,000	$3.45
Apr. 1, 2026 to Oct. 31, 2026	Fixed price	6,000	$2.51
Natural Gas Collars
Jan. 1, 2025 to Mar 31, 2025	Costless collar	1,000	$3.25-4.12
Jan. 1, 2025 to Mar 31, 2025	Costless collar	1,000	$3.42-3.62
Apr. 1, 2025 to Oct. 31, 2025	Costless collar	1,000	$3.10-3.83
Apr. 1, 2025 to Oct. 31, 2025	Costless collar	1,000	$2.50-3.16
Nov. 1, 2025 to Mar. 31, 2026	Costless collar	1,000	$3.30-4.08
Contract Period	Type	Total Daily Volume (Bbl)	Average Price (CDN$/Bbl)
Crude Oil Swaps
Jan. 1, 2025 to Mar. 31, 2025	Fixed price	500	$92.64
Jan. 1, 2025 to Jun. 30, 2025	Fixed price	500	$93.38
Jan. 1, 2025 to Dec. 31, 2025	Fixed price	700	$94.01
Apr. 1, 2025 to Sept. 30, 2025	Fixed price	100	$94.05
Jul. 1, 2025 to Sept. 30, 2025	Fixed price	100	$95.25
Jul. 1, 2025 to Dec. 31, 2025	Fixed price	300	$93.32
Jan. 1, 2026 to Mar. 31, 2026	Fixed price	200	$91.05
Jan. 1, 2026 to Jun. 30, 2026	Fixed price	300	$92.32
Jan. 1, 2026 to Dec. 31, 2026	Fixed price	100	$90.05
Jul. 1, 2026 to Sept. 30, 2026	Fixed price	100	$87.25

The following is a summary of Petrus's financial assets and financial liabilities that are subject to offsetting as December 31, 2024 and December 31, 2023:

$000s At December 31, 2023	Gross Amounts of Recognized Financial Assets (Liabilities)	Gross Amounts of Recognized Financial Assets (Liabilities) Offset on Balance Sheets	Net Amounts of Financial Assets (Liabilities) Recognized on Balance Sheets
Risk management contracts
Current asset	9,767	(996)	8,771
Long-term asset	2,093	(408)	1,685
Current liabilities	(396)	—	(396)
Net position	11,464	(1,404)	10,060
$000s At December 31, 2024
Risk management contracts
Current asset	5,630	(2,998)	2,632
Long-term asset	—	—
Current liability	564	(603)	(39)
Net position	6,194	(3,601)	2,593

Earnings impact of realized and unrealized gains (losses) on financial derivatives:

$000s	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Realized gain on financial derivatives	6,930	8,051
Unrealized gain/(loss) on financial derivatives	(7,466)	4,938
Net gain/(loss) on financial derivatives	(536)	12,989

10. SHARE CAPITAL

Authorized

The authorized share capital consists of an unlimited number of common voting shares without par value and an unlimited number of preferred shares.

Issued and Outstanding

Common shares ($000s)	Number of Shares	Amount
Balance, December 31, 2022	123,238,528	492,241
Common shares repurchased	(198,700)	(789)
Common shares issued on exercise of stock options	1,226,542	753
Balance, December 31, 2023	124,266,370	492,205
Common shares repurchased	(396,100)	(1,568)
Common shares issued on exercise of stock options	842,614	779
Common shares issued for dividend reinvestment plan	400,245	459
Balance, December 31, 2024	125,113,129	491,875

Dividends

On October 10, 2023, the Company declared a special dividend of $0.03 per common share totaling $3.7 million that was paid in November 2023. During the year ended December 31, 2023, the Company declared a monthly dividend of $0.01 per common share totaling $1.2 million, with the first paid in January 2024. During the twelve months ended December 31, 2024 the Company declared dividends of $13.7 million and paid $14.9 million (including $0.5 million in shares as dividend reinvestment).

Normal Course Issuer Bid ("NCIB")

On June 25, 2024, the Company announced the approval of its renewed NCIB by the Toronto Stock Exchange ("the TSX"). The 2024 NCIB allows the Company to purchase up to 6,218,596 common shares over a period of twelve months (expiring no later than June 27, 2025).

Purchases are made on the open market through the TSX or alternative Canadian trading platforms at the market price of such common shares. All common shares purchased under the NCIB are cancelled. The total cost paid, including commissions and fees, is first charged to share capital to the extent of the average carrying value of the Company's common shares and the excess paid is recorded to retained earnings and any shortfall is recorded to contributed surplus.

During the year ended December 31, 2024, the Company repurchased 396,100 shares for cancellation at an average price of $1.30 per share totaling 0.5 million.

SHARE-BASED COMPENSATION

Stock Options

The Company has a stock option plan in place whereby it may issue stock options to employees, consultants and directors of the Company. The aggregate number of shares that may be acquired upon exercise of all options granted pursuant to the plans shall, at any date or time of determination, be equal to ten percent (10%) of the number that is equal to (i) the number of the Company's basic common shares then issued and outstanding; minus (ii) a number equal to five (5) times the number of common shares that are issuable upon exercise of the then outstanding Performance Warrants, if any, minus (iii) a number equal to fifty percent (50%) of the number of common shares that have previously been issued upon the exercise of Performance Warrants, if any.

At December 31, 2024, 8,482,331 (December 31, 2023 – 8,616,900) stock options were outstanding. The summary of stock option activity is presented below:

	Number of stock options	Weighted average exercise price
Balance, December 31, 2022	8,519,709	$1.56
Granted	3,245,000	$1.67
Forfeited	(447,501)	$0.59
Expired	(1,207,500)	$2.12
Exercised	(1,492,808)	$0.61
Balance, December 31, 2023	8,616,900	$1.74
Granted	4,173,001	$1.50
Forfeited	(550,000)	$2.09
Expired	(2,081,256)	$2.20
Exercised	(1,676,314)	$0.77
Balance, December 31, 2024	8,482,331	$1.57
Exercisable, December 31, 2024	2,018,920	$1.65

The following table summarizes information about the stock options granted and outstanding:

Range of Exercise Price	Stock Options Outstanding
	Number granted	Weighted average exercise price	Weighted average remaining life (years)
$0.75	449,171	$0.75	0.13
$0.89	120,908	$0.89	0.13
$1.26	1,147,000	$1.26	1.38
$1.33	929,001	$1.33	1.90
$1.37-$1.78	4,117,910	$1.46	1.51
$2.09	340,000	$2.09	0.91
$2.25	755,000	$2.25	0.63
$2.81	623,341	$2.81	0.63
	8,482,331	$1.57	1.28

During the year ended December 31, 2024 the Company granted 4,173,001 options which vest equally over three years, and upon vesting, expire within 90 days thereafter. The weighted average fair value of each option granted during the twelve months ended December 31, 2024 of $0.51 was estimated on the date of grant using the Black-Scholes pricing model with the following weighted average assumptions:

	2024	2023
Risk free interest rate	3.23% - 4.79%	3.54% - 5.04%
Expected life (years)	1.00 - 3.00	1.13 - 3.13
Estimated volatility of underlying common shares (%)	72.62% - 77.90%	100% to 113%
Estimated forfeiture rate	5%	33%
Expected dividend yield (%)	9%	—%

Petrus estimated the volatility of the underlying common shares by analyzing the Company's volatility as well as the volatility of peer group public companies with similar corporate structure, oil and gas assets and size.

Restricted Share Unit ("RSU") Plan

The Company has a restricted share unit plan in place whereby it may issue restricted share units to officers, employees and consultants of the Company. Each RSU entitles the participants to receive, at the Company's discretion, either shares of the Company or cash equal to the trading price of the equivalent number of shares of the Company. All RSUs unless otherwise determined by the Board, vest as to one-third (1/3) annually over three years from the grant date. At December 31, 2024, 470,000 RSUs were issued and outstanding (December 31, 2023 – Nil).

Deferred Share Unit ("DSU") Plan

The Company has a deferred share unit plan in place whereby it may issue deferred share units to directors of the Company. Each DSU entitles the participants to receive, at the Company's discretion, either shares of the Company or cash equal to the trading price of the equivalent number of shares of the Company. All DSUs granted vest and become payable upon retirement of the director.

The compensation expense was calculated as equity using the fair value method based on the trading price of the Company's shares on the grant date. At December 31, 2024, 1,811,963 DSUs were issued and outstanding (December 31, 2023 – 1,658,837).

On each date that a dividend payment is made, holders of DSUs are credited with additional DSUs; the number of additional DSUs is calculated by dividing the dividends that would have been paid to such holder if the DSUs held at the record date of the cash dividend had been common shares, by the fair market value of the common shares on the date on which the dividends are paid on the common shares.

Share-based Compensation

The following table summarizes the Company's share-based compensation costs:

$000s	Year ended	Year ended
	Dec. 31, 2024	Dec. 31, 2023
Expensed	2,132	1,863
Capitalized to exploration and evaluation assets	—	194
Capitalized to property, plant and equipment	792	583
Total share-based compensation	2,924	2,640

NET INCOME (LOSS) PER SHARE

Net income (loss) per share amounts are calculated by dividing the net income for the period attributable to the common shareholders of the Company by the weighted average number of common shares outstanding during the period.

	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Net income (loss) for the period ($000s)	(1,246)	50,731
Weighted average number of common shares – basic (000s)	124,389	123,469
Weighted average number of common shares – diluted (000s)	124,389	126,436
Net income (loss) per common share – basic	($0.01)	$0.41
Net income (loss) per common share – diluted	($0.01)	$0.40

In computing diluted income per share for the twelve months ended December 31, 2024, no outstanding stock options, DSUs, or RSUs were included as they were considered anti-dilutive. For the twelve months ended December 31, 2023 – 8,616,900 outstanding stock options, 1,658,837 DSUs, and nil RSUs were considered in computing dilutive earnings per share.

OPERATING EXPENSES

The Company's operating expenses consisted of the following expenditures:

$000s	Year ended	Year ended
	Dec. 31, 2024	Dec. 31, 2023
Fixed and variable operating expenses	17,137	19,833
Processing, gathering and compression charges	4,568	5,068
Total gross operating expenses	21,705	24,901
Overhead recoveries	(1,329)	(1,396)
Total net operating expenses	20,376	23,505

13. GENERAL AND ADMINISTRATIVE EXPENSES

The Company's general and administrative expenses consisted of the following expenditures:

$000s	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Salaries	4,152	4,012
Other general and administrative expenses	3,026	3,125
Gross general and administrative expense	7,178	7,137
Capitalized general and administrative expense	(1,161)	(1,136)
Overhead recoveries	(726)	(1,818)
General and administrative expense	5,291	4,183

14. FINANCIAL INSTRUMENTS

At December 31, 2024, the Company's financial instruments include cash, accounts receivable, risk management contracts, accounts payable and accrued liabilities, revolving loan facility, lease obligations, and long-term debt.

The Company's Risk management contracts are carried at fair value on the balance sheets. These contracts are classified as Level 2 measurements in the three-level fair value measurement hierarchy. The approximate fair value of the Company's long term debt is disclosed in Note 6.

The carrying value of accounts receivable, accounts payable and accrued liabilities, and revolving loan facility as at December 31, 2024 approximate their fair values due to the short term nature of these instruments.

Risks associated with financial instruments

Credit risk

The Company's accounts receivable are with customers and joint venture partners in the petroleum and natural gas business and are subject to normal credit risk. Concentration of credit risk is mitigated by marketing the majority of the Company's production to reputable and financially sound purchasers under normal industry sale and payment terms. As is common in the petroleum and natural gas industry in western Canada, Petrus' receivables relating to the sale of petroleum and natural gas are received on or about the 25th day of the following month. Of the $11.6 million of accounts receivable outstanding at December 31, 2024 (December 31, 2023 – $17.3 million), $5.4 million is owed from 2 parties (December 31, 2023 – $5.8 million from 2 parties), and the balances were received subsequent to the year end. The Company considers accounts receivable outstanding past 120 days to be 'past due'. At December 31, 2024, the Company had an expected credit loss of $0.1 million (December 31, 2023 – $0.1 million). At December 31, 2024, 99.2% of Petrus' accounts receivable were aged less than 120 days. The Company does not anticipate any material collection issues.

The Company's risk management assets and cash are with chartered Canadian banks and the Company does not consider these assets to carry material credit risk.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company actively manages its liquidity through continuously monitoring forecast and actual cash flows activities and available credit and working capital facilities under existing banking arrangements. The Company believes that future cash flows generated from these sources will be adequate to settle Petrus's financial liabilities.

At December 31, 2024, the Company had a $60.0 million RLF, of which $32.7 million was drawn (December 31, 2023 – $24.4 million). For the year ended December 31, 2024, the Company generated cash flow from operating activities of $58.7 million.

The following are the contractual maturities of financial liabilities as at December 31, 2024:

$000s	Total	< 1 year	1-5 years
Accounts payable and accrued liabilities	17,287	17,287	—
Long term debt	31,638	2,750	28,888
Revolving Loan Facility	34,779	34,779	—
Lease obligations (discounted)	993	164	829
Total	84,697	54,980	29,717

At December 31, 2024, the Company had a working capital deficiency (excluding non-cash risk management assets and liabilities) of $36.3 million, primarily due to the $32.7 million drawn on the RLF, which is classified as a current liability. The RLF has a credit limit of $60 million and is payable upon demand, with the borrowings classified as current liabilities as of December 31, 2024. Excluding the RLF, the working capital deficit would have been $3.5 million.

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company's cash, bank indebtedness and accounts receivable are not exposed to significant interest rate risk. The RLF is exposed to interest rate cash flow risk as the instrument is priced on a floating interest rate subject to fluctuations in market interest rates. The remainder of Petrus' financial assets and liabilities are not exposed to interest rate risk. A 1% increase in the Canadian prime interest rate during the twelve months ended December 31, 2024 and holding all other factors constant, would have increased/decreased net income by approximately $0.3 million, which relates to interest expense on the average outstanding RLF during the periods assuming that all other variables remain constant (December 31, 2023 – $0.1 million).

Commodity Price Risk

Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in commodity prices. A significant change in commodity prices can materially impact the Company's borrowing base limit under its RLF and may reduce the Company's ability to raise capital. Commodity prices for petroleum and natural gas are not only influenced by Canadian and United States demand, but also by world events that dictate the levels of supply and demand.

The Company manages the risks associated with changes in commodity prices by entering into a variety of financial derivative contracts (see note 9). The Company assesses the effects of movement in commodity prices on net loss. When assessing the potential impact of these commodity price changes, the Company believes a $5/CDN WTI/bbl change in the price of oil and a $0.25/GJ change in the price of natural gas are reasonable measures, holding all other factors constant.

At December 31, 2024, it was estimated that a $0.25/GJ decrease in the price of natural gas would have increased income before income taxes by $2.1 million (December 31, 2023 – $2.1 million). An opposite change in commodity prices would result in an opposite impact on net income before income taxes. At December 31, 2024, it was estimated that a $5.00/CDN WTI/bbl decrease in the price of oil would have increased income before income taxes by $3.0 million (December 31, 2023 – $3.6 million). An opposite change in commodity prices would result in an opposite impact on net income before income taxes.

Foreign Exchange Risk

The Company is exposed to the risk of changes in the U.S./Canadian dollar exchange rate on crude oil sales based on U.S. dollar benchmark prices and commodity contracts that are settled in U.S. dollars. Foreign exchange risk is mitigated by entering into Canadian dollar denominated commodity risk management contracts.

15. CAPITAL MANAGEMENT

The Company's general capital management policy is to maintain a sufficient capital base in order to manage its business to enable the Company to increase the value of its assets and therefore its underlying share value. In the management of capital, the Company includes share capital and total net debt, which is made up of debt and working capital (current assets less current liabilities). The Company manages its capital structure and makes adjustments in light of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Petrus may issue new equity, increase or decrease debt, adjust capital expenditures and acquire or dispose of assets.

The Company's net debt is as follows:

$000s	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Long-term debt	25,000	25,000
Current assets	(17,583)	(30,805)
Current liabilities	51,268	61,755
Current financial derivatives	2,632	8,374
Current portion of lease obligation	(164)	(258)
Current portion of decommissioning obligation	(1,073)	(1,470)
Net debt	60,080	62,596

16. FINANCE EXPENSES

The components of finance expenses are as follows:

$000s	Year ended	Year ended
	Dec. 31, 2024	Dec. 31, 2023
Cash:
Interest	5,796	4,205
Finance fees	622	596
Foreign exchange	—	—
Total cash finance expenses	6,418	4,801
Non-cash:
Deferred financing costs	373	376
Accretion on decommissioning obligations (note 8)	1,167	1,277
Total non-cash finance expenses	1,540	1,653
Total finance expenses	7,958	6,454

17. SUPPLEMENTAL CASH FLOW INFORMATION

The following table reconciles the changes in non-cash working capital as disclosed in the statements of cash flows:

$000s	Year ended	Year ended
	Dec. 31, 2024	Dec. 31, 2023
Source (use) in non-cash working capital:
Deposits and prepaid expenses	(227)	(505)
Transaction costs on debt	30	60
Carbon credits	—	(630)
Accounts receivable	5,729	4,966
Accounts payable and accrued liabilities	(16,718)	(11,188)
	(11,186)	(7,297)
Operating activities	8,669	(3,654)
Financing activities	30	—
Investing activities	(19,885)	(3,643)

The following table reconciles the changes in liability resulting from financing activities:

$000s	Bank Indebtedness	Revolving Credit Facility	Term Loan	Total Liabilities from Financing Activities
Balance, December 31, 2023	208	24,175	25,000	49,383
Cash flows	(208)	8,181	—	7,973
Non-cash changes	—	388	—	388
Balance, December 31, 2024	—	32,744	25,000	57,744

18. COMMITMENTS AND CONTINGENCIES

Commitments

The commitments for which the Company is responsible as at December 31, 2024 are as follows:

$000s	Total	< 1 year	1-5 years	> 5 years
Firm service transportation	6,587	2,799	3,788	—

The commitments for which the Company was responsible as at December 31, 2023 were as follows:

$000s	Total	< 1 year	1-5 years	> 5 years
Firm service transportation	9,386	2,799	6,587	—

Contingencies

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

19. REVENUE

The following table presents Petrus' oil and natural gas revenue disaggregated by product type:

$000s	Year ended Dec. 31, 2024	Year ended Dec. 31, 2023
Oil and condensate sales	48,338	55,676
Natural gas sales	22,365	46,972
Natural gas liquids sales	22,848	22,603
Royalty revenue	170	354
Total oil and natural gas sales	93,721	125,605
Royalty expense	(12,572)	(17,255)
Gain (loss) on risk management activities	—	1,522
	81,149	109,872

20. RELATED PARTY TRANSACTIONS

The Company considers its directors and officers to be key management personnel. The following table outlines transactions with key management personnel:

$000s	Year ended December 31, 2024	Year ended December 31, 2023
Salaries, consulting fees, benefits and director fees, gross	1,485	1,348
Share based compensation, gross	1,080	1,135
	2,565	2,483

21. DEPOSITS AND PREPAID EXPENSES

The components of the Company's deposits and prepaid expenses for the periods indicated are as follows:

$000s	As at December 31, 2024	As at December 31, 2023
Prepaid interest and bank fees	146	169
Prepaid insurance	380	202
Prepaid operating expenses	19	19
Prepaid software	206	154
Deposits	1,989	1,992
Deposits and prepaid expenses	2,740	2,536

DEFERRED INCOME TAXES

$000s	2024	2023
Income (loss) before income taxes	(2,471)	31,110
Combined federal and Alberta tax rate	23 %	23 %
Computed “expected” tax recovery (expense)	568	(7,155)
Increase/(decrease) in taxes resulting from:
Share based payments	(530)	(429)
True up and other	1,187	19
Unrecognized deferred income tax asset	—	27,186
Deferred tax expense recovery	1,225	19,621

The components of the Company's deferred tax position at December 31, 2024 and 2023 are as follows:

$000s	2024	2023
Exploration and evaluation assets and property, plant and equipment	(42,308)	(37,305)
Asset retirement obligations	9,356	8,577
Non capital loss carry-forwards	54,099	50,608
Unrealized hedging loss	(605)	(2,314)
Other	304	55
Deferred tax asset	20,846	19,621

The Company had non-capital losses of approximately $240.4 million (2023 – $221.4 million) which may be applied against future income for Canadian tax purposes. These non-capital losses expire in 2032 and onwards.

CORPORATE INFORMATION

OFFICERS & VICE PRESIDENTS	DIRECTORS	SOLICITOR
Ken Gray, P.Eng
President and
Chief Executive Officer	Don T. Gray
Chairman
Scottsdale, Arizona	Burnet, Duckworth & Palmer LLP
Calgary, Alberta
Mathew Wong, CPA, CFA, CPA (WA, USA)
Chief Financial Officer	Ken Gray
Calgary, Alberta	AUDITOR
PricewaterhouseCoopers LLP (PwC)
Chartered Professional Accountants
Calgary, Alberta
Matt Skanderup
Chief Operating Officer	Patrick Arnell
Calgary, Alberta
Lindsay Hatcher
Vice President, Commercial & Corporate
Development	Donald Cormack
Calgary, Alberta	INDEPENDENT RESERVE EVALUATORS
InSite Petroleum Consultants Ltd.
Calgary, Alberta
	Peter Verburg
Calgary, Alberta	BANKERS
ATB Financial
Calgary, Alberta
		TRANSFER AGENT
Odyssey Trust Company
Calgary, Alberta
		HEAD OFFICE
1110, 240 – 4th Avenue S.W.
Calgary, Alberta T2P 4H4
Phone: 403-984-9014
Fax: 403-984-2717
		WEBSITE
www.petrusresources.com

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Petrus Resources Ltd. — Audit Report / Information 2024

47351_rns_2025-03-25_bf561132-3545-4401-83b0-7f9147bc4274.pdf

Independent auditor's report

Our opinion

What we have audited

Basis for opinion

Independence

Key audit matters

Other information

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

Auditor's responsibilities for the audit of the consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

1. NATURE OF THE ORGANIZATION

2. BASIS OF PRESENTATION

Statement of Compliance

Measurement Basis

Consolidation

Critical Accounting Estimates

i. Depletion and reserve estimates

ii. Impairment indicators and cash-generating units

Impairment

(c) Property, plant and equipment

Capitalization

Subsequent costs

Depletion and depreciation

Impairment

(d) Decommissioning obligations

(e) Finance expenses

(f) Financial instruments

(g) Share capital

(h) Income taxes

(m) Government grants

(n) Carbon credits

(o) New standards and interpretations

IAS 1 - Presentation of Financial Statements

New Accounting Standards

4. EXPLORATION AND EVALUATION ASSETS

5. PROPERTY, PLANT AND EQUIPMENT

6. DEBT

Revolving Loan Facility

Second Lien Facility

Financial Covenants

Working Capital

7. LEASES

8. DECOMMISSIONING OBLIGATION

9. FINANCIAL RISK MANAGEMENT

10. SHARE CAPITAL

Authorized

Issued and Outstanding

Dividends

Normal Course Issuer Bid ("NCIB")

SHARE-BASED COMPENSATION

Stock Options

Restricted Share Unit ("RSU") Plan

13. GENERAL AND ADMINISTRATIVE EXPENSES

14. FINANCIAL INSTRUMENTS

Risks associated with financial instruments

Credit risk

Liquidity risk

Interest Rate Risk

Commodity Price Risk

Foreign Exchange Risk

15. CAPITAL MANAGEMENT

16. FINANCE EXPENSES

17. SUPPLEMENTAL CASH FLOW INFORMATION

18. COMMITMENTS AND CONTINGENCIES

Commitments

Contingencies

19. REVENUE

20. RELATED PARTY TRANSACTIONS

21. DEPOSITS AND PREPAID EXPENSES

CORPORATE INFORMATION

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Petrus Resources Ltd. Audit Report / Information 2024