Pine Cliff Energy Ltd. — Interim / Quarterly Report 2021

May 6, 2021

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 – 2021

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
	(Canadian dollars, 000s)
	(unaudited)
			Note		As at March 31, 2021		As at December 31, 2020
	ASSETS
	Current assets
	Cash				15,528 15,523 2,404 333		7,878 14,863
	Trade and other receivables		3
	Prepaid expenses and deposits						2,484
	Investments		4				-
	Total current assets				33,788 7,837		25,225
	Exploration and evaluation		6				8,731
	Property, plant and equipment		7		241,357		254,943
	Total assets				282,982		288,899
	LIABILITIES
	Current liabilities
	Trade and other payables		3		25,577		27,275
	Lease liabilities		8		1,157		1,120
	Decommissioning provision		12		1,500		1,500
	Total current liabilities				28,234		29,895
	Lease liabilities		8		2,122		2,069
	Due to related party		9		6,000		6,000
	Subordinated promissory notes		10		6,000		6,000
	Term debt		11		48,774		48,747
	Decommissioning provision		12		229,768		233,505
	Total liabilities				320,898		326,216
	SHAREHOLDERS' DEFICIT
	Share capital		13		275,056		274,964
	Warrants				288		288
	Contributed surplus				14,596		14,540
	Accumulated other comprehensive loss				(67)		-
	Deficit				(327,789)		(327,109)
	Total shareholders'deficit				(37,916)		(37,317)
	Total liabilities and shareholders'deficit				282,982		288,899

Commitments (Note 16)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

1 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 – 2021

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS

(Canadian dollars, 000s except per share data) (unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS (Canadian dollars, 000s except per share data) (unaudited)	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS (Canadian dollars, 000s except per share data) (unaudited)
Three months ended March 31,
Note 2021	2020
REVENUE
Commodity sales 14 35,519	25,441 (1,740)
Royaltyexpense (3,289)
Commodity sales, net of royalties 32,230	23,701 950
Processingandgathering 14 940
Total revenue 33,170	24,651 18,336 2,376 11,597 7,900 - - 222 2,746 1,485
EXPENSES
Operating 17,953
Transportation 2,204
Depletion and depreciation 7 10,265
Impairment 7 -
Gain on disposition 6 (169)
Site decommissioning grants 12 (919)
Share-based payments 13 114
Finance 15 2,689
General and administrative 1,713
Total expenses 33,850	44,662
LOSS FOR THE PERIOD (680)	(20,011)
OTHER COMPREHENSIVE LOSS	- -
Unrealized loss on investments 4 (67)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (747)	(20,011)
Loss per share ($)	(0.06)
Basic and diluted 13 (0.00)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

2 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 – 2021

CONSOLIDATED STATEMENTS OF CASH FLOWS

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(Canadian dollars, 000s)
(unaudited)
Three months ended March 31,
Note 2021 2020
CASH PROVIDED BY (USED IN):
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CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Loss for the period		(680)	(20,011)
Items not affecting cash:
Depletion and depreciation	7	10,265	11,597
Impairment	7	-	7,900
Gain on disposition	6	(169)	-
Site decommissioning grants	12	(919)	-
Share-based payments	13	114	222
Finance expenses	15	2,689	2,746
Interest and bank charges	15	(1,300)	(1,301)
Decommissioning obligations settled	12	(158)	(501)
Changes in non-cash workingcapital accounts	15	(1,371)	985
Cashprovided byoperatingactivities		8,471	1,637
INVESTING ACTIVITIES
Property, plant and equipment	7	(336)	(1,809)
Exploration and evaluation	6	(32)	(13)
Acquisitions		-	(70)
Dispositions	7	25	5
Changes in non-cash workingcapital accounts	15	(212)	(2,309)
Cash used in investingactivities		(555)	(4,196)
FINANCING ACTIVITIES
Exercise of stock options	13	34	-
Payments on lease obligations	8	(300)	(259)
Cash used in financingactivities		(266)	(259)
Increase (decrease) in cash		7,650	(2,818)
Cash-beginning of period		7,878	8,661
CASH- END OF PERIOD		15,528	5,843

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

3 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 – 2021

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Canadian dollars, 000s) (unaudited)

(Canadian dollars, 000s) (unaudited)
	Note	Share capital	Contributed surplus1	Warrants	Accumulated other comprehensive income (loss)2	Deficit	Total equity (deficit)
BALANCE AT JANUARY 1, 2020		273,421	13,631	460	-	(277,002)	10,510
Loss for the period		-	-	-	-	(20,011)	(20,011)
Share-based payments	13	-	222	-	-	-	222
BALANCE AT MARCH 31, 2020		273,421	13,853	460	-	(297,013)	(9,279)
Loss for the period		-	-	-	-	(30,096)	(30,096)
Share-based payments	13	-	515	-	- - -	- - -	515
Exercise of warrants		-	172	(172)			-
Issuance of common shares, on exercise of warrants		1,543	-	-			1,543
BALANCE AT DECEMBER 31, 2020		274,964	14,540	288	- - - (67) -	(327,109) (680) - - -	(37,317)
Loss for the period		-	-	-			(680)
Share-based payments	13	-	114	-			114 (67) 34
Unrealized loss on investments		-	-	-
Exercise of stock options	13	92	(58)	-
BALANCE AT MARCH 31, 2021		275,056	14,596	288	(67)	(327,789)	(37,916)

1Contributed surplus is comprised of share-based payments.

2Accumulated other comprehensive income (loss) is comprised of unrealized gains and losses on available-for-sale investments.

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

4 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020. (all tabular amounts in Canadian dollars 000s, unless otherwise indicated)

1. NATURE OF BUSINESS

Pine Cliff Energy Ltd. (“ Pine Cliff ” or the “ Company ”) is a public company listed on the Toronto Stock Exchange (“ TSX ”) and incorporated under the Business Corporations Act (Alberta) . The address of the Company’s registered office is Suite 850, 1015 - 4th Street SW, Calgary, Alberta, T2R 1J4. Common shares of the Company (“ Common Shares ”) are listed for trading on the Toronto Stock Exchange (“ TSX ”) under the symbol “ PNE ”.

Pine Cliff is engaged in the acquisition, exploration, development and production of oil and natural gas in the Western Canadian Sedimentary Basin and conducts many of its activities jointly with others; these unaudited condensed consolidated financial statements (the “ Financial Statements ”) reflect only the Company’s proportionate interest in such activities.

2. BASIS OF PREPARATION

The Financial Statements have been prepared in accordance with IAS 34 – Interim Financial Reporting using International Financial Reporting Standards (“ IFRS ”).

The Financial Statements do not include all of the information required for annual financial statements and should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended December 31, 2020 (“ Annual Financial Statements ”).

The accounting policies, basis of measurement, critical accounting judgments and significant estimates to prepare the Annual Financial Statements as at and for the year ended December 31, 2020 have been applied in the preparation of these Financial Statements

The Financial Statements were authorized for issue by the Company’s board of directors (the “ Board ”) on May 5, 2021.

3. FINANCIAL INSTRUMENTS

Financial instruments and fair value measurement

Financial instruments of the Company consist of cash, trade and other receivables, trade and other payables, due to related party, subordinated promissory notes and Term debt, as defined herein. The carrying values of cash, trade and other receivables and trade and other payables approximate their respective fair values due to the short time before maturing. The carrying values of due to related party, subordinated promissory notes and Term debt approximate their respective fair values due to their interest rates reflecting current market conditions.

Assets and liabilities that are measured at fair value are classified into levels, reflecting the method used to make the measurements. Level 1 fair value measurements are based on quoted prices that 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. Pine Cliff has no level 2 or level 3 financial instruments. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy level.

The following table sets out the Company’s classification, carrying value and fair value of financial assets and liabilities as at March 31, 2021 and December 31, 2020:

($000s)	March 31, 2021 December 31,2020	March 31, 2021 December 31,2020	March 31, 2021 December 31,2020
Description	Carrying value	Fair value Carryingvalue	Fair value
Cash Trade and other receivables Trade and other payables Due to related party Subordinated promissory notes Term debt	15,528 15,523 (25,577) (6,000) (6,000) (48,774)	15,528 7,878 15,523 14,863 (25,577) (27,275) (6,000) (6,000) (6,000) (6,000) (48,774) (48,747)	7,878 14,863 (27,275) (6,000) (6,000) (48,747)

5 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

4. INVESTMENTS

As at March 31, 2021, the Company had an investment in a public company of $0.3 million, which was received as partial consideration of $0.4 million (see Note 6), and a decrease in fair value recorded to Other Comprehensive Loss.

5. RISK MANAGEMENT

The Company is exposed to both financial and non-financial risks inherent in the oil and gas business. Financial risks include: commodity prices, interest rates, equity price, foreign exchange, credit availability and liquidity. Financial risks can be managed, at least to a degree, through the utilization of financial instruments. Certain non-financial risks can be mitigated through the use of insurance and/or other risk transfer mechanisms, good business practices and process controls, while others must simply be borne. All risks can have an impact upon the financial performance of the Company. The Company’s exposure to market risk, credit risk and liquidity risk are consistent with those disclosed in the Annual Financial Statements, except as described in this note.

Commodity Price Risk

The Company is exposed to commodity price risk since its revenues are dependent on the prices of crude oil, natural gas liquids (“ NGL ”), and natural gas. Commodity prices have fluctuated widely during recent years due to global and regional factors including, but not limited to, supply and demand, inventory levels, weather, economic changes and geopolitical factors and instability. Changes in oil, NGL’s and natural gas prices may have a significant effect, positively or negatively, on the ability of the Company to meet its obligations, capital spending targets and expected operational results. A material decline or extended period of low oil, NGL or natural gas prices could result in a reduction of net production revenue. The economics of producing from some wells may change because of lower prices, which could result in reduced production of oil, NGL’s or natural gas and a reduction in the volumes of Pine Cliff’s reserves. Management may also elect not to produce from certain wells at lower prices. The Company does not hedge its crude oil or NGL commodity price risk. During the three months ended March 31, 2021, Pine Cliff’s average sales volumes were 90% natural gas.

Physical Sales Contracts

At March 31, 2021, the Company had the following physical natural gas sales contracts in place:

		Physical Delivery	Fixed Sale Price	Fixed Sale Price
Contractual Term	DeliveryPoint	Quantity (GJ/day)	($CAD/GJ)1	($CAD/Mcf)2
April 1, 2021 to October 31, 2021	AECO	21,500	$2.40	$2.52
April 1, 2021 to October 31, 2021	TransGas3	6,000	$3.11	$3.26
April 1,2021 to October 31,2021	Dawn	5,000	$3.24	$3.40

1 Prices reported are the weighted average prices of the periods.

2 Price has been converted from $/GJ to $/Mcf by multiplying by 1.05.

3 Subsidiary of SaskEnergy, Saskatchewan.

At May 5, 2021, the Company had the following additional physical natural gas sales contracts in place:

		Physical Delivery	Fixed Sale Price	Fixed Sale Price
Contractual Term	DeliveryPoint	Quantity (GJ/day)	($CAD/GJ)1	($CAD/Mcf)2
May 1, 2021 to October 31, 2021	AECO	5,100	$2.59	$2.72
July1,2021 to October 31,2021	AECO	2,500	$2.52	$2.65

1 Prices reported are the weighted average prices of the periods.

2 Price has been converted from $/GJ to $/Mcf by multiplying by 1.05.

Financial Derivative Contracts

Pine Cliff had no financial derivative contracts in place during the three months ended March 31, 2021 or subsequent thereto.

6. EXPLORATION AND EVALUATION

	Oil and gas	Mineral
Exploration and evaluation assets($000s):	properties	properties	Total
Balance at December 31, 2019	5,521	3,173	8,694
Additions	(14)	51	37
Balance at December 31, 2020	5,507	3,224	8,731
Additions	32	-	32
Dispositions	-	(926)	(926)
Balance at March 31, 2021	5,539	2,298	7,837

6 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

On February 17, 2021, Pine Cliff entered into an option agreement with Nighthawk Gold Corp. (“ Nighthawk ”) for the disposition of its Kim Cass gold property located in the Northwest Territories. Pine Cliff received a 2.5% net smelter royalty (of which 100% can be repurchased by Nighthawk for $2.5 million) and $1.1 million, with payments payable over the next two years. The first payment of $0.4 million was received on February 17, 2021 (340,000 common shares of Nighthawk). Nighthawk will not earn an interest in the property until all amounts have been paid. The present value of future payments has been recorded as a receivable from Nighthawk. Pine Cliff has recognized a gain of $0.2 million on the disposition of these assets.

7. PROPERTY, PLANT AND EQUIPMENT

. PROPERTY, PLANT AND EQUIPMENT
Cost:	($000s)
Balance at December 31, 2019	623,829
Additions	7,481
Lease obligations	576
Acquisitions	(6)
Dispositions	(829)
Decommissioning provision	10,467
Balance at December 31, 2020	641,518
Additions	336
Lease obligations	389
Dispositions	(25)
Decommissioning provision	(4,022)
Balance at March 31, 2021	638,196
Accumulated depletion and depreciation:	($000s)
Balance at December 31, 2019	(333,264)
Depletion and depreciation	(45,411)
Impairment	(7,900)
Balance at December 31, 2020	(386,575)
Depletion and depreciation	(10,265)
Balance at March 31, 2021	(396,839)
Carryingvalue at:	($000s)
December 31,2020	254,943
March 31, 2021	241,357

PP&E Impairment Assessment

As at March 31, 2021, the Company had four cash generating units (“ CGU ”) being the Southern CGU, Central CGU, Edson CGU and Coal Bed Methane CGU. The Company reviewed each CGU’s property and equipment at March 31, 2021 for indicators of impairment and determined that no indicators for impairment were present.

As at March 31, 2021, the following CGU was impaired:

s at March 31, 2021, the following CGU was impaired:
($000s)	Three months ended March 31,
CGU	2021	2020
Edson	-	7,900
Total Impairment	-	7,900

7 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

8. LEASE LIABILITIES

Pine Cliff had the following future commitments associated with its lease liabilities:

ine Cliff had the following future commitments associated with its lease liabilities:
	($000s)
2021	923
2022	1,135
2023	959
2024	316
2025	144
Thereafter	-
Total lease payments as at March 31, 2021	3,477
Amounts representinginterest	(198)
Present value of lease payments	3,279
Currentportion of lease obligations	(1,157)
Non-current portion of lease obligations	2,122

For the three months ended March 31, 2021, interest expense of $0.04 million (March 31, 2020 - $0.04 million) and a total cash outflow of $0.3 million (March 31, 2020 - $0.2 million) was recognized relating to lease obligations.

9. DUE TO RELATED PARTY

Pine Cliff has a $6.0 million subordinated promissory note to the Company’s Chairman of the Board. This promissory note matures on December 31, 2024, bears interest at 6.5% per annum and is payable monthly. This promissory note is secured by a $6.0 million floating charge debenture over all of the Company’s assets and is subordinated to any and all claims in favor of the holder of the Term debt, as defined herein. Interest paid on this promissory note for the three months ended March 31, 2021 was $0.1 million (March 31, 2020 - $0.1 million).

The Company has established a $4.0 million borrowing facility (the “ Facility ”) with the Company’s Chairman of the Board (the “ Lender ”), whereby the Lender will provide up to $4.0 million of borrowings at an interest rate of 6.5% per annum, payable monthly. The term (the “ Term ”) of the Facility expires on the later of: (i) December 31, 2024; or (ii) the date of full repayment of any outstanding borrowings. Amounts can be drawn, repaid and redrawn by the Company at any time during the Term and borrowings under the Facility are payable on demand to the Lender on 60 days written notice. The Facility can be cancelled at any time by the Lender on 60 days written notice, while the Term may also be extended by mutual consent of the Company and the Lender. There was no amount drawn on the Facility during the three months ended March 31, 2021.

10. SUBORDINATED PROMISSORY NOTES

Pine Cliff has issued $6.0 million subordinated promissory notes to a shareholder and a relative of that shareholder, owning directly or by discretion and control, greater than 10% of the Common Shares. These subordinated promissory notes mature on December 31, 2024, bear interest at 6.5% per annum and are payable monthly. These subordinated promissory notes are secured by a $6.0 million floating charge debenture over all of the Company’s assets and are subordinated to any and all claims in favor of the holder of the Term debt.

11. TERM DEBT

1. TERM DEBT
($000s)	As at March 31, 2021 As at March 31,2020
Term debt – beginning of period	48,747 48,642 27 26
Accretion expense
Term debt- end of period	48,774 48,668

The non-revolving credit facility (“ Term debt ”) with Alberta Investment Management Corporation (“ AIMCO ”), acting on behalf of its clients, consists of a first tranche with a principal amount of $30 million that matures on December 31, 2024 (the " 2024 Tranche ") and a second tranche with a principal amount of $19 million that matures on July 31, 2022 (the " 2022 Tranche "). Interest on the 2024 Tranche is payable at a rate of 9.75% per annum until September 30, 2021 and thereafter such interest rate will increase by 1% per annum up to 12.75% and interest is payable on the 2022 Tranche at a rate of 7.05% per annum. All or a portion of the principal amount outstanding can be repaid at any time, but without any penalty or premium after September 30, 2022 with respect to the 2024 Tranche and, July 13, 2021 with respect to the 2022 Tranche. The security for the Term debt consists of floating demand debentures totaling $150.0 million and a general security agreement with first ranking over all current and acquired properties.

8 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

Non-Financial Covenants

The Term debt contains various covenants on the part of the Company and its subsidiaries, including covenants that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, assets sales, hedging activities, management of environmental liabilities, investments, distributions, and mergers and acquisitions. The Term debt does not include any financial covenants.

Letter of Credit Facility

As at March 31, 2021, the Company had a $2.6 million letter of credit facility (“ LC Facility ”) with a Canadian bank which is supported by a performance guarantee from Export Development Canada (December 31, 2020 - $2.6 million). The LC Facility is for issuing letters of credit to counterparties and is available on a demand basis. Letters of credit issued under the LC Facility incur an issuance fee of 4% per annum. The LC Facility does not contain any financial covenants. As at March 31, 2021, The Company had $2.5 million in letters of credit issued against its LC Facility (December 31, 2020 - $2.5 million)

12. DECOMMISSIONING PROVISION

The total current and long-term decommissioning provision of $231.3 million was estimated by management based on the Company’s working interest and estimated costs to remediate, reclaim and abandon its wells, pipelines, and facilities and estimated timing of the costs to be incurred in future periods.

At March 31, 2021, the estimated total undiscounted and uninflated amount required to settle the decommissioning liabilities was $242.1 million (December 31, 2020 - $247.5 million). The discounted and inflated amount required to settle the decommissioning liabilities of $231.3 million has been calculated assuming a 2.00% inflation rate (December 31, 2020 – 2.00%) and discounted using a risk-free nominal rate of 2.30% (December 31, 2020 – 2.30%).

Changes in the measurement of the decommissioning provision were as follows:

		($000s)
	Decommissioning provision, January 1, 2020	221,360
	Development activities	125
	Provisions related to acquisitions	875
	Provisions related to dispositions	(493)
	Decommissioning expenditures	(1,503)
	Site decommissioning grants	(772)
	Revisions (changes in estimates, inflation rate, and discount rates)	9,958
	Accretion	5,455
	Decommissioning provision, December 31, 2020	235,005
	Decommissioning expenditures	(158)
	Site decommissioning grants	(919)
	Revisions (changes in estimates, inflation rate, and discount rates)	(4,022)
	Accretion	1,362
	Decommissioning provision, March 31, 2021	231,268
	Less currentportion of decommissioning provision	(1,500)
	Non-current portion of decommissioning provision	229,768

13. SHARE CAPITAL

Authorized

The Company is authorized to issue an unlimited number of Common Shares without nominal or par value. The Company is also authorized to issue, in one or more series, an unlimited number of Class B Preferred Shares without nominal or par value.

Issued

	Common Shares	Share capital
Issued and outstanding share capital continuity:	(000s)	($000s)
Balance, January 1, 2020	327,784	273,421
Shares issuedpursuant to exercise of warrants	7,500	1,543
Balance, December 31, 2020	335,284	274,964
Exercise of stock options	475	92
Balance, March 31, 2021	335,759	275,056

9 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

Stock Options

The Company provides an equity settled stock option plan (the “ Option Plan ”) for its directors, employees and consultants. Under the Option Plan, the Company may grant stock options up to 10% of outstanding Common Shares on the grant date. The term and vesting period of the options granted are determined at the discretion of the Company and the Board. The exercise price of each option granted equals the market price of the Company’s stock immediately preceding the date of grant and the option’s maximum term is five years.

				Weighted-average
			Options	exercise price
Stock options issued and outstanding:			(000s)	($ per share)
Outstanding, January 1, 2020			25,829	0.40
Granted			8,657	0.14
Expired			(6,782)	0.78
Forfeited			(2,142)	0.35
Outstanding, December 31,	2020		25,562	0.22
Granted			42	0.23
Exercised			(909)	0.20
Expired			(7)	0.25
Forfeited			(1,239)	0.24
Outstanding, March 31, 2021			23,449	0.20
Exercisable, March 31, 2021			6,102	0.35
	Stock options	Weighted-average	Stock options	Weighted-average
	outstanding	remaining term	exercisable	remaining term
Exerciseprice:	(000s)	(years)	(000s)	(years)
$0.10 - $0.15	12,685	2.0	1,369	0.6
$0.16 - $0.33	9,508	1.0	3,477	0.1
$0.34 -$0.79	1,256	0.1	1,256	0.1
	23,449	1.5	6,102	0.2

The Company records share-based payment expense over the vesting period, based on the fair value of the options granted to employees, directors and consultants. One third of the stock options granted vest annually on each of the first, second, and third anniversaries of the grant date and expire one year after each respective vesting date. During the three months ended March 31, 2021, the Company granted 42,000 stock options (March 31, 2020 – 87,750) with a fair value of $0.11 (March 31, 2020 - $0.05) per option using the Black-Scholes option pricing model using the following key assumptions:

sing the Black-Scholes option pricing model using the following key assumptions:
	Three months ended March 31,
Assumptions(weighted average):	2021	2020
Exercise price ($)	0.23	0.12
Estimated volatility of underlying common shares (%)	75.9	57.6
Expected life (years)	3.0	3.0
Risk-free rate (%)	0.3	1.4
Forfeiture rate (%)	3.9	3.9
Expected dividendyield(%)	-	-

Estimated volatility is measured as the standard deviation of expected share price returns based on statistical analysis of historical daily share prices for a representative period.

Warrants

Warrants outstanding:	Warrants (000s)	Weighted-average exercise price ($ per Common Share)
Outstanding, January 1, 2020	10,350	0.29
Exercised	7,500	0.21
Outstanding, December 31, 2020 and March 31, 2021	2,850	0.51

10 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

Per Share Calculations

The average market value of the Common Shares for the purposes of calculating the dilutive effect of stock options and warrants was based on quoted market prices for the period that the options were outstanding. In calculating the weighted average number of diluted shares outstanding for the three months ended March 31, 2021 and 2020, all stock options and warrants were excluded as they were not dilutive.

	Three months ended March 31,	Three months ended March 31,
Loss per share calculation:	2021	2020
Numerator ($000s)
Loss for the period	(680)	(20,011)
Denominator (000s)
Weighted-average Common Shares outstanding– basic and diluted	335,556	327,784
Lossper share – basic and diluted($)	(0.00)	(0.06)

14. REVENUES

The Company’s commodity sales revenue is determined pursuant to the terms of the marketing agreements. The revenue for natural gas, NGL and crude oil is based on the commodity price in the month of production, adjusted for quality, location, allowable deductions, if any, or other factors. Commodity sales revenues are based on marketed indices that are determined on a monthly or daily basis. Processing and gathering revenue is generally negotiated under multi-year contracts that vary by volume.

	Three months ended March 31,	Three months ended March 31,
($000s)	2021	2020
Natural gas	28,031	20,780
NGL	5,529	2,541
Crude oil	1,959	2,120
Total commodity sales	35,519	25,441
Processingandgathering	940	950
Total commoditysales andprocessingandgathering	36,459	26,391

15. SUPPLEMENTAL CASH FLOW INFORMATION

			Three months ended March 31,	Three months ended March 31,
($000s)			2021	2020
Changes in non-cash working capital:
Trade and other receivables			35	3,093
Prepaid expenses and deposits			80	(1,647)
Trade and otherpayables and accrued liabilities			(1,698)	(2,770)
			(1,583)	(1,324)
Change related to:
Operating activities			(1,371)	985
Investingactivities			(212)	(2,309)
			(1,583)	(1,324)
hanges in non-cash working capital excludes the receivable amount referred to in Note 6
			Three months ended March 31,
Finance expenses:			2021 2020
Interest expense and bank charges			1,300 1,301 1,362 1,419 27 26
Non cash:
Accretion on decommissioning provision
Accretion on subordinatedpromissorynotes
Total finance expenses			2,689 2,746

Cash interest paid in the three months ended March 31, 2021, was $2.3 million (March 31, 2020 - $1.6 million).

11 PINE CLIFF ENERGY LTD.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q1 - 2021

16. COMMITMENTS

As at March 31, 2021, the Company has the following commitments and other contractual obligations:

	2021	2022	2023	2024	2025	**Thereafter **
($000s)
Trade and other payables	25,577	-	-	-	-	-
Term debt1	-	19,000	-	30,000	-	-
Due to related party	-	-	-	6,000	-	-
Subordinated promissory notes	-	-	-	6,000	-	-
Future interest	5,120	4,861	4,380	4,605	-	-
Lease obligations2	923	1,135	959	316	144	-
Transportation3	6,785	6,717	5,247	4,450	4,065	6,386
Total commitments and contingencies	38,405	31,713	10,586	51,371	4,209	6,386

1 Principal amount.

2 See Note 8.

3 Firm transportation agreements.

12 PINE CLIFF ENERGY LTD.

CORPORATE INFORMATION

Q1 - 2021

BOARD OF DIRECTORS

George F. Fink - Chairman Philip B. Hodge Randy M. Jarock William S. Rice Jacqueline R. Ricci

OFFICERS

Philip B. Hodge President and Chief Executive Officer

REGISTRAR AND TRANSFER AGENT

Odyssey Trust Company of Canada

AUDITORS

Deloitte LLP

BANKERS

Toronto-Dominion Bank

STOCK EXCHANGE LISTING

Terry L. McNeill Chief Operating Officer

Alan MacDonald Chief Financial Officer and Corporate Secretary Christopher S. Lee Vice President, Exploration

TSX Exchange Trading Symbol: PNE

WEBSITE

www.pinecliffenergy.com

HEAD OFFICE

850, 1015 – 4[th] Street SW Calgary, Alberta T2R 1J4 Phone: (403) 269-2289 Fax: (403) 265-7488

INVESTOR CONTACT

info@pinecliffenergy.com

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